National Health Care Reform: Issues and Outlook

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National Health Care ReformIssues and Outlook
Worldwide Employee Benefits Network Cleveland, OH
April 16, 2009
James C. CaprettaFellow, Ethics and Public
Policy Center email jcapretta_at_eppc.org
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Content

• Issues driving reform agenda
• Outline of the emerging Congressional plan
• Issues for job-based coverage
• Potential pay or play dynamic
• Minimum benefit structure
• Potential changes in the federal tax preference
• Issues to watch
• Paygo support for offsets?
• Budget reconciliation?
• Sufficient cost-side agenda?

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The Census Data
Uninsured 45 million
Military 11 million 4
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Employer-Sponsored 177 million
Medicaid 40 million
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Medicare 41 million
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Other Private 27 million
Source Income, Poverty, and Health Insurance
Coverage in the United States 2007, Census
Bureau, Table C-1.
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Additional Data Sources
Source A Primer on the CPS Estimate of
Americas Uninsured, National Institute for
Health Care Management, August 2006.
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Cost Pressure
Sources Income, Poverty, and Health Insurance
Coverage in the United States 2006, Census
Bureau, Table A-1, and CMS National Health
Expenditure Data (www.cms.gov).
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Firm Size, Public Insurance, and the Uninsured
Source Notes, Employee Benefit Research
Institute, Vol. 26, No. 10, October 2005, Figure
3.
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Reform Prototype and Issues
Universal Coverage
Coverage Pay or play employer mandate Individual Mandate (at some point) New insurance subsidies (to 300 to 350 of poverty) Medicaid/SCHIP expansion
Regulatory Structure Stabilize risk pools with national/or state-based insurance exchange system which merges individual and small group market New public insurance option for working age people not enrolled in a job-based plan
Cost Escalation Remedy Health information technology Emphasis on chronic disease prevention and treatment Comparative effectiveness research Medicare-driven pay for performance changes
Some Key Issues Minimum benefit package? How determined? Enforcement of an individual mandate? National or state exchange? Will cost remedies make a sizeable dent? Political support for financing sources? Will a public plan option crowd out private coverage?
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The Massachusetts Connector

• Some Key Features
• Merges individual and small group markets.
• Takes premiums and pays insurers on behalf of
  eligible enrollees.
• Full federal tax preference retained for workers
  in small businesses.
• Annual open enrollment.
• Will receive premium subsidies from state for
  100-300 of poverty enrollees.
• Young enrollee products.

Eligible Enrollees
Insurers
Non-Working Individuals
BC/BS
Harvard Pilgrim
Sole Proprietors
The Connector
Small Business Employees (under 50)
Tufts
Fallon
Non-Offered Individuals
New Entrants, Others
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Federal Tax Preference for Job-Based Plans
2007 Total 246.1 (billions)
Federal Payroll Taxes
Federal Income Taxes
Source Tax Expenditures for Health Care,
Joint Committee on Taxation, JCX-66-08, July 30,
2008.
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The Income Distribution of the Tax Preference
Source Tax Expenditures for Health Care, Joint
Committee on Taxation, JCX-66-08, July 30 2008,
p. 5.
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Potential Pay or Play Dynamic
Pay or Play Employer Tax
Spent on Health Coverage Per Worker
Employer-Sponsored Insurance (ESI) Premium Per
Worker
Pay or Play Tax gt ESI Cost
Pay or Play Tax lt ESI Cost
Average Wage Per Employee
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Budget Reconciliation

• Process for reconciling program spending within
  a Committees jurisdiction with the spending
  allocation assumed in the budget resolution.
• Typically, committees are given to a date certain
  to report legislation meeting their target
• The Byrd Rule allows removal of extraneous
  provisions from a reconciliation measure. Can
  a coherent health-care reform bill work with the
  Byrd Rule in effect?

• Laws Enacted Via Reconciliation
• 1981 spending reduction plan (Reagan).
• 1993 tax and budget plan (Clinton)
• 1997 Balanced Budget Act (Clinton-Gingrich)
• 2001 tax cut (Bush)

The bottom line budget reconciliation process
allows bills to pass in the U.S. Senate with 51,
instead of 60, votes.
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Pay-As-You-Go
Entitlement Cuts Tax Increases gt Entitlement
Increases Tax Cuts (Ten-Year Test)
Per Year
Premium Discounts for Households Below 300/350 of Poverty 150 B

Limit Tax Deductions for Charitable Contribution and Home Mortgage Interest for High Earners - 30-40 B
Cuts for Medicare Advantage Plans - 20-30 B
Other Medicare Changes -10-20 B
Tax Cap for Employer-Paid Premiums -30-40 B
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Longer Range Federal Cost Projections
Medicaid
Medicare
Source The Long-Term Budget Outlook, CBO,
December 2007 (extended baseline scenario).
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The Cost-Side Agenda
The Issue
The Remedies

• Engineering a More Cost-Effective Delivery
  System
• Health Information Technology
• Comparative Effectiveness Research
• Reimbursement Reform (Pay for Performance, Value-
  Based Purchasing)

Per Capita Spending Growth 1975 to 2005 Per Capita Spending Growth 1975 to 2005 Per Capita Spending Growth 1975 to 2005
Real Per Capita Cost Growth Excess Cost Growth
Medicare 4.6 2.4
Medicaid 4.4 2.2
Other Health Care 4.1 2.0
Sufficient?
Excess Cost Growth is per capita spending growth
rate in excess of per capita GDP growth.
Source The Long-Term Outlook for Health
Spending, CBO, November 2007.
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