Is the House Bill a Good Deal for the Sullivans?

by Tim Foley

categories: National Health Exchange, Obama and Congress, The Uninsured and Underinsured

Published June 21, 2009 @ 05:43PM PT

Everyone is for “quality, affordable health care for all” as a general principle.  But as always, the devil is in the details.  The House bill has already been given kudos for delivering the general structure that it said it would deliver, without the “fill in the blank” or “compromising on the compromise” tactics that have obscured the Senate efforts.  But what, in practical terms, will it deliver for a family of four making $40,000 a year?  Let’s call them the Sullivans – would we really be helping them out?

Sen. Chuck Schumer says he likes to think through policy implications with a fictional New York family known as the Baileys -- he writed about them in his book Positively American.  I've found this approach is also helpful to me in picturing what the real-world implications of health policy are for the people I've met.  So I think of "the Sullivans" -- a fictional Irish-American, middle class family whose situation I pieced together based on talking to the many, many families struggling with the high costs of health care I met while canvassing in Wilkes-Barre, Hazleton and other towns in northwest Pennsylvania.  Mrs. Sullivan still works full time, but Mr. Sullivan was laid off from his job this year and can only get part-time shift at a retail job.  Neither of these jobs have benefits, and they have two young daughters, the youngest of whom was diagnosed a few years ago with type 1 diabetes.  With a combined income of $40,000, they’re doing relatively OK for their neighborhood, but are far from rich.  The kids qualify for SCHIP (they’re at about 180% of poverty), but the parents have no options for affordable insurance unless they get a high-deductible “emergency only” plan.  Presuming they could even find a health plan that would take their youngest and not deny her because of a pre-existing condition or raise their premiums, they’re looking at premiums of a little less than $1,000 a month.  That’s 30% of their income – and that’s just the premiums.  They can't afford that, so they go without, and pray there’s no accident or catastrophic illness in the family.  That would wipe them out.

So let's move to the House bill -- it's worth taking a look at how its Health Exchange would be structured in terms of quality and affordability.

First, there are the benefits themselves, which is really the crux of the matter – what are you covered for?  The House bill sets a standard minimum, which would be the same for the public health insurance option or for any private plans participating in the health exchange.  At the bare rock bottom “Basic Plan”, you’d have a Benefits Advisory Commission and the HHS Scretary designing a plan that covers the following (and here I’m cutting and pasting directly):

• Inpatient hospital services
• Outpatient hospital services
• Physician services
• Equipment and supplies incident to physician services
• Preventive services
• Maternity services
• Prescription drugs
• Rehabilitative and habilitative services
• Well baby and well child visits and dental, vision, and hearing services for children
• Mental health and substance abuse services

Although the exact coverage, including what’s in the prescription drug formulary, are still TBD, this list is pretty thorough.  “What are the minimum standard benefits we should expect?” has been an open question in American health care for decades, which is why you see so many plans offered in the individual insurance market that might only cover four of those categories at a lower price.  So right away, you know everyone’s hitting the same standards of coverage, and it’s pretty comprehensive (though not without some holes).

The House bill sets up tiers above the “basic package” which would cost more than the basic plan, but for the most part you don’t get more benefits – you just get more favorable cost-sharing in the form of co-pays and deductibles.  First of all, there’s no cost-sharing for preventative care – $0 out of pocket, no matter what plan you buy.  Second, cost-sharing is capped for everyone participating in the plan no matter what.  But if you want to pay less for a specialist visit, or less out of pocket for prescription drugs, you can also purchase an “Enhanced” or a “Premium” where you pay a little more upfront, but a lot less in co-pays.  It’s easy to see families with one or more members who have a chronic disease condition going for one of these plans – particularly if it’s an expensive condition like advanced diabetes or cancer, the extra spent on premiums won’t match what they save on co-pays.  The last tier is “Premium Plus,” and here’s where you get extra benefits attached, like dental and optical for adults.  Like Medicare Advantage, these are going to be the plans where private insurers are going to try to persuade you that they can offer you a much better package than anyone else.  They're welcome to try, but there's one big change.  Unlike how things work now, “insurers must disclose the separate cost of the additional benefits so consumers know what they’re paying for and can choose among plans accordingly.”  So you can go for the plan with a gym membership, but you’ll actually know how much extra you’re paying for it.

The last piece of the puzzle are subsidies to make coverage affordable.  First, the House bill extends Medicaid eligibility to 133% of poverty, but those between 133% of poverty and 400% would get a sliding scale subsidy based on income.  The House bill does a better job explaining this than what we’ve seen before.  Starting right at 134% of poverty, you get enough of a credit that what you’d spend out-of-pocket costs for the premiums of the basic plan are only 1% of your pre-tax income.  At the other end of the spectrum, you’d get a credit such that your premium would be 10% of your pre-tax income.  What happens to those above 400% of the poverty line?  They can still buy a plan, but don’t get a subsidy.  However, if they’re buying an average plan for a family of 4 on the individual market now, they’re already paying only 13% of their income on premiums – so it’s not that huge of a jump up.

Now let's go back to the Sullivans if the House bill becomes law.  Where once they had no options, now they can purchase insurance either online or by ordering material over the phone.  They can weigh their options.  Now the Sullivans have access to comprehensive coverage through the basic plan.  We’ll presume they don’t go for the “Enhanced” or anything higher because they’re still adjusting the family budget to their recent job loss.  Still, it’s a pretty good deal.  With the subsidy, they qualify for a comprehensive family plan at about $185 a month, out of pocket, for the premium of a plan from Highmark Blue Cross Blue Shield, the same company they used to have, or about $167 a month for the public health insurance plan (5% of their income).  They have no problems singing on their youngest with her pre-existing condition.  If her diabetes becomes worse or she develops complications, their total out-of-pocket expenses are capped.  And they pay nothing out-of-pocket for regular preventative care – something they have zero access to now.

It’s worth taking a step back before we enter into another week of distrcating politics and hand-wringing zeal about whether we're rushing the process.  Sure, it would be nice to have adult dental or optical included in the package.  It would be great to eliminate administrative costs out of insurance altogether.  It still seems somewhat unfair that older people in the same plan might have to pay twice as much as what the Sullivans do before they hit Medicare.  But the world that the draft House bill would create would be completely different from the one the Sullivans inhabit now.  They’d still have money problems, they’d still be worried about the economy and if they’ll ever have a better job, they’d still be worried about the unforeseen.  But they would no longer have cause to worry about being able to have quality health care for themselves and for their kids.

That’s worth fighting for.

(Photo credit:  genvessel on Flickr.)