A Healthcare Rough Draft

Following months of struggles, a healthcare bill finally emerged from the House last week!  While the House bill will undoubtedly change through the process of debate and backroom discussions to say nothing of the pending negotiations between the Senate and House, we at least have a “rough draft” of what Congress’ expansive healthcare reform will include.

Unveiled on Thursday amid much fanfare, Speaker Nancy Pelosi (D-CA) presented the $894 billion Affordable Health Care for America Act.  While the bill does not include Pelosi’s preferred public option model, where hospital and physician rates are tied to Medicare, it offers a more moderate government-run option with negotiated rates and voluntary provider participation. The bill expands government programs by offering subsidies to low-income Americans to buy healthcare coverage from either a private or government program.  The plan will provide coverage for 16 million uninsured through a Medicaid expansion program and an additional 21 million through the creation of a national health exchange.  Furthermore, it reduces the federal deficit by $30 billion over the next 10 years.  In essence, it merges the various Tri-Committee plans into a unified bill as I predicted several weeks ago.  So what are the specifics of the House healthcare bill?

• Public Option: The public option includes negotiated rates and voluntary provider participation.
• Medicaid:  Medicaid expands to 150 percent of the federal poverty level – an increase from 133 percent in other proposals.
• Medicare Growth Cuts: The bill contains roughly $500 billion in growth reductions for various Medicare providers.
• Employer Mandate: The legislation requires companies with a payroll of $500,000 or more to offer health coverage, or pay a penalty of at least 2 percent of payroll. The penalty increases gradually and firms with a payroll greater than $750,000 pay a penalty of 8 percent of payroll.
• Prescription Drugs:  The Medicaid drug rebate increases from 15.1 percent to 23.1 percent beginning in 2010.  Drug makers must supply rebates for drugs provided to “dual eligibles” under Part D starting in 2011.  The bill also allows the Health and Human Services Secretary to directly negotiate Part D drug prices.
• Taxes: The bill creates a 5.4 percent surtax on married couples with incomes exceeding $1 million a year or individuals making more than $500,000 a year.
• Fees on Insurance Plans: The bill contains neither a “Cadillac” tax on expensive plans nor any additional industry fees.
• Medical Devices: The bill includes a 2.5 percent excise tax on medical devices, which raises $20 billion over 10 years.
• CLASS (Community Living Assistance Services and Supports) Act: The bill creates a new long-term care insurance program for the long-term disabled and elderly.  This is a proposal that was one of the prime objectives for Senator Ted Kennedy.  Expect a variation on a theme for this program.  The House proposal is similar to the proposals presented in the Senate,  but it is highly controversial…

Though many of the provisions are quite similar to the Senate plan, there are some very important differences with the major issue relating to funding.  The House bill imposes a new income surtax on individuals earning more than $500,000 and couples with more than $1 million – a non-starter in the Senate.  The Senate bill imposes a tax on expensive “Cadillac” insurance policies, which advocates believe will encourage insurers and consumers to focus on reducing the cost of their plans.  But on the House side, this approach is an equivalent non-starter because it “taxes” health insurance policies of middle-class families (e.g. union members) who have historically bargained away wages in favor of better healthcare benefits.  So, while moving forward, there remains a fiscal impasse.  The other major issue is that the Senate plan calls for state responsibility to take on much of the reform work.  Many in both houses, and on both sides of the aisle, are concerned about how the states will respond to the challenges.  But, the final bill will likely address many of these issues…

While it’s an open debate on whether or not Speaker Pelosi can muster the 218 votes needed to pass the House’s healthcare reform plan, her modified approach solves many of the sticking points that Moderate Democrats have voiced.  Floor debate will begin this week with a final vote anticipated before Veterans’ Day on Nov. 11.  The clock is ticking…

The views and opinions expressed herein are my own and do not necessarily represent the views and opinions of Dell Perot Systems or its affiliates.