Understanding the House Democrats' health care bill

Understanding the House Democrats' health care bill

Yesterday I posted and described the draft Kennedy-Dodd health care bill. Today I would like to do the same for an outline produced by House Democrats.

Here is a three-page outline of “Key Features of the Tri-Committee Health Reform Draft Proposal in the House of Representatives,” dated yesterday (June 8, 2009).

The three committees are:

  • The House Ways & Means Committee, chaired by Rep. Charlie Rangel (D-NY). The Health Subcommittee is chaired by Rep. Pete Stark (D-CA).
  • The House Energy & Commerce Committee, chaired by Rep. Henry Waxman (D-CA). The Health Subcommittee is chaired by Rep. Frank Pallone, Jr. (D-NJ).
  • The House Committee on Education & Labor, chaired by Rep. George Miller (D-CA). The Health, Employment, Labor and Pensions Subcommittee is chaired by Rep. Robert Andrews (D-NJ).

The document suggests this is a joint product of the three committees and/or their subcommittees. My sense, however, is that it is Speaker Pelosi who is driving the bus. This is in contrast to the Senate, where the committee chairmen (Kennedy/Dodd and Baucus) appear to have the pen, in less well-coordinated efforts.

Kennedy-Dodd and the House bill outline are remarkably similar. Whether this represents House-Senate coordination or parallel thought processes is unclear.

I think the easiest way for me to present the House bill outline is in comparison with the Kennedy-Dodd bill. So here my description from yesterday of the Kennedy-Dodd bill, with today’s comparison to the House bill outline in red. I hope it’s comprehensible and useful this way. If you read yesterday’s post, you can skim the text in black and focus on the new text in blue.

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

  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.” The House bill also contains an individual mandate. The outline is less specific but parallel: Once market reforms and affordability credits are in effect to ensure access and affordability, individuals are responsible for having health insurance with an exception in cases of hardship.
  2. The Kennedy-Dodd 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.The House bill outline also contains an employer mandate that appears to parallel that in Kennedy-Dodd: “Employers choose between providing coverage for their workers or contributing funds on behalf of their uncovered workers.”
  3. 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.The House bill outline is consistent with but less specific than the Kennedy-Dodd legislative language. The House bill outline would “prohibit insurers from excluding pre-existing conditions or engaging in other discriminatory practices.” I will keep my eye on what “other discriminatory practices” means in the legislative language. Does that mean that a health plan cannot charge higher premiums to smokers? Like the Kennedy/Dodd bill, the House bill outline would preclude health plans from imposing lifetime or annual limits on benefits: “Caps total out-of-pocket spending in all new policies to prevent bankruptcies from medical expenses.” This would raise premiums for new policies. The House bill outline “introduces administrative simplification and standardization to reduce administrative costs across all plans and providers.” I don’t know what this means, but suggest keeping an eye on it.
    2. 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. Same: “… by creating various levels of standardized benefits and cost-sharing arrangements…” It also contains this addition relative to Kennedy-Dodd: “… with additional benefits available in higher-cost plans.” But note the “various levels of standardized benefits.” This appears to be more expansive government control of health plan design than in the Kennedy-Dodd draft.
    3. Plans would be required to cover a list of preventive services approved by the Federal government.This is unspecified in the House bill outline. We’ll have to wait to see legislative language.” The House bill would require plans to “waive cost-sharing for preventive services in benefit packages.”
    4. 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.This appears parallel but is less specific for now: “Independent public/private advisory committee recommends benefit packages based on standards set in statute.” I find the “standards set in statute” interesting. It suggests that provider and disease interest groups will have two fora in which to lobby for their benefits to be mandated: Congress, and the advisory committee.
    5. 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.The House bill outline is silent on this.
  4. 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. The House bill outline says it would “prohibit plans [from] rating (charging higher premiums) based on gender, health status, or occupation and strictly limits premium variation based on age.” If the bill were to provide nothing more, this would appear to parallel the Senate bill and preclude plans from charging higher premiums for risky behaviors.
  5. 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.The House bill outline is silent on guaranteed issue and renewal. I’m going to make an educated guess that the bill includes these provisions as part of “other discriminatory practices,” and they have just left them out of the outline. Given the philosophy behind this outline (with which I disagree), it would be a striking omission. But for now, the outline says nothing specific on these topics.
  6. 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.The House bill outline “expands Medicaid for the most vulnerable, low-income populations,” so we have no specifics other than that there’s an expansion.” I cannot tell if this is expanding eligibility or benefits. The outline also “improves payment rates to enhance access to primary care under Medicaid.” I assume this means the bill would expand the Federal share paid of each dollar spent by a State Medicaid program on primary care, rather than the Federal government actually mandating specific payment rates to be implemented by States. Federal micromanagement of specific Medicaid provider payment rates was eliminated in the mid 1990s.
  7. 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.The House bill outline has a sliding scale up to 400% of poverty. If this were in effect in 2009, a family of four with income of $88,000 would get small subsidy.
  8. 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.The House bill outline is not specific on this point. I would not expect it to be – this is something you can tell only from legislative language.
  9. 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.The House bill outline “creates a new public health insurance within the Exchange … the public health insurance option competes on ‘level field’ with private insurers in the Exchange.” There are no specifics on how the public plan would work, or on provider payment rates.
  10. Group health plans with 250 or fewer members would be prohibited from self-insuring.” ERISA would only be for big businesses.The House bill outline is silent on this point.
  11. 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.The House calls it an Exchange rather than a Gateway. While the Senate bill would tell each State, “Create a Gateway or we’ll create one for you,” the House bill outline says to each State, “We’re creating a single new national Exchange. You’re in it unless you develop your own State or Regional Exchange.”
  12. 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.The House bill outline appears to parallel the Kennedy-Dodd draft: “Phases-in requirements to benefit and quality standards for employer plans.” This means that new plans will be more expensive than old plans. It also means they’re creating a bifurcated system with all sorts of perverse unintended consequences for employment flexibility.
  13. 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. The House bill outline lists specific topics for changes to Medicare reimbursement:
    • Changing (how?) the Medicare reimbursement for doctors, called the “Sustainable Growth Rate” (SGR).
    • “Increasing reimbursement for primary care providers”
    • “Improving” the Medicare drug program. I won’t be surprised if, when I see the specifics, I disagree that their changes are “improvements.” In the past this has meant having the federal government mandate specific prices for drugs.
    • Cutting payments to Medicare Advantage plans.
    • Expanding low-income subsidies for seniors and eliminating cost-sharing for all preventive services in Medicare.

    The House bill outline also uses positive language to describe things that might generate budgetary savings from Medicare and/or Medicaid. The hospital readmissions point is specific. The first two points could increase or decrease federal spending, depending on the specifics.

    • “Use federal health programs … to reward high quality, efficient care, and reduce disparities.”
    • “Adopt innovative payment approaches and promote[s] better coordinated care in Medicare and the new public option through programs such as accountable care organizations.”
    • “Attack the high rate of cost growth to generate savings for reform and fiscal sustainability, including a program in Medicare to reduce preventable hospital readmissions.”
  14. 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.” The House bill outline is silent on this point.
  15. 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, …” The House bill outline is silent on this point.

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 House bill outline is not specific on this point.)
  • The Secretary of HHS could mandate that you provide him or her with “any such other information as [he/she] may prescribe.” (The House bill outline is not specific on this point.)

I strongly oppose the Kennedy-Dodd bill and the House Tri-Committee bill.

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

(photo credit: speaker.house.gov)

218 responses

  1. As a side point of possible interest, My 2008 Massachusetts Income Tax Return printed out to 8 pages. The minutia of dealing with the mandated coverage and penalties used up 3 of those pages.

    Also, the phasing out of subsidies with income is yet another driver of higher effective marginal tax rates at intermediate incomes, of which there are already far too many, including Social Security, which all by itself can drive marginal Federal rates up to almost 50%.

    Regards, Don

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  3. Pingback: Understanding the House Democrats’ health care bill « Obamacare Wakeup!

  4. In the late 19th century, insurance companies were numerous and activity was extreme with players entering the market at an ever increasing rate until competition became cutthroat. Many states saw this as a tax windfall and used those powers unmercifully and, at the same time, imposed large numbers of regulations that were highly variable between the states. State supervision was in many cases ignorant and corrupt as well. The companies were trapped between extremely high competition and equally high government-imposed costs and petitioned Congress for relief through a national regulation scheme with basic standards that they could all work under. This was stymied by a Scotus decision (Paul vs, Virginia, 1868) which essentially ruled that insurance was a contract as opposed to commerce and, hence couldn’t be controlled by the national government. The Gordian Knot of state control continued. (This information is from The Triumph of Conservatism by Gabriel Kolko. My apologies to him if I have misunderstood his points).

    Assuming that the industry is still under that ruling and that fact is responsible for at least part of the cost problem (That every insurance company has to set up separately under the regulations imposed by each state it wants to do business in) it seems like that might be a good place to start to reduce costs. That is, untie the knot that restricts companies to state regulation. I worked for the Federal Government and our insurance allowed us to choose from a bewildering array of companies and plans and the costs seemed to be fairly reasonable because of that competition. I believe this is the same plan that Congress is under.

    Allowing pre-existing conditions is not insurance, it’s a handout that everyone else’s premiums have to be raised to cover.

    Allowing “children” up to 26 years old and families at 400% to 500% of the poverty wage appears to me to be just eliminating age and poverty levels on Medicare and Medicaid.

    However it turns out, it seems that I will, once again, have the government in my pocket to take care of people who won’t take care of themselves. I’m paying their mortgages, I’m buying their cars, I’m buying their medical insurance, I’m buying their welfare handouts. At this point, at these costs, I feel I’m personally responsible for at least 2-3 of these deadbeats. I’d like to know who they are because I have some jobs here around the house they can do. I’d also like to be able to claim them as dependants on my taxes. Are there any provisions to help me with those things

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  6. Dennis your last paragraph says it all. Reminds me of what “joe the plumber” elicited from the wealth speader during the campaign. And I believe it doesn’t end there, does it? As the federal redistribution machine takes its cut, wastes some more, destroys human initiative and personal industry, responsibility, and has to go back to clean up the mess…I mean, we’ve been here before, havn’t we?
    On news last night a democratic congressman, harding? say in defense of heath care bill (I think this is exact) “we need to let government compete with insurance/health industry to make them (private business) more efficient.”

    No, really, that’s what he said.
    We’re in trouble.

  7. I won’t be participating in this new government plan, instead, I plan to pay cash for any medical needs of my family and will not accept a free handout of any kind.

    I refuse to pay for other’s free handouts and for other’s self destructive habits (i.e. drinking alcohol, using drugs, uncontrolled sex, smoking, etc.).

    You should assume that any health insurance you currently have will double or triple in price and you may well have additional taxes imposed to pay for it. Those of you expecting a free ride for your pre-existing condition will find your treatment options will be diminished. In the end, you will get exactly what you paid for.

    This is a good time to be and stay healthy.

  8. So community rating problems are to get even worse, and market distortions further exacerbated? By forcing ever more insane terms on private insurers, they can make the public option attractive without a taxpayer subsidy.

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  10. Pingback: Washington Bureaucrats to be Given Power to Re-write Your Health Plan, Without Your Input - Dan_Perrin’s blog - RedState

  11. Who do you need to hound? Start with your Senator and Congress Person. Call, e-mail, write. Make your voices heard. Don’t waste all this good indignation! It’s time to stand up and in the words of the Obama campaign shout “enough”!!!!!!!

  12. Before you get to critical of pre-existing conditions, my daughter was born with her illness-she did not neglect her health. Would you deny her health care because of a genetic defect?

  13. Pingback: CRISIS! Evaluating the leaked Democrat health care bill « Wintery Knight Blog

  14. I’ve lived in Canada for 63 years, so I can speak with some authority about single-payer health care. The average hospital emergency room wait is now 17 hours, 6 minutes. At the hospital nearest me, they have posted signs all around the emergency waiting room advising Do Not Even Think About Asking How Long The Wait Is. Doctors have begun holding raffles to pare their patient lists. Community clinics are begging local health authorities to send them doctors. Shades of 1984. Every voice raised to suggest the government consider privatizing a small part of the system in order to introduce a measure of free market efficiency is shouted down by the unions and ideology-bound leftists. You need to know that rationing is a fundamental fact in socialized medicine. The hidebound ideologues who run the system refuse to acknowledge that queuing is critical to the equitable distribution of scarce resources. If you think health care is expensive now, wait til it’s free.

  15. Kennedy-Dodd health care bill. It should really comfort us to have a health care bill authored by two of the biggest criminals to ever walk the halls of our nation’s capital.

  16. My company markets health insurance to small business. I don’t mind competing against a government plan as long as it does do not cheat, and guaranteed never to cheat. Presently Medicare under-pays doctors and hospitals by approx 30% and this underpayment is cost shifted to the insurance companies I represent. Kennedys’ proposed government option would underpay by 20% and this amount cost shifted to us and making us uncompetitive. It is obvious these Socialists want a government insurance plan force feed to all.

  17. So, if millions of us don’t buy the gov’t insurance and refuse to pay the tax (which i will), will they put us all in prison?

  18. I’m glad you’ve done this analysis, I’m still busy trying to find where the Constitution gives this bunch of crooks the authority to do this in the first place.

  19. FORCED HEALTHCARE???? This is unbelievable! Since the new admin, it seems we are hurling this country towards destruction. Have our politicians lost their minds? Has our government been infiltrated with idiots? We keep hearing about spreading the wealth, well I say GET UP OFF YOUR LAZY BUTTS and work for what you need or want for your family like most of us. We give, give, give and for some people it becomes very easy to take, take, take and keep on taking.. We CANNOT provide for everyone on this planet – It just is not possible.

    Our states and government have frequently spent our taxes unwisely, But when I read California spent $40 million plus for CHILDCARE for ILLEGAL IMMIGRANTS I threw up my hands and gave up. Has anyone ever considered providing FREE rental cars for those people who escape from prison? ? YOU ARE FEEDING THE SOURCE……. Get real – we don’t have to worry other countries trying to destroy us – OUR GOVERNMENT IS DOING THAT FROM THE INSIDE OUT.

    • Unfortunately Marlene, I believe that the government is doing everything they can to make this a communist country. They want to take away all the rights of the people in this country and will stop and nothing to accomplish their goals. They want this country to be so dependant on the government that when this country does fall (and I believe that it will, if the governement continues going down the path they are)we will have no one to turn to but them. My suggestion at this point: get food storage, a water supply, prepare for the worse and hope for the best…

  20. Pingback: Washington Bureaucrats to be Given Power to Re-write Your Health Plan, Without Your Input | WTF?! Obama

    • As a pediatrician, with my own practice, I am very frustrated with our healthcare. It does not work well. Yes we have the latest gadgets, but we have a very poor primary care system. If most cannot access basic preventative care what good is all the technology. I am diabetic, no insurance will touch me with a ten foot poll. But lets say I could not afford my insulin and glucose testing supplies,my average monthly expenses without insurance would cost more than $600, and if I was not able to buy what I need, I would eventually have kidney failure,amputation, blindness.. get on disability and my monthly cost to Medicaid would be in the several thousands a month, I couldn’t continue to be a productive member of society. So why pay thousands later when all that can be prevented.


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