What are the features of the Health Care Reform legislation?
In a very partisan vote (Click to see chart), Congress passed landmark health care legislation in March 2010. The new legislation addresses two of the major health care controversies: coverage for the uninsured and a form of "Patient Bill of Rights". It is very questionable whether it effectively addresses a third major problem: the relatively high cost of medical care in the United States when compared to other industrialized countries. On the contrary, the expanded coverage requirements may increase the cost of health care as a percentage of the GDP.
The following summarizes some of the key provisions:
All must obtain health insurance or pay tax penalties. The penalties will be phased in between 2014 and 2016. The types of insurance plans available will vary; there will be an option to purchase catastrophic coverage only.
Government assistance with purchasing insurance:
Available to persons or families with income below 400% of the Federal Poverty Level ($73,243 for a family of three). These persons will receive tax credits to help with the purchase of insurance. The amount of the tax credits will vary based on the income level.
Insurance plans forbidden from rejecting applicants due to preexisting conditions. Elimination of dollar caps on coverage.
The lower cost, government assisted insurance plans will be through state-based insurance exchanges. These will be primarily operated by nonprofits and their plans will be available to individuals and to employers with less than 100 employees.
Employers with 50 or more employees must provide health insurance as part of compensation or pay fine. The requirement may be met by facilitating a low income employee's participation in the government-assisted insurance exchange program. Employers with more than 200 employees must provide health insurance. Employers to receive tax credits to assist in meeting the coverage requirements.
Effective 2014, government provided health care will become available to all persons with income less than 133% of the federal poverty level ($24,407) for a family of three. Presently such coverage is only available to children, seniors, and disabled persons. Most of the expanded coverage will be financed primarily with federal funds, not state funds.
Limits the extent to which federal subsidies will be available for this procedure to saving the life of the woman or cases of rape or incest
Financing the reform:
New taxes on health care providers and pharmaceutical manufacturers. Limits on the tax deductibility of health insurance by employers to high income employees. There is a 0.9% increase in Medicare payroll taxes for Americans who earn more than $200,000 annually individually and $250,000 for couples.
Detailed provisions and incentives to achieve greater cost containment in the Medicare program. The "doughnut hole" in the prescription drug coverage has been closed, amounting to a substantial savings for seniors.
What has been the controversy regarding this legislation?
It is difficult to identify a common thread in the partisan opposition to this legislation. Most Republican politicians have publicly agreed that the health care situation needs to be addressed but their attacks on this legislation generally involved charges that it was too costly, that it should be a matter left to each state, and that it marked a trend toward socialism. Because health care reform has been primarily a campaign issue raised by Democrats, much of the opposition may have arisen from a desire to deny the opposition party credit for a signature accomplishment. There may also be opposition to the higher payroll taxes on higher income Americans which will partially finance this legislation.
How does the U.S. finance health care?
Unlike other industrialized countries, U.S. medical care is primarily financed through insurance provided at the workplace to employees which is usually part of the compensation package. There is a tax incentive for this type of coverage because health benefits are not treated as taxable income. This employment based financing system started when wage and price controls were enacted during World War II. Employers were not permitted to increase wages but were permitted to increase fringe benefits such as medical coverage. Because of Medicare and Medicaid, the government's portion of the nation's healthcare burden has steadily increased, but the majority of health care funding still comes from the private sector. With respect to these private funds, health insurance has replaced out-of-pocket consumer spending as the major source of payment. (Click to see chart)
What have been the major policy issues concerning health care?
Health care concerns have been a major political topic for the past two decades. The issues overlap but can be generally categorized as follows:
- Too many Americans are uninsured.
Most would agree that the primary problem with the U.S. health care financing system is that it leaves a large group of Americans uninsured. Many of the very poor are covered by Medicaid but others are not. A large group of uninsured Americans are lower income workers who work for employers who do not offer medical insurance. As more jobs move from the manufacturing sector to the service sector, this group is increasing in number. This is particularly true in states like California where the service sector of the economy has grown most. (Click to see map)
Another serious problem is that the system is stacked against workers at all income levels who have medical problems. Not only are they unable to obtain insurance, their condition often prevents them from obtaining employment from employers who offer medical insurance because they are bad risks.
Uninsured individuals also present a problem for hospitals and other providers who must provide treatment in catastrophic situations without compensation.
- Too much money is spent.
Health care costs are now more than 17% of the U.S. national economy and the economic repercussions have been felt by most American families as employers are increasingly unwilling to absorb the bulk of this increase. Health insurance costs have more than doubled in just a decade and are escalating at a rate even greater than the cost of health care. Overall national health care costs are likely to increase even further with the implementation of Medicare prescription drug coverage. Today, publicly funded medical care in the U.S. which serves slightly more than quarter of Americans, is greater than the cost of public systems in other industrialized countries which cover everyone.
The United States spends far more on health care in actual dollars and as a percentage of the GDP than any other country of the world. Many believe that this expenditure has not resulted in a corresponding improvement in public health. For example, the U.S. ranks low among industrialized countries in life expectancy and infant mortality. But others state that that it is incorrect to completely link public health to such vital statistics because many other cultural factors are involved. They point out that the United States health system has far more medical equipment and trained personnel per capita than any other country.
Many argue that the workplace insurance system together with Medicare and Medicaid tend to overinsure Americans leading to unnecessary spending and consumption of medical services. Managed care has attempted to address such overconsumption but many are dissatisfied with this solution.
Finally, critics of the present system argue that the insurance overhead is costly. For example, it has been stated that 25 cents out of every dollar spent for hospital costs is spent to cover bureaucracy and paperwork.
How do other countries finance health care systems?
The government plays a much larger role in health care in most industrialized countries than it does in the United States. Virtually the entire population is covered and most health expenditures are paid through public sources. The government participation in health care ranges from directly providing services through a public system or by contracting with providers in the private sector.
What are the prominent proposals for reforming health care financing?
- The 1993 Clinton plan
After winning presidency with campaign promises of reforming the health care system, President Clinton appointed his wife Hillary to head a task force to formulate a plan for reform. The proposal mandated employers to provide health insurance and pay 80% of the premium costs. It guaranteed continued health insurance to individuals who lost employment or changed employment. A major linchpin of this proposal was regulation of the health insurance industry. States were required to identify one or more regional alliances to serve as purchasing agents for health care insurance. Workers could choose between low cost (HMO) type plans or fee for service plans. The benefits offered would be standardized. All workers would be pooled without consideration of age, gender or health status. The percentage of employee compensation which could be spent on health care insurance was limited. Although the plan attempted to build on the existing employment-based structure, it ultimately was defeated because of an opposition which included some insurers and provider organizations and most Republicans. Perhaps due to its complexity, the plan drew little support in the face of such opposition.
- Medical Savings Accounts
Under this plan, individuals and their employers could make regular, tax-free deposits to MSAs, which would be the property of the individual. They could withdraw money without penalty only to pay medical expenses or health insurance premiums. Money they did not spend would grow with interest, and they could use it for medical expenses after retirement, roll it over into an IRA or pension plan or leave it as part of their estate. Some states have enacted legislation which permit such accounts. Proponents argue that such a proposal would save billions of dollars and restore the right of choice of a health care provider. President Bush supported this concept during the recent campaign. Opponents suggest that this would be an attractive option to younger and healthy workers but by removing these workers from the insurance pool, the resulting increase in insurance rates would threaten to destroy any type of insurance indemnity system. A limited version of the medical savings account idea was included as part of the Medicare reform package passed by Congress in November 2003.
- Tax credits for the purchase of health insurance
Those who do not receive employer financed health insurance are disadvantaged because the cost of individual health insurance is high and because they must purchase such coverage from income that has already been taxed. In the recent campaign, President Bush proposed a tax credit of $2000 for the purchase of health insurance.
- Expansion of the State-Children Health Insurance Program (S-CHIP) to include adults
The State Children's Health Insurance Program (S-CHIP) was enacted in 1997 with bipartisan support (Click to see chart) and enables states to insure children from working families with incomes too high to qualify for Medicaid but too low to afford private health insurance through separate state programs, Medicaid expansions, or a combination of both. Each state with an approved plan receives enhanced Federal matching payments for its S-CHIP expenditures up to a fixed state "allotment". Many Democrats, including Candidate Gore in the recent campaign, advocate allowing parents to also participate in the program thereby providing government-funded health insurance to many who are presently uninsured.
What is the concern about prescription drugs?
Prescription drugs are the fastest-growing part of the nation's health care expense. Pharmacy bills have become a significant item in the budget of most families, even those with medical insurance. For many of the 37% of Americans without prescription coverage, the problem is critical. The problem is most acute for seniors who constitute 12% of the population but use 37% of prescription drugs. The full Medicare prescription drug benefit does not begin until 2006. That benefit will help seniors with only part of the costs. The rest of the population, especially those without health insurance, is significantly affected by high drug prices.
What has caused this cost increase?
Much of it is due to the recent development of new effective medications for a variety of illnesses. Such newer "brand name" medications are patent-protected and cost far more than generic medications. The drug industry argues that the higher cost of new medications helps fund research and development of even newer medications. But many critics argue that much of the research and development of pharmaceutical products is actually government funded.
Also contributing to the cost increase is marketing. According to one study, marketing costs are about 30% of a drug manufacturer's budget. There is now one pharmaceutical sales representative for every ten physicians. In 1997, after the FDA relaxed its guidelines about advertising directly to the consumer, television advertising escalated markedly.
How do other countries control the cost of medications?
Most governments control the cost of patented medications. On the average, the cost of these medications is significantly less than in the United States.
What has Congress done about the problem?
Although adding a prescription drug benefit to Medicare was a major issue of discussion in the 2000 Presidential campaign, it was not until November 2003 that Congress finally did pass legislation authorizing such a benefit. The Medicare prescription drug benefit actually provides more extensive coverage than was proposed by either candidate during the presidential campaign although the benefit was delayed until 2006. But the legislation is controversial because of its very high potential cost. Moreover, the legislation does nothing to control the skyrocketing cost of new medications either through increased regulation or allowing foreign competition.
The key provisions of the legislation:
- Temporary discount cards effective early in 2004 will allow all seniors about a 15% discount and low income seniors a $600.00 benefit towards medications.
- Privatized prescription coverage for all seniors effective in 2006 will entitle seniors to enroll in plans that provide coverage. Estimates are that for a fee of $35.00 per month, seniors will receive 75% coverage of annual medications in excess of $250 up to a maximum of $2250.00. There will be additional 95% coverage for expenses greater than $5100.00. These dollar cost standards are subject to adjustment after 2006.
- Supplementary coverage for low-income, low-resource seniors effective in 2006 will provide 75% coverage for all prescription costs without the $35.00 premium, the deductibles, and the coverage gap.
What is the issue regarding reimportation of prescription drugs.
Because drug prices are significantly lower in many foreign countries, especially in nearby Canada, there has become increasing pressure to authorize wholesalers and pharmacists to reimport such drugs. Under current rules, only the drug manufacturer can do this. Opponents of reimportation indicate that there are safety problems with the proposal. Congress voted to support the concept as part of consideration of the Medicare prescription drug benefit but the final legislation contains provisions which will not make reimportation easy.
What is Managed Care?
Managed care has been the health insurance industry's response to controlling the growth of health care costs during the past two decades. Throughout the 90's membership in managed care Health Maintenance Organizations (HMOs) steadily increased although enrollments have recently declined. About 25% of Americans are now in managed care. There is a significant regional variation to the rate of HMO enrollment.
Under traditional "fee-for-service" health insurance plans, the patient chooses a doctor, gets treated, and the insurance company gets the bill. The patient might have to pay a deductible or a percentage of the total bill. Many in the insurance industry concluded that this structure when combined with the malpractice liability often encouraged physicians to prescribe services which were not medically necessary thereby leading to substantial increases in medical costs.
HMOs control costs by requiring patients to use a "network" of approved doctors and hospitals, and by reviewing what those doctors do. In many cases, patients have to get the insurer's approval before undergoing operations or other treatments. Many HMOs have also employed a more subtle method of controlling costs. The patient's primary physician is paid a capitation payment for each patient. Services used by the patient will reduce the amount of the capitation payment. This system financially rewards the physician if no medical services are used by the patient.
The majority of HMOs are for profit. Over the past five years, the nation's 18 largest for-profit plans have evolved into six--Aetna, United Healthcare, Cigna, Foundation Health Systems, Pacificare, and Wellpoint Health Networks. In about half of all states, the five biggest managed care firms now account for at least 50 percent of patients; in 16 states, they account for more than 70 percent. As a result, the vast majority of physicians and clinics, not to mention almost all hospitals, must accept managed care to stay in business. About125 million Americans belong to HMOs or similar plans--roughly three-quarters of the non-Medicare population, with the proportion steadily rising.
Has managed care worked?
Many experts believe that when it comes to cost control, managed care is working. In 1993, health care consumed 13.7 percent of the nation's GDP, and the rate was shooting upward and many projected it would hit 15 or even 18 percent by the year 2000. Instead, the relationship of health care to GDP remained about the same during the '90s. Now that HMO enrollment has begun to decrease in the present decade, health care costs are beginning to escalate again. There is no evidence that the quality of care has significantly deteriorated because of HMO enrollment. By almost all measures, U.S. public health gets better every year. Americans are living longer than ever before, and heart disease, stroke, hypertension, and most forms of cancer are steadily declining.
Critics of HMOs argue that patient choices have been limited under managed care. In particular, patients have been denied the opportunity to consult with specialists and treatment for hospital emergency room service has been denied when it was later determined that an emergency condition did not exist.
What are the proposals for reform?
Many states have enacted "patient's bill of rights" legislation which address some of the alleged abuses. Such legislation has usually guaranteed emergency treatment, specialist coverage and provided an appeal mechanism for denied services. Congress is considering similar national legislation but these efforts have stalled over the issue as to whether patients should have the right to sue an HMO for malpractice.
Where do Republicans and Democrats stand on HMO reform?
The political parties take different views on the content of "Patient Bill of Right" legislation. Most Democrats and some Republicans support legislation that would allow doctors rather than health plans to decide if a specialist should be consulted and support the right of patients to sue HMOs for damages for adverse health consequences resulting from denied treatment. The majority of Republicans support legislation which would continue to allow HMOs to determine the appropriateness of specialist care but provide an appeal mechanism and which would not permit HMOs to be subject to lawsuits. On June 29, 2001, legislation passed the Senate which would allow lawsuits but put a limit on the amount of damages. In response to the Senate activity, the House, on a party line vote , passed its own version of managed care reform several weeks later. The legislation, brokered by the White House and opposed by Democrats, grants patients only a limited right to sue. It caps punitive damages and shifts lawsuits against employers who administer their own health plans to federal court, rather than state court, where juries are less likely to award large verdicts in favor of plaintiffs. Additionally, the legislation blocks class action lawsuits. Because of the partisan empasse, there has ultimately been no progress on the patients bill of rights issue.
The new prescription drug benefit passed by Congress in November 2003 will chiefly rely on HMOs to administer the benefit thus enhancing the role of these organizations in the nation's health delivery system.
What has been the federal response to the AIDS epidemic?
Federal support for AIDS-related programs has increased steadily since the disease was first identified in the early 1980s. Strong advocacy at the local, state, and national levels has been helpful in supporting not only steady funding increases but also new approaches to community involvement in government programs. Though the Reagan Administration was vilified for its slow response to the emerging epidemic, Presidents Bush and Clinton both presided over improved federal responses to AIDS. AIDS funding has sometimes received increases when other health-related programs have not, leading to tensions among advocacy groups. AIDs research presently constitutes about 10% of all research funded by the National Institute of Health. By far the majority of funds are spend on treatment, particularly medications. The federal cost of such treatment is substantial and continues to increase dramatically.
The positive news regarding AIDs treatment is that medications have substantially reduced the mortality rate from the disease , although unfortunately the drugs have not worked for everyone. The medications are expensive and many afflicted with HIV must rely on government funding to assist with the cost of treatment. Funding for this treatment is provided through a combination of the Medicaid program and the Ryan White Comprehensive AIDS Resources Emergency (CARE) Act .
The major governmental funding issue involving AIDs at present is in the worldwide arena especially in the poor countries where most people with the disease live. The problem is compounded because AIDs strikes the most potentially productive segments of these societies. Brazil has found a way to provide HIV medications free to the public at less than $1000 per year per person by manufacturing its own generic version of most ARVs. But African countries have not had the initiative to duplicate the Brazilian efforts. By and large with the exception of Brazil, antiretroviral medications are not available to people in developing countries and are only minimally available in Africa.
The U.S. has contributed to the recent international effort to remedy this situation but until recently it opposed a duplication of the Brazilian effort to combat the disease with generic drugs. Former President Clinton's foundation has provided significant advocacy in support of this effort. Still the U.S. contribution, as a percentage of the population, is only average when compared to other G8 countries. Democrats are more supportive of increased funding for this effort than are Republicans.
Wikipedia - Health Policy
Wikipedia - Health care reform in the United States
Wikipedia - Patient Protection and Affordable Care Act
Wikipedia - Cross-country comparisons
Wikipedia - Health insurance exchange
Wikipedia - Uninsured in the United States
Wikipedia - U.S. Patients' Bill of Rights
Wikipedia - HIV/AIDS in Africa
Wikipedia - Timeline of AIDS
National Center for Health Statistics
Health Care Chartbook (CDC)
Avert.org - Worldwide AIDS News and Statistics
Health Care for All