Public option remains a flash point

No one's ready to bury the public option - not the health-care activists planning yet another protest today against Cigna Corp., the national health insurer with headquarters in Philadelphia, and certainly not insurance executives who stay resolutely on message about how the plan is a "distraction" to changing health care.

Tuesday night, the Senate Finance Committee, chaired by Sen. Max Baucus of Montana, voted down two efforts to adopt a government-run health insurance plan or, as it is known, a public option.

"It's the tail of the dog, not the dog," Independence Blue Cross spokeswoman Elizabeth Williams said yesterday, questioning why so much emphasis is being put on the idea of a government-run program, when the goal of the legislation is increasing coverage and quality while also lowering costs of health care.

Maybe it's because, at least in Philadelphia, health insurance is a big business.

Independence Blue Cross and Cigna employ more than 8,000 people, many of them working out of office buildings in Center City.

Aetna Inc., which is increasing its market share in the region, employs about 4,000 here, most of them in offices in Blue Bell, said spokesman Walt Cherniak.

The insurance industry is united in its opposition to the public option.

"It could lead to the demise of the private-insurance industry," said Cigna spokesman Chris Curran.

Here is his explanation: Most insurers, hospitals, and doctors already have experience with Medicare, the health plan for the elderly. They routinely complain that the federal government's reimbursements for care do not cover the cost of providing that care.

Curran said that $1,788 of every private-insurance subscriber's annual premium goes to make up for shortfalls in Medicare payments. There is some talk that public-option funding would follow a Medicare model.

If the government can offer a lower-cost insurance plan, he said, and if many people move from private plans to the government plan, those remaining in private plans will have to absorb more losses. Over time, that burden will become unsustainable for insurers.

So, would Cigna go out of business? Would all the people in its Center City skyscraper be lined up at the state-run career office in nearby Suburban Station?

"I doubt it," Curran said. "It's kind of hard to answer. If the business climate changes, businesses always adjust their business models - whether it's new regulations or new competitors."

Williams at Independence Blue Cross and top Aetna officials sounded similar notes.

"I think it's a diversion that doesn't get people covered," Aetna president Mark T. Bertolini told Inquirer editors Tuesday.

And earlier, in testimony before the U.S. House of Representatives, Aetna's chief executive officer, Ronald Williams, said the company would be able to compete if the competition was fair.

"All things being equal, I would say, yes, we can provide better value, quicker innovation, and do a better job in areas such as wellness, prevention, and chronic-disease management," Williams said.

"Everything I have read so far says that a public plan would pay providers Medicare rates or something close to them and would control the delivery of care itself," he said. "The government would be setting prices for services and paying below what providers consider to be market rates. There is no competition in this scenario."

Marc Stier, area director for Health Care for America Now, an advocacy group pressing for the public option, does not buy it.

All the plans being debated in Washington will expand coverage, giving insurers millions of new customers.

"It's not that they are fighting for their lives," he said. "They want reform that is going to increase their profits."

Because other versions of the health bill in the Senate and the House retain the public option, Stier said he thought the public option might yet live - and Curran agrees.

But while there is much disagreement about the public option, every proposal includes an expansion of another type of government-run health insurance: Medicaid, the state- and federal-funded program that now covers the poor and disabled.

Under the various proposals, people would not have to be as poor to qualify.

Conceivably, the Medicaid system could be expanded even more.

"If the public option dies, the next step is to make Medicaid available [to more people] as a choice," said Wharton School health economist Mark V. Pauly.

But Medicaid programs around the nation could face revenue pressures in fiscal 2011, when federal stimulus money runs out, according to a study released yesterday by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured. The recession has pushed up Medicaid enrollment 5.4 percent, the highest rate in six years. State spending also increased, the study says.

With that, financial strains remain. Starting today, for example, Chester County Hospital in West Chester will no longer accept patients covered by the Keystone Mercy Health Plan, a Medicaid HMO jointly owned by Independence Blue Cross and Mercy Health System in Conshohocken.

Hospital officials said that Keystone Mercy asked them to take a 30 percent cut. "The reimbursement does not cover the cost to provide care," said hospital vice president Paul Huberty.

Ten percent of the hospital's 15,000 inpatient admissions are covered by the plan, and 25 percent of the 2,618 births.

"We could not afford the commercial-based payment levels they required," Anne Morrissey, president of Keystone Mercy's Pennsylvania Managed Care Division, said in an earlier statement. "State funding to Medicaid managed-care plans already trails the rate of health-care inflation."

To Williams, at Independence Blue Cross, Medicaid's problems are proof that there should be less government involvement, not more.

"It is all interconnected," she said. "It is naive to think that the public option is a silver bullet that will improve the health-care system."