A national healthcare reform primer
Most people with health insurance say they like what they have. They trust their doctors, and they are fearful of any change in their policy.
Many of the 47 million uninsured people in this country don’t go to the doctor even if they need to because they figure they can’t afford it. They skimp on medications or skip them entirely.
President Obama has said that he and Congress will make both groups happy by cutting costs for those who have coverage and by bringing quality care to those who currently have no insurance.
It’s a tremendous challenge. And the goal, if accomplished, will affect every American.
On Thursday, Obama’s push to expand healthcare coverage began in earnest, with the announcement of his plan to create a $634-billion fund to do just that. The amount was described as a down payment over 10 years; the final price tag would be even larger, perhaps $2 trillion or more.
The president’s strategy is starkly different from the approach by the Clinton administration in 1993, when it corralled hundreds of experts and staff people to produce a detailed plan more than 1,000 pages long. The Clinton effort failed, despite Democratic majorities in both houses of Congress. Obama’s approach is this: Give me a bunch of money, and we’ll figure out the details later how we are going to manage this thing.
Now the wrangling truly begins -- with the administration trying to push its vision through Congress, with Democrats and Republicans trying to shape the effort to their liking and with special interests trying to affect the final outcome, whatever it may be.
The cost of covering the uninsured ultimately will depend on the number of people included, the specific benefits they receive, and the amount of financial help the taxpayers would provide. The only agreement among economists who study the issue is that the tab would be a big one:
* $200 billion to $250 billion a year, says Joe Antos of the conservative American Enterprise Institute.
* $150 billion to $175 billion a year, says Len M. Nichols of the liberal New America Foundation.
The debate over this first proposal and related, still-to-come proposals will boil down to a discussion about the powers and size of the federal government. Do we want the government to have the power to make us buy health insurance, as individuals or businesses? How much power should the government have to control costs? How much do we want to spend to provide health insurance to our fellow citizens who don’t have it?
Here is a primer on the big issues to watch as the healthcare debate unfolds:
Regardless of what happens, will I be able to keep the insurance I have now?
Almost certainly. The big lesson from President Clinton’s ill-fated attempt at healthcare reform in 1993 and 1994 was that people are terrified of change. They like their doctors, although they don’t like insurance companies. An oft-uttered reassurance in the 2008 residential campaign was: If you like what you have, you can keep it. This will likely be a key plank in any plan offered by the Obama administration.
Further, most people get their coverage at work, and this would continue. Despite rising costs, business managers still place high value on insurance as an attractive benefit. The share of the workforce with coverage remains around 70%.
If I don’t have health insurance, would I have to buy it if an agreement on reform is reached?
This is the tricky mandate issue. Advocates say you can’t cover everyone unless you make everyone buy a policy.
Although nobody from the administration is using the “M” word these days -- a mandate would represent a big expansion of government authority -- many believe it is the logical way to go. So do Democratic leaders in Congress.
Before such a mandate could become law, however, Congress would have to decide the amount of financial subsidies to help people pay for their coverage. Most people without health insurance work full-time and earn less than $30,000 a year. Meanwhile, the average policy for a family of four under job-based coverage cost $12,680 last year, with the employer paying $9,325, according to figures compiled by the Kaiser Family Foundation. Coverage for an individual through work cost $4,704, with the employer paying $3,983.
A decision on a mandate would also involve intense negotiations between the government and the insurance industry over the terms and details of coverage. The industry has indicated it’s willing to deliver “guaranteed issue” (nobody gets turned down) in return for a law requiring mandatory purchase of insurance.
The National Assn of Insurance Commissioners has proposed a model act for the states as a way to control costs. It says that the highest rates for any age group should be no more than 400% of the lowest rate charged to any group. This would be reduced to 300% two years after the law is passed, then to 200% after five years. That would mean a 63-year-old living in San Diego, for example, could not be charged more than double the rate paid by a 25-year-old in Santa Monica.
Price differences and subsidies are crucial. It would be meaningless to have the guaranteed right to buy health insurance if you make $30,000 a year, have high blood pressure and diabetes, and a policy would cost you $10,000.
If I have a business, would I have to buy coverage for my workers?
The answer to this question may determine the success or failure of health reform efforts.
This is the “pay or play” issue in health policy language. A company “plays” by offering coverage to its employees, or “pays” into a public fund to help cover the uninsured.
During his campaign, Obama said he favored a mandate for business. But, like the idea of a mandate for individuals, any discussion of a mandate for business was conspicuously absent from the budget document, and was never mentioned by administration officials in their briefings Thursday. They repeated over and over that the president wants every American covered by health insurance, and that he welcomes all ideas from Congress about how best to achieve the ambitious goal.
Big questions remain. If there is a mandate, which businesses should be exempt? Those with 25 or fewer workers? 10 or fewer? And what share of payroll should businesses have to contribute if they don’t offer coverage?
Big companies already offer coverage and likely would continue to do so. They might favor the mandate because it levels the playing field, with all firms now in the game.
Small businesses, vociferous opponents of the Clinton plan in 1993, would be hard to persuade now to accept a mandate as they struggle with the biggest economic slump since the Great Depression.
Would there be some help for older workers who don’t have coverage on the job and can’t afford an individual policy?
Perhaps. One of the ideas circulating on Capitol Hill would allow people to buy into the Medicare program at age 55 or 60. (Medicare eligibility begins at 65.) Early entry would protect people who may have taken early retirement, or been laid off in their late 50s. They are old enough to have developed medical problems that make it hard to get an affordable policy.
The question that would need to be resolved is how much would the government charge as a premium. Most of the cost of Medicare is borne by the taxpayers, with the beneficiaries paying only a small share. Since Medicare faces long-term financial problems, Congress might want to charge the full cost of Medicare to these new enrollees. This could range from $500 to $700 a month.
Might there be a public health insurance plan?
This idea, backed by the president, would create for the first time a public insurance plan to compete with the myriad plans offered by private-industry insurers. The plan would be designed to provide a benchmark for quality coverage, with a basic package of comprehensive benefits. The Obama health plan issued during the presidential election campaign envisioned that millions of the 47 million uninsured would move into a public plan.
How can the country pay for a reworking of its health insurance system?
There’s the rub. The only thing certain is that it would cost a lot, and the debate will be vigorous over where that money should come from.
Obama has proposed a down payment of $630 billion. Most of the money would come from an increase in federal income taxes by limiting deductions for people making more than $250,000 a year.
He also wants to cut payments to Medicare HMOs, saving about $175 billion over 10 years, according to the budget plan issued Thursday. This program, known as Medicare Advantage, requires enrollees to get their hospital and doctor care within a network of providers. In return, they get extra benefits, such as dental care, which are not included in the regular Medicare program. Under regular Medicare, called fee-for-service, the beneficiary can see any doctor or hospital where Medicare payments are accepted.
Other ways to find revenue, mentioned by administration officials but not endorsed in any way, include:
* Capping the federal income tax deduction for health insurance.
Workers do not currently pay taxes on the total value of their coverage. Suppose Sarah Jones has a policy at work with premiums of $10,000 a year. She pays $2,000 and her employer pays $8,000 on her behalf. That $8,000 is not counted as income for Sarah Jones. And her employer can deduct the $8,000 as a business expense.
If this deduction were limited, the government could collect lots of money to pay for the uninsured. But it would mean higher taxes for workers who have the most expensive policies, and they won’t greet that very warmly. Also, this would be a flip-flop politically for the president, since he spent millions of dollars on TV commercials during the campaign attacking the Republican presidential candidate, Sen. John McCain of Arizona, for making exactly the same proposal.
* Creating a special tax dedicated for healthcare.
This could be a special value-added tax on all goods, a kind of tax common in Europe. New taxes, however, are never popular, and especially not during a severe recession.
* Finding ways to make the system more efficient.
The president said in his budget that “healthcare costs could be reduced by a stunning 30% -- or about $700 billion a year -- without harming quality if we moved as a nation toward the proven and successful practices adopted by the lower-cost areas and hospitals.”
A study of Medicare spending, for example, shows that if hospitals in L.A. used the same methods of care as hospitals in Sacramento, Medicare would have saved $468 million in 2005 on inpatient care. The Medicare patients in L.A. spent more days in hospitals, more time in the intensive care unit and were seen by more specialists. Yet despite the higher spending, patients in L.A. didn’t live any longer and the quality of care was not better than in Sacramento, according to a study by the Dartmouth Institute for Health Policy and Clinical Practice.
Efficiency is one of the most popular ideas in Washington because it looks pain-free politically. After all, everybody is against waste. Except of course, when that “waste” is money you get -- or want -- for a service or product.
Currently, for example, if Drug A and Drug B are safe and effective in treating an illness, the Food and Drug Administration approves the sale of both drugs -- and Medicare and Medicaid pay for these drugs. But the House version of the stimulus bill would’ve allowed government programs to consider cost in deciding which drug to pay for, allowing programs to pick the cheaper one.
This was alarming to drug manufacturers and disease-specific patient-advocacy groups. Drug B might cost a lot more than Drug A, but it also might relieve pain more effectively and make life more bearable for a specific subset of the population. Neither drug makers nor these groups want the government to limit the ability of insurers and Medicare to pay for Drug B.
The Senate heard these concerns, and the final version of the stimulus bill included the word “clinical” as the standard of effectiveness that should be pursued. In other words, the programs can also emphasize how a drug works, not simply how much it costs.
What happened in the stimulus bill shows how hard it will be to create economic efficiency that slows the growth in healthcare spending.
Even in this deep recession, healthcare spending is expected to rise 5% this year, while the nation’s output of goods and services (the gross domestic product) shrinks by 0.2%, according to government forecasts issued just last week.
Health reform means trying to bring insurance to those who don’t have it without making the federal budget deficit even deeper, controlling the growth in health spending without denying patients what they think they need, limiting unnecessary procedures without hampering the autonomy of doctors to do what they think is best.
If Obama can figure out a way to persuade Congress to expand coverage to millions of uninsured people, while keeping those with coverage happy, it will be a feat of political magic that has eluded presidents for decades.