Health Overhaul Fails Without U.S. Plan, Rangel Says (Update2)

By Alex Nussbaum
Bloomberg News
May 26, 2009

May 27 (Bloomberg) -- An overhaul of the health care system won't pass the U.S. House of Representatives unless it includes a government-financed insurance plan for consumers, the head of the House's tax-writing committee said.

Representative Charles Rangel said a public plan is essential to compete with private insurers and hold down medical costs. A Senate proposal that doesn't contain the public option is "totally unacceptable," the New York Democrat, chairman of the House Ways and Means Committee, said in an interview today.

"It's my political judgment a plan without the public option would not be able to pass the House," Rangel said after a speech at a health-care forum in Manhattan.

A government-sponsored health plan has emerged as the "hot-button" issue in the debate over possible changes to the U.S. health system, Senator Max Baucus, a leading Democratic negotiator on the issue, said May 21 in an interview. While President Barack Obama and other Democrats support the idea, chief executives at insurers such as Humana Inc. and WellPoint Inc. said last month it may doom support by the industry.

Republicans are also unlikely to back the idea, said Senator Jon Kyl, the party's No. 2 leader in the chamber, in a telephone interview.

Republican Resistance

"Unless Max is willing to say, right off the start, okay we'll take the public plan off the table and we'll take rationing of health care off the table, Republicans are going to have a very hard time going along with anything," he said.

Two groups opposed to Obama's plans began airing television ads and a documentary today warning that more government-backed coverage will mean fewer choices, longer waits and difficulty getting drugs for patients. The groups, Americans for Prosperity Foundation and Conservatives for Patients' Rights, said they were spending more than $3 million for the campaign.

UnitedHealth Group Inc., the largest health insurer by revenue, released a report today saying the U.S. government could save $540 billion over 10 years through changes to the Medicare and Medicaid programs, such as encouraging more preventive care, early cancer screening and rewarding better- performing doctors.

Obama included $634 billion in his budget proposal to extend coverage to 46 million uninsured Americans. The president called the amount a "down payment." The ultimate cost of covering the entire country is likely to exceed $1.5 trillion over a decade, said Gail R. Wilensky, a former Medicare administrator, in a May 15 interview.

Medicare Advantage Cuts

Rangel said lawmakers expect to find money by reducing payments for Medicare Advantage, in which private insurers such as Humana, WellPoint and UnitedHealth administer programs that offer more benefits at higher costs than the regular government health plan for the elderly.

Obama's budget called for competitive bids for the Medicare Advantage contracts, which it said would save taxpayers $175 billion over 10 years to finance the overhaul. Rangel said he'll seek deeper cuts.

"Clearly we intend to save a lot of money there, as we have found for political reasons this particular program has been overpaid," he told doctors, educators and advocates in a speech sponsored by the National Coalition on Health Care, a Washington-based nonprofit group that calls itself non-partisan.

The cuts will only lead to higher premiums and reduced care for Medicare users, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, an industry group. Private Medicare plans cost more because they provide more benefits, including vision and dental care and lower out-of-pocket costs, Zirkelbach said by telephone.

Taxing Benefits

Rangel said in the interview that he's uneasy about a proposal by Baucus and other senators that would tax employer- provided health benefits.

"I really don't think it's a good law to do that," Rangel said, without ruling it out.

Obama opposed a tax on insurance benefits during last year's presidential campaign, though he hasn't rejected Baucus's proposal. Excluding health benefits from taxes favors the wealthy and encourages unnecessary care for those in "Cadillac health plans," Baucus has said.

Taxing all employee health benefits would have generated an additional $226 billion in revenue for the federal government in 2008, according to a May 8 report from Congress' Joint Committee on Taxation.

Baucus said his committee will draft legislation in mid- June that will include new regulations for insurers, cuts in reimbursements to Medicare providers and a "health exchange" giving some uninsured Americans affordable coverage. He said the measure will include some form of a public option that would compete with private insurers.

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