Health Carriers' Senate Letter Blasts Public Insurance Option

But, the letter added, sustaining the current private system, albeit with "strong market rules and consumer protections," will ensure that "nobody falls through the cracks without disrupting the coverage of tens of millions of Americans who like and want to keep their current health plans."

At the same time, President Barack Obama stepped up his efforts to build support for health care reform legislation.

He said at a press conference yesterday that he will not insist that a public plan be included in any health care reform legislation he signs.

But, he also sent a loud message to the industry that one of the ways health care reform legislation will be paid for is cuts in the Medicare Advantage program.

He also set an address to the nation on the issue.

"We have not drawn lines in the sand, other than that reform has to control costs and that it has to provide relief to people who don't have health insurance or are underinsured," the president said in a response to a question at his news conference. "You know, those are the broad parameters that we've discussed."

As to Medicare Advantage, he added, "If we're spending $177 billion over 10 years to subsidize insurance companies under Medicare Advantage, when there's no showing that people are healthier using that program than the regular Medicare program, well, that's not a good deal for taxpayers."

The industry letter was written to members of the Senate Health, Education, Labor and Pension Committee, which is continuing today to mark up language in its version of health care reform legislation.

The committee, which is being led by Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, in the absence of the HELP Committee chairman, Sen. Edward Kennedy, D-Mass., said it plans to complete work on its bill by Friday.

But, members of the Senate Finance Committee, which is also working on its version of the legislation, said they do not expect to complete work until after Congress returns from its July 4th recess.

Sen. Richard Durbin, D-Ill., a member of the Senate Democratic leadership, said late Tuesday night that a completed public option compromise would likely not
materialize until next month.

The industry group letter was signed by Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, and Scott Serota, president and CEO of the Blue Cross Blue Shield Association.

The industry letter also denounced efforts at crafting a compromise that would provide a public plan by other means.

But, the letter said, "We do not believe that it is possible to create a government plan that could operate on a level playing field."

Regardless of how it is initially structured, "a government plan would use its built-in advantages to take over the health insurance market," the letter said.

Ms. Ignagni and Mr. Serota said they are "particularly concerned" that a government-run plan would undermine efforts to transition to a high-quality health care delivery system.

They said they are concerned "that creating a government-run health insurance plan for the broader population would result in tens of millions of Americans being enrolled in a new coverage option that lacks a meaningful commitment to care coordination, disease management, health promotion and other pro-active initiatives that have been successfully implemented by private sector health plans."

They also voiced concern that a government-run plan would exacerbate the cost-shifting that already occurs from public programs to private payers as a result of the inadequate reimbursement rates that Medicare and Medicaid pay to hospitals and physicians.

They said that to offset these inadequate payments, providers pass on higher costs to individuals, families and employers in the private sector.

"If Congress establishes a new government-run health plan, this hidden tax on consumers could undermine the entire health care financing system," the letter said.

In short, "as the insured population migrates from employer coverage to the new government-run plan because of the lower payment rates (and therefore lower premiums), providers would have a declining base to shift costs to in the remaining commercial market," the letter said.

"Eventually, this dynamic would accelerate with rising costs in the private market because of the exacerbating cost shift, causing further declines in private coverage and leaving hundreds of billions of dollars to be covered by the federal budget," the letter added.