What the final health care bill should look like

I argued in my last post that we should stay the course and make the final bill as good as possible. This mostly means replacing some provision in the Senate bill with provisions form the House bill in four areas. I’ll discuss them and then turn to some good features of the Senate bill we want to keep.

1. Make health care affordable for people without employer-based coverage

The first problem is that the subsidies for health insurance in Senate bill—which we call the affordability provisions—are not good enough. We want the final to retain the best from the House and Senate bills.

Low- and moderate-income families can’t afford the Senate bill: For example, a family of 3 at 225% of the federal poverty line that earns $41,000 a year will pay an average of $7,000 a year for health care, or 17% of their income, under the Senate bill. This is $2,134 more than under the House bill which holds average costs to 11% of income. That family could pay a maximum of $9,000 a year on health care, $2,175 more than under the House bill.

On the other hand, middle-income families can’t afford the House bill: For example, a family of 3 that earns $70,500 a year will pay an average of $12,166 a year, or 17% of their income, under the House bill. This is $1,339 more than under the Senate bill which would reduce cost to 15% of income. They could pay a maximum of $18,250 a year, $3,419 more than under the Senate bill.

So, what we want is for Congress to enact the House affordability provisions for low-and moderate-income families and the Senate affordability provisions for middle-income people.

2. Make health care affordable at work

The House approach requires all but the smallest employers to either provide good insurance or pay up 8% of payroll in taxes. This is the most equitable approach. We want to encourage employers to offer insurance to their employees or pay their fair share of the cost of insuring them.

Under the Senate approach, employers are not required to contribute to the cost of coverage for all employees. Instead, employers only pay a fine if their full-time employees receive subsidies for health insurance. This will not do as much to encourage employers to provide insurance for their employees. The Senate bill creates also incentive for Employers to shift workers from full to part-time employment. And, because there are no minimum benefit standards for employers that do provide coverage, employers could avoid a find by offering barebones, high-deductible plans and charging their workers up to 10% of their wages for this terrible coverage.

The House bill is far better. All but the smallest businesses will contribute something for all of their workers, including part-time employees. Eleven million more Americans will get coverage at work compared to the Senate bill. There is a standard for good benefits. And the employer tax will raise more than $100 billion in revenue to assist those not receiving employer-based coverage.

 

So we want the House provisions on employer responsibility in the final bills.

 

3. Don’t tax health care benefits for middle-class families

The Senate bill includes an excise tax on employer sponsored health insurance benefits that are supposedly to costly. This is sometimes called that a tax “Cadillac” health insurance plans. But that’s not really want this tax is. It would, adversely impact tens of millions of middle-class families and one-third of all insurance plans, resulting in benefit cuts, increased premiums and out-of-pocket costs, and lower wages. The benefits that labor unions have worked so hard to win would be reduced. And the tax would be especially felt by people who live in states like Pennsylvania where health care costs—and thus insurance premiums—are higher than the national average.

Instead of the excise tax, Congress should raise revenues on those who can most afford to pay, those who earn $250,000 or more, as President Obama promised. This could be done by some combination of:

Adopting House millionaires’ surcharge which raises $460 billion from the richest 0.3% of Americans;

Applying the Medicare Hospital Insurance tax to earned and unearned income for those who earn more than $250,000; or

 

Adopt the President’s proposal to lower income tax deductions for those above $250,000.

 

4. Hold insurance companies accountable

The House bill includes a choice of a public option for everyone, federally-run exchanges, and strong consumer protections – regulations on insurers to hold them accountable. The Senate bill falls far short in a number of areas:

• It has no a public option which will lead to higher premiums because private insurers won’t have to compete with a plan that puts our health ahead of profits.
  
• It puts states instead of the federal government in charge of setting up and running the new Exchanges. This will be costly for the states and result in weak consumer protections in states in which there is political opposition to reform from governors.
  
• It allows insurers to set an annual cap on benefits, which increases the risk of medical bankruptcy.
  

So we want the final bill to:

• Give everyone in the exchanges the choice of a public option – as the House does.
  
• Enact strong consumer protections, including no limits on annual and lifetime benefits – as the House does – and require that insurers spend 90% of revenues on health care.
  
• Adopt a federally-run exchange with the ability of states to assume responsibility if they can guarantee consumer protections as the House does.
  

Good provision in the Senate bill which we want to see in the House bill.

1. The Senate bill does not include the Stupak amendment. Under it, people will be able to purchase insurance in the Exchange that covers abortion. While federal funds will not be used to subsidize the part of any insurance plan that covers abortion, people who choose such a plan will be able to get tax credits for it.

 2. The Senate bill may have a requirement that private insurers spend a certain percentage of their premiums on health care rather than administrative and marketing expenses or profits. We believe that the final bill should have a “medical loss ratio” be no less than 90%. This provision will reduce bloated insurance company profit and lower premiums.

3. The Senate bill has some provisions that will make it easier to create new health care payment and delivery systems in Medicare, which will improve health care for our seniors while reducing costs, and provide a model for private insurance companies to follow.