PRINTER FRIENDLY
 

The Family Smoking Prevention and Tobacco Act (H.R. 1256ENR) was passed by Congress and signed into law this week by President Obama.  In this bill, Congress made the following findings:

• Tobacco use is the foremost cause of premature death in America.

• Tobacco products appear to be inherently dangerous and cause cancer, heart disease and other serious adverse health effects.

• Nicotine is an addictive drug.

• Tobacco dependence is a chronic disease.[1]

Meanwhile, Private Health Insurance Companies Have Major Tobacco Investments

Why do health insurance companies, the very companies that Congress proposes to run health care reform, have major holdings in tobacco companies?

A recent report in a letter to the New England Journal of Medicine provides the answer:

Insurance firms, like any business, are driven by profit and this fact compromises any health care plan that includes them…..Although investing in tobacco while selling life or health insurance may seem self-defeating, insurance firms have figured out ways to profit from both. Insurers exclude smokers from coverage, or more commonly, charge them higher premiums. Insurers profit … twice over.[2]

According to the New England Journal report, here are the tobacco holdings of several major insurers:

• U.S. based Prudential Financial: $264.3 million in tobacco holdings;
• U.K. based Prudential: $1.38 billion in tobacco holdings;
• Standard Life: $950 million in tobacco holdings;
• Canada based Sun Life: $1 billion in tobacco holdings;
• Northwest Mutual: $235 million in tobacco holdings;
• MassMutual $585 million in tobacco holdings.[3]

True Health Care Reform Should Look to a Public Option

As the writers to the New England Journal of Medicine remarked, "[T]hese data are a reminder of the true priority of the insurance industry, which is making money, not ensuring health and well-being."[4]  Is this the industry we want running a new health care reform program? Why not look to a public plan like traditional Medicare instead? At the very least include a public plan option in health care reform.
 
President Obama continues to support a public plan option. In a press conference this week he questioned the logic of private insurers.  The industry claims that marketplace competition offers the best health coverage, yet they continue to insist that one more player in the market – a public plan, even one unsubsidized by tax dollars – would undermine their business.

A Public Plan Will Save Taxpayers' Money

Not only do private plans, as evidenced above, serve their own interests and those of their stockholders before those of beneficiaries, they simply aren't going to save the country money –

quite the contrary. In fact, a new study by the Commonwealth Fund, a non-partisan health policy research group, indicates that including a government-run public option for healthcare similar to Medicare in any proposed reform would save almost two TRILLION dollars more than any reform that does not include a public option.

The study, available at http://commonwealthfund.org/Content/Publications/Fund-Reports/2009/Jun/Fork-in-the-Road.aspx, looked at three possible paths to health care reform:

• Public Plan with Medicare Payment Rates. This path includes a public health insurance plan that pays providers at Medicare rates and is offered alongside private plans within a national health insurance exchange.

• Public Plan with Intermediate Payment Rates. This path includes a public insurance plan that pays providers at rates set midway between current Medicare and private plan rates and is offered alongside private plans in a national health insurance exchange—and subject to the same market rules as they are.

• Private Plans. This path does not include a public plan option; it includes only private plans offered to employers and individuals through a national health insurance exchange.[5]

All three paths would achieve the major goal of health insurance coverage for all.  However, the impact on the growth of health care spending varies dramatically among the options.  While health care costs would still rise, each option would save money when compared to continuing with the current system.  The public plan option with Medicare rates would save the most money by far – an estimated three trillion dollars, compared to two trillion for the intermediate rate option and only about 1 trillion for the private plan option.

The difference in savings among the three options comes from the competition of a public plan with private plans, which would be forced to streamline, as well as from tighter payment rates and, according to the study, from "application of payment innovations and system reforms to a greater share of the insured population [which would occur] under the two scenarios that feature a public plan."

A public health insurance plan option would:

• Provide a less-expensive base for expanding coverage than private plans due to lower initial payment rates (though higher rates than most providers now receive for uninsured and Medicaid patients).

• Enable more rapid spread of payment reforms, since more people would be covered under plans that adopt those reforms.

• Achieve savings through lower administrative costs.

• Potentially provide incentives and tools for more effective care, as well as eliminate poor, unnecessary or duplicate care.[6]

The ultimate truth is that inclusion of a real public plan option in health care reform will fuel savings across the board as the market adjusts to the new competition.  Do not be fooled into accepting anything less than real health care reform.  Support a public health insurance plan option.