Health Care Financing Reform: (61) The House of Representatives Passes H.R. 3962

     My wife and I stayed up late last night (OK, I stayed up late – she does not consider 11:30 p.m. to be late) to watch the House of Representatives adopt H.R. 3962, The Affordable Health Choices Act of 2009.  Here is my bottom line on the bill.

     The bill achieves nearly universal coverage by requiring people to have health insurance, by subsidizing its purchase by low income persons, and by requiring insurance companies to insure people regardless of any preexisting medical conditions.  According to the CBO, once the law is fully effective, 96% of Americans will have health insurance coverage (as opposed to only 83% of Americans under current law).  In addition, the bill addresses the problem of people being underinsured.  People with health insurance will have more comprehensive coverage than they do today, covering virtually all medical conditions except abortion.  (More on that in the next installment of this series, Number 62, concerning the Stupak Amendment). 

     This law should substantially improve the average health and well-being of Americans.  According to studies by the Commonwealth Fund, the Organization for Economic and Cooperative Development, and the World Health Organization which I have collected on my health care website, Americans are on the average less healthy than the people of any other industrialized country.  The 2009 Harvard Study accessible from the same site found that uninsured Americans are more than 40% more likely to die than persons who have health insurance, even though they are matched for race, gender, age, income, education, and general state of health.  All of these sources attribute the relative poor overall health of Americans to our country's failure to provide adequate medical care for chronic conditions such as asthma, diabetes, and cardiovascular disease, all of which require a strong system of primary medical care and efficient medical recordkeeping.  The House bill seeks to strengthen those aspects of the American medical system.  Another element of the bill that should improve the overall health of Americans and ultimately reduce the amount that we spend on health care is that the bill requires insurers to cover preventive care without co-pays or deductibles. 

     The bill enacts several reforms that should make the delivery of health care more efficient and less costly.  It standardizes health insurance policies so that they can be easily compared by consumers; it abolishes the antitrust exemption for health insurers so that there can be no more market allocation or price-fixing; it encourages the development of "best practices" in the treatment of illness and injury; it attempts to streamline the system of billing and reimbursement system so that physicians and hospitals can be paid promply and accurately; and it authorizes the delivery of health care in the home.  The one cost-cutting reform with which I find fault is the half-hearted provision purporting to subsidize states that adopt "certificate of merit" laws in medical lawsuits.  This portion of the bill dealing with "tort reform" is criticized in Number 59 of this series.

     The most serious defect in H.R. 3962 is that it does not reduce this nation's total expenditures on medical care.  All studies and reports including this June 29, 2009 CMS Report on Projected Health Expenditure Projections 2010-2019 and this 2008 report from the insurance industry agree that the amount that we spend on health care has doubled in the past ten years and is expected to double again in the next ten years.  According to a report issued October 21 by CMS (accessible from this site) it is estimated that the Democratic bill will do nothing to reduce those overall costs, and that in fact the bill will result in an additional 2% increase in health care spending – that is, over the next ten years health care spending will increase 102% instead of 100%.  Another way of looking at this is that the Democratic bill will vastly increase the number of Americans who are covered, and will vastly improve the scope of coverage that we have, without increasing total expenditures by a significant amount.  I would take that deal in a heartbeat.  But there still remains the difficult task of reducing the overall cost of medical care.  If improvements in primary care, preventive care, medical information technology, best medical practices, home health care, and billing systems are inadequate to get a handle on costs that are spiralling out of control, then pressure will be brought to bear on health care providers.  Pharmaceutical companies and the manufacturers will face price controls, either through direct regulation or by having to negotiate prices with entities that have equivalent market power, and managed care will replace fee-for-service among doctors and hospitals, meaning that doctors and hospitals will not be allowed to charge for each separate office visit, hospital stay, or medical procedure, but will instead be organized in larger groups such as HMOs or PPOs that will bid to provide all of the medical needs for specific populations.

     The House Republican alternative that was issued Tuesday, the proposed Common Sense Health Care Reform and Affordability Act, does not achieve any of the goals that the Democratic bill seeks to accomplish.  According to this November 4, 2009, CBO report the Republican bill would not reduce the percentage of uninsured Americans.  It does not prohibit exclusions for preexisting conditions or regulate differences in premiums based on gender and age.  It does not address the problem of "underinsurance" – that is, insurance policies that simply don't cover all medical conditions or that have high co-pays and deductibles.  Many of the Republican members of Congress who spoke on the floor of the House last night admitted that the existing system of medical care needs reform – they want to increase access, maintain quality, and reduce costs, just like the Democrats - but they are unwilling to admit what appears to me to be obvious – that the unregulated market for health insurance and health care is incapable of achieving these goals. 

     The weakest argument that Republicans mounted in defense of their alternative bill is that it would reduce the cost of medical care.  That is not what the CBO said.  The CBO stated that the Republican bill would reduce health insurance premiums by up to 10% what they otherwise would be under current law – that is, that instead of doubling, health insurance premiums will only go up 90% over the next ten years.  This is a rather modest reduction in the exploding growth of health insurance premiums.  And the Republican bill fails to take into account what people's out-of-pocket expenses would be if the market for health insurance remains unregulated.  It does not address the problem or the cost of caring for the uninsured.  It does not reduce the growth in the cost of Medicare and Medicaid.  It does not reflect the fact that every year insurance policies are covering fewer and fewer aspects of medical care.  The House Republican bill simply would not achieve very much, if anything, to help Americans pay for the cost of medical care.

     In my opinion the most powerful argument that Republicans mounted against the bill last night was directed against the "individual mandate" – that requiring people to purchase health insurance invades personal freedom and is contrary to the principles of the Declaration of Independence and Constitution.  While theoretically this argument could appeal to any American, as a practical matter those of us who are middle-aged or older are mostly aware of how necessary health insurance is.  This argument is most likely to appeal to healthy young people – the "young invincibles" who quite rationally choose to forego purchasing health insurance under current law.  As described in Number 40 of this series, the Democratic bill contains a number of features designed to ameliorate the effect of this requirement.  Young people will qualify for coverage under their parents' health insurance policies until the age of 27.  Government subsidies will be available for persons earning less than 400% of the Federal Poverty Level to help them purchase health insurance.  The law allows for exceptions in hardship cases, and permits individuals to purchase low cost – low quality "catastrophic care" policies in some cases.  Finally, for someone who is determined to exercise his or her fundamental right not to be insured, the legal penalty for not purchasing health insurance is not too onerous – $750 annually.   (Of course, there is the practical penalty for remaining uninsured – the out-of-pocket payment of medical bills.)  Finally, as well all know, no-one is young and healthy forever.  Within a few short years the "young invincibles" become mothers and fathers seeking health insurance for themselves and their families, and looking ahead they must ask themselves whether or not high quality health insurance will be both available and affordable.

     It was exciting to witness the passage of this landmark legislation.  Now our attention shifts to the Senate where we await the unveiling of the Democratic bill and, perhaps, a Republican alternative, in that chamber.

Tagged as: H.R. 3962, health care financing reform, health care reform, health insurance reform, house passage, passes in House, pelosi bill