Highlights from the Reconciliation Bill, and Maggie’s Comments on the Changes

Overall, the changes in the reconciliation bill will make the Senate bill more progressive—and fairer.

My prediction: the bill will pass. Those who oppose universal coverage are becoming angrier, louder, more abusive, and more frantic. This is because they realize that they are losing, and now they are just flailing about.

This evening (Thursday) I heard Bart Stupak acknowledge, on “Hardball with Chris Matthews”, that while the Democrats may not have the votes today, by Sunday, they could well have them. On this, I agree with Stupak.

Below, the details of the new bill, and my comments in red.

Under the new reconciliation bill:

• Low-income and middle-income families will have an easier time affording premiums. The tax credits for health insurance premiums are more generous for individuals and families with incomes between 250% and 400% of the federal poverty level (FPL)—i.e.  individuals earning less than $41,500,  or a family of three earning less than $70,400. When compared to the Senate bill, the legislation also cuts cost-sharing for individuals and families with incomes between 100% and 250% FPL.

Comment:  Research shows  that when a low-income family of four (for instance a family earning less than $22,000) is required to share in health care costs, too often they delay needed care.  For these families, even a $15 co-pay can be a barrier. Fifteen dollars will buy groceries for two dinners for a family of four (e.g. spaghetti with tomato sauce and bread).  Middle-income families who don’t have help from an employer also need the higher subsidies that the new bill provides.

• Six months after the bill is enacted, all existing health insurance plans are prohibited from imposing life-time limits on payouts or refusing to cover children suffering from pre-existing conditions.   Excessive waiting periods before insurance kicks in also will be banned, and insurers will be required to provide coverage for non-dependent children up to age 26 on their parent’s polices.  (Parents will pay extra for the coverage, but adult children will get better deals than many would on their own.) Beginning in 2014, group health plans will no longer be able to exclude adults based on pre-existing conditions. Annual limits on how much an insurer will pay out will be restricted beginning six months after enactment, and prohibited starting in 2014.

Comment: Limits on how much insurers will pay out annually or over a lifetime can condemn individuals to death. If you have the bad luck to be diagnosed with a very expensive disease that might require years of pricey treatments (MS for example, or childhood cancers) your insurance can easily “max out”—even though treatment that might cure you (in the case of some childhood cancers where we have been making great progress)-- or at least give you many additional years of life.

• The “Cadillac Tax” on expensive health insurance plans has been pushed back five years and won’t go into effect until 2018. The thresholds also have been raised: the tax will apply only to individual plans that cost $10,200 or more (up from $8,500) or family plans that fetch $25,500 (up from $23,000). Dental and vision plans would not be included.  Under the new bill, there is no special deal for unions.

Comment:  In my view, this is a positive change. As I have argued in the past, the Cadillac tax could hit middle-income families.

• While the Cadillac tax is rolled back, the Medicare tax for wealthy individuals earning over $200,000 and married couples who earn over $250,000 rises.  Today, they pay a 1.45% payroll tax on wages. The Senate bill would raise that tax to 2.35%. The reconciliation bill expands the tax to include investment income (dividends, capital gains, etc.) as well as earned income. It still applies only to individuals who show income over $200,000 and couples who report income over $250,000.

Comment:  This tax makes up for the cut-back and push-back on the Cadillac tax. In contrast to the Cadillac tax , this tax is limited to those at the very top of the income ladder. Unlike the middle-class, those earning over $200,000  have  enjoyed significant tax breaks and income hikes in recent years. They are in a much better position to afford the increase. It’s worth noting that other countries tax investment income to help fund healthcare.

• Medicare will save $200 billion by refusing to over-pay Medicare Advantage for-profit insurers. The bill will freeze  Medicare Advantage payments in 2011. Then, beginning in 2012, the provision reduces Medicare Advantage benchmarks relative to current levels. In high-spending areas, insurers will be paid 95% of what it would cost Medicare to care for patients. In low-cost areas, they will be paid 115% of what it would cost Medicare to provide coverage. (Note—this should encourage insurers to find more efficient hospitals and doctors in high-cost areas. Not all providers in high-cost areas are over-treating or over-charging.) The changes will be phased in over three, five, or seven years, depending on the level of payment reductions. The provision also creates an incentive system to increase payments to high-quality plans by at least 5%.  In addition, Medicare Advantage Plans would have to spend at least 85% of revenue on medical costs or activities that improve quality of care, rather than profit and administration.  Finally, the new Medicare Advantage policy applies evenly across the country—exceptions for Florida or other states have been eliminated.  This is another positive change. 

Comment:See these HealthBeat posts on Medicare Advantage here and here. Today, the majority of Medicare beneficiaries wind up paying more to cover  corporate welfare for Advantage insurers —and many of the “extras” that Advantage plans offer are  not medically  necessary. (At the same time there are well-established Medicare HMOS that are very efficient and doing a good job. Under the new bill, they would receive bonuses of at least 5%. (See my post on these HMOs here)

• Primary care physicians treating Medicaid patients will be paid  up to 100%  of Medicare rates beginning in 2013. Five stars! Today Medicaid pays only about 70% of what Medicare pays for the same services.  

Comment: There is no reason that doctors should be paid less when treating the poor. I just wish  this provision were going into effect immediately.

• Penalties for individuals who choose not to buy insurance become more progressive. Originally, under the Senate bill, the penalty ranged from $750 per year per person to $2,250 per family, or 2% of household income, whichever is greater. It would be phased in with the penalty reaching $750 for an individual or 2% of household income in 2016. The reconciliation bill lowers the dollar amount of the maximum penalty from $750 to $695, but raises the percentage of household income that a household would have to pay from 2% to 2.5% in 2016. Since households pay “whichever is greater” this makes the penalty more progressive; wealthier households would have to pay more.

Comment: I still think these penalties are too low. A young, healthy individual earning $70,000 a year would have little incentive to buy the insurance; he earns too much to qualify for a subsidy to help pay the premium, and in his income bracket a $750 penalty just isn’t that much money. But we need those young, healthy, affluent individuals in the insurance pool, or insurance will be too expensive for many families who aren’t quite poor enough to qualify for subsidies, but not quite rich enough to be able to afford comprehensive insurance with a low deductible.  I suspect that the penalties will be adjusted as we get closer to 2014 and have a better idea of what insurance will cost.

• Any employer with 50 or more full-time employees who does not offer health coverage would have to pay $2,000 per full-time employee if any of its full time employees receive federal subsidies to help pay for health coverage. Under the Senate bill, the employer paid only $750 per full-time employee. But the new bill offers a break for small employers-- those with 50 or more full-time workers can subtract the first 30 full time employees from the payment calculation (e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount).

Comment: This helps shield the smallest employers from large penalties while increasing penalties for larger employers. I suspect some amendment will be needed here to help small employers in labor- intensive businesses that have a very small profit margin. But the fact that we are talking about businesses with 50 full-time employees exempts many such businesses that have a large number of part-time employees (e.g. restaurants with 30 waiters working part-time, 30 hours a week). The danger is that, in order to avoid the penalty, employers will cut back hours for full-time employees so that they have fewer full-time employees, but this provision can be tweaked

• Mandatory Funding for Community Health Centers is raised to $11 billion over five years (FY 2011 – FY 2015).

Comment: Bravo! This is a major investment in public health.

• Nebraska would no longer be exempt from paying its share of the additional costs all states would incur as a result of expanding Medicaid.  But the new bill covers 100 percent of the increased Medicaid costs for all states until 2016. (After that, the federal aid ratchets down.)    In addition, the reconciliation bill also will allow an enhanced match to the 11 states that already cover childless adults who’s income is below 133% of the federal poverty level (the 11 states will begin receiving higher federal matching funds for this population.) This is good news for states that have been trying to do the right thing. (Hat-tip to Igor Volsky for pointing out this detail on Think Progress.) Under the Senate bill, Louisiana received additional Medicaid funds under a provision that provided extra money for states recovering from a statewide natural disaster. The Louisiana provision remains unchanged.  

Comment: Since the federal government failed to provide Louisiana with the help it needed following Katrina, it seems only fair to provide the state with additional help now.  And I’m glad to see all states receiving addition funding to help pay their share of Medicaid’s expansion.  (There was no reason to make an exception for Nebraska).

• Funding to fight waste, fraud and abuse is increased by $250 million over the next 10 years. The bill also lets the Secretary of Treasury share IRS data with HHS employees to help screen and identify fraudulent providers or providers with tax debts, and to help recover such debts. It also provides strict controls on the use of such information to protect taxpayer privacy.

• The industry fee on sales of brand name pharmaceuticals for use in government health programs is pushed up by one year to 2011, but the  revenue raised by the fees are increased by  $4.8 billion.

• The excise taxes on medical device manufacturers is delayed by two years to 2013.  Class I medical devices,  such eyeglasses, contact lenses, hearing aids, and any device of a type that is generally purchased by the public at retail prices for individual use are exempted from the tax.

• Funding for education is expanded.  For example, the bill provides $13.5 billion in mandatory appropriations to the Federal Pell Grant program. The legislation also amends the Income-Based Repayment program to cap student loan payments for new borrowers after July 1, 2014 to 10% of adjusted income, from 15% percent, and to forgive remaining balances after 20 years of repayment, from 25 years.  

Comment: This aid for students and their families belongs in the health care reform bill: we know that there is a very strong connection between lack of education and premature deaths from preventable diseases. By making this investment in education, the legislation recognizes that if we want to improve the health of the nation, we must invest in education, and public health.

Comments

[LS]

Just a correction, Maggie, I think maybe the coverage for children is through age 26, not up to?

[Maggie Mahar]

Pat S & 75441

Pat S.-- totally agree.

And, on the whole, I think the subisidies (as modified in the latest bill) will do the trick.

They may have to be adjusted--but many adjustments will have to be made as we get a better idea of how this will play out.

If penalties for those who don't buy insurance are not stiffened (substantially) a great many relatively affluent young and health people won't buy insurance.
That will make the pool much sicker and premiums much higher.

But I think that between now and 2014 Congress will
change the penalties. It's possible that, in addition to a finacial penalty, those who don't sign up for insurance will be told that they have to sign a document saying that they understand that, for three years, they will not be covered by the prohibiton against charging more for pre-existing conditions.

This means that if a young person is hit by a bus, and then needs care, he will get insurance, but his insurer will be able to charge him extraodinarily high premiums and co-pays--becuase he has a pre-existing condition.

This means that healther younger people will risk losing everything they have--savings, home, etc--
if they have the bad luck to become very sick or wind up in a very bad car accident.

This might well encourage more to take the risk of not having insurance more seriously.

[run75441]

Yeoman's work Maggie!

I have to disagree somewhat or at least until I can see the references to your stance. My 11%, 9.8%, 9.5% is straight from Obama's comparison of the three bills. The new House Reconciliation Bill on page 137 http://budget.house.gov/doc-library/FY2010/03.15.2010_reconciliation2010.PDF calls for a cap of 11%. I would be much happier if they changed it to 9.5%; but, I have yet to see that happen in the House. Page 2 here: http://www.whitehouse.gov/sites/default/files/rss_viewer/summary-presidents-proposal-final.pdf

I hope you are right and I am dead wrong.

[Pat S]

Maggie --

We are in agreement that the bill is far from perfect but that it offers very significant -- life saving in some cases -- benefits for tens of millions of Americans. I just thought your first red commentary made it sound like an impoverished family of four would not get adequate help, while in reality they will be tremendously benefited.

In the end, the most important benefit of this bill remains the redefinition of health care as a right, not a commodity, and the commitment by the federal government to making sure that all Americans get that right. This will set the framework for future important adjustments to American health care.

If the bill passes, this will be, as Churchill said, "not the end, or even the beginning of the end. But it is, perhaps, the end of the beginning."

[Don Levit]

Maggie:
I agree with you that the subsidies make the premiums more affordable.
With more affordable insurance, the newly insured would have the opportunity to utilize more benefits that heretofore were unaffordable.
Wouldn't that ability to access more benefits increase the premiums more rapidly in the short run than under the present environment?
Don Levit

[Maggie Mahar]

Pat--

I wasn't knocking the subsidies under the recon bill. I see them as an improvmement on the Senate bill.

But we still don't know waht isnurance will cost in 2014--this is why I think the subsidies may have to be raised.

That said, you make a good point that the family of four earning $22,000 up to $29,000 would be eligible for Medicaid.

But even under reform,it will be very hard for Medicaid patients to find specialist care (because specialists who care for (poor) Medicaid patients will continue to be paid 30% less than specialists who care for (older ) Medicare patients.

I would be much happier to see all Medicaid patients folded into Medicare (with Medicare fees paid to hospitals and docs.)

Right now, Medicaid patients get sub-par care.

You are entirely correct that 250% of the poverty level for a family of four -- at which point the responsibility for significant payments would kick in -- is $55,125, well over the median household income in the US.

And as you point out, " even with the somewhat less than ideal subsidies at income levels between 250% and 400% of poverty there would be very substantial reductions of maximum insurance payments and maximum total out of pocket in the range of about half of existing payments and risk."

As you note: "This program is not ideal, but would in fact provide free or nearly free care up to 130% of the poverty level and substantial (between 50 and 75%) savings for people well into upper middle class incomes."

I agree on all of these points. I think that, by and large, the reconciliation bill makes premiums affordable for low-income and middle-income to upper-middle-come customers.

But I do think the penalties for those who choose not to buy HC insurance are too low. Unless we raise them these subsidies will not be high enough make insurance affordable for middle-aged and older (55 to 65 year old Americans.)

[debt settlement]

This is horrible for the average household.

[Pat S]

Maggie --

On the first red paragraph:

The federal poverty guideline for a family of four is $22,050.

In the Senate Bill -- never mind any changes the House recommends -- a family of four with up to 130% of poverty level income ($29,326.50) would be eligible for Medicaid (as you say later 100% subsidized by federal payment.) Care would be essentially free for them.

The 250% of poverty level for a family of four -- at which point the responsibility for significant payments would kick in -- is $55,125, well over the median household income in the US.

However, even with the somewhat less than ideal subsidies at income levels between 250% and 400% of poverty there would be very substantial reductions of maximum insurance payments and maximum total out of pocket in the range of about half of existing payments and risk.

This program is not ideal, but would in fact provide free or nearly free care up to 130% of the poverty level and substantial (between 50 and 75%) savings for people well into upper middle class incomes.

In the end, about 12-15 million people would be added to Medicaid roles and another 20 million uninsured would receive substantial subsidies putting them in much better positions than today.

Could be better, but for those 30-35 million people it will be much better than now.

[Maggie Mahar]

Walter, Peter H., run 75441, Henry

Walter: Under reform all new insurance insurance plans would be required to offer free preventive care to their customers--begining six months after the bill is passed. In 2018, this applies to all private insurance plans.

As for Medicare, the plan eliminates co-payments for preventive services and exempts preventive services from deductibles under the Medicare program. This goes into effect beginning January 1, 2011.

There will be a high-risk pool for people who have been uninsured for 6 months.

Peter H--

The Democrats had a new plan for federal regulation of insurance rates but White House aides said Thursday that the Senate parliamentarian had ruled that the new insurance-rate regulation proposal didn't qualify to be included in that bill under rules for reconciliation.”

So they couldn't put it in the reconciliation bill. My guess is that it will be addressed under separate legislaiton.

As for insurance company denials of claims--I'm not sure what you mean. Insurers cannot deny a claim because the customer has exceeded an annual or life-time limit on payouts.

And under reform, the plans that insurers offer will have to cover a pretty rich package of "basic benefits". They won't be able to sell "Swiss cheese" plans filled with holes.

run 75441--

For people earnings under 4 times the Federal poverty level, premiums are capped at 9.5% of income (this applies to those earning 2.5 times up to 4 times the federal poverty level. ) Under the Senate bill they had been capped at 11% of income, so this an important change for lower-middle class and middle class families.

On medical loss ratios (MLRs): The bill requires plans in the individual and small group market to spend 80 percent of premium dollars on medical services, and plans in the large group market to spend 85 percent. Insurers that do not meet these thresholds must provide rebates to policyholders. Effective on January 1, 2011.

Henry-- Most of us want to live in a society where everyone is guaranteed coverage and no one is condemned to death because payouts for his medical care have exceeded a certain amount in a given year--or over the course of a lifetime.

Providing these guarantees to all Americans does cost money. But the cost will be spread out over the entire society.

If you now live in a state where insuers are allowed to refuse insurance to sick people--or are allowed to cut off insurance payments for a child who has cancer after the cost of the child's treatment reaches a certain amount then, yes, your insurance premiums are likely to be higher than they are now.

But you could consider moving to a developing country where children die daily for lack of medical care. Your premiums would probably be lower.

[Walter Ballin]

Maggie, Another question that I have is that under the reconciliation package, will people on Medicare no longer have to pay co-pays and deductibles for preventative care and will that be effective immediately? That also was the case under both the House and Senate bills before Scott Brown got Ted Kennedy's seat.

[Walter Ballin]

Maggie, Under the reconciliation bill, will people who have been turned down for insurance or medical treatment in the past be able to go into a high-risk pool and will they be subsidized? That was the case in the House and Senate bills before Scott Brown won Ted Kennedy's seat.

[Peter H]

Maggie,

Are there Rate regulations or limits to insurance co denials of claims in this bill ?

[Henry]

What an absolute bunch of garbage. With no lifetime limits and guaranteed coverage plan on health insurance rates similar to New Jersey!

[run75441]

Hi Maggie:

Did they drop the 11% to 9.8% (senate) or 9.5% (Obama) as the maximium amount to be paid in premiums? MLRs still in the bill?