President Bush recommended sweeping health-care reform and urged Congressional action this year in his State of the Union Address on Tuesday, Jan. 31.
Noted health economist Louis Rossiter, director of the College’s Schroeder Center for Healthcare Policy, former Secretary of Health and Human Resources in Virginia discussed the proposals and their likely impact on the country, the health-care industry and for the state of Virginia with the W&M News.
Q: What kinds of health-care reforms has the president proposed to Congress?
Rossiter: The president proposed three things in his State of the Union address regarding health care. First, tax policy, in which he will recommend changes in the way the Internal Revenue Service treats our spending on health care for tax purposes. In fact, this will is the lead portion of the reforms. By that I mean he is looking more to the Department of the Treasury and IRS for health-care reforms then he is going to look to the Department of Health and Human Services.
The second thing is changes in health insurance regulations. It’s actually very bold for a Republican president to recommend federal regulation to the health insurance industry, which has traditionally fallen to the states to regulate.
The last thing has three parts really—information, competition and malpractice. He will recommend improved information for consumers to help make decisions, which will encourage competition among hospitals and doctors and other kinds of providers. Also, he will pull up the old malpractice reforms that were made two and three years ago to see if he can’t put that in a package that the Congress will buy this year.
Q: Are the president’s proposals fluff or are they feasible?
Rossiter: They are entirely feasible. He will face resistance from one group who feels that it is not enough and another group who is very suspicious about the long-term impact of placing consumer-directed health plans and health savings accounts (HSAs) in place and how difficult that would be to have a more government-driven health system.
Q: Why do you think the president chose health-care reform as a focus of the State of the Union address?
Rossiter: As gas prices have moderated, health care is rising to the top of primary concerns among Americans. As the country feels safer and gas prices have fallen back, people are seeing their health care go up and are also seeing employers, like Wal-Mart, and General Motors, and United and Delta drop or cut back on their coverage and wonder if that will happen to them. So this is squarely to address those rising anxieties.
Q: President Clinton tried some pretty substantial health-care reforms in his administration that fell completely flat. Do you think what the president has proposed has a better chance?
Rossiter: President Clinton’s proposals in 1995 were much broader and bolder than these reform proposals. President Clinton’s proposals relied very heavily upon managed-care organizations, managed-care companies and significant expansion of the federal roll in paying for health-care coverage.
President Clinton’s proposals would have covered more people and reduced the number of uninsured. The proposals of President Bush, in contrast, do not guarantee that the number of uninsured people will fall.
President Bush’s proposals are much more focused on individual responsibility on the part of the patient or the family to set aside dollars for normal health-care spending and withdraw those dollars from basically an ATM or a debit card kind of account. The proposal allows for catastrophic coverage in case very high cost expenses are incurred. The emphasis is on the individual or the family. They have to obtain their own catastrophic health-insurance coverage and set aside dollars in health savings accounts to use for every day medical expenses. But, under Bush’s proposals these contributions would receive the same tax favored status that the rest of us receive that get health-care coverage through our place of appointment.
Q: Will these proposals be in lieu of traditional health-care services?
Rossiter: These proposals are intended to complement traditional sources of private health insurance which are predominantly through employer-based coverage. The intention is to encourage small businesses, which don’t now offer health insurance for their employees, to enable those employees to receive the same tax benefits as those able to access the employment based health insurance system.
Q: What will be the impact of these reforms on the average American?
Rossiter: The average American has employer-based health insurance coverage. This is intended to reach the people who work for small employers, who do not have health insurance coverage, and give them the option to receive tax benefits if they purchase health insurance of a particular kind, that is to say a health savings account, a consumer-directed health plan combined with catastrophic health insurance coverage.
Qs: How many Americans will these proposals affect?
Rossiter: Approximately 21 million.
Q: What will this mean for small business?
Rossiter: Small businesses may face pressures from their employees to offer grouped coverage. Individual coverage is more costly than group coverage, so if all employees in a small business now have tax advantages to purchasing health insurance for the family, it may spur health insurance companies and employers to at least offer group coverage even though they may not pay for it.
Q: What will the states think about this?
Rossiter: I think the state health insurance commissioners will be the ones most affected. Frankly, they will probably be split with some state health insurance commissioners thinking that their regulations are just fine and that the federal government shouldn’t meddle, and others who understand the importance of nation-wide standardization for these large health insurance companies.
Q: How about insurance companies, what will be the impact on them?
Rossiter: Large national insurance companies are very much in favor of these proposals because it reduces their cost of doing business across state lines. Rather than having to meet the requirements of 50-plus state insurance commissioners, they would be able to meet the federal requirements anywhere in the country.
Q: Do health-savings accounts work?
Rossiter: Health savings accounts have been out there for 20 years. People buy health savings accounts. Companies market and sell health savings accounts. They are designed for the vast majority of individuals and families who do not have high cost current conditions.
Q: Long-term are these proposals a good thing for the country?
Rossiter: Yes, if the concept of consumer-driven health care
can be realized it is very good for the country. The current system is
unsustainable, individuals and families have no interest in the cost of
the health care they get because someone else pays for it. So this is
designed to put those costs in front of you as a consumer and ask you
to better manage your personal health care costs, which then leads to
better cost control for the country.
Q: Should insured American be concerned by these proposals?
Rossiter: Insured Americans might if they fear consumer-directed health care, that is health savings accounts combined with catastrophic health insurance. But they also face the risk of seeing their benefits cut back year after year because of the rising costs. So there is no right answer to the rising cost of health care and the apparent declining state of quality of health care.
Q: What is the anticipated impact on Virginia and other states?
Rossiter: These proposals are being driven by the advent of national insurance companies over the last eight years, and Virginia is no exception. Our nice little Blue Cross-Blue Shield plan went public, was bought by Anthem and now has been bought by Wellpoint, which is like the third-largest company in the country.
Q: Will there be a revenue impact for states then?
Rossiter: Yes. There are some states that have premium taxes on health insurance…Virginia is one, and it’s possible that a federal preemption could occur. I don’t think this is part of the president’s proposal but it will likely arise as an issue as legislation and regulations are considered.
Q: Would Virginia be affected differently than any other state by the president’s proposals?
Rossiter: Virginia is sort of the high middle in the percent of uninsured. Virginia also has an extremely skimpy Medicaid program that covers only people who are at the lowest end of the poverty level. So Virginia might not benefit as much as another state which has a relatively low percent of uninsured and already provides a lot of Medicaid coverage.
Q: What contributes to Virginia’s high percentage of uninsured?
Rossiter: That has shifted in the 1990s and into this century and it tends to be tied increasingly to a large number of small businesses that are serving the high tech industries in northern Virginia. Also, there are a lot of transient people in the Tidewater area—those connected with the military and support services through the military. We just have a hard core group of low income individuals throughout the rest of the state, in particularly in southwest Virginia who just have too much in the way of assets and income to be eligible for Medicaid.
Q: Are there health policy bills under consideration in the Virginia General Assembly now that might be affected by these proposals?
Rossiter: Yes. The Virginia General Assembly is considering legislation that could dovetail quite nicely and benefit largely small businesses.
The House is considering legislation that would establish Medicaid health savings accounts in Virginia, which they call enhanced benefit accounts. These would be accounts that would be organized by Virginia Medicaid and tax payer dollars—both state and federal—would be used to help fund them. Individuals and families would also be expected to contribute to the account and employers would be invited to participate as well but it would be largely a volunteer program.
Right now you can’t just pass a law. In fact if you read the
legislation it doesn’t say establish enhanced benefit accounts (which
is a Virginia Medicaid name for health savings accounts.) but it says
seek a waver from the Federal government to conduct a demonstration
program of these kinds of accounts.
Q: Do you think that Virginia is ahead of the game?
Rossiter: Virginia could be ahead. There are similar proposals from Florida and South Carolina.