Tuesday, June 16, 2009

The Senate HELP Committee's Affordable Health Choices Act: A Summary and a Recommendation for a Consumer Friendly 'Nutrition Facts Label'

Readers may have already learned that one of the two major Senate Committees that are drafting health reform legislation has finally come up with a long awaited product of the political process called a "bill." While this particular piece of legislation is still a work in progress, Senator Kennedy's Health, Education, Labor and Pensions (‘HELP’) Committee’s bill has already made some progress: it has been preliminarily ‘scored’ by the Congressional Budget Office (CBO).

CBO's analysis makes for very interesting reading. What is helpful about the CBO report is that it gives a readable summary of this ‘Affordable Health Choices Act’ (AHCA), saving the Disease Management Care Blog from having to don its oxygen apparatus and blow tanks for a dive into the original legislative language. CBO then tells us how well this will work and how much this is going to cost. It ain't pretty.

According to CBO, AHCA would either mandate or impose ‘play or pay’ health insurance coverage, provide States grants to establish Massachusetts-style ‘exchanges’ that enable insurance purchasing and subsidize that purchasing on a sliding scale from 150% to 500% of the Federal Poverty Level. The bill assumes that individuals below 150% would qualify for Medicaid.

Because AHCA doesn’t mention it, there is no mention by CBO on the impact of a ‘public insurance option’ or the expansion of Medicaid. Another possibility being considered in Congress is allowing children to be covered as dependents until age 27 years, which could also change things. In addition, administrative costs are unknown and some language in AHCA needs to be clarified. As a result, CBO’s assessment is technically incomplete - which was not only pointed out in their report, but on the Director's Blog.

So with the ‘incomplete’ caveat, CBO projects that, absent any legislation, the number of persons who are less than age 65 years with insurance will go from the current level of 217 million to 228 million over the next ten years. At the same time, the number of persons without insurance will go from the current level of 50 million to 54 million - or 19% of the U.S population.

If the HELP AHCA legislation, as currently written, passes Congress, the number of persons without insurance will decrease to 36 million - or 13% of the U.S. population. About a third of these uninsured would be undocumented aliens or Medicaid eligible individuals who haven’t been signed up. What’s more, the report predicts the number of persons with employer based insurance will decline from 162 million (if things are unchanged) to 147 million.

Cost? The total cost of the sliding scale insurance subsidies is $1.28 trillion, averaging $5000 per individual. $60 billion is needed to set up the insurance exchanges. These costs would be offset by taxes on more employers presumably paying higher wages if they’re not paying for health insurance ($257 billion) plus fewer people using Medicaid and SCHIP ($38 billion) plus ‘pay’ penalties from individuals who refuse to ‘play.’ Bottom line? A whopping $1.042 trillion over ten years.

Wait a minute, says the DMCB: 36 million uninsured? OK, 24 million if we exclude illegals. 13% of the U.S. population? $1 trillion? Fewer persons with employer-based insurance? That sounds like there will still be plenty of uninsureds in 2019, which even ardent liberals find shocking. Heart breaking tales of bankruptcy and lack of access will continue to pepper the health policy landscape and we’ll have 36 million reasons to move to a single payer system.

The DMCB doesn't think it's just about the money. Americans are generally willing to give the government more money if they believe the expense is worthwhile. This is not about the eye-popping sum of $1 trillion, this is about getting $1 trillion of value for the taxpayer.

Unless the DMCB is naively misreading the CBO report, $1 trillion in exchange for ‘only’ 36 million uninsured would not seem to pass muster. The DMCB hasn't done the math, but it suspects that the Federal outlays necessary to reach higher percentages of the uninsured are not a "linear" process. Much like the "last mile" of broadband connectivity, the cost will spiral up on a logarithmic scale. Good intentions, the DMCB would like to introduce you to fiscal reality.

And don't let the notion that the report is 'incomplete' fool you. Here's a quote:

“Although this analysis reflects the proposal’s major provisions, taking all of its provisions into account could change our assessment of the proposal’s effects on the budget and insurance coverage rates—though probably not by substantial amounts relative to the net costs already identified. Public plan and expansion of Medicaid would mean additional costs.”

Given the consternation over the cost of AHCA, the DMCB would like to borrow from the ubiquitous FDA's 'Nutriton Facts Label' that is designed to help consumers quickly navigate through the ingredients and the value of pre-packaged food. A similar label is necessary for AHCA bill, so that consumers can quickly and efficiently understand what they are getting for their hard earned money. If you think about it, the only difference is that the HELP Committee is giving us a pre-packaged health reform solution. If that's a box on the DMCB's fiscial breakfast table, it recommends that the label should look like this:

1 comment:

Anonymous said...

Hi Jaan,
Excellent write up; The Democrats are shying away from the CBO's score and Kennedys plan "this is not the Administrations bill and it's not even the final Senate Committee bill"
To add to your big numbers:
* The Kennedy plan provides subsides for people making between 150-500% of the federal poverty level. For a family of 4, 500% of poverty is $110,000. The CBO assumes the subsidy per enrollee would be ~ $5000 in 2014 rising $6000 by 2019. Even those numbers shy observers should be raising their eyebrows...Sen. Baucus certainly is, as he is waiting for accurate CBO estimates. Thank you, Lea