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Queen Olympia, You've Done It Again! You're Eviscerating The Reform Bill.

Queen Olympia has decided that the very thing that would make insurance exchanges work is the thing that has to go. And you know when the queen spea

queen olympia_8b0e3.jpg

Queen Olympia has decided that the very thing that would make insurance exchanges work is the thing that has to go. And you know when the queen speaks, the Senate listens! (Do you ever get the impression that the Queen is actually wearing no clothes?)

Olympia Snowe looks set to reprise her role in hobbling the stimulus bill in exchange for providing the key pivotal vote for it by killing John Kerry’s amendment, “Empowering State Exchanges to be Prudent Purchasers.” Jon Cohn explains:

In the bills that passed three House committees and the Senate Health, Education, Labor, and Pensions (HELP) Committee, the exchange would be a “prudent purchaser.” In other words, it would have a staff that bargained with insurers to bring down premiums — and that made sure all plans lived up to strict guidelines for coverage and customer service. In effect, any insurer that wants to offer coverage through the exchanges has to get the equivalent of a “Good Housekeeping Seal of Approval” from the administrators. This is precisely how it works in Massachusetts.

By contrast, the Senate Finance bill envisions much weaker exchanges. Instead of choosing which plans to make available, the exchange administrators would, by law, have to accept any plan that meets a relatively minimal set of standards.

There are several problems with this. One is that it’s going to be a mess for consumers. Another is that it threatens to turn the exchanges into playgrounds of implicit risk-shifting efforts wherein companies try to design policies specifically around dissuading high-need people from signing up. Thus ever-more burden is going to be placed on the untested risk-adjustment machinery that’s supposed to even this all out. Ezra Klein observes that Jon Kingsdale is basically the only person in America’s who’s run anything like the exchanges envisioned in all the different bills—he does the job in Massachusetts—and he views the prudent purchaser rule as absolutely essential. Against that Snowe is pitting, I guess, her intuition that this is too much government involvement.

TNR's Jonathan Cohn lays out his argument here:

The bills moving through Congress all set up exchanges modeled more or less on what Massachusetts has done. But there are a few critical differences. Among the most important is a difference in how the exchanges would select which plans to offer people.

In the bills that passed three House committees and the Senate Health, Education, Labor, and Pensions (HELP) Committee, the exchange would be a "prudent purchaser." In other words, it would have a staff that bargained with insurers to bring down premiums--and that made sure all plans lived up to strict guidelines for coverage and customer service. In effect, any insurer that wants to offer coverage through the exchanges has to get the equivalent of a "Good Housekeeping Seal of Approval" from the administrators. This is precisely how it works in Massachusetts.

By contrast, the Senate Finance bill envisions much weaker exchanges. Instead of choosing which plans to make available, the exchange administrators would, by law, have to accept any plan that meets a relatively minimal set of standards.

Jon Kingsdale, who runs the Massachusetts exchange, calls that a recipe for "policy disaster," as consumers faced a dizzying array of more expensive, less regulated choices. "It would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery. ... The exchanges would be nothing more than an automated Yellow Pages."

Kingsdale is among several Massachusetts-based policy experts who have been ringing the alarm bells about this flaw in the Finance bill. And it's no coincidence that it's a Massachusetts senator, Kerry, who now proposed to fix it by giving the exchanges the same powers envisioned in the House and HELP bills.

But when Kerry introduced his plan last week, he couldn't get the votes to pass it. The reason, several sources on Capitol Hill say, was opposition from Olympia Snowe, the Maine Republican who also sits on Senate Finance. Snowe seems to be concerned that a more aggressive exchange would amount to more government--which, in fact, it would be. But, as Massachusetts has shown, sometimes more government is exactly what health care needs.

Chances are reasonably good that Kerry's vision of reform will prevail, if not during the Senate floor debate then afterwards, when a conference committee merges whatever passes from the two congressional chambers. But it's not a sure thing, which is why this seemingly narrow question deserves a lot more attention.

Exchange design doesn't get the attention of controversies like the public option, abortion, or supposed death panels. In the long run, though, it could be far more decisive in whether reform works.

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