January 29, 2007
Prospects for a new national discussion of broad-scale reform of U.S. healthcare—politically moribund since 1994 when President Bill Clinton’s initiative collapsed and the Democrats lost control of the House—surged into the spotlight this month.
Catapulting healthcare reform to front pages across the country was a convergence of events in California and other states; in Washington among lobbyists for insurer, business, labor, and consumer coalitions; and on Capitol Hill where numerous reform bills have already been introduced or are circulating as drafts.
First Out of the Starting Gate
California captured the headlines first when Rep. Governor Arnold Schwarzenegger on January 8 unveiled his plan for universal healthcare coverage. All residents would have to secure coverage, including an estimated 6.5 million uninsured, through work, in the private market, or from a state purchasing pool. The price tag: an estimated $12 billion, with costs spread among individuals, employers, doctors, hospitals, the state and federal government.
Not long after the California proposal, two influential coalitions representing a broad swath of businesses, health plans, unions, doctors, hospitals, and consumer groups made headlines with their plans to lobby the Democratic-controlled 110th Congress and the public to at least begin to address the healthcare coverage crisis that currently leaves a growing number of Americans, now estimated at 47 million, without any healthcare coverage.
Paying the Tab
The California plan would expand benefits to the uninsured through the Medicaid (Medi-Cal) program and Healthy Families (the State Children’s Health Insurance Program or SCHIP). It also includes controversial provisions requiring employers and providers to pay into a state purchasing pool where workers could buy coverage.
Businesses with at least 10 employees must offer health insurance or send the state an amount equal to 4% of payroll, raising an estimated $1 billion. Doctors would pay 2% of gross receipts and hospitals 4% of theirs, raising an estimated $3.5 billion, though some of this transfer would be offset by higher Medi-Cal payment rates, which state officials concede are too low.
The provider provisions are not likely to affect clinical laboratories, Mike Arnold of the California Clinical Laboratory Association told NIR. Few details of the Governor’s plan have emerged, he cautioned. Labs also are not likely in line for the proposed Medi-Cal rate hikes, he said, but CCLA is working separately to get Medi-Cal lab fee increases.
How the employer and provider provisions are interpreted will be crucial to any enactment of the plan. If the assessment is a fee, it could pass the state legislature by a simple majority; if it is a tax, a two-thirds majority would be necessary, requiring GOP buy-in.
States Have Led the Way
When President Bush lauded state efforts to cover the uninsured in his State of the Union address, he was recognizing a solid trend during this decade for states to pick up the slack, frustrated with the lack of federal action. Maine became the first state to enact universal health coverage access in 2003, with the Dirigo ("I Lead") Health Reform Act, a measure aimed at providing every citizen with access by 2009.
Massachusetts last year enacted an individual mandate that all state residents secure healthcare coverage or forfeit certain state income tax advantages. All employers that have 11 or more workers and do not provide them with health insurance must pay an annual assessment of up to $295 per employee. The coverage mandate is scheduled to take effect July 1 of this year.
Also last year, Vermont created the voluntary Catamount Health Program to provide comprehensive coverage for uninsured residents, with access to publicly subsidized or lower-cost private insurance. Coverage focuses on managing chronic diseases. State funding comes from a Medicaid waiver, increases in the tobacco tax, and an employer assessment for employees who are not offered insurance or are uninsured.
In 2005, Illinois enacted an All Kids Health Insurance initiative to cover those below age 19, largely through expanding Medicaid and SCHIP benefits. All Kids began July 1, 2006. And Pennsylvania is following through on a similar plan for uninsured children.
A host of other states this year are looking at incremental reforms for the uninsured, according to the National Conference of State Legislatures. Several states have commissions due to report recommendations on expanding healthcare coverage. In Washington state, a blue-ribbon report to the legislature, released January 11, recommended, as a broad principle, that access to healthcare coverage be available to all the state’s children by 2010 and to all adults by 2012.
Shifting Political Climate in Washington
When the Democrats took control of the House, they quickly acted on a modest healthcare agenda, passing bills to expand stem cell research and to require Medicare to negotiate directly for discounts from drug companies. The latter cleared without a veto-proof majority, however, and Senate Finance Committee chairman Max Baucus (MT) has indicated that while he favors ending the ban on direct negotiations, he does not necessarily favor requiring the HHS Secretary to undertake direct talks.
But the Democratic majority soon was called on to consider a broader healthcare agenda and break the political gridlock over system-wide reform. The Service Employees International Union, AARP, and the Business Roundtable on January 16 announced a campaign to get national elected officials to bring about universal healthcare coverage and a retirement system for long-term financial security. The coalition is laying the groundwork for a concerted effort in the 2008 national elections, where members intend to make healthcare a front-and-center issue in every race.
Higher healthcare costs threaten U.S. long-term prosperity and competitiveness, said John Castellani, Business Roundtable president. "They are a top priority concern of America’s business leaders." While the growth in U.S. healthcare spending has slowed, it still outstrips the rate of inflation and growth in the economy as a whole. On-the-job coverage is slipping, dropping from 81% in 2001 to 77% in 2005. As premiums rise, many businesses curtail benefits or drop coverage altogether.
Then on January 18, the Health Coverage Coalition for the Uninsured called for a two-phase strategy to provide healthcare coverage to low-income Americans, beginning with all children and spreading to most adults. Coalition members include America’s Health Insurance Plans, AARP, the American Hospital Association, the American Medical Association, Pfizer, Johnson & Johnson, and the U.S. Chamber of Commerce.
The initial phase—Kids First—calls for expanded funding for Medicaid and SCHIP and for a new tax credit to help families cover the cost of buying coverage for their children. Families with earnings up to three times the federal poverty level ($60,000 per year for a family of four) would be eligible for the tax credit. For those with access to job-sponsored coverage, the tax credit could be used to buy coverage through an employee health benefits program.
Congress Open to Discussion
The shifting political climate has prompted Democratic party leaders to say they will take a closer look at ways to cover the uninsured, cut medical costs, and achieve savings on prevention and on administrative costs.
Party lions Sen. Edward Kennedy (MA), who chairs the HELP Committee, and Rep. John Dingell (D-MA), who heads the Energy & Commerce Committee, remain committed to universal healthcare coverage. Senate Finance member Ron Wyden (D-OR) has a Healthy Americans plan which would guarantee every American healthcare coverage that could never be taken away and would be equal to coverage enjoyed by members of Congress. Significantly, Wyden’s plan would free employers from finding affordable coverage for their workers. After a short transition period, employers will make a "shared responsibility" payment of up to 25% of the average premium for essential care in the area.
A bipartisan group of lawmakers in the House and the Senate favor supporting state initiatives as "laboratories" for reforms that work and those that don’t. The group has introduced bills to provide federal grants to states to carry out reforms to reduce the number of uninsured. The legislation would establish a state health innovation commission to review state health reform proposals. The proposals would then be subject to approval by Congress. As much as $4 million would be provided to operate the commission, but the amount to states would vary on the type and scope of their plans.
Bumping Into Budget Constraints
The overriding challenge to enacting sweeping healthcare reform is how to pay for it. If Congress follows the pay-as-you-go rules, the federal budget deficit is likely to severely constrain enactment of any major proposals. Medicare already is facing a potential funding warning that could mandate spending cuts.
Democratic party leaders say they will provide a sounding board for the issues leading into the 2008 presidential and congressional elections. House Ways & Means health subcommittee chairman Pete Stark (CA) does not foresee any big initiatives. "We have got to win again in 2008 … We are building up to a year, 2007, in which a lot of people are willing to discuss the benefits and costs of universal coverage, but I don’t think we are going to make legislative headway." Stark has long advocated using Medicare as a model to provide universal coverage to all Americans.
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January 29, 2007 - Table of Contents
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