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RJ Eskow

RJ Eskow

Posted: July 15, 2009 08:02 PM

The House Health Reform Bill: How Good Is It?


First, the good stuff: The bill includes a public plan option, although initially its availability will be limited. There's an insurance exchange to help the uninsured gain coverage. Some of the insurance industry's egregious underwriting practices will be banned, and rates can only vary based on age, location, and family size.

Premium subsidies are fairly generous, with some level of assistance going up to 400% of the Federal poverty limit (though if I had to bet, I'd wager that will drop to 300% after all the horsetrading is done). The Medicare subsidies for private insurers are eliminated.

Potential problems:

It's not universal. It's probably not politically possible to pass truly universal coverage, but it should be noted: Despite the presence of both individual and employer mandates (more about that below), the CBO estimates that 9 million citizens (as well as a similar number of illegal immigrants) will remain uninsured. That's very close to the figure of 8 million I came up with a year ago, using back-of-the-envelope calculations based on Massachusetts experience. It means that roughly 20% of the uninsured will stay that way under these proposed reforms - and it's my suspicion that this figure is, if anything, low.

Why does that matter? Incremental improvement is a good thing, and if I were in Congress I'd vote for this bill. But it will leave an ongoing humanitarian problem as well as a strain on the system.

The small employer provisions can be gamed. Tax penalties for failing to offer benefits kick in on a sliding scale for companies with payrolls of $250,000 and higher. How many small employers - small restaurant or retail chains, for example - will simply re-incorporate as mutiple businesses with common ownership in order to avoid this penalty?

The plan's major provisions don't begin until 2013. Granted, it will take time and effort to ramp up a a public plan and a national insurance exchange. But it shouldn't necessarily take three years, and the roll-out could be phased. I collaborated with a multinational initiative to help formerly Communist countries set up national insurance programs, and that didn't take this long to begin rolling out. That was without any previous infrastructure, and using technology that was nearly 20 years old.

We have Medicare's platforms and other resources. We also have the experience gained in Massachusetts and elsewhere. I would have thought they'd be able to implement some of the bill's features in stages, with slightly more aggressive timing. (On the other hand, the desire to do it right rather than quickly is understandable.)

Those individual mandates will be tricky. I understand the economic role of mandates, but here's the problem: Many uninsured middle-income families will find it difficult to pay five-figure premiums. And the penalty for not obtaining insurance is 2.5% of adjusted gross income. That means most middle income families will find it much less expensive to take the penalty than to buy the insurance (which was one of my primary concerns with Massachusetts' legislation). In fact, based on current premiums, you'd need to make upwards of $400,000 before premiums and penalties are in the same ballpark.

Of course, many or most families will realize that it's prudent to purchase insurance -- if you can afford it. But many hard-pressed families may choose (or be forced) to gamble if they don't have enough cash on hand to pay premiums and meet their monthly obligations. That's why I suspect compliance projections are overstated.

There's a political red flag, too: While the Massachusetts health reform plan is generally popular, we reviewed the poll results here and found that those who were affected by it personally felt (by a 56% margin) that it had a negative impact on their lives. To those who choose the lower-cost penalty over the insurance premium, this bill will not provide coverage... and it will feel indistinguishable from a tax hike. That could create an immediate compliance problem, and a political problem for Democrats down the road.

Which gets us to the big problem...

It doesn't do enough to control costs. The outline of an effective, information-driven cost reduction (and, more importantly, outcome improvement) program is there -- but only if administrators follow through with intensive research and creative redesign of provider reimbursement programs. The intensity with which these initiatives will be followed depends on political will... and political will, in turn, depends on how effectively the Democrats make the case that true innovation is required to bring our cost problems under control.

I'm not as negative as Roger Collier on this score, but I do see reasons for concern. Since these outcomes-improvement and cost-management provisions are being underplayed in the political arena -- perhaps wisely -- they'll need to be emphasized during implementation.
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The Senate HELP Committee has just passed its version of the bill. While the Senate is essentially following the same path as the House, they are also pursuing premium discounts for enrollees making "healthy lifestyle" choices. Employer mandates are gentler in the Senate version, and there are several other (relatively minor) differences.

The HELP Committee passed its bill with no Republican votes in favor. The Democrats are likely to own both the credit and the blame for whatever winds up being passed in Washington. And, while they're likely to change in some ways, these bills may well provide the basic outline of health reform legislation. That means everybody tasked with finalizing and executing reform should concentrate on four areas:

1) Ensuring (and communicating) fairness in defining and enforcing mandates;

2) Creating the most sophisticated, effective, and user-friendly insurance exchange possible;

3) Defining robust benefit plans that protect enrollees from financial shock due to out-of-pocket medical costs;

4) Developing strategies for providing care to those who will be left out of this plan.

They've avoided my biggest fear: that the bill would contain individual mandates but no public plan option. We could tinker with the balance between the two, but at least the public option is there. Still, as complicated as it may be to pass a bill, it's only the first step. Even if Congress meets the President's August 1 deadline, the reform process is only beginning.

Other references:

- Maggie Mahar's comparison of the House and Senate bills

- Full text of the House bill

- CBO's initial analysis of the House bill

- Joe Paduda's summary of the House bill

- Ezra kinda digs the bill, and gives a shout-out to its process

(Note: This is all based on initial review of the bill and other summaries. We'll keep reading ...)

RJ Eskow blogs when he can at:

A Night Light
The Sentinel Effect: Healthcare Blog

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