Wednesday, December 16, 2009

Health reform and the realistic limits of our capacity for change...

It sounds crazy as I type this, but I believe that the health reform bill that will pass will not go nearly far enough and I think it was the right decision for the White House to urge the Senate to appease the moderates and counsel restraint. The public option might be the right way to go, but it isn't the only way to get there. And this idea of expanding Medicare to 55-64 with a buy in as an alternative to the public option is like getting turned down for $50 and then asking for $50,000.

The bill that passes will do a number of really important things.

1. It creates a mandate that all people have health insurance (like the auto insurance mandate) that meets a certain minimum level of coverage. This will most likely be catastrophic coverage.
a. The penalty for not having coverage will be either a 2.5% tax on adjusted annual income (House Bill) or $750/person up to a family of four (Senate Bill)

2. It will create a payroll tax for businesses that don't provide some level of coverage to employees to help offset the cost of those employees buying coverage and help cover the cost of subsidies for people who are below a certain income threshold.

3. It will regulate insurance companies.
a. They will no longer be able to turn away people for pre-existing conditions or arbitrarily cut peoples coverage when they get sick.
b. They will only be allowed to charge one rate for insurance that is not based on health status (huge for people with HIV, Hep-C, Diabetes, etc.).
c. They will not be allowed to create annual maximum coverage levels (many cut off at $100K or $1 million) or maximum coverage levels for the life of the policy (not annual, but overall)

4. It will expand Medicaid to cover all individuals up to either 133% of the Federal Poverty Level (House) or 150% of FPL (Senate)

5. It will remove anti-trust exemptions for health and malpractice insurers (interstate competition)

6. It will limit medical loss ratios to 85% (the amount of revenues from health insurance premiums that is spent to pay for the medical services covered by the plan.)

7. It will create health insurance exchanges (like in the Mass reform from 2006) This will:
a. Improve competition
b. Allow states also to create & regulate exchanges
c. Create Co-ops (like Kaiser, GroupHealth of Puget Sound and the Mayo Clinic to name a few)

8. It will address affordability
a. Sliding scale for families up to 400% of FPL
b. Small employer tax credit

9. It will create a health savings account system for pharmaceutical coverage

They are looking at ways to pay for this. One idea is a 5.4% tax on adjusted income for those making over $500,000 per year.

The Senate bill was scored by the Congressional Budget Office as being deficit neutral (i.e. cost savings will balance new costs).

So there I have painted a very rosey picture for you. That certainly isn't the totality of this bill. It doesn't do enough to control the cost of health care in this country, the regulation doesn't go far enough (in my opinion). A medical loss ratio of 85% is a joke (considering that the VA is like 98% and Medicare is 95%). There are many short comings.

My personal belief is that we should look at the Dutch health reform from a couple years ago as a model. It is a highly regulated private sector system.

Here's a link

But if this is all that passes, and I think it will pass, it will be a huge step forward for health care in this country. That doesn't mean that the game is done. As with all public policy issues, you drink a beer, celebrate the victory and wake up the next day and begin anew (also true for climate change at COP15 and the Cap and Trade legislation).

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