After Obamacare, many decisions now made in the private sphere will be made in the public sphere, assuming it is implemented as the law currently provides. The government will be defining key terms, and government-set uniformity will supplant the diverse results that arise from private parties interacting.
One example of this comes from yesterday鈥檚 FDA decision to approve Provenge, a breakthrough therapy for the treatment of prostate cancer. Provenge isn鈥檛 a drug, it鈥檚 an immune therapy that involves extracting immune cells from a patient鈥檚 blood, exposing those cells to a protein found in prostate cancers, and returning the cells to the patient鈥檚 bloodstream.
Removing cells, treating them, and returning them to the body is a complex process. Published accounts suggest it won鈥檛 be cheap: $93,000 per patient.
Each private health-insurance plan must decide whether to cover Provenge and under what terms. That may not be true under health-care reform.
Health-care reform introduces the concept of 鈥渆ssential health benefits.鈥� One of the many rules the secretary of Health and Human Services must write to fulfill her responsibilities under the new law is a rule defining what 鈥渆ssential鈥� means. One of the unknowns of health-care reform, punted by Congress to the executive branch, is how detailed a definition of 鈥渆ssential鈥� the government will enforce. The law provides some examples of things that must be covered that pass the common-sense test (e.g., hospitalization, emergency-room visits). These examples, however, are only the starting point. The secretary has to come up with a definition of 鈥渆ssential鈥� that is 鈥渆qual to the scope of benefits provided under a typical employer plan.鈥� That cuts off the bottom of the distribution. If it鈥檚 鈥渢ypical,鈥� it鈥檚 鈥渆ssential.鈥�
If the secretary says it鈥檚 essential, then every health plan that wants to remain 鈥渜ualified鈥� will have to cover it. If a plan is not qualified, those who get public subsidies can鈥檛 buy it and employees who buy it can鈥檛 enjoy the tax-code subsidy for buying health insurance.
Even if the secretary doesn鈥檛 want to get herself in the middle of every tough call on what鈥檚 鈥渆ssential鈥� and what鈥檚 not, she鈥檚 pushed that way by another concept in the new law: actuarial value. The 鈥渋t鈥� that employers have to provide to their employees (or face penalties) or that people must buy (or face penalties) has to meet a test of actuarial value, an amount that arises from calculating the cost of providing 鈥渆ssential health benefits鈥� to a 鈥渟tandard population.鈥� The necessity of calculating actuarial value requires an understanding of what a plan covers and what it does not. (Otherwise a plan could compete by not covering certain drugs or treatments 鈥� an outcome that would go against the ethos of making competition among health insurers 鈥渇air鈥� by removing opportunities for variation.)
The secretary already has a lot of sway with what the coverage rules will be for Provenge 鈥� as many as 75 percent of those who can benefit are enrolled in Medicare. With health-care reform, she may be making decisions for the entire population.