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New White House Proposal on Health Reform Leaves Questions  (1 comment)

Posted: Thursday, February 25th, 2010

by Dennis Smith

On February 12, 2010, the White House invited the congressional leadership to a bipartisan meeting on February 25 at the Blair House to discuss health legislation. Since then, there has been much speculation about a new proposal from President Obama that would meet his four- part test to:

• Bring down costs for all Americans as well as for the Federal government
• Provide protection against abuses by the insurance industry
• Make coverage affordable and available to tens of millions
• Get us on a path of fiscal sustainability.

The President’s own proposal, posted on the White House website on February 22, appears to raise as many questions as it answers. The White House did not provide any documentation as to the cost or coverage. The Congressional Budget Office (CBO) has stated it could not provide estimates because the details were not sufficient. (see here)

Spend More, Get Less Coverage. From the various statements put out by White House officials, it appears likely that the Proposal will spend more than the Senate bill and get less new coverage than under the House bill. One area in which the President does lower cost is to reduce subsidies to the lowest income group. But he also proposes to lower the penalties for noncompliance. Because of weaker compliance requirements, there probably will be less coverage than even the Senate bill when the Proposal is actually scored.

The President’s Proposal adopts a “get it now, pay for it later” approach, delaying many of the tough fiscal decisions for future Administrations and Congresses to deal with. The Washington Post chides, “… what credit or credibility is due a president who endorses a tax but leaves to his successor the unpleasant task of collecting it?” (see here)

If A, then B Cannot Follow. The White House website insists that under the President’s Proposal, “… the Medicare Trust Fund will be extended for more than nine years.” This seems to be inconsistent with the other promise to not increase the deficit. If Medicare savings and revenues are used to pay for the rest of the legislative package, then they cannot be counted as extending the Trust Fund. Conversely, if they are used to secure the Trust Fund, they cannot be counted as paying for the new non-Medicare benefits.

More Questions. The Proposal generally used the Senate passed bill as its base with some modification. The website avoids dealing with the controversial issues of coverage of immigrants and abortion. The President’s Proposal adds a new Health Insurance Rate Authority that will give the Secretary of the U.S. Department of Health and Human Services the power to order a private health plan to “lower premiums, provide rebates, or take other actions to make premiums affordable.” The Proposal, however, does not specify the Secretary’s enforcement mechanism. To force compliance, will the Secretary be able to suspend enrollment in a health plan? Revoke its business license? Apply monetary sanctions? Will a health plan be able to appeal an adverse decision? To whom? Will this make health care more subject to political pressures rather than less?

According to the White House website, “… all Americans who can afford to purchase insurance will be asked to (emphasis added).” Generally, to be asked implies the individual is free to decline. Under the Obama Proposal, “asked” really means “required” and the requirement will be enforced with financial penalties. In reality, millions of Americans probably will not know if they are subject to the mandate until they walk into a government office. Many will be surprised to learn they will not qualify for the new subsidies to purchase private insurance but will be enrolled into Medicaid instead.

Why is catastrophic coverage sufficient only for some, not all? Why should it be illegal for Americans to buy only the coverage they deem necessary, including be allowed to “self-insure?” Once Americans accept the concept of an individual mandate to purchase health insurance, what next will the federal government compel us to do? Although many may not protest because the fine for noncompliance is so low today, what will prevent a future Congress from increasing the penalties if too many people pay the fine instead of buying coverage?

Budget Gimmicks. The Administration’s Medicare provisions also raise questions. Where is the “doc fix”? If the $200 billion cost of the “doc fix” were included, the White House claim that the Proposal will reduce the deficit by $100 billion clearly would not be true. The President’s Proposal calls for an extension of the State Children’s Health Insurance Program until 2019 but does not provide necessary new funding, forcing states to drop children or put them into Medicaid at a lower federal match rate. Finally, simply because the bill is being considered a year later, the budget score will substitute a more expensive year (2020) for less expensive year (2010) which will increase the overall cost.

Biggest Question. What happens if actual legislation shows:
• The cost will be more, not less than promised (a true score with the physician fix will exceed $1 trillion)
• Fewer people will be covered than under previous versions
• Millions of seniors will lose the coverage they have chosen (Medicare Advantage Plans)
• The Proposal is not really paid for

Will Congress still jam this through under budget reconciliation rules?

One Response to “New White House Proposal on Health Reform Leaves Questions”

1. New White House Proposal on Health Reform Leaves Questions « Leavitt Partners says:

   February 25, 2010 at 10:48 am

   [...] Dennis Smith shares his thoughts on the White House Health Reform Summit. See his latest blog entry here. News New White House Proposal on Health Reform Leaves Questions Leavitt Partners Managing [...]