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No, this is NOT another Public Option Diary.  Nor is it an attempt to in any way, down play the importance of the Public Option.  I like many of you have read, diaried, and commented at length about the Public Option in all its forms, as well as the legislative process involved in getting a bill passed with a strong Public Option in it.  While I would agree that it is a critically important aspect of the health insurance legislation and deserves a great deal of attention, it is not the only important part of the legislation that we need to be concerned about.  This diary will explore some of these other important aspects that we should be concerned about and give some of our attention, including how the legislation is paid for, the insurance exchange participation limitations, and the 2013 implementation.  If you are interested in one or all of these topics, please join me after the jump /\ for more details and discussion.

Let’s get right down to it, shall we:

How Its Paid For - As many of you know, the White House, the Senate and the House Dems. have all agreed that the legislation will not increase the deficit, that the government will provide subsidies for lower and lower-middle income folks to purchase insurance, and that these subsidies will NOT be paid for through middle class tax increases.  As a result, the legislation must include ways of paying for these subsidies not involving the middle class, but that’s where the agreement between the House and Senate ends.

In the versions of the legislation coming out of the House committees, they pay for the subsidies by imposing an excise tax on those earning at or above $500,000 a year or the top 1%.  This is sometimes called the "Millionaires" tax, and is basically the Robin Hood principle, taking from the rich to pay for the poor (no criticism intended).  Yes , this is the payment version that we (the progressives) favor.  It will not effect the middle class, or even the upper middle class income levels.  From a political perspective, it is either neutral or beneficial to 99% of the voters and is detrimental to only 1% of the voters, and that upper, upper 1% don’t for Democrats anyway.  It is also the populist approach for financing the subsidies.  In the current climate of the Wall Street collapse and big CEO bonuses, who doesn’t want to inflict some pain (however minor) on these top earners, and I use the term "earners" in this case very loosely.

In the Senate, the Finance committee version of the legislation pays for the subsidies by imposing a tax on high benefit private health insurance policies or so called "Cadillac" policies.  Since these high benefit policies also come with high premiums, it is thought that they are only being purchased by upper end individuals and employers who can afford them.  Therefore, the assumption being made is that this payment proposal should be similar to the House version, only effecting the upper class.  But, not so fast, there are some flaws in this assumption.  First, while this method requires the private insurance companies to pay the additional tax on the Cadillac policies they issue, it does not require that they pass down the tax to only the holders of these Cadillac policies.  If they choose, they can pass the cost of this tax onto any or all of its customers, which means it could pass the tax along to middle class policy holders.  Second, there is no requirement for private insurers to continue to offer these Cadillac policies.  Many may decide to drop them to avoid the tax.  If this happens, which is certainly possible, it will substantially reduce the amount of revenue the government anticipates to get to pay for the subsidies, resulting in either more deficit spending or cuts in subsidies down the road.  That’s why at first glance the Senate’s proposal looks fine, but as we dig a little deeper, it is one we should oppose.

However, what concerns me most about the House and Senate payment proposals is that they are worlds apart, and at some point they have to come togther if we are going to pass a bill.  I have heard reports that some in the House consider the Senate’s proposal to be a "non-starter" which is political speak for "it don’t got a chance."  On the other side, I haven’t heard a single Senator come forward and say they are enthused about the Houses’s proposal to tax millionaires.  I am sure there are a number of Dem Senators who oppose the millionaires tax, after all many of their friends are millionaires and billionaires and would be in favor of raising taxes on your friends?

If you ask me, there is a greater threat that this payment issue could sink the whole bill, than from disagreements on the public option.  At least with the public option they are discussing possible compromises.  I have not heard about any such discussions going on between the House and Senate with regard to how to pay for subsidies.  I sure hope they are discussing this behind the scenes.

Insurance Exchange Participation - The legislation proposes the creation of an Insurance Exchange which would include a variety of private insurers and hopefully a government run public option, through which individuals can purchase affordable health insurance policies.  However, this exchange would NOT be available to those receiving health coverage through employer-based programs, which are the majority of us.  Now, while the public option will provide competition to private insurers on the exchange, providing affordable coverage for all those able to purchase off the exchange, what happens to the rest of us in the employer-based private insurance wilderness?  President Obama has promised that we can all keep the insurance we have, but he hasn’t guaranteed that we won’t have to pay more for it.  Since private insurers will have to substantially reduce the costs of the policies they provide on the exchange to compete with the public option, they may, probably will substantially jack up premiums to the captive employer based policies to maintain their massive profits.  In response, employers will probably either pass the added costs on to us, the employees, or dump coverage altogether leaving us to fend for ourselves.

Senator Wyden has been pushing his amendment to open the Exchange up to all, not just those outside the employer-based umbrella.  This would prevent the potential for private insurers from gouging those of us in the employer-based system.  Unfortunately, he is like the Man-of-LaMancha, with few other Senators supporting his cause.  Even President Obama has said from the beginning that the exchange is meant to help the un-insured find affordable coverage, and has offered no support for expanding its availability to the rest of us.  He has chosen this tactic to help down play the effect the public option will have on the insurance market by limiting its availability to uninsured individuals in hopes this will make it less threatening to them and reduce their opposition.

But assuming the Wyden amendment fails, which realistically seems likely, we could end up with a two-tiered insurance system with private individuals finding affordable coverage on the Exchange from the public & private providers, while those getting coverage from private insurers through employer based programs pay substantially higher premiums for basically the same coverage.  President Obama and other Dems. in congress may be gambling that those in employer based systems will then demand legislation giving us access to the cheaper policies offered on the exchange, making it easier for them to open it up down the road.  They may be right.  But it also could create a backlash from employer based individuals who think they were told they would not be effected by the health care legislation, and now paying much more for health coverage due to the legislation, will feel they were sold a bill of goods.

Bottom line is if we can open up the Exchange to everyone now, we can avoid these problems.  But make no mistake about it, it is a significant up hill push.

2013 Start Date  - Whenever you hear someone say something like "coverage will start in Year One", "Year One" as prescribed in the current legislation is 2013.  That is because it will take some time to set up the new insurance exchange and establish HHS administrative oversight.  Understandable, but what happens to those desperate for health coverage between now and 2013?

President Obama touched on this in his speech to Congress, speaking in generalities about the need for a government safety net to help out desperate individuals between now and 2013.  Representative Clyburn also talked about including something in the House bill to address this coverage gap between bill passage and implementation.  But I have not heard much lately.

Besides being an all to real problem for the uninsured in need, it could create a political problem for Dems. in 2010 and 2012.  No matter how much our candidates in 2010 & 2012 campaign on the theme of "Don’t worry, the calvary is coming in 2013", Republicans will portray the Democratic health insurance legislation as a failure or at least claim that it won’t help when it goes into effect.  It will be a "he said, she said" type of campaign.  Democrats would be far better off if we can point to some tangible positive results from the legislation going into the 2010 & 2012 races.  Let’s hope we can get something in the bill to address this implementation lag.

Well that’s it!  My point is that besides the public option, we need to pay some attention to the issues above, because if we don’t put some pressure on Congress to address them in the way we want, I am afraid bad things will happen.

Thanks for reading!

Originally posted to Doctor Who on Sat Oct 24, 2009 at 06:52 PM PDT.

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Comment Preferences

  •  Tip Jar (21+ / 0-)

    "Some men see things as they are and ask, 'Why?' I dream of things that never were and ask, 'Why not?"

    by Doctor Who on Sat Oct 24, 2009 at 06:52:29 PM PDT

  •  Well Done and Merits Wide Attention (4+ / 0-)

    I hope your diary gets it.  Thanks.

    "Give me but one firm spot to stand, and I will move the earth." -- Archimedes

    by Limelite on Sat Oct 24, 2009 at 07:06:02 PM PDT

  •  The financing point is good (4+ / 0-)
    ...and one that has been far, far too neglected in my opinion. It's quite a different proposition to fund a benefit for the middle class from taxes on the rich, who have a grossly disproportionate share of the income right now in America, than to fund it from taxes on the middle class. If you do the latter, then effectively there may be no benefit at all.

    We all know these reforms are not going to change the fundamental structure of the system. They're only funneling subsidies through the existing one. So if they're going to accomplish anything, those subsidies should come from the rich.

    This diary won't get widespread attention here, but the financing point is important.

    Join ZBlogs--an explicitly leftist blog. www.zmag.org/blog

    by khin on Sat Oct 24, 2009 at 07:10:22 PM PDT

  •  The main battle was joined at Public Option... (2+ / 0-)
    Recommended by:
    Doctor Who, Cassandra77

    But it could have been joined at various other places. I suppose historians will get around to why it was PO, rather than one of the others.

    The best argument for keeping all of the other potential battle locations simmering nearby in our heads is to be on guard against conservadems/republicans trying to stealthninja some crap into our reform.

    So I appreciate discussion of the broader campaign theater, even while I acknowledge that the main battle is at PO.

  •  the regulation stuff has to start right now. I (2+ / 0-)
    Recommended by:
    Cassandra77, CalliopeIrjaPearl

    can see them saying they have to phase in some stuff, but regulating the industry, extending dependent childrens coverage until age 26 on parents plans, stopping exclusions for preexistings, etc. That should start now.

    Insulin in Ca public schools ruling STAYED during appeal. Great ruling for 15,000 diabetic students. http://preview.tinyurl.com/dxafql

    by foggycity on Sat Oct 24, 2009 at 07:16:24 PM PDT

    •  Insurance Company Restrictions (2+ / 0-)
      Recommended by:
      Cassandra77, foggycity

      I think these will go into effect soon after the legislation is signed into law.  But any control on what private insurers charge us won't be until 2013.  Between now and then, who knows what they'll charge.

      "Some men see things as they are and ask, 'Why?' I dream of things that never were and ask, 'Why not?"

      by Doctor Who on Sat Oct 24, 2009 at 07:24:14 PM PDT

      [ Parent ]

      •  need a grand jury trial for collusion by (1+ / 0-)
        Recommended by:
        Cassandra77

        the insurers.

        Insulin in Ca public schools ruling STAYED during appeal. Great ruling for 15,000 diabetic students. http://preview.tinyurl.com/dxafql

        by foggycity on Sat Oct 24, 2009 at 07:30:27 PM PDT

        [ Parent ]

        •  No Good (1+ / 0-)
          Recommended by:
          Cassandra77

          Both Baseball and the Private Health Insurance Industry are EXEMPT from anti-trust laws, so they can legally do all the collusion and price fixing they want.  However, that is another thing that I should have covered, Schumer is contemplating including in the health care legislation an amendment to stripthe insurance industry of their anti-trust exemption.

          "Some men see things as they are and ask, 'Why?' I dream of things that never were and ask, 'Why not?"

          by Doctor Who on Sat Oct 24, 2009 at 07:52:22 PM PDT

          [ Parent ]

          •  I was talking, but not typing, about (0+ / 0-)

            after the anti trust exemption repeal.Pelosi said it would be in the house bill. only need one provable communication from one insurer to the other. I hope they clean up the corporatism of hospital owners too. Reading some really sleazy stuff about Tenet's owner and a horrid history.

            Insulin in Ca public schools ruling STAYED during appeal. Great ruling for 15,000 diabetic students. http://preview.tinyurl.com/dxafql

            by foggycity on Sat Oct 24, 2009 at 10:29:41 PM PDT

            [ Parent ]

    •  stuff has already started in the stimulus bill (0+ / 0-)

      including $2 billion to community health centers for operating and building new ones. There are 1300 around the country. Low cost excellent care, primary docs mostly. take Medi –care –aid, private insurance and sliding scale. They don't turn anyone away ---- unless they run out of $$ which they were doing.

      HIT, the tech stuff is being pushed ahead now, and education grans are being phased in, as well as prioritizing where biggest need to look at best practices.

      Paying for it is not that big a worry. We already pay for all the care; we are just shifting it around.

      And taxes need to be made more progressive. It is the only way to get it through people's heads that they are part of a group, a country, and they need to pay dues and keep it going and not just feed off it.

      If they start taking some responsibility for it, for us as a nation, maybe they won't be so quick to trash us.

      We are in a time where it is risky NOT to change. Barack Obama 7-30-08

      by samddobermann on Sun Oct 25, 2009 at 04:20:48 AM PDT

      [ Parent ]

  •  The advantage of using Medicare as the basis (1+ / 0-)
    Recommended by:
    Cassandra77

    for the public option is that the administrative machinery is already in place, so it could be implemented much quicker.

    If company based medical coverage rates are jacked up, the ideal solution would be for companies to increase their employee's pay by the equivalent of the costs of health coverage from the exchange, then drop corporate coverage.  Then both corporations and their employees would escape increases specifically targeted at corporate plans.  But we all know that corporations will not necessarily do the ideal thing.

    In the end though, no matter how we handle insurance coverage, it won't matter if the growth in health care costs is not reduced.  This would probably require a major modification of the fee for service method that most medicine in the US uses.

    "For the world is changing: I feel it in the water, I feel it in the earth, and I smell it in the air."

    by Thutmose V on Sat Oct 24, 2009 at 07:58:52 PM PDT

  •  When CBO scored the tax on Cadillac policies, (4+ / 0-)

    they found that most of the revenue will come not from the actual tax but from employers offering cheaper policies and paying the difference in salary (that would be taxed as usual).

    Exchange is supposed to become available to everyone at much later date (2018?). I doubt policies offered on Exchange will be much cheaper than those offered by employers. The primary goal at this point is to deal with the mess on the individual market. Look at Massachusetts (although it doesn't have a public option).

    There is probably no way to set up anything in time for 2010 election. In Massachusetts it took close to a year to set up the Connector. But they could have done smth by 2013 if they wanted. My understanding is that late start of the reform is partially a gimmick to reduce the 10 year cost of the plan.

    Overall, great diary.

    •  That's a repug talking point. Late start not to (0+ / 0-)

      hide/delay costs. A lot is being spent to fix the system. electronic records make for better health care. It also exposes a lot of info Insurance co hide.

      Money is going into training professors of nursing so they don't have to turn away nursing school applicants. The is an exploding shortage of nurses.

      Money for scholarships for primary care docs and for loan forgiveness. there is much much more.

      while 45k die from lack of care/yr, 198k die in hospitals from PREVENTABLE medical errors each year. That needs to stop. Even quicker than lack of care.

      Read some list of ARRA health care, on the white house site, and read at least the titles of HR 3200.
      see thomas.gov.

      We are in a time where it is risky NOT to change. Barack Obama 7-30-08

      by samddobermann on Sun Oct 25, 2009 at 04:30:39 AM PDT

      [ Parent ]

  •  Option would be available to all (1+ / 0-)
    Recommended by:
    Rachel Q

    If people simply dropped their employer based insurance.

    Of course employers pay half (at least) of the premium now, and those covered by an employer would have to choose the cheaper of the two alternatives.

    In the beginning many thought of taxing all insurance as regular compensation as a way to pay.

    "Don't fall or we both go" Derek Hersey

    by ban nock on Sat Oct 24, 2009 at 08:20:41 PM PDT

    •  That was McCain's plan, I think. (1+ / 0-)
      Recommended by:
      LordMike

      In the beginning many thought of taxing all insurance as regular compensation as a way to pay.

      In retrospect, the health insurance exemption was an historic mistake, but ending it suddenly would leave a lot of people hurting.

  •  I've argued all along that if people find that (1+ / 0-)
    Recommended by:
    Doctor Who

    their expectations are not met with the passage of a healthcare reform bill, the political consequences may be quite brutal. There's been a lot of reporting about the "debate", but virtually no specifics analyzed. I bet that 90% of Americans haven't a clue. BUT, they will have expectations. Not only is waiting a few years dangerous, but the failure to control costs for employer based coverage is also quite risky.

    And you make a very astute observation that people may compare who benefitted the most from the bill, and may become angry by feeling shortchanged. The tinkering and toiling that takes place daily, I believe, foreshadows a very convoluted conference compromise (if it gets that far), and I don't see
    how cost controls, mandates, exchanges, staggered start dates, exclusions, policy designs and generating revenue to pay for it all can be packaged to make the voter happy.

    Only a robust public option can make an otherwise complex bill palatable, because everyone knows they would have a chance to "get in". Great Diary!!!!

    •  Just because you don't understand what is (0+ / 0-)

      happening doesn't mean that does who have been reading and working with it find it that confusing.

      Much of the delay  for the exchange is for the private plans to get their shit together and for the cost benders and quality improvement measures can spread more widely. The more they can reduce costs the less the subsidies will be.

      but everyone can't get in at least for quite a while. But most people don't want to get in.

      They are going to put in a bridge plan to cover those who really need help now.

      We are in a time where it is risky NOT to change. Barack Obama 7-30-08

      by samddobermann on Sun Oct 25, 2009 at 04:39:02 AM PDT

      [ Parent ]

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