Health Care For America Now

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.

A new poll is out today from the Washington Post, the guardian of DC beltway conventional wisdom. And guess what? The public health insurance option is overwhelmingly popular. Even the Post can't bury the lede, they ran with the headline: "Public option gains support: CLEAR MAJORITY NOW BACKS PLAN."

The poll confirms everything other previous polling has shown:

• The public health insurance option is popular: 57% support it while only 40% oppose it
• The tax on health care benefits is unpopular: Only 35% support it while 61% oppose it

Now, the conventional wisdom says that taxing health benefits should be part of a health care bill, and a public health insurance option shouldn't, as they are in the Finance bill. The reasoning is that these things will make a health care bill bipartisan. But guess what? The Post polled that question, too, and the American people could care less about bipartisanship.

Both Greg Sargent and Jon Walker note it:

Which of these would you prefer –- (a plan that includes some form of government-sponsored health insurance for people who can’t get affordable private insurance, but is approved without support from Republicans in Congress); or

(a plan that is approved with support from Republicans in Congress, but does not include any form of government-sponsored health insurance for people who can’t get affordable private insurance)?

Prefer government-sponsored insurance: 51%

Prefer Republican support: 37%

When faced with the choice that may face the Senate - pass a public health insurance option or get a Republican vote or two - America wants the public option more than they want bipartisanship.

These poll numbers, coming from the voice of the establishment, should make it absolutely clear that the Beltway wisdom is wrong. The American people don't care about making the Senate's life easier, they care about results. Bipartisanship doesn't matter, but policy does.

The reform people want is real reform, with a public health insurance option and no taxing of health benefits. Bipartisanship only matters to a minority. Eventually, even the conventional wisdom has to catch up to reality.

Ezra Klein at the Washington Post takes issue with Health Care for America Now's stance on the excise tax.

I appreciate Ezra saying he has a lot of respect for HCAN. We continue to differ on the policy issues around taxing higher cost health benefits, whether doing it head-on as was proposed in the past, or through the back-door, as is the case with the 40% excise tax on high cost plans in the Senate Finance bill.

First, Ezra claims that the excise tax is isn't really a tax on the middle class:

The ad says the excise tax is "a 40% tax on health-care benefits of middle-class workers." It isn't. It's not even a little like that. It's a 40 percent tax on employer-provided health-care benefits above $21,000 for a family, and $8,000 for an individual. If your family's health-care premiums cost $23,000, then there's a 40 percent tax on $2,000 of your premiums. It's inconceivable that anyone's full health-care policy would be taxed at 40 percent.

Moreover, your family's health-care premiums probably don't cost $23,000. The average employer-provided health-care plan cost $13,375 in 2009. There are some middle-class workers with uncommonly generous health-care plans, but they're not the norm. This isn't as progressive as a tax on millionaires, but it is, in general, progressive. Goldman Sachs traders, for instance, have health-care plans valued around $40,000 a year. Wal-Mart employees don't.

But income and the value of people's health care plans do not correlate. The Communications Workers of America, using data from the Joint Committee on Taxation (JCT) and an analysis by Citizens for Tax Justice (CTJ), concluded that 40% of health care plans will be hit by this excise tax by 2019.

Second, as Ezra notes, the excise tax "isn't as progressive as a tax on millionaires. " Yup. Health Care for America Now is for progressive financing, which is why our new ads push for having people who earn more than $250,000 pay their fair share. That's what the House bill does and it's what the President's initial proposal to fund health care through lowering tax deductions for people who earn more than $250,000 does too.

Ezra goes on to support employers buying less generous health care plans for their employees:

The argument against the excise tax is that it cuts the deficit by encouraging employers to shop for cheaper plans. The Joint Committee on Taxes suggests that the tax won't raise money because people will pay it. It will raise money because it will encourage employers to purchase cheaper plans for their employees and divert money they've saved into wages, which are taxable income. That means that a number of very generous plans will become more like middle-range plans. They'll have deductibles if they don't already, tighter networks, tiered drug formularies and so forth. Any plan that's lavish enough to even near the tax is going to remain a very generous plan, but it will become less so on the margin.

Some people, myself included, think that's a good thing.

I don't.

The problem here is confusing cutting costs with shifting costs. Cutting costs means finding ways to make health care more efficient and to provide better care for the same or less money. But shifting costs is different. By incentivizing employers to offer less generous health care benefits, which means higher deductibles and the like, "costs" may go down, but in reality the policy simply transfers these costs to the worker. Moreover, higher out-of-pocket costs can discourage people from getting the care they need.

And that's a really big deal:

Congressional budget analysts have given House leaders cost estimates for two competing versions of their plan to overhaul the health-care system, concluding that one comes within striking distance of the $900 billion limit set by President Obama and the other falls below it.

House leaders have been working to lower the cost of the $1.2 trillion health-care package they offered in July. The report from the Congressional Budget Office, a copy of which was obtained by The Washington Post, puts the cost of one plan at $859 billion over the next decade and the other at $905 billion.

…

Both packages are based on the original House framework, which proposes to extend coverage to more than 30 million Americans by expanding Medicaid eligibility and subsidizing private insurance for people who lack access to affordable coverage through an employer. Each would expand the ranks of the insured to more than 95 percent of Americans by 2019, and each would create a government-run insurance plan to compete with private insurance companies.

As a refresher, the bill being considered in the House is a much better bill than what Finance passed on Tuesday. It has a public health insurance option, it asks employers to pitch in their fair share, it is fairly financed, and it has much more generous subsidies (read: tax credits) to make health care affordable for everyone.

So, why, with all that good stuff in there, does it look like the will CBO say the House bill still covers millions more people and costs just as much, while remaining deficit neutral? Because things like employer responsibility, fair financing, and the public health insurance option save money.

That's right. The public option saves money. The CBO has said so before, and it looks like they're saying it again.

Combine that with raising money by taxing households that make over $350,000 per year instead of the middle class, and asking employers to chip in for their employees health care, and you've suddenly got a lot more money to work with. Which means you can give middle class people more generous subsidies than the anemic Finance bill. Which means you and I won't be on the hook for 16.5% of our income paid towards health care costs, the level a typical middle class family would have to pay under the Finance bill.

Plus, you get a bill that increases competition, keeps the insurance industry honest, and gets us out from under the insurance industry's monopoly. Health Care for America Now released a TV ad promoting the public option today:

Here's the bottom line: A good health care bill - fairly financed with a public health insurance option - is more fiscally responsible. Those that support being more fiscally responsible should support these ideas.

Health Care for America Now's polls told us so, but so do independent polls:

A recent Pan Atlantic SMS Group poll shows:

–ObamaCare: 46 percent favor, 41 percent oppose

–Public Option: 57 percent favor, 37 oppose

–Increased Insurance Regulation: 73 percent favor, 21 percent oppose.

That's 61% of independents and 80% of Democrats, when you break it down. Let's hope their Senators are listening.

Who should help pay for health care? At its heart, the health reform debate is about this question.

Right now, you and I pay for health care, as evidenced by the growing mountains of medical bankruptcies in this country. Health care costs are heaped on consumers and on their employers, while insurance companies profit.

Under reform, this burden would be more fairly distributed. Consumers would still pay for health care, but government would help them shoulder the burden. That's not enough, however. Insurance companies would have to compete with a public health insurance option, driving down costs. And lastly, employers would have to continue chipping in.

At least that's how it should be. However, business right-wing groups like the Chamber of Commerce are against this "employer mandate," claiming, like everything they disagree with, that the provision would destroy business. (Some employers, like Wal-Mart interestingly, disagree.)

Employers do help pay for health care now, as most people get their health care through work with at least some help from their employer. Asking employers to share the responsibility for providing health care to their workers would strengthen the employer based health care system, a system business defends as necessary for attracting talent. Employer responsibility provisions would also ensure people get not just health care, but good health care by requiring employers to meet a minimum standard for health benefits.

Of course, employers could choose not to offer health care, and that's their right. But if they do, they should not get off Scot free. It's only fair to ask employers, who share in the fruits of a healthy workforce, to help pay to keep that workforce healthy. If employers don't want to provide health benefits, they should pay the government to provide benefits for them.

This is how the "pay-or-play" provisions in health reform should work, and it is how they do work in the House health reform bill, HR 3200 [pdf]. Jacob Hacker, one of the fathers of the health reform plans promoted by President Obama and others, feels these pay-or-play provisions are a necessary part of reform. For moral reasons, I agree.

Of course, it helps that this idea is not only fair, but popular. In Kaiser's August health care tracking poll [pdf], 68% of people thought a pay-or-play requirement was a good idea:

Employers should have to help pay for health coverage, just like consumers and government, and the American people agree.

Too bad Senator Max Baucus doesn't. His bill, released yesterday, has no measures to hold employers responsible. To make things worse, it has a "free rider" provision that would discriminate against the hiring of older workers, poor and minority workers, workers with children, and unmarried workers.

Sounds like reform that works for business better than it does for you, right?

A few basic questions on the public health insurance option answered.

What is the public health insurance option?

The public health insurance option is an idea supported by President Barack Obama as part of his health reform plan. (It is modeled after Jacob Hacker's original "public plan choice" paper [pdf].) In essence, it is a health insurance program run by or accountable to Congress and the voters. It would be national - available in every state in this country - and ready to use as soon as it gets built. It would be offered as a choice - and only a choice - to people who need insurance.

In the five health care bills currently being considered by congress, four of them include a public health insurance option - the bills in the House of Representatives and the bill that the late Senator Ted Kennedy wrote and passed out of his committee. The framework put forward by the "gang of six" in the Senate Finance Committee does not have a public health insurance option.

To borrow a phrase from Ezra Klein, here's a simple, easy to understand chart of how health care would work if health care reform is passed. It's really not that hard to understand, and it's certainly much more specific than the Republican plan.

For your consideration (click for bigger version and fact sheet, pdf warning):