Tag: individual mandate

Kennedy’s Health Bill: A First Look

A draft of Sen. Ted Kennedy’s health care reform bill is finally available, and it is difficult to overstate how far he would move us to a government-run health care system. An initial read-through reveals among the key provisions:

  • An individual mandate, requiring that every American purchase a “qualified” insurance plan. (Sec. 161(a)) The mandate will be enforced through the tax code with Americans required to pay a penalty if they fail to comply.  In an extraordinary delegation of congressional authority, the Kennedy bill would give the Secretaries of Treasury and Health and Human Services the power to determine what this penalty should be. Individuals would be required to submit information on their insurance status over the previous year to the Secretary of HHS, along with “any such other information as the Secretary may require.” (Sec. 6055(b)(2) and (3)). Individuals who already have insurance could keep it. However, if they changed plans (or presumably changed jobs), their new insurance would have to meet the definition of “qualified.”
  • A “pay or play” employer mandate requiring employers to provide all workers with health insurance and pay a minimum amount of the premium, or pay a tax (Sec 162). Again, the amount of the new tax is left to the discretion of the Secretaries of HHS and Treasury. Some small employers would be exempt from the mandate, but the size of those firms remains TBA. (Sec. 3113(g)) Companies with fewer than 250 workers would be forbidden to self-ensure. (Sec. 2720)
  • A new federal bureaucracy, the Medical Advisory Council, which would determine what benefits will be required to be part of your “qualified” insurance plan. (Sec. 3103(h) and (i)). Lest anyone think Congress won’t get involved. The Council’s decisions can be disapproved by Congress if, say, they don’t mandate inclusion by a favored provider group or disease constituency. (Sec 3103(g)).
  • Massive new federal subsidies. Medicaid would be expanded to individuals earning 150 percent of the poverty level, and the federal government would pay all incremental costs of the increased enrollment. (Sec 152.) Single, childless adults would become eligible for Medicaid. Even more egregious, individuals and families with incomes between 150-500 percent of the poverty level ($110,250 for a family of four) would be eligible for subsidies on a sliding scale-basis.(Sec. 3111(b)(1)(A-G)).
  • Insurers would be required to accept all applicants regardless of their health (guaranteed issue) and forbid insurers from basing insurance premiums on risk factors (Community rating). There does not appear to be any exception for lifestyle factors, such as smoking, alcohol or drug use, diet, exercise, etc. Thus, not only will the young and healthy be forced to pay higher premiums to subsidize the old and unhealthy, but the responsible will be forced to pay more to subsidize the irresponsible.
  • A “public option” operating in competition with private insurance (Section 31__). How this plan would be funded, the level of premiums, etc. is left mostly TBA. In response to criticism, the Kennedy bill does require that the public plan pay providers 10 percent above Medicare reimbursement rates. (Sec 31__(B)). That would still allow for a considerable degree of cost-shifting to private insurance. And, we should recall that such promises are ephemeral. When Medicare began, proponents promised it would reimburse at the same rate as insurance. That promise didn’t last long.
  • States would be prodded to set up “gateways,” similar to Massachusetts’ “connector.” (Sec 3104(a)) If a state fails to do so, the federal government will set one up for them. (Sec. 3104(d)) The federal government would provide grants to states to help them set up these gateways. The amount of the grants is, you guessed it, left to the discretion of the Secretary of HHS. Gateways may also fund their operations by assessing a surcharge on insurers. Sec. 3101(b)(5)(A)/
  • A new federal long-term care program (Sec 171).

Kennedy does not include any estimate of how much his plan would cost, nor any proposal for how to pay for it.

More details will undoubtedly emerge, but it is very clear that the Kennedy plan would put one-sixth of the US economy and some of our most important, personal, and private decisions firmly under the thumb of the federal government.

The Economic Case for Health Care Reform

There’s an old Yiddish saying that, “If my bubba had wheels she’d be a trolley.” So goes the logic of the Obama administration in their paper released yesterday, “The Economic Case for Health Care Reform.” Their claim is that reducing health care costs would help the economy. Yes, if health care costs were reduced it would likely help the economy, though we should remember that the health care industry is part of the economy.

There is nothing in Obamacare, however, that will reduce costs. In fact, expanding coverage may cause costs to rise. One study by MIT’s Amy Finkelstein suggests that the prevalence of insurance itself has roughly doubled the cost of health care. So, if Obama succeeds in expanding insurance coverage, it’s very likely to increase the cost of care.

Take Massachusetts for example. Three years ago, Massachusetts governor Mitt Romney signed into law one of the most far-reaching experiments in health care reform since President Bill Clinton’s ill-fated attempt at national health care. Proponents promised the reforms would reduce health care costs, suggesting the price of individual insurance policies would be reduced by 25-40 percent. In reality, however, insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year. This is compared to a nationwide average increase of 5.7 percent over the same three years. Nationally, on average, health insurance for a family of four costs $12,700; in Massachusetts, coverage for the same family costs an average of $16,897.

In fact, since the bill was signed, health care spending in the state has increased by 23 percent. Thus, despite individual and employer mandates, the creation of an insurance connector and other measures that increase insurance regulations, Massachusetts has failed to bring costs down.

President Obama and Congressional leaders have endorsed expanding coverage in similar ways to Massachusetts. The proposals would undoubtedly make it easier for some people to get coverage, but would also raise insurance costs for the young and healthy, making it more likely they would go without coverage. This leaves two choices: revert to the individual mandate (President Obama opposed the mandate as a candidate) or increase subsidies to try to cut costs to young and healthy individuals, thereby adding to the already substantial cost of the proposed plans.

Ultimately, controlling costs requires someone to say “no,” whether the government (as in single-payer systems with global budgets), insurers (managed care) or health care consumers themselves (by desire or ability to pay). In reality, any health care reform will have to confront the fact that the biggest single reason costs keep rising is that the American people keep buying more and more health care.

The Health Care Battle Begins

Sen. Edward Kennedy (D-Mass.) has begun circulating drafts of his proposed health care reform legislation. Initial reports, including an op-ed in the Boston Globe by Kennedy himself, suggest that the bill will contain every one of the bad ideas that I outlined in my recent Policy Analysis on what to expect from Obamacare.

Among other things, the Kennedy bill will call for:

  • An employer mandate;
  • An individual mandate;
  • A so-called “Public Option,” a Medicare-like plan that will compete with private insurance;
  • The use of comparative-effectiveness/cost-effectiveness research to restrain costs;
  • Subsidies for families earning as much as 500% of the poverty level ($110,250 for a family of four).
  • Insurance regulation, including guaranteed issue and community rating. (He would also establish a Massachusetts-style Connector); and
  • Government-directed health IT.

There’s no indication yet of how much the plan would cost or how Sen. Kennedy plans to pay for it.

The bill will be formally presented to Senator Kennedy’s Committee on Health, Education, Labor & Pensions (HELP) sometime next week. Hearings could be held around June 10, and committee “mark up” could begin on June 17.

Senate Finance Committee chairman Max Baucus (D-Mont.) is expected to introduce his health care bill shortly before the Finance committee begins its scheduled mark up on June 10.

Meanwhile President Obama’s campaign apparatus is planning rallies and demonstrations around the country to build support for health care reform.

The battle over the future of health care in this country has begun.

The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill

Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:

  • Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
  • Mandate that all plans offered through those exchanges meet federal regulatory standards,
  • Mandate “guaranteed issue” in those exchanges,
  • Mandate “uniform and reliable measures by which to report quality and price information,”
  • Impose price controls on those plans by prohibiting risk-rating,
  • Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
  • Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” – essentially, trying to achieve universal coverage by nagging Americans to death.

Needless to say, I am troubled.

The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?

The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level – when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?

And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?

The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.

But the above provisions would sow the seeds of a government takeover of health care – so much so that The Washington Post’s Ezra Klein is salivating:

The word of the day is “convergence.” That – and that alone – is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.

A superficial read of the Patients’ Choice Act – which I’ve uploaded here – would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”

And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms – which it calls a “well-known, bi-partisan achievement of universal health care” – in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.

This idea – present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan – would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.

In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.

UPDATE: After discussions with Sen. Coburn’s staff, I happily issued a few corrections. Still, concerns remain.