Sunday, September 20, 2009

A Whiter Shade of Pale: Health Care Reform Proposals

To coin Procol Harum the dizzying health care reform noise has become a ‘whiter shade of pale’. Basically when we cut through the morass we have 2 camps:
1. Obama/Pelosi Care (HR 3200): a far left radical, some would say socialist, health care reform policy led by President Obama and Speaker Nancy Pelosi,
2. BaucusCare: a supposedly cost neutral and moderately bipartisan proposal coming out of the Senate Finance Committee on 9/16/09 led by Sen. Max Baucus (DMont.).

Both the Obama/PelosiCare and BaucusCare proposals are very complicated and nuanced pieces of proposed legislation. The following is a high level break down of the two choices and their solutions, costs and funding mechanisms.

Executive Summary
Obama/PelosiCare is ostensibly designed to ultimately have a government takeover of the health insurance industry squeezing out private insurers, individual choice of plan, provides for taxpayer funded abortion, is sketchy as to including illegal aliens, no medical malpractice tort reform measures, reduces Medicare, invokes taxes on the wealthy and is fiscally not feasible according to the Congressional Budget Office.

BaucusCare takes advantage of private insurance exchanges across state lines. The federal government would have oversight as to the minimum requirements in the plans, but it is a solution that does afford individuals more choice for their health care selections. However experts feel that there are some hidden costs in the plan that private insurers and other affected health care industries will pass on to individuals. BaucusCare has no provision for taxpayer funded abortions, does not allow for illegal aliens to be covered by the plan and starts to review medical malpractice tort reform. Funding would be through fees invoked on insurance companies, pharma, medical device companies, levies to insurance companies on ‘cadillac’ health insurance plans, cuts in Medicare and fees from companies and individuals that do not provide or take health insurance coverage.

BaucusCare is the best option to date and is on the right track since it represents compatible blending of both private health care choice and government oversight. However, both democrats and republicans have issues with various aspects of the plan, but not to the wildly partisanship associated with Obama/PelosiCare.

1. Obama/PelosiCare

  • Every American would be required to buy an insurance policy that meets certain government requirements. Even individuals who are currently insured — and happy with their insurance — will have to switch to insurance that meets the government's definition of "acceptable insurance."
  • A government run plan similar to Medicare would be set up in competition with private insurance, with people able to choose either private insurance or the taxpayer subsidized public plan. Subsidies and cost shifting would encourage Americans to shift to the government plan.
  • The government would undertake comparative effectiveness research and cost effectiveness research, and use the results of that research to impose practice guidelines on providers initially, in government programs such as Medicare and Medicaid, but possibly eventually extending such rationing to private insurance plans.
  • Private insurance would face a host of new regulations, including a requirement to insure all applicants and a prohibition on pricing premiums on the basis of risk.
  • Obama/PelosiCare would impose substantial penalties on small businesses if they did not provide government mandated types of health insurance to their employees. Most experts feel this is simply a back door means for the administration and Pelosi to force feed a government plan and ultimate takeover of health care since many employers may find it cheaper to simply pay the penalty than provide the government mandated type of coverage.
  • Obama/PelosiCare also opposes interstate health insurance sales for two reasons. First, they don’t believe a market can work in health insurance. They believe it is necessary for the government to look over everybody's shoulder to make sure patients are getting the care and coverage the government believes is appropriate at a price the government believes is affordable. Second, they want benefit rich policies that cover virtually everything, but are also very expensive. They want people to have the types of health insurance plans that the uninsured can't afford. They will ‘solve’ the affordability issue by imposing price controls and regulations on insurers and drug companies, and force taxpayers to subsidize the rest of the cost.

Do we see a theme here in the Presidential/Pelosi health care reform proposals?

Obama/PelosiCare Cost
  • Obama/PelosiCare is a $1.2 trillion bill that would be paid for primarily by tax hikes on the wealthy, Medicare and Medicaid savings and a decade long delay of a tax benefit originally promised to businesses in 2004.
  • Mr. Obama’s central arguments, and supported by the Pelosi factions, toward health care reform have always centered on controlling costs or, as he likes to say, ‘bending the cost curve down’ or is it?
  • The President’s specious argument around ‘bending the cost curve down’ conveniently eliminates any legislative proposals for medical malpractice tort reform and opportunities for consumers to purchase their health insurance across state lines. From 1990 through 2008 the trial lawyer lobby (which has the democrats in their hip pockets and has lined the democrat pockets,) has contributed almost 4:1 to democrats over republicans, i.e., $760,000,000 to democrats vs. $270,000,000 to republicans. So obviously Mr. Obama and the democrats are not going to kill their golden goose contributions with medical malpractice tort reform. Arguably, the CBO states that medical malpractice suits contribute only 0.5% of the overall cost of health insurance, but one would think Mr. Obama and his far left crew would look for every opportunity to, if not bend down the curve, at least put any pressure to sit on it a bit.
Obama/PelosiCare Funding
  • Beginning in 2011, married couples filing jointly who have a combined adjusted gross income above $350,000 will get hit with a 1% surtax. For couples making more than $500,000, this surtax jumps to 1.5%. For couples making more than $1 million annually, it soars to 5.4%. The legislation reserves the right to bump up the 1% and 1.5% surtaxes to 2% and 3%, respectively, if reform doesn't produce the desired savings in Medicare and Medicaid.
  • For single filers, the income threshold for the surtax is 80% of the level for married couples filing jointly. So, someone who makes more than $280,000 would pay the 1% surtax. The 1.5% and 5.4% charges phase in at incomes above $400,000 and $800,000, respectively.
  • $622 billion would be cut from Medicare and Medicaid, with a big chunk coming from Medicare Advantage, to pay for Obama/PelosiCare.
  • As far as bending the cost curve the nonpartisan Congressional Budget Office director Elmendorf is quoted as saying “… the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount and, on the contrary, the legislation significantly expands the federal responsibility for health care costs.” The Congressional Budget Office analysis of H.R. 3200, the main health care reform bill before the House of Representatives and supported by the President, says the reforms would cost $1.2 trillion over 10 years and add $239 billion to the federal deficit. The President’s and Pelosi health care plan appear to bend the cost curve in the opposite direction.
    Wasn’t this a ‘Dumb (Obama) and Dumber (Pelosi)’ bit?

Obama/PelosiCare Summary
No free market competition, no special interest reform, no freedom of choice for consumers and not fiscally responsible. Did we expect anything less from the two of them? Basically Obama/Pelosi Care is designed with one real central theme; SQUEEZE OUT THE PRIVATE HEALTH INSURANCE INDUSTRY OVER TIME TO COMMANDEER GOVERNMENTAL CONTROL OF 1/6TH OF THE ECONOMY. Obama/PelosiCare will not pass due to the above.

To those thinking a U.S. government run health insurance plan will be successful let’s look at the track record of other ‘successful’ government run programs.
  • the U.S. Postal Service was established in 1775 — you have had 234 years to get it right; it is broke.
  • Social Security was established in 1935 — you have had 74 years to get it right; it is broke.
  • Fannie Mae was established in 1938 — you have had 71 years to get it right; it is broke.
  • the "war on poverty" started in 1964 — you have had 45 years to get it right; . . . it hasn't worked and our entire country is broke.
  • Medicare and Medicaid were established in 1965 — you've had 44 years to get it right; they are broke.
  • Freddie Mac was established in 1970 — you have had 39 years to get it right; it is broke.
And please remind me again why the President and his factions can’t feasibly comprehend why their economic policies are tagged socialist?

2. BaucusCare
  • As an alternative to the controversial Obama/PelosiCare government run health option, BaucusCare, beginning in 2012, would provide $6 billion in federal seed funding to states or groups of states to set up nonprofit, consumer owned and operated health insurance cooperatives.
  • BaucusCare does not mandate employer sponsored health care(but see below BaucusCare funding for potential fines to employers).
  • These cooperatives would be unaffiliated with any government entity and would be self-insured meaning cooperatives would collect premiums from members and pay out claims from those funds. Cooperative insurance plans would be available to consumers through the state exchanges that are to be set up as part of the reform plan.
  • BaucusCare would dramatically expand eligibility for Medicaid, the government health care program that covers the poor. Beginning in 2014, eligibility for Medicaid would be raised to individuals earning up to 133% of the federal poverty line — $14,400 for an individual; $30,000 a year for a family of four. Childless adults, currently excluded from Medicaid, would be eligible
  • As mentioned above BaucusCare would set up a new system of insurance "exchanges," where millions of people without access to affordable coverage through an employer could find high quality insurance at rates heavily subsidized by the federal government. There would be a range of plans offered in the exchanges: bronze, silver, gold and platinum. Bronze plans would be the cheapest, offering the least amount of coverage; platinum plans, the most expensive, offering the most coverage.
  • Insurers would no longer be able to exclude applicants based on preexisting conditions or charge higher premiums for those with preexisting conditions. Insurers would have to offer coverage to anyone who applies for it and would be allowed to adjust premium rates only based on tobacco use, age, family size and geographic location.
  • Abortion funding: those eligible for federal subsidies to purchase insurance through exchanges would be able to choose from at least one plan that covers abortions beyond those in the case of rape, incest or to save the life of the mother (the exceptions that Medicaid and other federal programs currently allow) and one that doesn't. Those private plans that do offer the services would have to segregate funds internally to make sure that only individual premiums, and not federal subsidies, pay for actual abortion services.
  • Illegal alien funding: no illegal alien funding. The bill would require individuals and families eligible for subsidies to prove their citizenship by providing their names, Social Security numbers and dates of birth. Those who cannot prove their citizenship would not be allowed to purchase insurance through the exchanges, with or without subsidies.
  • Medical malpractice tort reform: BaucusCare includes a section expressing support for a review of malpractice reform. The section specifically endorses reform approaches like those expressed by President Obama: funding for pilot programs to study ways to reform the malpractice system without capping malpractice awards.

    BaucusCare Cost
    Standing alone at a podium on 9/16 Senate Finance Committee chairman Max Baucus announced a $856 billion plan (the Congressional Budget Office puts the bill's total cost at a lower $774 billion), designed to protect millions who have unreliable insurance or no coverage at all, at the same time restraining the explosive growth of medical costs. To the credit of Sen. Baucus and the Senate Finance Committee’s gang of six charged with a senate health care proposal the CBO estimates the proposal would reduce the ranks of the uninsured by 29 million over a decade. They also predicted the plan would trim federal deficits by $49 billion over the same period and suggested savings in the range of hundreds of billions of dollars might result for the decade that follows.
  • However, if history is any predictor of predictors for controlling health care costs, when Medicare was launched in 1965, Part A was projected to cost $9 billion by 1990, but ended up costing $67 billion. When Medicaid’s special hospitals subsidy was added in 1987, it was supposed to cost $100 million annually, but it already cost $11 billion by 1992. When Medicare’s home care benefit was added in 1988, it was projected to cost $4 billion in 1993, but ended up costing $10 billion. So the jury will be out for quite some time as to whether BaucusCare is cost neutral.
BaucusCare Funding
  • BaucusCare imposes $93 billion in fees on insurance companies, drugmakers and other sectors of the health care industry starting in 2010 with $6 billion in ‘fees’ (taxes) on insurance companies $4 billion on medical device makers, $2.3 billion on drug manufacturers and $750 million on clinical laboratories. These would be used to help pay for the reform and is designed to alleviate the effort's sticker shock that has angered some voters. Insurers will have potentially millions of new customers because of the individual mandate.
  • The Baucus plan also imposes a 35 percent excise tax on health insurance plans that offer benefits in excess of $8,000.
  • BaucusCare proposes cutting payments to hospitals and other providers that serve recipients of Medicare, the federal health care program for the elderly. BaucusCare would force millions of senior citizens out of their Medicare Advantage (MA) plans — the private insurance component of Medicare — and back into the government run fee for service program. Medicare Advantage payment rates would be reduced by requiring these plans to bid against each other — but the fee for service would remain exempt from competition. The resulting cut in Medicare — $124 billion over ten years — would come directly out of the pockets of the beneficiaries.
  • BaucusCare requires every American to purchase a government designed minimum insurance package and would also collect nearly $50 billion in penalties from people who do not obtain health insurance and employers who do not offer their workers affordable options for coverage. Beginning in 2013, individuals would be required to have health insurance. Individuals and families who do not have insurance for more than three months in a given year would be subject to an annual excise tax of $750 and $1,500, respectively, if their income is below 300% of the federal poverty line (or $66,150 for a family of four). Tax penalties for individuals and families with incomes above that would be $950 and $3,800. Roughly half of Americans, mostly middle class, would be affected.
  • Employers would not be mandated to provide coverage, but would have to pay an annual tax penalty if any of their workers receive subsidies to purchase insurance through the exchanges. The tax penalty assessed to the employer would be either $400 per worker (regardless of how many workers receive subsidies) or the average cost of subsidies in a given year multiplied by the number of workers receiving them in the company — whichever is lower. Businesses with fewer than 50 employees would be exempt from this tax. Initially, only individuals and businesses with 50 or fewer employees would be eligible to shop in the exchanges, but by 2017, states would have to develop plans to phase in larger employers. By 2022, all businesses would be eligible to purchase coverage through the exchanges. Insurance plans for sale in the exchanges would be vetted by the Federal Government to meet minimum standards for coverage.
  • Starting in 2013, the Federal Government would offer a refundable tax credit to low and middle-income individuals and families who purchase certain policies through the state exchanges. The credit would be available to individuals and families who earn up to 300% of the federal poverty level, which for a family of four would be about $66,000 in 2009.
BaucusCare Summary
  • The good news under BaucusCare is there is no government plan per se, but insurance exchanges and allows for the first time people to purchase health insurance across state lines. It would allow states to establish interstate compacts for insurance purchasing beginning in 2015.
  • It would also allow insurers to develop national products that could be sold in any state. National plans would be exempt from state mandated benefits. Moreover the employer mandate and the tax increase on wealthy Americans is eliminated.
  • The plan would force states to increase Medicaid eligibility to individuals at 133 percent of the poverty level, and to enroll single, childless adults. While the federal government would pick up some of the increased cost, states would be responsible for at least some of the increase, a provision that will undoubtedly strain already tight state budgets.
  • While the employer mandate is much watered down, it is still there. The Baucus plan has no specific requirement for employers to provide insurance. But any employer who fails to do so would have to pay the cost of all subsidies that the government provides his or her workers to help them pay for insurance on their own, up to $400 per worker. Since it will ultimately be the worker who pays the mandate's cost, through reduced compensation or reduced employment, the government will be giving the worker a subsidy with one hand, and taking it back with the other.
  • The bill would cut payments to the Medicare Advantage program. In response, many insurers may stop participating in the program, while others could increase the premiums they charge seniors. Millions of seniors will likely be forced off their current plan and back into traditional Medicare.
  • The "fees" on prescription drug companies, medical device manufacturers, and clinical laboratories is simply a way of hiding taxes, and will result in higher health care costs that will be passed on to consumers.
  • Lawmakers in both parties are questioning whether Baucus's main revenue source, an excise tax on insurance companies for their most generous insurance policies, would simply be passed on to consumers.

3 comments:

Michael Kirsch, M.D. said...

Tort reform was rather low down on your list of Obamacare flaws, but it is very high on physicians' list. The president is devoting an insulting $25 million (in a $1 trillion health reform plan) to examine medical malpractice concerns. This is a joke. Physicians are not only tortured by the unfair medical malpractice system, but we spend billions on defensive medicine and expose our patients to the risks of unneccessary medical testing. See www.MDWhistleblower.blogspot.com

Anonymous said...

“President Obama’s speech last week really moved me. Despite what my colleagues think of me. If what he says is what will EXACTLY happen, how can I not hope and work towards that cause”? Mike Oliphant runs a small Utah health insurance website www.benefitsmanager.net/SelectHealth.html and www.dentalinsuranceutah.net whom deals with hundreds of people on a day to day struggle to be approved for health insurance. “I get hopeful that I can finally tell people they can qualify for coverage REGARDLESS of their pre-existing medical condition”. Mike’s concern is that Obama’s people won’t deliver what he urges on areas within his speech. “I really have been moved by this guy and wish we could just talk so he could understand the frustration of a health insurance agent. I have been involved on a political level within the state of Utah and their struggle for health care reform. I have seen and regrettably been part of politics at work. I have learned lessons through baptism of fire with politics. For instance, I struggled against House Speaker Clark and H.B. 188 because that was what I was urged to do from our industry (that was all I knew). But after awhile and countless meetings with state and private carriers in Utah, I began asking myself if I was doing the right thing. I realized over time that House Speaker Clark really means what he says and is hard nose about getting reform done in Utah. I got that there wasn’t any behind the scene conspiracy scheme or personal objective of Mr. Clark. His bill makes allot of positive changes in the “health insurance reform” world of Utah. He claims that reform just doesn’t stop there, it must continue through “health care reform”. You see, there is a major difference between the two reforms. Clark “gets it” but I really worry that Obama’s administration doesn’t because if you have noticed the subtle language change of dropping “health care reform” and going to “health insurance reform”. See more about what Utah has accomplished here which utilizes private carrier involvement with true reform. If you can believe it, they reached it with an objective of $500,000. Perhaps the feds should take a look at Utah and House Speakers Clark’s bill 188. www.prweb.com/releases/utah_health_insurance/health_care_reform/prweb2614544.htm. Now I find myself on the “other side” of the fence furthering Utah’s cause. Let’s hope we don’t all have a mental breakdown nationally and just take a honest look at the proposals.

jwardintl said...

Thanks for postiing these view points. There is much to consider. I am concerned that we allow debate and not ram through legislation to meet an arbritrary deadline to have a bill set by either side.

How do we require publication of all proposed plans and allow time for debate?