We've talked a lot about a few elements of the larger healthcare reform bill working its way through the Senate. The public option and abortion are the flashpoint issues--where there's the most to be both gained and lost both in terms of policy and in politics. A strong public option competing nationally would be truly systemic reform. The extension of the Hyde amendment, already an egregious restriction on the health care choices of millions of women, would be an unacceptable backslide for women. Those are high stakes issues, but it's a big reform bill, so let's see what else is there to fight over.
(Note that this summary all applies to the Senate bill as released on November 18, the bill merged by leadership from the HELP and Finance Committee's products, known as the manager's amendment. There's a new manager's amendment now being analyzed by the CBO, the "compromise" bill that jettisons the opt-out public option, apparently in favor of some sort of triggered option, includes some kind of Medicare buy-in for people over 55, and would create one or more national non-profit plans under the administration of the OPM--another sort of exchange within the exchanges created by the existing bill.)
I have two primary sources for what's in the bill. The first is a series of posts (all linked in the Editor's Note in the post at that link) in Health Affairs by Timothy Jost, Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law, and coauthor of a casebook, Health Law, a standard text for teaching health law. The second resource, which also allows you to compare the House and Senate bills side-by-side on every provision, is the Kaiser Family Foundation's interactive comparison page. Here's the main elements:
Individual Mandate: Beginning in 2014, U.S. citizens and legal residents will be required to maintain "minimal essential coverage," or face a penalty of $750 per person, to a maximum of $2,250 per family. [Update: To clarify, the maximum $750/$2,240 penalty is reached in 2016, phased in.] The penalties will be phased in over the period from 2014-16, reaching those maximums in 2016, and then will be annually to the cost of living. There will be exceptions for financial hardship, religious objections, for American Indians and people who have been uninsured for less than three months. Additionally, exceptions will be granted if the lowest cost health plan available to them exceeds 8% of income, or for those with an income below the poverty level ($10,830 for an individual and $22,050 for a family of four in 2009). There are not criminal prosecutions for not having insurance.
Minimal essential coverage is not defined specifically, but includes either a public (Medicaid, Medicare) plan, or an employer-sponsored plan, a plan in the individual market, or a grandfathered plan--one that that person was enrolled in before enactment of the legislation. Note that this is referring to coverage--having some kind of insurance--not what that minimum plan actually has to provide in terms of benefits.
Premium Tax Credits: If you are going to mandate coverage, there has to be assistance to people who can't afford it. This is where it gets expensive for the government. Subsidies will be available to people with an income of up to 400 percent of the federal poverty level ($88,200 for a family of four in 2009) to purchase insurance within the exchange. The premium credits (subsidies) will be tied to the second lowest-cost silver plan (the one at 70% actuarial level) in the area. How much of the premium you pay out of pocket will be set on a sliding scale, so that the premium contributions are limited to 2.8% of income for those at 100% of poverty to 9.8% of income for those between 300-400% of poverty. For those with incomes between 100 and 133% of poverty level, the premium contribution is limited to 2% of income. (At 133% of poverty, individuals will get their coverage through Medicaid.)
Employer Mandates: Employers with 50-199 employees aren't required to provide coverage, but the legislation does set up a schedule of fees for employers required for their employees who receive subsidies or credits. Employers with fewer than 50 employees have no requirements, and are not subject to fees; employers with more than 200 employees are required to cover their employees.
Expansion of Public Programs--Medicare and Medicaid: Again, this doesn't include the Medicare buy-in proposal currently being scored by CBO. The Medicaid expansion is very significant, and in terms of really expanding coverage and getting people access might be the most critical part of the effort. The program would be expended to cover all poor Americans whose household income is below 133% of the federal poverty level (FPL) as of 2014. Any state that wanted to expand coverage sooner could do so as early as January 1, 2011. The states could limit coverage under this expansion to "benchmark" coverage, a basic package of the essential benefits available through the exchange. However, eligibility would be determined based on modified gross income without expenses factored in, so the eligibility ceiling isn't as high as it would be if the eligibility were determined as it is now for Medicaid--more income will be counted.
To assist the state, the federal government will cover 100% of the costs of expanding it from 2014-2016. For the next two years federal aid would depend on the state's coverage of non-elderly, non-pregnant individuals, and then after 2019, would receive increases based on expansion, up to 95% assistance. The bill maintains CHIP (which has been phased out in the House bill). The bill doesn't increase reimbursement rates for doctors providing care through Medicaid, a problem if that population is increased, since many providers refuse to take Medicaid. The House bill is also more generous, using 150% of poverty level as the cut-off.
The Medicare provisions are fairly significant tweaks intended to improve the quality and effectiveness--as well as contain costs--in the program. It does entail some cuts, the cuts you've been hearing Republicans yammer on endlessly about on the Senate floor in the past two weeks. Those includes most significantly reductions in Medicare Advantage plans, private plans that supplement Medicare that would now have to transition to a payment system based on competitive bid. A lot of the system changes in provider payment, quality and performance based reimbursement and penalties. It contains a number of proposals that would change the way that Medicare pays doctors, moving away from a system that rewards unnecessary tests and towards a system that rewards quality care. It starts to close the Part D "donut hole" in 2010, to be eliminated by 2019. It also created a new 15-member independent Medicare Advisory Board, appointed by the president and responsible for providing recommendations to Congress on reducing excess Medicare cost growth.
The Exchanges: First off, yes, that's plural exchanges. While the House sets up one national exchange, the Senate sets up many, many exchanges, depending on the states to either set up their own, or work with other states to form regional exchanges. In addition to the state exchanges, American Health Benefit Exchanges, states can also set up Small Business Health Options Program (SHOP) Exchanges. Beyond that, states can allow more than one exchange to operate in a state as long as each exchange serves a distinct geographic area.
This approach dilutes some of the advantages of an exchange, putting the onus on states to create them (if they don't, HHS can establish one or contract with a private nonprofit to do it). The House approach of one national exchange is certainly more straightforward, and would seem at least 50 times more efficient for HHS to oversee. For now, the public option would be one of offerings in the state exchanges, unless the state chose to opt-out.
The exchange administrators will be charged with a large number of tasks: certifying and overseeing plans; managing enrollees; rating plans; figuring out who qualifies for exemption from the mandate; creating and maintaining the "marketplace" of the exchange--an Internet portal that has to be standardized; providing customer service to both insurers and enrollees. Splitting all these activities up in dozens and dozens of exchanges seems highly inefficient, and costlier than necessary.
The exchanges are open to uninsured individuals and business with fewer than 50 employees, though states can allow allow business with up to 100 workers into their exchanges. in 2017, states can open up the exchange to larger employers.
Insurance Reforms: Some of the insurance reforms are designed to take effect 6 months after passage, others are phased in. Insurance companies would not be allowed to stop paying for coverage after a certain lifetime limit, but the annual limit loophole, just as problematic for people with serious and chronic illnesses, still exists, as does the exclusion of out-of-pocket expenses in that limit. Insurance companies would not be allowed to charge co-pays for preventative services, such as checkups, immunizations, or recommended mammograms. Young adults under 27 would be able to stay on their parents' plan. Beginning in 2014, insurance companies would be barred from discriminating against applicants based on pre-existing conditions, health status, or gender. Before 2014, uninsured Americans with a pre-existing condition would have access to an immediate insurance program, which would help them maintain affordable coverage.
Risk adjustment mechanisms aren't as strong as they could be, however, and opportunities for cherry-picking enrollees still exist. Insurers will be able to tailor plans to attract young and healthy enrollees, displacing more of the cost burden--and driving up premiums--on certain plans. This was one of the reasons that the CBO estimated the public option could have higher premiums than other offerings in the exchange--it would have the sickest people dumped in it. It's important to remember, though, the public option was still estimated to save $25 billion over ten years.
The bill requires HHS to develop standards for disclosing insurance coverage and requires plans to being reporting whether they maintain those standards, as well as requiring HHS to develop reporting requirements for their health outcome improvement, patient safety, and wellness programs. Health insurers must report the percentage of their premiums that they spend on administrative costs and rebate to their enrollees the amount that they spend on administrative costs.
Plans in the exchange must cover a range of "essential health benefits," which will be determined by HHS, and will be equivalent to a typical private, employer-based plan. The levels of coverage provided are problematic, and this is where the largest affordability vs. quality trade-offs come into play. The plans participating in the exchange must fit under one of four levels of coverage--bronze, silver, gold and platinum, which correspond to actuarial values of 60, 70, 80, and 90%, respectively. The House bill has three levels, with actuarial values of 70, 85, and 95%, so the Senate bill offers much less generous coverage.
The best private plans available now have an actuarial value of 80%, meaning patients are responsible for the other 20%. What that means, is that someone in the bronze level will be paying 40% of their healthcare costs out-of-pocket. There are caps on out-of-pocket expenses for all levels, but the likelihood that those in the bronze and silver plans will end up spending all the way up to that cap makes these plans a not particularly good value, and will place an undue burden on those who can least afford it. There's also the "young invincibles" plan, catastrophic plans with very high deductibles that will be offered to young people in the exchanges. These plans offer very high deductibles and minimal basic care. They (and basically the bronze level of plan) are really no better than what we call "junk" insurance now--very, very high deductibles, minimal coverage.
Additionally, health plan premiums will be allowed to vary based on age (by a 3 to 1 ratio), geographic area, tobacco use (by a 1.5 to 1 ratio), and the number of family members. The 3 to 1 ratio for age is problematic for that 55-64 age group that's been so much the focus in the Medicare buy-in debate. That means that they could be charged three times as much as a younger person for an equivalent plan, and as we've heard this week, that's an age group that's already particularly vulnerable in the market.
There are few provisions that would force insurers to keep premium rates affordable. There is a cap on the amount that insurance companies could spend on non-medical costs, like executive salaries, but there are no penalties for companies that exceed the cap. Rockefeller and Franken have introduced an amendment that would require that 90 percent of each health insurance premium dollar go toward health care services. The amendment would not prevent insurance companies from raising premiums to offset the ensuing losses.
One of the clues to the lack of cost controls imposed on insurance companies in the bill is the reaction by Senate staff when the loophole allowing insurers to impose annual limits on coverage was reported:
[T]his was inserted because CBO said premiums would "go through the roof" if insurers couldn't cap benefits. The official quote from Jim Manley, Harry Reid's spokesperson, says much the same thing. "We are concerned that banning all annual limits, regardless of whether services are voluntary, could lead to higher premiums," he explained.
This is basically an admission that there's nothing else in this bill to limit insurance companies from increasing rates through the roof.
An additional problem is created by a provision that would allow states to form compacts allowing insurers to sell policies in any state participating in the compact. The problem with this is that the insurer would only be subject to the laws and regulations in the state where it is based, where the policy is written and issued. So insurers could sell their plans from states that have poorer regulations in states with better regulations, and in this way avoid having to comply with those regulations. This could create a real race to the bottom among insurers.
Prevention and Wellness: The bill does invest in preventative care. It would invest in a national prevention and public health strategy and improve education on disease prevention and public health; authorize enough funding to expand federal Community Health Centers in every underserved community; and fund the National Health Service Corps to provide scholarships and loan repayments to medical students going into primary care. It would also higher reimbursement rates to providers who choose to practice in underserved areas. Kent Conrad should like that.
Financing: The bill is financed through a combination of savings from Medicare and Medicaid and new taxes and fees. The largest and most controversial source of new revenue will come from an excise tax on high-cost insurance, which CBO estimates will raise $149 billion over ten years. Unfortunately, as Jon Walker describes, that tax is also likely to "result in most people getting worse health insurance from their employer, insurance that covers less." There are other fees on certain manufacturers and insurers, an increase in hospital insurance contributions for high-income taxpayers, additional taxes on cosmetic surgery (not things like breast reconstruction, but vanity surgery), and a .5% Medicare payroll tax hike on single people earning more than $200,000 and married couples earning more than $250,000.
The CBO puts the price tag of the bill at $849 billion over ten years, and says it would reduce projected federal budget deficits in that time fram by $130 billion. It would cover 31 million people, leaving 23 million uninsured. The House bill, by comparison, comes in at just over $1 trillion, would reduce deficits by about $139 billion, and would cover 36 million. The stronger public option and more generous Medicaid expansion are key elements making the difference there.
That's a fairly high level view of the basics. If you really want to dig into the specifics and want to compare the House and Senate bills, I can't recommend the Kaiser Family Forum guide highly enough. On the whole, the House bill is more consumer friendly and more affordable for more people, from the larger Medicaid expansion to the more generous actuarial values. It also, of course, has a national public option.