Health Care Reform Passes the House

Quoting the Wall Street Journal on last night’s events:

The House narrowly passed its sweeping health bill late Saturday, marking the biggest victory yet for Democrats in their drive to create near-universal health insurance.

The bill passed by a 220-215 margin after fractious debate and garnered the unexpected backing of only one Republican, Rep. Anh "Joseph" Cao of Louisiana. Thirty-nine Democrats voted against the measure. The narrow passage in the House, where the Democrats have a large majority, underscores how controversial the measure has become. It faces a tougher fight in the Senate where Republicans and some Democrats argue that the bill is too costly and won’t achieve its goals. […]

One of the day’s most dramatic scenes came when lawmakers sparred over an amendment that would exclude coverage of abortion for those gaining new health insurance under the overhaul. The 240-194 vote to pass the amendment flipped the usual voting lineup, with 176 Republicans joining 64 Democrats in favor.

On the rest of the bill, Republicans offered nothing but sharp opposition. Republicans framed the issue as an unprecedented power grab that would raise — not lower — medical costs. They lambasted the legislation for creating new taxes and failing to curb frivolous medical malpractice lawsuits.

Remember that the Senate bill hasn’t come up for a vote, and some of the differences between the two bills are controversial.  It’s not a done deal yet.

Personally, while I welcome the idea that more people will (in theory) have access to more complete health care, and that more people will make the fiscally responsible decision of getting health care before spending money on more frivolous things (even if they do so only under threat of fine or prison), I am still disappointed that all Congress seems to be doing is proclaiming, “Fiat salus!” without actually taking the time to really address the structural concerns that lead to the state of health care in the U.S. today.

So, what’s in the bill?   An Opinion Journal article a few days ago [free link] included a few tidbits:

Sec. 202 (p. 91-92) of the bill requires you to enroll in a "qualified plan." If you get your insurance at work, your employer will have a "grace period" to switch you to a "qualified plan," meaning a plan designed by the Secretary of Health and Human Services. If you buy your own insurance, there’s no grace period. You’ll have to enroll in a qualified plan as soon as any term in your contract changes, such as the co-pay, deductible or benefit.

Sec. 224 (p. 118) provides that 18 months after the bill becomes law, the Secretary of Health and Human Services will decide what a "qualified plan" covers and how much you’ll be legally required to pay for it. That’s like a banker telling you to sign the loan agreement now, then filling in the interest rate and repayment terms 18 months later.[…]

Sec. 59b (pp. 297-299) says that when you file your taxes, you must include proof that you are in a qualified plan. If not, you will be fined thousands of dollars. Illegal immigrants are exempt from this requirement.[…]

Sec. 1302 (pp. 672-692) moves Medicare from a fee-for-service payment system, in which patients choose which doctors to see and doctors are paid for each service they provide, toward what’s called a "medical home."

The medical home is this decade’s version of HMO-restrictions on care. A primary-care provider manages access to costly specialists and diagnostic tests for a flat monthly fee. The bill specifies that patients may have to settle for a nurse practitioner rather than a physician as the primary-care provider. Medical homes begin with demonstration projects, but the HHS secretary is authorized to "disseminate this approach rapidly on a national basis."

A December 2008 Congressional Budget Office report noted that "medical homes" were likely to resemble the unpopular gatekeepers of 20 years ago if cost control was a priority.[…]

Sec. 1402 (p. 756) says that the results of comparative effectiveness research conducted by the government will be delivered to doctors electronically to guide their use of "medical items and services."

From NPR:

A little-noticed provision tucked into the House’s nearly 2,000 page bill would require chain restaurants and operators of vending machines to post calorie counts for the food they sell. Don’t feel bad if you missed it, it’s stuck down in Section 2572, starting on page 1,510.

From a Wall Street Journal article:

The uninsured: They’re the biggest winners under the bill. Starting in 2013, it gives government subsidies to a chunk of low- and middle-income Americans and expands Medicaid to cover a greater swath of the poor. At the lowest income level, the subsidy would keep a family of four earning just over $29,000 a year from paying more than 1.5% of their income on insurance premiums. It reaches as far up as a family of four earning about $88,000 a year, so they would pay no more than 12% of their income toward insurance.[…]

But for those who don’t want insurance, there’s a downside. Once these changes take effect, people who choose to go uncovered would generally have to pay a penalty equal to as much as 2.5% of their income.

The insured: Democrats tried to pack the bill with benefits for this group, but the upside is less tangible and some of the wealthy would see higher taxes. Most consumers would see their out-of-pocket medical costs capped at $5,000 a year for individuals and $10,000 a year for families. Insurance companies could no longer drop coverage when customers got sick.

Some perks would go away. Employees with tax-free flexible spending accounts could no longer use them to buy over-the-counter medicines, and they couldn’t put more than $2,500 a year in the accounts.[…]

Seniors on Medicare: Over time, the bill would close a gap in prescription drug coverage. Currently, Medicare participants are responsible for paying drugs’ full price in the "doughnut hole," which kicks in when their drug spending exceeds $2,700 and goes up to $6,154 per year.[…]

Doctors: Primary-care doctors could see a strain from an influx of the newly insured. While the bill carries new incentives to boost the supply of these doctors, health professionals expect demand to outpace the supply.

The bill’s provisions on medical liability are far short of what most doctors want. It creates new incentive payments to states that have alternative medical liability laws aimed at cracking down on frivolous malpractice lawsuits. Also, the bill doesn’t address a looming sharp cut in payments to doctors under Medicare.[…]

Hospitals: With more Americans carrying insurance, they would no longer give away so much uncompensated care. But the money the government gives them to lessen that burden would also go down, and they fear the new paying customers won’t offset the cuts. They would also face new penalties for readmitting Medicare patients in instances that the government deems unnecessary.

Another WSJ article drills down into the tax aspect of the bill, mentioning:

• The penalty paid by people who choose not to acquire coverage;
• The penalty paid by all but the smallest businesses which do not provide adequate health coverage to employees (likely impacting most those companies with many part-time workers);
• The reduction in health care flexible spending account contribution to $2,500 from $5,000 (resulting in a significant increase in taxes to those of us who have significant family health bills); and
• A 5.4 point increase in income tax rates for individuals earning $500k or more, or families with incomes in excess of $1,000,000 (as opposed to the cadillac health plan tax in the Senate bill).

As to the impact to actuaries, Power Line Blog notes:

As I wrote here, you can force insurance companies to "cover" preexisting conditions, but the resulting product is not insurance. You cannot insure against something that has already happened. It is merely a bill-paying mechanism. Likewise, the House bill prohibits insurance companies from charging premiums on any rational basis. Section 213, titled "Insurance Rating Rules," provides:

The premium rate charged for a qualified health benefits plan that is health insurance coverage may not vary except as follows:

(1) LIMITED AGE VARIATION PERMITTED.–By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1.

So young people–who, remember, will now be forced to buy health insurance–will subsidize older people.

(2) BY AREA.–By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators).

(3) BY FAMILY ENROLLMENT.–By family enrollment (such as variations within categories and compositions of families) so long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, as specified under State law and consistent with rules of the Commissioner.

That’s it. A lower premium for non-smokers or the non-obese? Forget about it. It’s illegal.

Under the House bill, it is scarcely an exaggeration to say that health insurance companies are no longer in the insurance business. They can’t rate and underwrite risks, which is the essence of insurance. That’s illegal. They can’t decide to whom they will issue policies; that’s illegal, too. They can’t offer novel or innovative coverages; their coverages are dictated by law. To a limited extent they can make decisions on paying claims, but under the watchful eye of government regulators. Meaningful competition among insurance companies will be, in effect, illegal. (In that context, it is a sick joke that the Pelosi bill also subjects health insurance companies to the antitrust laws, from which they had been exempted in consideration of their regulation by state, not federal, authorities.)

In the world that the House bill would create, the money we will pay to insurance companies won’t really be insurance premiums. Insurance premiums are contractual payments which the parties voluntarily agree upon and which are based on a mutual assessment of risk. Rather, the checks we write to insurance companies will be taxes–legally compelled, at rates set by the federal government that are designed to punish some and subsidize others.

Isn’t this socialized medicine in all but name? The only difference, perhaps, is that when things start to go badly, as they inevitably will–spiraling costs, long waits for treatment–Nancy Pelosi and her colleagues will have someone to blame: the insurance companies. Maybe old-fashioned socialized medicine would be better. Then, at least, the government would have to take responsibility for its folly.

I am still disappointed (but not terribly surprised) that Congress isn’t doing more to tackle the structural problems in how health care is delivered in the country, and the core causes for medical care cost inflation.  I’m not aware of anything substantive in the bill that really addresses how medical costs increase significantly faster than the general rate of inflation, other than the threat that less will be paid, regardless of the cost.

I’m personally miffed at the reduction in flex-spend amounts.  Thanks to my wife’s disability, my family has pretty significant health bills.  Between the limitation on flex-spend and other changes likely to emerge from reform, I expect that our health care spending will increase 15-20%, before factoring in inflation.  Reform was destined to mean that someone was going to pay more, and we should certainly pay our fair share…but paying that much more for probably less benefit sucks.

And, I note that there is still nothing in the bill that acts as a significant incentive for health plan administrators to not behave badly.  Actually, considering the cap in allowable administrative expense loads in both leading reform measures, I fear more shenanigans on the horizon.  i wonder just how many more times I’ll have to fight with our health plan administrator over their declining to pay for preauthorized treatment, their repeated “forgetting” that my wife doesn’t have Medicare Part B, or their dropping many of our doctors from the network.

Ah, there’s nothing like a bit of chaos to keep life interesting, eh?