Kerry Urges Affordability Measure Included in Merged Health Bill

November 13, 2009

Contact: Jodi Seth/Whitney Smith, 202-224-4159

Kerry Urges Affordability Measure Included in Merged Health Bill

Kerry proposal builds on successful best practices in Massachusetts health care reform

WASHINGTON, D.C. - Senator John Kerry (D-Mass.), a senior member of the Finance Committee, has written Senate Majority Leader Harry Reid (D-Nev.) requesting Kerry's proposal to provide affordable insurance plans for the middle class be included in the health reform legislation that comes to the senate floor.

Kerry's plan, often referred to as "prudent purchasing," would allow state-run health insurance marketplaces to negotiate with private insurance companies to select the best, most affordable options for consumers.

"Every day we read about the importance of bending the cost curve in health care reform, and this idea actually helps make it happen. We know prudent purchasing works because it's working in Massachusetts. It will control costs while providing middle class workers with the affordable health care options they desperately need," said Sen. Kerry. "We've seen firsthand the powerful impacts this has on families in Massachusetts, and I know we can bring those same results to the rest of the country."

The full text of the letter is below:

The Honorable Harry Reid Majority Leader United States Senate S-221, The Capitol Washington, D.C. 20510

Dear Majority Leader Reid:

As you put together health care reform legislation, I ask for your help to include my prudent purchasing provision in the merged bill. I offered this provision during the Senate Finance Committee's consideration of health care reform because I believe it will lower costs and increase affordable options for consumers.

The Finance Committee bill requires the exchange to accept all licensed health plans, regardless of the plan's ability to deliver competitive prices or offer high quality care. Chairman Baucus agreed to work with me on the proposal so I withdrew the amendment from consideration.

Under my amendment, and a similar provision that was included in the House-passed bill, exchanges would negotiate with plans for lower bids, encourage plans to form select networks, and exclude plans that do not offer good value and cost-effectiveness. Negotiating with health plans is already a common practice for other large purchasers. The federal government negotiates with plans participating in the Federal Employee Health Benefits Plan and large employers negotiate with the health plans they offer their workers.

One of the key ingredients to the success of health reform in Massachusetts is the ability of the Connector to negotiate with health plans. This negotiation process saves six percent off the cost of premiums and places pressure on carriers to keep rates increases low overall. Empowering exchanges to engage in active purchasing would lower premiums for all enrollees in the exchange, as well as, lower the amount of subsidy paid by the federal government.

My proposal also encourages the participation of Medicaid Managed Care Organizations (MMCOs) in the exchange. These plans have a proven experience serving low-income enrollees and are less expensive than nonprofit and commercial plans. Massachusetts uses MMCOs to serve all subsidized enrollees in the Commonwealth Care portion of the exchange.

I respectfully request that you include my amendment in the merged health reform bill. It provides us with a tangible way to control the long-term growth of health care costs while ensuring that families have access to affordable coverage options.

Sincerely,

John F. Kerry