HEALTHCARE: REVIEWING THE BIDDING

Sam Smith - The Senate healthcare bill combines good and bad proposals in an insidiously corrupt manner unlike any legislation I've ever seen. This creates a strong argument, as Rep. Slaughter proposes, to drop the measure and start all over. But with what? The same politicians being bought by the same health industry lobbyists? On the other hand, John Cohn of the New Republic, writing for Kaiser Health News - makes an argument on the measure's behalf using specific examples. Your editor has taken two distinctly different positions in the past few weeks and now is leaning towards futile agnosticism. I've never waffled so badly on any legislation.

The problem is that the bill is copiously dishonest, designed to delay and deceive, so that whatever benefits it offers will be achieved at uncertain but extensive fiscal and moral expense. It symbolizes politics in the adhocracy that has arisen following the fall of the First American Republic.

Here are some of the important unresolved issues:

The Hill - Rep. Louise Slaughter (D-N.Y.), the chairwoman of the House Rules Committee and co-chairwoman of the Congressional Pro-Choice Caucus, says the Senate bill would charge seniors higher premiums, would fail to nix health insurers' antitrust exemption and would not go far enough in extending coverage to people in the U.S. "Supporters of the weak Senate bill say 'just pass it - any bill is better than no bill,' " Slaughter wrote. "I strongly disagree - a conference report is unlikely to sufficiently bridge the gap between these two very different bills. . . It's time that we draw the line on this weak bill and ask the Senate to go back to the drawing board," she said. "The American people deserve at least that."

Jonathan Cohn, Kaiser Health News - It's certainly true that, under the terms of the Senate bill, insurance would cost more and cover less than many of us would prefer. But would it really produce little social progress? Is it really worse than nothing?

One way to answer this question is by comparing how a typical family would fare with reform and without. At my request, MIT economist Jonathan Gruber produced a set of figures, based on official Congressional Budget Office estimates. The results tell a pretty compelling story, particularly when put in human terms.
Let's imagine it's 2016 and you are an administrative assistant, a garage mechanic or perhaps trying your hand at consulting for the first time. You're married, just turned 40 and have two kids to feed on a household income of around $50,000. You want to buy health insurance, but can't get it through an employer. How much will it cost? And how much--or how little--protection will it provide?

If reform doesn't pass, according to Gruber's figures, the average premium for the non-group market--that is, the market for people buying coverage on their own--will be around $12,000 a year. Right off the bat, you're spending a fifth of your income on health insurance.

But what does it cover? Policies in the non-group market are notoriously spotty and unreliable. And benefit requirements vary enormously depending on the state. Many allow considerable, sometimes unlimited, out-of-pocket expenses. For the sake of comparison, though, let's assume you have a policy with a deductible no higher than that allowed for a Health Savings Account. According to Gruber's projections, that would mean you're on the hook for--wait for it--another $12,000, plus a few hundred in change.

Put it altogether and that's a total liability of around nearly $25,000--about half of your income.

That may actually be a best-case scenario in one sense. If you're going to hit that high deductible, chances are pretty good that someone in your family has a chronic medical condition. And if you or your family member has had that condition all along, insurers might not even sell you a policy. Maybe you have diabetes. Or you're married to a cancer survivor. Maybe one of your kids has asthma. Whatever the case, chances are you can't get health insurance at all. Your total risk of loss would be, well, every single penny you have.

So what happens if reform does pass? For starters--and this is no small thing--the insurance company will have to sell you a policy, no matter what pre-existing conditions your family brings to the table. And you'll know from the start that the policy will cover basic services because the government will be defining a basic benefits package. That package is going to include a broader range of services than the typical non-group policy would without reform. So when your doctor recommends a standard test or procedure, you won't have to panic it falls into some hidden policy loophole.

But what will that coverage cost? The basic premium is roughly the same, according to Gruber's calculations that he extrapolated from official Congressional Budget Office estimates. But that $50,000 income means you're also eligible for federal subsidies. Large federal subsidies. In fact, the government will cover about two-thirds of the price, so that you're left owing just $3,600.

Now, you could end up spending a lot more on medical care if you or someone in your family gets sick. But here, too, the federal government would step in to help. Under the reforms, the government would limit out-of-pocket spending to around $6,000 per year. Combined with the premium, you'r on the hook for around $10,000 total, or about a fifth of your income.

That's not pocket change, for sure. A family making $50,000 will have to make serious sacrifices to find $10,000. But it's better--light years better--than finding $25,000 or more. It's potentially the difference between having to give up your home, get an extra job or declare bankruptcy. Just knowing the bills that could come will be the difference between getting care you need--and skipping it, at grave risk to your health. . .

Washington Post - A Senate plan to cut Medicare to pay for an overhaul of the health system would threaten the profitability of roughly one in five hospitals and nursing homes over the next decade, according to a new analysis by the government official responsible for monitoring the popular health program.

Rick Foster, chief actuary for the Centers for Medicare and Medicaid Services, questioned the sustainability of many of the proposed cuts, the major source of funding in a plan to extend insurance to more than 30 million additional Americans.

The proposal to reduce payments to hospitals and other providers, to force them to adopt more efficient practices, could prove particularly problematic for institutions that serve large numbers of Medicare patients, Foster wrote. He warned that many institutions might drop Medicare, "possibly jeopardizing access to care for beneficiaries."

Moreover, he wrote, simulations by his office suggest that 20 percent of institutional medical providers would become unprofitable within a decade.

Sam Smith, Progressive Review - The pending healthcare bill greatly increases the chances of bankruptcy in two ways:

- By mandating purchase of health insurance by many currently uncovered Americans, which the legislation's authors think they can afford, but which their checking account may say they can't.

- By subsidizing to an inadequate degree private health insurance plans - with the same effect. . .

And while there have been pieces about the potential loss of coverage under Medicare, many of these have been disingenuously dismissive. This is a serious question, all the more so because of the strong effort on the part of some Democratic senators and the nefarious Peterson Foundation to undermine both Medicare and Social Security. . .

There is no doubt that the pending legislation is one of the greatest subsidies ever granted to a private industry. There is no doubt that much of the legislation is indefensible both morally and pragmatically. There is no doubt that some people will be helped and others hurt, but no seems interested in determining how many of each and in what ways. . .

Still, just as there are strong arguments for handing your wallet to a robber, so there are strong arguments for voting for this measure. If it saves tens of thousands of lives, the fact that it also subsidizes the health insurance industry is a problem we may want to put on hold.

Darcy Burner, Open Left - There are four key questions we can use to evaluate the proposed reforms:

If we look at the current Senate proposal, the scorecard is not promising:

- Affordable coverage for everyone: FAIL. The latest CBO estimates for the Senate bill say that a family of four with a household income of $54,000/year should expect to pay 17% of their gross income on healthcare - about $9,000/year. (And that was when there was a public option to hold down costs) That's more than they'll spend on federal taxes. That's more than they'll spend on food. I'm guessing if you took a poll, very few Americans would consider that affordable. And because of the way they've approached this, there's no effective cost cap on premiums and nothing providing downward pressure, so this is a problem that would get worse rather than better over time.

- Value: FAIL. In January 2007, the McKinsey Global Institute released a study showing that the United States spends twice as much on healthcare as the rest of the industrialized world. It costs our economy a extra $480 billion per year -- roughly $1,600 for every man, woman and child in the country. It's not because we get more effective care: we have lower life expectancy and higher infant mortality. Our results are worse, even though we're spending twice as much.

- Fixing insurance company injustices: PASS. The biggest areas of insurance company abuse -- denying coverage to people with pre-existing conditions, canceling policies retroactively after people get sick, discriminating in rates on the basis of gender - appear to be addressed by the bill. I'll give them the benefit of the doubt here.

- Trajectory: FAIL. Finally, the question is not only whether the bill improves each of the three areas in the short term, but whether they will improve in five years or ten years or twenty years. What the Senate is currently discussing will make healthcare more expensive for individuals, families, and businesses, with no check on the insurance companies and none of the systemic reforms that might fix the incentive problems. They're on track to make the problems worse over time rather than better.

Kaus Files - David Leonhardt, complaining that the House health care bill doesn't do enough to control costs, touts a particular model for imposing parsimonious changes on the nation's health care delivery system:

"Twice a year, an outside advisory board sends Congress a list of suggestions for Medicare payment rates, based on the available evidence. Congress generally ignores them, in deference to the various industry groups that oppose any cuts to their payments."We already have a wonderful model for how to avoid such interference. It's called the Federal Reserve. The Fed is charged with setting interest rates based on economic conditions, not politics. The Senate bill would create such a commission for Medicare."

But does the Senate bill really have a cost-cutting commission that's like the Fed? The Fed is a highly independent agency whose actions take effect without approval from Congress. Maybe Congress could overturn a Fed action, but it would require a new piece of legislation, passed by both houses and signed by the president. In contrast, the current cost-cutting "MedPAC" panel submits proposals that then have to be passed as new laws by Congress or else they don't take effect (which, as Leonhardt notes, is usually what happens).

The logical middle ground would be to have an independent panel whose recommendations take effect unless they are somehow vetoed by Congress without presidential involvement, or whose recommendations must be affirmatively passed by Congress but get the benefit of a streamlined, limited-amendment up-or-down fast-track "base closing" type of legislative process. . .

As far as I can see, it's actually a whole lot closer to Leonhardt's Fed model than I'd thought. In general, there is an independent panel, and if Congress does nothing, its cost-cutting rules take effect. What's more, the "fast track" process described by Klein would not allow Congress to simply stop the board's rules, only to substitute its own plan to save the same amount of money. This would be a very powerful unelected board. . . .

Ricardo Alonso-Zaldivar, Kennebec Journal & Morning Sentinel - Americans will feel the pain before the gain from the health care overhaul Democrats are close to pushing through Congress.

Proposed taxes and fees on upper-income earners, insurers, even tanning parlors, take effect quickly. So would Medicare cuts.

Benefits, such as subsidies for lower middle-income households, consumer protections for all, eliminating the prescription coverage gap for seniors, come gradually.

"There's going to be an expectations gap, no question about that," said Drew Altman, president of the nonpartisan Kaiser Family Foundation. "People are going to see their premiums and out-of-pocket costs go up before the tangible benefits kick in."

Most of the 30 million uninsured helped by the bill won't get coverage until 2013 at the earliest, well after the next presidential election.

More than two-thirds of Americans get their coverage through large employer plans and their premiums won't go up because of the legislation, according to number crunchers at the nonpartisan Congressional Budget Office.

But Congress can't abolish medical inflation, so don't hold your breath waiting for premiums to drop.

For people who buy their own insurance policies -- about one of every six Americans -- premiums will go up. But that's for better benefits prescribed under the legislation. And about half of them would get tax credits to substantially lower their costs. . .

The final package could end up looking like the Medicare prescription drug benefit, delivered through private insurance companies, but subsidized and regulated by the government.

Just like seniors now pick their drug coverage from a range of private plans, Americans who were previously uninsured would select brand-name coverage through a new kind of insurance supermarket called an exchange. Like seniors today, they would have to pay part of the cost themselves. Most people with employer coverage wouldn't need to go to the exchange.

The exchanges could be national, regional, or state-based. They'd be up and running in 2013 under the House bill, a year later in the Senate version. Around that same time, other major changes would snap into place:

- Health insurance companies would be prohibited from denying coverage to people with health problems, or charging them more.

- For the first time, Americans would be required to carry health insurance, either through an employer, Medicare or Medicaid, or by buying it themselves. Refusal would bring fines, except in cases of financial hardship.

- Federal subsidies would start flowing to individuals and small businesses buying coverage in the exchange, helping them afford the premiums.

- Most employers would be required to offer coverage or pay a tax under the House bill. In the Senate version, employers would get a bill if any of their workers got subsidized coverage in the exchange.

- Medicaid coverage would be expanded to pick up millions more living near the poverty line.

Debated since President Harry Truman's administration, health care overhaul would finally be in place. An estimated 94-96 percent of Americans, not counting illegal immigrants, would have coverage.

But there's a catch.

Cost is the Achilles heel of the whole complicated undertaking. To keep the cost of the bill at around $1 trillion over 10 years, lawmakers had to limit subsidies for people seeking coverage through the exchange.

The aid tapers off dramatically for households with solid middle-class incomes. A family of four making $66,000 a year would still have to spend about 10 percent of its income on premiums -- less than a mortgage but more than a car payment. And that's without counting co=payments and deductible. Several million otherwise eligible Americans could still be priced out.

Labels: HEALTH INSURANCE

12/23/2009 | Comments