Reform Debate Drives Question of Minimum Benefits

Because the money available for health care in the United States is not boundless, decisions must be made. 

Who should be eligible for subsidies for health insurance from the federal government? 

If there’s a minimum level of benefits people can agree U.S. residents should have access to, what is it?

As members of Congress, White House negotiators and other stakeholders work through their differences on health care overhaul proposals, they’re going head to head over these very questions, just as Gov. Arnold Schwarzenegger (R) is asking California lawmakers to tackle some of the same questions in the state budget.

California stands as an example of a state that used boom-time revenue to expand access to a number of health care programs and cover more and more services under Medi-Cal, the state’s Medicaid program.  But now that the boom has ended, lawmakers have had to return to more modest levels of coverage, and even deeper cuts are looming on the horizon. 

A New England Journal of Medicine perspective tackles this issue head on, using a scenario that envisions a fixed health care budget of $180 billion annually to force the question: Is it better to provide more generous benefits to a smaller number of people? 

Under a scenario laid out by a team of Harvard researchers, policymakers could use that $180 billion to provide a policy with $6,000 in annual premiums to 30 million people, or they could dial back the benefits and provide a $3,500 policy to 50 million people.

The perspective’s authors assert that members of Congress are going to have to answer this question in the not-too-distant future, explaining, “There is only 100% of gross domestic product to go around.”

The authors write, “Some might call this rationing, but the reality is that millions of Americans now have no access to lifesaving medical technologies at the same time that the public resources are being devoted to covering less-effective therapies for less-serious conditions,” concluding, “We find that sort of rationing hard to justify.”

In 2003, President George W. Bush and a Republican-controlled Congress to some extent tried to shift the decision-making power from legislators and policymakers to individuals.  The Medicare Modernization Act of 2003 created health care savings accounts, which let individuals contribute as much as $2,600 and families up to $5,150 for HSAs each year free of federal income tax.  In conjunction with a high-deductible health plan, supporters said that HSAs would help control rising health care costs and increase efficiency in the health care system by giving consumers a more direct connection to the cost of health care services.

Critics of HSAs asserted that they let healthy, higher-income people opt out of the traditional insurance market, removing a key element of the risk pool.

President Bush’s push to expand HSAs didn’t gain traction in 2006, and now current health care reform proposals aim to dial back the federal tax benefits for HSAs.  Under both the Senate and House bills, spending on over-the-counter medications would no longer be considered a qualified expense for HSAs and other consumer-driven health care services, a move the Congressional Budget Office projects would generate $5 billion from 2011 to 2019 to help cover the cost of the proposed coverage expansion. In addition, CBO projects that increased penalties for nonqualified distributions from HSAs would yield another $1.3 billion over the same period.

More news on the Obama administration’s efforts to rally support for health care reform proposals and details on Republican efforts against the legislation appear below.

Administration News

  • During a meeting with the House Democratic caucus at the Capitol on Jan. 14, President Obama said that Republican opposition to health care reform and an improving economy will bolster Democratic prospects in the upcoming midterm elections, The Hill reports. Obama acknowledged recent polls showing voter discontent with current overhaul provisions. However, he said that once the bill is passed, U.S. residents will have a “fair shake” in dealing with insurance companies and will realize that their “worst fears” are “groundless” (Alarkon, The Hill, 1/14).
  • At the meeting, Obama also said that he wants to renegotiate a provision in current reform legislation that would grant biotechnology drugs at least 12 years of market exclusivity before generic versions can come to market, CQ Today reports. Obama said brand-name biologics manufacturers should face competition sooner, and he proposed lowering the exclusivity window to seven years (Wayne, CQ Today, 1/14).

What’s in the Bill

  • On Jan. 14, Sen. Russ Feingold (D-Wis.) called on congressional leaders to strip the “sweeteners” and special deals included in the Senate health care reform bill (HR 3590) from the final legislation, Roll Call reports (Drucker, Roll Call, 1/14).

Cost Estimates

  • Savings from proposed Medicare provider payment cuts cannot be used to finance both expanded health insurance coverage for the uninsured and extended life of Medicare’s hospital trust fund, according to a memo released last week by the CMS Office of the Actuary, CQ HealthBeat reports. The Senate health reform legislation (HR 3590) lays out such a plan, despite objections from Republicans (Reichard, CQ HealthBeat, 1/12).
  • In a separate memo, the Office of the Actuary updated its analysis of the Senate’s health reform bill to reflect the final bill as passed on Dec. 24, CQ HealthBeat reports. The new analysis estimates project a 0.6% increase in national health expenditures because of the bill, compared with a previous estimate of 0.7%. The analysis estimates that the bill would expand coverage to 34 million people who currently are uninsured, an increase from previous estimates of 33 million. The Congressional Budget Office estimated 31 million would gain coverage. CMS Actuary Richard Foster estimated the coverage expansion would cost $882 billion from 2010 to 2019, compared with CBO’s estimate of $871 billion (Reichard, CQ HealthBeat, 1/12).
  • CBO has sent a letter to Sen. Olympia Snowe (R-Maine) estimating the cost of a “bronze” insurance plan — the required level of benefits for people ages 30 and older under the proposed individual mandate — would be $4,500 to $5,000 for individuals and $12,000 to $12,500 for families, CQ HealthBeat reports. Those costs are lower than previous CBO projections of premium costs under current law (Reichard, CQ HealthBeat, 1/12).
  • The pharmaceutical, health insurance, nursing home and hospital industries could be asked to contribute more than they already have committed to cover the cost of health reform, Politico reports. According to Politico, Senate Democrats on the night of Jan. 12 asked nursing home industry officials to contribute an additional $1 billion on top of the $14.6 billion in Medicare cuts the group would already incur under the proposed Senate reform bill. In addition, sources have speculated that the hospital industry would be asked by congressional negotiators to contribute more than the $155 billion in Medicare cuts to which they already have agreed. However, Federation of American Hospitals President Chip Kahn on Friday said that such rumors are “totally false” (Frates, Politico, 1/15).


  • House Speaker Nancy Pelosi (D-Calif.) and Majority Leader Steny Hoyer (D-Md.) pledged to make the final health reform bill available for review for at least 72 hours prior to a vote, Roll Call reports (Dennis, Roll Call, 1/14).

Republican Opposition

  • Following a Republican strategy conference on the morning of Jan. 13, House Republican leaders expressed confidence in their ability to block passage of Democrats’ health reform plans by utilizing mounting public opposition, CQ Today reports. House Minority Leader John Boehner (R-Ohio) said, “The bottom line is, I believe we can beat this bill. The American people are with us” (Epstein, CQ Today, 1/13). House Minority Whip Eric Cantor (R-Va.) also outlined a GOP strategy intended to sway some moderate Democrats to vote against reform legislation (Bendery, Roll Call, 1/13). According to Cantor, the Republican campaign effort is going to be primarily directed at antiabortion-rights Democrats who previously vowed not to support the final bill unless it contains language by Rep. Bart Stupak (D-Mich.) that restricts federal funding for abortion services (Hooper, The Hill, 1/13).
  • On Jan. 13, Rep. Vern Buchanan (R-Fla.) said that House Republican leaders are targeting 40 to 50 House Democrats to garner the 218 signatures in support of a discharge petition to grant C-SPAN access to the closed-door health reform negotiations, The Hill‘s “Blog Briefing Room” reports (O’Brien, “Blog Briefing Room,” The Hill, 1/13).
  • On Jan. 13, Rep. Joe Barton (R-Texas), the ranking member of the House Energy and Commerce Committee, said that a public insurance exchange would benefit uninsured U.S. residents, a message that is inconsistent with the GOP message on health reform, The Hill‘s “Blog Briefing Room” reports. “If you have no insurance now, having some sort of subsidized public exchange may be a good deal,” Barton said. However, he added that it would not benefit U.S. residents who already have coverage (O’Brien/Zimmermann, “Blog Briefing Room,” The Hill, 1/13).
  • Rep. Paul Ryan (R-Wis.), the ranking member of the House Budget Committee, called on his GOP colleagues running for election in 2010 to campaign on plans to repeal the Democrats’ health reform plan, The Hill‘s “Blog Briefing Room” reports (O’Brien, “Blog Briefing Room,” The Hill, 1/14).

Shaping the Debate

  • A pair of lobbyists revealed that last summer six of the nation’s largest health insurers contributed between $10 million and $20 million to the U.S. Chamber of Commerce for television advertisements aimed at killing or changing health reform legislation, CongressDaily reports. The insurers — Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group and WellPoint — each provided at least $1 million, and the total amount was as much as 25% of COC’s advertising budget, according to one source. The trade group America’s Health Insurance Plans solicited the funds from the insurers, according to CongressDaily. COC’s top lobbyist, Bruce Josten, declined to comment on the issue except to say that COC does not disclose its funding sources (Stone, CongressDaily, 1/13). In a statement released on Tuesday, Kaiser Permanente denied providing funding for COC’s advertising campaign, Politico‘s “Live Pulse” reports (Budoff Brown, “Live Pulse,” Politico, 1/12).
  • The U.S. Chamber of Commerce will launch its “largest, most aggressive” campaign in its history as it works to unseat lawmakers who support health reform and other issues the organization views as harmful to the economy, USA Today‘s “On Politics reports.  Thomas Donohue, COC’s president and CEO, made the pledge when he spoke at its annual State of American Business event on Jan. 13 (Schouten, “On Politics,” USA Today, 1/12).
  • Manufacturers of generic biotech drugs have launched a lobbying campaign to reduce the length of market exclusivity for brand-name biotech drugs currently included in the reform legislation, the AP/San Francisco Chronicle reports (Fram, AP/San Francisco Chronicle, 1/14).
  • On Jan. 13, the National Community Pharmacists Association said that the House health reform bill (HR 3962) would not provide adequate Medicaid reimbursements to pharmacies for generic medications, CQ HealthBeat reports. The House bill would set the Medicaid reimbursement rate for generic drugs at a maximum of 130% of the average manufacturer prices, and NCPA Senior Vice President of Government Affairs John Coster said that a reimbursement rate of at least 150% of the average manufacturer prices is needed for a pharmacy to regain its costs (Kim, CQ HealthBeat, 1/14).
  • On Jan. 13, some House Democrats hosted a coalition of advocacy groups and union supporters seeking to keep the health reform debate focused on affordability for low- and middle-income U.S. residents, CQ HealthBeat reports. Some of the House members acknowledged that affordability proposals in the House bill likely would not make it into the final health bill (Norman, CQ HealthBeat, 1/14).
  • On Jan. 13, 19 Senate Democrats released a letter calling for a provision in final health reform legislation to repeal the insurance industry’s longstanding exemption from antitrust laws, The Hill reports. The letter was sent to President Obama, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.)  (Herszenhorn, “Prescriptions,” New York Times, 1/13).
  • On Jan. 13, the American Medical Association sent a letter to Pelosi opposing the creation of a new commission to make cuts to Medicare, Politico‘s “Live Pulse” reports (Frates, “Live Pulse,” Politico, 1/13).
  • A lobbyist for a large drugmaker has told the Obama administration that the pharmaceutical industry might be willing to make $15 billion to $20 billion in further concessions to help secure passage of a health reform bill, CQ Today reports. The money could help close the “doughnut hole” in Medicare Part D coverage, and the deal is contingent upon several key industry priorities being maintained in a final reform bill (Armstrong, CQ Today, 1/13). The industry trade group Pharmaceutical Research and Manufacturers of America has declined to comment on the deal (Edney, CongressDaily, 1/13).






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