Kennedy's Plan Dribbles Out, Showing Complexity of Reform

There are no surprises in an early version of a health reform bill drafted by Sen. Edward Kennedy's committee. In a section of the bill devoted to insurance reform, The Senate Health, Education, Labor and Pensions (HELP) Committee favors guaranteed issue of policies without pre-existing condition exclusions, limited community rating of premiums without gender or health status as factors, and no annual or lifetime benefit limits. It would require individuals to purchase insurance, unless they had no access to an "affordable" plan (a la the Massachusetts program). Their payments for coverage would be limited to an unspecified percentage of individual or family income, on a sliding scale. The bill would also require employers to help cover workers or pay into a fund, although small firms would be eligible for tax credits if they contributed to their workers' coverage.

As reported earlier, the draft includes the controversial "public plan" that would compete with private insurers and specifies that that plan would pay providers 110 percent of the Medicare fee schedule. It also describes the workings of statewide insurance markets patterned after the Federal Employee Health Benefits Program. The states are supposed to reform their insurance laws in conformity with the federal legislation before they launch these voluntary insurance exchanges, which would give individuals and employers a choice of plans and would aggregate them into large risk pools.

One earlier report suggested that Kennedy was contemplating a huge expansion of Medicaid. This draft talks only about requiring states to provide Medicaid to individuals with incomes up to 150 percent of the federal poverty level. That would be a substantial increase, however, considering that many states have lower income limits and also do not cover men or childless women. At a time when sharply lower tax receipts are forcing states to cut their budgets, it appears that the federal government would have to raise its share of Medicaid costs to make this work.

Of course, when the blanks in the plan are filled in, a battle royal is likely to erupt. For example, take the percentage of income that people will be required to spend on health insurance. In a just-released position paper entitled "Health Reform: What Women Need," the National Partnership For Women & Families says, "Each family's out of pocket costs should be capped on a sliding scale, with no family being asked to pay more than 10 percent of their income for coverage." This is somewhat ambiguous, since "out of pocket costs" usually includes more than insurance premiums. But, even under the more expansive definition, there will be a fierce debate over the income level at which families will be expected to pay the maximum percentage of their incomes for health care.

The insurance consulting firm Milliman recently released figures showing that the average family of four with employer-subsidized coverage spends $4,004 on insurance and $2,820 on other out-of-pocket costs. The total of $6,824 is more than 10 percent of the median family income; but people with employer-provided insurance also tend to earn more than the average. So perhaps 10 percent is a good cutoff. But what would lower-income families have to contribute, and how much would it cost the government to subsidize them? The HELP committee draft suggests that government subsidies might go to people making up to 500 percent of the federal poverty level, which translates to $110,000 for a family of four.

Of course, the amount health care costs consumers is crucially dependent on what benefits are covered. The National Partnership for Women & Families points out that, according to a recent study, 62 percent of bankruptcies filed in 2007 were linked to medical expenses; of the people who filed for that reason, nearly 80 percent had health insurance. The women's group demands that maternity care, well-woman and well-child visits, cancer screening, and reproductive health services be included in a nationally mandated "essential benefit package." Makes sense, but we can expect many other interest groups to fight for the benefits they deem essential, as well.

Bottom line: Regardless of how quickly Democrats try to ram healthcare reform through Congress, we are in the foothills of a very long, challenging climb that will continue long after the President signs a bill.