David Coates

Before the Vote: Commentary on the health care debate before March 21 2010

The importance of health care reform was brought home sharply by data released February 20th, showing that in June 2009 48.9 million Americans were enrolled in Medicaid programs country-wide, an increase of nearly 3.3 million on the number in June 2008 (This data from the Kaiser Family Foundation, reported in The New York Times February 22, 2009).

The President issued his own plan, ahead of the health care summit. Details include:

  • If You Have Health Insurance More Stability and Security
  • Ends discrimination against people with pre-existing conditions. Over the last three years, 12 million people were denied coverage directly or indirectly through high premiums due to a pre-existing condition. Under the President’s plan, it will be against the law for insurance companies to deny coverage for health reasons or risks.
  • Limits premium discrimination based on gender and age. The President’s plan will end insurers’ practice of charging different premiums or denying coverage based on gender, and will limit premium variation based on age.
  • Prevents insurance companies from dropping coverage when people are sick and need it most. The President’s plan prohibits insurance companies from rescinding coverage that has already been purchased except in cases of fraud. In most states, insurance companies can cancel a policy if any medical condition was not listed on the application – even one not related to a current illness or one the patient didn’t even know about. A recent Congressional investigation found that over five years, three large insurance companies cancelled coverage for 20,000 people, saving them from paying $300 million in medical claims – $300 million that became either an obligation for the patient’s family or bad debt for doctors and hospitals.
  • Caps out-of pocket expenses so people don’t go broke when they get sick. The President’s plan will cap out-of-pocket expenses and will prohibit insurance companies from imposing annual or lifetime caps on benefit payments. A middle-class family purchasing health insurance directly from the individual insurance market today could spend up to 50 percent of household income on health care costs because there is no limit on out-of-pocket expenses.
  • Eliminates extra charges for preventive care like mammograms, flu shots and diabetes tests to improve health and save money. The President’s plan ensures that all Americans have access to free preventive services under their health insurance plans. Too many Americans forgo needed preventive care, in part because of the cost of check-ups and screenings that can identify health problems early when they can be most effectively treated. For example, 24 percent of women age 40 and over have not received a mammogram in the past two years, and 38 percent of adults age 50 and over have never had a colon cancer screening.
  • Protects Medicare for seniors. The President’s plan will extend new protections for Medicare beneficiaries that improve quality, coordinate care and reduce beneficiary and program costs. These protections will extend the life of the Medicare Trust Fund to pay for care for future generations.
  • Eliminates the “donut-hole” gap in coverage for prescription drugs. The President’s plan begins immediately to close the Medicare “donut hole” – a current gap in its drug benefit – by providing a 50 percent discount on brand-name prescription drugs for seniors who fall into it. In 2007, over 8 million seniors hit this coverage gap in the standard Medicare drug benefit. By 2019, the President’s plan will completely close the “donut hole”. The average out-of-pocket spending for such beneficiaries who lack another source of insurance is $4,080.
  • If You Don’t Have Insurance
  • Quality, Affordable Choices for All Americans
  • Creates a new insurance marketplace – the Exchange – that allows people without insurance and small businesses to compare plans and buy insurance at competitive prices. The President’s plan allows Americans who have health insurance and like it to keep it. But for those who lose their jobs, change jobs or move, new high quality, affordable options will be available in the exchange. Beginning in 2013, the Exchange will give Americans without access to affordable insurance on the job, and small businesses one-stop shopping for insurance where they can easily compare options based on price, benefits, and quality.
  • Provides new tax credits to help people buy insurance. The President’s plan will provide new tax credits on a sliding scale to individuals and families that will limit how much of their income can be spent on premiums. There will also be greater protection for cost-sharing for out-of-pocket expenses.
  • Provides small businesses tax credits and affordable options for covering employees. The President’s plan will also provide small businesses with tax credits to offset costs of providing coverage for their workers. Small businesses who for too long have faced higher prices than larger businesses, will now be eligible to enter the exchange so that they have lower costs and more choices for covering their workers.
  • Offers a public health insurance option to provide the uninsured and those who can’t find affordable coverage with a real choice. The President believes this option will promote competition, hold insurance companies accountable and assure affordable choices. It is completely voluntary. The President believes the public option must operate like any private insurance company – it must be self-sufficient and rely on the premiums it collects.
  • Immediately offers new, low-cost coverage through a national “high risk” pool to protect people with preexisting conditions from financial ruin until the new Exchange is created. For those Americans who cannot get insurance coverage today because of a pre-existing condition, the President’s plan will immediately make available coverage without a mark-up due to their health condition. This policy will offer protection against financial ruin until a wider array of choices become available in the new exchange in 2013.
  • For All Americans
  • Reins In the Cost of Health Care for Our Families, Our Businesses, and Our Government
  • Won’t add a dime to the deficit and is paid for upfront. The President’s plan will not add one dime to the deficit today or in the future and is paid for in a fiscally responsible way. It begins the process of reforming the health care system so that we can further curb health care cost growth over the long term, and invests in quality improvements, consumer protections, prevention, and premium assistance. The plan fully pays for this investment through health system savings and new revenue including a fee on insurance companies that sell very expensive plans.
  • Requires additional cuts if savings are not realized. Under the plan, if the savings promised at the time of enactment don’t materialize, the President will be required to put forth additional savings to ensure that the plan does not add to the deficit.
  • Implements a number of delivery system reforms that begin to rein in health care costs and align incentives for hospitals, physicians, and others to improve quality. The President’s plan includes proposals that will improve the way care is delivered to emphasize quality over quantity, including: incentives for hospitals to prevent avoidable readmissions, pilots for new “bundled” payments in Medicare, and support for new models of delivering care through medical homes and accountable care organizations that focus on a coordinated approach to care and outcomes.
  • Creates an independent commission of doctors and medical experts to identify waste, fraud and abuse in the health care system. The President’s plan will create an independent Commission, made up of doctors and medical experts, to make recommendations to Congress each year on how to promote greater efficiency and higher quality in Medicare. The Commission will not be authorized to propose or implement Medicare changes that ration care or affect benefits, eligibility or beneficiary access to care. It will ensure that your tax dollars go directly to caring for seniors.
  • Orders immediate medical malpractice reform projects that could help doctors focus on putting their patients first, not on practicing defensive medicine. The President’s plan instructs the Secretary of Health and Human Services to move forward on awarding medical malpractice demonstration grants to states funded by the Agency for Healthcare Research and Quality as soon as possible.
  • Requires large employers to cover their employees and individuals who can afford it to buy insurance so everyone shares in the responsibility of reform. Under the President’s plan, large businesses – those with more than 50 workers – will be required to offer their workers coverage or pay a fee to help cover the cost of making coverage affordable in the exchange. This will ensure that workers in firms not offering coverage will have affordable coverage options for themselves and their families. Individuals who can afford it will have a responsibility to purchase coverage – but there will be a “hardship exemption” for those who cannot.

The White House went on the offensive on health care reform both at the February summit and after it. The administration proposals included changes to the Senate bill (raising the threshold on Cadillac plans to be taxed and delaying that tax to 2018; eliminating the Nebraska Medicaid deal struck with Senator Nelson; closing the doughnut hole for seniors; and increasing the subsidies to low income families). They also included proposals canvassed by Republicans (being open to increased Medicaid reimbursements for doctors, stepping up action against fraud in the health care system, investment in medical malpractice reform, and also people buying insurances in the health exchanges to participate in Health Savings Accounts). That did not win him Republican support, the changes being dismissed as minor compared to the size of the bill in total.

White House pressure for an up-and-down vote on the Senate bill in the House is now intense. That vote is expected by March 21, the new date for the President’s departure for his Asian tour. It is not yet certain that the vote is there – many liberal House members find the Senate bill too conservative and many anti-abortion Democrats find it too liberal. As we wait, the following listing of the main differences in the bill (a list drawn up with colleagues at Wake Forest University and first published on the University website) may be of value.

Areas of Agreement between the House and Senate bills

  • Mandates that most Americans must carry health insurance or pay a fine.
  • The creation of health insurance ‘exchanges’ where individuals and small business can compare and buy health insurance coverage.
  • Subsidies for lower- and middle income families to buy mandated coverage – subsidies to families earning up to 400 percent of the poverty level – the subsidies being slightly more generous in the House bill than in the Senate one
  • Tax credits for small companies to encourage them to offer health insurance to their employees
  • No adverse change to existing plans for those with employer-provided health coverage
  • An expansion of Medicaid, and a standardization of state rules on when Medicaid coverage kicks in – in the House bill at 150 percent of the poverty level (encompassing 15 million currently uninsured Americans); in the Senate bill at 133 percent of poverty levels (encompassing 13 million currently uninsured Americans)
  • Cuts in payments to Medicare Advantage, but elimination of Medicare co-payments on preventive services.
  • Minimum standards of coverage in all plans, including eventually bans on companies denying coverage for pre-existing conditions, and bans on insurance companies denying coverage or raising premiums for people when they become ill.
  • An extension of coverage for young people under their parents’ existing policies – to age 26 in the House bill, or 27 in the Senate version.
  • No major changes to current medical malpractice law – a central concern of the Republican Party, among others – although the Senate version does include a ‘demonstration project’ designed to test, on a small scale, unspecified malpractice law reform
  • Pre-existing medical conditions to be immediately addressed through the creation of a temporary national high-risk pool for those denied coverage previously (or unemployed for the previous six months)
  • Both bills also focus strongly on prevention (wellness) and effectiveness (quality) research in the health care system.

Big Issues still in Dispute

  • The Public Option – The House bill contains a public health insurance plan option, available within the exchanges and across the country. The public option will have different categories of plan – a basic package, plus others with varying levels of cost-sharing and supplementary services. The Senate bill does not go that route at all. It simply gives the Office of Personnel Management (the agency overseeing the Federal Employee Health Benefits Program enjoyed by members of Congress) responsibility for the oversight of at least one national non-profit plan in the exchange, and one for-profit plan. These new national plans will be contracted with private insurers.
  • Paying for the Changes – In the House version, individuals earning more than $500,000 a year, and families earning more than $1 million, will pay an extra 5.4% income tax. In the Senate version, insurers will pay a 40% excise tax on so called “Cadillac” plans (those valued at more than $23,000 a year for a family or $8,500 for an individual), and an annual $2+ billion fee will be levied on each of the pharmaceutical and medical device manufacturing sectors.
  • Employer Requirement – In the House version, employers with annual payrolls over $750,000 must offer coverage to their employees or pay a sum equivalent to 8 percent of their payroll into a Health Insurance Exchange Trust.(Smaller employers pay a smaller sum, or no sum at all, depending on their size.) In the Senate version, employers with more than 50 employees will pay $750/employee if they fail to offer coverage, and those employees will receive federal help to buy coverage on an individual basis.
  • The Stupak Amendment – In the House version, insurance companies participating in the exchanges will be prohibited from offering plans that include abortion coverage unless it is in the form of a supplemental plan that consumers can purchase only with their own funds. Insurance plans will be banned from including abortion coverage if even a single person buying the plan is receiving a federal subsidy to help her do so. In the Senate version, people receiving a federal subsidy can purchase a plan that includes abortion coverage but only if they pay for the abortion part with their own money in a separate personal check. The Senate bill allows states to ban the coverage of abortion by health plans sold on the new exchanges. (It will remain the case, as now, that federal funding for abortion will be available in cases where continued pregnancy threatens the life of the mother or is the result of incest or rape.)

The Devil in the Detail

Will subsidies ensure that all Americans will be able to afford health care coverage?

No, in neither bill is that the case. The CBO estimate that under the House bill 96% of legal US residents under age 65 will be covered. For the Senate bill, the estimate is 94%. (Currently 83% of legal US legal residents of working age have health cover.) Subsidies decline (cost-sharing increases) as incomes rise, and end entirely when income reaches 400% of the federal poverty level (The federal poverty level varies by family size. It is currently $18,310 for a family of three.)

What will the fine be on those who fail to buy coverage?

In both bills the schedule of fines is complicated. In the Senate version, by 2016 the fine will be up to $750 or 2% of income, whichever is the higher. Each bill requires confirmation on your tax returns that you have health coverage, and excludes the very low-paid from any penalty. The groups most vulnerable to fines are likely to be those just about the Medicaid threshold (earning 133/150% of the federal poverty level) – too well-paid to receive free health care, too poor to be able to afford even its subsidized purchase.

Will there be a Medicare Board?

Not in the House version, but definitely in the Senate version – a board charged with recommending ways of trimming Medicare spending as it grows.

Will insurers be able to vary charges by category of customer?

The answer is yes in both bills. The House bill is stricter, allowing them to charge older customers no more than twice the charge on younger ones. The Senate bill is less restrictive.

Will there be one national exchange or 50 separate state exchanges?

The House bill has one, the Senate bill has 50.

Will illegal immigrants be covered?

No, in neither bill. The House version excludes undocumented workers from receiving low-income insurance subsidies. The Senate version goes further, denying undocumented workers the right to purchase insurance through the exchanges, even with their own money.

Will insurance companies be allowed to impose annual benefit caps – increasing the risk of medically-induced personal bankruptcy (in 2007 the cause of 62% of such bankruptcies)?
Even in the Senate bill, insurers, beginning in 2014, will not be allowed to cap annual or lifetime benefits. In the House bill, it is out-of-pocket expenses that are capped for low-income families: at no more than $5000 a year for an individual and $10,000 for a family earning 400% of the federal poverty level (with lower caps for families on even lower incomes).

At what rate will health care providers be reimbursed by the non-profit plan on the exchange?

In the House version the Public Plan would set reimbursement rates based on a percentage of the Medicare fee schedule. Conservative opponents in the Senate objected to this because Medicare fees are already lower than private payers pay. Hence in the final Senate Bill the fees of the non-profit plans in the exchange are prohibited from basing their fees on the Medicare rates

When will all these changes begin?

Many changes will come into effect immediately, but the big ones will be phased in, to ease the problems of transition. The key date in the House bill for the creation of exchanges and the ban on denials for pre-existing conditions is 2013. The equivalent date in the Senate version is 2014.

Finally this. It looks as though we are all going to learn lots about the budget reconciliation process if the House vote succeeds! If you need a guide to that process, there is one by Robert Keith, The Budget Reconciliation Process: Timing of Legislative Action at the website of the Congressional Research Service (www.crs.gov)

David Coates holds the Worrell Chair in Anglo-American Studies at Wake Forest University. He is the author of Answering Back: Liberal Responses to Conservative Arguments, New York: Continuum Books, 2010.

He writes here in a personal capacity.

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