A Close Look at the Details

You have to hand it to them: on a Saturday, at the 11th hour, in the midst of a blizzard that shut down the nation’s Capitol, Senate Democrats finally nailed that 60th vote needed to bring health care reform home in time for the Holidays.
In the end, Nebraska Democrat Senator Ben Nelson decided that he didn’t want to play Scrooge. Though his heart  melted only after he  had won: 1) tighter restrictions on insurance coverage for abortions (health insurance plans will be allowed to cover abortions, but states can prohibit the coverage of abortions by plans that are offered in their exchanges); 2)  a special holiday present for his state (the amendment includes, solely for Nebraska, an extension of increased federal contributions to the cost of an expansion of Medicaid);  and 3) a pledge that no major changes will be made to the Senate bill in conference.
Nelson has made it clear that if any provisions from the House bill that he doesn’t like are added to the Senate bill, he will vote against it.

 With regard to the abortion compromise, pro-choice Senators Barbara Boxer, Democrat of California and Patty Murray, Democrat of Washington, issued a joint statement, saying that they could live with it:  “We said we would not accept language that prohibited a woman from using her own private funds for her legal reproductive health care– this compromise meets that test.” 

Nevertheless, pro-choice groups are not happy. Under the compromise, if a health plan covers the procedure, subscribers would have to make two separate monthly premium payments: one for all insurance coverage except abortion and one for abortion coverage.

But that’s just one of the many new twists in the bill. Saturday morning, Senator Majority Leader Reid introduced a 338-page package of last-minute amendments, along with the changes that were needed to win Nelson’s support.  (You’ll find this“manager’s amended” bill here. )

The Senate is expected to vote on December 24. Make no mistake: reform’s opponents are bitter, and will fight this legislation to the end. Nevertheless, as long as the 60 votes hold– and it appears that they will– we’re close to the finish line.

But in the days ahead, Senate Majority Leader Harry Reid will have to keep an eye on each of his 60 Democratic votes. Even after all of the compromises, it appears that no Senate Republican will support the legislation. (Reid got snow, but not Snowe.)  This confirms my belief that bi-partisan reform was never possible. Republicans simply did not want to change our bloated health care system–on any terms. Too many of their supporters profit from the excesses.

The Details That Matter In the Amended Plan

Since the public option is no longer on the table, the fine print becomes  more critical. There will be no public plan to set a high bar for the marketplace. A combination of insurance regulation and Medicare reform will have to do the job.

Originally, reform legislation laid out three goals: to expand coverage, to reduce spending, and to improve the quality of care.  The current legislation goes a long way toward accomplishing the first goal by ensuring coverage for most low-income and middle-class families. The amended bill also makes medical bankruptcy unlikely: after 2014 insurers will not be able to impose annual or lifetime caps on how much they will pay out for an individual’s care.

 But when it comes to addressing the other two goals—reducing costs and improving care—this will happen only if Medicare is allowed to pave the way. The Senate bill calls for an independent Medicare Commission that would have the authority to cut waste, protecting patients from the risks of unnecessary care while simultaneously lowering costs. When the Senate HELP and Finance bills were merged, the Commission was neutered; for example, hospitals were exempted from cuts for ten years.

 Now, however, an amendment introduced by Joe Lieberman, Jay Rockefeller and Sheldon Whitehouse would strengthen the Commission and let it use financial carrots and sticks to insist that hospitals begin providing better value for Medicare dollars.

Lieberman? Yes, the insurance industry does not object to letting Medicare rein in spending and improve care; after all, the private insurance industry doesn’t compete with Medicare. And so Lieberman, who some have begun to call the “Senator from Aetna,” is happy to help. 

That said, this is an excellent amendment. Jay Rockefeller deserves a standing ovation for putting principles ahead of personalities, and teaming up with Lieberman in an effort to draw support from moderates.
Finally, and perhaps most importantly, keep your eye on premiums for older Americans. As the legislation now stands, both middle-class and upper-middle-class Americans in their late 50s and early 60s who don’t have employer-based coverage could find insurance totally unaffordable.

 This remains the biggest hole in “universal coverage.” But under the latest version of the Senate plan, states can, if they choose, protect older patients by refusing to let insurers charge them three times as much as they charge younger customers.

Glass Half-Full

Despite the legislation’s warts, many of the details in the original bill and in the amended legislation will contribute to real reform. Here is a short list of provisions that make this bill matter:
–In the amended bill, insurers that  hike premiums now–before reform becomes a reality– will not be allowed to sell insurance in the Exchanges;

 

• Primary care physicians will see increases in their Medicare and Medicaid reimbursements;
• Insurers will not be allowed to discriminate against customers suffering from “pre-existing conditions.”
• The legislation provides an additional $10 billion dollars over the next five years for community health centers. This funding will create centers in 10,000 communities.
• From this point forward, children cannot be denied coverage because of pre-existing conditions.
• Insurers in the large group market will have to spend 85% of the premiums they spend on medical care.
• Medicaid expands.

Wealthier Americans will contribute more to Medicare. Originally, the legislation called for a 0.5 percent increase in the tax for individuals earning $200,000 and couples earning $250,000 or more; the amendment calls for a 0.9 percent increase raising the tax from 1.45% to 2.35%. Medicare needs this extra money. 
Yet, I remain concerned that the full plan does not roll out until 2014. As I pointed out in an earlier post, if President Obama loses the election in November of 2012, and Democrats lose control of Congress, their replacements will have a full year to repeal the legislation.  Most of these hard-won reforms might never be implemented.

 

Under Reform, Will You Be Able to Afford Insurance?

Yes, if you live in a low-income or moderate-income household. Most families in this group who do not have employer-based insurance will receive subsidies to help them cover premiums in the insurance exchanges. The subsidies are available on a sliding scale, and are pegged to income and the size of the household. Families that earn less than four times the Federal Poverty Level will receive help.  For example, a single person earning less than $43,320, a couple with income under $58,280,  a three-person household reporting earnings up to $73,240, or a family of four earning  as much as $88,200, are eligible for “premium credits.”
Under the Senate plan, households at the low end of the scale will not be expected to shell out more than 2.8% of their income toward their share of insurance premiums; the subsidy will pay everything over that amount. At the high end of the ladder, (a single person earning close to $43,320 or a family of four approaching $88,200), the amount they will owe is capped at 9.8% of household income.

If you are accustomed to generous employer-based insurance, 9.8% of income may sound like an extortionate amount of the family budget to fork over for healthcare.  But for the uninsured, the self-employed and those who work for employers who don’t offer insurance, this is less than they would pay today if they tried to buy good, comprehensive insurance in the individual market. And families in the middle of this sliding scale are asked to contribute just 4% to 6% of their earnings.

Out of pocket payments also are capped. The Senate plan begins by limiting how much even the wealthiest individual buying insurance in the Exchanges will pay out of pocket in a given year to $5,950 ($11,900 for a family). Caps are lower for those who earn less. For example, if an individual earns somewhere between $32,490  and $43,320 the out-of-pocket limit is set at roughly $4,000. A person earning $21,660 to $3249 would pay no more than $3,000. Finally a single person earning $10,830 to $21,660 would never face medical bills that exceeded $2,000.

These caps should virtually eliminate medical bankruptcies– at least after 2014. 
Earlier this month, AP reported that a last minute change in the Senate bill would permit insurance companies to place annual limits on the dollar value of medical care, as long as those limits were not ‘unreasonable.’   But AP noted, the White House pledged to fix the loophole. “The president has made it clear that health insurance reform legislation should prevent insurance companies from placing annual limits on health expenditures that can force families into financial ruin,’  White House spokesman Reid Cherlin told the Associated Press. “We will continue to work with Congress on this policy.”  “The bottom line is they are going to try to improve the Senate bill," said Stephen Finan, a policy expert with the American Cancer Society Cancer Action Network, which first called attention to the problem.”

And indeed, it seems that they have. In the amended version of the plan, an insurer “may not establish lifetime limits on the dollar value of benefits for any participant or beneficiary or annual limits . . . except as provided in paragraph 2.

Paragraph 2 indicates that this regulation does not go into effect until 2014 when the insurance exchanges open up.  Until then, insurers may still impose limits, though it appears that they can only cap annual and lifetime payments for “non-essential benefits.” 
 

Who Won’t Be Able to Afford Insurance?

Upper-middle-class households, as well as those living on the upper-edge of the middle class (for example, a couple earning $59,000) won’t qualify for subsidies. If they do not have employer-sponsored insurance, and must shop in the Exchange, many will find the best insurance plans cost more than they can afford. (As I pointed out in part 1 of this post, history reveals that the Office of Personnel Management, which will be overseeing the Exchanges, has done a poor job of holding down premiums for federal employees. From 2001 to 2008, government workers watched averaged premiums climb by 62.3%.)

Probably many of these families will have to settle for so-called “Bronze plans” which cover only 60% of the cost of essential care, or perhaps “Silver plans” which cover 70% of costs. It’s less likely that they be able to ante up the higher premiums for “Gold Plans” (which cover 80% of bills) or “Platinum Plans (which pay 90% of the costs.) This means that they’ll use the insurance in emergencies, but may put off routine care.  In other words, a  family  that earns too  much to qualify for subsidies- but not enough to buy a Platinum, Gold or Silver plan— may find that while they have health insurance, they don’t have access to the health care that they need– unless they can afford to pay 40% of the cost of that care out of pocket.

 There is, however, a possibility that the rules which determine who is eligible for subsidies will be changed to reflect differences in cost of living in different parts of the country. Right now subsidies are limited to individuals and families who earn less than four times the Federal Poverty Level. But the amended legislation calls on the Secretary “to conduct a study to examine the feasibility and implication of adjusting the federal poverty level  to reflect the variations in cost-of-living among different areas within the United States. If the Secretary determines that an adjustment is feasible, he is required to submit a report to Congress no later than January 1, 2013” recommending a methodology to make the adjustments.

In Part 3 of this post, I will talk about how the amended legislation could leave many older Americans out in the cold.  The only solution: Medicare must lead the way in reining in the cost of care.