A Senate Committee’s Health Reform Bill

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The Senate Health, Education, Labor and Pensions Committee, which has been struggling in the absence of ailing Chairman Ted Kennedy, has put out a full version of a health reform bill that solves many of the problems of its earlier versions and trial balloons. This amounts to enormous progress, largely creditable to Connecticut Senator Chris Dodd, who has taken the helm of the committee in Kennedy’s stead.

Where the earlier, incomplete version had been estimated to add $1 trillion to the deficit over the next decade, the new one has pared that cost to $611.4 billion. It also does a lot better job of covering the uninsured; the Congressional Budget Office estimates that, combined with the Medicaid expansion expected under the bill that the Senate Finance Committee is working on, this legislation could assure that 97 percent* (Republicans dispute this figure; please see update.) of the U.S. population (excluding illegal immigrants) has coverage.

The full bill is here, and there’s a summary in this letter to their colleagues from Kennedy and Dodd. Two components of the bill are worth a closer look: the play-or-pay provision that would require employers to provide health benefits to their workers, and the proposal for a government-run “public plan.”

The employer requirement–it used to be called a “mandate,” but politicians these days prefer to talk in gentler terms of “shared responsibility”–would require companies that have 25 workers or more to pay at least 60% of the cost of their employees’ health coverage, or pay an annual fee of $750 per uncovered full-time worker and $375 for each part-timer. The size of the assessment is no accident; this is the amount that CBO estimated it would take to assure that companies that currently offer insurance don’t drop their coverage and dump their workers onto the government plan. (An earlier version of the bill, which did not have that kind of fee or any kind of requirement that companies cover their employees, would have resulted in 15 million workers seeing their employer-provided coverage discontinued, according to CBO.)

**The other component of that “shared responsibility” is an individual mandate–a requirement that people who are not covered by their employers go out and buy coverage for themselves and their dependents. These people will be able to buy that coverage on newly established exchanges–called Gateways–where a public plan will be one of the options offered. (And some people would get government subsidies to help them afford it. That element will be part of the Finance Committee bill.)

The public plan, of course, has been the issue that has gotten the most discussion from the left and the right. The version in the HELP bill (called the “Community Health Insurance Option”) won’t make either side completely happy, but it does represent an effort to bridge the divide. It won’t look like Medicare, exactly, particularly in the reimbursements that it pays health care providers. Where Medicare pays doctors and hospitals fees that are about 30% lower than most private plans do, this one will reimburse providers according to what is being described as “no more than the local average private rates — but could be less.” The rates would be negotiated by the HHS Secretary. And health care providers would not be required to accept patients enrolled under that public plan–which has been an important sticking point with the American Medical Association.

What does all of this mean? The public plan won’t be as powerful a tool to hold down health care costs as some of its most ardent advocates would have hoped. But it also won’t be as likely to drive hospitals, doctors and insurance companies from the bargaining table as health reform moves forward.

And here’s an important point that is likely to get lost in all the noise: Under the HELP Committee proposal, not everyone would have access to that public plan. If you have employer-provided coverage, as the majority of Americans do, you would not be allowed to opt out of it in favor of the public plan, unless your current coverage were deemed unaffordable (which is defined as costing more than 12.5% of your salary). By comparison, the version that is being drafted by three House committees would allow anyone who wants in to buy into the public plan after five years. (We still don’t know what the public plan will look like in the Senate Finance Committee bill, but the betting is that it will be a weaker version than either the HELP bill or the House one.)

Because this bill was released shortly before a holiday weekend, and in the middle of a congressional recess, we aren’t hearing a lot of reaction to it just yet. President Obama has issued a statement saying the bill “reflects many of the principles I’ve laid out, such as reforms that will prohibit insurance companies from refusing coverage for people with pre-existing conditions and the concept of insurance exchanges where individuals can find affordable coverage if they lose their jobs, move or get sick.” He also lauded the government-run plan as one that “would make health care affordable by increasing competition, providing more choices and keeping the insurance companies honest.”

But we will be hearing a lot more soon. Dodd hopes to have his bill passed by the committee as early as next week, and said he still thinks it is possible that the Senate will complete work on the bill by the time it leaves town for its August recess. Of course, whatever the HELP Committee does must be melded with whatever the Senate Finance Committee does. (We may see their bill next week.) It will be within the Finance Committee’s purview to not only write the provisions expanding Medicaid, but also to set the levels at which the government will subsidize Americans who would be required to purchase health insurance on their own. As a result of those two big-ticket items, the Finance Committee bill may well have a signficantly larger price tag. These are not small details, and ultimately, could determine the fate of the bill.

UPDATE: I received this e-mail from Steve Wymer, communications director for the Republicans on the HELP Committee, which adds this caveat to the claim that this bill would cover 97% of Americans:

Your coverage numbers look really similar to what Kennedy has released, but the CBO report is a more fair analysis. The CBO shows that 34 million people (12 percent of the population) will remain uninsured 10 years into the program. That means of the 54 million who would be uninsured in year 10 under their bill, only 20 million get covered.

In order for Kennedy/Dodd to claim that 97 percent of Americans are covered, they must assume a significant expansion of Medicaid. An earlier version of the legislation assumed Medicaid would expand up to 150 percent of the Federal Poverty Level (FPL) with the federal government assuming all costs for the first five years. If we assume this expansion for coverage purposes, it would only be fair to assume the hundreds of billions—likely approaching $500 to $700 billion—in costs that will come with it. This would put the total new spending in the Kennedy/ Dodd bill at $1.2 to $1.4 trillion. Additionally, CBO may include interactions that could drive the cost of the plan well above this estimate. And this is before hundreds of pages of public health grants are included in the cost.

Bottom line is that if they are going to claim credit for covering 97%, they also have to take the costs. Their bill spends $645 Billion and leaves 34 million uninsured. To get to 97% coverage, they have to expand Medicaid, which will cost several hundred billion more than the $600 they talk about.

UPDATE2: **This paragraph added, in response to commenter questions, to make it clearer that the plan also has an individual mandate.

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