CBO-KAY! Senate HELP Bill Rebounds

by Tim Foley

categories: For Profit Insurance, Medicare and Medicaid, National Health Exchange, Obama and Congress, Public Plan

Published July 01, 2009 @ 10:35PM PT

Republicans have made hay for the past few weeks on how Ted Kennedy’s bill cost too much ($1 trillion dollars) and covered too few (only an additional 16 million).  Of course, that score was on a partial bill, one that the Congressional Budget Office itself claimed “[does] not represent a formal or complete cost estimate for the draft legislation” (italics theirs.)  It also lacked the details on the individual mandate, the employer “pay or play” mandate, and the public health insurance option.  But Kennedy and Chris Dodd have kept at it, undeterred from the catcalls, and have finally delivered the goods.  According to Jon Cohn on The Treatment, the new, full bill is in.

The results?  A price tag of $600 billion over ten years (chew on that, Senate Finance Committee!) and coverage for an estimated 97% of the uninsured.

Imagine that – you actually include shared responsibility in an individual mandate and an employer mandate, new revenue, a robust public option competing on cost and generous expansions of public coverage through Medicaid, and the damn thing works.

First of all, this kills the sticker shock stories, at least for a few days.  Second, it restores the notion that you can have health care reform without some version of pay or play or the public plan, but it’s cheaper to include them, no matter how politically problematic.  Third, it shows the Senate Finance Committee’s reaction to the initial incomplete estimate was, to be blunt, wrong.  They immediately began to cut subsidies and then cut them some more.  But if I’m reading this correctly, the HELP bill hasn’t cut any subsidies – they’re still funded on a sliding scale at up to 400% of the Federal Poverty Line.  The cost of the bill is down anyway.  This is also good news for the House draft bill’s ultimate score, since the two bills have much in common.

The most intriguing news of all: according to Jon’s analysis, this CBO score doesn’t take into account any of the Obama Administration’s proposals for cost-savings in Medicare or new revenue – meaning we already have concrete proposals on the table from the White House to pay for nearly the whole thing, presuming that Medicaid expansion (which for jurisdiction reasons cannot be in this bill) costs an additional $400-$600 billion.

I’ll post a link to the full bill as soon as someone uploads it (updated -- see below).  From my perusal and first reaction, these revisions make the bill somewhat less generous than the first released “principles” document (which is looking more and more like it was a trial balloon).  The subsidies up to 500% of poverty are out, as is the public plan that would force providers to participate if they accepted Medicare and charge them 110% Medicare rates.  But for all that, this is a strong bill which covers most of the bases of the common blueprint that most of the 2008 presidential candidates laid out.

The guts:

As in the previous draft, the Secretary of HHS will establish state-level Gateways with comprehensive benefits (to be set by the Secretary later), no exclusions based on pre-existing conditions, no rescissions, and community rating that only offers variance by geography, family size, and age (a 2:1 maximum ratio – which sounds bad until you realize in our unregulated market, it’s more like 8:1).  There will be an individual mandate – a fine if you have “affordable” coverage options but don’t enroll in any of them – but that fine will be set by the Secretary.  The Gateways are at the state level, in part, to allow for state mandates on insurance to continue.

For those buying a plan through the Gateway, they’d have different levels of plans with increased premiums for less cost-sharing (total out of-pocket-expenses are capped.)  HELP would extend Medicaid eligibility to 150%, so those at 150% of poverty and above would receive subsidies so the premiums for any standard-level plan would be 1% of their pre-tax salary.  The subsidies are sliding scale, ending at 400% of poverty where the cap is 12.5% of pre-tax income – less generous than the House version, but in the same ballpark.

Going to my fictional family in Northeast Pennsylvania, the Sullivans, I’m guessing that the average Gateway plan for them would cost $2,800 (7% of their income) to $4,000 (10%).  That’s a great deal considering the average family plan on the current individual market is $12,000!

Among the plans offered will be the new “Community Health Insurance Option,” aka the public plan (sec 3106).  It’s open to those without coverage through their employers, and small businesses (under 50 employees), and would be entirely voluntary.   Similar to the House and the Schumer model, it would rely on negotiated rates with providers, and would be self-sustaining through premiums and the same subsidies available to any other plan in the Gateway.  The government would give it a loan to get started, which it would pay back once it was actuarially sound.  It’s not as generous as the original Kennedy version, but it still has enough leverage, cost savings and incentive to offer a real choice between public and private.

The employer mandate weighs in as a fixed amount, rather than a percentage of salary as some (me) were guessing it would be: $750 per employee (sec. 3115).  This sets up an intriguing set of incentives.  If your employees make what the Sullivans do and you provide benefits, it’s not a slam-dunk that you would drop their coverage.  If you have relatively high-priced employees, you’d save a lot of money if you dropped your coverage, but other incentives kick in at that threshold -- like the expectation that you should offer benefits, or competitors who are after the same pool of employees.  Add to that a generous credit given to small businesses from 0-50 employees (on a sliding cale by number of employees – sec. 3112) and it’s easy to see why, as Jon Cohn says, “Erosion of job-based coverage would be virtually zero.”

Now we can argue the policy merits of a system that largely keeps employer-based insurance intact so long as the employer is providing a strong plan (in fact, I'm counting on it).  CBO estimates that 20 million people would be in the Gateway with 21 million more on Medicaid – which is much less in the Gateway that I would have hoped. But politically, it’s going to be even less credible for critics to sound the alarm that individuals who like they’re coverage would be losing it.  The CBO tooketh away under Clinton, but here, it seems to be supporting the strongest claims for health care reform.

If past is prologue, the same critics who have spent weeks saying the bill was ineffective won’t miss a beat in saying these provisions will be too effective.  And just because the first incomplete score set off a wave of media panic doesn’t mean this more favorable score will help build momentum for reform.

Update:  7/2/09 at 9:23 am PT -- The chairman's markup of the new provisions is online, so you can follow along with the sections I cite above.  Apparently I missed the $375 for each part-time employee figure as part of the employer mandate the first time.

(Photo credit:  jonathanpberger on Flickr.)