Parsing the House Health Bill

By Janet Adamy
November 8, 2009

 The Wall Street Journal.

With the House health bill passed, Congress moves a step closer to making the biggest changes to the health system in more than four decades. Here’s a look at what the bill would mean for various groups:

The uninsured: They’re the biggest winners under the bill. Starting in 2013, it gives government subsidies to a chunk of low- and middle-income Americans and expands Medicaid to cover a greater swath of the poor. At the lowest income level, the subsidy would keep a family of four earning just over $29,000 a year from paying more than 1.5% of their income on insurance premiums. It reaches as far up as a family of four earning about $88,000 a year, so they would pay no more than 12% of their income toward insurance.   <!– [more] –>

Shopping for insurance would probably get easier since the bill creates new exchanges designed to allow consumers who buy their own policies to compare plans side by side. One of those plans would be a government-run insurance plan, also known as the “public option.”

Obtaining coverage would get easier because the bill prohibits insurance companies from denying coverage to people over pre-existing health conditions.

But for those who don’t want insurance, there’s a downside. Once these changes take effect, people who choose to go uncovered would generally have to pay a penalty equal to as much as 2.5% of their income.

The insured: Democrats tried to pack the bill with benefits for this group, but the upside is less tangible and some of the wealthy would see higher taxes. Most consumers would see their out-of-pocket medical costs capped at $5,000 a year for individuals and $10,000 a year for families. Insurance companies could no longer drop coverage when customers got sick.

Some perks would go away. Employees with tax-free flexible spending accounts could no longer use them to buy over-the-counter medicines, and they couldn’t put more than $2,500 a year in the accounts.

To finance the overhaul, individuals who earn more than $500,000 a year or families making $1 million or more annually would pay a new 5.4% tax on top of existing income taxes.

Seniors on Medicare: Over time, the bill would close a gap in prescription drug coverage. Currently, Medicare participants are responsible for paying drugs’ full price in the “doughnut hole,” which kicks in when their drug spending exceeds $2,700 and goes up to $6,154 per year.

Medicare recipients would no longer have to pay out of pocket for preventive care. Certain early retirees could tap into a new fund that offsets the cost of high-cost health claims.

Since cuts to Medicare spending are one of the bill’s biggest funding sources, some benefits could evaporate from the program. Core benefits aren’t likely to be affected. Most likely to be eliminated are benefits such as free fitness classes offered by private insurers who cover some people on Medicare.

Large employers: The biggest changes don’t directly affect most large employers. The health-insurance plans they currently offer employees would get grandfathered in to protect them from most new insurance requirements. Those offering skimpy coverage, or none at all, would have to pay a fine of up to 8% of their payroll.

Small Employers: The bill gives tax credits to firms with up to 25 workers and an average annual salary of $40,000. Employers with payroll of less than $500,000 are exempt from paying a fine if they don’t offer insurance. And the bill gives them grants to create employee wellness programs. But business owners with larger payrolls would face the fine if they don’t offer sufficient coverage.

Also, the tax on the wealthy could affect some small-business owners, depending on the tax structure of their income. That is a big reason small business groups have vocally opposed the bill.

Doctors: Primary-care doctors could see a strain from an influx of the newly insured. While the bill carries new incentives to boost the supply of these doctors, health professionals expect demand to outpace the supply.

The bill’s provisions on medical liability are far short of what most doctors want. It creates new incentive payments to states that have alternative medical liability laws aimed at cracking down on frivolous malpractice lawsuits. Also, the bill doesn’t address a looming sharp cut in payments to doctors under Medicare.

Hospitals: With more Americans carrying insurance, they would no longer give away so much uncompensated care. But the money the government gives them to lessen that burden would also go down, and they fear the new paying customers won’t offset the cuts. They would also face new penalties for readmitting Medicare patients in instances that the government deems unnecessary.

Insurance companies: They’re probably losers. The bill forces them to abandon some of their most profitable practices without any guarantee the tens of millions of new customers they’ll likely get would make up the difference.

Insurers couldn’t charge an older customer more than twice as much as a young one for insurance. They face caps on how much they spend on administrative costs. Since some of the requirements take effect as soon as next year, insurers say it would throw off contracts they’re locking in right now during employer open enrollment for policies.

But the most widely cited threat that insurers face under the bill—the new public insurance plan—may be overblown. The plan is only open at first to individuals who can’t get coverage at work and certain small businesses, though some larger employers could eventually gain access. Because the public plan would have to negotiate prices with doctors and hospitals just as private insurers do, the Congressional Budget Office has projected that the public plan generally wouldn’t offer lower premiums and wouldn’t take away many customers from private insurers.

Pharmaceutical companies: The bill costs them far more than they had hoped. Drug makers estimate they’ll forgo $125 billion to $150 billion over the next decade, largely in lower government payments for drugs, under the changes. However, they would gain business because wider insurance coverage means more people taking prescriptions.

To discourage undue influence over health-care providers, drug makers and distributors would be required to report any payments they make totaling more than $5 to doctors, pharmacies, hospitals and other care providers.

 

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