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.

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

  1. 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?

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

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

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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.)

  9. 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

  10. 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.”

  11. 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.

  12. 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.

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