The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Health Care Reform 2009 Style

Posted by Alan on December 29, 2009


When it comes to health care reform 2009 has been an interesting year. And while comprehensive health care reform legislation will not be arriving on President Barack Obama’s desk this year, it is all but certain that will happen early in 2010. Getting to this penultimate moment has, to put it mildly, taken some doing. And the process says a lot about America and its leaders.

Health Care Reform Activity

President Obama had made clear throughout his campaign for the presidency that health care reform would be a top priority of his new administration. He lost no time making his promise real after his inauguration. Expansion of the State Children’s Health Insurance Plan, a proposal twice vetoed by then President George Bush, along with significant funding for medical technology, were a part of Administration’s economic stimulus package.

President Obama’s health care reform efforts took a serious blow in February when former Senate Majority Leader Tom Daschle was forced to withdraw his nomination as Secretary of Health and Human Services and as Director of the White House Office on Health Reform due to problems with his past tax returns. Senator Daschle is a political pragmatist who is highly regarded by lawmakers from both parties. Would the health care reform debate have been more civil had Senator Daschle led the White House reform effort? We’ll never know. What we do know is that civility quickly left the room as the House and Senate Committees with jurisdiction on the matter began their deliberations. The health care reform debate was passionate, raucous and partisan to the extreme. Neither party and no ideology is blameless for this descent into the dark side of politics. Both have benefited from it (although none as much as the 24 hour cable news channels) and both have sullied their standing with the public as a result.

Given what’s at stake when 1/6th of the nation’s economy is subjected to the legislative process, there may have been no avoiding an ugly health care reform debate. President Obama made clear in a speech in February that he wanted health care reform passed quickly. Many Republicans (and their talk show host allies) made it clear they’d rather see no health care reform rather than anything along the lines being proposed by – or that would politically benefit – President Obama. Meanwhile, the House Ways and Means, House Education and Labor and the Senate Health, Education, Labor and Pensions Committees pushed through liberal bills; anchors on the left in anticipation of the negotiations to follow. The resulting climate promoted intense partisanship.

Eventually more conservative Democrats forced the House Energy and Commerce Committee to slow done and moderate the legislation, although what they passed would still be considered “liberal” by most definitions.  All the House bills passed out of the committees without a single Republican vote. Meanwhile Senator Max Baucus was trying to fashion legislation that might gain the support of at least three GOP members of the Senate Finance Committee. (He would eventually manage to get the support of only one GOP Senator).

The difficulty of finding common ground between liberals and conservatives on health care reform was made abundantly clear during the summer of 2009. The disruption of lawmaker’s town hall meetings were reminiscent of the anti-Viet Nam War protests of the 1960’s. (I suppose it’s ironic that many of those shutting down the town hall meetings had participated in the anti-war protests more than 40 years earlier). The passion and concern of the health care reform protests were as sincere as some of the rhetoric and actions were unfortunate and despicable (death threats and swastikas are inherently contemptible and disgraceful). The protests did assure, however, that Republicans would remain united against the kind of reforms being pushed by the Administration.

Reform was being pushed by the White House even if the Administration was declining to define reform. Instead the White House broadly described the key elements they’d like to see in a reform bill. President Obama’s three core principles for health care reform called for reducing costs, guaranteeing choice and ensuring quality care for all. He would later add other conditions (e.g., reform could not add to the deficit), but the details of the bill were being hashed out in Congress by Democratic lawmakers. The result, much to the chagrin of liberals, was that over time the legislation became increasingly moderate culminating in the legislation passed out of the Senate Finance Committee with the support of only one Republican, Senator Olympia Snowe.

With all the committees of jurisdiction having staked out their positions it was time for Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to pull together the pieces into bills that could pass their respective chambers. Speaker Pelosi succeeded first with the House passing a health care reform in November. The price of passage was high: liberals had to accept language dealing with abortions that sparked outrage in the pro-choice community.  It took the Senate more than a month to follow suit, but eventually they did. Now it’s up to a conference committee to pull the pieces together into one bill that can pass both the House and the Senate. Not an easy task, but with the finish line in sight it’s very doubtful lawmakers will falter now.

The Public Policy Dimension

While the activity swirling around health care reform has been … interesting, the evolution of the substance of the legislation has been even more fascinating. Not all that long ago liberal lawmakers were claiming a health care reform bill lacking a government-run health plan was no health care reform at all. They seemed to believe that a public health plan was the magic wand that would remake America’s health care system into something fair, competitive and wonderful. Or maybe they just thought the public option was a way station on the path to their promised land: a single payer system. While the House bill would create a new government health plan, the Senate legislation rejected the public option. While liberals outside of Congress continue to attack reform without a public option, liberals lawmakers seem to accept the inevitable. What emerges from the conference committee will no doubt lack a public option and liberal lawmakers will still support the reform package.

While liberals were losing a public option an unlikely coalition of conservatives and liberals were also watering down a requirement that all Americans purchase coverage. Conservatives dislike the idea as a restriction on the freedom of people to have their health care reform subsidized by higher health insurance premiums for everyone else. Liberals don’t like it because, apparently, the result is a windfall for evil health insurance companies. (OK, they offer more substantive public policy arguments against the individual mandate, but the rhetoric focuses on freedom and windfalls). Never mind that requiring health plans to sell coverage without requiring individuals to buy coverage before they incur claims is a recipe for higher insurance costs or that many states require drivers to buy auto insurance. As the legislation has moved through Congress the penalty for failing to purchase coverage has drifted toward a slap on the wrist end of the spectrum.

Other issues have taken interesting turns as well. Reimbursing doctors for counseling to seniors concerning living wills and the like was removed from the bill once the discussions were labeled “death panels.” What taxes will be imposed to pay for health care reform is still uncertain. Anti-abortion advocates have done a masterful job of inserting abortion into the debate. Both the House and Senate bills contained provisions that could “bend the cost curve” (which is apparently the new articulation of what was once called cost containment). If all the cost cutting provisions in the current bills were moved into separate legislation it would actually look like a serious effort. Mixed in with the health insurance reform dominating the current versions, however, the provisions appear weak and almost an afterthought.

Health Care Reform 2009: The Human Factor

So what to make of health care reform 2009 style?

First, that the legislative process is messy and can be downright uninspiring. Second, that tackling an issue as important and complicated as health care reform cannot overcome the need for partisans of both parties to put aside the public good for their political stratagems. Third, that the health care reform package that finally passes will be far more moderate than might have been apparent earlier this year. Fourth, criticism that Congress is moving too fast on reform are really complaints that Congress is not doing what critics leveling this charge want them to do. The health care reform bill that will find its way to President Obama’s desk in 2010 will be over a year in the making. Longer if you count the debate on health care held during the 2008 presidential election. Longer still if you include the previous health care reform efforts undertaken over the past several decades.

We elect politicians to hold office because they promise to address problems. No one has ever won a campaign on the promise to do nothing if elected. In 2008 Democrats won, and won handily, in part on a promise to solve the problems posed by America’s current health care system. They are fulfilling that promise. In the process they will create new problems.

Because the fact is we humans rarely solve problems. Instead we tend to replace existing problems with new ones. And if the 2009 health care reform process has taught us anything, it’s that the people who make up the Administration and Congress (and the general public) are only human. Anyone looking at the health care reform package emerging from Congress would find evidence of that reality.

8 Responses to “Health Care Reform 2009 Style”

  1. Ed H said

    And here we are in June and we will be seeing some changes shortly. But just wait until 2014 when the mess starts to explode. High rates, massive debt… Should be interesting.

  2. georgia said

    Great, now the economy and health reform are dead. Congratulations America!

  3. James S. Thornton said

    Alan, I have found all your blogs singularly enlightening, and this particular summing up is exceptionally good.

    I am not sure if I agree, however, that the best we can hope for is the substitution of new problems for old ones.

    What may be more accurate to say, in my opinion, is that there will be new winners and new losers. I am convinced the benefits to the new winners will more than outweigh the drawbacks to the new losers.

    Those who are currently the worst losers under the present system–i.e., people who can’t afford health care, or have their policies rescinded when they need them, or are going bankrupt trying to keep insured–are likely to see their fates improve significantly (if they can hang on long enough for reforms to become law in 2014.)

    On the other hand, the biggest winners under the current system–very high earners with generous health care coverage they now pay little out-of-pocket for–are likely to become losers, at least is the sense that their taxes will probably increase somewhat, and so-called Cadillac plans might become rarer. (Ironically, the latter might prove more silver lining than cloud–studies showing that too much health care, too many scans and invasive tests, etc. often hurt people’s health more than help it.)

    Despite the likelihood of higher taxes, I don’t think the $500,000+ wage earner is at risk or bankruptcy.

    Another class of current “winner” likely to become somewhat less fortunate are those who, for whatever reason, don’t currently buy insurance at all and have managed to luck out and not need it. The young and healthy, in particular, seem destined to help subsidize the old with the new mandate that everyone needs to obtain insurance. Unfair, yes–but today’s youth will, with luck, become tomorrow’s elderly, so things have a good chance of balancing out.

    I guess my view is that the people most egregiously harmed by the current system will benefit drastically from the proposed changes. And those that currently benefit may suffer a little but not drastically.

    I suspect when the smoke clears, the major harm to the latter will have been psychological–a sense that those ideologically opposed to any degree of the “all for one, one for all” mindset are being forced, in some small way, to subsidize their fellow countrymen.

    Somewhere between Marxism and social Darwinism, countries that prosper over the long run do so by balancing individual rights with some sense of social responsibility. Personally, I applaud Obama’s efforts to bring the U.S. somewhere closer to a mid ground here.

    • JimK said

      Mr. Thornton,

      I have read your previous posts here and understand that the proposed legislation may be beneficial to you, but after reviewing the summary of the Bill proved by the Kaiser Foundation I believe that the Senate Bill has more negatives then positives for most Americans.

      My reasons are as follows:

      Requirement to offer coverage, other requirements

      The requirement to offer coverage encourages companies with 50 or more employees who do not offer healthcare coverage to pay sufficient wages whereby none of the company employees would be eligible for a premium tax credit (not likely) or to pay seven-hundred and fifty dollars ($750.00) for all full-time employees if even one full-time employee qualifies for a premium tax credit.

      Since the language cited in the Senate summary comparison provided by Kaiser specifically states full-time employee and not full-time equivalent employees it would appear that this particular provision would discourage an employer from hiring lower paid full-time employees. In addition, I am sure that accountants and lawyers will be able to devise additional strategies to minimize or eliminate a company’s costs relative to the requirements for a company to provide healthcare insurance.

      On first reading, it would appear that if a company with more than 50 employees presently offers healthcare insurance, the above scenario does not change much.

      However, the provision that requires all employers who presently offer healthcare insurance to offer free choice vouchers to all employees at or below 400% of the FPL appears to apply to all employees at or below 400% of the FPL and may discourage any company at or near the 50 employee threshold may be discouraged from adding additional full-time employees.

      Further, this provision, as written in the summary, appears contradicts the exemption for those companies with less than 50 employees. Since this particular language contradicts the fifty-employee exemption in the Senate summary, I will assume that the exemption for employers with less than fifty employees will supersede the contradictory language. If the provision is applicable to employers with less than 50 employees, it just proves the old adage that “no good deed shall go unpunished.”

      As to the free choice voucher, the description in the Senate summary states that an employee is eligible for the health insurance exchange if the employee’s premiums exceed 9.8% of their total gross pay or if the employer’s plan has less than a 60% actuarial value. This particular provision would appear to apply to full-time employees in companies with less than 200 employees and all employees for companies with over 200 employees.

      The “stick” for this particular provision would appear to lie in the language in the Senate summary that states that the employer must offer the free choice voucher for the amount that the employer contributes to the employee’s healthcare plan.

      Upon further review, there does appear to be some limitations on this particular “stick.” If an employer contracts with a third party insurance carrier and the employer’s contribution were greater than 9.8% of the cost of the premium, this particular provision, if I understand it correctly, would create an incentive for the employer to reduce the employee’s contribution and increase actuarial value of the employer’s healthcare plan. . However, if the employer is self-insured and its current payroll contributions towards healthcare are less than 9.8% it may be more cost effective to provide the employee with a free choice health voucher.

      A case study on the latter point involves Wal-Mart and the State of Maryland. Maryland, acting on its State Insurance regulatory authority passed legislation directed at Wal-Mart. The legislation mandated that an employer with over ten-thousand employees would be required to contribute at least 8% of their payroll costs towards healthcare coverage.

      The purpose of this legislation was to minimize Wal-Mart employee eligibility for State mandated medical coverage. Wal-Mart challenged the legislation and the States authority to intervene in this matter. Wal-Mart stated that they were self-insured. Wal-Mart further stated that the rules for their plan are governed by the Employee Retirement Income Security Act (ERISA ), and as such are preempted from State intervention. The Fourth Circuit agreed and the State mandated 8% provision was overturned. Based upon this ruling it may be more cots effective for a company to provide a free choice voucher and further burden the Public Assistance rolls.

      Premium Tax Subsidy v Public Subsidy;

      The premium tax credits are set on a sliding scale with the premium tax credit capped at 9.8% for an individual or family at 400% of the FPL. Any cost sharing subsidies will only benefit individuals or families at or below 200% of the FPL.

      I am not in the health insurance business so I am just assuming that the language under the Senate summary on cost sharing subsidies raises the actuarial value of a particular health insurance plan to 90% of individuals at or below 150% of the FPL and 80% to those individuals or families at or below 200% of the FPL. Therefore, the public subsidy provision of the Senate Bill is separate and distinct from the tax credit provisions used towards the purchase of healthcare insurance.

      The language of the free choice voucher program specifically states that the value of the free choice vouchers will offset the premium cost for health exchange participants. Therefore, it is my guess that the cost-sharing subsidy of the Senate plan will be funded by taxpayers through either the Cadillac excise tax or the increased tax on wealthy individuals.

      If the provisions of the Senate Plan are passed and the Cadillac tax remains the funding choice, the Democrats will lose an important constituency.

      Individual Mandate;

      The individual mandate has been covered extensively so I will not get into that with the exception of stating that an individual’s choice will be entirely predicated on their particular income situation (e.g. individuals in higher income brackets will forego the insurance and pay the penalty).

      In addition, if the relatively minor penalties remain in place there will be more cost shifting to existing enrollees.

      Treatment of Medicaid;

      It appears from the Kaiser summary that Medicaid is the de facto public option. Under the current rules, Medicaid eligibility is determined by the individual States and for a large number of States income is only one of the qualifying factors. Under the proposed legislation, income levels will be the determining factor on whether an individual or family qualifies for Medicaid.

      While the federal government will pay the initial costs for covering newly eligible participants, the 100% federal subsidy for newly eligible participants will be reduced over time and while initially beneficial to the residents of many of the so-called Red States the decreased funding over time will have an enormous affect on local State budgets.

      Unknown Factors (at least to me);

      The Senate summary does not address temporary employees and taking the language at face value, I will assume that temporary employees will count towards an employer’s total employee count. Since the penalty for a waiting period of 30 to 60 days for a full-time employee to participate in the company health plan is four-hundred dollars ($400.00). The lack of a penalty for hiring part-time employees for less than 60 days will encourage employer’s to hire more temporary employees.

      The waiting period for all other employees is 60 to 90 days and the although the penalty is six-hundred dollars ($600.00) it may still be more cost effective to hire more temporary employees and pay the penalty.

      While I understand some of the provisions cited above do not take effect for several years, given the fact that during our present financial crisis hiring has been limited to temporary employees it would appear to me that this legislation only exacerbates this trend.

      Conclusion;

      While my opinions are based primarily on the summary report issued by the Kaiser foundation and my concerns may be addressed by the specific provisions in the legislation, it is my conclusion that the current Bill will reduce the number of full-time employees; increase the usage of temporary employees; further shift costs to the currently insured; and further shift the cost burden to over-stretched State budgets.

      • James S. Thornton said

        Could you post the link to the Kaiser Foundation summary?

        If I am reading your comment correctly, the gist of it is that the proposed reform is riddled with loopholes and unclear language that the crafty and the manipulative will likely use to their advantage and to the detriment of others.

        You appear to be saying that more people will suffer than will be relieved from suffering by such reform.

        You may well be correct.

        My contention is that the people who have been suffering the worst will be helped; and that there may well be new losers, but these new losers will not be as bad off as the current health care insurance victims are.

        Do you disagree with this? It seems that you do–that you believe the well-to-do will always find a way to come up on top, and the lower class wretches will never win, no matter how much they are helped. The lower classes, for instance, may be more likely to get covered for health insurance under the reform–but they will be even less likely than ever to get decent jobs.

        Is this what you are saying?

        • JimK said

          Alan provided the link in a previous post (Senate makes History). I had additional links in my Word document but they did not carry over to this blog. I should have just entered the links at the end rather than try and embed them in the blog.

          Click to access housesenatebill_final.pdf

          Now to hopefully answer your questions: yes, I do believe that the present Bill will be more harmful then helpful for the majority of individuals who are already covered.
          I also believe the Bill will encourage more outsourcing and a dramatic increase in Public Spending on Healthcare and an increase in the number of temporary employees.

          I also agree that the Bill will be helpful to those in your situation as well as to those individuals who cannot presently afford healthcare but will now qualify for Medicaid. However, since the Senate Bill does not provide any provisions eliminating a lifetime cap on benefits you may not be as well off as you think.

          I also believe that the Democrats are making a huge miscalculation. IMO the Senate Bill will do more to shift costs to the 80% with existing coverage and are presently content with their coverage, Obama and the Healthcare reform Bill be blamed for this cost shift.

          Along this same vein the excise tax if it is maintained at the present levels will come back and bite the Democrats in the ass as the Unions will believe that Obama sold them out. After listening to Obama’s Chief Economic Advisor, Professor Romer, on This Week it appears that the excise tax will remain relatively intact.

          The major saving grace for the Democrats is that many of the provisions do not become effective until 2014.

          In closing, as I stated in my previous post, my analysis is based purely on the Kaiser Summary and not the actual specifics of the Bill. Therefore, my conclusions may be entirely off the mark. Regular reader’s of this Blog who are in the Healthcare industry probably have a better grasp of the consequences of the Senate legislation.

          The bottom links are to two articles from the NY Times; one is an editorial in yesterday’s paper; and the other is on a Court decision involving employer funding for healthcare programs.

          http://www.nytimes.com/2010/01/10/opinion/10sun1.html?pagewanted=1

          http://www.nytimes.com/2007/01/17/business/17cnd-walmart.html?_r=1&hp&ex=1169096400&en=6303c3ebfadf583b&ei=5094&partner=homepage

        • JimK said

          I stand corrected on the lifetime limits, page 11 of the Kaiser summary addresses the issue of lifetime dollar limits (none). My original interpretation was based upon the essential benefits section on page 10.

          Also I don’t think I answered your question: If you are including the middle class as members of the lower class wretches I generally concur with your assessment of my interpretation.

  4. dave said

    This healthcare debate has gone exactly like all other debates in congress goes – that is liberals believe that big govt. programs can do great things, while conservatives have no faith that big govt. programs will be ran well.

    Bush and his cohorts in congress blew it for 6 years and Dems. took over. Obama got in because of Bush, not because of Obama’s policys. Now that people are seeing his policys up close, moderates especially are appalled.

    The facts are that it is true that very few federally ran programs run well, VA has done an excellent job, Social Security runs well, Medicare has at least 10% of its revenues going out for fraudulent claims and providers dont really like it.

    In fact the entire structure where the congress appropriates the funds, the president and HHS runs the system, and the states then enforce the laws is totally dysfunctional.

    Each year the congress gets bribes from special interests, then has hearings, then tinkers with the program forcing the providers and the states to have to change their computers, their accounting, so that they can keep up with the changes.

    Providers and employers have to hire useless brokers and managers to keep up with all the changes year after year as congress in their infinite wisdom improves the program. Conservatives take control and change comes, liberals take over and more changes. This creates tons of paperwork, and middlemen hired to wade through the mess so people can get paid.

    We need a system where smaller authoritys based on regions or states would have elected authoritys to run either a single payer system, or a private insurance based conservative system. This authority would be accountable to the voters and would be able to self rule and self tax based on local tastes. Voters in Vermont are very different than voters in Utah. This notion of national health care policy is folly.

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