Health Care For America Now

Because every single Republican in the Senate continues to say NO to health reform, and because the House is rightly unwilling to pass the flawed Senate bill unchanged, anything that gets sent to the President's desk will have to be passed in the Senate using the budget reconciliation process, otherwise known as majority rule.

In recent years, the use of the filibuster to block legislation has skyrocketed. While it still only takes 51 votes to pass a bill in the Senate, the minority has ramped up the number of times its blocked legislation with only 41 votes. The Republican party of NO started codifying the use of the filibuster for every piece of legislation proposed by the opposing party under President Clinton. Since then, the use of the filibuster has jumped:

To date, the Republican party has filibustered every single piece of legislation introduced by Democrats in the Senate.

That's not how this country was supposed to work, and it's certainly not how the Senate is supposed to work. The American people voted for change in 2008, and they're making clear that if Congress doesn't deliver, there will be problems at the ballot box.

So how does health care move forward? Budget reconciliation.

One huge issue that's received almost no attention in the debate on health care reform is what will happen to health coverage at work. There's been an enormous amount of attention paid to what will happen to the small percentage of Americans - less than 10% - who will get coverage through the new health insurance marketplaces called Exchanges. Will they have access to a public health insurance option? Will the government subsidies be enough to make health care affordable? Will insurance companies be able to raise rates because of health conditions, age, or gender?

This discussion - the one that's dominated the debate - has nothing to do with the majority of Americans, some 150 million, who will continue to get their health coverage at work. During the past decade, coverage at work has deteriorated with employees paying a bigger share of premiums for shrinking benefits. A study of employers released this past fall found that the trend is sure to continue in 2010. A key question is whether reform will deal with this growing problem for most working Americans.

What will happen depends on which reform bill you read. The House bill guarantees people will get good coverage they can afford. But the Senate bill not only fails to protect employees in large firms but also encourages employers in low-and-moderate wage businesses to offer barebones insurance plans and shift workers to part-time jobs.

For the key question most people ask when it comes to health reform - "Will I get good health coverage I can afford?" - the House bill provides unambiguously good news for people at work. The House bill requires all but the smallest employers to offer and help pay for good benefits or pay a percentage of their payroll to the government to help cover the cost of subsidies. Coverage must include a good package of benefits as defined by the federal government. Employers are required to pay a specified share of premiums for individual and family coverage, and the new insurance rules would apply to coverage offered by all employers, large and small. As a result, the House bill will not change a thing for people who get good coverage now at work but will establish a floor to protect people against the national trend toward skimpier benefits and higher costs to employees.

As the informal conference process moves forward, the premiums and out-of-pocket costs the uninsured, individuals, and small businesses will pay on the new health insurance Exchange is getting a lot of focus:

Congressional Democrats and President Barack Obama began work in earnest Tuesday on difficult issues still standing in the way of their national health care overhaul after months of tortuous debate. Topping the list: How to help Americans pay for insurance premiums.

At a White House meeting that stretched into Tuesday evening, the president and Democratic congressional leaders agreed on fast-track negotiations that would bypass the need for a formal conference to resolve differences between the House and Senate health care bills.

Obama "also stated his intention to work with leaders to strengthen affordability … beyond what is in the Senate bill," said a House leadership aide, who spoke on condition of anonymity because the meeting was private.

Affordability for people in the Exchange is a key issue. Along with making sure health care is affordable at work, not taxing health benefits, holding insurance companies accountable with strong regulations, and creating a public option, it's key to finishing health reform right.

To make health care affordable for the millions who will buy it on the Exchange, who are largely the most vulnerable populations - the uninsured, individuals, and small businesses - the affordability provisions from the House and Senate bills should be merged.

When people buy health insurance in the new Exchange, they will receive tax credits to help them afford health care premium and out-of-pocket costs. Those tax credits (or subsidies) vary based on income, so people who make more money receive less assistance.

Under the House bill, families who make less money (between about $18,000 and $36,000 per year) would pay on average only about 2% to 8% of their income (on a sliding scale, so families making $18,000 would pay 2%, families making $36,000 would pay 8%) for health care costs. That's not chump change, but that's very affordable compared to the Senate bill, where the same families would pay between about 9% to 13% of their income on average for health care costs.

For a family making $36,000 per year, paying almost $5,000 in premiums and out-of-pocket costs on average every year is not affordable. The House provisions are clearly better for people in that income range.

But for families who make more money (between about $64,000 and $73,000 per year), the Senate bill is better. These families would pay about 15% of their income, where under the House bill they would pay about 17% on average per year.

(For a full look at the numbers at various income levels, see the analysis here. [pdf])

To make health care affordable for everyone along the income scale, the House provisions for lower and middle income people and the Senate provisions for higher income people should be combined, so we end up with a scale of tax credits that works for everyone.

Of course, we need to fix more than affordability for people on the Exchange. Making sure employers pay for good health insurance, not taxing middle class benefits, strong regulations, and a national public option are key as well. These and other issues will get a look as we fight to finish reform right.

The public health insurance option is treated in the media like an ideological sacred cow, something that must necessarily be sacrificed to moderates in order to pass health reform. The reality is, the public health insurance option would perform an essential function in the overall health care system.

The public health insurance option gives us the way to control insurance company costs and behavior. No other proposal would do this.

First, cost. The public option would put a lid on insurance company rate increases.

Even the CBO - a notoriously conservative outfit - has confirmed this fact. In their analysis of the House health care bill, they concluded that the public option would keep overall insurance premiums within the health insurance exchange down.

This would work in the way you'd expect - through competition.

Say I'm one of the over 50 million people who will get health care through the exchange under the House bill. When the exchange is finally open for business, I'll get to pick from any plan available. Likely, that will include plans from the for-profit insurance companies (one from Aetna, one from Unitedhealth, etc…), plans from the non-profits like Blue Cross Blue Shield, and the public health insurance option. Every one of those plans has to provide good benefits for me, so nobody can sell cheap but junky insurance in the exchange. And I'll receive a fixed subsidy to help offset the cost if I can't afford the plans.

So, let's say the insurance companies decide to do what they always do and price their plans sky-high. That means in the exchange, every plan will have a huge price tag except for the public health insurance option, which, having no profit motive and no executives to pay, has no reason to raise prices like the private insurance companies do. Which plan do you think I'm going to choose? Given I'm getting a fixed subsidy, the public option is going to be better for my wallet. And I also know the public option is looking out for my health, not for profit, so I don't have to be worried it will deny my care like the private insurance companies do.

Taken in aggregate, if the insurance companies keep raising their rates, all of the 50 million plus people in the exchange - 1/6th of America's population - will choose the public option, costing the private insurance companies a huge amount of business. So what will insurance companies do? They won't raise their rates. In fact, they'll keep their prices low to attract business. In indeed, this is exactly what the CBO said would happen.

Sometimes it’s easy in the policy and political debates around health reform to lose sight of what, ultimately, this is all about. For me, Thanksgiving was a good reminder. There were 18 of us around the table, and at least 11 of my family members would see lower – sometimes dramatically lower – health care costs under the legislation that is likely to pass Congress. And all of us – everyone at the table– would see some benefit.

Let’s start with my cousin. She’s fought advanced cancer all year and is now in remission. Out of work during this literal fight for her life, she’s paying $18,000 a year for coverage, money she inherited when her mother died earlier this year. At this rate, she’ll use up her inheritance soon. She hopes to get back to work but will likely be self-employed when she does. Under the health reform legislation, she would pay for coverage based on her income and would have the security of coverage she could afford.

My wife’s niece, a self-employed film producer in Los Angeles, was out of work in the depressed movie industry up until a few weeks ago. Living with asthma, she kept paying for health coverage even as she fell behind on her mortgage. The legislation in Congress would also scale her health coverage to her income.

I have a singer-songwriter musician brother, a married father of two, who has been paying more and more for less and less coverage. And my sister is also married and a mother of two. She and my brother-in-law are both self-employed and buy a high-deductible plan. Both families would pay less for better coverage.

Then there’s my daughter. A year out of college, she has a low-wage job in Boston but has health coverage she can afford because of the Massachusetts law. It’s easy for people on the left to dump on the Massachusetts bill because it doesn’t do enough to control costs. But as a father who doesn’t have to worry about his daughter being uninsured or having to pay more than $300 a month for medication she needs, I’m extraordinarily grateful that Massachusetts has covered almost all of its residents now.

The legislation in Congress would help others at our Thanksgiving table too.

Jonathan Gruber of MIT is out with a new report today, proving once again that health reform - this time the Senate version in particular - would save people money. And once again, he's relying on CBO numbers to prove the point. Here's the argument:

In a letter to Senator Reid on November 20, the Congressional Budget Office (the official government scoring agency) reported that they estimated the cost of an individual low-cost plan in the exchange to be $5200 in 2016. This is a plan with an "actuarial value" (roughly, the share of expenses for a given population covered by insurance) of 70%. In their most recent communication with Congress, CBO also projected that, absent reform, the cost of an individual policy in the non-group market would be $5500 for a plan with an actuarial value of 60%. This implies that the same plan that cost $5500 without reform would cost $4460 with reform, or almost 20% less.

Gruber goes on to chart some of the savings for people:

It's worth noting that the premium savings - calculated between $200 and $400 - are before the subsidies are applied. When the subsidies are factored in, you can see how significant the savings are, especially at lower incomes.

The Senate bill - with exchanges, a public health insurance option, and generous subsidies for lower incomes - would indeed save people a good chunk of change. Of course, there are parts that can and should be improved - better affordability standards for all Americans, for example - but critics who take the insurance industry line and say reform will increase costs are dead wrong.

There was a phone call today with farm leaders from the National Farmers Union and affiliated groups. Their message to those Senators who are not on board yet with a public health insurance option? Rural America needs a public health insurance option most.

The facts in rural America are stark. Roger Johnson, President of the National Farmers Union, noted that rural people spend 22% more on premiums and out of pocket costs than their urban counterparts do. They're also 70% more likely to be uninsured. And where 8% of the population overall rely on individual health insurance policies, the kinds of policies where the insurance companies screw you the most and therefore make the best profit on, 33% of farmers and ranchers rely on these policies.

As a result, farmers and ranchers in rural America get hit hardest by insurance company abuses. John Hansen, President of the NFU in Nebraska, explained:

Farming and ranching is a risky business, with a low margin.

There is a continual pattern of ranchers and farmers out here who can't afford health insurance, or have a body part that has a problem not covered by the insurance policy due to pre-existing exclusions. They have an accident or get sick and suddenly, their entire farm is being fed into the medical system. This is not a theoretical problem.

Annie Cheatam, President of the NFU in New England, added:

Farmers are also very eager to provide health insurance to their employees. But they are reporting that their rates are going up 15-20% a year. No small business can sustain that kind of increase over time. Rates went up 90% in Maine since 2000.

States like Arkansas, Nebraska, and Maine have some of the largest rural populations per capita in the country. Perhaps as a result, the NFU and their allies have found broad support for health reform and the public health insurance option. That's why they are confident that Senators like Blanche Lincoln (who chairs the Agriculture Committee in the Senate and is intimately aware of rural concerns) will find a way to do the right thing. Olly Neal at the Arkansas Land and Farm Development Corporation said:

Senator Lincoln is our friend, and we're pleased she agreed to debate the health care bill. We think, knowing her, that she'll find a way to be supportive of it, and we hope it'll include a public option. We believe there's a way she can get to that support. The majority of Arkansas has shown itself to be supportive of a public option, and we think she'll respond to that majority.

Rural America needs the public option perhaps even more than the rest of America does. The Senators from rural states who are thinking about standing in the way need to do the right thing for their constituents.

Last week, after the House health care bill was unveiled, the CBO released their analysis of the bill. In it was a few paragraphs on the public health insurance option that seemed noteworthy and puzzling:

Roughly one-fifth of the people purchasing coverage through the exchanges would enroll in the public plan, meaning that total enrollment in that plan would be about 6 million.

That estimate of enrollment reflects CBO’s assessment that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees. (The effects of that “adverse selection” on the public plan’s premiums would be only partially offset by the “risk adjustment” procedures that would apply to all plans operating in the exchanges.)

This analysis confirms a lot of what I've been saying about the insurance industry. Even with regulation, they will continue to seek out younger, healthier people they can make money on, while dumping older, sicker people they lose money on. Risk adjustment mechanisms (such as those built into the House bill) can help mitigate some of this, and surely, stronger risk adjustment mechanisms may be necessary. But as usual, the CBO is obscuring the real story.

Jonathan Gruber, MIT health care economist, has put together a fuller picture of the CBO's analysis of the public health insurance option:

In a letter released today, the Congressional Budget Office (the official government scoring agency) reported that they estimated the cost of an individual low-cost plan in the exchange to be $5300 in 2016. This is a plan with an "actuarial value" (roughly, the share of expenses for a given population covered by insurance) of 70%. In their September 22nd letter to the Senate Finance Committee, the CBO projected that, absent reform, the cost of an individual policy in the non-group market would be $6000 for a plan with an actuarial value of 60%. This implies that the same plan that cost $6000 without reform would cost $4540 with reform, or almost 25% less.

In other words, Gruber says the CBO has confirmed that even though the public option premiums themselves may be slightly higher than private premiums within the Exchange, the public health insurance option will act to keep overall premium levels down.

The CBO's analysis of the House health care bill seems to confirm this, saying [pdf]:

"[The House bill] would also include a public plan that CBO estimates would place some downward pressure on the premiums of private plans operating in the exchanges.

While it's hard to accurately predict what's going to happen eight or ten years from now, the overall picture is clear. Put together, the conclusion by the CBO is that the public option works. Not only does it save money - $25 billion, less than a public option with negotiated rates, but still a chunk of change - but it holds down private premiums as well.

The House health care bill does numerous things that would strengthen the employer-based health care system, through which most Americans get their insurance. Most significantly, the bill contains strong provisions to ensure employers are responsible and offer good insurance to their employees [pdf].

Currently, many employers offer health care benefits, but some freeloaders don't. The House bill makes it fair to all employers, and to employees. It's only fair to ask employers - who benefit handsomely from healthy workers - to contribute to their employees' health care [pdf], and the House bill does just that.

If you work at a large business (those with payrolls over $750,000 per year), your health care coverage will get better and cheaper:

• Employers will have to contribute at least 72.5% of premiums for individuals and 65% for families.
• Employer health benefits will have to conform to the essential benefits package [pdf]. This means that the coverage would provide for essential services (hospital, physician, prevention, maternity, prescription drugs, baby, mental health), eliminate out-of-pocket costs for preventative care, cap annual out-of-pocket spending, and prohibit annual or lifetime caps on coverage.

If your employer chooses not to offer you insurance, they will have to contribute to the Exchange based on the size of their payroll to help subsidize their employees, who will be able to purchase insurance through the Exchange. In this way, employers would have to either "pay or play," and share responsibility with the government and individuals for keeping everyone in America healthy.

If you work for a small business, which are exempt from the "pay-or-play" requirement, you may get health insurance for the first time (if your employer currently doesn't offer it), or your insurance will become better and cheaper:

• Your employer can choose to purchase insurance for all its employees through the Exchange, or you can purchase insurance through the Exchange yourself, giving you the benefits package described above, as well as subsidies to help you afford it if you qualify.
• New rules will prevent insurers from charging more to small businesses if they have sick employees.
• Tax credits will be offered for two years to small businesses to help them afford good coverage.

Over time, bigger businesses will be able to buy into the Exchange, with automatic options opening in the years after the Exchange is set up, and the Secretary of HHS given discretion on whether to allow the largest of businesses thereafter.

The net effect is significant. Not only will you have access to coverage you could afford at work, but your coverage will be better. The House bill significantly strengthens the employer-based health care system, ensuring business and families can afford coverage, and good coverage at that. It expands the choices available to business, and it lets small business employees and potentially large business employees buy into the Exchange, where they can utilize the public health insurance option if they choose.

For those of us who get coverage through work - already the most stable and least costly of the insurance markets, especially the large group markets used by large businesses - this is welcome news.

Over the next few days, I'll be taking a closer look at the provisions on the House health care bill - H.R. 3962, the Affordable Health Care for America Act. As was the case when the original tri-committee bill was released, the House committees have a ton of fact sheets on the bill that are required reading for folks looking to learn more.

Overall, the House bill is a bill that takes on the insurance industry. Here's how:

A Public Health Insurance Option

First and foremost, the House bill creates a public health insurance option, available in the new health care marketplace called the "Exchange," that would compete directly with private insurance. The public option won't have to worry about profits or stockholders, and because it is run by HHS, it will have huge bargaining clout to get good rates from providers. Overall, while the public option in the House bill won't save taxpayers as much money as a public option based on Medicare rates, it will still save money according to the CBO.

Because of all that savings, and because the public option will have a mandate to provide health care to people, not maximize profit, it will be a strong competitor to private insurance, keeping prices down and attracting customers. Private insurance will be forced to compete or face losing their most profitable customer base - the individuals and small group customers who are in the Exchange from the start.

Insurance Industry Regulations

The House bill puts new regulations on the insurance industry to curb their bad practices.

The practice of rescission - terminating someone's insurance plan because they get sick - would be outlawed immediately. Similarly, as soon as this bill is signed, lifetime caps on insurance coverage would be outlawed.

After the Exchange is set up in 2013, all insurers, not just the ones in the Exchange, will be barred from denying care for pre-existing conditions, charging more if your are a woman or sick, or employing annual benefits caps. They will have to cap out-of-pocket expenses at a standard level, keep administrative costs down to below 15%, and publicly disclose and justify their rate increases.

Medicare beneficiaries and the unemployed will benefit as well, with overpayment to private companies through Medicare eliminated and COBRA coverage extended until the Exchange is set up.

Finally, the House bill will eliminate the anti-trust exemption on health insurance companies, making it possible to finally prosecute them for their monopolistic practices.

Immediate Relief

The House bill also provides immediate relief for people at the mercy of the insurance industry by setting up an interim high risk pool open to people who have been uninsured for at least a few months or who have been denied insurance because of pre-existing conditions.

Though clearly not a long term solution, the high-risk pool, combined with the COBRA extensions mentioned above, would get people out from the trap the insurance industry has put them in until full reforms kick in.

Taking on Drug Companies

The House bill also gives us significant savings from drug companies, which according to the Washington Post would amount to between $125 and $150 billion in cuts to their profits.

It does this by eliminating the donut hole which forces seniors to pay unaffordable prices for prescription drugs, starting immediately and completely closing the hole by 2019. It also requires the Secretary of HHS to negotiate for better drug prices for Medicare and Medicaid, and makes it easier for Medicare Part D to offer free generic prescription drugs to enrollees.

Of course, some issues, like biologics (new drugs exempted from generic competition), are still unresolved.

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There's a lot to talk about in the House bill - employer responsibility, fair financing, a whole host of other reforms that take effect immediately. Over the next few days I'll talk about those. However, the overall thrust of the bill is clear - it takes on the insurance industry for consumers, strengthening care for folks without insurance, on the individual market, in small and large businesses, and on Medicare and Medicaid.