Just Another Piece Of The Two-Trillion Dollar Pie

The House Energy Commerce Committee on July 30 rejected an amendment to the health reform bill that would have capped noneconomic damages in malpractice cases against medical practitioners to $250,000.

Generally, conservatives have made the case over the years that a major problem with our health care system is skyrocketing malpractice claims that are driving doctors to defensive medicine and sometimes forcing them to relocate their practices to states that already have enacted malpractice reform.

Stories also abound about surgeons paying hundreds of thousands of dollars in malpractice insurance and enormous settlements that drive up even further these insurance costs.

Liberals often cite various anecdotes concerning tremendous pain and suffering in specific malpractice cases and warn that limits on malpractice rewards will only punish those who have been victims of malpractice.

We are likely to see the issue raised again and again as health reform is discussed.

An alternative approach to the problem might be to review increases in claims losses and premium payments over the years. According to A.M. Best & Company data obtained by Americans for Insurance Reform, although malpractice claims costs have tended to track inflation, malpractice premium costs follow a rather typical insurance rating schedule in which insurance companies raise rates when they are seeking ways to make up for declining interest rates and market-based investment losses and reduction in interest rates. The increases do not seem to track any increases in claims payments.

Data concerning loss ratios in medical malpractice insurance also is illuminating. In the 1970s and 1980s, loss ratios rarely went above 0.5, which means that insurers were at the worst paying out about half of what they took in from premiums.

Some of the concern about medical malpractice may come from the loss ratios reported in the last ten years, which typically have been over 0.5, and in 2000 were close to 0.8, according to A.M. Best figures. For whatever reasons, insurers that were collecting two dollars for every dollar they paid out now are collecting much less, although even in the worst year, premiums still exceeded claims costs by 21%

I guess a debate about the relative merits of getting 20% more rather than 50% more from your investment in malpractice insurance is less interesting than anecdotes on the potential absence of medical specialists and stories about the decline of the medical profession. And talking about victims of malpractice is more exciting than the salaries of malpractice lawyers.

I also guess that that declining return on investment is the real issue here, and it is one we are unlikely to see discussed.

Shop ‘til you drop . . . your FSA balance to zero?

If some lawmakers have their way, you might have to say goodbye to reimbursement of over-the-counter medications through your health flexible spending account (FSA).

What’s an FSA? A health FSA is an employer-sponsored benefit program in which an account, set up in an employee's name, is used to reimburse the employee for certain medical expenses. An employee wishing to participate in an FSA must complete an enrollment form and determine how much to save in the account each year. Amounts placed into the FSA are deducted from the employee's paycheck.

If the FSA is "forfeitable" (that is, if the employee does not have the right to receive any of the unused amounts left in the account at the end of the year – also known as the “use-it-or-lose-it” rule), the reimbursements made through the account are excluded from the employee's taxable income. That means the IRS doesn’t receive any taxes on the money placed in an FSA.

What expenses can be reimbursed? The annual deductibles for the medical portion of an employer-provided health care plan, as well as expenses not covered by the plan (e.g., eye examinations, glasses, hearing aids, and orthodontia), can be reimbursed from a health FSA.

Currently, employees also can use money in a health FSA to purchase over-the-counter medications. Such nonprescription drugs include, among others, antacids, allergy medicines, pain relievers and cold medicines.

Reimbursements by FSAs are not subject to tax if the employee properly substantiates the purchase. Substantiation means that the employee provides independent verification of the purchase and paperwork (such as a receipt) describing the service or product, the date of the service or sale, and the amount.

What’s the change? The House Ways and Means Committee’s amendment to the America’s Affordable Health Choices Act (H.R. 3200) would prohibit employees from using health FSA dollars to pay for over-the-counter medications. The proposal is estimated to raise $8.2 billion over 10 years. The proposal also would extend to health savings accounts (HSAs), health reimbursement arrangements (HRAs) and Archer Medical Savings Accounts (Archer MSAs).

No more stocking up on Tums? Because of the use-it-or-lose-it rule mentioned above, employees with small amounts of money left in their accounts just before the period ends for using it often stock up on items such as Tums or cold medicine. I’m sure that’s not what the IRS intended to encourage when it expanded the list of expenses that can be reimbursed through FSAs. But these unnecessary spending sprees could be avoided if the “use-it-or-lose-it” rule were repealed and employees were allowed to roll over the remaining money in their accounts from year to year. While such a repeal could help employees save for future health care expenses, it’s unfortunate that it would not, unlike the amendment discussed above, generate revenue for funding health care reform.

So, maybe I’ll be seeing you in the health aisle in a few months. Don’t stare at my shopping cart, and I won’t stare at yours.

Costs of health reform inaction hidden, high

It appears all but certain that Congress won’t meet the August "deadline" for health care reform passage (or, in the new lingo, health insurance reform). This got me to wondering: What would happen if Congress doesn’t produce a health reform bill at all this year, or even ever? How would this affect us, with each passing day, week, month, or year. Caution: lots of speculation ahead.

With Congress not making much headway, right now, no meaningful health reform legislation in 2009 is a distinct possibility. Of course, when it comes to Congress, it's probably wise to never say never. Even so, with Theodore Roosevelt’s Bull Moose Party campaigning on a health reform platform in 1912, it has certainly taken long enough to get it done!! Think about it: that's almost as long as it's been since the Cubs last won the World Series. Will health reform pass before the Cubs win the World Series again? (I'd have to go with Congress, not the Cubs, on this one.)

Health insurance premiums. If Congress does not act on meaningful health reform, health insurance premiums likely will continue to increase faster than overall inflation. According to a recent survey by the Center for American Progress, health care costs would be expected to increase by 71 percent over the next 10 years. Under this scenario, the average family’s health insurance premiums, which are about $13,100 in 2009, would likely increase to more than $22,000 by 2019. In some high-cost states, the average annual family premium would be over $25,000 by 2019. Even with this increase, the typical family’s total health care costs in 2019 actually would be much higher than that, as this number does not take into account co-pays, coinsurance, deductibles, and other out-of-pocket expenses. Do you think you'll be able to afford health insurance then?

An increase of 71 percent over the next 10 years might not seem like much. Keep in mind, however, that between 1999 and 2008, the average annual family premium increased by 119 percent, even though general inflation was only a touch over 29 percent during that time. My salary did not go up by 119 percent during those years, did yours? Did anyone’s?

Hidden health tax. The so-called hidden health tax also grows every year. In 2008, for family health coverage, it stood at $1,017, according to Families USA. For individuals, the amount was $368 per insured single person. The “hidden health tax” is the undisclosed insurance premium surcharge, which is paid by American businesses and by insured individuals and families when they buy health insurance. This hidden tax, in effect, subsidizes the uncompensated health care costs of the uninsured. As more people lose their health insurance, this “hidden health tax” number almost certainly will continue to increase.

Lost health insurance. There are plenty of Americans already without health insurance. According to the Census Bureau, there were nearly 46 million uninsured Americans in 2007. Because the Census Bureau numbers count only those who lacked health insurance for an entire year, this works out to an astonishing one out of every three working age Americans (under age 65) lacking health insurance at some point during the past two years.

Every week, according to Families USA, 44,230 people lose their health insurance, which adds up to 2.3 million people losing their insurance coverage every year. I would be willing to wager that this number is not going to be decreasing anytime soon if Congress does not act on health reform and unemployment continues to rise.

Bankruptcies. According to a recent report by CNN, more than 60 percent of Americans who file for bankruptcy do so because of medical bills. Not surprisingly, the number of personal bankruptcies due to medical bills is also on the rise. For those who say it can’t happen to them because they have good health insurance, think about this: an amazing 78 percent of those who filed for bankruptcy due to medical bills actually had health insurance but were bankrupted anyway, due to coinsurance, deductibles, and medical services that were not covered by insurance.

Deaths. Higher medical bills, lost health insurance and personal bankruptcies due to medical bills are bad enough but it gets worse. For some, the lack of health insurance, for whatever reason, is even more dire. It costs them their lives. The Urban Institute estimates that 22,000 adults died in 2006 because they did not have health insurance. Families USA calculations show, for instance that, in Illinois alone, more than 18 working age residents die each week due to a lack of health insurance. In fact, in 2006, twice as many people died from a lack of health insurance as died from homicide. While homicide investigators are glorified in hit TV shows, no one seems to do remotely close to that for victims of "lack of health insurance coverage."

To many, delaying health reform by a few months or a year might not seem like much but, in terms of higher premiums, lost insurance, bankruptcies, and even deaths due to a lack of insurance, even small delays matter.

House Committee Blue Dog Dems May See In-District Health Reform Benefits

On July 24, the House Energy and Commerce Committee released to each representative a district-level analysis of the estimated impact of H.R. 3200, the America’s Affordable Health Choices Act, the legislation proposed by three House committees. The Energy and Commerce Committee is the only of the three House committees that has not yet approved the measure. The reports provide estimates for each congressional district on the number of employers and individuals who would benefit from this reform and the proportion of persons in the district who would be affected by a surtax on high income..

Some “Blue Dog” Democrats on the Energy and Commerce Committee have been withholding their approval and pushing for additional cost-control measures in health reform. There are eight Blue Dog Democrats on the Committee—Mike Ross (Ark.), Jane Harmon (Cal.), John Barrow (Ga.), Baron Hill (Ind.), Charlie Melancon (la.), Zach Space (Oh.), Bart Gordon (Tenn.), and Jim Matheson (Utah). .The Blue Dog Coalition, composed of 51 members, describes itself as “fiscally conservative” Democrats who say they aim to represent the center of the House of Representatives and appeal to the “mainstream values of the American public.”..

Let’s take a brief look at the estimated benefits of H.R. 3200 for the congressional districts of these eight Blue Dog Democrats and see how much fiscal responsibility they would be exerting for their constitutents.

Rep. Mike Ross, 4th District, Ark.--up to 12,500 small businesses could receive tax credits to provide coverage to their employees; 6,700 seniors would avoid the donut hole in Medicare Part D; 1,500 families could escape bankruptcy each year due to unaffordable health care costs; health care providers would receive payment for $155 million in uncompensated care each year; and 124,000 uninsured individuals would gain access to high-quality, affordable health insurance.

Rep. Jane Harman, 36th District, Cal.--up to 14,300 small businesses; 1,600 seniors; $22 million for uncompensated care; and 63,000 uninsured individuals would gain access..

Rep. Baron P. Hill, 9th District, Ind.--up to 14,000 small businesses; 6,300 seniors; 2,000 families; $93 million for uncompensated care; and 72,000 uninsured individuals would gain access.

Rep. John Barrow, 12th District, Ga.--up to 13,800 small businesses; 2,900 seniors; 2,000 families; $69 million for uncompensated care; and 94,000 uninsured individuals would gain access..

Rep. Charlie Melancon, 3rd District, La.--up to 11,000 small businesses; 3,000 seniors; 350 families, $146 million in uncompensated care; and 115,000 uninsured individuals would gain access.

Rep. Zack Space, 18th District, Ohio--up to 11,500 small businesses; 3,800 seniors; 1,100 families; $103 million for uncompensated care; and 88,000 uninsured individuals would gain access.

Rep. Bart Gordon, 6th District, Tenn.--up to 11,600 small businesses; 3,500 seniors; 200 families; $92 million for uncompensated care; and 107,000 uninsured individuals would gain access.

Rep. Jim Matheson, 2nd District, Utah--up to 22,200 small businesses; 4,600 seniors; 450 families; $123 million for uncompensated carer; and 83,000 uninsured individuals would gain access.

The totals for these representatives’ eight districts alone amount to 746,000 uninsured getting access to affordable, high quality health insurance, and $803 million potential savings from avoided uncompensated care. Maybe these Blue Dogs will finally see the light.

Cobra: is the venom pro-employer?

As we watch the health care overhaul debate unfold (and as "See You in September" plays on the soundtrack), it's not surprising to see a proposed COBRA expansion slither its way into the debate.

After all, the legislation that first provided Americans who received health insurance via their employers the chance to continue that coverage on a limited basis if they lost their jobs is one of many incremental efforts made over the years to address America's longstanding problem with access to health care.

(And, as an aside, the legislation, formally styled as the Consolidated Omnibus Reconciliation Bill of 1985-- or "COBRA" for short--has over the years provided many a bored benefits analyst with herpetology-based hilarity. Not to mention the puns.)


Under an amendment to the House bill introduced by Rep. Susan Davis (D-CA) and approved by the House Education and Labor Committee last week, COBRA benefits would be expanded to help bridge the transition to broader availability of coverage.

Currently, former employees may generally continue their former employer's coverage for 18 months. Under the Davis Amendment, those same employees could remain on COBRA coverage until the proposed Health Insurance Exchange is up and running, which under the current bill won't happen before 2013. COBRA coverage would be cut off if the individual gains access to other employer-based coverage or to Medicare, or if the individual fails to pay applicable premiums.

Will this amendment make the cut into a final health reform bill? Well, you'll recall that a proposed COBRA expansion in the House version of the 2009 stimulus package, which would have permitted unemployed workers 55 and over to keep COBRA coverage until they turned 65, never made it into the final version of that bill. Instead, the stimulus package included a narrower COBRA change: a temporary premium subsidy targeted strictly at those "involuntarily" terminated.

So, employers probably won't like this amendment: COBRA notice requirements cause headaches for many businesses, and some suggest that those who sign up need to see the doctor a lot. However, even in the worst recession in a generation, COBRA sign-up rates still remain low. Perhaps workers have more to fear from COBRA's venom than employers.

The Joys Of Building On The Existing System

If you want to know why health reform legislation is so complicated, just take a peek at Sec. 461 of H.R. 3200, the Affordable Health Choices Act. First, some background is necessary.

While numerous differences still divide legislators on health reform, there is general consensus that any final legislation will build on the existing employer-provided health care system.

There also is general agreement that health reform should cover as many additional individuals as possible.

Enter Sec. 461. This provision, subtly titled “Certain health related benefits applicable to spouses and dependents extended to eligible beneficiaries,” was added to the original bill by the House Ways and Means Committee.

You might think that legislation intended to cover all individuals in the United States would reduce current miasma of laws, rules, and exclusions that prevent some individuals from getting coverage under the current system. Well, maybe not, if you want the current employer-provided system to cover, say, domestic partners.

Sec. 461 would do that, but the path is a bit messy, to say the least. The goal of the provision clearly is to allow employees to cover domestic partners under their existing employer-provided coverage. But because current law prohibits this, a number of laws would have to be changed, including the addition of IRC Secs. 106(f) and changes to IRC Sec. 105(b), 3121(a)(2), 3306(b)(2), 3401(a), 162(l), and 501(c)(9).

Sound confusing? It is, but in a nutshell, the provision would allow employers to provide tax-free medical coverage to any one individual who has the following characteristics:
--Is not a spouse or dependent,
--Is not under age 19 (or age 24 if a full time student),
--For the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household.

Of course, this covers any one individual in a household, domestic partner or not, who is an adult and lives in the same household as an employee with health care coverage.

Is this an overly convoluted way to cover individuals for health care? Sure. Would this be complicated for employers to administer? Of course.

Shouldn’t there be an easier way to provide health care coverage to all? As already noted, we have a consensus that health reform should build on the existing system, whether that makes sense or not.

Oh, well, as a friend of mine often says, “better than a sharp stick in the eye.”

Do you want fries with that?

Big Mac, Filet-O-Fish, Quarter Pounder, french fries, icy Coke, thick shakes, sundaes and apple pies!

Do you remember that jaunty jingle? It was a McDonald’s commercial. In one little ditty, they told us of all the yummy (unhealthy) foods we could buy. What they didn’t tell us in that spot was the number of calories we’d consume if we ate each one of those items. (If you really want to know, go to the nutrition section of the McDonald’s website. But trust me, you don’t want to know.)

We’re hearing a lot about the controversial provisions in the Senate Health, Education, Labor, and Pensions (HELP) Committee’s Affordable Health Choices Act. There are many stories and posts about the public option, the employer mandate, and much more.

But did you know that the bill also contains a menu labeling provision?

According to the committee’s press release, “This initiative represents a compromise between the Menu Education and Labeling (MEAL) Act, sponsored by Senator Harkin, and the Labeling Education and Nutrition (LEAN) Act, sponsored by Senators Carper and Murkowski. Under the terms of the compromise, a restaurant that is part of a chain with 20 or more locations doing business under the same name (other restaurants are exempt) would be required to disclose calories on the menu board and in a written form, available to customers upon request, additional nutrition information pertaining to total calories and calories from fat, as well as amounts of fat, saturated fat, cholesterol, sodium, total carbohydrates, complex carbohydrates, sugars, dietary fiber, and protein.”

The “nutrient content disclosure” requirement doesn’t apply to “items that are not listed on a menu or menu board (such as condiments and other items placed on the table or counter for general use).” Whew! Good thing they threw in this exception, because, I don’t know about you, but if the calorie content of my beloved ketchup were listed right alongside all those other menu items, I’d turn on my heel and march right out of that fast food place as quickly as I could say, “Tofu, anyone?”

Health reform and abortion on a collision course?

These days, probably the only issue that's more controversial than health care reform is abortion. Just when you thought things were starting to happen with health care reform (or, depending on your point of view, just when things started falling apart), there’s another fly in the ointment. Some experts now believe that the abortion issue—in particular whether a health reform bill includes abortion funding—could derail the whole health reform process.

Up until recently, the abortion issue has been lurking on the sidelines of the health care reform debate. However, on Fox News Sunday, White House budget director Peter Orszag addressed the abortion issue, observing that abortion funding is still playing out in the health reform debate. Orszag added, however, that he is "not prepared to say explicitly" whether health care reform legislation would prohibit the use of federal tax revenue to fund abortion coverage.

The New York Times recently offered a comprehensive summary of the issues and arguments involved, which would affect both the public plan option and private insurance. Under the House bill, for instance, most insurers would be required to provide an “essential benefits package.” The contents of this package would be specified by the health and human services secretary (currently Kathleen Sebelius), with recommendations from a federal advisory committee. Abortion opponents would want Congress to prohibit inclusion of abortion in that essential benefits package, while those who favor abortion rights feel that the contents of the package should be left to medical professionals.

Last I looked, the Senate Finance Committee was itself still struggling with how to handle the abortion funding issue in its version of health care reform.

Only time will tell whether the abortion funding issue ends up being the straw that broke the camel's back, sending comprehensive health care reform legislation down to defeat, or whether it’s something that both sides can address on the road to reform. Senator Judd Gregg (R-NH) (also on Fox News Sunday) said "I would hate to see the health care debate go down over that issue." I suspect that many people who care about the state of health care in our country, regardless of their views about abortion, would echo this sentiment.

Self-Insured Plans And Their Buddy, ERISA, Vulnerable

The House’s Affordable Health Choices Act, H.R. 3200, as approved last week by the House Committee on Education and Labor and referred to the full House, includes provisions that would affect self-insured (or self-funded) health insurance plans. Many employers self-insure their health insurance plans to avoid multiple states’ insurance coverage mandates and allow them more plan design flexibility and thus lower costs.

Among the provisions for self-insured health insurance plans is one that would require health insurers and self-insured plans to pay a new annual federal tax per plan participant to fund comparative effectiveness research. The tax would be implemented in fiscal year 2013. The Department of Health and Human Services would determine the amount of the tax required to raise $375 million per year. If HHS were unable to determine the tax, it would be $2 per plan participant. H.R. 3200 also would authorize a study to determine the financial solvency and capital reserves of self-insured plans and the risk that these plans will be unable to pay claims. Furthermore, the study would ensure that the law does not establish incentives for small and medium-sized employers to self-insure their health care plans.

And self-insured health insurance plans also will have to meet any minimum benefit coverage requirements prescribed in the law.

Modify ERISA To Allow States Single-Payer?

Furthermore, an amendment to H.R. 3200 offered by Ohio Rep. Dennis Kucinich and approved on a margin of 27 to 19, would allow states to implement single-payer health care. Of course, in order for states to do this, the Kucinich amendment would provide for a waiver of Sec. 514 of the Employee Retirement Income Security Act (ERISA) to remove its preemption provisions for states that request it. ERISA Sec. 514(a) provides that ERISA will supersede any state law that "relates to" an employee benefit plan.

It is highly unlikely that the amendment will stick to revised versions of H.R. 3200. As noted in the Web site American Everyman, “After one state adapted a real “universal” health care program for ALL it’s citizens, it would only be a matter of time before it’s success would inspire EVERY state to adapt the same policy for themselves.” Or so some people believe. Kind of like a virus, you see.

But the insurance industry won’t allow that to happen as it could mean the demise, or at the very least, severe restriction, of their business. Self-insured employers also will lobby against the Kucinich amendment to avoid losing ERISA preemption and becoming subject to “insurance” requirements of multiple states.

The plot continually thickens….

Unintended consequences: more health security, fewer jobs?

The law of unintended consequences suggests that despite the best efforts of Congress and the Obama Administration, any significant overhaul of the current health care system may result in unexpected outcomes. Opponents of the overhaul effort want to capitalize on fears of the unknown to squash significant reform.

One common warning: "government-run" health care will create massive job loss. Is that true? Well, when (perhaps "if" is better?) the overhaul is enacted and up and running for a while, we'll have a better answer. Until then, take a look at this cogent summary of current attempts to offer a serious answer to this question.

In "Effects of Changes to the Health Insurance System on Labor Markets," the Congressional Budget Office reviews recent studies and reports on this topic and reaches the following general conclusions:

• A "play or pay" employer mandate is likely to create a minor reduction in employment.


• The availability of new subsidies for health insurance that decline in value as a person's income rises could discourage some people from working more hours.


• "Job lock," which occurs when workers who would otherwise retire or seek more fulfilling employment stick with a job to continue to get health insurance, would decline.

The weight of any of these projected broad effects would vary, CBO cautions, depending on the details. For example, the structure of the play or pay requirement would matter. If fees imposed on employers would apply only to full-time workers who are not offered health insurance, that might increase incentives for firms to replace some full-time employees with part-time or temporary help.

Beware Of “Similar Provisions”

Rep. John D. Dingell on July 14 introduced H.R. 3200, America's Affordable Health Choices Act, a 1,018-page proposal already agreed to by the House Committees on Education and Labor and Ways and Means.

On July 15, the Senate Health, Education, Labor, and Pensions (HELP) Committee approved by a vote of 13-10 the Affordable Health Choices Act.

As the titles might suggest, many of the provisions are similar. “Similar,” however, is a red flag for those who know detailed differences in proposed legislation are exactly those items that will be at the crux of any final agreement on health reform between the House and the Senate.

Here are just a few examples from the recent House and Senate proposals.

Insurance Exchanges

In general, the House proposal puts more emphasis on federal control than does the Senate proposal.

The House bill would establish a national exchange with an option for individual states to operate an exchange. It would set and enforce insurance reforms and consumer protections, facilitate enrollment, and administer affordability credits to help low- and middle-income individuals and families purchase insurance. Over time, the exchange would be opened to all employers as another choice for covering their employees. States could opt to operate the exchange in lieu of the national exchange provided that they follow the federal rules.

The Senate bill would establish state insurance exchanges, called Affordable Health Benefit Gateways, which would be administered through a governmental agency or non-profit organization. Coverage offered through the Gateways would have to include an essential health care benefits package that would provide at least ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse services, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services, and pediatric services. States would regulate health insurance sold outside the Gateways.

Public Plan Option

A key difference here is in reimbursement rates under the public plan. The Senate version provides less leeway to cut reimbursement rates through the public option.

Under the Senate proposal, a community health insurance option (public plan) would be available under which premiums would be sufficient to cover the plan's cost. The HHS would negotiate rates for provider reimbursement. Negotiated reimbursement rates would not be higher than the average of all Gateway reimbursement rates. A "Health Benefit Plan Start-up Trust Fund" would be created to provide loans for the initial operations of the community health insurance plan.

The House bill also has a public plan option which is intended to be self-sustaining and would include some initial federal funding. The House version initially would base payment rates on Medicare reimbursement rates.

Employer Requirements

The Senate proposal likely would be less onerous for those employers that choose not to offer health insurance.

Under the Senate proposal, employers with more than 25 employees that do not offer qualifying coverage or that pay less than 60% of their employees' monthly premiums would be subject to a $750 annual fee per uninsured full-time employee and $375 per uninsured part-time employee. For employers subject to the assessment, the first 25 workers would be exempted. Beginning in 2013, the penalty amounts would be adjusted using the Consumer Price Index for Urban Consumers. Employers with 25 or fewer employees would be exempt from penalties and are eligible for program credits.

Employers with 50 or fewer full-time workers that pay 60% or more of their employees' health insurance premiums would be permitted to receive tax credits for subsidizing coverage. Credit amounts would be based on the type of employee coverage, the size of the employer, and the proportion of time the employer paid employee health insurance expenses. Tax credits would be available for up to three consecutive years.

Under the House bill, employers would have the option of providing health insurance coverage for their workers or contributing funds on workers' behalf. Employers that choose to offer coverage would have to meet minimum benefit and contribution requirements (72.5% for individual coverage and 65% for family coverage). Large employers that do not provide health insurance coverage would pay a fee based on 8% of their payroll. For small employers that do not provide health insurance, the House proposal includes graduated rates of 2% of payroll for employers with payrolls in excess of $250,000 to $300,000; 4% for employers with payrolls in excess of $300,000 to $350,000; and 6% for employers with payrolls in excess of $350,000 to $400,000. Employers with less than $250,000 in payroll would have no contribution requirement.

An exemption from the employer responsibility requirement would be put in place for certain small businesses with payrolls less than $400,000 annually. In addition, a small business tax credit of up to 50% of the cost of insurance would be available for firms with 25 or fewer employees and would be based average annual employee compensation.

Individual Requirements

The Senate would provide less onerous penalties for individuals who did not obtain health coverage.

Under the Senate proposal, all individuals would be required to obtain health insurance coverage. Exemptions would be made for individuals for whom affordable health care coverage is not available or for those for whom purchasing coverage creates an exceptional financial hardship. The minimum penalty for not purchasing coverage would be no more than $750 per year. Individuals deemed to lack availability to affordable coverage, American Indians, individuals living in states where Gateways are not yet established, and individuals without coverage for fewer than 90 days would be exempt from the mandate and penalty.

Under the House bill, except in cases of hardship, once market reforms and affordability credits are in effect, individuals would be responsible for obtaining and maintaining health insurance coverage. Those who choose not to obtain coverage would pay a penalty based on 2.5% of adjusted gross income (AGI) above a specified level.

Taxes don’t make you healthy, new group says

As lawmakers continue to figure out how to pay for health care reform, the American public is exercising its right to assemble (I just love the First Amendment, don’t you?).

A coalition of concerned citizens has formed a group called Americans Against Food Taxes. As I mentioned in a previous post, there are proposals to tax food and beverages to help pay for health care reform. Americans Against Food Taxes, which is made up of 110 national and state organizations and more than 20,000 individuals, oppose such new taxes.

"A tax on juice drinks and soda would further squeeze hard-working families already struggling to pay their bills and keep their health coverage. With the economic downturn, there could not be a worse time to ask them to pay more for the simple pleasures they enjoy," said Susan Neely, president and CEO of the American Beverage Association.

"We all want to improve health care, but taxes don't make anyone healthy. Education, exercise and balanced diets do that," Neely said.

The group’s website indicates that it has two primary aims: “1) To promote a healthy economy and healthy lifestyles by educating Americans about smart solutions that rely upon science, economic realities and common sense; and 2) To prevent the enactment of this regressive and discriminatory tax that will not teach our children how to have a healthy lifestyle, and will have no meaningful impact on child behavior or public health, but will have a negative impact on American families struggling in this economy.”

Individuals who oppose the proposed taxes can sign a petition on the Americans Against Food Taxes’ website. The site also allows individuals and businesses to send an e-mail to their members of Congress. More than 60,000 messages have been sent so far, according to the group.

“Pay or play” could play key role in health care reform

On July 14, 2009, the House released its latest version of health care reform legislation. Besides a public plan option, a health insurance exchange, and funding proposals, among the many provisions packed into the 1000+ page behemoth, America’s Affordable Health Choices Act of 2009, includes a “pay or play” provision, as does the revised proposal by the Senate Health, Education, Labor and Pensions (HELP) Committee, the Affordable Health Choices Act. Groups on all sides of the health reform debate are making their positions known on pay or play.

Under the newly-released House bill, employers who do not offer health coverage would be required to pay an 8-percent excise tax based on compensation paid to uninsured employees. The bill provides exemptions for smaller firms, based on the amount of the company’s payroll. For instance, firms whose annual payroll is below $250,000 would be exempt from the House “pay or play” penalty. Companies with annual payrolls between $250,000 and $400,000 would pay reduced penalties for failing to provide health insurance.

What is pay or play? Why are they doing this? Well, first off, don’t confuse “pay or play” mandates with “pay to play.” This is not a blog about corrupt politicians in my home state. Ahem. Instead, “pay or play” rules are mandates imposed on employers as part of a shared responsibility approach (along with individuals and the government) toward increasing health insurance coverage. Generally, under pay or play, employers would be required to provide a minimum level of health insurance to employees or else face a monetary penalty. So, in addition to broadening employer-provided health insurance coverage (or maintaining it where it already exists), “pay or play” is also a financing mechanism.

What to look for. As we continue through the health care reform process, the Kaiser Family Foundation lists several key questions to keep in mind about any “pay or play” proposal. These include:

• What benefits must an employer offer to meet the pay-or-play requirement?
• Is there a minimum employer contribution to premiums?
• Should some firms be exempt from requirements?
• What do employers that do not offer health insurance pay?
• Should small employers be provided tax credits to encourage them to offer coverage?

With each passing day, we are coming closer to the self-imposed deadlines to get health reform completed in 2009. Will “pay or play” make it into any final legislation and if so, what format would it take? Will there even be final legislation this year? For answers to these and other intriguing questions in this ongoing saga, stay tuned.

Cap Or Eliminate The Tax Preference For Employer-Sponsored Health Insurance?

The value of employer-provided health insurance generally is not subject to income or payroll taxes, including Federal Insurance Contribution Act (FICA covering Social Security and Medicare) taxes and unemployment (FUTA) taxes. “This effectively results in the subsidization of employer-provided health insurance by the federal government [that is, taxpayers, including those who do not receive employer-provided health insurance],” two legislative attorneys pointed out in a June 12 Congressional Research Service (CRS) report, Employment-Based Health Coverage and Health Reform: Selected Legal Considerations. “Some have argued that this subsidization is partly responsible for increasing costs of health insurance, as it gives participants an inaccurate sense of the true cost of their health care and leads to increased utilization of health care resources.”

One of the proposals for health care reform, both to fund coverage for uninsured and to contain the rising costs of health care, is either eliminating or capping the tax exclusion currently granted to employer-sponsored health insurance benefits. It is estimated that in 2008 this tax exclusion cost the federal government [that is, American taxpayers] $226 billion in foregone income taxes and another $42 billion for Medicare taxes, ac­cording to the congressional Joint Committee on Taxation. The JCT attributed the foregone federal income to $133 billion from exclusion from the income tax and $93 billion from excluding the value of health insurance from both the employer and employee portions of the FICA tax.

The Urban Institute’s Tax Policy Center estimates next year’s revenue loss from the tax exclusion at $240.5 billion and $3.5 trillion through the next decade. “Thus, the tax exclusion for employment-based health coverage is the single biggest subsidy in the fed­eral tax code,” noted a July 9 Health Affairs Health Policy Brief considering the pros and cons of taxing employer-sponsored health insurance.

At a May 12 Senate Finance Committee hearing on financing health care reform, Chairman Max Baucus (Mont.) reminded panelists that "We are not going to eliminate the exclusion. But the current tax exclusion is not perfect. It is regressive. It often leads people to buy more health coverage than they need. We should look at ways to modify the current tax exclusion so that it provides the right incentives. And we should look at ways to make it fairer and more equitable for everyone." The Senate Finance Committee is the only one of the three major health care reform “proposals” that has been weighing a tax cap on health insurance benefits.

The Congressional Budget Office (CBO) in a June 16 report requested by Sen. Kent Conrad (N.D.) reviews opposing views on how the government can spur changes by significantly limiting the current tax subsidy for health insurance. "Changes in the tax exclusion for employer-sponsored health insurance can affect the efficiency of health care financed by the private sector, by giving workers stronger incentives to seek lower-cost health insurance plans.

Advocates for tax exclusion say that it encourages employers to offer health coverage to their employees and workers to want it. Employer sponsorship led to “risk pooling” at the workplace when covering all of their full-time workers, and with the larger group, employ­ers can spread the costs of coverage more evenly across sicker and healthier workers alike, supporters argue.
Opponents claim that the tax exclusion does not help people who do not get coverage through their job, or their spouse’s or parent’s job. The exclusion may also encourage people to elect more generous health insurance instead of seeking higher wages, and may indirectly be driving up the cost of both health coverage and health care. Supporters of a cap on the value of employer-provided health insurance say it would address inequities and inefficiencies in the tax code.

Some experts say that the highest-income people in the highest tax brackets get the greatest ben­efit from the tax exclusion, while the lowest-in­come individuals get the least benefit. According to an analysis by Massachusetts Institute of Technology economist Jonathan Gruber, the exclusion provides an average tax benefit of $319 to workers earning less than $20,000 a year; $1,002 for workers with incomes between $20,000 and $40,000; and $2,823.for workers with incomes of $150,000.

Cap opponents say that as more out-of-pocket costs were shifted to individuals, [which is happening now anyway], chroni­cally ill individuals might forgo care and see their health status worsen as a result. The impact would be higher on those with more generous benefits, including unionized workers who presumably have agreed to reduced pay in exchange for higher benefits. And costlier plans in areas with high health costs will be more likely to .exceed a cap, as might companies in high risk industries or with older workforces.

A JCT analysis tying a tax cap to the cost of basic health insurance for federal employees found that this would raise an estimated $418 billion over ten years. The Senate Finance Committee also has considered tying the caps to individual or family income and appling it only to individuals with income above $100,000 or couples with incomes above $200,000.

Not surprisiingly, major employers oppose such a cap. A Mercer survey of 329 U.S. employers revealed that employers remain most opposed to limits on the favorable tax treatment of employer-sponsored health care benefits (59% believe that this should not be part of reform). However, employers were less uniform in their responses anticipating their reaction if a hypothetical reduction in the current tax exclusion for employer-sponsored coverage resulted in an average increase of $3,000 in taxable income to their employees. About one-fifth said that they “very likely” would change the plan or reduce the level of benefits provided to avoid the increase and another fifth would make no change and let employees absorb the higher tax bill. Few said that they would be very likely to discontinue offering a health plan (3%).

The preferential tax treatment, that is, subsidy, of employer-sponsored health insurance benefits is costing American taxpayers beau coup bucks, with greatly disparate benefits among workers and families in those plans. And yet, nearly 50 million uninsured get no benefit at all. Is this the best we can do to provide health insurance to U.S. residents?

Selling health reform: agreements with stakeholders

The White House continues to roll out one aspect of its health care reform communication strategy: on a regular basis, announce agreements with health care industry stakeholders that demonstrate their commitment to the reform effort.

So, last week Vice-President Biden announced an agreement reached by the Administration and Finance Committee Chairman Sen. Max Baucus (D-MT) with three major hospital organizations that would cut hospital Medicare spending by $155 billion over the next 10 years in order to help pay for health care reform.

Where will the savings come from? They'll be achieved, according to the Vice-President, "through a combination of delivery system reforms [and] additional reductions in the hospital's annual inflationary updates." One caveat: the hospital organizations (the American Hospital Association, the Catholic Health Association of the United States and the Federation of American Hospitals) agreed to the reductions only if coverage of the uninsured is increased as a result of reform.

Sounds good, right? I mean, $155 billion is a sizable chunk of the projected $1 trillion reform is expected to cost over 10 years. So, how did the MSM play the story?

Hmmm. "Discord on Health Care Dulls Luster of New Pacts," says the Washington Post (free registration required). "Health-Care Overhaul Goals Prove Challenging," cautions the Wall Street Journal. Reporters at both papers buried glancing references to the hospital announcement inside stories focused on the difficulty Congress is currently having finding funding methods that will garner enough votes for passage of a final bill.

[In both stories Biden is said to have "trumpeted" the announcement. Is that word choice a subtle dig at the Vice President? Or just an attempt to punch up the copy? ("Make it zippy," one long-ago editor of mine used to say.)]

Even the New York Times, which gave the story deeper coverage over two days [and used the more decorous "said" when quoting Biden; nothing zippy for the Grey Lady] refused to take the announcement at face value. In "Health Deals Could Harbor Hidden Costs," quotes from Senators and others caution that such deals may raise false expectations by failing to clarify what the industry stakeholders will receive in return for their concessions.

Good Solutions Produce The Right Results

Many of the current health reform proposals look like the reform enacted in 2006 in Massachusetts, and an interesting problem has arisen there which gets to the heart of an effective health reform policy.

According to a June 22 article by Charles D. Baker, the chief executive officer of Harvard Pilgrim Health Care in Massachusetts, because the individual and small group health markets have been merged in the state, health plans in Massachusetts can “no longer apply a pre-ex exclusion or waiting period to individual purchasers unless we applied it to all purchasers in the merged market (including all small businesses). No one was willing to impose such a condition across the entire merged market -- primarily because it would be unfair to small businesses to impose such a requirement. In the end, we all hoped that the new state requirement on individuals to have health insurance -- or pay a tax penalty - would encourage healthy individuals to purchase insurance every year, and offset this now wide open front door for individual coverage.

“Long story short, I don’t think it’s working. A few months ago, brokers started posting comments on this blog site that implied that people -- and some brokers and employers -- were gaming that wide open front door -- purchasing health insurance for a few months at a time, using a lot of services, and then dropping their coverage. The penalty for not having coverage isn’t all that steep -- about $900 - and while a few months of coverage might cost $2,000-3,000 in premiums -- that’s peanuts compared to the cost of many medical services, which can run into thousands of dollars in a matter of days.”

(Full disclosure: More than 30 years ago (when I had no preexisting health conditions), I also “gamed” the health care system when I was unemployed for a few months and bought an individual policy and then cancelled it when I found another job. At the time, I thought that was the best way to keep myself and my family covered in a market-based health insurance system.)

Mr. Baker’s solution to the problem in Massachusetts is to reinstitute “waiting periods and/or pre-ex exemptions for individuals purchasing health insurance in the merged market. That would be the simplest and easiest way to protect individuals and small businesses who are playing by the rules -- and limit the very costly impact of this wrinkle in health care reform.”

In response to Mr. Baker’s comments, Bob Laszewski wrote in his blog, Health Care Policy and Marketplace Review, “So, how do you balance the goal of giving everyone access to the health insurance system without letting others game it?”

Fortunately, several individuals (in comments on Mr. Baker’s and Mr. Laszewski’s posts) came up with a few different solutions to the problem of gaming the system:

--Institute a 12 month lock in period when purchasing health insurance. Coverage changes would be allowed during either an annual open enrollment period or when starting a new job and taking up the new employer’s health insurance offering.

--Impose individual and employer mandates with penalties that discourage individuals from abandoning health care coverage. For example, I cannot renew my annual state license plate without providing proof of auto insurance. A system similar to that (how about rejection of income tax filing without proof of health insurance?) with appropriate financial penalties would make it unlikely that individuals would take health coverage only when they were sick.

--Set up any other arrangement in which there was no system to game. Single payer would work, but that’s not possible in the United States. Making sure that low income individuals were covered regardless of ability to pay also would help (and yes this would be increasingly expensive if “low-income” had a generous definition).

The lessons here? Solutions to a problem will be developed only in light of one’s overall goal or desired result. In this case, if the overall goal is to protect insurance companies and providers, waiting periods and preexisting condition exclusions make sense. If the goal is to protect individuals with health care coverage, waiting periods and preexisting conditions exclusions seem silly, while devising methods to keep all individuals covered are eminently reasonable.

Ayes and nays on play or pay

Both the revised version of the Affordable Health Choices Act, released by the Senate Health, Education, Labor and Pensions (HELP) Committee, and the House Democrats’ health care reform bill contain employer “play-or-pay” requirements.

So, who’s for and who’s against such requirements? Let’s find out.

All those in favor, say “aye.” You might be surprised to learn that both Wal-Mart and the Service Employees International Union (SEIU) support an employer mandate. On June 30, 2009, Mike Duke, president and CEO of Wal-Mart Stores; Andrew W. Stern, president of the SEIU; and John D. Podesta, the president of the Center for American Progress, wrote a letter to President Barack Obama that supports “an employer mandate which is fair and broad in its coverage.”

The June 30 letter notes that supporting health reform legislation will “require employers to consider the trade off of agreeing to a coverage mandate and additional taxes versus the promise of reduced health care cost increases.”

Another supporter of the mandate is Families USA. The group cites the following five reasons in support of requiring employers to contribute to the cost of health care coverage:

1. Employer assessments help to level the playing field so that all employers do their fair share to pay for coverage.
2. An employer responsibility requirement will discourage employers from dropping coverage and keep needed dollars in the health care system.
3. Employers that currently pay a share of their employees’ health insurance cover a large portion of employees’ health bills.
4. Employer assessments have been helpful in places that have implemented them.
5. Job-based health coverage is priced more equitably than individual coverage.
   

The public also supports an employer mandate, according to the Employee Benefit Research Institute’s 12th Annual Health Confidence Survey. EBRI asked survey respondents for their reaction to specific options to expand coverage “in order to make sure all Americans have access to health insurance.” Seventy-five percent supported establishing some form of employer mandate to subsidize coverage.

All those opposed, say “nay.” Most employer groups, including the U.S. Chamber of Commerce, the National Retail Federation (NRF), and the National Federation of Independent Businesses, oppose an employer mandate.

In testimony before the House Committee on Ways and Means, the U.S. Chamber of Commerce’s Senior Vice President of Labor, Immigration, and Employee Benefits, Randel Johnson, expressed concerns with the employer mandate. “First and foremost, the Chamber opposes the ‘pay-or-play’ proposal. Requiring employers to either provide some level of health insurance or surrender a huge percentage of payroll to the government will result in job losses and lower wages. Many employers can afford health insurance, but many can’t,” Johnson stated.

According to NRF’s blog, “NRF told lawmakers retailers would rather see no reform than be saddled with an employer mandate.” The group fears increases in the cost of labor.

The American Benefits Council also opposes a mandate. “An employer requirement to provide coverage is not needed to achieve universal coverage. The myriad requirements that would inevitably be imposed on those who might prefer to sponsor health coverage would ultimately, if unintentionally, result in a net reduction in employer-sponsored coverage by leading some companies to simply ‘pay’ rather than ‘play’. We are also concerned about proposals under consideration that could require employers to pay their ‘normal’ premium contribution to a health insurance exchange if an employee opts out of an employer plan,” said James A. Klein, President of the American Benefits Council.

Finally, it’s no surprise that employers themselves oppose mandates. A recent Mercer survey found that 52 percent of respondents believe employer mandate initiatives should not be part of health care reform.

Health care cooperatives could offer relief…years down the road

One “compromise” position that has been garnering a lot of attention lately is the idea of a health cooperative, which is a non-profit, consumer-owned, health insurance plan network. Last month, Senator Kent Conrad (D-ND) floated the idea of a co-op and later, HHS Secretary Kathleen Sebelius said that President Obama is open to the idea of co-op (though he is said to still prefer a public plan option). Some Senate Republicans have indicated that they could support health reform legislation that includes a health care cooperative proposal, according to Senator Conrad.

There is some speculation that the health reform bill being finalized by the Senate Finance Committee (SFC) would include a private-sector health insurance cooperative provision. This would set up a confrontation with the Senate Health, Education, Labor, and Pensions (HELP) Committee whose version includes a public plan option but does not include a cooperative proposal.

Drawbacks of a health care cooperative. Cooperatives have succeeded in other industries (think credit unions or farm co-ops) so what’s not to like with a health care cooperative? Well, first of all, there’s a need for “seed money” to get the health care cooperatives going. Some have estimated that state and regional co-op branches would need $10 billion or more though others think it could be much more.

At least one commentator fears that the medical industry could interfere with co-ops, for instance, by getting “involved” in health cooperative board elections.

The key problem, however, is that cooperatives could take an entire generation to pay off. Senator Conrad estimates that, in order to have a sufficient amount of leverage, a cooperative would need to have at least 500,000 members. Existing co-ops have taken decades to reach those membership levels and public plan supporters doubt that any cooperative could reach that number any time soon.

So, which will it be? Public plan option or health care cooperative? In the end, it could all boil down to what will "play in Peoria."

Look Who's Calling The Kettle Black

Contrary to opponents’ claims, a public health insurance option would not be anti-competitive with private health insurance. After all, private health insurance currently is not competitive. This is particularly true for individuals and small employer groups—they have few insurance options, particularly comprehensive and affordable health insurance.

Consequently, “these [private health insurance] markets are not providing the benefits one would expect from competition, including efficient operations and consequent control over health care costs,” according to John F. Holahan and Linda J. Blumberg, economists and, respectively, director and senior fellow at the Urban Institute’s Health Policy Center. Mr. Holahan and Ms. Blumberg discussed this and other premises in their research paper, ”Is the Public Plan Option a Necessary Part of Health Reform?”, released on June 26.

A major contributor to the lack of competitiveness in the health insurance market is the consolidation in the past several years of insurers and hospital markets, the authors noted. In 2003 in 36 of the 50 states, three or fewer health insurers accounted for 65% of the commercial market, a 2004 study found. And a 2008 review done for the American Medical Association found that consolidation continues: in 89% of the 314 metropolitan statistical areas (MSAs) studied in 42 states one health insurer had at least 30% of the commercial health insurance market and in 15 states one insurer had at least half of the insurance market.

Competitive markets are expected to exhibit the following characteristics, Mr. Holahan and Ms. Blumberg explained:
• Many buyers and sellers participate in the market for a particular good.
• Buyers are able to make comparisons on price and characteristics of the products offered by the various sellers. And sellers should be able to freely enter or exit the market.
• Economic profit (that is, all income) is used to pay for the expenses incurred in the production process.
• The market price for each buyer and sellers is determined through competition..

Not only does the current commercial health insurance market lack many different insurers, the features and cost of the insurance products available, particularly in the individual market, are too varied and difficult for consumers to compare. Unless health reform requires greater uniformity in benefit packages and cost-share, as many of the major reform proposals provide, it will continue to be difficult for consumers to compare value.

Another indicator of the lack of competition in health insurance markets currently is the industry’s increasing profits—in the period from 2000 to 2007, privately insured spending rose 6.7% annually, but insurance premiums rose 8.9% and 9.5% annually for single and family coverage, respectively, Mr. Holahan and Ms. Blumberg pointed out.. During that same period, health insurers reported large profits.

“There are at least two strong arguments for a competing public plan,” Mr. Holahan and Ms. Blumberg added. “The first reason is that there is a strong need for cost containment both to lower the growth in health care costs for all Americans and to lower the cost of providing government subsidies for the purchase of insurance to lower-income people. The public plan would have lower administrative costs than private plans and could establish or negotiate provider payment rates at lower levels than private payers are able or willing to do today. The second reason is that some private insurers have denied claims and delayed payments to individuals with high health care needs as a way to control costs.”

“The presence of both types of plans [public and private options] should make
each perform better in a reformed insurance marketplace,” the authors concluded.. “Most importantly, faced with competition from a public plan, private alternatives will become more efficient, leading to declines in their own costs. The net effect would be reduced growth in health care costs.”

As President Franklin Delano Roosevelt said in 1933, “the only thing we have to fear is fear itself--nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance." Those who work to instill fear of a potential public health insurance option, or any other major health reform initiative, would have us retreat, not advance.

Shortage of primary care doctors could hinder health reform efforts

America faces a severe shortage of primary care doctors--those doctors trained in general internal, pediatric, or family medicine--and the problem is getting worse. According to a prediction by The American Academy of Family Physicians, the shortage of family doctors could reach 40,000 in a little more than 10 years as too few new doctors are choosing primary care medicine. Regardless of the reasons for the shortage, the problem is real.

What does this problem mean for health care reform efforts? Providing insurance coverage to 46 million uninsured Americans could swamp the system. Patients likely would find it even more difficult than it already is to find a new doctor or to make an appointment. Ultimately, without adequate numbers of primary care physicians, even more patients would turn to emergency care, further increasing health care costs.

Proposals urge primary care revival. In light of the primary physician shortage, researchers at the University of California, San Francisco (UCSF) Center for Excellence in Primary Care recently called for a national effort to revive primary care as part of health care reform legislation. In articles in two of America’s leading medical journals, the New England Journal of Medicine (NEJM) and the Journal of the American Medical Association (JAMA), Dr. Thomas Bodenheimer and Dr. Kevin Grumbach of UCSF urge a comprehensive federal plan to revitalize primary care in the U.S.

In the NEJM, Dr. Bodenheimer provides an overview of a three-part plan for federal legislation on primary care that would (1) reform primary care payment, (2) invest in primary care infrastructure and organization, and (3) attract more U.S. medical students into primary care by improving the work life of primary care physicians and by redirecting Medicare graduate medical education funds to primary care residency programs.

The authors suggest that a failure to address the shortage of primary care physicians as part of the health care reform package will lead to a lower quality of care at higher costs. According to Dr. Bodenheimer, “it has been proven over and over again that a solid primary care foundation to a health care system means better quality and lower costs. That is why Congress needs to strengthen primary care as a central feature of national health care reform.”

A nationwide Primary Care Cooperative Extension Service, if created and run by the Department of Health and Human Services as the authors recommend, would provide county-based health extension organizations to support primary care clinicians in the same way that the agricultural model supports family farmers, providing infrastructure for practice transformation through local learning communities, information exchange, and cross-fertilization of ideas among practices.

According to Dr. Grumbach, "if Congress passes health care reform without strong provisions for increasing the numbers of primary care physicians and supporting those primary care clinicians already in practice, many newly-insured families will be unable to find a family doctor and costs will continue to escalate."

This provides even more food for thought on an already full health care reform plate.

Preview of a national benefit standard: what's in, what's out

Lyme disease. In vitro fertilization. Wigs. What do these have in common? Each one is a benefit “mandate” in at least one state.

What is a benefit mandate? States are permitted to pass laws that require group health insurance policies and health plans to cover (or offer coverage for) certain benefits, health care providers, and patient populations. The nationwide total of state mandates is more than 2,000, according to the Council for Affordable Health Insurance (CAHI). Such mandates range from a low of 13 (Idaho) to a high of 70 (Rhode Island). The benefit mandates listed above are less common (Lyme disease – 5 states; in vitro – 15; and wigs – 11), but there are several that are widespread (emergency service – 47 states; diabetic supplies – 47; and coverage of adopted children – 45).

What benefits would be in a national standard? There are proposals on the health care reform table that would require a national benefit standard to be set. So, the question arises, which benefits should be required to be covered?

The Commonwealth Fund recently published an Issue Brief that “considers what a broad federal minimum standard might look like by comparing existing state benefit mandates with the services and providers covered under the Federal Employees Health Benefits Program (FEHBP) Blue Cross and Blue Shield standard benefit package, an example of minimum creditable coverage that reflects current standard practice among employer-sponsored health plans.”

The current FEHBP standard option includes the following:

• General care, such medically necessary physician visits and hospital care;

• Women’s health, such as comprehensive maternity care and a broad range of contraceptives;

• Preventive care for adults and children, such as screenings and immunizations;

• Mental health, such as inpatient and outpatient care and medications; and

• Other explicitly covered services, such as acupuncture and chemotherapy.

The Commonwealth Fund authors found, “With few exceptions, benefits in the FEHBP standard option either meet or exceed those that state mandates require — indicating that a broad-based national benefit standard would include most existing state benefit mandates.”

The Issue Brief does not mention Lyme disease. In vitro fertilization is a benefit that is explicitly excluded by the FEHBP standard option. In addition, wigs are beyond the scope of the FEHBP standard option. But states could be permitted to mandate more generous benefits than the national standard, the authors noted.

Is half a loaf of health care reform enough?

As we move into the second half of 2009 and the health care reform process continues to play itself out, there will likely be an increasing tendency to compromise, whether in the interests of time or bipartisanship. The public plan option and other elements are being bandied about now but will they survive to see the light of day this fall or whenever a final bill emerges?

It’s still early in the game but even so, it’s probably not too early to think about health reform’s big picture. Assuming that it’ll likely be difficult to get 100 percent of what they want, do Democrats settle for “half a loaf” (or insert any other fraction you want here) or do they hold out for more? Timing will be critical, of course, as this year seems to be the ideal time to act and the pressure to get the health reform bill done will likely intensify as summer turns to fall.

One fly in the ointment is that the bills coming out of the various committees are already watered down. Senator Max Baucus (D-MT) now admits, for instance, that it was a mistake to rule out a single payer plan, so, in effect, the loaf is starting out at less than 100 percent already.

Another danger is that, once health reform passes, it would be extremely difficult to go back and pass another major health reform bill. As a result, it’s essential that the “good parts” make it into the final bill. As New York Times columnist Paul Krugman said recently, “reform isn’t worth having if you can only get it on terms so compromised that it’s doomed to fail.” As Krugman further states, whether health reform is ultimately considered a success depends on whether it successfully controls costs. If the eventual bill is too watered-down to control costs, would there be enough enthusiasm to go back and fix any problems?

Starting out with a half a loaf, however, could mean that the end result is a quarter of a loaf or perhaps even less. What is minimally acceptable, in the end, is something only the health reform players know for sure. For the rest of us, we’ll just keep watching and offering our opinions.