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Healthcare Reform Update - September 2-9, 2009

 

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Compiled by Brian C. Betner*

September 9, 2009

Baucus Proposal For Senate Finance Health Care Deal
September 8, 2009

Senate Finance Committee Chairman Max Baucus, D-Mont., has circulated this document (.pdf) to five other key Democratic and Republican negotiators in a bid to reach bipartisan agreement over a $900 billion health care overhaul bill. Instead of a government-run insurance option favored by House Democrats, this version would create a network of nonprofit cooperatives.

The so-called "framework" would establish health insurance exchanges in 2010, require health plans to report the amount of money they spend on items other than health care and require insurers to cover pre-existing medical conditions, according to documents obtained today by Kaiser Health News.

Baucus is proposing tax credits to help individuals who earn up to 300 percent of the federal poverty level, or $66,000 for a family of four, to purchase health care coverage. In addition, individuals who earn between 300 percent and 400 percent of the federal poverty level would be eligible for a premium credit as a flat percent of income.

Democrats Are Tightening The Belt For Health Reform
By Mary Agnes Carey and Eric Pianin, KHN Staff Writers
September 7, 2009

If health care reform has to be put on a diet to pass this year, how much must the proposal slim down?

Over the weekend, Senate Finance Committee Chairman Max Baucus, D-Mont., proposed a health care overhaul "framework" for committee consideration that would cost under $900 billion over the next decade, according to a source close to the negotiations. The measure also would expand Medicaid coverage to 133 percent of the federal poverty level, provide tax credits for people with incomes up to 300 percent of poverty and establish a series of health insurance exchanges to help individuals find affordable coverage.

The proposal would also create health care insurance cooperatives rather than the government-run public health insurance option that many Democrats favor. The plan may also place a tax on high-cost health insurance policies as a way to raise revenue and insurers would be prohibited from denying coverage based on pre-existing medical conditions. The Finance panel's "group of six," composed of three Democrats and three Republicans who are trying to reach consensus on a package, will meet Tuesday and are facing a Sept. 15 deadline to produce legislation. Baucus has told members that the proposal is not a final product and that more elements may be added. If members want to suggest changes to the bill that would increase its costs, however, they must also include financing offsets so the overall cost would not increase.

But members in both parties may see the Finance proposal as too large and propose possible cuts. Policy experts say that Democrats may have to accept a bill that is a far cry from the ambitious and costly health care overhaul blueprints on the drawing boards in the House and Senate that would extend coverage to many uninsured Americans, eliminate discriminatory practices within the insurance industry and try to rein in health costs in the coming decade. These experts suggest that if President Barack Obama and lawmakers move to scale back the plan, they might end up having to shift to a middle ground or a bare-bones approach.

A middle-ground alternative, in the range of $500 billion to $700 billion over the coming decade, would likely include an expansion of the Medicaid program for the poor, subsidies to help low-income people buy coverage and some basic reforms in the insurance industry, these experts say. A bare-bones package, in the neighborhood of $200 billion to $300 billion, would focus primarily on a Medicaid expansion, more health care coverage for children and state health insurance exchanges.

"What you're talking about then would appear to be very thin gruel to most Democrats," said Robert Reischauer, president of the Urban Institute, a Washington think tank.

Obama's Options

Since Congress departed for an August recess of angry town hall meetings on health care reform and widespread complaints about out-of-control government spending, Washington has been abuzz with talk about the need to scale back the Democrats' proposals for health care reform or simply hit the restart button.

After months of private deal making with special interest groups and coaxing Democratic and Republican lawmakers from the sidelines, Obama next week will move to center stage with a prime time speech to House and Senate members in which he is expected to propose important refinements to health care legislative proposals pending on Capitol Hill in a bid to win over a majority of Democrats and at least one or two Senate Republicans. But Republicans are offering stiff opposition.

"It's clear the American people don't want a new speech, they want a new plan," said House Republican leader John A. Boehner, Ohio, while Robert E. Moffit of the conservative Heritage Foundation advised the White House to "erase the blackboard, start over and do it right to expand insurance coverage, reduce costs and make the insurance markets work better."

One thing Obama might do, much to the displeasure of liberal Democrats, is put off for at least a number of years the creation of a public health-insurance plan to compete with private insurers to drive down costs, along the lines of a proposal by Sen. Olympia J. Snowe that would have the government offer a health care insurance alternative only if private plans didn't enter certain markets by certain dates. A scaled back package could also require most individuals to purchase insurance, create a government operated exchange in which individuals and small businesses could buy insurance, and provide subsidies or tax credits to defray the premiums for low-income Americans.

But it's not clear that such a bill could capture enough support, and health care policy experts say that Democratic leaders may have to shed more to win final passage of health care legislation this year.

For example, rather than shooting for near universal coverage, these experts say, the Democrats might try to extend coverage to all uninsured children, which was Obama's original campaign promise, or forget about creating a public insurance plan or co-ops, and instead substantially expand the Medicaid program for low-income children and adults. The proposal might also include a far more limited version of a national health insurance exchange in which consumers could compare and purchase health care coverage. Finally, federal lawmakers might require state governments to pick up some of the cost of a Medicaid expansion, although this would almost certainly touch off loud complaints from governors and other cash-strapped state officials.

"This is deja vu all over again, when the Clinton administration plan failed in '93 and '94 and we turned to incrementalism." said Jonathan Oberlander, an associate professor of health policy at the University of North Carolina at Chapel Hill. "No question incrementalism helped a lot of children . . . . But all the other problems we had got worse—more uninsured, higher spending, and more questions about health care. What we've learned is that more incrementalism doesn't help."

Taking such steps would almost certainly prompt an angry backlash from liberal Democrats, who want to use their majorities in the House and Senate and control of the White House to push for the biggest bill possible this year—one that would include a public insurance option, coverage for up to 95 percent of those currently uninsured, and generous premium subsidies for low-income families.

Dean A. Rosen, who was chief health care advisor to former Senate Majority Leader Bill Frist, R-Tenn., said, "My sense is it's going to be challenging politically and substantively to pass a bill that costs less than $300 billion."

Some experts also caution that trying to scale back the existing proposals on Capitol Hill might trigger unexpected or unintended consequences. Michael Tanner, a senior fellow at the libertarian Cato Institute, noted that portions of the plan are interlinked and that major changes or elimination of key provisions can have an undesirable ripple effect. "If you try to do insurance reform but you have no individual mandate to buy insurance, [the bill] falls apart," he said.

To be sure, it may take weeks for Democrats and Obama to reach consensus on what elements will be included in a health care bill, and perhaps even longer to secure enough votes for passage.

"There is no good option here," said Robert Laszewski, president of Health Policy and Strategy Associates, an Alexandria, Va., consulting firm. "Either [Democrats] do, 'Damn the torpedoes' and maybe lose the 2010 elections or they do the more modest kind of thing, in which case liberals will feel they bungled the greatest opportunity for health reform in 10 years."

The Middle Ground

A scaled-back health overhaul approach could include subsidies to help individuals purchase coverage, an expansion of the Medicaid program and require the government to cover expenses for the highest-cost medical cases.

While Baucus' proposal to allow individuals over 55 to buy into the Medicare program has gained little traction since he suggested it in a policy paper last November, it could resurface in a compromise package as a way to help older workers who have lost their jobs and their health insurance in the economic downturn.

Subsidies to help low-income people buy coverage could be scaled back from the 400 percent of poverty, or about $88,000 for a family of four, now included in the House Democrats' package and legislation approved by the Senate Health, Education, Labor and Pensions Committee to 300 percent of the poverty level, or about $66,000 for a family of four.

Medicaid eligibility might be expanded to provide coverage to millions of uninsured poor adults who do not now qualify for the program.

Other ideas include targeting a mandate for health insurance coverage to a specific group, such as individuals age 25 or younger, or pegging it to income levels. Small businesses could receive tax incentives to spur coverage, an idea supported by many Republicans.

To reduce insurers' expenses for the most expensive care, the government could cover catastrophic costs over a certain dollar amount, which could keep health insurance premiums down for everyone else.

Congress could also fund health insurance exchanges on the state or regional level, similar to programs ongoing in Massachusetts and other states.

A Bare-Bones Package

This smaller package might focus on three areas: expanding Medicaid, creating state and regional health insurance exchanges and mandating that all children have health care coverage.

While this option, which could cost $200 billion to $300 billion, might attract at "handful" of Republican votes, "it's nothing anybody on the left would recognize as universal coverage," Tanner said.

One benefit of a smaller plan is that less money would be needed to finance it, so there would be fewer reductions in Medicare spending or the need to raise taxes to pay for a health care overhaul. By contrast, to finance its current $1 trillion package, House Democrats would place a surtax on individuals earning more than $280,000 and couples making above $350,000 a year, although those levels may be raised.

There are other potential problems with a dramatically scaled-back approach. If premium subsidies are dropped to make the bill more affordable, fewer people will be covered. Without a requirement that everyone purchase coverage, insurers would not make good on their pledge to cover everyone with pre-existing medical conditions. Hospitals, which agreed to $155 billion in cuts over the next decade in return for fewer uninsured patients, may want to revisit that deal.

This less ambitious option would do little to control the growth of health costs, "because you are increasing demand by expanding the Medicaid component but aren't able to do any of the broader cost control efforts," Reischauer said.

KHN's Julie Appleby contributed to this report.

Obama To Offer Details, Strive For Consensus In Upcoming Speech
September 4, 2009

"With President Obama poised to give a health-care address Wednesday before a joint session of Congress, administration officials promised that he will deliver a detailed prescription for reform despite the risks of spelling out exactly where he stands," the Washington Post reports. If the president spells out precisely which provisions he favors and opposes, he faces a political risk if those aspects of the plan don't come to fruition. However, aides said he would do just that (Kornblut, 9/4).

Separately, aides said he will focus on aspects of the plan that have bipartisan consensus, steering clear of controversial points, like the so-called public plan, the Boston Globe reports. Obama's health care adviser, Nancy-Ann DeParle, said, "I think the insurance market reforms are so deeply thought to be needed that I think the Congress would be willing to enact those apart from the increases in coverage" (Kranish, 9/4).

Officials, experts, opponents and allies are attempting to pull the president in all directions on the speech, the Wall Street Journal reports. Liberals threatened to vote against any proposal without a "robust public option," while conservatives plan a new ad insisting that "the proposals contain no guarantees to prevent government from rationing health care and creating long waits for treatment (Adamy, 9/4)."

Whatever he says, according to some experts, he will be facing souring public opinion and diminishing polling numbers, Bloomberg reports. "At the moment, except for the people without insurance, we're not in a health-care crisis. . . . You do need a crisis to generate movement in Congress and to help build a consensus," said one professor of government (Goldman and Johnston, 9/4).

Meanwhile, "the White House is urging congressional Democrats to stress the progress that has been made on legislation to overhaul health care and advising them to prepare for 'a new phase in the debate,' "CQ Politics reports. A memo circulated to Senate Democrats detailed goals for next week's speech and concludes, "After this speech, opponents of health reform will need to either propose their own plan or explain why they think it is best to do nothing while premiums crush American families and thousands lose their coverage every day (Hunter, 9/3)."

Democrats Consider 'Trigger' Option Instead Of Immediate Public Plan
September 4, 2009

The White House is considering a health reform proposal that would turn to a government-run public plan only if private insurers fail to provide affordable options.

The New York Times: "As President Obama faces conflicting pressures from the left and the right over his proposal for a new public health insurance program, White House officials are investigating a possible compromise under which the government would offer its own health plan only if private insurers failed to provide affordable coverage. The idea of such a backup plan or 'trigger mechanism' has emerged in negotiations between the White House and the one Republican willing to engage with them on the issue, Senator Olympia J. Snowe of Maine, on whom the White House rests its hopes of finding a middle ground."

"For several months, the administration has sent mixed signals on proposals for a public plan, sometimes embracing the idea and sometimes suggesting it is not essential."(Pear and Calmes, 9/3).

The Los Angeles Times: Talks regarding the so-called 'trigger' are ongoing between the White House and key lawmakers. "For Obama, the challenge is to come up with benchmark numbers that would satisfy both moderate Republicans and liberal Democrats. A concern voiced by Republicans is that the bar would be set so high for private insurers that a government-run program would prove inevitable. . . . Suggestions that Obama might support a trigger were welcomed by the influential 52-member coalition of Blue Dog House Democrats—conservatives who generally are not sold on the health care plans" (Nicholas and Parsons, 9/4).

Dems Revisit Tax On The Wealthy To Fund health care Reform
September 4, 2009

"Senate Democrats are revisiting proposals to raise taxes on high-income people to help pay for an overhaul of the health-care system," The Wall Street Journal reports. "The main proposal getting renewed attention is one by President Barack Obama that would limit the federal tax deductions for higher-income families for mortgage interest and other widely claimed purposes, said two senior Senate Democratic aides. The development reflects a hardening of partisan lines in the effort to forge a health-care bill. Raising taxes on the wealthy was regarded as a virtual deal-breaker for Senate Republicans engaged in negotiations over the spring and summer. So Senate Democrats steered clear of such an approach."

The proposals would also conflict "with Finance Committee Chairman Max Baucus's hopes of taxing the most costly employer-based health plans as a way to reduce overall health-care spending. But many Democrats are losing hope that Mr. Baucus's bipartisan negotiations will produce a deal, so they are beginning to plan for a bill crafted by Democrats" (McKinnon, 9/4).

This information was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.

*We would like to thank Brian C. Betner, Esquire (Hall Render Killian Heath & Lyman, Indianapolis, IN), for selecting the articles for this week's update.

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