And so the President finally released his compromise plan between the House and Senate health care reform bills. This diary analyzes the strengths and weaknesses of the President's proposal.
[For those who have been paying attention to me, this is going to seem a bit redundant, so I apologize.]
Now obviously, the strengths and weaknesses of any health care reform bill depend upon what you see as its central purpose. To me, that central purpose is to create a sustainable health care system that protects every American from having large medical expenses for essential care, and shields them from its consequences (i.e., bankruptcy, death). That, I believe, is what Democrats have aspired for the last 60 years.
We also must take into account the core questions that will determine the bill's political fate (granted I would never consider myself to be politically astute):
- Will people be able to afford the premiums even with the subsidies?
- Even if people are able to afford the premiums, will people be able to afford the cost-sharing?
- Will the bill make health insurance affordable for everyone and not just some average person?
- Will the people who purchase health insurance on the Exchange have a similar risk profile to those in employer-based health insurance?
- Will there be enough regulations to have insurance companies on the Exchange compete on the quality of their services rather than the people who they select?
As most Kossacks know, I strongly prefer, with the exception of sin taxes, the financing the bill entirely through the health care system (i.e., Medicare cuts, the excise tax, capping the employer tax exclusion) than having part of the bill be financed outside the health care system (i.e., with the millionaire tax, payroll tax, VAT tax) simply because only health care costs rise as fast as health care costs. Financing outside the health care system amounts to installing a ticking time bomb of when you have to raise taxes again.
As many Kossacks also know, I'm pretty indifferent to the public option and the anti-trust exemption repeal. Still, I feel the House bill is a more ambitious, more progressive, and demonstrably better bill than the Senate bill. Here are at least 13 reasons why:
- The House bill subjects the self-insured to the minimum benefit packages; the Senate bill does not.
- The House bill applies the community rating to all group markets, and conducts a study what causes organizations to self-insure. The Senate bill applies the community rating to just the individual and small group market.
- The House bill has a 2:1 age rating and no smoker rating; the Senate bill has a 3:1 age rating and a 1.5:1 smoker rating.
- The House bill does not have "prevention and wellness" discounts; the Senate bill does.
- The House bill has a 70 percent minimum actuarial value. The Senate bill has a 60 percent minimum actuarial value, and worse allows those under 30 to purchase catastrophic policies (actuarial value around 50 percent).
- The House bill’s subsidies for 133-300 percent FPL level are far more generous than that of the Senate bill.
- The House bill has merely a hardship exemption from the individual mandate and imposes a 2.5% income tax for not complying with the individual mandate. The Senate bill has an 8% income exemption, and begins a $750/person, $375/child penalty in 2017.
- The House bill has a much, much stronger employer mandate than Senate bill, which allows for employment discrimination against low-income workers.
- The House bill has a federal Exchange; the Senate bill has state-based Exchanges.
- The House bill has competitive bidding, rate reviews, etc. for insurers even to get onto on the Exchange; the Senate bill merely has reviews for rate increases.
- The House bill forbids non-group insurance to be sold outside the Exchange; the Senate does not.
- The House bill explicitly forbids benefits outside of items on the minimum benefits package to be offered on the basic, enhanced value, and premium level tiers. In the Senate bill, once a plan has fulfilled the items on the minimum benefits package at the tier’s minimum actuarial value, the plan can offer items outside of the minimum benefits package that are attractive to young, healthy people (i.e., gym membership, dental care, eye care).
- The House bill limits cost-sharing variation in a benefit category by ±10 percent. The Senate bill leaves this up to the HHS Secretary to limit cost-sharing by actuarial value.
Igor Volsky has an excellent chart comparing the President's compromise to that of the House and the Senate bill:
|Provision||Obama's Bill||House Bill||Senate Bill|
|Affordability||Improves the Senate bill’s subsidies for lower income Americans. Families below $44,000 and above $66,000 would pay less in premiums. Also raises the percent of health costs that are paid by insurers from the Senate proposal.||Families earning below $55,000 would still receive more subsidies under the House bill, but Americans earning more than $55,000 would pay higher premiums (as compared to Obama’s proposal).||The percent of costs paid by the insurers is higher than Obama’s proposal. Families making under $55,000 would see higher premiums than Obama’s proposal and the percent of costs paid for by health insurers is lower than Obama’s proposal.|
|Excise Tax||‘Labor agreement’ for everyone. Changes effective date of the Senate policy from 2013 to 2018. Raises the amount of premiums that are exempt from the assessment from $8,500 for singles to $10,200 and from $23,000 for families to $27,500 and indexes these amounts for subsequent years at general inflation plus 1 percent.||No excise tax.||40% excise tax beginning in 2013 on individual polices worth $8,500 or higher and family policies starting at $23,000.|
|Payroll Tax||Adopts Senate bill approach and adds a 2.9% assessment on unearned income.||5.4% surcharge on high-income households.||Payroll tax increase of 0.9% on earnings above a specific threshold for a total employee assessment of 2.35% on these amounts.|
|Individual Mandate||Mixed bag. May be easier for younger Americans to opt out. Lowers flat dollar amount to $695 by 2016 from the Senate bill and raises the alternative percent of income to House levels that individuals will pay for not having health insurance. Hardship waiver when premiums over 8% of their income, and couples under $18,700 are exempt from the requirement.||2.5% of income by 2016 with a limit of the average national health premium.||Flat rate of $750 by 2016 and hardship waiver when premiums exceed 8% of income.|
|Employer Mandate||No mandate, free rider provision. Large employers (50+ workers) have to pay a fee if employees receive subsidies. Improves transition to free-rider policy by subtracting first 30 workers. (A firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount.)||The House bill requires a payroll tax for employers that do not offer health insurance that meets minimum standards.||No mandate, free rider provision. Large employers have to pay a fee if taxpayers are supporting the health insurance for their workers.|
|Grandfathered plans||Plans have to conform to new regulations. Plans have cover adult dependents up to 26yo, prohibits rescission. After exchanges begin in 2014, plans can’t institute annual and lifetime limits or pre-existing condition exclusions. Beginning in 2018, the President’s Proposal requires "grandfathered" plans to cover proven preventive services with no cost sharing.||"Grandfather" policy that allows people who like their current coverage, to keep it. Abide by all rules after 5 years.||"Grandfather" policy that allows people who like their current coverage, to keep it.|
|Medicare Donut Hole||Completely closes donut hole. Replaces $500 increase threshold increase limit with a $250 rebate to Medicare beneficiaries who hit the donut hole in 2010. Closes donut hole by phasing down the coinsurance so it is the standard 25% by 2020 throughout the coverage gap.||The House bill fully phases out the donut hole over 10 years. Raise the dollar amount before the donut hole begins by $500 in 2010.||The Senate bill provides a 50% discount for certain drugs in the donut hole. Raise the dollar amount before the donut hole begins by $500 in 2010.|
Based on this chart, President Obama clearly decided to take the politically easiest path to getting the bill passed. [Also, the President was very limited in what he could do because so many of the items, i.e., the community rating and the minimum actuarial value, would be ruled out of order in the budget reconcilliation process.] That is fine given the difficulty of passing any major health care reform bill and the stakes for millions of Americans. Just look at what the President did on the individual mandate, the employer mandate, the public option, the excise tax, and the self-insured. Like Igor, I am concerned that the 8 percent income exemption will exempt too many 27-year-old bachelors from the mandate, cause these people to go bare, and drive up the costs for everyone else. I think the House's position should have been adopted on this front. The same is true of the employer mandate; the House version should have been adopted.
The excise tax, which is replaced with
(cough, cough) another middle-class tax increase of subjecting passive income above $200,000/$250,000 to the Medicare payroll tax, has an exemption for dental and eye care, which a policy person would find offensive. Such an exemption makes perfect sense on a political level, but is absolutely nuts on a policy level. In a world of scarce resources, why are dental and eye care exempt from the tax but not maternity care, mental health, durable medical equipment, skilled nursing facilities, substance abuse treatment, etc.?
If I had my way on the excise tax, I would have adopted Max Baucus's (Tom Daschle's/Bob Dole's/Howard Baker's) original idea of capping the employer tax exclusion at FEHBP BC/BS Standard Option ($6,500 individual/$14,600 family), and indexed it to the NHE index, and mitigated the unfair age, gender, occupational, etc. effects by adopting the following House provisions:
- The five-year grace period for grandfathered plans
- The 2:1 community rating with no smoker rating
- The application of the community rating to all markets, and the study on why people self-insure
- The individual mandate
This would raise around $500 billion over 10 years.
The grandfathering of self-insured plans is another glaring example where the President took the politically easy path. Those who get their health insurance through businesses which self-insure will get the removal of limits on coverage and free preventative care, but won't get the requirement that each plan has to meet the minimum actuarial value, has to cover certain items at some minimum level. Without those mandated benefits, business who self-insure will skimp on the big bucks items such as maternity care, durable medical equipment, mental health, skilled nursing facilities, substance abuse treatment, and offer more benefits attractive to the non-users of health insurance (i.e., gym membership, dental care, eye care). The result is that those with pre-existing conditions will have to shell out a much greater percentage of their income for health care -- precisely the opposite of what insurance is supposed to do. I sincerely wished that the House had prevailed on its five-year grace period grandfathering provision -- even if it means 75+ million Americans would not be able to keep the coverage they currently enjoy.
Whatever passes will require lots of work over the next several years before the community rating, the individual mandate, the minimum benefits package, the Exchange, and the employer mandate go into effect. That is to be expected.
While I continue to believe the House bill as whole is demonstrably better than the Senate bill as a whole, that is not relevant at this point since it is not an option. At this point, I'll happily accept even the inferior Senate bill. Even the inferior Senate bill would still represent the biggest domestic social policy change in at least 40+ years -- let alone provide relief to millions of Americans, save hundreds of thousands of lives, and avert millions of bankruptcies. That is the real prize of this bill and the entire point of the enterprise.
This bill isn’t about honoring political campaign promises, sticking it to the other guy, establishing grand theories of justice, or what have you. It is simply about making the lives of millions of Americans less painful, less wrenching when they, their family members, or their fellow citizens get sick. It's as simple as that.
Every generation has its own moral challenge. As a teenager, I listened to my grandmother tell me how 30-40 years ago she almost lost her job as a teacher due to her views on integration. I find it unthinkable today that this country could have allowed children of different colors to go to different schools.
I am 30 years old. I know I will be worse off with the Senate bill. But I want 30-40 years from now my grandchildren to find it unthinkable that this country ever allowed its citizens to go broke -- let alone die -- just because they or their child got sick.
That is the moral challenge of our time. The Senate (and the House) bill certainly will not get us to that moment I envision 30-40 years from now, but it will set us on a path to get to that moment. We must remember that passage of this bill marks the beginning -- not the end -- of a new era. The arc of history is long. This health care reform bill bends that arc a little bit more towards justice.