THE BLOG
06/08/2009 04:54 pm ET | Updated May 25, 2011

The American Health Choices Act

by Faiz Shakir, Amanda Terkel, Matt Corley, Benjamin Armbruster, Ali Frick, Ryan Powers, and Ian Millhiser

To receive The Progress Report in your email inbox everyday, click here.

Sen. Edward Kennedy (D-MA), the chairman of the Health, Education, Labor, and Pensions Committee, is circulating draft legislation designed to overhaul the nation's health care system. This so-called "draft of a draft" is the first piece of concrete health reform legislation to emerge from Democrats in Congress. As the Washington Post notes, "[A]t least five congressional chairmen are working on health-care reform bills," and Kennedy's draft represents the Democrats' first attempt at "a partial road map for how the nation might address health coverage gaps and problems such as rising costs and inferior quality." The legislation, called the "American Health Choices Act," would provide affordable coverage to all Americans, require businesses to provide and individuals to obtain coverage, and establish a new public health care plan to compete alongside private insurers.

EVERYBODY IN, NOBODY OUT: Kennedy's bill aims to improve access to coverage by regulating insurers, expanding Medicaid and the State Children's Health Insurance Program (SCHIP), and building state-sponsored insurance Gateways (or exchanges) to help Americans find affordable coverage. Americans who like the insurance they have can keep it, but those who are dissatisfied with the porous policies of the individual market -- and those who are uninsured -- would be able to purchase affordable and adequate coverage. Under the legislation, "a group or individual health insurance plan may not impose preexisting condition exclusions." In fact, "rates cannot vary by health status, gender, class of business, or claims experience." Insurers must accept every employer and individual that applies" for coverage and must also renew their policies. The bill eliminates lifetime or annual limits on benefits and limits the cost sharing for certain preventive services and immunizations. Individuals and employers would be required to purchase insurance, but families earning up to 500 percent of the federal poverty line (FPL) -- $110,000 for a family of four -- could "buy insurance on a sliding scale with government subsidies." Anyone with incomes up to 150 percent of the FPL -- $33,000 for a family of four -- would also be eligible for Medicaid, and people up to age 26 would be able to participate in SCHIP. The new state-based insurance Gateways -- where individuals and small employers could compare plans side by side, find options with a minimum benefits package, and buy coverage -- would help applicants find and enroll in comprehensive and portable coverage and certify qualified health plans to ensure they "provide a level of standard benefits."

A MUSCULAR PUBLIC OPTION:The new public health plan would provide all Americans under 65 the choice of public coverage, restore competition into the consolidated health insurance market, lower health care premiums across the board, lead the way in innovation, and improve health quality. As CAPAF Senior Fellow Peter Harbage and Director of Health Policy Karen Davenport argue in a recent report about the public plan, "In the face of tremendous consolidation in the health insurance market, employers and individuals have a shrinking set of health insurance options. Private insurers have used this market power to boost their profits." Harbage and Davenport add, "By including a public health insurance plan as another insurance option and creating a health insurance exchange that delivers transparency and accountability to the market, we can assure both viable competitors and real competition." A new public plan has the potential "to drive improvements in the health care system" and set the standard for developing new payment models and investing in preventive care and care coordination. Critics of the public option, including the insurance industry and most Republicans, argue that a public plan could not compete fairly with private insurers because its lower reimbursement rates would "crowd out" private coverage and spell death for the private insurance industry. But as health care economist Uwe Reinhardt explains, "If the new public plan had to negotiate its own prices, then it would not have a competitive advantage any more 'unfair' than is the ability of large insurers -- such as Aetna and Wellpoint -- to negotiate lower prices with hospitals and physicians than these providers charge smaller insurers. For some reason, no one has ever called this form of price discrimination 'unfair.'" Under Kennedy's bill, the new public option would reimburse providers 10 percent above current Medicare rates. It would not have to negotiate its own rates, but could piggyback off of Medicare's considerable reach. Using "Medicare plus 10" rates, rather than the prevailing market rates, would lower costs and allow the plan to charge lower premium rates.

'HEALTH CARE REFORM BY OCTOBER': President Obama "is preparing an intense push for legislation that will include speeches, town-hall-style meetings and much deeper engagement with lawmakers," the New York Times reports. In Saturday's radio address, Obama argued that "fixing what's wrong with our health care system is no longer a luxury we hope to achieve -- it's a necessity we cannot postpone any longer. ... Today, at this historic juncture, even old adversaries are united around the same goal: quality, affordable health care for all Americans." The radio address kicked off a "50-state grass-roots effort that Organizing for America, the president's political group, began Saturday to promote a health care overhaul." The push also follows Obama's letter to Kennedy and Senate Finance Committee chairman Max Baucus (D-MT), in which he reiterated his support for the public health plan and committed to "fully offset the cost of health care reform by reducing Medicare and Medicaid spending by another $200 to $300 billion over the next 10 years" and "by enacting appropriate proposals to generate additional revenues." The Washington Post's Ezra Klein, who obtained a timeline of Congress's legislative schedule for passing health reform, reports that the Senate -- which is expecting a separate bill from the Senate Finance Committee on June 17 -- will vote on a single health bill during the last two weeks of July, and the House is expected to move a bill to the floor in "the last week of July." "The overarching goal is to get health care reform to the president's desk by Oct. 1," Klein writes.