There is an excellent article by Ricardo Alonso-Zalvidar in today's Chicago Tribune describing the current political status of health care reform. The journalist quotes Senator Max Baucus (D-MT) as saying that there is "a sense of inevitability … that yes, we're going to pass health care reform." Senate Majority Leader Harry Reid and Speaker of the House Nancy Pelosi are deciding what to include in the legislation that they will bring to the floor of their respective chambers. This posting summarizes the topics where there is broad agreement and the issues that are still being hashed out.
Almost everyone agrees that the health insurance system must be changed in the following respects:
1. Exclusions for Preexisting Conditions Must Be Abolished. Health insurance policies must cover preexisting conditions. No-one may be refused insurance, or be required to pay a higher premium, simply because they are sick.
2. We Must Create Health Insurance Exchanges. Individuals and small employers should be permitted to purchase health insurance on state-wide "exchanges" which would offer health insurance at a uniform rate to all customers.
3. Insurance Must Pay for Preventive Care. Health insurance should pay for preventive health care. This should help to keep us in better health, thus reducing spending on health care.
4. We Must Create Wellness Programs. For the same reason, there should be incentives for people to adopt a health lifestyle, and grants to employers and communities to create wellness programs.
5. The Government Should Establish Best Medical Practices and Standard Protocols. The government should encourage the development of "best medical practices" and ensure that these practices are followed.
6. We Must Expand the Use of Information Technology. Information technology should be maximized both to streamline medical care (making information available throughout the health care system) and to reduce the cost of billing and payment to health care providers.
However, there are a number of areas where lawmakers have yet to reach a consensus.
1. Who May Participate in the Exchange, and Should It Be State-Wide or National? Some of the bills would allow only individuals and small businesses to purchase insurance through the Exchange. Other proposals would allow mid-size employers to participate – and there is support for allowing everybody to purchase insurance through the Exchange. Supporters of expansion believe that this is the best way to promote competition and bring down costs. Opponents fear that it would destroy the system of employer-based insurance. There are similar arguments in favor and against creating a national exchange. Premiums would be lower if there were a national marketplace for health insurance because consumers would have more bargaining power relative to insurers, and insurers would have more bargaining power relative to physicians. On the other hand, a national market could not be regulated by state insurance commissioners, and the tradition of state regulation of insurance would be abandoned in favor of national regulation.
2. Will There Be a Public Option and If So, to Whom Will It Apply? Will the government create an insurance program like Medicare or Medicaid to cover middle-class Americans who have not reached retirement age? Proponents claim that this would reduce health care expenditures because of lower administrative costs. Opponents fear a government "takeover" of medical care.
a. Universal, Opt-In, or Opt-Out? Would the public option automatically be available in every state, would states have to affirmatively choose whether to participate, or would states have to take steps to refuse to participate in the program? There is political benefit to allowing each state to decide what it prefers – but proponents of the public option fear that any opportunity for a state to "opt-out" of public insurance would unnecessarily harm people who would benefit from low-cost government health insurance.
b. Date Certain or Trigger? The bills currently pending in Congress that contain a public option would have the program commence automatically in 2013 or 2014. But there is additional support among Republicans and conservative Democrats for a public option that would be "triggered" either by a lack of competition among private insurers within a state or by rising health care costs within a state.
c. Mandated Reimbursement Rates or Negotiated Rates? Under the public option, would rates be set by the Department of Health and Human Services as they presently are for Medicare, or would the government have to negotiate rates with doctors and hospitals the way that private insurers do? Mandated rates would be lower than negotiated rates, but doctors and hospitals are more likely to support and participate in a program where they have the right to negotiate their fees.
3. What Should be the Scope of the Individual Mandate?
a. Extent of the Mandate? Will every person be required to purchase health insurance, or will there be broad exceptions for people who do not want it or who cannot afford it? If healthy people are not required to purchase insurance, or if people don't purchase health insurance until they are injured or become ill, then the pool of people who are insured will be relatively sicker, thus raising the average cost of health insurance for everybody.
b. Penalty for Noncompliance? How much will people be fined if they do not comply with the mandate? Again, without a sufficient penalty, there will be "adverse selection" – people will make no contribution to pay for health care while they are healthy; instead they will purchase health insurance only when they become sick.
c. Level of Subsidies? How much will the government contribute so that low-income people can afford to pay for health insurance? The Senate Finance Committee bill saved money by reducing the level of subsidies. Obviously that approach imposes a hardship on people who are barely getting by today.
4. Should There Be an Employer Mandate? Will employers be required to provide health insurance? If so, the same three questions arise for them – the extent of the mandate, the penalty for noncompliance, and the level of subsidies available from the government to help pay for health insurance.
5. How Will We Pay for Subsidies or for the Public Option? Current bills identify three possible revenue sources: raise taxes on high income earners, charge an excise tax on expensive health insurance policies, or impose a tax on the sale of medical devices. Another possibility that is not included in any of the proposed bills is to reduce the tax exemption for employer-based health insurance.
Most analysts expect that Pelosi and Reid will finalize the House and Senate bills within the next few days. And then we'll see!
Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.
