William & Mary

Who's helped, who's hurt

A scorecard on the health reform billLou Rossiter has written a book on Medicare reform

Lou Rossiter is a research professor at the Thomas Jefferson Program in Public Policy at the College of William & Mary. He is former Secretary of Health & Human Resources for Virginia and has written a book on Medicare reform.

Who will be helped the most?

The 46 million Americans without health insurance who will receive Medicaid or federal subsidies to purchase private health insurance just like 60% of the country with coverage through their employment.

Who will be hurt?
* Medicare beneficiaries with Medicare Advantage
* High-income taxpayers with income greater than $250,000 (for a couple)
* Children’s and other hospitals serving a disproportionate share of uninsured (although they will see the uninsured all but disappear)
* Those paying the excise tax on high-premium health plans.

After four years, the states will have to pick up their share of the massive increase in Medicaid coverage, which many states see an impossible task with the current fiscal crisis.

How will  Medicare be affected?
There will be cuts to payments to doctors and hospitals ($186 billion over 10 years). No one knows whether these cuts will affect access to care for Medicare beneficiaries.

What about locally?
In a comprehensive study by the Schroeder Center for Health Policy at W&M covered on the front page of the Gazette, the access to physician services in greater Williamsburg was comparable to, if not better than, the national averages. This could change with lagging payments to doctors under Medicare, but doctors might be fine if they do not have to worry about uninsured patients. 

And Medicaid?
The changes in Medicaid are enormous.  Almost exclusively a program today for women and children, a national standard eligibility level of 133 % of poverty will be placed on states. 

This means low-income working and non-working individuals and families ($29,327 a year for a family of four) will receive Medicaid. The provisions will cost the federal government $386 billion over 10 years. The states will see their Medicaid share rise sharply in coming years. 

How is the finished bill different?
There is no public option health coverage in the bill just passed by the House. The House originally wanted to set up another federal program for the uninsured.

This public option would have be in addition to already existing federal health progams: Medicare (the largest in terms of dollars), Medicaid (the largest in terms of number covered), Childrens Health Insurance Plan (CHIP), Veterans Health Administration, CHAMPUS, CHAMPVA, and the Indian Health Service. 

What happens instead?
The uninsured will be able to select private health insurance plans and pay for them with subsidies provided by the federal government based on their family income. Medicaid will remain the predominate Public Option and will be greatly expanded.

The original bill passed by the House also had mandates for employer-provided insurance for small employers. And it had higher taxes on families and individuals with high income. 

What's better?
The tax on the “Cadillac” health plan is in the reform bill, although the effects do not kick in for some time and too many were exempted. 

Economists have long argued that the main problem to be reformed in health care is that some people have too much health insurance and others have none or too little.

Those with excessive insurance tend to increase the cost for everyone by demanding more health services with their Cadillac coverage. That is why too many people have no health insurance — it’s too costly.

How is the problem fixed?
You can simultaneously reduce excessive health insurance coverage by counting it as taxable income, and raise revenues to help pay for subsidies for those who cannot afford it. A variation of this notion is in the health insurance reform bill and will become more important in capping excessive coverage and as a source of financing when insurance premiums increase over the years.

Some people are tired of economists talking about this, but it is in the bill.

What’s worse?
If you are covered by Medicare and have selected a Medicare Advantage private health plan, cuts to Medicare Advantage private health plans are a major setback. 

More than 22% of Medicare beneficiaries nationwide have selected the private health plan option, and more than 150,000 Virginians have joined Medicare Advantage in just the last four years. 

These Medicare beneficiaries will no doubt see a reduction in benefits and an increase in premiums. That’s a shame. Medicare Advantage represents real Medicare reform because of its heavy emphasis on preventive care, better coordination of complex chronic diseases, and higher quality and cost conscious networks of doctors and hospitals.

Your own forum last fall noted that senior citizens would benefit from provisions in the bill. How so? 
Medicare Part D prescription drug coverage will be gradually expanded to cover the “donut hole.” This is the provision that requires beneficiaries to pay 100% of drug costs when their costs are between $2,830 and $6,440.  Thus it is called a “donut-hole” in coverage. It will be filled gradually over a 10-year period.

Are there still provisions to help the elderly remain independent?
The bill includes a new federal program called Community Living Assistance Services & Supports (CLASS). It is funded by voluntary participants with their premiums. After five years of paying premiums, if you have a disability you can receive cash benefits of around $50 per day to purchase at home assistance, technology assistance and other assisted living services. 

What will the health care bill cost?
The bill increases federal outlays by more than $1 trillion over 10 years, but it also cuts currently planned outlays and raises federal revenues through tax increases by hundreds of billions.  Taken together, the net effect is a federal cost of $940 billion over a decade and reduction in the deficit by $138 billion in the first 10 years, according to Congressional Budget Office estimates.

How will small business owners be affected?
They will face increased paperwork to show the Internal Revenue Service how they are dealing with the new requirements and subsidies they will receive to provide health insurance. Employers with 50 or more full-time workers who refuse to offer coverage will pay a penalty of $2,000 per worker if their workers are forced to go to the new health insurance exchanges for government subsidized insurance.

What’s the likelihood large companies will opt out, placing the burden of employees on the federal government?
Large companies have been providing health insurance for nearly 60 years in order to attract talented employees. They are not likely to change their practices because of this bill. But public policy often has unintended consequences.

What happens to pre-existing conditions?
The bill adopts health insurance rules nationwide that have been common practice in many states for many years. 

First, a temporary national high-risk pool will be set up fairly quickly to cover people with pre-existing conditions. At last count approximately 26 states already had high-risk insurance pools to provide coverage for those who have been denied coverage. Pre-existing condition clauses would be banned in insurance policies.

Second, insurance companies will have to report their loss ratio, the amount of premiums paid out in benefits. Nearly all state insurance commissioners require this information.

Third, beginning this year, young adult children will be able to stay on their parents health policy, and annual and lifetime limits will be gone.

Are public health programs still the most costly part of the program? Why?
Yes and no. Medicaid will become the most costly health program in history, but employers, especially small ones will be paying more to cover their employees in order to receive subsidies and avoid penalties. 

Individuals and families with incomes above 133% of the poverty level will also be paying more for health insurance. We all could be paying more when the new insurance rules regarding pre-existing conditions, and maximums, ripple through the existing insurance pools and have to be financed.

How to pay the estimated $900 billion reform is still up in the air. States might be left holding the tab.

What is the short-term impact of the legislation?
Most of us will be unaffected in the first year. Those denied coverage because of pre-existing conditions, aging out of parents’ health plans, or hitting annual or lifetime health insurance limits, will be able to receive coverage through high-risk insurance pools or private insurance companies that quickly comply with the expectations. But the bill is so complicated it will take months and years of rule-making from the federal agencies to fully implement the provisions.

And the long term?
Beyond the estimated cost ($940 billion) and deficit reduction ($138 billion) in the first 10 years, less than 5% of the U.S. population will be without health insurance and the differences among states in the percent uninsured (for example, Virginia 14%) will be wiped out.