Federal Healthcare Update: What Direction Should It Take?

The nation is buzzing with a potential government-run Plan for Healthcare Reform on the horizon. Congress is currently discussing whether to create a Public Health Plan to compete with private insurance companies which advocates say would lower the cost and raise the quality of care. But how would it actually impact the cost, accessibility of health care? What is the debate in Washington D.C. and how, if passed, will US businesses and individuals be impacted?

In February of this year President Obama presented the following items as his Eight Principles for healthcare reform, principles he vowed to adhere to as the discussion of reform took to the floor:

1. Guarantee Choice. The plan should provide Americans a choice of health plans and physicians. People will be allowed to keep their own doctor and their employer-based health plan.
2. Make Health Coverage Affordable. The plan must reduce waste and fraud, high administrative costs, unnecessary tests and services, and other inefficiencies that drive up costs with no added health benefits.
3. Protect Families’ Financial Health. The plan must reduce the growing premiums and other costs American citizens and businesses pay for health care. People must be protected from bankruptcy due to catastrophic illness.
4. Invest in Prevention and Wellness. The plan must invest in public health measures proven to reduce cost drivers in our system—such as obesity, sedentary lifestyles, and smoking—as well as guarantee access to proven preventive treatments.
5. Provide Portability of Coverage. People should not be locked into their job just to secure health coverage, and no American should be denied coverage because of preexisting conditions.
6. Aim for Universality. The plan must put the United States on a clear path to cover all Americans.
7. Improve Patient Safety and Quality Care. The plan must ensure the implementation of proven patient safety measures and provide incentives for changes in the delivery system to reduce unnecessary variability in patient care. It must support the widespread use of health information technology with rigorous privacy protections and the development of data on the effectiveness of medical interventions to improve the quality of care delivered.
8. Maintain Long-Term Fiscal Sustainability. The plan must pay for itself by reducing the level of cost growth, improving productivity, and dedicating additional sources of revenue.
   

But following the passing of SCHIP and the healthcare inclusions in the Economic Recovery Plan, healthcare found itself less in the limelight than expected. Until now. The discussion and debate for healthcare reform is here, and everyone has something to say about it.

One area being discussed it the creation of federal or state exchanges. These exchanges pool large numbers of individuals and give them access to various health care plans so that they may enroll in the plan of their choice while risks and administrative costs can be widely spread. Employers would choose between paying into the exchange and buying insurance directly to cover their workers. Currently all the proposals receiving serious consideration in Congress allow employers to continue to insure their workers and dependents directly. The insurance exchanges are proposed as an alternative means for individuals and employee groups to purchase coverage. If there is a new government-run plan, it would be one of the options in those exchanges. Senate Finance Committee members discussed whether offering subsidizing health insurance could have negative implications for employer-provided health insurance coverage

In light of the Democratic proposals the other side of the aisle has presented solutions to the need for reform as well. The premise of the Republican plan for health reform is to move away from an employer-based coverage system by eliminating the tax exclusion at a certain level that employer-provided benefits now enjoy and instead giving individuals a tax credit with which to buy their own insurance on the open market.

Members of the GOP leadership and the party's "Health Care Solutions Group" held a press conference mid-June to unveil their proposal, which would rely heavily on tax credits and reform of entitlement programs to reduce the number of uninsured Americans. Republicans emphasized the high priority that their plan would not include the public insurance option that most Democratic proposals do. Instead, Republicans would provide people who don't have insurance from their employers with a tax deduction equal to the cost of their premiums, so they could buy the insurance themselves. The GOP blueprint also calls for employees of small businesses to band together to buy insurance through "association health plans”, which former president George W. Bush advocated during his term in office. And Republicans would implement medical malpractice reform, a topic that was a point of contention during Obama's recent address to the American Medical Association.

Within the Republican plan, the health care reforms outlined are designed to:

1. Make quality health care coverage affordable and accessible for every American, regardless of pre-existing health conditions.
2. Protect Americans from being forced into a new government-run health care plan that would: a) eliminate the health care coverage that more than 100 million Americans currently receive through their job; b) limit your choice of doctors and medical treatment options; and c) result in the federal government taking control of your health care.
3. Let Americans who like their health care coverage keep it, and give all Americans the freedom to choose the health plan that best meets their needs.
   Ensure that medical decisions are made by patients and their doctors, not government bureaucrats.
4. Improve Americans’ lives through effective prevention, wellness, and disease management programs, while developing new treatments and cures for life-threatening diseases.
   

As with any reform, fiscal debate lies at the heart of the proposed healthcare plans. How are the various advocates planning to fund their proposals?

The various Democratic plans that are emerging involve paying for part of expanded health coverage by trimming several hundred billions over 10 years from Medicare and Medicaid. Obama proposed limiting the growth of Medicare fee-for-service payments, taking hospitals and other health-care providers at their word that they will reduce costs. He also proposed cutting subsidies to hospitals that treat uninsured patients on the theory that such payments will decline as more people are covered through his plan. Furthermore, President Obama also called for reducing payments to drug companies that serve Medicare recipients. These are all ideas that are still being discussed.

President Obama argues that "These savings underscore the fact that securing quality, affordable health care for the American people is tied directly to insisting upon fiscal responsibility, and these savings are rooted in the same principle that must guide our broader approach to reform: We will fix what's broken, while building upon what works."

But many are arguing providing anything close to universal coverage will cost at least 1 trillion dollars over 10 years, and that will mean finding some new revenues. In House hearings earlier this month, Republicans claimed to have an independent estimate showing that the House health reform measure unveiled last week would cost more than $3.5 trillion over the next decade and cause 64 million people to lose their current, private insurance and buy into a government-run public plan. The House bill has yet to receive an official cost estimate from the Congressional Budget Office. House leaders have estimated the cost of the still incomplete measure at around 1 trillion dollars and asserted that it would provide coverage to 95 percent of Americans. The GOP analysis, by HSI Network, can be found here and here.

There is much discussion on feasibly increasing Healthcare revenue. President Obama has proposed limiting the itemized deductions of wealthy taxpayers; Senate Democrats are considering taxing some employer-provided health benefits; others are talking about taxing sodas.

The debate surrounding the proposed reform has been fierce.

Many have found concern with the “exchanges” proposal. An argument has arisen that unless the exchange is fiscally beneficial enough for a majority of employers to take advantage of it, organizations with a young, healthy work force will be inclined to buy insurance on their own, while those with higher-cost employees will go into the exchange's pool. Theoretically, this pattern would create an “adverse selection” in the pool. The pool would get stuck with a higher-risk population.

As of now an attractive solution for both parties does not appear likely. According to the Kaiser Family Foundation: “It has been clear for some time that if there is to be a deal on health reform in this Congress it will be a centrist deal, one that neither purists on the left nor the right will be truly enthusiastic about. It will build on the current system of employment-based insurance and public programs, contain a heavy dose of private insurance and market mechanisms and lots of delivery and payment reforms aimed at achieving future savings, and allow people to keep their current doctors, hospitals and insurance coverage if they want to. The Democratic majority in the Congress has little interest in the directions championed in the Bush years, but by the same token conservative Democrats and deficit hawks will be leery of a larger government role and will try to minimize future spending obligations.”

But a centrist solution, while not particularly appealing to either Party, is argued to be the safest route for America as a whole. It is thought that once a proposal is passed, depending on the specific clauses within, America’s healthcare system could dramatically slide one way or the other. Theoretically, if unconstrained, the public plan could drive private insurers out of business, setting off a political backlash from the healthcare industry as well as a majority of the public who could be adversely affected. On the other hand, if over-constrained, the public plan could go into a dramatically downward spiral as it becomes a dumping ground for high-risk enrollees, as its rates rise, and as it loses its appeal to the public at large.

The US Chamber issued the following statement on the conversation on healthcare: “The business community strongly supports reform that addresses delivery system shortcomings and delivers lower cost and better quality health care. Employer mandates, including requirements to pay or play are not the answer to the nation’s healthcare challenges. An employer mandate would undermine the ability to address the twin goals of health reform: coverage and affordability. Employer mandates, by their nature, limit flexibility and innovation; the foundation of voluntary employer provided health care.

“The creation of a government public plan option would inevitably result in a government-run health care system. We believe that market-driven health reforms are the best approach to reducing costs, promoting efficiency, wellness, and quality of care. Using convoluted subsidies, employer mandates, and legal structures to force people into a connector and then into a public government-run plan fails to tackle the underlying challenge of controlling costs, improving care, and expanding coverage.”

Creating a fair system of public-private competition is one hefty project in itself. Add into the mix a continued and heated debate from both sides of the aisle and the weight and difficulty of this policy development only intensifies. Both houses have expressed a desire to have a workable solution to the need for healthcare reform before the August recess. This fast paced policy advancement will surely be the hot topic of the summer.