Posts Tagged ‘age rating’

Of Doughnuts and Dragons: The Health Reform Insider

Wednesday, January 6th, 2010

Though a series of critical votes happened in the last month, not to mention the holidays, the issues that define negotiations between the House and Senate remain largely the same (check out our list if you need a refresher). Here’s an update on a few of those, and the process ahead.

The Overall Process
Reports that the House and Senate will bypass a formal conference committee and informally negotiate a bill instead have been circulating for over a month but, in one of those mysteries of the news cycle, the plan has recently become a hot topic.

The other important process piece (though also not really news) is that the Senate bill is expected to be the starting point for negotiations, and the House will likely have to wage a limited number of battles to make changes.  Defining what that list will include is The Task for House Democratic leaders now as they seek to hold together their own fractious caucus.  One item almost certain to make the list is closing the Medicare Part D “doughnut hole.”  Indeed, Senate leaders have already stated publicly their intention to close the Part D coverage gap—though how to pay for it remains a matter of intense debate, with House members arguing that funding should come from the drug industry, and the Senate perhaps less keen to go that route (as the specter of its summer deal with PhRMA looms.)

Financing
As we reported in December (and said many times before that), in the coverage debate, financing is the key.  Most observers believe that the excise tax on high-cost health benefits in the Senate bill will be further scaled back in negotiations with the House.  A critical and related issue—probably the most important one you never hear talked about–is one we flagged just before Christmas: How the price tag of reform gets calculated.

By our reckoning (see last week’s post), the Senate bill provides only a little over $600 billion in assistance to make coverage affordable for low- and moderate-income families, while the House comes in at around $900 billion.  Those extra $300 billion in assistance translate into a year’s worth of coverage (at the front) and more financial protection to low- and moderate-income uninsured people.

So the big financing questions left are: Will the House accounting prevail? And what, if anything, replaces the money lost from the excise tax? The answers to those questions determine whether there is any possibility of doing better than the Senate on critical affordability measures or by accelerating the implementation timetable.

Exchange Exchange
It looks now like the House is going to make a major push to swap out the Senate proposal for state-based insurance Exchanges in favor of a national Exchange as in the House bill.   (States could still opt to run their own if they met federal standards.)  With that in mind, here’s a brief overview of the pros and cons of state and federal Exchanges.

A national Exchange benefits from uniformity and is likely to have lower administrative costs than 50 state Exchanges would. A national Exchange also reduces the problems that could stem from state governments being unable or unwilling to take on the new responsibilities envisioned in the Senate bill. It’s also possible that a national Exchange would have somewhat better negotiating leverage with national insurance plans, at least in small states.

But the price tag difference between a national Exchange and state Exchanges is likely less than many proponents of a national Exchange who tout a federal model’s savings believe.  The bulk of health care costs are determined by underlying local conditions, and a national Exchange will have little influence over those factors.  In addition, while it’s likely that states will vary in how well they rise to the new challenge, at least some are likely to do an excellent job.  If a future federal administration were to be hostile to health reform, the entire Exchange for the whole country could be undermined; recall that this was a problem for many executive agencies in the previous administration.

Finally, a national Exchange is no more a safeguard against the influence of the health care industry than are state Exchanges.  In fact, the geographic remoteness of Washington from most of the country poses no real obstacle to special interests seeking to influence decisions, but does limit the ability of consumers to engage directly in the decision-making process or hold decision-makers accountable.

In the end, state versus national Exchange is of less importance than are the rules under which any Exchanges must operate and the underlying structure of insurance regulation.  So for example, a bill should ensure that there is no conflict of interest in Exchange governance and that business is conducted subject to open meeting laws, as well as provide for consumer representation in Exchange governance.

It is also important not to carve insurance markets up into distinct pieces: for instance, not to split up non-group and small-group insurance, or allow separate risk pools to operate both within and outside the Exchange. The bill should also empower the Exchange to exclude insurers if it is determined that they do not meet standards for providing good value.

On many of these issues, the House does in fact do better than the Senate, as well as on matters  of insurance regulation such as limiting rate variation based on age and clearly eliminating annual and lifetime limits on coverage.

Bottom line? If the House wants to fight about Exchanges, they should focus on the issues that matter most.

Immigrant access
Discrimination against immigrants remains a problematic aspect of reform, but the Senate seemed to make progress as reports indicate that leadership agreed to eliminate the ban on federal Medicaid matching funds for immigrants who have been in the country for less than five years.

We hope that, in negotiations,  the House will match the Senate’s willingness to remove the “5-year bar,” but won’t trade this progress for legal immigrants for its rightful opposition to the Senate proposal to bar undocumented immigrants from the Exchange, even when paying entirely with their own money—a provision supported by the Obama administration.

It’s also unclear just how many states would take advantage of the new matching funds option when, by doing nothing, they can leave the entire cost of covering low-income recent immigrants to the federal government.  The only fair alternative would be to give legal immigrants equal access to Medicaid, but state-based opposition to this fix has proved insurmountable thus far.

Next Dragon in the RoadDragon
Though negotiations between the House and Senate are far from finalized, reform opponents are already gearing up for a multi-pronged attack on the legislation, including legal challenges, state constitutional amendments and ballot initiatives.

Those who argue that these challenges have little legal merit are missing a larger point.  This strategy is first a political one, and only secondarily aims to change the course of the short-run health care debate.

First, given the pace of implementation, the Presidential election of 2012 becomes pivotal.  A change of administration that year would likely cripple implementation, perhaps fatally.  Campaigns being developed now are largely geared toward building a base of activists for 2012.

Even if they are unable to unseat Obama, Republicans see health reform as a wedge issue they can use to regain control of Congress.  Failing that, by defeating some vulnerable and prominent supporters of reform, opponents hope to create a chilling effect that will dampen the willingness in Congress to pursue further reform.

What this means for reform supporters is that—far from final negotiations curtaining the show—a new act in the saga of U.S. health care reform  is about to begin.


–Michael Miller, director of strategic policy

photo courtesy  of austinevan at flickr creative commons

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Harry Reid’s Flying Circus

Monday, December 7th, 2009

Oops! Read the Public Option Post-Mortem and Dec. 14 Health Reform Insider here.

And now for something completely different, Senator McCain proclaims himself a defender of Medicare

The first week of Senate debate has seemed, at times, more like Monty Python satire than serious debate. Like when Sen. John McCain took the Senate floor to decry proposed Medicare savings in the bill. Apparently, McCain forgot his own proposal as a presidential candidate to make much deeper cuts. The Medicare debate highlights the extent to which the reform debate has become much less about health care and much more about partisan positioning. The main purpose of the McCain amendment appears to have been to afford Sen. McCain the opportunity to record a “robo-call” message casting Democratic politically vulnerable Senators as opponents of Medicare.

Perhaps as a sign of the significance Politico attaches to the floor proceedings, the Capitol Hill online news rag’s weekend health reform coverage focused more on President Obama’s meeting with the Democratic caucus and whether Sen. Baucus did something inappropriate by recommending his girlfriend for a job as a U.S. Attorney than on anything happening on the Senate floor.

Health Reform Punching Bag
It’s a good thing Democratic Majority Leader Harry Reid is a former boxer. He’s going to need everything he learned in the ring to keep health reform from becoming a giant punching bag for opponents while he works to corral 60 votes. The Republican strategy seems to be to throw everything but the kitchen sink up against health reform and hope some of it sticks.

The Democrats’ counterstrategy is to file and debate their own “message amendments” meant to shape the news coverage and allow members, especially those facing difficult reelection fights, to champion popular causes. Examples include an amendment sponsored by Sen. Michael Bennet (D-CO) to ensure that there would be no cuts to Medicare benefits (passed 100-0), and an amendment by Sen. Blanche Lincoln (D-AR) to cap the tax deductibility of pay for insurance company executives (which fell short of passage by four votes, 56-42).

About those 60 votes
We’ll see a short break from these posturing and “message amendments” today as the Senate tackles abortion, one of the two main issues that appears to be hampering its ability to lock down 60 votes for reform (the other being the public option). Senator Ben Nelson (D-NE) has said that he would not support reform legislation unless it included language restricting abortion similar to the language inserted in the House by Michigan Congressman Bart Stupak. But the Senate does not seem likely to approve an amendment that mirrors the House provision.

If Reid loses Nelson’s vote, he will need to rely on the pro-choice but anti-public option Republican Senators from Maine in order to get the 60 votes he needs. In the process, he could possibly pick up the vote of Sen. Lieberman, who has said he would support a filibuster if the public option was included in the Senate bill, but Reid risks losing support from progressives who feel that the “state opt-out” provision in the Reid bill is already too weak. A new public option proposal could emerge from negotiations between liberal supporters, conservative opponents and the White House sometime this week.

Two issues that divide the Democratic caucus but are not likely to get resolved in the Manager’s Amendment are: How far to push the drug industry for savings, and how best to structure health coverage for children.

On the drug issue, many Democrats believe that the deal Senate Finance Chair Max Baucus and the White House struck with PhRMA lets the industry off too easily. They want to wring additional savings from the drug companies and use the money to close the Medicare Part D “donut hole.” Other Democrats fear, though, that if they push the drug industry too hard, the major investment the industry has been making in supporting reform will flip to opposition and could sink the bill. Even if the Senate decides to continue the kid-glove treatment for the drug companies, they will have to wrestle with the issue again because the House takes a more aggressive approach.

The children’s issue mirrors the long-running debate on affordability in that it is not so much about principle as about cash. Both Senators Casey and Rockefeller plan to file amendments aimed at making sure that kids don’t lose benefits they have now. While the Senate supports enhancing coverage for children, the amendments have not yet been scored by CBO, and it is unclear if they are budget neutral or will require an additional revenue source.

As soon as Reid gets 60 votes worth of support on these two issues, watch for a rapid increase in the pace of Senate debate, with many of the Senate Democrats’ main concerns getting wrapped into a final Manager’s Amendment.

Assuming all goes according to plan…
The Senate will conclude their debate prior to Christmas, leaving the House, Senate and White House to work through the many differences in the respective versions. Here are the key ones to watch:

Financing
The House relies largely on progressive income taxes to finance health reform, while the Senate proposal taxes health benefits. Interestingly, this chasm may be the hardest one to bridge, though it hasn’t attracted nearly the press coverage of other tough issues.

Affordability
The House does much better for low-income people, while the Senate, at least on premiums, does better for moderate-income folks—though in general, the House provides better benefits. The obvious solution is to take the best of both worlds, but the challenge goes back to the financing debate: Where will the money come from?

Exchanges and Insurance Regulation
In most ways, the House bill establishes tighter oversight and more consumer-friendly regulation of the insurance industry, including less scope for discrimination against older subscribers, or opportunities for the back-door reintroduction of the practice of charging people more when they are sick. The House also gives the exchange more power to negotiate with insurers and exclude plans from the exchange if they do not offer good value.

Abortion
As of this writing, we don’t know the outcome of the Senate debate, but odds are against the Senate adopting the House language. The question for conferees is whether there is anything in the middle that both sides can live with.

Public Option
After the Senate gets through wrangling over the public option, members will have to take the matter up again in the House, where support for a public plan runs much deeper. A number of  progressive members of Congress are on record saying they won’t vote for a bill without a public option, and advocates are working to hold them to their word.

Employer Responsibility
The House includes a “pay or play” provision, while the Senate charges employers penalties only if their employees actually access subsidized coverage.

Undocumented immigrants
Though relatively few undocumented immigrants could actually afford to pay the full cost of an insurance policy, the Senate bill prohibits them from buying insurance through the exchange, even with their own funds. During the House debate, members of the Congressional Hispanic Caucus told Speaker Pelosi that they would not vote for a bill that contained such a restriction. If the same holds true for a conference report, the Senate may have to back down.

–Michael Miller, director of strategic policy

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Last week, on ‘As the Public Option Turns’

Tuesday, October 13th, 2009

Insurance Industry Takes the Gloves Off
While the insurance industry has been using “guerrilla” tactics behind the scenes to undermine aspects of health reform all along – opposing strong Exchanges, a decent minimum benefit standard and eliminating discrimination based on age and health status –  a report commissioned (and heavily advertised) by the insurance industry and released late Sunday night that attacks the Senate Finance proposal is the first public shot across the bow against reform.

The report, produced by PricewaterhouseCoopers, is problematic for a several reasons—it doesn’t make an “apples to apples” comparisons, it looks only at selected parts of the bill, not the bill in total, and it makes unjustified assumptions about some of the provisions.

For example, the report ignores all of the cost-containment provisions, the positive effect on the risk pool of providing subsidies or the potential for administrative savings through benefit standardization.  And it is, to say the least, disingenuous for the industry to oppose provisions that would lead to more effective cost-containment, such as a public option or an Exchange that can negotiate actively with insurers, and then complain that cost-containment efforts do not go far enough.  Hopefully, lawmakers will see through the report’s flaws and not make concessions to the industry that has finally stopped playing nice.

Food Fight
Insurers aren’t the only interest group turning up the volume as reform lurches forward.  Watch for worried governors to further press their case for Medicaid help.  Govs got the Finance Committee to move from temporary to permanent enhanced federal matching funds for the expansion population, but many remain nervous about new costs their states would have to shoulder under reform.  Governors like Schwarzenegger, who represent a much-sought-after bipartisan voice could be particularly influential, and some Senators have already committed themselves to finding extra help for the states.  Another group turning up the heat is the hospitals, upset that SFC would leave them with a substantial uncompensated care burden while slashing federal funding to hospitals that provide that care.

What this also means is that we can expect a fierce food fight for the remaining $70 billion in “headroom” – the difference between what President Obama said he would support and the CBO score of the Senate Finance bill.  Additional affordability improvements are one way that space could be filled (if revenue or savings measures can be agreed to), but others include the above-mentioned additional help for states, or rolling back fees on health industry stakeholders that are in the SFC proposal now and that have provoked vocal opposition from Senators in both parties.

House inching closer
The House continues to grapple with divisions within the Democratic caucus, aiming to send a combined House bill to CBO this week.  The key divisions remain over the revenue provisions and the public option.  House leaders are likely to scale back the surtax on wealthy households, raising the threshold to perhaps as high as $1 million, but they have yet to agree on how they would plug the resulting revenue hole.  Don’t look for a bill to hit the House floor for another couple of weeks.

Meanwhile, join us for another installment of:

As the Public Option Turns
The ongoing debate over public options sometimes feels like soap opera – lots of drama but not much plot advancement.

Previously on As the Public Option Turns, we found the importance of the issue elevated by a White House commitment to keep cost of reform under $900 billion.  That means Congress must find ways to make reform more cost effective unless they are willing to sacrifice affordability.

We now join our hero, Public Option, in the House, where the latest whip count shows the House Democratic caucus overwhelmingly in favor of a strong public option with rates based on Medicare payments, but close doesn’t count.  They have to get to 217 votes for passage and it’s those last few that will be the hardest to lock down.

While back in the Senate…
Last week Sen. Carper offered a proposal that would allow states to opt out of the public option.  This week, Sen. Schumer is floating a counterproposal which would make inclusion of the public option the default position but allow states opt out instead of having to opt in.  Schumer is also actively working to defang the Republicans’ number one emerging attack line:  that the individual mandate non-compliance penalties constitute a tax increase on the middle class.  Schumer proposes to blunt that attack by changing the penalty from a fee paid to government to a required contribution that an individual could use to purchase insurance at a later date.

In a separate but related plot line, another public insurance plan is getting a second look.  In their search for more a more cost-effective proposal, House leaders are considering a further Medicaid expansion, up to 150 percent of the FPL.  Even if the federal government paid 100 percent of the cost, expanding Medicaid is more cost-effective than putting people in private plans.

It’s Beginning to Look a Lot Like Christmas (or later)
The goal in the Senate is to have a bill on the floor next week, but it is not certain Majority Leader Reid will be able to complete the combination of the HELP and Senate Finance bills as fast as originally thought. Sen. Reid has indicated that he would like a CBO score on the blended bill, which could also slow things down depending on how extensive changes are. (It’s worth noting that work to combine the bills started even before the SFC final vote).

Add on three weeks of floor debate (maybe even more to account for procedural delays) and, assuming House can match the generally more slow-moving Senate, bills could clear the floor by Thanksgiving.  (That assumes the Senate remains on track for a 60-vote strategy and doesn’t have to pull the bill off the floor to adjust it for Budget Reconciliation).

This leaves only a few weeks before Christmas for what promises to be a protracted and challenging conference committee and final votes in each chamber. As an example of just one of those contentious issues that will have to be resolved in conference, more than half of House Democrats have signed a letter opposing the primary financing source in the Senate proposal.  With multiple and similarly thorny issues to resolve, don’t be surprised if health reform spills over into the new year.

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The Great Consensus Hunt: Search for a public option

Tuesday, October 6th, 2009

Despite the support of many Senators, led by Sens. Rockefeller and Schumer, the effort to add a public option to the Senate Finance bill fell short.  Significant opposition from conservative Democrats both on and off the committee makes it hard to see how a public option as currently formulated can pass the Senate as long as 60 votes are needed.

Nonetheless, the strong showing in the Finance Committee has led to an ongoing search for a formulation that will satisfy both the left and right in the party.  One possibility is that conservative Democrats would agree to vote with the majority of Democrats to break a Republican filibuster, but would still be given a chance to vote against the public option.  Another approach is to find one or more new approaches that can satisfy both wings of the party.  With that end in mind, both Sens. Cantwell (D-WA) and Carper (D-DE) have offered new ideas for consideration. (See below).

Cantwell: harnessing state purchasing power, but consumer protections needed

An adopted amendment sponsored by Sen. Cantwell (D-WA) would allow states to negotiate for coverage on behalf of low-income enrollees instead of having them buy coverage through the Exchange.  Presumably states would contract with Medicaid managed care organizations (MCOs) (at rates higher than Medicaid, but lower than commercial insurance) or directly with organized networks of providers.  The proposal is similar in structure to the Washington Basic Health Plan and, in some respects, to Commonwealth Care in Massachusetts.

While it would likely put some downward pressure on insurance rates, the Cantwell amendment has some significant weaknesses.  First, unlike a Medicaid waiver, which must be budget neutral, the federal government gets a cut off the top.  States would receive only 85 percent of the money that would otherwise be available for subsidies for low-income people.  If a state chose this option, savings would accrue automatically to the federal government while the state would be at financial risk for providing a benefit package equivalent to what would have been available in the Exchange, but with less money.  This could give states incentives to skimp on coverage for enrollees.

To the extent states are able to negotiate additional savings, nothing in Cantwell’s proposal requires that any portion of those savings be used to reduce premiums, cost-sharing or improve benefits for the low-income enrollees who would be required to participate in the plan.  Finally, the process for building the program at the state level and room for consumer input there are unclear.  In order to make this proposal work for low-income enrollees:

•    States should get 100 percent of tax credit, maintaining budget neutrality to the federal government
•    Savings should be required to be reinvested in better coverage for program participants
•    Access to providers in the “basic health plan” should be at least as good as in Exchange plans for higher-income enrollees
•    States would need to ensure that the Basic Health Plan was coordinated with both Medicaid and the Exchange to ensure seamless coverage for enrollees
•    Rules should be put in place to make the program development transparent at the state level and ensure opportunity for public input.

Carper: State flexibility to create a public option

Another idea making the rounds, but not included in the SFC bill, is a proposal offered by Sen. Carper as an alternative to forming insurance co-ops.  It would allow states to offer either a public option or open the state employee program to the Exchange population.  While this would give some states an opportunity to experiment with a public option, Sen. Carper’s proposal gives governors a veto that cannot be over-ridden.  a public plan would be available only if a governor and the legislature agree. (Presumably, though it’s not clearly-worded in the proposal, the co-op would be put in place in the absence of an agreement).  As with the Cantwell amendment, the Carper proposal has some merit, but it doesn’t make a public option available uniformly across the country.  As a result, it is likely to get a cold reception from advocates of the public option, both in and outside Congress.

But a proposal like Sen. Carper’s, if it can pass the Senate, does have the advantage of “raising the floor” in eventual negotiations with the House.  In the meantime, Senators and advocacy groups will continue their efforts to secure as much support as possible for the public option in the Senate.  Even if it does not pass, getting a yes vote from over 50 Democrats will strengthen the public option’s prospects in House-Senate negotiations.

It’s Snowe-time

As we’ve observed here before, Sen. Snowe has been the most closely-watched member of the Senate.  Despite all the tea-leaf reading of her committee votes, her position on the SFC bill is still unclear.  But the time for Sen. Snowe to either fish or cut bait is rapidly approaching.

If she votes with the rest of the Republicans against the SFC bill, it will be very hard to convince other members of the Democratic caucus, already frustrated by long months fruitlessly courting the GOP, that they should continue to offer concessions with no assurance of support.  On the other hand, if she votes for the bill coming out of SFC there will continue to be substantial deference to her views, both during the merger with HELP and beyond.

A closer look at the age-rating debate

Sen. Baucus revised his original proposal to narrow the permissible variation in premiums from 5:1 to 4:1 based on age – a move in the right direction though such a wide rating band will still leave insurance unaffordable for many, and should be brought in line with the 2:1 rating proposed in the Senate HELP and House bills. But even 4:1 drew a sharply-worded letter from the insurance industry claiming that it would cause young people to drop out of the risk pool and make coverage more expensive overall. It’s worth reality-testing this common argument against tight rate bands.

The experience that insurers draw on to support their claim is what happened to costs in some states with guaranteed issue and community rating.  But these states were operating without the benefit of income-related subsidies or an individual responsibility requirement – both components of national reform.  With reform, age will be irrelevant for most people with income below 400 percent of the federal poverty line (FPL) buying non-group insurance; They will pay an income-related premium regardless of age.  Only above the subsidy line does age become a meaningful factor, and there the difference is stark.

A 25-year-old making $45,000 buying insurance with a 2:1 rate band (as in the House and HELP bills) would pay about 6.75 percent of her income for coverage).  A 64-year-old with the same income would have to pay about 13.5 percent of hers.  If the age bands remain at 4:1 as Senate Finance proposes, the 25-year-old will be able to get insurance for less than 5 percent of her income, but the 64-year-old would have to pay 19 percent of her income just for premiums.

So despite the insurers’ claims, a 2:1 age band will not make insurance prohibitively expensive for young people, but failing to reduce age-related discrimination more than the Senate Finance bill has so far will leave older adults without affordable options.

House Update: tough sledding ahead

During the Senate Finance mark up, the House has been working out of spotlight, a lack of attention that has probably been welcome to House leaders, who face major challenges to putting together final version of bill.  A debate reminiscent of the Energy and Commerce committee one in July is going on, and has so far kept House leaders from settling on a public option approach.  House Democrats can only lose 39 votes and still retain a majority. More than that have already committed to oppose a plan that does not tie reimbursement in the public option to Medicare rates, but it’s not clear that there are enough votes from Blue Dogs and other more conservative members to pass such a strong public option.

Several other contentious issues remain unresolved, especially how the House will lower the price tag of their bill without gutting affordability protections, and how to resolve concerns about the financing provisions.  A bill isn’t expected on the floor for at least two weeks (although once a bill does go to the floor, the House can move much more quickly than the Senate).

(from the Health Reform Insider, which you can read in full here).

–Michael Miller, Director of Strategic Policy

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