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A Real Person's Guide to Health Reform

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Overwhelmed by the health debate? Can't keep track of the SHOP and the MACPAC?

Take a deep breath. It really isn't all that complicated. With Senate about to pass its version of health reform, Congress is beginning its stretch run toward final approval. When a consensus bill appears in January, just break it down into bite-sized chunks, ask yourself how each element measures against your own goals for health reform, and finally whether all the parts fit into a coherent whole.

For all the thousands of pages of arcane legislative language, there are really only six major pieces to health reform. They are broadly common to both the House and Senate bills and would: require insurance companies to sell to all, require (almost) everyone to be insured, create an insurance exchange so people could buy coverage at a fair price, subsidize premiums for those unable to afford them, modestly control costs, and pay for it all. Let's look at each one:

Guaranteed coverage. This is a profound change in the U.S. insurance system. Carriers could no longer refuse to sell insurance or raise premiums based on someone's health status, nor could they drop coverage because a person had big medical claims. Insurers could charge older people somewhat higher premiums than younger buyers, but they'd be limited in their ability to do even this.

The individual mandate. Making insurers sell to all is only half the equation. Insurance reform also requires everyone to get coverage. Otherwise, young and healthy people would continue to go bare, and insurance that covers only the sick would quickly become prohibitively expensive. Thus, both bills mandate that nearly all individuals buy insurance. In addition, large companies would either have to provide coverage for their employees or pay into a pool to help subsidize workers who buy on their own.

The exchange: This is essentially a mechanism that allows those without employer coverage to buy on the individual market. It also sets up a competitive insurance market within states that should help keep premium costs relatively low.

Subsidies: Despite these first three proposals, insurance will still be too expensive for many. For the poorest, the bills expand Medicaid. For others, they provide financial assistance to lower the cost of insurance. The bills also encourage small businesses to buy coverage for their employees. The bottom line: This new system is expected to cover as many as 36 million of those who now have no insurance.

Cost controls: Early on, President Obama and Congress abandoned efforts to fundamentally restructure the way health care is delivered in the U.S. Thus, for better or worse, we will maintain our basic health system. But the bills include dozens of small experiments aimed at delivering medical treatment more efficiently while reducing payments for unnecessary care.

Paying for it all: Because the House and Senate proposals lack broad-based cost controls, they must finance both premium subsidies and the Medicaid expansion through tax increases. This may be where the House and Senate bills differ the most. The House relies largely on a tax surcharge on those making more than $500,000-a year. By contrast, the Senate taps a potpourri of tax hikes. The most important is a 40 percent excise tax on high-cost employer-sponsored health plans.

There are a few things to keep in mind about all this. The first is that there is a remarkable consensus on these big framework issues between the House and Senate, at least among Democrats (Republicans wrote themselves out of negotiations last summer). And despite all the angst, the legislation largely mimics the bipartisan health bill enacted by Massachusetts a few years ago. Despite cries of socialism by the right and shouts of "sell-out" by the left, Congress is pretty much doing middle-of-the road insurance reform.

The second is details do matter. And while the framework is clear, there is much we won't know about the guts of this new insurance system until final negotiations conclude next month. And those details could make all the difference between a model that actually functions in the real world and one where workability takes a back-seat to political deal making. Still, Congress is about to make extraordinary and far-reaching changes in the way we get health insurance in this country.