Wednesday, November 11, 2009

US House Health Care Bill

As promised, here is a quick look at the US House version of health care reform. Please keep in mind that the Senate will pass a version and then the two bills will go to a conference committee to be reconciled and back to both chambers for a vote on final passage. In other words, what you see today is a long way from law.

Some Key Points of the Legislation with Comment:

Health Insurance Exchange
This refers to a "marketplace" that allows for comparison shopping among insurance providers. The exchange would also administer the affordability credits provided in the legislation.

Public Insurance Option
Within the health insurance exchange would be an option to purchase a public plan in areas where just one or two carriers dominate the market. This is a much watered down version of the public option than originally discussed. The first version of a public option would have been offered anywhere in the nation, not just in the areas with few insurers. The first version would have provided insurance for a massive group of around 129 million Americans. The current version allows for about 6 million Americans to buy a public plan.
This area is of major concern because a comprehensive public option was our best hope of controlling health care cost inflation. When a plan has 129 million consumers, it can dictate to the market what it will and will not pay for various procedures and drugs. A plan with 6 million is not likely to have much market leverage. Moreover, a small public option could simply turn into a high risk pool which will eventually price itself out of existence.

Guaranteed Coverage and other Insurance Reforms
This is probably the best part of the bill. Insurance companies would no longer be allowed to exclude people from coverage for pre-existing conditions. Equally important, insurers would no longer be able to base premiums on health status, but only on age, geography, and family size.

Sliding Scale Affordability Credits
These are credits to help low and moderate income individuals and families purchase insurance. Medicaid will still exist for very low income people and the credits will start just above that level and continue up to 400 percent of the federal poverty level ($43K for an individual and $88K for a family of four).
One negative aspect of this program is that federal tax dollars (public) will flow to (private) for-profit insurance companies. This is not what happens with Medicaid for example, because Medicaid is the insurer and directly pays the health providers without the middlemen of the insurance industry taking a cut. This is why Medicaid has an administrative cost of about 2 or 3 cents for every dollar of heath care delivered as opposed to private insurers whose overhead is around 25 cents to 27 cents for every dollar of care delivered.

Expands Medicaid
Individuals and families with incomes at or below 133% of the federal poverty level will be covered. The expansion will be fully federally financed to avoid stressing state budgets.

Improves Medicare
The current "donut hole" in the Part D drug program will be eliminated helping seniors with their prescription drug costs. Cost sharing for preventive services has been eliminated. Physician payments have been improved. Also, improvements in the delivery system have been made.

Individual Responsibility
Once all reforms and affordability credits are in place, individuals must obtain health insurance. Failure to buy insurance will result in a penalty of 2.5% of adjusted gross income.
This is very controversial. Private, for-profit insurance companies will now reap billions from all Americans forced to buy their products. Without cost controls, what is to stop the insurance industry from charging exorbitant rates?

Employer Responsibility
Employers will chose between providing coverage for employees or paying 8% of their payroll into a health fund. Small businesses with payrolls under $500,000 are exempt from the requirement. Above $500k, businesses begin to pay on a sliding scale that maxes with the 8% for those over $750k in payroll.

In conclusion, this legislation still needs work, and it is a long, long, way from being a truly progressive health care reform bill.

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