What Happens Now?

Most of the reform changes do not begin until 2014, and 2016 will roll around before all reforms are fully implemented. But there are some things that begin right away or by next year. Here are some of the things we will see in the next two years.

Starting in Calendar Year 2010

• Small business tax credits of up to 35% of premiums -- increasing to 50% in 2014
  
• Re-insurance program for early retirees (aged 55-64) to lessen health care costs -- effective 90 days after enactment
  
• Bans rescissions by health plans -- effective 6 months after enactment
  
• Bans denial of coverage to children for pre-existing conditions -- effective 6 months after enactment
  
• Bans lifetime caps on coverage -- effective 6 months after enactment
  
• Restricts annual caps on coverage -- effective 6 months after enactment
  
• No cost sharing (co-payments) on preventative care for new group or individual plans -- effective 6 months after enactment
  
• Interim high-risk pool to cover people with pre-existing conditions
  
• Allow children to remain on their parents health care plan until their 26th birthday
  
• Increased funding for community health centers
• Medicare: $250 rebate to beneficiaries who hit the Part D "doughnut hole" -- closes doughnut hole by 2020
  

Starting in Calendar Year 2011

• Require individual plans to spend at least 80% of premium dollars on medical services
  
• Require group plans to spend at least 85% of premium dollars on medical services
  
• Medicare: 50% discount on brand name drugs for beneficiaries who hit the Part D "doughnut hole"
  
• Medicare: Eliminates co-payments for preventative services
  
• Medicare: Increases payments to primary care physicians

Source: http://docs.house.gov/energycommerce/IMMEDIATE_PROVISIONS.pdf

Americans Win!!!

This is a great and historic day for America! While the Senate health care reform bill has its flaws, it also has great "bones." By that, I mean it has a great structure that will serve America for many decades. It will:

• set minimal standards for health insurance
  • guarantee coverage
    
  • eliminate recision
• create health insurance marketplaces where consumers can easily compare and contrast plans from different insurers
  
• help those with low- and middle-incomes purchase health insurance
  • provide tax subsidies that to people with incomes less than 400% of FPL
    
  • limit out-of-pocket costs for people with incomes less than 400% of FPL
• help small businesses provide health insurance to their employees
  
• start controlling health care costs
  • eliminate overpayments for Medicare Advantage plans
    
  • establish a strong Independent Medicare Advisory Panel to recommend cost saving measures
    
  • test potential cost-saving changes such as bundled payments
    

I don't think that Jonathan Chaitt is too far off when her writes that, "[h]istorians will see this health care bill as a masterfully crafted piece of legislation."

It is Time to Pass Health Care Reform

"We are not bound to win, but we are bound to be true. We are not bound to succeed, but we are bound to let whatever light we have shine... It is time to pass health care reform for America"

...

"I believe in an America in which we don’t just look out for ourselves, that we don’t just tell people you’re on your own, that we are proud of our individualism, we are proud of our liberty, but we also have a sense of neighborliness and a sense of community ... and we are willing to look out for one another and help people who are vulnerable and help people who are down on their luck and give them a pathway to success and give them a ladder into the middle class. "

Health Reform By the Numbers

Health Care Opposition Zeitgeist

(via Nate Silver) This wordle represents the responses from people who opposed health care reform in the recent Gallop poll. According to these responses, people's biggest complaint (or worry) is government. Presumably the looming government takeover of health care, or as I often see it expressed, the government takeover of one-sixth of the economy.

Incidentally, that is not a view I share.

source: http://www.wordle.net/show/wrdl/1783870/healthcarebad and http://www.fivethirtyeight.com/2010/03/two-pictures-tell-story-on-health-care.html

A few points about the health care reform "takeover"

• It is a "takeover" that will spend nearly $1 trillion over the next 10 years. That is a lot of money, but it accounts for less than 4% of expected health care spending for the next decade.
• It is a "takeover" that protects health insurance companies, provides incentives to small businesses to remain or start offering group health benefits, and helps the 50+ percent of the population enrolled in group coverage to remain in that group coverage.
• It is a "takeover" that strengthens Medicare financing by reducing Medicare advantage over-payments, increasing payments to primary care physicians to promote health, reduces payments to specialists to reduce overuse, and helps the 15% of the population in Medicare to remain in Medicare.
• It is a “takeover” that directly affects about 10-15% of the population by financially helping them purchase health insurance from private companies to obtain services from private enterprise providers.

Radical Health Care Reform

For all the talk about how radical this reform is, how it is nothing less than a “socialist take-over of one-sixth of the economy,” what we have is a very moderate plan. A plan so reasonable that it is endorsed by the AARP and the AMA, and supported by Big Pharma and hospitals and unions as well. For most of the process even health insurers quietly accept the reforms.

Yet because Republicans refuse to add their votes to the bill it is described as extreme. The truth is that the health care reform bill includes many Republican ideas. It is essentially the Massachusetts health reform plan implemented by Republican Mitt Romney with added cost controls. The Massachusetts plan, in turn, was a version of Republican John Chaffee’s counter-proposal to the Clinton health care proposal of the early 1990s.

The Cost of Doing Nothing

If no health care reform is enacted, what effects can we expect from doing nothing different? The Urban Institute and The Robert Wood Johnson Foundation recently looked into this. Here are some of their findings.

Health care costs and premiums are growing faster than personal incomes, if this trend continues,

• Fewer employers will offer group-coverage insurance because of the cost
• Fewer employees will take group-coverage offered because they can not afford it
• More people will be in the market for non-group coverage because fewer employers will offer coverage, but because of higher costs a smaller proportion of those people will purchase that coverage
• More people will enroll in Medicaid and the Children's Health Insurance Program (CHIP) straining government revenues and increasing pressure for higher taxes.

In 2019, health care spending for governments, employers, and individuals will increase $880B above current spending.

Between 2009 and 2019,

• Medicaid & CHIP spending will increase from $251B to $458B per year (an 82% increase)
• Uncompensated care will increase from $62B to $123B (a 98% increase). The combined increases in Medicaid, CHIP, and uncompensated care raise government spending by $268B
• Employer premiums payments will increase from $430B to $847B (a 97% increase), average premium per employee will increasing from $5,900 (11% of median family income) to $11,700 (19% of median family income)
• Individual & family spending will increase from $326B to $521B (a 60% increase), raising average out of pocket costs from $1200 to $1800 per person.

source: The Cost of Failure - The Urban Institute

http://www.urban.org/UploadedPDF/411887_cost_of_failure.pdf

The Importance of Health Care Reform

Health reform is the most important issue we face today. Period. It is, in fact, an existential issue.

I think this not because health care reform will save lives, although it will save somewhere around 20,000 to 30,000 lives a year (based on providing health care coverage to 31 million otherwise uninsured people, source:http://www.urban.org/UploadedPDF/411588_uninsured_dying.pdf and http://www.harvardscience.harvard.edu/medicine-health/articles/new-study-finds-45000-deaths-annually-linked-lack-health-coverage).

No, health care reform is an existential threat to us because health care costs are poised to bankrupt the Nation. Nearly all of the projected expansion of the Federal deficit in future years is caused by growing health care costs as illustrated in this chart which shows Federal spending as a percentage of GDP.

(source: http://www.cbo.gov/ftpdocs/102xx/doc10297/06-25-LTBO.pdf).

If we do nothing, the Medicare HI trust runs out of money around 2017. The Senate bill buys us some time: without finding any additional cost savings it adds 9-10 years of life to the HI trust (source: CBO). That is time we can use to develop cost saving strategies.

This is important not just for Medicare but for all of us. Health care costs are growing to such an extent that they threaten to bankrupt not just the Federal budget, but also the Nation's economy. Medicare is the canary in the coal mine: the problems faced by Medicare are the same problems faced by the rest of the health care system. If we do nothing, Medicare goes down first, but it will be followed by group health and then by the whole system. If we do nothing, employer premiums payments will increase from $430B to $847B per year (a 97% increase), average premium per employee will increasing from $5,900 (11% of median family income) to $11,700 (19% of median family income). As a result,

• Fewer employers will offer group-coverage insurance because of the cost
• Fewer employees will take group-coverage offered because they can not afford it
• More people will be in the market for non-group coverage because fewer employers will offer coverage, but because of higher costs a smaller proportion of those people will purchase that coverage
• More people will enroll in Medicaid and the Children's Health Insurance Program (CHIP) straining government revenues and increasing pressure for higher taxes. Medicaid & CHIP spending will increase from $251B to $458B per year (an 82% increase).

The Senate Bill Is Good Reform

So how can we stop this erosion? The Senate reform bill is a great place to start, and given the polarization and intransigence in Congress I think it is the only option available. The Senate health care reform bill goes a long way towards fixing our health care problems:

• It makes health insurance available to 96% of U.S. residents (under the age of 65)
• It opens Medicaid to many more people
• It makes health insurance more affordable
• It provides subsidies to help people buy insurance without spending more than a a percentage of their income (5% scaling up to 12% as incomes rise)
• It provides subsidies to small businesses to offer coverage to their employees.
• It exposes people to pricing signals but also limits their exposure with subsidies that confines their out-of-pocket expenses to a percentage of their income (a maximum of around 20%)
• It improves the insurance offered to people, mandating real coverage, minimum benefits, guaranteed enrollment, and it prohibits rescission
• It reduces the Federal budget by $132B over the next 10 years (source: http://www.cbo.gov/ftpdocs/108xx/doc10868/12-19-Reid_Letter_Managers_Correction_Noted.pdf)

And equally important, it includes scores of potentially cost-saving measures such as bundled payments, accountable care organizations, eliminating Medicare Advantage overpayments, and an independent Medicare payment advisory board.

Massachusetts Disaster?

A comment/complaint I often read is that health care reform won't work because the reform Massachusetts implemented in 2006/7 is a failure. The complaint usually continues that per capita health care costs in Massachusetts are now the most expensive in the Nation, so trying Massachusetts-style reform on a nationwide scale would be a disaster. This raises two questions:

1. Is the Massachusetts reform a good analogy for the Senate (or House) bill?
2. What has actually happened in Massachusetts?

Senate Reform and Massachusetts Reform

Is the Senate reform bill similar to the Massachusetts reform? Yes. The Senate bill is essentially the a refinement of the Massachusetts reform, but with added cost controls (this also applies to the House bill). Common, basic features are:

• Insurance market reforms
• Establish minimum requirements (a floor) for benefits
• Guaranteed issue (no pre-existing conditions or recision)
• Combines the individual and small group risk pools
• Individual mandate
• Include most of the population in the risk pool
• Income-based subsidies to help people purchase insurance
• Penalties for failure to purchase insurance with exemptions for financial hardship
• Create a marketplace where individuals and employers can compare plans and purchase coverage
• Pay or play for employers
• Require firms to offer employees health care coverage or pay a tax
• Exempts small employers
• Subsidies for small employers
• Expand availability of Medicaid.

The Massachusetts plan did not include any cost reduction steps, while the Senate bill includes trial measures such as bundled payments and accountable care organizations aimed at reducing cost growth. In addition, the Massachusetts plan did not address Medicare which is a Federal program.

What Did Reform Do In Massachusetts?

Do the people of Massachusetts like the Massachusetts reform? Yes.

Prior to enacting the reform measures, public opinion was 61% in favor of reform. After experiencing life with the reforms, that favorability grew to 69%. It was not just patients that like the results, 72% of primary care physicians and 70% of specialists also like the reforms.

Sources:

http://www.hsph.harvard.edu/news/press-releases/2008-releases/hsph-bcbs-poll-strong-support-for-ma-health-reform-law.html

http://healthcarereform.nejm.org/?p=2133

Did reform improve the availability of health care? Yes.

The percentage of the population uninsured dropped from 6.4% in 2006 to 2.6% in 2008 (the lowest rate in the country). The percentage of people who cited cost as an optical to receiving care also declined:

• For the uninsured, it declined from 86% in 2007 to 64% in 2008
• For those with insurance it declined from 37% in 2007 to 24% in 2008.

During that same time period, the percentage of firms offering health insurance to their employees increased as well:

• For firms with 3+ employees it increased from 73% to 79%
• For firms with 11-50 employees it increased from 88% to 92%

Source: http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/09/key_indicators_nov_09.pdf

Did reform make insurance more or less expensive? It depends.

The Association of Health Insurance Plans (AHIP), an industry trade group, periodically surveys it's members and estimates average premiums. The latest two surveys for individual policies were taken in 2006/7 and again in 2009: before Massachusetts reforms were in place and after the reforms were in place. During that time period, according to AHIP:

• The average premium for individual family coverage increased 9% Nationally but decreased 14% in Massachusetts
• The average premium for individual single coverage increased 14% Nationally but decreased 40% in Massachusetts

Prior to the reforms, budget analysts estimated an overall premium decrease of 24% in the non-group market.

• The surveys for small group insurance covered different (earlier) time periods with the latest survey taken before Massachusetts reforms were fully implemented

Source: http://www.ahipresearch.org/

How did reform impact the State's finances? Both positively and negatively.

State health care costs are around $400M higher than anticipated:

• Individuals participation grew faster than expected (around 220,000 signed up compared to the 140,000 that were expected)
• The recession cut State revenues.

On the other hand, uncompensated care payments (from the State to hospitals and community clinics) declined dramatically:

• The number of claims dropped by 38%
• The amount paid by the state dropped 41%.

Source: http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/09/key_indicators_nov_09.pdf

Are health care costs in Massachusetts more expensive than anywhere else? Probably.

At best, this is a logical (and reasonable) assumption, but the fact is that no one knows. The most recent state-level data on health care costs is for 2004. At that time, per capita costs in Massachusetts were the highest in the Nation (nearly 27% higher than the National average). The 2006/7 reform did not address health care costs, nor was there anything else the State did that would reduce costs. So it is probably reasonable to assume that Massachusetts remains the highest cost state in the Union. It is not reasonable, however, to assume that reform is a driver of that cost.

Dennis Kucinich

In fits of hyperbole, I sometimes describe myself as "one of those ultra-Liberals who thinks Dennis Kucinich is too conservative." But now that the National Journal has release 2009 Congressional rankings, I see that Kucinich is the 160th most Liberal member of the House of Representatives. What do I do now?