Understanding the Kennedy health care bill

Understanding the Kennedy health care bill

Over the weekend a draft of Senator Kennedy’s (D-MA) health care bill leaked. After playing with Adobe Acrobat, here is the text of the draft Kennedy bill as a text file (173 K), and as a single Acrobat file (3.4 MB). Update: I fixed the broken link to the PDF. Unlike the leaked version, both of these are searchable.

Calling it the “Kennedy” bill is something of an overstatement. Senator Kennedy chairs the Senate Health, Education, Labor, and Pensions committee, and his staff wrote the draft. By all reports, however, Chairman Kennedy’s health is preventing him from being heavily involved in the drafting. Senator Reid has designated Senator Chris Dodd (D-CT) to supervise the process, but as best I can tell, it’s really the Kennedy committee staff who are making most of the key decisions. For now I will call it the Kennedy-Dodd bill.

As the committee staff emphasized to the press after the leak, this is an interim draft. I assume things will move around over the next several weeks as discussions among Senators and their staffs continue. This is therefore far from a final product, but it provides a useful insight into current thinking among some key Senate Democrats.

Update: I now have a three-page outline of the House Democrats’ health care bill. I have a new post which contains all of the content below, and compares it to the House bill. If you read the new post, you’ll get two for the price of one: Understanding the House Democrats’ [and Kennedy-Dodd] health care bill[s].

Here are 15 things to know about the draft Kennedy-Dodd health bill.

    1. The Kennedy-Dodd bill would create an individual mandate requiring you to buy a “qualified” health insurance plan, as defined by the government. If you don’t have “qualified” health insurance for a given month, you will pay a new Federal tax. Incredibly, the amount and structure of this new tax is left to the discretion of the Secretaries of Treasury and Health and Human Services (HHS), whose only guidance is “to establish the minimum practicable amount that can accomplish the goal of enhancing participation in qualifying coverage (as so defined).” The new Medical Advisory Council (see #3D) could exempt classes of people from this new tax. To avoid this tax, you would have to report your health insurance information for each month of the prior year to the Secretary of HHS, along with any such other information as the Secretary may prescribe.”
    1. The bill would also create an employer mandate. Employers would have to offer insurance to their employees. Employers would have to pay at least a certain percentage (TBD) of the premium, and at least a certain dollar amount (TBD). Any employer that did not would pay a new tax. Again, the amount and structure of the tax is left to the discretion of the Secretaries of Treasury and HHS. Small employers (TBD) would be exempt.
    1. In the Kennedy-Dodd bill, the government would define a qualified plan:
        1. All health insurance would be required to have guaranteed issue and renewal, modified community rating, no exclusions for pre-existing conditions, no lifetime or annual limits on benefits, and family policies would have to cover children up to age 26.
        1. A qualified plan would have to meet one of three levels of standardized cost-sharing defined by the government, gold, silver, and bronze. Details TBD.
        1. Plans would be required to cover a list of preventive services approved by the Federal government.
        1. A qualified plan would have to cover “essential health benefits,” as defined by a new Medical Advisory Council (MAC), appointed by the Secretary of Health and Human Services. The MAC would determine what items and services are “essential benefits.” The MAC would have to include items and services in at least the following categories: ambulatory patient services, emergency services, hospitalization, maternity and new born care, medical and surgical, mental health, prescription drugs, rehab and lab services, preventive/wellness services, pediatric services, and anything else the MAC thought appropriate.
        1. The MAC would also define what “affordable and available coverage” is for different income levels, affecting who has to pay the tax if they don’t buy health insurance. The MAC’s rules would go into effect unless Congress passed a joint resolution (under a fast-track process) to turn them off.
    2. Health insurance plans could not charge higher premiums for risky behaviors: “Such rate shall not vary by health status-related factors, … or any other factor not described in paragraph (1).” Smokers, drinkers, drug users, and those in terrible physical shape would all have their premiums subsidized by the healthy.
    1. Guaranteed issue and renewal combined with modified community rating would dramatically increase premiums for the overwhelming majority of those Americans who now have private health insurance. New Jersey is the best example of health insurance mandates gone wild. In the name of protecting their citizens, premiums are extremely high to cover the cross-subsidization of those who are uninsurable.
    1. The bill would expand Medicaid to cover everyone up to 150% of poverty, with the Federal government paying all incremental costs (no State share). This means adding childless adults with income below 150% of the poverty line.
    1. People from 150% of poverty up to 500% (!!) would get their health insurance subsidized (on a sliding scale). If this were in effect in 2009, a family of four with income of $110,000 would get a small subsidy. The bill does not indicate the source of funds to finance these subsidies.
    1. People in high cost areas (e.g., New York City, Boston, South Florida, Chicago, Los Angeles) would get much bigger subsidies than those in low cost areas (e.g., much of the rest of the country, especially in rural areas). The subsidies are calculated as a percentage of the “reference premium,” which is determined based on the cost of plans sold in that particular geographic area
    1. There would be a “public plan option” of health insurance offered by the federal government. In this new government health plan, the federal government would pay health care providers Medicare rates + 10%. The +10% is clearly intended to attract short-term legislative support from medical providers. I hope they are not so naive that they think that differential would last.
    1. Group health plans with 250 or fewer members would be prohibited from self-insuring. ERISA would only be for big businesses.
    1. States would have to set up “gateways” (health insurance exchanges) to market only qualified health insurance plans. If they don’t, the Feds will set up a gateway for them.
    1. Health insurance plans in existence before the law would not have to meet the new insurance standards. This creates a weird bifurcated system and means you would (probably) be subject to a different set of rules when you change jobs.
    1. The bill does not specify what spending will be cut or what taxes will be raised to pay for the increased spending. That is presumably for the Finance Committee to determine, since it’s their jurisdiction.
    1. The bill defines an “eligible individual” as “a citizen or national of the United States or an alien lawfully admitted to the United States for permanent residence or an alien lawfully present in the United States.”
  1. The bill would create a new pot of money for state gateways to pay “navigators” to educate people about the new bill, distribute information about health plans, and help people enroll. Navigators receiving federal funds “may include … unions, …”

This would have severe effects on the more than 100 million Americans who have private health insurance today:

    • The government would mandate not only that you must buy health insurance, but what health insurance counts as “qualifying.”
    • Health insurance premiums would rise as a result of the law, meaning lower wages.
    • A government-appointed board would determine what items and services are “essential benefits” that your qualifying plan must cover.
    • You would find a tremendous new disincentive to switch jobs, because your new health insurance may be subject to the new rules and would therefore be significantly more expensive.
    • Those who keep themselves healthy would be subsidizing premiums for those with risky or unhealthy behaviors.
    • Far more than half of all Americans would be eligible for subsidies, but we have not yet been told who would pay the bill.
    • The Secretaries of Treasury and HHS would have unlimited discretion to impose new taxes on individuals and employers who do not comply with the new mandates.
  • The Secretary of HHS could mandate that you provide him or her with “any such other information as [he/she] may prescribe.”

I strongly oppose this bill.

Update: If this topic interests you, I highly recommend Jim Capretta’s blog Diagnosis.

(photo credit: kennedy.senate.gov)

383 responses

  1. What a nightmare! Is this what the Obama administration is proposing?

    If this is the Administration bill, it will make the US once again the most left leaning government of the Western world….

    The Right won yesterday’s Euro elections. Sarkozy and Obama mix about as well as oil and water….

    Maybe the solution is for Freedom-loving Americans and US corporations to move to the EU and leave the socialism with Obama on the left side of the Atlantic!

    • first… I'd just like to say that, Europe has a very different government than we do, there is not liberal, or democrat… the Right doesn't exist in Europe, and by putting the "american" way on every single country in the world, you're just proving how very "american" you are… don't think for a minute that the Europeans think or have the same political beliefs as americans do, I live in europe, and guess what? we like obama… all of my friends and family, and pretty much every european I know, would have voted for him… and unless you're extremely un-informed, you must know that this bill is proposing something very similar to what we in Europe already have for healthcare!!!
      oh, and please, don't come to the EU if you don't want "socialism" cuz guess what? Germany is a socialist government, Holland is a socialist government, belgium, france, switzerland, poland, greece, austria… you may want to do a little more research before you make such an ignorant statement

    • You have to know when Castro praises this garbage and declares that the US should have done this years ago to be on a par with Cuba there is something seriously wrong. Yeah right, I have always wanted to go to Cuba!! Starvation and poverty, and corruption are high on my list.
      As far as voting for Obama, numbers don't make it right. I know people who voted for him too, but can't say why other than he was "change that we could believe in" whatever that means. The people who believe this should spend less time extolling the virtues of communism/socialism and pick up a copy of the Constitution. This country was founded on LIMITED government and individual accountability NOT The nanny state gone wild with hoards of sheeple charging off a cliff blathering about change. Just remember in the words of Margaret Thacher: "The probllem with socialsim is that it always fails because you eventually run out of other peoples money to spend"

  2. Pingback: Instapundit » Blog Archive » KEITH HENNESSEY: Understanding the Kennedy Health Care Bill….

  3. My lord, the Kennedy-Dodd bill reads like a script for a gothic horror film. As I read KH’s summary, the little hairs on the back of my neck stood at attention.

    Keith, could you maybe explain what in the world these people are thinking?

    If I’m not mistaken, this whole idea is cribbed from the usual pattern of agency creation. The one I’m most knowledgeable about (the EPA) began with the Clean Air Act and other “Clean X” bills, which essentially said, “Agency sets the standards, states develop State Implementation Plans, which have to be cleared by Agency, or else Agency just imposes a State Plan.” The Kennedy-Dodd plan is rooted in the same notion: “qualified” packages are the agency standards, with all pretensions to federalism or competition masking the brawn of the Czars.

    This model has been a disaster for the EPA. The whole Kennedy-Dodd bill resembles–as it seems to me–nothing more than the very worst of what the EPA has had to offer, namely CERCLA, aka Superfund. The whole shameless delegation of taxing power (and presumably very generous liability standards for noncompliant states, localities or institutions) smacks of the way Superfund tried to take away a huge chunk of budgetary discretion from Congress. That is, by turning it over to Treasury and HHS, it becomes a matter of “expertise,” presumptively valid as a proper scientific task of centralized administrators. Hereafter, Congress can just shrug and say, “Hey, don’t point at me, blame the experts!”

    Anyway, if I’m way off base, or if I’m not, or whatever, could you help us get a “big picture” view of what exactly is “the theme” of this pudding?

  4. Dept of the Treasury being able to impose taxes? Isn’t that the responsibility of the Congress? Since when does the Executive branch have the ability to imopse taxes?

  5. This bill was clearly written by a committee with absolutely no understanding of how the US Health Care system works. Case in point – public plan option at Medicare +10%. Traditionally, providers set rates at between Medicare X 100%-150% in order to cover costs lost from those receiving Medicare (ie, Medicare charges don’t come close to covering most costs so providers pass the costs along to other payers). Also, I particularly enjoy the part about not being able to rate individuals due to risky behavior (eg, motorcycle riders, smokers, drinkers)…to do so would likely impact all the “sin” taxes on cigarettes and alcohol that keep cities like Chicago alive.

  6. GI doc,

    I was just thinking the same thing. But it wouldn’t be the first time this administration overstepped the bounds of the executive office, nor, I fear, will it be the last. This bill is a nightmare, and I pray it never sees the light of the Resolute desk!

  7. Ted Kennedy is obviously trying to do the same thing to the American economy that he did to Mary Jo Kopechne: deep-six it and then lie about his involvement when inconvenient questions start arising.

    • If he thought this plan was so good, he should have had his brain operation under all those rules..Hypocrite…I went to a town meeting in Queens last night and Congressman Anthony Weiner "lied" to my face and said that "they" hadnt voted to exempt themselves, but t hey did.

      • No seriously….a politician being dishonest!! Inconcievable!! What they're doing is telling us we can go to a restaurant of our choice as long as they approve of it first……setting standards of course that no restaurant could achieve and then forcing us to eat out of their leftovers from a pig trough. OINK OINK OINK to those little piggies!!

  8. except that it is unlikely TK has anything (personally) to do with this thing, except support its existence. Which is even more scary, when you think about it. Where is the accountability on this thing?

  9. “People in high cost areas (e.g., New York City, Boston, South Florida, Chicago, Los Angeles) would get much bigger subsidies than those in low cost areas (e.g., much of the rest of the country, especially in rural areas). The subsidies are calculated as a percentage of the “reference premium,” which is determined based on the cost of plans sold in that particular geographic area”

    I wonder about this – if high cost areas get bigger subsidies, would there be an incentive for some ‘players’ in the health care system to increase costs to get more gov. subsidies? Or, am I just nuts to think this? (Don’t answer that! :) )

  10. Pingback: Healthcare reform takes shape - SoWal Beaches Forum

  11. I am in the process of getting my irish passport (already have duel citizenship). The way I see it the Eu has a better central bank, and if we are going to have a noncompetitive business environment I may as well live in the EU and reap the fruits there instead of here. It also looks like the EU govs are getting more conservative, while we are getting less.

  12. I agree with most of this but I think you are wrong on the New Jersey point: New Jersey (and New York) are nightmares because they impose community rating and no exclusions (pre-existing etc.) and no Mandate. The key is the mandate – if enough people are forced to contribute the increase in premiums may be more modest.

  13. Pingback: Hot Air » Blog Archive » A closer look at the health-care bill

  14. Awful — on so many levels. And I’m guessing ACORN is already setting up training courses for “navigators” — just like they trained all those “mortgage counselors” to help unqualified borrowers and illegal aliens apply for their NINJA subprime loans.

  15. I didn’t read it all but Section 2, “Declaration of Rights” is interesting. It may be just boilerplate as usual but I am seeing a growing (although probably still small) movement among doctors to drop out of Medicare and practice on a cash basis. I even know several surgeons in Orange County, CA who have done so. They are setting fees at the Medicare payment but refusing to have anything to do with filing claims. Since it is illegal to be a Medicare provider and charge privately for service, they have simply dropped out of Medicare. If this new program sets fees at Medicare + 10%, I could see this spreading, at least in fairly affluent areas. I’m retired now but I knew a lot of primary care docs who never billed Medicaid for care. They would take care of some Medicaid patients but the time and effort to get paid a pittance was deemed not worth it. This may have a lot of unanticipated consequences besides early retirement for lots of older docs.

  16. there is obviously a strategy to take most of the active decisions away from the legislative and executive branch so that unknown, un-elected officials start to make the biggest decisions. There isn’t a better recipe for disaster over the long term.

  17. My wife and I placed a small wager(cleaning the fridge and buying ice cream) on the 2012 result. She’s forecast an Obama landslide, the crux of the bet. I told her she will have her first female POTUS(and I currently clean the fridge).

    This bill will guarantee my victory, too bad about our country.

    • Sorry Gary, but you are wrong. Since the bill is written as I understand to go into effect in 2013, "Loonie Tunes" will still be looking good to the knuckheads that supported him.

  18. This bill needs to be renamed The Stick A Fork In Private Health Insurance: It’s Cooked act.

    Insurance companies will have two choices, either price their product appropriately for the government mandated “qualified” coverage levels thereby rendering themselves unaffordable; or limit themselves to selling non “qualified” plans to those few willing to bear the burden of additional penalties masquerading as taxes. either way nobody will be buying from them.

    Or the act could be most accurately named Single Payor, The Obamacare Introduction Act of 2009.

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