After months of preparations and negotiations, Senator Max Baucus, chairman of the Finance Committee, unveiled his health care bill on Wednesday morning. The three Republicans in the so-called Gang of Six working on the legislation with Senator Baucus have so far refused to endorse his proposal, though negotiations will continue.
We asked health analysts and economists for their reactions to the bill. What are its most notable strengths and flaws? Does it achieve the broad goal of health reform?
Jacob S. Hacker, political science professor
Michael D. Tanner, Cato Institute
Dean Baker, Center for Economic and Policy Research
Henry J. Aaron, Brookings Institution
Lisa Dubay, professor of public health
Karen Davenport, Center for American Progress
Maggie Mahar, health care fellow at the Century Foundation
Michael Chernew, health care economist
William H. Dow, former Council of Economic Advisers economist
--------------------------------------------------------------------------------
A Bad Bill
Jacob S. Hacker is a professor of political science at Yale and the author of “The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream.”
To be successful, health care reform has to be constructed on three strong pillars: personal responsibility, shared responsibility and shared risk. Unfortunately, all three of these pillars are dangerously weak in Senator Baucus’s proposed legislation. In the Sisyphean search for a grand bipartisan deal that will not occur, Senator Baucus has produced a bad bill that will leave too many Americans without affordable quality coverage and do too little to ensure health security over the long term.
Personal and shared responsibility means employers and individuals should be expected to contribute to the cost of their coverage. Yet this responsibility creates a countervailing obligation on the part of the government to ensure that workers and firms have a choice of good affordable coverage that offers security and stability.
This proposal would leave too many without affordable coverage and does too little to ensure health security.
The Baucus bill fails to meet this obligation. Not only are the federal subsidies for low-income and (especially) middle-income Americans inadequate, the standards for coverage are extremely weak. Larger employers could offer coverage with extremely high deductibles and limited benefits without penalty, which their workers would be required to take unless it was extremely expensive.
At the same time, the penalty that employers would face if they didn’t offer coverage would be minimal and levied only when they failed to cover workers eligible for subsidies, creating limited incentive for businesses to continue offering coverage and a perverse incentive to prefer higher-income workers.
The third pillar of reform, shared risk, requires a new national insurance exchange that allows workers without secure coverage to join good group health plans, including the choice of a public health insurance plan competing on a level playing field with private insurers. Instead of a public plan, however, Senator Baucus’s bill contains the largely untested — and almost certainly ineffectual — idea of encouraging new member-run health care “cooperatives” through $6 billion in federal loans and start-up funds.
As I have argued elsewhere at length, cooperatives are not a serious means of reliably achieving any of the public plan’s three critical goals: providing choice for consumers, creating competition for insurers and controlling costs over the long term. They are unlikely to get off the ground quickly or broadly, or to have any real effect on the cost and quality of care.
The Baucus bill should be dead on arrival.
--------------------------------------------------------------------
A Mouse on Steroids
Michael D. Tanner is a senior fellow at the Cato Institute and co-author of “Healthy Competition: What’s Holding Back Health Care and How to Free It.”
Sen. Baucus and his fellow Gang of Six negotiators have labored mightily and brought forth a mouse — a steroid-enhanced, misshapen mouse, but a mouse nonetheless. In fact, despite months of work, Senator Baucus has not actually produced a bill, but a 223-page summary of what he hopes a bill will contain. Unfortunately, without seeing actual legislative language, many questions still remain.
Here is some of what we know and don’t know:
The Good:
— The plan drops the idea of a government-run “public option” in favor of co-ops. Government involvement with these co-ops would essentially be limited to providing start-up grants. The co-ops are unlikely to have much, if any, impact on the cost or availability of health insurance, but are far preferable to a government run plan.
— The plan takes the first tentative steps toward allowing people to purchase health insurance across state lines. It would allow states to establish interstate compacts for insurance purchasing beginning in 2015. It would also allow insurers to develop national products that could be sold in any state. National plans would be exempt from state mandated benefits. This doesn’t go far enough, and risks simply transferring regulation and mandates from the state to the regional or national level, but a first read suggests it is a step in the right direction.
The Bad:
— The plan would force states to increase Medicaid eligibility to individuals at 133 percent of the poverty level, and to enroll single, childless adults. While the federal government would pick up some of the increased cost, states would be responsible for at least some of the increase, a provision that will undoubtedly strain already tight state budgets.
— While the employer mandate is much watered down, it is still there. The Baucus plan has no specific requirement for employers to provide insurance. But any employer who fails to do so would have to pay the cost of all subsidies that the government provides his or her workers to help them pay for insurance on their own, up to $400 per worker. Since it will ultimately be the worker who pays the mandate’s cost, through reduced compensation or reduced employment, the government will be giving the worker a subsidy with one hand, and taking it back with the other.
— The bill would cut payments to the Medicare Advantage program. In response, many insurers may stop participating in the program, while others could increase the premiums they charge seniors. Millions of seniors will likely be forced off their current plan and back into traditional Medicare.
The Ugly:
—The Baucus plan contains a heavily punitive individual mandate, a requirement that every American purchase a government-designed minimum insurance package. Failure to comply would result in a fine that could run as high as $3,800 for a family of four. Moreover, the mandate may not apply just to those without insurance today. While the summary says that those with “grandfathered” plans would not have to change their current plan to satisfy the mandate, it is vague about what qualifies as “grandfathered.” The summary also says that employer-provided plans would have to be changed within five years to comply with new insurance regulations, and that “grandfathered” plans would not be eligible for any subsidies. It is unclear, therefore, whether people will be able to keep their current plans.
— The Baucus plan imposes a 35 percent excise tax on health insurance plans that offer benefits in excess of $8,000. Insurers would almost certainly pass this tax on to consumers in the form of higher premiums. Roughly half of Americans, mostly middle-class, would be effected. There are also “fees” on prescription drug companies, medical device manufacturers, and clinical laboratories. This is simply a way of hiding taxes, and will result in higher health care costs that will be passed on to consumers.
Where’s the Cost Containment?
Dean Baker is an economist and co-director of the Center for Economic and Policy Research.
The big plus of the Baucus plan is that it will eliminate discrimination based on pre-existing conditions, which means that people will have real insurance. As it stands now, few people are really insured against serious illness since if they get sick, they will lose their job and then they will lose their insurance. The Baucus bill would effectively allow people to still buy affordable insurance.
The bill’s less generous subsidies could lead to serious political problems.
The subsidies in the bill should also help many moderate income families afford insurance. At the same time, they are less generous than the subsidies in the other bills. This could lead to serious political problems if people resent being forced to buy a policy that they have trouble affording.
Finally, the proposal does not include the option to buy into a public plan. This is important because the public plan provided a potential mechanism for effective cost control. It is hard to see how costs can be contained in this plan. Also, in the absence of a public plan, many people may resent being forced by the government to buy a private insurance plan.
Affording Reform
Henry J. Aaron is a senior fellow in economic studies at The Brookings Institution.
Groucho Marx famously said that he would not join any club that would have him as a member. American voters are about to find out whether the U.S. Congress will vote for any health plan it is willing to pay for.
It is not clear that enough Democrats will vote for the tax increases or spending cuts necessary to pay for any bill they are willing to support.
The fundamental challenge is simple: extending health insurance to everyone is expensive. Meeting the president’s prudent commitment not to sign any bill that would boost the deficit requires sizable tax increases or spending cuts to pay the subsidies necessary to make insurance affordable for low- and moderate income households. How generous coverage should be depends on how much taxes can be increased or spending cut.
Like earlier draft Senate and House bills, the ‘”chairman’s mark” of Senator Baucus would require legal residents to be insured — through a public program, employer-sponsored plans, or individually purchased insurance. The price tag of the earlier bills was north of $1 trillion over 10 years. However, members of Congress seemed unable to identify ways to pay for those bills in a politically acceptable way. Senator Baucus’s plan lowers the overall cost by promising much less generous benefits than previous bills did.
Unfortunately, reducing one problem creates another. Health insurance is costly because health care is expensive. Someone has to cover those costs — individuals or taxpayers. So, reducing the subsidies heightens the risk that health insurance mandate may place undue financial burdens on low- and moderate income households.
Complicating the politics is the irresponsibility of Republican members of Congress. With remarkable inconsistency, they favor extending insurance, don’t want to boost burdens on households, oppose cuts in Medicare payments to providers, swear to vote against tax increases of any kind, and profess deep worry about the budget deficit.
With the support of virtually no Republicans, passing a bill requires that Democrats must stay united. But here is where the Groucho Marx problem bites. It is not clear that enough Democrats will vote for the tax increases or spending cuts necessary to pay for any bill they are willing to support.
An Impossible Task
Lisa C. Dubay is an associate professor and Director of Policy Studies in the Department of Health Policy and Management at the Johns Hopkins Bloomberg School of Public Health. Her research focuses on insurance coverage, access to care, and the health of low-income populations.
Senator Baucus attempts to craft a bill that will bring along moderates from both sides of the aisle and balance the scale of the nation’s under- and uninsured problem with the fiscal realities of the day. This is an unenviable and clearly impossible task.
That said, the bill has much to recommend it. It offers broad sweeping insurance market reforms that would protect all Americans from being discriminated against based on their health status or denied coverage because they have a pre-existing condition. It would also place a cap on individuals’ annual health care costs.
It doesn’t have regulatory teeth that would control cost growth in the absence of a public plan.
State level health insurance exchanges would be established for individual and small group markets making the purchase of coverage more affordable and transparent. For the uninsured, the bill would expand the Medicaid program offering an affordable coverage to 17 million uninsured Americans and provide subsides to purchase coverage in health insurance exchanges for up to another 16 million uninsured Americans.
Other parts of the bill are pure political compromise. Despite President Obama’s extolling the clear virtues of having a public plan in health insurance exchanges in his speech last Wednesday, the Baucus plan is the only committee bill that does not include a public plan. Unfortunately, neither does it include regulatory teeth that would control cost growth in the health insurance exchanges in the absence of a public plan.
At the same time, it would allow for the purchase of insurance across state lines — a plum reward for which the insurance industry has been lobbying for decades. The bill does allow for the formation of nonprofit state level co-operatives, but they are unlikely to be competitive or effective at controlling costs in the many markets where one or two insurers or large hospital systems dominate the scene. Consequently, health care costs will continue to rise at the current rate and affordability concerns will remain.
Finally, in trying to keep the costs of health reform down, the bill provides much less generous premium subsidies to purchase coverage in the health insurance exchanges than other bills before Congress. Premium subsidies are tied to affordability standards that range from 3 percent of income for those just above poverty to 13 percent of income for those with incomes between 300 and 400 percent of poverty.
This trade-off reflects a sad reality of our nation, its citizens and our representatives today: Americans want reform but they don’t want to pay for it. Senator Baucus and all of us need to look deeper into our souls and our wallets and make health care truly affordable for all. The character of our nation is at stake.
Embracing Obama’s Ideas
Karen Davenport is the director of health policy at the Center for American Progress and served on the White House Health Care Reform Task Force in 1993.
This is a compromise proposal and it shows. It was designed to elicit Republican support, though at this writing, not a single Senate Republican has embraced this plan.
Senator Baucus has hewed closely to some of the key elements of President Obama’s reform proposal and the Senate health and education committee House reform plans.
The plan takes meaningful steps toward ensuring that all Americans have affordable access to health insurance.
He creates a new marketplace for individuals and small businesses to purchase insurance coverage, and he would require health insurance plans to offer coverage to everyone, without excluding coverage for pre-existing conditions or charging higher prices to people with health problems.
He would provide help to small businesses who struggle to offer coverage to their employees, and help to lower-income families who cannot afford health insurance premiums. He would expand Medicaid, the proven program for many low-income Americans, to ensure that everyone with incomes below 133 percent of the poverty level could rely on this safety-net.
And he would require the Medicare program — one of the best levers we have for prompting system changes in payment systems and health care delivery — to develop new payment methods designed to link payment incentives to higher-quality, higher-value health care.
These changes will make meaningful steps toward ensuring that all Americans have affordable access to health insurance. But do they go far enough?
In comparison to legislation that has moved through the House health committees, the Baucus proposal offers slimmer subsidies towards the purchase of health coverage for low and moderate-income Americans, and less help with cost-sharing responsibilities. Key senators have expressed concern that this help will not be enough to guarantee that individuals and families can afford to purchase health coverage and access health care, and amendments to enhance this support are expected during committee consideration of the proposal next week.
Progressives are disappointed — but perhaps not surprised — that the proposal does not include a public insurance option. Nor does it require employers to provide health coverage to their workers. On these issues, and others, the proposal falls short of the president’s plan.
These choices also affect other aspects of the bill. For example, the Congressional Budget Office — which estimated that a public health insurance option would charge premiums 10 percent lower than typical private coverage — said today that the health insurance cooperatives in this proposal would have little impact on insurance markets or reduce the federal costs of the bill.
Senator Baucus has offered a proposal that makes important reforms. He has also made significant compromises that affect the overall shape, reach and cost of his proposal. But so far, these compromises have failed to win him any votes. It remains to be seen whether changes in committee can both improve the plan and secure Republican support.
Good News for Insurers
Maggie Mahar is the health care fellow at the Century Foundation where she writes the blog, Health Beat. She is the author of “Money-Driven Medicine: The Real Reason Health Care Costs So Much.”
Under the Baucus bill, insurers won’t be able to charge more if you are sick, but they will be able to charge more if you are older — asking you to pay five times as much as a “young invincible.” (Under the House bill, HR3200, premiums for older customers are capped at twice what insurers bill younger Americans.) If you are a single parent, you pay 80 percent more than a single adult — a pretty stiff penalty for single parenthood since children usually need substantially less health care. Finally, there is a 50 percent surcharge for smokers.
If you’re not young and invincible, you’re not going to like this plan.
No doubt many observers would say that charging smokers more sounds fair — until you stop to consider the fact that the vast majority of adult smokers in this country are poor. Many will qualify for a 100 percent subsidy. So who will pay the extra 50 percent? Taxpayers.
Single parents also tend to be on the low end of the income ladder, and many will qualify for a subsidy. More tax dollars winging their way to Aetna.
But it’s the age penalty that really hurts. Granted, premiums for a mid-level “silver” plan are capped at 13 percent of income. But that means a 56-year-old couple with income of $60,000 could wind up paying premiums of $7,800, plus out-of-pocket expenses for coverage that’s worth 25 percent less than the top-of-the-line “gold plan.” (Couples earning more than $43,710 don’t qualify for subsidies.)
Finally, the Senate Finance Committee vetoed the public sector option. Giant profit insurers will have to compete only with puny co-ops — and they must be newly formed. No established co-ops allowed, giving the private sector insurance industry a virtual monopoly over the millions of new customers who will be coming their way, tax subsidies in hand.
A Sinking Ship
Michael Chernew is a professor of health care policy at Harvard Medical School.
The estimated costs of the Senate Finance bill (and all other reform proposals) are inherently uncertain. Assumptions need to be made about how patients, providers and insurers will respond to the numerous provisions that change the health care environment and regulatory structure, many of which are not yet fully specified or deferred to new entities.
It’s unlikely we will find some magic combination of provisions that is politically feasible and effective at controlling spending.
Thus, reasonable people will reach different conclusions regarding the expense of reform. Arguing about whether the 10 year cost is higher or lower than the Congressional Budget Office estimate (which is more favorable than previously reported and to its credit will have detractors on both sides) is not productive.
More importantly, we must evaluate the fiscal consequences of the plan based on whether it creates a financially sustainable health care system in the long run. Higher taxes or fees are necessary evils but do not, in general, further the goal of a better system.
The Baucus bill is a reasonable start towards systemic reform, but much work will remain to be done. Insurance reforms and establishment of exchanges are a start but will not be sufficient. Information technology, comparative effectiveness research and increased prevention are all good reforms but will likely not be sufficient. More fundamental changes, such as payment reform and benefit design reform will be needed.
To its credit, the Baucus plan provides mechanisms to encourage such changes but the cost containment provisions are not strong enough or spelled out in enough detail to convince the skeptics. Certainly some will prefer stronger explicit cost containment options but it is unlikely we will find some magic combination of provisions that is politically feasible and sufficiently effective at controlling spending.
In the end, we must recognize we are on a sinking ship. The Baucus bill offers us one reasonable life raft, but if we board it we must recognize it will take a lot of continued work to make sure it floats.
Needed: A Private Plan Option
William H. Dow, who was a senior economist for President George W. Bush’s Council of Economic Advisers, is a professor of health economics at the University of California, Berkeley.
The health reform mark released today by Senator Baucus proposes several compromises regarding a “public option.” For proponents, he proposes seeding new nonprofit cooperative health insurers. For supporters of private insurance approaches, he allows some Medicaid eligibles (only those with incomes 100-133 percent of the poverty line) to choose private insurance plans instead in their insurance exchange.
He would also expand “premium support” programs that subsidize Medicaid eligibles who instead choose employer insurance. These proposals offer something for both sides of the public/private debate, but as proposed they would likely have little impact. I would suggest building on the spirit of these proposals to offer more meaningful compromise proposals.
A fiscally prudent way to introduce competition into Medicaid.
First, allow all Medicaid eligibles the choice of instead electing qualifying private plans through the exchange. If a new cooperative or existing insurer markets a more attractive insurance option that covers mandated services, Medicaid eligibles should be able to vote with their feet. If these private insurance plans cost more than the actuarial value of Medicaid, then individuals would have to pay any difference in premiums. This proposal is consistent with recent conservative efforts at introducing competition into Medicaid.
Second, allow anyone eligible for premium credits to buy into their state Medicaid plan at unsubsidized rates. If individuals are willing to forgo private insurance amenities for the lower price of a Medicaid plan, as some low-income people likely would, then they should be given that option. This is particularly important for individuals receiving premium credits, because over time it could reduce the needed public budgetary cost of those credits. This policy would expand choice while also being fiscally prudent.
These proposed changes would create 50 state market experiments to better understand the relative merits of public versus private plans. By focusing on the low-income, these changes would avoid undermining the private health insurance industry as some public-option opponents have feared. And these changes would promote the goal of stable, portable insurance coverage among this vulnerable population.
Not a Bad Plan
Gail Wilensky is a senior fellow at Project HOPE. She was the administrator of Health Care Financing Administration (now the Center for Medicare and Medicaid Services) from 1990 to 1992 and the chairwoman of the Medicare Payment Advisory Commission from 1997 to 2001.
It is not surprising that the Baucus plan is getting criticized by both sides, especially the left. Compromises are rarely pretty. And while I have some concerns about the proposal as it stands, on balance it is better than the other bills under consideration.
One of the best things about the Baucus bill is the absence of a public plan.
Several provisions improve the bill. Most important to me is the absence of a public plan. For me, public plans will inevitably use the power of government to reimburse at rates under cost and fundamentally destabilize private insurance. The proposal to create co-ops needs to be carefully designed so that the federal subsidies are limited and used only for start-up purposes. Otherwise a co-op at the national level could become a poorly disguised public plan. With 1,300 insurance companies in the U.S., I’m not sure the lack of insurance alternatives is really a problem, other than maybe a political problem.
The second improvement is the use of a 35 percent excise tax on insurance companies for plans costing more than $8,000 to $21,000. This is a clumsy way to introduce a tax cap but since it will shift the cost to the plan owners, ultimately it will get the job done of discouraging high cost plans. Third, people who are between 100 percent and 133 percent of the poverty line will have the choice of enrolling in Medicaid or in a private health insurance plan offered through the health insurance exchange. Extending this option to those below 100 percent of the poverty line over time would make it even better. And fourth, it is judged by the Congressional Budget Office as not only providing a slight reduction to the deficit over the first 10 years but remaining budget neutral in the following budget period.
While I am sympathetic with the Congressional committee’s need to expand coverage to the uninsured at as low a cost as possible and having to finance that cost so as to not add further to the deficit, a few of their strategies are disturbing. The penalties being proposed are pretty stiff for people at 300 percent of the poverty line (although they are waived if the lowest cost premium exceeds 10 percent of income). It may be better to phase into this level of penalty in two or three steps, though, ultimately, insurance reforms and full coverage require enforced individual mandates. In addition, the various fees that are being imposed on insurance companies, pharmaceutical companies, etc. to raise revenue will just increase the cost of health care which is counter-productive to the efforts to reduce the costs of health care, to say the least.
My biggest concern is that the efforts to reform the delivery system are no more than gentle pushes in the right direction, which are likely to produce no more than tepid responses from providers. If the country is serious about slowing health care spending, it better get as aggressive in its efforts toward payment bundling, payments for accountable care and other innovative efforts as it is proposing to be in its enforcement of individual mandates.
http://roomfordebate.blogs.nytimes.com/2009/09/16/grading-the-baucus-health-plan/
No comments:
Post a Comment