Obama Spars With Insurers On Health Care

Thursday, Jun 25,2009, 10:17:43 AM Click:

WASHINGTON -- President Obama challenged the health insurance industry Tuesday to drop its steadfast opposition to a government-run plan that could compete with private insurers to drive down costs in a revamped health care system.

Industry leaders, however, said any type of public insurance option would drive private companies out of business, raise costs for employers and workers and increase budget deficits.

The back-and-forth represented a potential setback for Obama's goal of overhauling the nation's health care system -- something insurers helped to scuttle 15 years ago under President Clinton with their national "Harry and Louise" advertising campaign.

After months of getting along, lawmakers and health industry stakeholders have parted ways in recent weeks on key elements of the overhaul. Business groups, such as the U.S. Chamber of Commerce, have opposed a mandate on employers to provide insurance or contribute toward it.

House and Senate committees, meanwhile, are trying to write legislation that would keep costs below $1 trillion over 10 years and attract Republican support.

Tuesday's sparring was some of the most direct in a year that began with bipartisan "summits" at the White House, where industry leaders praised Obama's determination to succeed where Clinton had failed.

It began with a letter from American's Health Insurance Plans and the Blue Cross and Blue Shield Association to Sen. Edward Kennedy, D-Mass., whose Senate health committee plans to include a public option in its legislation. They cited a Milliman study that showed an average family of four pays $1,700 a year in higher premiums because Medicare and Medicaid underpay doctors and hospitals.

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

Asked about the industry's concerns at a White House news conference, Obama responded. He said a public plan that is not profit-driven could reduce administrative costs and benefit consumers, forcing private insurers to compete.

"Why would it drive private insurers out of business?" he asked. "If they tell us that they're offering a good deal, then why is it that the government -- which they say can't run anything -- suddenly is going to drive them out of business? That's not logical."

Robert Zirkelbach, a spokesman for the industry trade group, said it's because a government plan would "simply set prices and manipulate the rules," causing many people with private insurance to want to switch plans.

Obama sounded willing to negotiate, however, on the structure of a private plan.

"There can be some legitimate concerns on the part of private insurers that if any public plan is simply being subsidized by taxpayers endlessly, that over time, they can't compete with the government just printing money," the president said.

The author of a much-cited study on public plan options by the Lewin Group said both sides have a point. The study found that if Medicare payment levels for doctors and hospitals were used, premiums could be 30% less than in private plans. If the plan had to use private payment levels, the difference would be substantially less.

"I think insurers could tough it out and do a pretty good job of competing if the public plan isn't given unfair advantages," said Lewin's John Sheils. Political pressures, however, could cause Congress to reduce premiums or cut reimbursement rates to doctors and hospitals, Sheils said.

"As soon as you start doing that, it's not a level playing field anymore," Sheils said.