House Health Reform Bill Does Not Please Many in Health Care

(MoneyWatch)  While healthcare industry players continue to salivate over the prospect of millions of new patients with insurance, the unified House reform bill would also ding the healthcare and insurance companies to varying extents.

The measure, designed to cover 36 million more Americans, would hit the insurance, drug and device sectors with new taxes and restrictions. Hospitals would lose some reimbursement from the $426 billion in Medicare and Medicaid cuts in the House bill-about the same as in the Senate bill. But physicians would get socked much harder, unless the House can figure out how to pay for rescinding scheduled Medicare payment decreases that total more than $200 billion over the next 10 years. The Senate has the same problem, after the defeat of a separate bill that would have canceled the drop in Medicare payments to doctors.

Under the House bill, the pharmaceutical companies, which had earlier negotiated an $80 billion reform "contribution" with the White House, would have to fork up another $60 billion in rebates on drugs used by seniors who are eligible for both Medicare and Medicaid. In addition, Medicare would be able to negotiate drug prices for the first time.

The device manufacturers got off somewhat easier in the House legislation. In place of the $40 billion that the Senate version would levy on the device makers, the House toll is around $20 billion. (The Senate is also planning to reduce it to that level, some reports say). In addition, the 2.5 percent tax on medical device revenues in the House bill would go into effect three years later than its Senate counterpart.

The insurance industry loudly protested provisions affecting them in the House bill, including the public option and the repeal of the antitrust exemption for insurance companies. Karen Ignagni, CEO of America's Health Insurance Plans, predicted that the House version of the public option "would bankrupt hospitals, dismantle employer coverage, exacerbate cost-shifting from Medicare and Medicaid, and ultimately increase the federal deficit." Similarly, the Blue Cross & Blue Shield Association said the public option endangered employer-provided insurance, which now covers about 160 million people.

They needn't have worried. According to the Congressional Budget Office, the public option in the House plan would attract only 6 million enrollees and would have higher premiums than private insurance plans. And according to some on the left, the public options being proposed in the House and the Senate are a sham that would neither reduce costs nor be a viable competitor to private insurance.

If that's the case, why is the insurance industry, as well as business coalitions, working so hard to stamp out the idea? Most likely, it's because they see any public option as the proverbial "camel's nose under the tent" that could eventually lead to a single payer system. Businesses don't like that because it would mean that the government could compel them to pay a significant amount for their workers' health care. That's also the other major reason why business groups oppose the House bill: It would require employers with payrolls of greater than $500,000 to cover their workers or contribute 8 percent of their payroll to a federal fund that subsidizes coverage for those who can't afford it on their own.

With all of these interest groups slugging away, here is no doubt that reform legislation will go through many more twists and turns before anything passes. Stay tuned.