Despite long debate, health-care costs could soar

WASHINGTON —

In its drive to overhaul the nation's health-care system, Congress is preparing to impose a virtually unprecedented new federal mandate: requiring almost every American to buy medical insurance.

The mandate — long sought by insurance companies — would mark the first time the federal government has compelled millions of consumers to buy a single industry's product, effectively creating a huge captive market for medical-insurance policies.

But so far, at least, lawmakers have rejected provisions that would directly shield consumers from the kinds of sharp premium increases that have become the norm in recent years. Health-care premiums have more than doubled in the past decade.

"We are about to force at least 30 million people into an insurance market where the sharks are circling," said California Lt. Gov. John Garamendi, a Democrat who once was the state's insurance commissioner. "Without effective protections, they will be eaten alive."

Soaring premiums eventually could stir market forces, increasing competition and potentially restraining costs. But that would be a lengthy process.

Democrats have shied away from regulating premiums in the face of charges from business leaders and Republicans that controlling what insurers charge would be meddling too much in the private sector.

As a result, the idea has been largely banished from the health-care debate, although states have long supervised charges for mandated automobile and homeowners insurance.

"That would be a very substantial additional intervention in the marketplace," said Sen. Jeff Bingaman, D-N.M., who worked with Senate Finance Committee Chairman Max Baucus, D-Mont., on his health-care bill. "I just don't think the support would be there for that kind of a change."

Nor is Congress seriously considering any proposals to regulate what doctors, hospitals, drugmakers and other providers charge, a strategy used by some European countries.

Senior House Democrats have proposed the most far-reaching regulation.

Their bill, which is still being debated, seeks to control insurance premiums, in part, by limiting companies' nonmedical spending such as on marketing and dividends to shareholders. The legislation would require at least 85 percent of an insurance company's expenses be dedicated to paying benefits.

The House bill also features a new government insurance program, — or public plan — which advocates believe could pressure insurers to rein in premiums.

The Baucus proposal, which reflects widespread opposition to a new government plan from industry groups and business leaders, would instead set up nonprofit insurance cooperatives.

Baucus' bill would offer incentives through Medicare to encourage hospitals and other providers to become more efficient, a step health-care experts say is crucial to slowing the overall growth of medical spending.

But even the insurance industry's leading representative in Washington acknowledged those changes may not slow the rising cost of premiums soon.

"You can't restrain premiums unless you restrain medical costs," said Karen Ignagni, president of America's Health Insurance Plans, expressing the industry's view of the problem. "So far, members of Congress have been allergic to that."

Slogging through a second day of work on legislation intended to overhaul the nation's health-care system, the Senate Finance Committee wrestled Wednesday with politically volatile proposals to squeeze money out of Medicare.

As they continued marking up the bill, a process expected to stretch into next week, Democrats fended off attempts by Republicans to restore proposed reductions to the program, which serves the elderly, and get rid of government restrictions on the ways insurance companies market to seniors.

Although the daylong session was marked by a slow pace and partisan sniping, Committee Chairman Baucus could take comfort in several signs about the bill's prospects.

Early indications suggested that two key swing senators — Blanche Lincoln, D-Ark., and Olympia Snowe, R-Maine — were inclined to back the bill. Additionally, Baucus, who has not always enjoyed broad support in his caucus, held the Democratic bloc together in the face of an energetic assault from GOP senators.

The Baucus bill relies on more than $400 billion in reductions to the growth in federal health programs over the next decade to help cover the cost of covering nearly 30 million uninsured people.

The bulk of the reductions would be achieved by lowering payments to hospitals, nursing homes and other providers by about $200 billion. Baucus also proposes slicing $113 billion from Medicare Advantage, a program that pays private insurance companies more than traditional Medicare to provide additional benefits.

The Medicare Advantage payments are "stuffing money into the pockets of private insurers and (don't) provide any better benefits to anybody," said Sen. Jay Rockefeller, D-W.Va.

AARP, the seniors advocacy group, argues that the proposed changes would have little impact on Medicare beneficiaries because they represent such a small portion of total Medicare spending, and says insurance providers have agreed to accept the reductions as part of an overhaul that would deliver millions of new customers.

The cuts "are about a 3 percent reduction overall in what Medicare is expected to spend over the 10-year budget window. So the question is: Can we find 3 to 5 percent in efficiencies in the Medicare program?" said David Sloane, a senior vice president at AARP.