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Individual Premiums to Increase; No Rate Relief for Small Group Under Senate Bill

BestWire Services –

Dec. 1: A new analysis from the Congressional Budget Office demonstrates that most nonelderly people who would be insured under the current U.S. Senate health reform bill would pay about the same or less in premiums by 2016, if government subsidies for lower-income people are factored in.

The vast majority of the insured 70% would still be in large group plans, the report said. Premium changes among that group would range anywhere from zero change to 3% less, according to the findings of the nonpartisan congressional spending experts.

The insurance industry pointed out that the report demonstrates “the current health care reform proposal fails to bend the health care cost curve,” according to a response from America’s Health Insurance Plans. The industry association focused on those with nongroup policies, who would end up paying more in 2016 — “double-digit premium increases for millions of Americans.”

AHIP argued that the bill encourages people to delay purchasing coverage until they are sick, and the organization also said the CBO report ignored regional variations in premiums.

The next largest segment 17% would be the nongroup insured, where more than half would have their insurance costs subsidized by federal government help.

Those receiving subsidies would pay 56% to 59% less than they would if the system continues as it is now. But the remainder amounting to about 7% of the total nonelderly insured, or 13.8 million would pay from 10% to 13% more than they would without the bill.

The last segment is the small group, representing about 13% of the market.

Their premium difference would be close to zero — except for the 12% who would receive subsidies, bringing their costs down by as much as a tenth.

Besides the 7% potentially seeing significant premium increases, the other negatively affected group are those who currently receive higher-cost plans, also known as “Cadillac plans” in the ongoing health care debate in Congress.

Those premium plans held by about one in five people would be subject to a new excise tax to help pay for the overall health reforms. The report surmises that “most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums.” But those plans would come with reduced coverage.


Healthcare Issues: Mandated Individual Coverage

Nov. 19: A look at key issues in the health care debate:

THE ISSUE: Should every person be required to either have health care insurance or pay a penalty tax?

THE POLITICS: Requiring everyone to buy health insurance can help spread the responsibility for medical costs. With proposed subsidies to help the poor buy in, the so-called “individual mandate” gets Democrats closer to moving millions of uninsured into coverage plans. Insurance companies are largely on board, though they have raised fears that a Senate version of the health bill doesn’t impose stiff enough penalties to ensure that people actually comply.

Insurers say the mandate, covering everyone so they can’t seek insurance just when they are ill, could bring concessions from them on other issues. An example: Acceptance of all, regardless of pre-existing health status.

President Barack Obama did not support an individual mandate in his campaign, but now says his thinking has evolved. Critics on the left say the plan leaves out lower-middle-class people who aren’t poor enough for a subsidy but will struggle to pay for insurance even if some exceptions are granted.

WHAT IT MEANS: Individuals who don’t have health insurance through employers or another group would have to purchase it, either privately or from any public plan Congress creates. Ignoring the mandate would bring a penalty fine. Democrats propose taxpayer-supported subsidies for the lower-income who can’t afford insurance, though concerns have been raised about whether those subsidies are generous enough; if not, some people could find it cheaper to forgo coverage and pay the penalty instead. Proponents of the individual mandate say among the cost problems it would solve is the hospital and taxpayer burden of the uninsured who use emergency rooms as their primary care when they’re sick.


Healtcare Bills Could Jeopardize States’ Consumer Protection Laws

Los Angeles Times –

Nov. 16: Healthcare overhaul bills working their way through Congress could jeopardize laws in California and other states that require insurers to pay for treatments such as AIDS testing, second surgical opinions and reconstructive surgery for breast cancer patients.

What’s more, the federal legislation could make it virtually impossible for states to enforce other consumer protection laws, such as the right to appeal if an insurer denies coverage for a particular treatment.

Healthcare overhaul bills in both the Senate and the House would open the door to insurers selling policies across state lines — which some lawmakers fear could allow health plans to take advantage of the lenient rules in some jurisdictions while avoiding tougher enforcement regimes in places like California.

“It would be a huge problem for California consumers,” said Rep. Jackie Speier (D-Hillsborough), who helped craft insurance laws when she served in the state Senate. “California is leading the way in terms of consumer protection, and I don’t want to see that lost.”

The proposals are part of the broader federal healthcare legislation that has been passed in the House and is still under consideration by the Senate. Before any of it can become law, both houses would have to agree on final language and President Obama would have to sign it.

Allowing insurers to sell across state lines is a key tenet of the Republican healthcare platform, and Sen. John McCain (R-Ariz.) made it a centerpiece of his presidential campaign. Proponents argue that interstate sales would enable insurers to customize policies to individual customers’ needs, ignoring state benefit mandates they view as overly burdensome.

Democrats, on the other hand, generally oppose interstate sales and have defeated earlier efforts in Congress to allow them. Opponents fear that allowing insurers to sell across state lines would trigger a “race to the bottom,” in which insurers compete to sell bare-bones policies at the lowest price, lacking benefits such as maternity care.

Interstate sales “is insurance code for picking their rules,” said Jerry Flanagan, patient advocate for Santa Monica-based Consumer Watchdog. “The insurance companies will all run to Wyoming to issue policies, and Wyoming laws would rule in California.”

Whereas some insurers want to be able to sell policies across state lines, the Blue Cross Blue Shield Assn. opposes the idea. It argues that such permission would result in inexpensive, watered-down policies.

California Laws:

Currently, most health insurance is subject to the laws of the state where the purchaser lives. Some states, including California, have greater consumer protections than others.

Patients’ rights are among many areas where California has sought to provide protections beyond those of the federal government and other states. In a similar way, the state’s standards for air and water pollution and fair employment and housing exceed federal laws.

California mandates require insurers to cover home healthcare, bone density screening for osteoporosis, in vitro fertilization and mastectomy. Mandates also cover certain providers, such as chiropractors, and conditions, such as autism. If insurers are allowed to sell under the laws of other states, they might be able to offer policies that do not include those benefits.

The American Cancer Society’s Cancer Action Network believes the federal benefits package will end up including many of the cancer screening and prevention services, such as mammograms and tobacco cessation classes, that the group has fought for in the states for years.

“Healthcare reform could apply them nationwide with one fell swoop,” said spokesman Steve Weiss.

But benefit mandates are not the only concern. Some California lawmakers and policy analysts worry the federal legislation would gut a host of other consumer protections.

In California, for instance, insurers must comply with prompt claims payment laws. And if an insurer refuses to pay for a particular treatment, such as chemotherapy or an organ transplant, the consumer has the right to appeal that decision to an independent medical review panel whose decisions are binding.

Consumer advocates and California lawmakers fear that hard-fought insurance gains may be lost.

Rep. John Garamendi (D-Walnut Creek) is a strong proponent of the healthcare overhaul legislation. But the former California insurance commissioner said he sees trouble in the interstate provision. “There is a real potential for problems here for consumers.”

The office of Gov. Arnold Schwarzenegger, a supporter of the Obama health plan, is assessing the details of bills before Congress, spokeswoman Rachel Arrezola said. But, she said, the governor “strongly believes that any healthcare reform proposal should not erode California’s landmark consumer protections.”


Healthcare Reform Bill Wouldn’t End Higher Premiums Based on Age

Los Angeles Times –

Nov. 9: Under the healthcare proposals now before Congress, insurance companies would no longer be able to charge higher prices to policyholders who had diabetes or cancer, became pregnant or were severely overweight.

But the far-reaching clampdown on insurers leaves one highly controversial element untouched: the issue of charging higher premiums to older policyholders than to younger, presumably healthier consumers who are less likely to file costly claims.

Under the provisions of the bill passed by the House on Saturday, as well as in the probable Senate version, insurers will be able to charge middle-aged consumers at least twice as much as they do younger customers.

And depending on the ultimate language of the Senate bill, insurers could be allowed to demand four times as much.

“There’s no argument that healthcare spending for older adults is substantially higher than younger adults,” said Linda Blumberg of the Urban Institute, a Washington think tank that has studied the matter. “The issue is how we want to distribute those costs.”

Experts use the arcane-sounding term “age rating,” and they discuss it in terms of ratios — as in a 2-1 formula or a 4-1 formula. Behind the jargon, the issue has huge financial and other implications for millions of Americans and the insurance industry.

For example, according to a recent Urban Institute study, if the age-rating ratio were set at 2 to 1, a typical 58-year-old policyholder would pay about $5,900 a year for health insurance. If the age rating were 4 to 1, the premium could jump to $8,650.

Conversely, a 24-year-old would pay about $2,965 under a 2-1 rating system, but the premium could fall to $1,880 if the 4-1 ratio were used.

Advocates for older Americans argue that age rating amounts to discrimination, gives insurers a back-door way to deny coverage to those who need it most, and imposes serious hardship on many middle-aged people who are years away from being eligible for Medicare.

“Age is an immutable characteristic. I can’t make myself younger,” said Natale Zimmer, policy director for OWL, an advocacy group for middle-aged and older women. “To charge someone more simply based on age really amounts to discrimination.”

Some advocates argue that even a 2-1 ratio is overly punitive and ignores the fact that an in-shape 52-year-old can be healthier than an overweight 28-year-old.

The insurance industry says age rating is necessary to make coverage affordable for younger people, whose participation in the system is crucial to keeping the overall costs of insurance down for everyone.

Because young consumers submit fewer health claims than their older peers, their premiums help cover the costs of older consumers who file bigger claims.

“Over time, in order for it to be a solvent insurance pool, you have to do one of two things: raise premiums for everyone or figure out a way to get more people into the pool,” said Jason Grau, an analyst with Oliver Wyman, a consulting firm that has studied the effects of age rating nationwide on behalf of the industry.

Age rating is widespread at the state level. In some states, the ratio can be 10 to 1 or even much higher. In California, a 2.5-1 ratio is used. In Illinois, it’s 4.2 to 1.

In Washington, the House is committed to a 2-1 ratio. Senate leaders are grappling with a bill produced by the Finance Committee, which allows a 4-1 rating ratio, and another version passed by the Senate Health Committee, which stipulates 2 to 1.

The industry says that if the final bill carries a 2-1 rating, those younger than 25 will see their premiums jump by 90% and anyone younger than 50 will see their insurance rates increase at least somewhat.

But Blumberg says young people are more likely to benefit from the government subsidies to buy insurance that will be offered to those who make incomes slightly above the federal poverty level, reducing the overall cost to them.

Meanwhile, depending on the ratings, older people could have both higher costs and higher out-of-pocket expenses because they are more in need of services.

“It really is a double whammy as you get older,” Blumberg said.


Former AMA President Speaks Out Against Senate Inclusion Of Public Option

Spokesman for 10,000-member doctor group opposes additional government control of medicine

WASHINGTON–(BUSINESS WIRE)–The following is a statement from Dr. Donald Palmisano, spokesman for the Coalition to Protect Patients’ Rights and former president of the American Medical Association, on Sen. Reid’s decision to include a public option in healthcare overhaul legislation:

“The government-controlled public option is bad policy that will weaken our nation’s healthcare system. As we’ve seen in places around the world, government-controlled healthcare leads to long waiting lines, substandard care, and an end to medical innovation. Placing Medicaid-for-all-type government caps on payments will not slow the cost of healthcare, it will only minimize the care that those patients’ receive.

“Even with a state opt-out option, the federal government has leverage and resources to coerce states into accepting the terms of Congress’ desires. A simple example is the government withholding highway transportation funds until states complied with their legislative dictates. Now imagine the impact if the federal government chooses its Medicaid funding as the means to pressure cash-strapped state houses to accept the Congress’ latest whim.

“Medicaid and Medicare already reimburse doctors and hospitals less than the cost of providing many medical services. By forcibly tightening the grip on our nation’s healthcare sector, the federal government will wrest more of the healthcare decision-making from patients and doctors and give it to bureaucrats in Washington.

“We have the best healthcare system in the world. More than 230 million Americans have health insurance and the vast majority of them are happy with their care and their doctors. And we agree that we should work together to expand access to healthcare without expanding the reach of the federal government.

“The Coalition to Protect Patients’ Rights believes that legislators can strengthen our healthcare system by shielding patients from being dropped by their insurance carrier for pre-existing conditions, allowing individuals to keep their health coverage even when they change jobs, and empowering patients to purchase insurance across state lines. However, growing government control of healthcare is a recipe for disaster.

“We urge all Members of Congress to proceed with caution, because patients’ lives are at risk. We continue to look forward to working with Members of Congress to ensure healthcare reform strengthens our nation’s healthcare system for all Americans.”


Soaring Medical Costs Strain Small Businesses

San Diego Union-Tribune –

Oct. 12: Cathy Jamieson and her husband struggle to maintain health insurance coverage for workers at their small plastics molding plant in Chula Vista. Premiums at American Design have doubled over the past three years, annual deductibles have climbed to as much as $10,000 per family, and the company has turned to three different insurers to find affordable options for its 12 employees, Jamieson said.

With the recession killing more than half of American Design’s business, Jamieson worries that medical benefits might soon have to go. “I don’t know where we’re going to be next year,” she said.

If Jamieson is confident of anything, it’s this: The health care reform proposals now winding their way through Congress won’t make things better for American Design. She fears the price for extending coverage to most of the nation’s 46 million uninsured will fall on business owners like her.

While small businesses around the country have rallied around legislative measures that would force insurers to accept all applicants and offer government subsidies to low-income workers, they’ve winced at mandates to provide coverage for every employee or pay a penalty equal to as much as 8 percent of payroll.

“They really want reform, but then there are the ones thinking, ‘How much will this cost me, and will it hurt my business?'” said Amanda Austin, the lead Washington, D.C., lobbyist for the National Federation of Independent Business. “It’s a little bit of a mixed lv bag.”

About 70 percent of the small-business owners in California who provide health coverage to workers are straining to continue the benefit, while 86 percent of those who don’t blame high premiums, according to a poll published in August by the nonprofit Small Business Majority, a national group based in Sausalito.

In a separate study, the organization concluded that health reform legislation as currently envisioned in Washington could cut small businesses’ medical costs by as much as $855 billion nationwide over the next decade.

“The basic framework in D.C. is certainly much more helpful to small businesses than doing nothing,” said John Arensmeyer, founder and CEO of Small Business Majority. Overall, the small-business community’s mixed reactions help to explain why its voice largely hasn’t been heard in recent months amid intense debates on Capitol Hill and in town hall meetings nationwide.

Unlike big corporations and generously funded special interest groups, most small-business owners are too busy running their shops, bakeries, salons, restaurants and professional firms to study proposals that fill thousands of pages.

“It’s an incredibly complex issue,” said Marshal Scarr, a partner in the downtown San Diego real estate law firm Peterson & Price. “It’s hard to know what is the best thing to do, and it’s hard to know what is realistic and effective.”

Small businesses, the self-employed and those with fewer than 500 workers number 26.9 million. They employ roughly half of the nation’s work force or more than 60 million people, according to the National Small Business Association.

California had 637,730 companies that each employed fewer than 20 workers in 2006, the most recent year for statistics from the U.S. Small Business Administration. The figure accounted for 88 percent of all companies in the state that year.

Health care analysts generally agree that small businesses have fewer options than large corporations for dealing with ever-rising medical costs, including the ability to use large numbers of potential enrollees as leverage during negotiations with insurers.

Forty-nine percent of U.S. companies with three to nine employees and 78 percent of businesses with 10 to 24 workers offered health coverage last year, according to a July report from President Barack Obama’s Council of Economic Advisers. In contrast, the council reported, 99 percent of companies with more than 200 workers provided health insurance.

The reform debate took on sharper focus last week, when the nonpartisan Congressional Budget Office said the leading Senate bill would extend coverage to 29 million people at a cost of $829 billion over 10 years while reducing the federal deficit by $81 billion.

That measure is moving through the Senate Finance Committee, which is expected to vote on it tomorrow. The legislation is widely seen as having the best chance of winning support from liberals, moderate Democrats and a handful of Republicans in Congress, giving it enough votes to proceed to Obama’s desk.

National associations representing small businesses have responded more favorably to this Senate proposal than they have to plans crafted in the House. “We think it gets closest” to the interests of small companies, said Austin of the National Federation of Independent Business.

Her organization, which lists 2,200 members, has vigorously opposed the “pay or play” option. Under that provision, companies would be required to shoulder at least 75 percent of the premium for single employees and 65 percent for families or agree to increases in their payroll taxes.

Supporters of the measure said exemptions would exclude as much as 91 percent of small businesses from the penalty, but that hasn’t dampened the criticism. “It’s not a great idea in a good economy, and it’s a bad idea in a bad economy,” Austin said.

The leading Senate proposal does include a “pay or play” provision that would apply to businesses with more than 50 employees. Rather than imposing higher payroll taxes on companies that don’t offer health insurance, it would fine them up to $400 for each worker receiving government-subsidized coverage outside work.

In addition, groups advocating for small businesses back the creation of exchanges where health insurance plans can be compared against one another in an effort to boost competition and drive down prices.

What small-business owners want most from a reform plan is assurance that skyrocketing health costs will be reined in, said Bill Hammett, a health insurance agent and president of the San Diego Association of Health Underwriters. Many companies have watched premiums rise as much as 15 percent annually in recent years.

At American Design, the annual insurance premium has climbed from $2,200 to $4,400 in the past three years while deductibles continue to go up, Jamieson said. The company pays 50 percent of the bill.

Several workers have stopped buying health insurance because of the increases, Jamieson said. “Business owners want to help their employees access health care, but they can’t do it at the expense of keeping their doors open,” Hammett said.


Report: Health Bills Show Some Price Gaps

USA Today –

Oct. 12: Washington – Older Americans who buy health insurance on their own could pay nearly 50% more in premiums under the Senate Finance Committee bill compared with other versions pending in Congress, an independent study says.

Americans ages 55 to 64 could be charged an average of $8,650 a year for insurance under the Finance Committee bill compared with $5,930 under a separate bill approved in July by the Senate health committee, according to a report by the Urban Institute and the Robert Wood Johnson Foundation.

The discrepancy would not affect people who get insurance from Medicare or through work. It would apply to older Americans who buy coverage in the individual market or who are currently uninsured about 6 million people between 55 and 64, Kaiser Family Foundation data show.

The Finance Committee is scheduled to vote Tuesday on its bill, which would cost $829 billion over 10 years and would cover 29 million uninsured Americans. The bill would require nearly everyone to buy a health insurance policy.

Determining how much insurance companies can consider age when setting premium prices could become a sticking point if the committee passes the bill. Democratic leaders will then have to merge the finance version with the health committee’s bill, which is more generous to older people.

David Sloane, the AARP’s chief lobbyist, asks, “Why is it more acceptable to discriminate against older people?” The AARP was formerly known as the American Association of Retired Persons.

Families with two people ages 45 to 64 could be charged an average of $11,939 under the finance bill compared with $9,662 under other versions of the bill, according to the report.

Younger Americans, on the other hand, could pay less. The report found that single adults ages 18 to 24 would pay $2,163 a year on average under the finance bill compared with $2,965 under legislation approved in July by the Senate health committee and bills pending in the House.

“This intergenerational issue is where the tension comes in,” said Linda Blumberg, senior fellow at the Urban Institute and lead author of the study.

In a July letter, the industry trade group America’s Health Insurance Plans asked Congress to allow them to charge older Americans five times more than younger ones — which the Urban Institute study says is close to the current industry practice. The finance bill would let insurers charge older adults four times more while the health committee and House versions of the bill set a 2-1 ratio, which is favored by the AARP.

Representatives for the AARP and the insurance industry said they will be closely watching the merging process. Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, said individuals younger than 35, who are likely to use fewer health care services, could wind up subsidizing coverage for others if lawmakers favor older people.

Blumberg said because younger Americans earn less on average, they would receive larger federal subsidies to offset the premiums. Individuals earning between $32,490 and $43,320, for instance, would get subsidies to cover premiums that exceed 12% of their income.


Medi-Cal’s Future Is Under Threat

Medi-Cal is getting squeezed with rising healthcare costs and increased demand for services while state revenues are declining, according to a report by the California HealthCare Foundation.

Medi-Cal’s share of the state’s General Fund spending grew from 17% to 19% in just two years. State lawmakers would have had to make much deeper cuts to Medi-Cal if not for the federal stimulus bill that gave the state $10 billion to $11 billion in additional federal Medicaid matching funds. The report includes the following facts about Medi-Cal:

* California spends 25% less than the national average per Medicaid beneficiary.
* Medi-Cal spending has grown 36%, per beneficiary, over the past decade compared to a 114% growth in private health insurance premiums.
* Medi-Cal spending is highly concentrated among a small subset of beneficiaries; just 10% of fee-for-service beneficiaries account for 81% of expenditures.
* Medi-Cal spending is growing fastest among adults with disabilities, with outlays for personal care services rising the fastest.
* Medi-Cal’s prescription drug spending has dropped since Medicare is now the primary source of drug coverage for beneficiaries eligible for Medicaid and Medicare.


What’s Behind Rising Health Costs? Lots

The Philadelphia Enquirer –

Oct. 5: Lots of us think we know why American health-care costs are rising faster than a speeding bullet, or at least faster than our GDP, incomes, and inflation. It’s because we’re such profligate users of medical care. We run to the doctor at the first sign of a sniffle and demand heroic treatment until our final days.

We may cringe at the bills, but we’re all after pain-free immortality. Plus, we’ve built the best health-care system in the world. Industry experts see a much more complicated picture. Americans actually see doctors and stay in the hospital less than residents of other industrialized countries, they say. Our costs are high for a constellation of reasons involving relatively uncontrolled prices, insurance that masks real costs from consumers, heavy use of technology, wide variations in care, and excessive administrative costs.

Making a dent in this problem, as Washington is discovering, is a tough, disruptive job that not only would change the way people get care, but also threaten the livelihood of powerful vested interests.

“Your cost is my income,” Tom Getzen, a health economist at Temple University, pointed out. “Real cuts, the kind of cuts that count, are also the kind that hurt.” Health-care experts are divided on the best approach, with some saying a more rational use of resources could curtail spending and others saying the only effective solution is price control.

Reining in expenses

Uwe Reinhardt, a health economist at Princeton University who falls into the latter group, sees little in the health-care packages under discussion that would rein in expenses. “For bending the cost curve, there’s really nothing in there but a few little hopes and a few little prayers,” Reinhardt said.

Our cost curve is a thing to behold. While health spending has grown faster than GDP by half a percentage point a year in other rich democracies, it has averaged an extra 2 percent in the United States, said Jacob Hacker, an expert on the politics of health policy at Yale University.

Health spending now $2.2 trillion accounts for 16.2 percent of GDP. We spend an average of $7,421 per person, even with millions uninsured. Other countries average far less and cover almost everybody. Generally, experts said, care here is not markedly more effective.

Economists say that health-care spending tends to rise with income everywhere. Even taking that into account, though, the United States spends about $2,000 per person per year more than expected based on income, Reinhardt said.

End of life

Much as we might like to blame some of that on excessive spending in the last year of life, economists say that’s not a major cost driver. Joseph White, an expert on international health care at Case Western Reserve University, said the proportion of Medicare spending in the last year of life has been consistent for decades.

“Do we spend a lot of money at the end of life? Yes,” he said. “Do we spend a lot of money on people who are really sick? Yes. That’s the whole point.

That’s why you have insurance.”

Insurance itself has driven spending, some experts said, not only by making it possible for customers to get more care while insulating them from the cost, but by making it safer for companies to risk developing expensive new machines and for hospitals to buy them. But, other countries have more insurance than we do.

Overuse of technology

That leaves the big culprits, resource use and prices. We do use more technology, which researchers define broadly to include medicine, devices, and techniques. Over the years, new technology has improved care. But, American doctors and patients too often assume that “more is always better,” said Elliott Fisher, director of the Center for Health Policy Research at Dartmouth.

We are far more likely than people in other countries to get MRIs and CT scans, Cesarean sections and knee replacements, Mark Pearson, head of the health division of the Organization for Economic Cooperation and Development, told the Senate Special Committee on Aging last week.

We also have big regional variations in resource use without corresponding variations in quality, Fisher said. “Most of the differences across regions are about how much time people spend in the hospital for similar illnesses and how many physicians are involved in their care,” he said.

Making everybody’s care like that in the most cost-effective regions would cut overall costs 20 percent to 30 percent, he said. But, you cannot just cut spending 20 percent in high-cost areas like Philadelphia without causing “chaos,” he added.


He thinks the key is making hospitals and doctors more accountable for spending. Other experts said the main reason we pay so much for health care is that we have done a lousy job of controlling expenses compared with other countries.

“Our prices are higher for everything,” said Jonathan Oberlander, a University of North Carolina expert on social medicine and health policy.

Oberlander and White argued in the New England Journal of Medicine last month for a system where all public and private insurers pay the same rates to doctors and hospitals.

“What I would say is that if countries want to control health-care spending, then they should have spending controls,” Oberlander said. In other countries, someone pays attention to overall cost, White said. Either there’s a single payer, or payers band together to set rates. Here, everything is fragmented.

Given all the hoopla about the more minor changes proposed so far, the policy experts think there is little chance that Americans will jump on the rate-setting bandwagon soon.

“It will happen, but not right away,” Reinhardt said. “You have to get the American people a whole lot more desperate. The American people have to suffer.”


Senate Healthcare Plan to Create Winners, Losers

The Associated Press –

Sept. 14: Washington – Hospitals and drug makers like what they see in the early version of a health care plan that may evolve into the one that ends up on President Barack Obama’s desk.

But insurers and doctors say they aren’t happy. Neither are advocates for low-income workers and some business groups representing employers.

Senate Finance Committee Chairman Max Baucus, D-Mont., has promised a formal proposal within days and plans to convene a bill-drafting session the week of Sept. 21. The Baucus plan is important for two reasons: It’s the only proposal that’s been worked out in close consultation with Republicans, and it also seems to be headed in the general direction Obama wants to take.

“It’s the logical starting point for negotiations,” said Dan Mendelson, president of Avalere Health, an information company serving industry and government clients. An 18-page summary of an early version of the Baucus plan circulated last week.

His proposal is widely seen as making major concessions to industry. There’s no government insurance plan to compete with private carriers, and no requirement on employers to provide coverage as legislation drafted by House Democrats would provide.

In another significant break with House Democrats, Baucus wouldn’t raise taxes on upper-income earners to pay for health care. That should please tax-averse Republicans. Instead, he uses a series of “fees” on medical industries to help pay for his plan.

“There are no deal killers in here,” said Robert Laszewski, a health care industry consultant. But it looks like there’s still going to be plenty to argue about in the fine print. Here’s a sampling of initial concerns already being raised by groups and some lawmakers:


The Baucus plan would require individuals and families to get health insurance from an employer, a government plan or by buying it on their own.

Because coverage is so expensive, it would provide tax credits for millions of middle-class people, mainly those who have to purchase their own plans.

Ignoring the requirement would result in a stiff fine. But Sen. Jay Rockefeller, D-W.Va., says the way eligibility for the tax credits is being computed might result in a meager benefit that leaves many consumers with insurance sticker-shock.

The credits would be based on the percent of family income that’s eaten up by health insurance premiums. But Rockefeller points out that premiums are only one part of health care costs. People with insurance also face an annual deductible and co-payments every time they go to the doctor or pharmacy. That can add up for someone in poor health.

Rockefeller says the tax credits should be based on an individual’s total medical costs, including premiums and out-of-pocket expenses. “Affordable health care is about more than your monthly insurance premium,” said Rockefeller. “It’s also about whether you can afford the co-payment for your prescription drug or 20 percent of the cost of a test or scan that you need.

Health reform must reflect that reality.”


Employers won’t get off free under the Baucus plan, says Kathryn Bakich, a senior vice president with the Segal Group, a benefits consulting firm.

Although there’s no requirement to offer insurance, an employer will be charged a $400 fee if their workers receive a tax credit from the government to purchase coverage. But here’s the catch, Bakich said: Even if just one employee gets help, the fee would be multiplied by the total number of employees at the firm.

“This is a very hard provision to understand,” said Bakich. Advocates for the poor say it could discourage some companies from hiring low-income workers.
There may also be a problem for big companies that provide generous benefits.

Large companies typically don’t buy coverage, but “self insure” by setting aside enough to cover employee medical costs. Then they hire an insurance company to administer their plan.

Under the Baucus plan, high-cost insurance worth more than $8,000 for an individual and $21,000 for a family would pay a 35 percent tax on any amount over those thresholds. The tax would be levied on a big company’s insurance administrator and presumably passed through to the company itself. “People do seem startled at the tax,” said Bakich. “Thirty-five percent is not a minor thing.”

R. Bruce Josten, a lobbyist for the U.S. Chamber of Commerce, complained the Baucus plan will drive up the cost of coverage. “He’ll tax anything and everything that moves in health care,” Josten said.


Some critics say the Baucus plan amounts to a government bailout of the health insurance industry. Not only would the government subsidize tens of millions of new customers, but insurers wouldn’t have to worry about competing with a new public plan that could draw consumers away with the promise of lower-cost, nonprofit health care.

Yet Robert Zirkelbach, spokesman for America’s Health Insurance Plans, isn’t smiling. In addition to the tax on high-cost plans, Baucus has proposed cuts in a lucrative arrangement insurers have under Medicare and a $6-billion annual “fee” on the industry, allocated according to each company’s market share.

Dreams of fat profits from a health care overhaul may vanish. “What we do see is the insurance industry being forced to shoulder a significant share of the cuts in health care reform,” said Zirkelbach, who represents the main health insurance trade group.

How interest groups respond to the Baucus plan will require a combination of hard calculation and political finesse. Hospitals and drug makers are satisfied that Baucus has upheld the deals they struck with him to make contributions to the health care overhaul. Doctors are upset Baucus has not given them as much relief from scheduled Medicare fee cuts as have Democrats in the House.

Consumers and low-income people will have help from liberals like Rockefeller, who argue that the interests of average folks have not been adequately taken into account.

But health industry groups and other business interests will have to contend with the perception that Baucus has already cut them a good deal. Asking for more could come off as being greedy.

“We are still only in the second act of this play,” said Alexander Vachon, a Washington health policy consultant. “Industry still has time to step up if they feel it’s not workable.” Starting this week, they’ll all be running their spread sheets.