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.
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
Below, the details of the new bill, and my comments
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
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
- 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
- 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
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
- 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
- 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.