by Denise Alexander
These days, when you turn on any cable news channel, you immediately see talking heads arguing vigorously about the merits of the health care reform legislation recently passed in the House and Senate.
Some pundits excoriate what they see as an unfair health care system that fosters a society of haves and have-nots by failing to provide the working poor and unemployed with affordable health insurance. This side sees little reform in legislation that does not have some form of a public option, a governmentsponsored insurance plan.
The other side advocates a free-market system that has its faults but, they contend, serves 80% of Americans to a reasonable degree of satisfaction. This side raises concerns about a government takeover of the health care system leading to rationed medicine and a price tag that will burden generations to come. For many in this corner, both versions of the pending legislation are unacceptable.
These polarized views are also reflected in public opinion polls. A December 16, 2009, NBC/Wall Street Journal poll reported a 44-41 split among respondents, with the majority in favor of maintaining the status quo as opposed to passing health care reform legislation.
Despite all the polemics, few Americans fully understand this complex issue, and Congressional horse trading and a byzantine legislative process have muddied the waters even more. Marymount Professor of Business Donald Lavanty, J.D., an expert on health care policy, recently sat down for a Q-and-A to help clarify the issues and the potential impact of a new law. Mr. Lavanty has been teaching Health Care Management, Business Law, and Business classes at Marymount for 30 years and has extensive consulting experience in the health care industry.
Q: What is the goal of health care reform legislation?
A: The goal is to provide health care coverage for all Americans. Essentially, if some form of the pending legislation becomes law, the underinsured and the unemployed will have access to affordable health care through one of the following: a Medicare-like government program, a nonprofit private insurance option, or some combination of these two where a trigger would allow for a government plan if private insurance doesn’t seem to be working out after a few years.
The trick through this whole process has been how to mesh the way we currently offer health insurance in the U.S. with a means of making insurance accessible to people who can’t afford it or don’t get it through their job.
Q: Will there be universal coverage?
A: It will be close to universal coverage. The House-passed legislation covers 96% of the population, and the Senate-passed legislation covers 94%. Currently, 80% of Americans have insurance and 20% are uninsured. Around 5% of the uninsured are illegal immigrants.
Q: Will individuals be required to buy health care insurance?
A: Yes, both of the bills under consideration mandate individual coverage and impose penalties if people don’t buy insurance. The Senate and House versions differ on the level of penalties. A health insurance mandate is not a new idea – it really follows the example of mandatory automobile insurance for individuals and workmen’s compensation laws.
Q: Will employers be required to offer insurance?
A: The House version requires employers to offer insurance. The Senate bill does not require it; however, any business with more than 50 employees that does not offer health insurance and has even one employee who is eligible for federal subsidies could be fined.
Both bills include some qualifiers. Any final legislation will probably take into account employers’ need to provide coverage on a phased-in scale. And both bills include exemptions for small businesses that cannot afford to offer coverage.
Q: What is the public option? Does it have any chance of surviving in conference? What is the Senate alternative?
A: The public option is a government sponsored program that would provide insurance coverage to those people who either aren’t covered through their work or don’t have the means to purchase insurance on the open market.
The House-passed legislation provides for a public option, but it is very unlikely that it will survive.
The Senate version calls for health care plans to be offered by private insurance companies under the regulation of the Office of Personnel Management (OPM), the same agency that handles health coverage for federal workers and members of Congress.
Again, this is not a new idea. It is modeled after the Federal Employees Health Benefits Act, which allows government workers to choose their health coverage from a pool of private insurance plans that are approved by OPM.
The Senate version appears to be more palatable for Congressional moderates and will probably prevail. But there is a strong possibility that language will be included for a government-backed option that would be triggered down the road if the OPM-regulated private insurance program isn’t providing affordable health coverage.
Q: Both the House and Senate versions set up exchanges as the marketplace to buy insurance. How are they different? Who will be eligible to participate?
A: Yes, an exchange will be the mechanism for people who aren’t covered through an employer plan to buy insurance. Those eligible to purchase through the exchange are also likely to qualify for federal subsidies to help pay for their coverage.
The House version sets up a national exchange; the Senate provides for 50 different state exchanges, similar to the current Medicaid model. Both versions provide start-up funding for exchanges to offer insurance to qualified individuals and small businesses that employ 100 or fewer employees.
It is likely that the House leadership will strongly push for its version of a national exchange, mostly because they do not want to follow the stateby- state Medicaid example. A national exchange allows for more federal oversight and reduced administrative costs.
Q: There is a lot of fear about how this legislation will affect Medicare. With huge Medicare funding reductions in both bills, will the final law save Medicare or doom it?
A: With or without health care legislation, there was always going to be a reduction in Medicare funding because of the impact that the baby boomers will have on the system in the not-too-distant future. The current system could not maintain the same levels of spending with such a huge increase in numbers. Medicare will survive; it’s ingrained in our system. But spending will be trimmed.
The Medicare reductions are intended to make the program more efficient and less wasteful and are directed toward providers, not beneficiaries. For example, the proposed legislation promotes Centers of Excellence where one hospital might become the premiere facility in a region for a specialty, say for cardiology. In this scenario, all the various providers for that discipline would work through this specialized facility. With a streamlined system, there would be less redundancy of physician visits and testing, resulting in reduced Medicare pay-outs. Likewise, coverage for medical conditions won’t change, but add-ons like gym memberships might go by the boards.
Q: If you’re part of the 80% who are mostly happy with their current coverage, how will you be affected?
A: You will be able to keep your current plan. However, things will change. The environment will be more competitive among insurance companies, and this may or may not affect your premiums. There will also be increased efforts to control costs.
For example, you might see changes in terms of convenience of delivery. Instead of having an x-ray at your physician’s office, you might have to go to a radiology office. The thinking is that this will reduce the number of unnecessary tests, making the system more efficient and more cost effective.
The new health care policy will also emphasize preventive care; hospitalization for only the most acute illnesses; more medical home care; and counseling on medical options, which some have interpreted as “pulling the plug on Grandma.” This is an exaggeration, but there is a fear that patients could be pressured into not choosing certain treatments.
Q: What major provisions are in both the House and Senate bills and are expected to be included without controversy in the final legislative package?
A: Both houses of Congress agree that reform legislation should include electronic record-keeping and other information-technology advancements, an emphasis on preventive care, and a requirement that insurance companies provide coverage for those with preexisting conditions.
If passed, the new law will require a uniform system of electronic recordkeeping that will reduce costs in both billing and delivery. Beyond that, information technology will be essential in establishing uniform protocols – basically online practice guidelines – for all providers to follow for various illnesses and procedures.
For example, every pregnant young couple may want an ultrasound of their baby, but to have one every month for nine months is excessive. Ultrasounds are an expensive test that should be limited to medical need. Reform legislation won’t be boilerplate medicine, but it will provide guidelines as to when, and how often, to order more costly procedures.
Preventive care is really a philosophical revolution that’s already ongoing. Originally, the idea of insurance was payment for a loss. But starting in the 1990s, health insurance companies realized that it would be more cost effective to change their business plan from reactive to proactive.
Health care reform will expand preventive testing to screen and minimize potentially costly illnesses down the road, like glaucoma and diabetes. With an American population that is living a lot longer, preventive health care is key to any reform legislation.
Despite opposition from health insurance companies, coverage of preexisting conditions is a given. However, while carriers won’t be able to deny coverage, they will be able to manage care differently. This could lead to changes in the levels of coverage and/or higher premium costs.
Q: How much will all this cost? And who is going to pay?
A: The House version of health care reform would cost $894 billion; the Senate version would cost $871 billion. Both versions call for billions in Medicare funding redistribution, as well as new taxes. The House version would tax wealthy Americans (individuals who earn more than $500,000 per year or families earning more than $1 million per year) and it would also institute a franchise tax on medical providers. The Senate version would pay for the legislation by putting an excise tax on “Cadillac” plans, which are high-cost insurance options, and also calls for higher Medicare taxes on wealthy Americans. In addition, the Senate bill would levy taxes for an extra year in advance of policy implementation, so that there would be more of a “kitty” built up when everything kicks in.
Those who oppose this legislation believe that it will not be self-funding and will add to the deficit.
Q: If health care reform is signed into law this spring, when will its provisions become effective?
A: Under the House-passed bill, taxes to finance the new benefits would be levied in 2011, with the public plan and insurance exchange starting in 2013. Until that time, uninsured people who cannot get coverage could join temporary high-risk insurance pools, and COBRA benefits would be extended for unemployed workers. The COBRA program allows people to keep their insurance after leaving a job by taking on the full cost of their own coverage.
Under the Senate bill, the taxes would start to be levied in 2012, but most benefits wouldn’t kick in until 2014.
Q: So what happens next?
A: I think it’s fair to say that, at the very least, Americans are getting a national civics lesson as we grapple with this very complex issue. Currently, negotiations are underway to meld the House and Senate bills in preparation for final passage in late January. If approved by both houses of Congress, the health care reform bill will be sent to President Obama for signature sometime before or shortly after the State of the Union Address.
Donald Lavanty, J.D., has been a member of Marymount’s faculty since 1979. He has also been a consultant on health care policy issues since the 1970s.