Regardless of whose rhetoric you tend to believe, the fact remains that the goals of health care reform are hard to decipher. Is it to reduce the federal deficit, to manage health care costs, to expand coverage, to improve quality or to lower the future cost curve? Perhaps it is all of the above. Unfortunately, those goals are sometimes at cross-purposes and the people most adversely affected are Americans who already have health insurance or Medicare.
The so-called Cadillac tax on high cost health plans is one example. The perception that those plans affect only high paid well off individuals is wrong. In reality they cover many if not most government workers and many union workers simply because the high cost reflects the generous benefits and the geographical area in which they are provided. The logic goes that if these plans are taxed the plan design will be changed to lower costs thus creating a segment of the population that is more concerned about health care costs and they will be more aware of costs and more prudently use health care. What they do not tell you is that to accomplish that goal, co-pays, coinsurance and deductibles will rise, and perhaps non-essential covered services will be eliminated. That means one thing, the out of pocket cost for plan participants will increase. Therefore, while the premium may decline slightly, the people who are the greatest users of health care will be most affected and since utilization tends not to be based on income when you have health insurance, middle and lower income workers will be most adversely affected.
Much of the case for the current version of health care reform is based on controlling government costs for Medicare and Medicaid. Most of the funding for the expansion of coverage comes from cuts in Medicare, that is, cuts in payments under Medicare Advantage and eliminating waste, fraud and inefficiency (although one has to wonder why that has not been done already in the interest of keeping Medicare solvent, but I guess it is not politically correct to raise that point). At the same time, the legislation will gradually eliminate the donut hole in Medicare Part D thus improving the prescription drug benefit for beneficiaries. Democrats at the President’s recent health care meeting made a big deal of this and the need for it, apparently forgetting that not too long ago there was no coverage for prescription drugs and also forgetting that this means expanding a fast growing entitlement that America cannot afford. The President repeatedly makes the case that there will be no cuts in benefits for Medicare beneficiaries, but does not mention that the eleven million participants in Medicare Advantage will see their premiums increase (some pay nothing now), their benefits decline or both because the providers of those plans will receive less payment from the government. Interestingly, a recent study of those plans appears to show better medical outcomes for plan participants than under traditional Medicare.
You also hear little about the new “voluntary” long-term care program that is part of the funding scheme for health care reform. Under this portion of the legislation, every worker is automatically enrolled in this government program at a cost of about $65.00 per month to be deducted from the individual’s pay. Yes, they can decline the coverage, if they realize it is there and if they remember to do so. Why has such a program been included? Well, because the premiums are collected for five years before benefits can be paid and that initial surplus is counted as part of the funding revenue for health care reform. Dare we mention the additional administrative burden on employers at a time when employers are trying to cut costs?
Then we have the matter of subsidies for health insurance for those who cannot pay the full cost. This is where is a large part of the cost of reform goes. This is also how the President defines making health care “affordable.” The problem is that the subsidy is going toward premiums that will continue to escalate at far more than inflation and this means that the subsidies will also increase in a like manner. While there are some provisions in the legislation intended to control costs, they are many years in the future, (if they prove viable and are actually implemented- don’t forget the Mammogram debacle) because they are focused on Medicare and thus their transfer to the private sector is more than ten years hence. This means that premiums (driven by health care services – not insurance companies,) will continue to rise at what we all call unsustainable rates. In other words, by not tackling the cost problem we are enacting a new entitlement with potentially out of control costs in the years ahead and certainly for the five years or so after enactment- think Massachusetts.
[picapp align=”left” wrap=”false” link=”term=health+care+summit&iid=8092600″ src=”3/f/d/a/Healthcare_Activists_Group_9bbb.jpg?adImageId=10904880&imageId=8092600″ width=”380″ height=”251″ /] Paid for how?
The President’s latest proposal still includes the Senate plan to tax the prescription drug rebate given to employers who retain prescription drug coverage for their retirees. This raises costs for employers and puts this coverage at risk because many companies will reduce or eliminate this benefit. Millions of retirees will be worse off paying for prescription drug coverage and more for each prescription. The irony is that this funding scheme actually may cost the government more than it saves, as Part D is required to pick a greater liability than the amount saved by changing the tax law on employers.
Finally, there is the overall question of philosophy, should we be lowering out of pocket costs or assuring that every American has a stake in the cost of health care? Many economists say that one of the problems with our system is the lack of skin in the game by people with health insurance plus the favorable tax treatment of employer contributions toward health benefits. However, what do we do? We make more services 100% reimbursable without a deductible and we do not address the tax status of health benefits. By reinforcing the notion that paying health care expenses is someone else’s responsibility even for minor charges like an office visit and by ignoring the concept of true insurance to cover unmanageable, unpredictable financial risk we are making it virtually impossible to change the system that is driving up health care costs.
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