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June 26, 2009

Competing Versions of National Health Care Reform Emerge in Washington—An Update of the Politics and the Policies

The Politics

Significant action occurred in Washington over the past several weeks, as both the Senate and the House move closer to taking action on what could emerge as final national health care reform legislation.

The first committee to take decisive action was the Senate HELP (Health, Education, Labor, Pensions) Committee, chaired by Senator Edward Kennedy (D-MA) (and led by Senator Chris Dodd (D-CT) in Senator Kennedy's recent absence). Shortly after releasing legislative language (outlined below), the HELP Committee began the process of receiving amendments to the bill and holding hearings to "mark-up" the bill. This process resulted in over 380 amendments and full-day hearings over the past week to get the bill in final form. Even without language or amendments relating to a public plan or other issues that were not included in the HELP bill, we expect these hearings to continue through the current week. The legislation was dealt another blow when, despite the bill's silence on significant issues, the Congressional Budget Office (CBO) "scored" the bill at costing over a trillion dollars while providing coverage to only sixteen million new insured. A bad "score," or cost-estimate, from the CBO is difficult to overcome and presented public and political issues for the Committee as the hearings began.

Noting the difficulties facing the HELP Committee from a budgetary and political perspective, the Finance Committee tempered its legislative schedule and instead of releasing legislative language last week, it continued to work on the bill to gain bipartisan support and ease the budgetary impact over the course of the week. Given the timing of the 4th of July recess, should the Finance Committee fail to release language within the next 24 hours, hearings to "mark-up" its bill will likely fall to after the recess.

The Policies

Draft Language Released for Senate HELP Committee's Health Reform Bill

The draft legislative language for the Senate HELP Committee's bill proposes several insurance market reforms for both group and individual markets. The proposed reforms would:

• Prohibit plans from imposing preexisting condition exclusions;

• Prohibit plans from varying premiums based on health status, gender, class of business, or claims experience;

• Require plans to accept any individual or employer that applies for coverage;

• Proscribe plans from establishing annual or lifetime limits; and

• Require plans to provide rebates to enrollees when "non-claims" costs exceed specified thresholds.

Other significant provisions of the draft legislation would establish an individual coverage requirement, provide premium assistance to individuals and families with incomes up to 500 percent of the federal poverty level, expand Medicaid eligibility to 150 percent of the federal poverty level, and create American Health Benefit Gateways in order to facilitate the purchase of health insurance.

The Senate HELP Committee draft bill also includes a notable provision that would establish a national voluntary longterm care insurance program, the CLASS Program, to provide cash benefits in order to meet the needs of individuals who have functional limitations. The proposal is a revised version of S. 697, the "Community Living Assistance Services and Supports (CLASS) Act," which was introduced by Senator Edward Kennedy in March 2009. The proposed CLASS Program would be funded with premium contributions collected through payroll deductions. Employers would be permitted to automatically enroll employees, and employees would be allowed to opt out of the program.

As mentioned, the HELP Committee draft bill is silent on several major issues. The bill indicates in several areas that major components of the legislation are still being discussed and have yet to be made public, including a government-run health plan, the responsibility of employers in any plan, non-discrimination in health care provisions, and biologics.

House Chairmen Release Outline for "Tri-Committee" Health Reform Proposal

The Chairmen of the House Energy and Commerce Committee, the House Ways and Means Committee, and the House Education and Labor Committee recently released an 850-page health care reform bill. The proposal has been characterized as a "tri-committee" product since the chairmen of all three committees have been working to develop a unified proposal that they plan to bring to their respective committees in the next few weeks. Provisions include:

• A government-run health insurance plan and a health insurance exchange with rates tied to Medicare for first three years;

• Insurance market reforms that would prohibit preexisting condition exclusions, prohibit rating based on health status, gender, or occupation, and strictly limit premium variation based on age;

• Premium assistance for individuals and families with incomes between Medicaid eligibility and 400 percent of the federal poverty level;

• An individual coverage requirement, with exceptions for hardship;

• A national exchange (with options for state or regional exchanges) for individuals or employers with up to 10 employees in year one; individuals or employers with up to 20 employees in year two; and eligibility in the discretion of the Health Choices Commissioner in year three and beyond;

• Creation of a new federal agency—the Health Choices Administration—that would establish qualified health benefit standards and manage the national exchange;

• A small business tax credit for firms that provide employee health coverage;

• A pay-or-play requirement for employers (eight percent payroll penalty), with space for an exemption for small, low-wage firms;

• Reductions in Medicare Advantage funding to 100 percent FFS with quality potential upside; and

• General delivery system reforms with a focus on outcomes and a new methodology for determining Medicare physician payments.

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