Healthcare: Part 2. Congress’s Healthcare Bill

Healthcare: Part 1. The American Healthcare System.

The healthcare debate this summer was marked by raucous shouting, grandstanding, and distortions of the plans being considered, but out of it emerged a healthcare proposal that has already passed in the House of Representatives and is currently under consideration in the Senate. Of the five Congressional committees that wrote bills, each differed slightly in cost and coverage, and substantially on the status of a so-called public option to cover those who could not afford private insurance. The House and Senate bills, as of right now, both include some sort of public option (the Senate’s allows states to opt out), both cover a majority of the uninsured, and both would actually the reduce the federal deficit by offsetting their costs. Opponents argue the bills would lead to increased costs, decreased employment, and rationing of care. We examine the healthcare bills, their provisions, and the debate that surrounds them.

The Healthcare Plan

Both Republicans and Democrats can agree on one basic idea: the healthcare industry is in need of reform. Proposals put forth by both parties would prohibit insurers denying coverage based on pre-existing conditions. However, the similarities end there. As President Obama left the crafting of the plan to Congress, the details of different proposals vary, but in general, the Democratic plan operates on the premise that access to health insurance is a fundamental right, and seeks to make insurance more widely available through subsidies and tax breaks, while paying for the bill by reducing Medicare waste and taxing the insurance plans of the wealthiest Americans.

The Affordable Healthcare for America Act, the plan Democrats finally agreed upon and passed in the House two weeks ago on a 220-215 vote, would accomplish this through the creation of health insurance exchanges where employers can, “compare benefits and prices, and choose the plan that’s best for them, in the same way that Members of Congress and their families can,” according to the President, who made the exchanges the basis for his healthcare proposal. Any plan participating in the exchange is forbidden from discriminating prices based on sex or pre-existing conditions. The bill provides for subsidies for low-income Americans to purchase plans through the exchange.

Representative Virginia Fox (R-NC) speaks at a press conference about healthcarePhoto by Rep. Virginia Foxx - http://flic.kr/p/6EPb32

The main criticism leveled by Republicans at the bill as a whole is the cost of its programs at a time when we are in a recession. According to the CBO, the bill passed by the House would cost $891 billion over 10 years. President Obama has demanded that any healthcare bill passed must be deficit neutral, and the provisions in the bill to increase revenue would indeed offset the costs: the bill would reduce the federal deficit by $138 billion over the 10 year period. The bill would allow for coverage of 36 million Americans currently living without insurance, raising the percentage of the non-elderly population with health insurance to 96% rather than 83% as it currently stands.

The Republican alternative proposal, primarily focused on reducing the costs of health insurance rather than expanding coverage, would cost $8 billion over 10 years and reduce the federal deficit by $68 billion over that period. The bill would only cover 3 million more Americans. In terms of controlling costs, the CBO estimates that the Republican proposal would result in “lower average insurance premiums in 2016 by zero to 3 percent compared with amounts under current law.”

Another main criticism of the bill is that it will cut jobs and hurt the economy during a recession. The US Chamber of Commerce, in a recent TV ad, declared the bill would, “make a bad economy worse,” and, “wipe out even more jobs.” The Congressional Budget Office, stated that the bill, “is likely to reduce employment, although the effect would probably be small.” However, the changes under the bill would be not be initiated until 2013, when the CBO estimates the economy to have recovered and unemployment to be at a manageable 5.8%. In addition, as the costs of healthcare continue to rise, they will dwarf all other federal spending and bankrupt the federal government. The cost for these programs will reach 19% of the GDP in 2082, as the CBO puts it, “ roughly equivalent to the total amount that the federal government spends today.”

The Public Option

The bill also includes a government-run public option, albeit a much more moderate one than the one favored by liberals and the President earlier. In areas where single insurance companies dominate the market and experience little or no competition, the public option was designed as a check against corporate irresponsibility to keep costs down and provide adequate care as Americans would have a choice to leave if they were unsatisfied. The public option would use its collective bargaining power to negotiate rates with medical providers and therefore lower costs for its participants.

Nancy Pelosi signs a healthcare billPhoto by Speaker Pelosi - http://flic.kr/p/77BbVL

However, Republicans decried the public option as the first step towards a single-payer health system and a “government take-over of healthcare.” They argue that the private insurance industry will not be able to compete with a government-funded alternative and as a result, every American would be dumped onto the public plan while the insurance industry would collapse.

A radical assertion put forth by Republicans was that the bill would lead to governmental rationing of care. Sarah Palin famously used a provision in the bill, designed to allow voluntary end-of-life counseling for senior citizens and included in the bill at the request of Republican Senator Johnny Isakson, as the creation of a “death panel,” despite her support of similar end-of-life counseling programs in Alaska the year before. Though thoroughly debunked by Politifact and other sources, the charge was repeated and adopted by other Republicans, including Senator Chuck Grassley, the ranking Republican on the Senate Finance Committee in charge of writing the healthcare bill, who said, “We should not have a government program that determines if you’re going to pull the plug on grandma.”

As previously discussed in the first healthcare article, healthcare in the United States is in effect rationed by pre-existing conditions, ability to pay, and health insurance boards that determine, instead of the recommendations of doctors, whether procedures are “medically necessary.” Republicans argue that the bill amounts to socialized medicine akin to the system of Canada that will result in worse medical outcomes and preventable deaths, despite the World Health Organization ranking Canada ahead of the United States in terms of healthcare performance.

Responding to Republican complaints, Democrats clarified that the public option would affect only those who cannot afford private coverage. The Congressional Budget Office estimates the public option would be available to 10% of Americans and only 2% would choose it. Further, the public option would be merely government-run, not government-funded. According to President Obama, the plan would be, after an initial investment to establish it, paid for with the premiums of those it insures rather than taxpayer dollars. It would still be able to pass on reduced costs to its customers by lowering overhead costs and being a non-profit enterprise. The House’s public option would be limited to those most in need of coverage and would be specifically designed to compete with, not supplant, private insurance.

In the Senate, where all 60 Democratic votes would be needed to pass a bill and some centrist Democrats have shown resistance to the House’s version of the public option, a number of alternatives are being considered. Senator Harry Reid, the majority leader, included the public option in the bill currently on the Senate floor, but it allows state legislatures the choice to opt-out of the insurance plan if they feel it is not in their interest. Still, Senator Lieberman has threatened to support a filibuster of the opt-out plan, which would leave Democrats one vote shy of 60.

Senator Olympia Snowe (R-ME)

Senator Olympia Snowe of Maine, the only Republican who voted for the influential healthcare bill passed by the Senate Finance Committee, disagrees with the opt-out proposal and instead favors, along with moderate Democrat Ben Nelson of Nebraska, a “trigger.” The proposal goes that after the health insurance exchanges were created, states would be tested to see how effective private insurance has been in covering the citizens of each state. Only in states that fall below an as-yet-undetermined threshold of coverage would the public option go into effect to quell the shortfall. Though most Republicans still criticize the trigger as vigorously as the opt-out plan, it may secure the few additional swing votes for the bill to pass.

Senator Kent Conrad of North Dakota put forth a most moderated alternative to the public option. Instead of a government-run insurance program, he favors the creation of health insurance cooperatives, owned by their customers that would provide insurance without the demand for profits that other companies have to compete in the health insurance exchanges. Seed money would be provided by the federal government, then repaid with premiums. Critics of the cooperatives argue they lack the collective bargaining power that would allow the public option to lower prices for its insured and so would not solve the problems of affordability that affects so many.

Opinion polling on the public option has been used by both sides of the debate to claim they have the public on their side, however, the more recent polls have shown a shift towards favoring the public option. A Pew Research Center poll conducted in early October shows 55% of Americans favor the inclusion of a public option in the healthcare bill, and a Gallup poll in late October showed 50% in favor with 46% opposed. A poll conducted by Republican House Whip Eric Cantor that found that 61% of Americans opposed a “public plan that would replace your healthcare,” though the wording possibly threatens the poll’s credibility. The latest CBS news poll shows that 51% of Americans favor a healthcare bill with a public option, 16% favor a bill without a public option, and 26% prefer no bill be passed at all.

Medicare

One area that healthcare reform must address is the rising cost of Medicare, whose current expenses are unsustainable. Costing 16% of the total federal budget every year, $440 billion in 2007, with that figure expected to rise substantially in the years ahead as the Baby Boomers become eligible for the program. The Medicare Board of Trustees believes the program will go bankrupt by 2019 unless healthcare costs can be reduced.

President Barack Obama speaks at Healthcare rally at UMDPhoto by borman818 - http://flic.kr/p/6Zv4Ne

Reducing Medicare waste is a critical part of the reform package President Obama called for. He has called for the creation of an independent commission to research and address rising Medicare costs, as his budget director Peter Orszag put it, “moving toward a health system emphasizing quality rather than quantity [of care]” to reduce costs without worsening outcomes. In addition, the President hopes to save $54 billion from government health entitlement programs that the Office of Management and Budget estimates were paid out improperly to fraudsters, almost 10% of total expenditures on these programs. The stimulus bill appropriated $200 million towards auditing the one billion claims issued every year through Medicare and Medicaid.

Republicans, who had long previously criticized the program as overly expensive (President Reagan sought to cut $1 billion from its $40 billion budget in 1981), now criticize the Democratic plan as threatening the program and the well-being of seniors. They are painting the savings that Obama seeks to gain by increasing efficiency in the program as “cuts” to Medicare funding. “We need to protect Medicare and not cut it in the name of health-care reform,” RNC Chairman Michael Steele wrote in an op-ed in the Washington Post. The AARP, the largest senior interest group, however, supports the Obama healthcare proposal. John Rother, AARP executive Vice President refutes the Republican claims saying, “the proposed Medicare savings do not limit benefits, they do not impose rationing and they do not put the government between patients and their doctors.”

Employer Mandate

The final publicized provision of the healthcare bill requires individuals and businesses financially capable of purchasing insurance to do so or else face a penalty tax. Under the Obama proposal, “There will be a hardship waiver for those individuals who still can’t afford coverage, and 95 percent of all small businesses would be exempt from these requirements.” The President continued, “but we can’t have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees. Improving our health care system only works if everybody does their part.” Under the President’s plan, a fine would be imposed on those who refuse to comply with the requirement. By adding individuals who feel they don’t need to purchase insurance, such as healthy young adults, to the insurance pool, they spread the risk and supposedly lower costs for everyone.

The Congressional Budget Office, in its original assessment of the Senate Health, Education, Labor, and Pensions Committee (HELP) Healthcare Bill that lacked an employer mandate, estimated that employers would drop coverage of 15 million employees under the bill to curb costs. Under a revised HELP bill that included a penalty of $750 per employee left uninsured, the CBO found that a mere 150,000 would lose their employer coverage compared with the 21 million that would gain insurance as a result.

Then-Senator Obama had originally opposed the mandate during the Democratic primary when then-Senator Clinton supported it as part of a healthcare reform package. Discussing the mandate for purchasing insurance in Massachussetts, “In some cases, there are people who are paying fines and still can’t afford it, so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine,” effectively presaging the arguments made by his detractors against the currently proposed mandate, publicized by both MoveOn.org and the Cato Institute that the mandate would hurt those most in need of assistance. Conservatives argue that a government requirement to purchase a good or service is unconstitutional, while liberals find the idea annoyingly inefficient compared to a single-payer system that would eliminate the need for a mandate.

The health insurance industry, however, has argued in favor of the move, as it would significantly increase their customer base. The mandate amounts to a compromise for the insurance companies, whose profit margins would theoretically be hurt by the provision forcing insurers to cover those with pre-existing conditions, would benefit from the mandate’s addition of low-risk insurees. The measure was also endorsed by Wal-Mart, the nation’s largest private employer. Leslie Rach, corporate Vice President said, “As a company, we believe the present health-care system is unsustainable and making the country’s businesses less competitive in the global economy.”

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