News & Politics

Why Congress' Health Care Bills Are Better Than You Think

The health care bills wending through Congress are getting a bad rap. And the major culprit is the Congressional Budget Office, and its chief, Doug Elmendorf.

Many progressives are expressing deep disappointment with the health reform legislation now moving through Congress.

Some suggest that some legislators made deals with lobbyists and let them write the bills. Others complain that both the subsidies and the penalties are too low. Still others don't like the fact that states can "opt out" of the public insurance option and decide not to offer "Medicare E" -- Medicare for everybody.

Finally, many ask: "Why can't everyone sign on for the public plan in 2013? Why do we have to wait until 2013? Why can't they roll out universal coverage next year?"

Normally, I would be among the first to critique the bills. By temperament and training, I'm both a skeptic and a critic.

But in this case, I think it is important to recognize that we cannot expect this first piece of health reform legislation to be anything but wildly imperfect. In fact, I'm impressed by the progress Washington has made in just 10 months.

I've been watching the struggle for health care reform since the early 1970s, and compared to what has happened over the past 39 years, this is mind-boggling.

I also believe that those who favor overhauling our health care system should send a strong signal to legislators: We support you for having come this far. We realize that you have three yearsto strengthen, change and refine the plan before rolling it out in 2013.

What Has Been Accomplished So Far: Affordability

What is astounding is that this Congress has made as much progress as it has. We may have a new administration in the White House, but we do not have a brand-new group on the Hill.

The majority of our legislators are moderates; many are conservatives. Nevertheless, a sufficient number have found the will to stand up and back changes that would make health care affordable for millions of poor, working-class and middle-class Americans.

For example, under the House bill, a family of three making $32,000 a year would pay $1,360 in annual premiums for good, comprehensive coverage; under the Senate Finance Committee bill, that family would be asked to lay out $2,013. Today, without reform, if that family tried to buy insurance, it would find that the average plan costs $13,500. For this household, the current legislation makes all the difference.

Too often, the press suggests that such a family would be expected to pay $10,000 out of pocket to cover co-pays and deductibles. That just isn't true.

Even if the entire family were in an auto accident and racked up $200,000 in medical bills, at their income level, the House bill caps out-of-pocket expenses at $2,000 a year. Under the Senate Finance bill, the family would have to pay $4,000.

Moreover, under both bills, there are no co-pays for primary care. Even private insurers cannot put a $25 barrier between a family and preventive care.

Moving up the income ladder, a median-income household earning roughly $55,000 would pay premiums of $4,300 to $6,500 -- depending on whether the Senate Finance bill or the more generous House bill sets the terms.

Without legislation, they too would face a $13,500 price tag -- and that is if they could get a group rate. If they are buying insurance on their own, coverage could easily cost $16,000.

For self-employed workers, early retirees and those who work for (or own) a small business, the legislation offers major savings.They will be able to buy coverage on the Insurance Exchange, where they would suddenly become part of a group -- which makes their premiums much lower.

Whether rich or poor, this is great news for anyone who works for himself, retired early (voluntarily or involuntarily) or is part of a small firm.

Granted, the legislation now on the table still doesn't make insurance affordable for many Americans at the upper edges of the middle class -- or the upper class. They don't qualify for subsidies. But, as I discuss below, the legislation does point the way to lowering their premiums.

Before reform becomes a reality in 2013, I am convinced that this will happen, in part because it must. We can no longer ignore the waste, inefficiency and pure fraud in our health care system. There is absolutely no reason why we should pay so much more for health care than any other nation in the developed world.

And at least the current legislation protects these more affluent households from medical bankruptcy. No matter how much a family earns, they cannot be asked to pay more than $10,000, out of pocket, in a given year. For households that have savings and property to protect, this means that they don't have to worry about being wiped out by a medical disaster.

Even if you and your family are in that car accident that leads to $200,000 in doctors' and hospitals bills, you will owe only $10,000. In that situation, doctors and hospitals will let you pay off your bills over time, because they know you can. You won't be forced into bankruptcy court. This represents an enormous step forward.

In addition, under reform, private insurers will not be able to put a cap on how much they will pay out to you and your family, over the course of a year or over a lifetime. If tragedy strikes and a child needs six or seven years of cancer treatments, your insurance will not "run out."

For some families, this one provision will mean the difference between being able to care for their child and financial ruin (coupled with the suspicion that, if they had just had more coverage, they might have been able to save their child).

Moreover, in the very first year of reform, the public plan will offer less expensive, higher-quality coverage to uninsured Americans, the employees and owners of small firms, and those who now buy their own insurance in the private sector.

Congressional Budget Office Director Douglas Elmendorf has been spreading misinformation about the government plan, asserting that only 20 percent of those who are eligible for the Exchange will choose it. His offers no evidence for this claim -- just a string of "probablies."

He then argues that despite the fact that its administrative costs will be far lower than those of private insurers, the public plan will cost more than comprehensive private insurance. This theory is based on the unfounded assumption that only one-fifth of Exchange shoppers will pick the government option, coupled with speculation that those running the public plan will make no effort to control costs and utilization.

For peculiar reasons that I don't fully understand, progressives have been listening to Elmendorf's numbers. They seem to forget his past: He was mentored by Martin Feldstein, known as the dean of conservative economists. Elmendorf first made his mark in Washington by helping to quash the Clintons' hopes for health care reform.

Coverage Denial Is Forbidden

Finally, under the House and Senate reform bills, insurers will no longer be able to deny coverage, or charge a customer more, because of a pre-existing condition.

If you've begun to take that idea for granted, keep in mind that the Republican's recent 11th-hour proposal for reform "gives the insurance industry more leeway" as the Wall Street Journalput it yesterday. (Media Matters points out that this WSJ story disappeared from the paper's Web site sometime last night.) Under the Republican proposal, insurers would be able to take pre-existing conditions into consideration.

House Speaker Nancy Pelosi's health care reform fact sheet offers two outrageous examples of just how easy it is for insurers to deny coverage today:

  • Peggy Robertson: The Colorado mother of two was denied health coverage because she had a C-section in 2006. The insurance company told her if she got "sterilized" she would be eligible for coverage.
  • Christina Turner: After being sexually assaulted in Florida, Turner followed her doctor's orders and took a month's worth of anti-AIDS medication as a precautionary measure. She never developed an HIV infection. Months later, when shopping for new health insurance coverage, Turner was repeatedly denied coverage because of the precautionary anti-HIV treatment she received after being raped.

Today, in most states, this could happen to anyone. (I am fortunate to live in New York, where we have community rating, so I don't have to worry about pre-existing conditions. My employer provides excellent insurance, with no annual or lifetime caps, so the current reform legislation would probably have no immediate effect on my life.) We all should recognize that the bills on the table would change the lives of millions of Americans, giving them the security they don't have today.

Progressives cannot let this opportunity slip through our fingers because we are so busy critiquing the legislation -- and arguing with each other. The Wall Street Journal Online reports that Senate Majority Leader Harry Reid has begun to warn that the Senate may not be able to complete the legislation by the end of this year.

Given all of the criticism he has faced, Reid could be losing heart. After all, conservatives continue to argue that legislators like Reid will be punished at the polls. Congressmen who have been pushing for reform need our encouragement. Progressives should continue to make it clear that the majority of Americans want reform -- and a public option -- even if the legislation is far from perfect.

Next year, the 2010 election campaigns will be in full swing. Fearful of losing, some members of Congress will begin to back away from change, so it is critical that broad reform legislation is passed this year.

Over the next three years, it can be amended as the crucial details are fleshed out. Anyone who thought that Congress would be able to overhaul a $2.6 trillion industry with just one bill was, I submit, terribly naïve.

What Remains To Be Done In the Next Three Years

There is so much to be done to lay the groundwork for a reformed system -- this is one reason reform cannot be implemented until 2013:

  • Congress must figure out how to regulate the private insurance industry. This will require enormous cunning.
  • Reformers will have to find a way to stiffen the penalties for those who choose not to buy insurance, without alienating young, healthy voters. This is a job for a charismatic president.
  • Legislators must map out how the Insurance Exchange will work.
  • They also will need to come up with a formula that will adjust for risk if one plan winds up with a larger share of poor and sick customers. (Some fear that this will happen to the public plan, so this, too, is a crucial detail.)
  • Finally, and perhaps most importantly, Medicare needs time to begin eliminating waste in the system -- saving billions of health care dollars while simultaneously lifting the quality of care. In fact, while all eyes are focused on the legislation, Medicare already has begun putting its own house in order.

What the Current Proposed Public Plan Offers

What many reformers don't seem to understand is that when the public plan begins to negotiate fees with providers in 2013, Medicare fees for some very expensive services will be significantly lower than they are today, while reimbursements to primary care doctors will be substantially higher.

Medicare already has announced plans to cut fees for CT scans and MRIs by as much as one-third and has proposed trimming fees to cardiologists by 6 percent next year. Meanwhile, it would hike fees for primary care physicians by 4 percent.

Congress has 60 days to respond, or the changes take effect Jan. 1. Over the next three years, we can expect more changes in the fee schedule. And private insurers will follow Medicare's lead. As their representatives explained to the Medicare Payment Advisory Commission (MedPAC), they just want Medicare's actions to provide political cover for their own.

In other words, the public plan will be negotiating fees with providers in a very different, less expensive and more rational context.

This is another reason why public-plan premiums will be significantly lower than the CBO's Elmendorf suggests.

Over the next three years, Medicare will be realigning financial incentives to reward preventive care and management of chronic diseases, while reducing payments for overly aggressive tests and treatments that have no proven benefit -- and penalizing hospitals that don't pay enough attention to medical errors. In the process, Medicare will be conserving health care dollars while protecting patients from needless risks.

As President Barack Obama has promised, Medicare cuts can make health care safer and more affordable for everyone -- including the upper middle class. Because most private insurers will mime Medicare's efforts to reduce overpayment, the cost of care will come down for everyone.

The public health insurance plan will incorporate Medicare's reforms, and it will have clout. Seven percent of Americans now buy their own insurance in the private sector market. Most are neither poor nor sick. (If they were, they wouldn't be able to purchase insurance.) More than half earn over $55,000. They will be able to go into the Exchange and sign up for the public plan.

Other middle-class self-employed Americans who cannot afford to buy individual insurance will join them in the Exchange, where they will automatically become part of a group. In addition, a large share of relatively young Americans (age 25-34) are uninsured. Most are relatively healthy. No one knows how many will choose the public plan, but since it will have much lower administrative costs than private-sector plans, it will be less expensive. This should make it attractive to younger Americans.

Finally, even if the Senate's opt-out provision for states remains in the final health care reform bill, states will not opt out. It would be too difficult for politicians to try to explain to voters why they cannot have access to a government plan that will be able to offer comprehensive insurance for less than what they pay for private insurance.

The Enemy of the Good

If there ever was a time to avoid the traps of perfectionism, it's now. As the old saying goes, don't let the perfect be the enemy of the good.

And there's a lot that's good in the bills coming out of the House and Senate. No, they're not perfect, but they offer a path to even better reform in the future while improving the lives and health care outcomes for millions of Americans. And that is all to the good.

Maggie Mahar is a fellow at the Century Foundation and the author of Money-Driven Medicine: The Real Reason Health Care Costs So Much (Harper/Collins 2006).
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