On October 29th , leadership in the House of Representatives released a bill entitled the “Affordable Health Care for America Act” that merges legislation passed in July by the three House committees (Education and Labor, Energy and Commerce, and Ways and Means) with jurisdiction over health reform. The CBO estimates that this bill will cost $894 billion over ten years and cover 36 million of the 54 million uninsured. To pay for the cost of the bill, the Committee places a 5.4% surcharge on adjusted gross income above $1 million for married couples and $500,000 for singles, reduces provider payment rates under Medicare, reduces spending for the Medicare Advantage program, obtains prescription drug rebates and discounts for Medicaid and Medicare Part D from pharmaceutical companies, places a 2.5% sales tax on medical devices, and makes changes to HSA and FSA rules. House leadership has stated that floor debate on the bill will likely start later this week or early next week. Details of the House bill include:
·   Insurance Market Rules Effective in 2010: Several insurance market rules take effect in 2010, including government review of health plan premiums and a requirement that 85% of premiums be spent on medical care, prohibition of lifetime benefit limits for individual and group plans, a requirement that health plans cover children as dependents through the age of 26, and prohibition of coverage cancellation or rescission except in cases of fraud. Prior to the implementation of new market rules and the Exchange in 2013, the House bill also establishes interim provisions between 2010 and 2013 that extend COBRA eligibility, shorten the pre-existing condition “look back” period to one month and the benefit exclusion period to three months, and establish high risk pool provisions for individuals who can not obtain coverage due to health status or a pre-existing condition.
·   Insurance Market Rules Effective in 2013: Beginning in 2013, the House bill makes additional insurance market changes that require guarantee issue and renewal of coverage, prohibit pre-existing condition exclusions and premium variation based on health status, and allow premium variation only for age, family size, and geographic area. The new market rules apply to all health plans inside and outside the Exchange. Starting in 2015, states could pass legislation to form “Health Care Choice Compacts” to allow the purchase of individual insurance across state lines.
·   Public Plan and CO-OPs: The House bill establishes a national public plan in 2013 to compete with private insurers in the Exchange. Provider rates for the public plan would be negotiated and providers are presumed to participate unless they opt-out.The House bill also provides start-up funding to states to establish not-for-profit member-governed cooperative health plans (CO-OPs) to compete with private insurers and the public plan in the Exchange. CO-OPs and the public plan must comply with the same rules as other plans in the Exchange. States are not required to establish CO-OPs.
·   Exchange: A national health insurance “Exchange” is established in 2013 and would be operated by a new federal agency, the “Health Choices Administration (HCA).” The Exchange is designed to serve as a facilitator of comparison shopping, enrollment, and subsidy administration, a regulator of plan standards and rules, and a negotiator of premiums and contracts with health plans. All individuals who purchase coverage outside the group market or whose premiums are more than 12% of income (and are not eligible for Medicare or Medicaid) are eligible to purchase coverage through the Exchange. Participation in the Exchange is voluntary, but no individual market exists outside the Exchange except for “grandfathered plans.” Employers can purchase coverage through the Exchange if they have up to 25 employees in 2013, up to 50 employees in 2014, and up to 100 employees in 2015 (with the potential to open participation to all groups starting in 2015).
·   Benefit Plans: In 2013, individuals have a choice of four plan types including “Basic” (70% actuarial value), “Standard” (85% actuarial value), “Premium” (95% actuarial value), and “Premium Plus” (value over 95%). A new independent “Benefits Advisory Committee” is created to define and update the requirements for the minimum benefit plan or “Basic Plan.” Plans are prohibited from having annual or lifetime benefit limits or establishing cost sharing above $5,000 individual/$10,000 family. Plans are required to cover a list of specified mandated benefits, but states may establish additional benefit rules. Individuals may keep their current coverage (“grandfathered plans”) instead of enrolling in one of the four new plans, as long as no change is made in cost-sharing, contract terms, or benefit levels. Employers are required to at least meet the requirements of the “Basic Plan” by 2018.
·   Coverage Mandates, Penalties, and Subsidies: Beginning in 2013, individuals are required to have health insurance coverage that is either a “grandfathered plan,” a government plan (Medicaid, Medicare, and the like), an employer-based plan (until 2018), or an individual or group plan that meets or exceeds the qualifications of the federally-defined minimum benefit plan (“Basic Plan”), or pay a 2.5% of income tax penalty. Waivers are allowed for Native Americans, those with religious objections, dependents, and individuals with a financial hardship defined as premiums over 12% of income. Individuals up to 400% of the federal poverty level ($88,000 for a family of four) are eligible for sliding scale premium and cost-sharing subsidies. In 2013, employers with an annual payroll over $500,000 are required to offer health insurance coverage to their employees or pay an 8% of payroll tax penalty. Employers must pay 72.5% for single and 65% for family coverage of the lowest cost qualified plan to avoid the penalty. Employers are also subject to the penalty for employees in the Exchange obtaining subsidies if the cost of employer-based coverage is higher than 12% of the employee’s income. Employers with an average wage below $40,000 and 25 or fewer employees are eligible for up to a 50% premium credit for two years.
·   Medicaid and the Children’s Health Insurance Program (CHIP): Medicaid eligibility is expanded to 150% of the federal poverty level for all individuals in 2013 with full federal funding of the expansion in 2013 and 2014 and 91% federal funding to states starting in 2015. States are required to maintain existing Medicaid eligibility; states are also required to maintain CHIP eligibility, but only until 2013 when CHIP beneficiaries will get coverage through the Exchange. The bill also extends enhanced federal Medicaid funding from the stimulus bill (ARRA) to states until June 2011.
·   Medicare: The House bill reduces payments for Medicare Advantage to 100% of Medicare fee-for-service spending by 2013 and establishes quality bonuses for plans with high quality scores in markets with low Medicare fee-for-service spending and high Medicare Advantage enrollment. By 2019, the “donut hole” or coverage gap under Part D is eliminated. Pharmaceutical manufacturers are to provide a 50% discount for brand name drugs purchased in the “donut hole” and HHS is required to negotiate directly with manufacturers for Part D drug pricing. The income subsidy exclusion for employers who maintain prescription drug plans for Part D eligible retirees is eliminated. The House bill also creates pilot programs for coordinated care delivery models, establishes a new “Center for Medicare and Medicaid Innovation” to test and implement new provider payment methods, and changes payment incentives to reduce hospital readmissions. Annual provider payment updates are reduced for Medicare Part A and Part B and the Institute of Medicine is instructed to study geographic variation in payment rates and recommend changes.
CMS Actuary Estimates Cost and Coverage Impact of House Health Reform Legislation
In late October, the Chief Actuary for the Centers for Medicare and Medicaid Services (CMS) released a report analyzing the cost and coverage impacts of health reform legislation debated in July by the three House committees with jurisdiction over health reform. The report states that total national health expenditures will increase under the House language and that “demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.” The CMS Actuary also states that the language does little to contain health care cost growth, “With the exception of the proposed reductions in Medicare payment updates for institutional providers, the provisions of H.R. 3200 would not have a significant impact on future health care cost growth rates.” In addition to analyzing the impact of the House legislation on costs, the CMS actuary estimates the impact on coverage for Medicare beneficiaries, stating that the reduction in Medicare Advantage rates to 100% of Medicare fee-for-service would result in less generous benefit packages and enrollment in Medicare Advantage plans would decrease by 64%.
UPDATE 11/18/09
Senate Majority Harry Reid (D-NV) is pressing to advance his version of health care legislation past a key juncture this week in a bid to avoid a timing crunch that could otherwise kick the process into next year. The primary obstacle to moving forward is that the Congressional Budget Office (CBO) has not completed its analysis of the legislative language, though it is likely to complete that work soon. Democratic leaders told staffers yesterday they expect that CBO score to be ready today. But even under the most optimistic scenarios, Senate Democratic aides said the chamber would be unlikely to vote on whether to start debate before Friday, and several said a Saturday or Sunday vote was more likely. Staff have mentioned that the Senate could be in session Thanksgiving week and that there is a real possibility that the Senate could have Saturday sessions in the month of December. House Majority Leader Steny Hoyer (D-MD) said he hopes the Senate will pass a health reform bill soon and send the measure to a House-Senate conference committee in time to allow a final vote in both chambers this year. He has told his members that votes are possible on December 21 and 22.
The Senate Democratic Leadership also faces a number of procedural hurdles including: (1) the need to obtain 60 votes to begin debate on the bill; (2) a 60-vote hurdle on controversial amendments such as abortion and the public option; and, (3) a 60-vote requirement to end debate and proceed to final passage. There also will be a significant number of both substantive and political amendments, which will take time to consider and will add weeks to the debate. The absence of both a final bill and a cost estimate from the CBO has made some centrists anxious about offering their support for an otherwise routine test vote that typically unites a majority party.
On the policy front, Senator Reid has stated that he will raise the level at which high-cost insurance plans will be subject to a tax from $21,000 to $23,000. He also has floated the idea of increasing the Medicare portion of the FICA payroll tax on individuals that make more than $250,000 a year. Senator Tom Carper (D-DE) continues to work on an alternative to the public option in the event that the current approach that allows states to opt-out cannot pass. On the political front, moderate Democratic Senators are receiving pressure to vote against a motion to proceed to the bill. Senators Ben Nelson (D-NE), Blanche Lincoln (D-AR) and Mary Landrieu (D-LA) are the primary targets of ads claiming a vote to proceed on the bill is a vote for health care reform. While it is believed that Senator Reid is close to the 60 votes he needs to begin debate on the bill, the ads are showing that it will not be an easy vote.
One cause for health reform anxiety is that no one is sure whether the legislation would achieve one of its most critical goals: lowering health care costs. Many economists are skeptical, including White House favorite Jonathan Gruber of MIT, who recently said the legislation "really doesn't bend the cost curve," though it takes steps in that direction. In fact, no independent group has taken a comprehensive look at how the legislation would impact premiums for the 170 million Americans who receive insurance through their employers. The dearth of reliable data has led Senator Evan Bayh (D-IN) to ask the Congressional Budget Office for a report on the bill's impact on employer-sponsored insurance premiums. If it comes with bad news for Democrats, it could lead to last-minute changes to the bill.
A new report from the Centers for Medicare and Medicaid Services (CMS) finds that the health overhaul bill passed by the House will raise, not lower, health costs by approximately $289 billion in the next ten years. The report was requested by House Republicans and compiled by CMS' chief actuary, Richard Foster. CMS's analysis is not an apples-to-apples comparison to the cost estimate conducted by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) because CMS did not review tax provisions, which help offset the price tag of the Democrats' measure. However, the CMS analysis clearly states that the House bill falls short in attaining a key goal of the Democrats' effort to reform the nation's healthcare system - "the provisions of H.R. 3962 would not have a significant impact on future healthcare cost growth rates."
The Business Roundtable, which represents Fortune 500 company CEOs, said in a report released last week that some of the changes being considered by Congress have the potential to reduce future health care cost increases, bringing medical inflation closer in line with overall economic growth. But the group also warned that other provisions in the bills could raise costs. If deployed in the right balance, reform measures could save companies up to $3,000 per employee by 2019, according to the report, which was commissioned by the Roundtable but crafted by the consulting firm Hewitt Associates. Smaller businesses, on the other hand, are concerned about being able to offer low-cost insurance to their employees in the first place. Though lawmakers have crafted proposals overtly targeted at small business, business groups like the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB) vehemently oppose the public option. The Chamber says it would pay below-cost reimbursement rates, leading doctors and hospitals to charge private insurers (and the employers who purchase coverage from them) more to make up the difference.
Last week, the American Medical Association reiterated its endorsement of the health reform bill passed by the House of Representatives, rebuffing dissident members and voting to stick with support for ongoing health reform efforts while reiterating wariness over proposals that threaten doctors' pocketbooks and independence. The action at the group's semi-annual meeting in Houston could be seen as a vote of confidence for AMA leaders who voiced support for the bill the U.S. House passed recently. Debate regarding proposals to change the group's policy position spurred a lengthy debate that went on for more than eight hours. However, delegates voted instead to follow the more moderate path chosen by AMA's leaders. In the end, the AMA decided to maintain its endorsement of the House bill, saying the bill was not perfect but was worth standing behind to move the overhaul effort forward, despite the fact that some state medical associations and specialty societies rejected AMA's stance, mainly over the House bill's inclusion of the public option.
The House's passage of a health reform bill has pushed the advertising battle over reform into a new phase, as competing groups have taken to the airwaves to thank or punish Democrats for their votes. MoveOn.org, for instance, launched a $500,000 television campaign targeting lawmakers who voted no, including first-term members. Another group -- Health Care for America Now -- is spending money thanking freshmen lawmakers from battleground districts for their "yes" votes. Such vulnerable seats are sure to be hotly contested in next year's midterm elections, and health bill votes will be key to opponents' campaigns. Abortion-rights advocates are pressing lawmakers through new ad campaigns to keep a provision restricting abortion coverage out of the Senate health care bill. Groups are running ads online and on TV in Washington.
Business foes of health care overhaul legislation are outspending supporters at a rate of 2-to-1 for TV ads as they grow increasingly nervous over a final bill. Led by the U.S. Chamber of Commerce, opponents of the Democratic health reform proposals have spent $24 million on TV commercials over the past month compared to $12 million spent by labor unions and other backers. That's an abrupt reversal from the vast spending advantage supporters enjoyed most of this year, according to Evan Tracey, president of Campaign Media Analysis Group, which tracks political ads. Coalitions are also proliferating among business groups hoping to amplify their attacks, including one that is still gearing up and tentatively named the "Start Over Coalition." It is envisioned as a huge alliance of trade groups and companies that will use grass roots, local contacts with lawmakers and shoe-leather lobbying to persuade Congress to drop its current effort and settle for far more modest legislation. A complementary group started last month, "Employers for a Healthy Economy," already has spent millions of dollars on three sets of TV ads, including one aired nationally that argues Democrats' health care plans would further weaken the economy. Illustrating how convinced lobbyists are that the economic argument is a winner, the group updated the commercial to reflect the recent announcement that the unemployment rate now exceeds 10 percent.
Health Care for America Now, backed by labor and liberal groups, has spent $9 million this year on TV ads, including $7 million since September as Congress' work has intensified, according to national campaign manager Richard Kirsch. Even so, the group is asking previous donors for more help in response to the other side's stepped-up spending. Other liberal and labor groups that have run recent ads include Moveon.org, the American Federation of State, County and Municipal Employees, and Americans United for Change. Obama's political organization, Organizing for America, e-mailed members on its huge mailing list last week, urging action by people in the 32 House districts that Obama carried last year and are represented by Republicans who opposed the House bill.
An Associated Press poll conducted by Stanford University with the Robert Wood Johnson Foundation found that the fine print in health bills worries some Americans. Of those surveyed by the poll, 43 percent oppose the plans while 41 support them. Fifteen percent remain undecided. In one particularly striking finding, the poll indicated that public support for banning insurance practices that discriminate against those in poor health may not be as solid as it seems. When told it would probably cause them to pay more for their insurance, 43 percent said they would still support doing away with pre-existing condition denials but 31 percent said they would oppose it.
Two Quinnipiac polls released last Thursday show the leading GOP Senate candidates in Connecticut and Ohio growing their leads. The surveys are the first major Senate polls since the House passed its health care reform bill. President Barack Obama's approval on the health care issue has also slipped in Ohio from 44 percent to 36 percent in the last two months, and now 57 percent of voters disapprove of his handling of it. Voters also by a wide margin say they oppose the healthcare bill, 55-36, after they were evenly divided, 44-44, in September. In Connecticut, the drop is less drastic, and voters still support the bill by a 47-42 margin. But the all-important independent voters disapprove of Obama's handling of the issue, 55-36. Two months ago, they disapproved by a six-point margin. The more troubling numbers are in Ohio, mostly because the drop-off is bigger, but also because it is often seen as an electoral harbinger for the rest of the country.
A Washington Post-ABC News poll released today shows Americans deeply divided over the proposals under consideration and majorities predicting higher costs ahead. In the new poll, 48 percent say they support the proposed changes; 49 percent are opposed. The new poll provides ammunition for both advocates and opponents of reform. For opponents, a clear area of public concern centers on cost -- 52 percent say an altered system would probably make their own care more expensive, and 56 percent see the overall cost of health care in the country going up as a result. Few see clear benefits in exchange for higher expenses. Rather, there has been a small but significant increase in the number (now 37 percent) who anticipate their care deteriorating under a revamped system, putting that number in line with opinion in July 1994, just before President Bill Clinton's health-care reform efforts fizzled.
But reform proponents have other findings to bolster their case. Two-thirds of those surveyed support one of the basic tenets of the reform plan, a new requirement that all employers with payrolls of $500,000 or more provide health insurance coverage for their employees or face fines. As in previous polls, a majority supports a government-sponsored heath insurance plan to compete with private insurers, although the percentage supporting the general idea has slipped slightly over the past month to 53 percent. Support for the scheme jumps to 72 percent when the public plan is limited to those who lack access to coverage through an employer or the Medicare or Medicaid systems.
While Americans overall are divided on reform legislation, the Democrats have made some progress among at least one key group. Support among senior citizens, while still broadly negative, is up 13 points since September to 44 percent. Looking toward next year's midterm elections, 25 percent say they more apt to back a candidate who supports the proposed health-care changes; 29 percent are less likely to do so. More, 45 percent, say the vote will not make much of a difference. Independents are nearly twice as likely to be swayed away from rather than toward a candidate who supports the changes (31 percent to 17 percent). There are also evident signs of an anti-incumbent mood in the new survey, which would disproportionately hurt the majority Democrats next fall should they hold. Most see the country as headed pretty seriously off on the wrong track and half of all Americans say they are inclined to look around for someone new to support for Congress; just 38 percent are inclined to re-elect their member of Congress. These numbers are similar to those from November 1993, one year before Republicans took back control of the House and Senate and close to those from May 2006, six months before Democrats re-captured the Congress.
Roy Ramthun, "Mr. HSA"
HSA Consulting Services, LLC
