The Obama Healthcare Plan

On Monday, following weeks of speculation, the White House finally unveiled its long awaited proposal on the country’s healthcare reform effort. Leading up to this week’s Healthcare Summit at the Blair House, the Obama Administration sought to capture the momentum for what many believe is a sputtering healthcare reform effort. By releasing their proposal, the equivalent to a healthcare “wish-list”, the White House stayed on offense by putting forward a package consistent with most of the basic ideas contained in the Democrat packages.  In laying out his healthcare blueprint for the first time, President Obama has now officially kicked off the latest round of political wrangling intended to bring closure to what was once his top domestic priority.  While the White House plan was touted as a clear proposal for discussion with the Republicans, it also provided a clear outline to both House and Senate Democrats on Obama’s expectations should no Republican support be forthcoming – which is likely.

The Obama healthcare plan embraced many of the elements from the Senate proposal with the goal of finding common ground among policymakers on Capitol Hill. Though the vast majority of provisions have already been proposed and debated over the lengthy reform process, the White House added a new angle.  The White House unveiled a new provision giving the federal government unprecedented power to regulate and prevent insurers from increasing premium rates. Coming on the heels of the recent 39% spike in premiums from Anthem Blue Cross, the proposed rate-review process would force insurers to post their annual increases publicly and give the Secretary of Health and Human Services or state insurance commissioners the ability to deny the rate hike.  As a new idea that has yet to be analyzed by the Congressional Budget Office, White House officials are heralding the proposal as a way to control healthcare’s escalating costs.

Aside from the new rate review process, the White House’s blueprint includes provisions where points of consensus exist among many Democrats, including:

• Patients Covered– Like in the Senate’s proposal, the White House plan covers 31 million uninsured Americans.
• Insurance Mandate– The White House plan requires nearly everyone to purchase insurance or to face a penalty. Like the House’s proposal, Obama’s plan exempts people under the tax-filing threshold ($45,295 for a family of four) while the Senate’s plan exempted those under the federal poverty line ($21,200 for a family of four)
• Coverage Reform– Similar to the House and Senate proposals, Obama’s plan prohibits insurers from denying coverage based on pre-existing conditions while establishing the new rate review system to restrict excessive premium increases.
• Employer Coverage– Like the Senate’s plan, the White House would not require businesses to offer coverage, but would impose a fine on companies of 50 or more workers who fail to offer health insurance. The Obama plan increases the fine from $750 to $2,000 per employee.
• Medicaid– The White House plan broadens the federal-state Medicaid insurance program, covering those with incomes up to 133 percent of the federal poverty line ($29,327). The so-called “Cornhusker Kickback” (giving Nebraska 100% federal funding for newly eligible Medicaid recipients) was deleted by Obama’s plan but the so-called “Louisiana Purchase” (giving Louisiana $300 million in Medicaid funding) remained.
• The “Doughnut Hole”– The White House plan closed the Medicare prescription drug “Doughnut Hole”. By adding an additional $10 billion in fees to the pharmaceutical industry, Obama’s proposal closes the gap entirely by 2020.
• The “Cadillac” Excise Tax– One of the more discussed aspects of the healthcare reform debate, the White House included an excise tax on high-cost insurance plans. Obama’s proposal though scales back the plan from taxing coverage worth $8,500 for individuals and $23,000 for families, to $10,200 for individuals and $27,500 for families, an estimated loss of $120 billion over ten years. Additionally, Obama’s excise tax proposal would be delayed from 2013 until 2018.  This particular provision is likely to be the Achiles heel of the Obama plan because it reduces the available tax revenue to support the new health insurance program.  Pushing off tax increases to pay for the proposal to a future President and Congress may make for good politics today but, delays the inevitable fiscal problems associated with program expansion by pushing them into the future.
• Payroll Tax– To partially make up for the lost $120 billion in the revised excise tax, the White House plan includes an increased Medicare payroll tax on investment income in addition to all wages for those earning more than $200,00 a year individually or $250,000 a family.
• State Based Exchanges– The White House plan creates new state-based exchanges which allow small businesses, self-employed workers, and uninsured Americans to purchase coverage in groups.
• Public Option– To the disappointment of many liberals in Congress, the White House plan did not include any government-run insurance plan.
• Abortion– As the “elephant in the room”, Obama’s proposal mirrors the Senate bill where health plans have the option to cover the procedure but cannot use federal funds to pay for the service. Though exceptions would be made for incidents of incest, rape, and danger to the mother, states would have the authority to ban the coverage of abortions in their state-based exchanges if they desired.

Referred to as a “starting point” by White House officials, the Obama proposal is a step that 1600 Pennsylvania Avenue hopes will be the beginning of the end. A largely moderate package that includes a number of compromises, the plan brings forth a basic platform as the foundation for further reform of the healthcare system.  In the aftermath of the theater, anticipate continuing clashes between Democrats and Republicans or – let the games begin.

Kevin Fickenscher, MD

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