Five years ago, shut out of the White House, in the minority in the House, and only 45 seats strong in the Senate -- the smallest in decades -- Democrats seemed hopelessly powerless to stop President Bush's mission to demolish the party's 7-decade old crowning accomplishment. But they did.
Five years later, now back in the White House, having over 255 House seats and a filibuster-proof Senate, the party of Franklin Roosevelt, Harry Truman, and John F. Kennedy, have for the first time ever passed health care reform bills in both the House and the Senate. House Speaker Nancy Pelosi, through sheer guts and determination, has succeeded where Sam Rayburn and Tip O'Neill failed. Senate Majority Leader Harry Reid, with no margin for error, has succeed where Lyndon Johnson, Mike Mansfield, and George Mitchell all failed. And now Democrats are poised to succeed where President after President after President after President has failed. These are not small people.
So I would like to go over my priorities for how the Senate bill -- which is assumed to be the base bill when the bills are merged in conference -- can realistically be improved. I assume the Senate bill going to be the base bill since as David Waldman points out, is the only bill that has passed both houses.
[For those who have been following me closely, this diary is going to sound almost like a repeat of my previous diaries.]
First, here are a couple of useful links:
Next, we must define the central purpose of the bill. 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 shield them from its consequences (i.e., bankruptcy, death). This, I believe, is what Democrats have aspired for the last 60 years. We should always keep this in the back of our minds when we think of changing this bill, and think about the provisions that acheive this central purpose.
All about priorities
To the chagrin of many here, we're going to have to live some of the Senate's provisions. So the question is about priorities.
As I've pointed out before, I think whereas state-based Exchanges with a negotiated rates public option and no competitive bidding contracts would improve the Senate bill about 5 percent, a federal Exchange with competitive bidding (more bargaining power for the Exchange; also, see Sec. 303 of the House bill when I talk about the competitive bidding) but lacking a public option would improve the bill about 25 percent: the bargaining power of a negotiated rates public option just pales in comparison to the bargaining power and enforcement ability a federal Exchange has. And of course, the federal Exchange is a lot easier to achieve than a public option -- even one at negotiated rates -- as Sens. Lincoln, Landrieu, and Nelson have already voted for a federal sub-Exchange.
Also, as I pointed out in my previous diary, I don't find Sens. Lincoln, Landrieu, and Nelson's demand that the bill be financed entirely through the health care system to be unreasonable. Financing the bill entirely through the health care system is the only way to make the bill deficit neutral over the very long-run as health care experts have warned us that only health care costs rise as fast as health care costs. You're losing a lot of revenue over the long-term when you don't finance entirely through the health care system, and you'll eventually have to raise and keep raising taxes on the middle-class in some form to finance universal health insurance. And of course, the tax subsidy for employer-provided health insurance is inequitable. So the reducing or eliminating the revenue raised from the excise tax on Cadillac plans is not a fight worth picking, either. The demands of Sens. Lincoln, Landrieu, and Nelson could be far, far worse.
Priorities for merging the House and Senate bills
I think the biggest areas of concern in the Senate bill are its affordability and risk selection provisions -- the two areas that will most determine the bill's long-term political fate. 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?
So as I've pointed out 39,457 times, here are my top priorities for improving the Senate bill:
- Increasing the the subsidies for those earning 133-300 percent FPL
- Eliminating the "young invincible," or "catastrophic," policy, and increasing the minimum actuarial value on the Bronze Tier from 60 percent to 70 percent; 70 percent to 80 percent for the Silver Tier; 80 to 85 percent for the Gold Tier; and 90 to 93 percent for the Platinum Tier. Forbid plans from offering discounted gym membership, dental coverage, eye care, and other benefits attractive to young and healthy people on the Exchange.
- Adopting the House's rating rules (2:1 age rating and no smoker rating) and apply to all insurance markets, as the House does
- Increasing the income exemption for the individual mandate from 8 percent to 15 percent, and starting the $750/person or 2.5% of income tax penalty once the community rating goes into effect (The former must be done if 2 and 3 are done, or too many young, healthy people will be exempt from the mandate)
- Improving the Senate's noxious pay-or-play provision
I think 1 is pretty obvious. The CBPP table I linked at the top shows that under the Senate bill, someone earning between 150 and 300 percent FPL would pay significantly more in premiums and out-of-pocket expenses than in the House bill. A hotel worker earning $24,000/yr. with an asmatic child (150-200 percent FPL), for example, would pay 5.5 percent of their income for a policy having 93 percent actuarial value (see below examples on cost-sharing from actuarial values) under the House bill, but pay 6.3 percent of their income for a policy having 80 percent actuarial value under the Senate bill. And of course, because every dollar counts for people with incomes this low, this is a big difference in health care expenditures for this family. The subsidies are definitely worth fighting for tooth-and-nail.
2 is also pretty obvious. A 60 percent actuarial value policy -- let alone the 50 percent actuarial value "young invincible," or "catastrophic," plans -- is not a lot of coverage. Below is a table showing what plans at given actuarial values look like on the Massachusetts Connector:
| Plan Provision | Bronze Low Tier HMO Design -- Actuarial Value: 56% | Silver Low Tier HMO Design -- Actuarial Value: 67-70% | Silver High Tier HMO Design -- Actuarial Value: 79-81% | Gold Tier HMO Design -- Actuarial Value: 93% |
|---|
| Annual Deductible (individual/family) | $2,000/$4,000 | $1,000/$2,000 | none | none |
| Out-of-Pocket Maximum (individual/family) | $5,000/$10,000 | $2,000/$4,000 | $2,000/$4,000 | none |
| Routine Physical/Routine GYN Exam/Well-Child Care | $25 | $20 | $20 | $20 |
| Routine Vision Exam | $25 | $20 | $30 | $20 |
| Primary Care Visit Copay | deductible, then $25 | $20 | $25 | $20 |
| Specialty Care Visit Copay | deductible, then $25 | $20 | $25 | $30 |
| Generic Prescription Drugs | deductible, then $15 | $15 | $15 | $15 |
| Preferred Brand Name Prescription Drugs | deductible, then 50% co-insurance | $30 | 50% co-insurance | $30 |
| Non-Preferred Brand Name Prescription Drugs | deductible, then 50% co-insurance | $50 | 50% co-insurance | $50 |
| Inpatient Hospitalization | deductible, then 20% co-insurance | deductible, then $0 | $500/admission | $150/admission |
| Diagnostic Lab | deductible, then 20% co-insurance | deductible, then $0 | $0 | $25 |
| Diagnostic X-Ray | deductible, then 20% co-insurance | deductible, then $0 | $0 | $25 |
| Diagnostic CT/MRI/MRA/PET Scan | deductible, then 20% co-insurance | deductible, then 20% co-insurance | $100 | $75 |
| Physical Therapy | deductible, then 20% co-insurance | deductible, then $0 | $25 | $20 |
| Mental Health Outpatient Office Visits | deductible, then $25 | $20 | $25 | $20 |
| Durable Medical Equipment | deductible, then 20% co-insurance/$1,000 limit | deductible, then 20% co-insurance/$1,000 limit | 20% co-insurance/$1,000 limit | 20% co-insurance/$1,000 limit |
Now obviously this is comparing apples and oranges as preventative care will be free under the bills passed by the House and the Senate. But this table does give us a crude, if imperfect, estimate of what policies at a given actuarial value look like. As you can see, even a 70 percent actuarial value policy -- what the House bill has as their minimum actuarial value for a policy to be sold -- is not a lot of coverage. Nobody should have to go broke -- let alone die -- because they cannot afford the most basic treatment, so I strongly prefer the House bill's provisions on what the minimum level of coverage should be for an insurance policy to be sold. Increasing the minimum level of coverage an insurance policy is required to have is definitely worth fighting tooth-and-nail.
3 is about making health insurance more affordable for older adults. The more premiums are allowed to vary by age (and smoking status), the more ability insurance companies have to price older adults out of the individual insurance market. The Senate bill has a 3:1 age rating and a 1.5:1 smoker rating, and the rules are only applied to the individual insurance and the small-group markets. The House bill, as I point above, has the same rating rules as Massachusetts -- 2:1 age rating and no smoker rating -- and the House's rating rules are applied to all markets. As I've pointed out before, I don't think a 3:1 age rating will make health insurance affordable enough for adults ages 55-64, and the smoker rating -- which requires a blood test to determine smoking status -- is a recipe for political backlash when combined with an individual mandate. If you want to penalize unhealthy behavior, don't do it through the medical underwriting process -- do it through sin taxes (i.e., cigarette) and reducing subsidies for consumption of goods you find unhealthy (i.e., sugar). The House should prevail on all of this -- particularly with the presence of the excise tax -- and we should be prepared to fight tooth-and-nail over this. I'll talk more about that later.
4 is also about making health insurance more affordable for everyone. The more people who are in the system, the more risk is spread, and the more affordable health insurance is for everyone. In this bill, the cyclist and the diabetic of the same region, family structure, age, and possibly smoking status pay the same rate for the same policy. The mother of the child born with heart problems pays the same rate for the same policy as the divorced father whose son set the school record for fastest mile time. The marathon runner pays the same rate for the same policy as the guy who needs to down a six-pack of beer every night to fall asleep. In addition, the bachelor is required to purchase maternity care. The Mormon is required to purchase alcoholism treatment. The triathlete is required to purchase durable medical equipment. That is the magic of this bill. There needs to be something to prevent healthy people from going bare until the get sick so health insurance is affordable for the diabetic child, the person in the powered wheelchair, the person with cancer, etc. The individual mandate is that vehicle.
The Senate's 8% income exemption that the House does not have as well as the Senate's fines being phased in over time makes the House bill's individual mandate provision far superior to the Senate. Too many young, healthy people will be exempt from the mandate, and choose to go bare -- all while Joe and Jane Q. Policyholder who responsibly pay their premiums every month get punished with higher premiums. The House's individual mandate provision should prevail over the Senate's in conference, and this is definitely an item worth fighting for as the CBO will score a stronger individual mandate much better than a weaker individual mandate.
5 is also pretty self-explanatory. The House's pay-or-play provision raises $100 billion more revenue than the Senate bill, which could be used to beef up the subsidies.
Interactive effects
It's also important to take into account the interactive effect of policies. Unlike, say, cap-and-trade, each part in health care reform is interdependent of another part. With cap-and-trade, what electricity standard you set has little effect on your carbon caps. Not so much with health care. If you split the difference on the minimum actuarial value -- 60 percent in the Senate and 70 percent in the House -- to 65 percent, for example, you also have to worry about how many young, healthy people will suddenly be exempt from the 8 percent of income exemption that the Senate has. And if young, healthy people decided to go bare, that will increase the price of insurance. Which is why health care reform is so hard to do.
So here's another practical example of the interactive effects with the bill: A lot of premium variation in the group insurance market can be explained by the occupation and the age of the group. Nurses, for example, tend to be obese and smokers, and therefore have higher premiums than most other professions. The organization where I work has very few employees under age 30, and many over age 50, and as a result, our premiums are much higher than other organizations. I think with the excise tax, you absolutely have to have the House's rating rules (2:1 age rating, no smoker rating) and applied to all markets as the House bill does rather than applying the rating rules to only the individual and small-group markets as the Senate bill does. That way people in high-risk jobs basically save more from the community rating than they would be hit from the excise tax. And firms with older workers aren't as much subject to the excise tax.
And of course, if you have the 2:1 age rating and no smoker rating, you have to increase the income exemption from 8% to some higher number -- say, 15%. Otherwise, to many young, healthy people will be exempt from the mandate, and that will increase the price tag of the bill -- or at least make it less cost-effective.
Conclusion
In conclusion, this bill is far from perfect. The subsidies and the minimum actuarial value are much lower than what I would like. The bill does a shadow of what I think should be done on cost-control -- and that doesn't just include the public option. This bill is only a starter home, and changes will have to be made over time.
In short, the reason this bill is so good is because our current system is so bad. Too many Americans desperate for help with only their government to turn to have waited far too long for justice and relief, and this bill provides a large number of these people with that help.
Under the Senate bill, the federal government will for the first time take responsibility for providing health insurance to Americans other than the elderly and the indigent. 31 million Americans will gain health insurance. 150,000+ lives will be saved. Tens of thousands of medical bankruptcies will be averted. That's nothing to be ashamed of.
This bill is our time's calling. History will not be kind to us if this bill fails. We are on the brink of succeeding where Presidents over the last 60 years have failed. So let us create that magical moment in history, and bend the moral arc of the universe a little bit more towards justice.
Update: This is my third diary to get on the recommended list. Thanks to all who have recommended this diary. I try to be as knowledgeable and articulate as Ezra Klein, but I'll never get there.
Update x 2: Many Kossacks have asked about my opposition to allowing insurance companies to offer dental and eye care. Well, let me just say that the Federal Employee Blue Cross/Blue Shield Standard Option does not offer dental or eye care. As kck and ruascott have ably pointed out downstream, unless all plans have equal co-pays, insurance companies will be able to cherry-pick off these benefits as they are very attractive to young, healthy people. And if you require dental and eye care to be covered, this will dramatically increase the price of insurance, or there will be a huge deductible -- effectively creating a doughnut hole, and having Americans carry more risk, which of course precisely the opposite of what this bill is designed to do. That is why the House proposal (Sec. 303) only allows the Premium Plus Tier plans (95% actuarial value) to offer gym membership -- and only once all the required services under Sec. 222(b) have been covered at 95% actuarial value. Also in the House bill, those who offer on the Premium Plus Tier have to offer on all tiers.
