It's About Affordability And The Mandates, Stupid

slinkerwink

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Wed Dec-16-09 03:14 AM
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It's About Affordability And The Mandates, Stupid

The issue of mandates is very problematic because it's wrong to force American families to subsidize private insurance with taxpayer money, and it further entrenches the special interests such as private insurance in our system. Right now, Americans are finding it hard to make ends meet, and Darcy Burner makes it very clear that a family of four making $54,000 cannot afford a policy of $9,000:

The latest CBO estimates for the Senate bill say that a family of four with a household income of $54,000/year should expect to pay 17% of their gross income on healthcare - about $9,000/year. (And that was when there was a public option to hold down costs!) That's more than they'll spend on federal taxes. That's more than they'll spend on food. I'm guessing if you took a poll, very few Americans would consider that affordable. And because of the way they've approached this, there's no effective cost cap on premiums and nothing providing downward pressure, so this is a problem that would get worse rather than better over time.

I know that Nate Silver feels very passionately that this is affordable for Americans in having their money go towards private insurance in the form of premiums AND in subsidies as well with no price controls on private insurance. He's wrong on this issue, and about the bill making insurance coverage better for Americans when the excise tax that he discusses will do the opposite of that. Here's why below:

Help is being defined as giving insufficient subsides to Americans now forced by the government to buy extremely expensive, poorly regulated, junk insurance. Without banning annual limits and an extremely high out-of-pocket cap (which thanks to a massive loophole is not really capped at all), the insurance regulations are basically meaningless. Having this new, mandated �coverage� will not stop you from being bankrupted by accumulated medical debt should you get seriously ill. Insurance that does not protect you from financial ruin if you get sick makes a mockery of the entire concept health insurance.

The harm this bill will do thanks to the excise tax on employer-provided insurance benefits is enormous. The health care bill is designed with the goal of making millions of middle class Americans� health insurance coverage much worse. That is not a bug, it is a feature.

The excise tax is meant to force your employer to cut back your insurance benefits, reduce your coverage, and increase your co-pays and deductibles. This is not the conclusion of partisan think tanks, bloggers, or activists, this is the conclusion of the non-partisan Congressional Budget Office (CBO) and the Center for Medicare and Medicaid Services (CMS). The CBO concluded:

n estimated 19 percent of workers with employment-based coverage would be affected by the excise tax in that year <2016>. Those individuals who kept their high-premium policies would pay a higher premium than under current law, with the difference in premiums roughly equal to the amount of the tax. However, CBO and JCT estimate that most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums; those reductions would result from choosing plans that either pay a smaller share of covered health care costs (which would reduce premiums directly as well as indirectly by leading to less use of covered medical services), manage benefits more tightly, or cover fewer services.

The CMS also concluded:

In reaction to the tax, many employers would reduce the scope of their health benefits. The resulting reductions in covered services and/or increases in employee cost-sharing requirements would induce workers to use fewer services. Because plan benefit values would generally increase faster than the threshold amounts for defining high-cost plans (which are indexed by the CPI plus 1 percent), over time additional plans would become subject to the excise tax, prompting those employers to scale back coverage.

To translate, they both conclude the tax will effectively force employers to scale back the health insurance benefits they offer in order to avoid the excise tax. This can be done by reducing what benefits the plan covers and/or increasing cost sharing (i.e. higher co-pays, higher deductibles, higher out-of-pocket limits, and possibly lower annual limits). If you have a good employer provided health insurance plan, it will be dramatically scaled back. Contrary to Obama�s direct promise, you will not be able to keep the coverage you currently have, and that is by design.

The real problem with this excise tax on what are dubbed �Cadillac� plans is that it is not indexed to health care inflation. In the first few years, it will only affect high-end plans, but, after a decade, it would force employers to make the vast majority of employer-provided health insurance plans much worse. A decade after reform starts most Americans will have much worse health insurance coverage as a result.

And what kind of health reform is that? Especially with the annual limit loophole and the loophole on out-of-pocket costs?

nother problem with the Senate bill is that it doesn�t plug a loophole that a lot of junk insurance plans use: not counting deductibles or co-payments for doctor�s visits or prescription drug payments toward a plan�s annual out-of-pocket maximum. That can be a catastrophe for people who are seriously ill. And it�s one of the things we recommended legislators fix.

The Senate bill does say that the stingiest plans must cap consumer�s out-of-pocket payments at around $6,000 (at least in the first year after reform goes into effect; the cap could go up in succeeding years based on inflation). But it fails to specify that ALL out-of-pocket expenses-- deductibles, coinsurance, co-payments, and similar charges--would count against that out-of-pocket-maximum. The House bill does. It�s not too late for the Senate to follow suit.

We were told that we wouldn't go into medical bankruptcy under this bill, but that has been shown to be false under this Senate bill. The annual limit loophole would very quickly put a family into medical bankruptcy especially if one of their children has cancer or if one of the spouses has a life-threatening illness. The annual limit becomes a lifetime cap for them. And the loophole on out-of-pocket costs exacerbates the problem for seriously ill people who think that deductibles, co-payments, and prescription drug payments are covered under the out-of-pocket cap when they're actually not covered at all thanks to this loophole inserted by private insurers.

We were told that private insurers wouldn't cherry pick, but the weak regulation in the Senate bill has lead to the continuing problem of adverse selection, and has been covered in detail by the Washington Post. We were told that private insurers wouldn't rescind your policies under the Senate bill, except we find that they have the same statutory excuse to rescind your coverage based on "fraud" that they already use. We were told that people with pre-existing conditions would be able to get into the stopgap high-risk pool in the Senate bill http://www.dailykos.com/story/2009/12/13/813717/-$5-Billion-Isnt-Enough-For-Sick-And-Dying-Americans">except we found out that the high-risk pool would run out of money by 2011 due to being underfunded in the Senate bill, and that premiums in the high-risk pool would be expensive for these people.

Called a "high-risk pool," it would be a special health plan just for people with preexisting conditions, who are costlier to insure. A plan just for sick people could require extraordinarily high premiums. However, to make it more affordable, the bill would set aside $5 billion for federal subsidies. According to Foster, that's not enough.nd

"By 2011 and 2012 the initial $5 billion in Federal funding for this program would be exhausted, resulting in substantial premium increases to sustain the program; we anticipate such increases would limit further participation," he wrote.

That means that people with pre-existing conditions would find it very hard to afford insurance in the high-risk pool and would have to wait until 2014 to actually get into one of the 50 state exchanges under the Senate bill to find coverage from private insurers.