Ten more things about the official Kennedy-Dodd health care bill

Ten more things about the official Kennedy-Dodd health care bill

The Senate HELP Committee staff has filed an official copy of their draft legislation with the Senate clerk. A friend and I were discussing today two possible tactical scenarios:

  1. The weekend leak forced the majority staff to release their official text as damage control. Under this scenario, filing the official copy is a damage mitigation strategy: “If there’s going to be a version out there, let’s at least have it be a version we want.”
  2. The weekend leak was by the majority staff, and filing the official text is part of a gradual rollout strategy.

I’m guessing scenario 1 is right. Either way, we now have official text to chew on. This text is more expansive than the leaked version I posted Monday. It contains some new items, but is largely identical to the leaked draft.

More importantly, I have now had more time to read the 615 page bill. (I skimmed some parts.) Doing so turned up some things I missed the first time. So here are ten more things you should know about the official draft of the Kennedy-Dodd health care bill.

(Editorial note: I have made a page that will always have the latest version of this complete list, along with the comparison to the House Democrats’ bill. I will also post when I update that page.)

  1. The employer mandate section from the leaked draft has been replaced with [Policy under discussion].

    A few inside friends confirmed my guess – they think this is a tactical move by the majority staff to try to relieve blowback from the employer groups: Chamber of Commerce, Business Roundtable, NFIB (the small business lobby), etc. Until it is otherwise demonstrated, I will continue to assume that the Chairman’s mark will include language that will roughly parallel that in the leaked draft.
  2. The bill gives the Secretary of Health and Human Services authority to limit premiums and profits of health plans by forcing plans to rebate to enrollees premiums above a certain margin.
    Specifically,  section 2704(a) is the “Requirement to provide value for premium payments.” A health plan must report how much of their premium revenues are used for clinical services, how much for “activities that improve health care quality,” and how much for “all other non-claims costs.”Section 2704(b)(1) then tells the Secretary to look at how much other health plans spent on “all other non-claims costs,” and based on that survey, set an allowable percentage for this category. Plans are then required to rebate premiums if they go above this amount. This is direct (but confusing) regulation of premiums and profit margins.I found the labeling of this section interesting. It appears that this section will be the justification for the claim that this bill reduces health care costs. Loosely phrased, it appears their argument will be “We’re reducing health care costs by forcing plans to lower their administrative costs and profits.”
  3. The bill mandates that health plans include and provide financial incentives for the “medical home model” for services, then gives a highly prescriptive description of this model, detailing the interactions among the health plan and different types of providers.

    Section 3101(m) requires qualified health plans to develop and adopt a strategy “that provides increased reimbursement or other incentives for … improving health outcomes … including through the use of the medical home model defined in section 212 [of the] Affordable Health Choices Act, for treatment or services under the plan or coverage;”Section 212 then sets up the “medical home model” over seven pages of legislative text. I am far from an expert in plan-provider relationships, and am not familiar with the medical home model. But the language looks highly prescriptive, as if it is defining an extensive set of rules about the interactions among plans and different types of providers. I would love help from some commenters on what’s going on here, or some more education about the “medical home model.” My instinct is that, even if it is a good delivery model, the federal government should not be tilting the playing field for or against it.
  4. The bill requires health plans adopt Medicare and SCHIP�s �generally implemented incentive policy to promote high quality health care.
  5. Employers must offer the same health insurance to all employees, independent of salary.
  6. Gateways can charge a tax of up to 3% of premiums to cover implementation and administrative costs.This is a huge deal. Take a typical $13,000 (employer-based) family health insurance policy. That means the State can add up to $390/year to the cost.
  7. The Secretary of Health and Human Services shall required that Gateways shall “ensure that [uninsured] individuals are directed to enroll in the program [that she deems] most appropriate.” This is in the context of whether they should enroll in a private health plan, or a government plan: Medicaid, SCHIP, or the new “public option.” The bill gives SecHHS authority to push/force State Gateways to push/encourage/force? the uninsured toward (or away from) particular types of plans. The danger is that a SecHHS could say, “It’s best to have all the uninsured in a government plan.”
  8. States (through Gateways) shall redistribute premiums from plans with low-risk individuals to those with high-risk individuals.

    This gives the people running Gateways a tremendous amount of power over health plans.
  9. States can opt out their state and local employee plans for the first four years. I’m trying to think of a reason why they should be treated differently. Otherwise, it looks like caving to pressure either from State governments, or from public employee unions.
  10. The bill creates a new $10 B “Reinsurance for Retirees” fund to subsidize costs for those between ages 55 and 64. The bill defines eligible “employers” to include “a voluntary employee benefit association.” This may include the UAW VEBA.

    This looks like a fallback. Traditionally, health advocates on the Left have wanted to allow near-retirees (55-64) to “buy in early” to Medicare. And I need to be clear – I cannot conclude that this provision was written specifically to benefit the UAW VEBA. I just know that it allows a VEBA to apply as an employer for a share of this fund, and that the UAW VEBA is the most prominent one that might ask for such funds.

Remember, you can now always find an updated version of the complete list here.

While the list of two dozen items surely creates an impression of why I oppose this bill, I would like to put some structure on it. I hope to post in the next few days a higher-level view that crystallizes my biggest concerns with this bill in a structure that is easier to understand.

(photo credit: Wikipedia)

43 responses

  1. This is far worse than the UK’s NHS that I left in the 70’s. Do they not anticipate the same “Brain Drain” of physician leaving the US in droves nor the effect on small businesses? This will undoubtedly accelerate the shut down of more employers.
    Will the American patient stand for the reduced care and long waiting list for “Non-Vital” procedures such as hernia & heart valve operations.

  2. My husband has worked in hospital finance for 25 or so years and he has never heard the term medical home model. In my training as a marriage and family therapist I first heard of a similar approach in the treatment of sexual dysfunction probably 15 or so years ago. Basically what I see outlined here is that the bill would provide grants for multi-disciplinary teams to form providing they can show a business plan to profitability in three years. Those teams would contract with state agencies or state designated agencies specifically to PCP to provide a team approach to treatment of chronic illness. I think they are precluding anything “new age” for lack of a better term. Team members must be trained in a field that could demonstrate measurable medical success.

    I think there is not much new about this model and more facilities have been utilizing a similar model for some time. Off the top of my head, Cancer Treatment Centers of America who frequently advertises on television, touts such a model. Here is where I see a potential issue, the PCP will be capped and then must contract with this team to provide all these additional services. Many hospitals who already have such teams use this approach as a means to attract patients to their facilities. Doctors or medical practices do not incur these costs, though I am sure there are large practices that offer such an approach. Basically, I think the free market is already driving such a model anyway. I am not sure why the government needs to provide grants for this unless such models have not been utilized in state agencies due to limited reimbursement.

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  4. You said,

    Loosely phrased, it appears their argument will be “We’re reducing health care costs by forcing plans to lower their administrative costs and profits.”

    Does this make sense to anyone else? How can you force someone to lower their administrative costs, especially if there are new regulations put into place?

  5. I say we go with the mass health care plan. Only one caveat, Congress and the President must agree to only use the same resources and plan afforded to the public. To stray from the plan they would have to resign first.

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  7. Yikes the Kennedy Dodd connection doesn’t sit well …..will there be a Friends of Chris or Friends of Ted group who get special care? at better rates? or more care faster????

  8. Briefly, the medical home concept involves a primary care physician leading a team of assistants, nurses and other professionals to manage and track patient’s health. I think the American Board of Family Practice has been out in front on this: http://www.aafp.org/online/en/home/membership/initiatives/pcmh.html .

    I am a family practice physician, have been reading about the medical home model for years and still don’t completely understand it.

  9. #5 is a huge burden to large employers with unions. Often unions have very specific and rich health benefits. As we’ve seen with GM, the management has often offered benefits they can’t afford. If salaried employees at those companies now have to be offered the same plans (I’m sure the next step is to require the employee cost to be the same as well), then these companies will be in a bind- renegotiate with the unions, or pay through the nose for all employees.
    Guess we won’t need ECFA if the government is going to just start declaring that employers offer union benefits to non-union employees.

  10. A serious question: Do you know what will happen to ex-pats? That is, is there a way you can avoid the mandate by not living in the US?

    There are a number of us out here who are entrepreneurs, with skills and capital, who are “sitting on the beach”. (Right now is a crappy time for business formation.)

    I am more serious than ever about starting my next company out of the United States. The US is a mess, and it seems every day something new is done to make us less competitive in world markets.

    Why in the world would a young, educated, HEALTHY person with skills and capital stay here?!?!

  11. i do not understand how this legislation can be pushed along – or even have a substantive discussion, without discussing Tort reform. If this area is not addressed – and redressed to conform with the rest of the world – The entire health care proposal becomes non-sensical. Physicians and hospitals suffer vast reductions in revenue while having to support huge insurance premiums.
    Would you even want to see a doctor who was dumb enough to practice under those conditions?

  12. Can one avoid the personal mandate if they do not live in the US?

    That is, is there an exception for US citizens who do not live in the US?

    I am an entrepreneur “sitting on the beach” — it is a bad time for business formation.

    I am more convinced than ever that my next business will not be started here; every day something new is done to make the US less competitive on world markets.

    Why in the world would a young, educated, HEALTHY person — with skills and capital — start a company here?!?!

    {Mr. Hennessey: I am sure I am not alone in asking this question.}

  13. I havent read the language on the Medical Home model, but will do so thanks to Keith’s alert. The Medical Home model is a reaction by the physician community to the growth of external care management companies that interact directly with chronic patients to try to improve the quality of their treatment, compliance etc. It has become (like Pay-for-Performance, which from Keith’s summary doesn’t seem to have made it into the bill) a reason for Physicians, particularly primary care, to be paid more. Looked at another way, it is a kinder, gentler kind of physician gatekeeper model (remember the HMOs?). It is far from settled as to what a MH is, what it should do or what supporting technology needs to be in place, and there is almost no evidence that the Medical Home model saves any money. (There is one (heavily criticized) study from North Carolina medicaid that showed savings.) In my opinion, any kind of model that is rolled out to physicians will require enormous investment in technology and support services, not just the fabled Electronic Medical Record (which may be funded) but also workflow that links participants and provides triggers when appropriate. I doubt that there is money available to fund this level of investment (except in major systems like Kaiser), which means the MH will become a big manual effort by physician practices.

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  15. With the trifecta of kennedy/dodd/obama, I say show me the money….we all know these three are in it for the money they will “appropriate” into their private funds.

  16. Please don’t forget the effect that socialization will have on innovation. Every country that has adopted this squeezed part of their cost savings out of reducing or eliminating profits, which were the source of future R&D. When that happens, R&D must be willed into existence through government spending, and it is the first to get cut because of difficult to prove ROI. They have been looking down their nose at us “Cowbow Capitalists” for decades, all the while waiting for the US to come up with the new drugs, devices, and procedures. Those of us who wait for a cure have the most to lose.

  17. I have worked as an Agent in the Health Insurance business for 12 years. My family has owned and run a successful Agency for 40+ years. I agree with Keith that this will be the death of private insurance. Some interesting thoughts on these new finds:

    – Home health care is a pretty solid way of delivering care to the elderly. I was recently at a charity fundraiser for the Visiting Nurse Association. I will try to dig up some statistics but during a presentation from the VNA they had some pretty convincing numbers. Their treatment statistics, recovery statistics, and cost of care was quite a bit lower than typical costs of the care they were delivering (as compared to Medicare).

    – The administrative fee the “Gateways” can charge is ridiculous. It is a tax and guess who’s going to end up paying it? You and me. An company with 100 employees easily pays in excess of $500,000 in premiums. That comes out to $15,000 paid to the Gateway. Multiply that out across every employer in a given state and that comes out to a HUGE amount of money. It’s bad enough when employer’s have to absorb 5% or 10% premium increases (and many do), but a 3% TAX is probably going to be passed on to the employee. The insurance companies will surely pass the cost off to their customers. Why would employer pay something that clearly benefits employees the most? Let’s be honest – this is a tax on all of us.

    – The killer is the revelation that the government is going to regulate profits. I can’t even believe they have the audacity to do that.

    Put all of this together and Insurance companies will have lost almost all autonomy. They can’t determine their own profits. They must offer insurance to everyone. They can’t price their products the way they want to. If this bill is passed I wouldn’t be surprised if a few health insurers just back out of the market day one.

  18. The medical home model is a team approach in which non-physician providers, such as nurse practitioners and others, are supervised and coordinated by primary care physicians. It works well in geriatrics where pharmacists and psychologists are often very important contributers to the team. It is also a situation in which care can be provided in the patient’s home or in an assisted living facility instead of asking elderly patients to travel for appointments in clinics and doctors’ offices. It is also used in workers compensation cases where case management can be very important in getting people back to work. For the other 75% of health care, it sounds like a gimmick and probably is a way to sugar coat rationing.

  19. The administrative cost ceilings are simply price controls, and like all price controls will create pressure for reduced quality to compensate – i.e. customer service will get much worse, and insurance companies that compete on the basis of superior customer service (at higher cost) will be the worst hit. Depending where the limits are set, this could easily be yet another part of the plan that will drive everyone into government run insurance in the long run.

    And if doctors hate dealing with insurance companies now….


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