Why It Matters: A Strong Public Plan, Medicare Rates, and Affordability

Let’s start from the end. You want health reform. Republicans say they want it. The insurance industry wants it. People who pay individually for health insurance want it - they can’t afford coverage. People with insurance want it – they too often have their claims denied – 1 in 5. 44,000 people die every year because they are uninsured. Medicare is going broke because prices are going up outside of the Medicare system, and lots of families are going bankrupt for the same reason.

To put the middle in the middle: Getting there means finding 218 members of the House of Representatives, plus 51 Senators, to convince the White House they will vote for reform.

Keeping it there after it passes means we all need to be able to afford it, and still get the care we need.

Here is the part to nail down this week: A strong public option, that pays Medicare rates and uses Medicare providers, is the only way to make the plan affordable.

There are 2 parts to making insurance affordable. The first part is limiting how much we pay providers – hospitals, doctors, drug companies. Basing payments on Medicare rates is the key here.

The second part is making sure these limits get passed back to you, in the form of lower insurance company premiums.

We need a strong public option for both.

The Congressional Budget Office says using Medicare rates saves $110 billion over 10 years, $85 billion more than a public option that doesn’t use Medicare rates.

Medicare already establishes payment rates to hospitals and doctors on behalf of 40 million Americans. These rates are accepted by all hospitals and most doctors, but aren’t susceptible to the hyper-inflation that has driven prices in the private sector over the last 10 years. Adding millions of enrollees to this system will help put the brake on payment rates.

So if the public plan limits payments to providers, how will that translate into lower premiums? The public plan won’t pay profits or bonuses, and will benefit from lower overhead than private plans. All the savings go right back to you, in the form of lower premiums.

Private insurance companies on the other hand can charge whatever they want, even if they are paying providers less. They have to charge higher premiums, to pay their shareholders and executives. This is true even if they paid less to hospitals and doctors – they have no reason to pass those savings on to you, in the form of lower premiums, and every reason to just do what they always do: hold onto the money themselves. Unless, of course, they have to compete with a public plan.

A public plan will charge lower rates, be affordable for people who need care, and set a standard on prices that both providers and insurance companies will have to compete with.

Will doctors still treat you if you are on the public plan, even if it pays less than private plans? For those who think Medicare rates are too low, the version of the public option linked to Medicare rates gives plenty of flexibility. First, we’re not talking about today’s Medicare rates. The bill will require changes in rates to address regional differences, including adjustments for rural areas, and ways to promote quality. Second, it provides an extra 5% (Medicare +5) for individual providers. Third, it allows any provider to opt out – and the decision can be made (and reversed) each year. Finally, it gives the HHS Secretary authority to go higher than Medicare rates if necessary to attract doctors, hospitals and other providers based on local conditions.

Why not negotiate the rates the new public plan will pay providers? Simple: They'll be higher. That's why providers and insurance companies want them. A new plan, with new enrollees, needs to build on the strongest platform we have. That's improved Medicare rates, with a cap of 5% extra. (Even a public plan with negotiated rates saves $25 billion more than relying solely on private insurers.)

Again: A public plan will charge lower rates, be affordable for people who need care, and set a standard on prices that both providers and insurance companies will have to compete with.

So here we are with the beginning for this week:

We need a public plan.
That pays Medicare rates plus 5%.
And includes Medicare providers.

Pass it on to 218 of your friends in the House, and 51 Senators.

More on HR 3200: Public plan delayed, affordability uncertain

John Gilman (johnhgilman@yahoo.com) and Ellen R. Shafffer


Concerns
· State benefit mandates – to continue these mandates, state will have to pay any additional cost of affordability credits in the Exchange that are due to the mandates. With tight state budgets, states are likely to drop these benefit mandates, which will effectively reduce the scope of coverage for all state residents whether insured in or outside the Exchange.

· Delayed Implementation of Health Insurance Exchange, Public Option, and Affordability Credits and limited access once implemented.
o Exchanges do not go into effect until 2013. In that year the only employers that may insure through the Exchange are those with 10 or fewer employees. Individuals without other coverage may also enroll, but if they have been offered coverage by their employer they will not be eligible for any affordability credits.
o Beginning in 2014, any employer with 20 or fewer employees may enroll in the Exchange. Individuals without other coverage may also enroll, but if they have been offered coverage by their employer they will be eligible for affordability credits, but only if the employee’s share of premium exceeds 11% of adjusted gross income and the employee’s family income does not exceed 400% FPL.
o Beginning in 2015, and beyond, the Health Care Commissioner may, but is not required to, expand employer participation to larger employers.
· There is an individual mandate to have insurance but Affordability Credits are limited. These credits are not available unless you receive coverage through the exchange, and even then, they are not available through the exchange if you have declined coverage from your employer unless your share of premium under your employer’s plan exceeds 11% of your income.
o For those that qualify, Affordability Credits provide some protection for those with the lowest incomes, but these credits quickly phase-out and are not available for much of the middle class. Anyone with family income above 400% FPL ($43,320 for an individual; $88,200 for a family of four) is not eligible for any subsidy. The following are examples of health care costs for people buying coverage through the exchange:
§ A single person with $16,000 annual income would receive a subsidy and pay no more than a $480 per year premium (3% of income), while having a cost sharing burden of 3-5% of medical costs.
§ A couple with family income of $35,000 would receive a subsidy and pay no more than a $2450 per year premium (7% of income), while having a cost sharing burden of 15% of medical costs with an out-of-pocket family limit of $10,000 per year.
§ A family of three, with family income of $72,000 would receive a subsidy and pay no more than a $7920 per year premium (11% of income), while having a cost sharing burden of up to 30% of medical costs with an out-of-pocket family limit of $10,000 per year.
§ A family of four with family income of $90,000 would not be eligible for any premium subsidy and in addition could expect to have a cost sharing burden of up to 30% of medical costs with an out-of-pocket family limit of $10,000 per year. According to the California HealthCare Foundation, in 2008, the average total family premium for an employer sponsored PPO in California $1251/month ($15,012/year). This family would be paying over 16% of its income just for the health care premium.
· The bill permits a basic insurance plan to have high out-of-pocket expenses. Cost sharing under the basic plan can be up to 30% of medical costs, with out-of-pocket limits of $5000 per individual and $10,000 per family.
· Although the bill offers “enhanced” and “premium” plans with reduced cost sharing–it appears that everyone is entitled to the “basic” plan. The enhanced and premium plans have less cost sharing but higher premiums. Low and middle-income workers will likely not be able to buy enhanced and premium plans because they will not be able to afford the higher premiums, so they will be stuck with the basic plan and its high-cost sharing.
· Play or Pay. Employers must “play” (offer health insurance to employees) or “pay” (pay a fee to the Health Insurance Exchange Trust Fund).
o If the employer plays, the minimum employer contribution to premium (for full-time employees) is 72.5% of the premium cost for a single employee and 65% for family coverage. That means the employee with family coverage may pay 35% of the premium cost of his or her policy. (According to the California HealthCare Foundation, single employees in California pay on average 12% of premium costs, while employees with family coverage pay 24% of premium costs.)
o Employers that choose to pay must pay an amount equal to 8% of total wages (The amount is less for employers with payrolls of up to $400,000). When the employer chooses to pay, none of the amount paid by the employer is credited to his or her employees, who must obtain insurance through the exchange. Many of these employees will find themselves paying for the full cost of their insurance. See the above discussion for Affordability Credit subsidies available through the Exchange.
· State-based health insurance exchange – States, or groups of states, can form their own health insurance exchange. However, it appears that such an exchange would NOT be required to offer a public option. (See Section 208)
· State benefit mandates – to continue these mandates, state will have to pay any additional cost of affordability credits in the Exchange that are due to the mandates. With tight state budgets, states are likely to drop these benefit mandates, which will effectively reduce the scope of coverage for all state residents whether insured in or outside the Exchange.

· Essential community providers: The bill requires that only basic plans contract with essential community providers? [Page 90 - Sec 204 (b)(6)]

Good:
· Prohibits cost sharing for preventive benefits
· Establishes a minimum Medical Loss Ratio, BUT leaves exact ratio to be set by the Secretary of HHS, (effective 1/1/2011)
· Limits policy rescissions (effective 10/1/2010)
· Public Option –Provides incentives for Medicare providers to be public option providers (assures broad, diverse panel of providers)Page 122-123 – Sec 223 (b)(1) – 5% incentive to Medicare providers who also participate in Public Option]

· Medicaid improvements
o Expands coverage: Requires state Medicaid programs to cover childless adults, parents, and individuals with disabilities with incomes up to 133% FPL. Requires state Medicaid programs to cover newborns up to the first 60 days of life who do not have other coverage. These expansions will be paid 100% by federal government. BUT, these expansions do not go into effect until 2013.
o Improves primary care reimbursement: Requires state Medicaid programs to reimburse for primary care services at no less than 80% of Medicare rates in 2010, 90% in 2011, and 100% thereafter. The incremental cost of this increased reimbursement will be paid 100% by federal government.
o Establishes a five-year Medicaid Medical Home pilot program, with 90% federal matching funds for community care workers for the first two years and 75% federal matching for next three years.
o Increases pharmaceutical manufacturer rebates for brand-name drugs purchased by State Medicaid programs from 15.1% of average manufacturers’ price to 22.1%.
· Establishes the Center for Comparative Effectiveness Research


Uncertain effect
· Options for certain individuals to enroll in Medicaid or receive insurance through the Exchange (probably good)
· Eliminate SCHIP; transitions SCHIP eligibles into Exchange, but no earlier than 2013.
· 2.5% tax penalty (2.5% of modified AGI) for failure to obtain coverage, but not to exceed average premium cost; hardship exception available. (If you pass the “hardship test” your prize is not having to pay the penalty and not having health insurance.)
· Up to 50% employer tax credit for premiums paid by small employers with low wage workers
o Phases out beginning at over $20,000/ year average wage, fully at $40,000
o Phases out beginning at 11 employees; fully at 25
o Does not apply to any employee earning over $80,000
· Requires state maintenance of effort (MOE) for Medicaid and CHIP eligibility as of June 16, 2009. This assures that eligibility does not contract (good), but how able are states to do this, given their bleak budget picture.

The Good, the Bad and the Murky: Health Reform on July 14

Here’s (a partial, one-person view of) what happened:

The House released a 1,017 page reform bill, summarized in 35 pages, promising progress and peril over the next 4 years. It improves affordability of health insurance, and proposes to regulate “rescissions” and other worst practices. The public plan option is semi-strong: it’s available to anyone who gets coverage through the new Health Insurance Exchange, but it’s less affordable for people covered by an employer. And it postpones indefinitely including large employers in the Exchange, running the risk that the Exchange and the public plan will drown in high payments for people likely to need health care.
Bill and summary online: http://www.centerforpolicyanalysis.org/id41.html

More below on the new House bill.

The Senate Health, Education, Labor and Pension (HELP) Committee gamely marched through amendments to its bill. Sen. Bernie Sanders’ state single payer amendment elicits shining and shameful moments: Strong statements of support from Senators Tom Harkin (“We have a dysfunctional system”), Jeff Merkley, and Sherrod Brown. Listen To Your Staff Demerit for Barbara Mikulski (“Can’t states enact single payer anyway?” [She is reminded that states need waivers for ERISA, and transfers of federal funds.] “Oh.” She still voted No. The amendment failed, but may come up again to the full Senate.) Hero award to Kennedy chief staffer David Bowen, at the table full time, accurately describing every technical foible of the draft bill, and every amendment.

The Mainstream Media fuss about the tab. Washington Post and NYT focus on taxes on the wealthiest. Very not the point.

Preliminary Details: The House Bill: Big questions for consumers and providers are: Will it make insurance affordable and dependable?

The bill targets the worst insurance company abuses: pre-existing condition exclusions, rescissions of coverage after the fact, denial of coverage or renewal to sick people. They will have to spend most of the premiums on health care. But enforcing these rules will depend on the existence of a real alternative. Here’s the murky part.

Most employers will have to offer insurance, covering about 70% of the premium, or pay an 8% payroll tax to a Health Insurance Exchange. The Exchange offers Qualified Health Benefits Plans that meet certain rules. The Public Plan is one of the options. Anyone eligible for the Exchange can enroll in the Public Plan. (Why do I see images of Holly Hunter demanding that George Clooney prove he is “bona fide”?)

But until 2013, the Exchange is open only to individuals without coverage, and to small employers.

And after 2013, it is up to the new Health Choices Commissioner to determine whether or not larger employers will be included.

There are affordability limits on what individuals will have to pay, that are better than proposed earlier: Sliding scale subsidies for premiums up to 400% of the federal poverty limit, if premiums cost more than 11% of your adjusted gross income. There are limits on total out-of-pocket spending (premiums, co-pays, deductibles).But: Subsidies in the first 3 years are only available to those who do not have an affordable offer of employer-sponsored insurance.
So you can quit your employer's crummy plan if you don't like it, and join another plan offered thru the Exchange, as long as you can afford to do so without the affordability credits, until 2013.

Payments to providers would be tied to Medicare rates. This is a boon to cost control and affordability in the long run. (There are other benefits that keep provides in the plan.)

Drug Bust: The Health Choices Commissioner can negotiate for drug prices.

The Medicare doughnut hole will close – by 2023!!! We can do better.

Quality Improvements: Many good proposals to improve the quality of care, through Medicare and other programs. The bill would tilt reimbursement and training to primary care providers, gerontologists, and nurse midwives. Needed funds for prevention and public health.
State Options. Still to be explored; from the Summary:
Sec. 208. Optional operation of State-based health insurance exchanges. Permits states to offer their own Exchange or join with a group of states to create their own exchange in lieu of the federal Health Insurance Exchange, provided that the state(s) perform all of the duties of the federal Exchange as approved by the Health Choices Commissioner. The Commissioner has authority to terminate state exchanges if they are not meeting their obligations.

Coming up: House Committee mark-ups starting – today! Get online. Take notes. One way or the other, history is happening.