With the unveiling of the Senate Majority Leader Harry Reid's health care reform package, all the pieces are on the table for a historic overhaul of the nation's health care system. The House passed its version of health care reform earlier this month. And while the proposals aren't perfect — primarily because they don't do enough to control rising medical costs — this is a pivotal moment. The Senate should vote to begin debate on its bill and vote early next month so final negotiations can begin that should produce further refinements of the package.
Both the House and Senate measures have much to commend. They would expand health insurance coverage to most uninsured Americans, an additional 36 million people in the House bill and 31 million in the Senate. They would require people get insurance and bar insurers from rejecting customers for pre-existing conditions or imposing lifetime benefit caps. They would create new insurance exchanges where individuals could shop for affordable coverage. Both measures would also pay for themselves and reduce the deficit, according to 10-year projections by the Congressional Budget Office.
There are important choices left to be made in at least five key areas:
The House bill includes a public health insurance plan that would be made available in the new national health insurance exchange. This is the best way to inject competition into the health insurance market which, in turn, should put downward pressure on premiums. The health insurance lobby has been fighting a public option, but the government plan would not lead to a state takeover of health care as critics contend. The public option would have to pay for itself through premiums and would negotiate prices for services with providers just like private insurers.
Reid's Senate bill also includes a public option, but it includes an opt-out for states. That may win more support in the Senate, but the opt-out provision will weaken its competitive value and mean fewer options for people who live in nonparticipating states. A nationwide public option is an essential cost- containment element and should be in any final health reform measure.
Neither the House nor the Senate took sufficient steps to rein in the spiraling costs of health care. Serious cost containment would address the perverse incentives of the current fee-for-service model that encourage doctors to schedule too many visits and unnecessary tests. But stabilizing the cost of Medicare is critical, because the trust fund used to pay hospital expenses will be insolvent by 2017.
The Senate would establish an independent Medicare advisory board to reduce growth in expenses by targeted amounts. The board's recommended cost savings would go into effect automatically if not voted down by Congress within a limited time. And if Congress rejects the recommendations, it would have to come up with similar cost savings.
The third-rail politics of Medicare make this the most pragmatic way to accomplish cost containment. The House bill does not include a similar program.
This is another disappointing aspect of the House bill. It would largely fund health care reform through an income tax surcharge of 5.4 percent on families making above $1 million a year, which would raise $461 billion in revenue over 10 years. Imposing added income taxes on the rich would do nothing to encourage rational health care spending. And any revenue from higher income taxes will be needed to address the overall federal deficit.
The Senate has a better approach. Its bill would impose an excise tax on gold-plated health insurance policies, paying for health reform within the health care system itself. Health insurers would be charged an excise tax on policies that cost more than $8,500 for individual coverage or $23,000 for family insurance. The tax would encourage moderation in premium increases and give insurers added incentives to hold down the cost of medical care. It also would raise $149 billion toward paying for the cost of health reform.
Other reasonable revenue sources in the Senate bill are an increase in Medicare payroll tax by one-half percent on couples with incomes that exceed $250,000 or individuals earning more than $200,000, and a 5 percent tax on elective cosmetic surgery.
Most Americans get their health insurance through their employer, and any health reform should encourage that tradition. In the House bill, employers over a certain size — more than eight of every 10 small employers would be exempt — would have to subsidize reasonable health insurance coverage for their workers or pay a percentage of their payroll as a penalty. In contrast, the Senate bill has weaker employer responsibility language. It requires employers that do not offer health coverage to pay for any federal subsidies granted to workers who obtain their insurance on the exchanges.
The Senate version does not offer strong enough incentives for employers to maintain coverage.
Health reform in the House became embroiled in a battle over abortion rights. Current law bars federal tax money from paying for abortion except in rare instances. The status quo was protected under a compromise in the original House bill that segregated federal subsidies from any part of the premium that paid for abortion coverage. But a group of antiabortion Democrats led by Rep. Bart Stupak of Michigan demanded more sweeping abortion restrictions in return for their support. Stupak's amendment bars federal funds from any public option or private insurance plan that includes abortion coverage. That likely means that insurance policies offered on the exchanges won't include this reproductive health service.
Reid resisted calls to include the Stupak language in his bill. The Senate bill sticks to the original House compromise and directs that at least one insurance policy include abortion coverage in each state. This ensures that a woman's right to choose is not compromised in overall health care reform.
It has been apparent for years that this nation cannot afford the current health care system, which represents 16 percent of the economy. Americans deserve affordable, available health care coverage. While considerable progress has been made in Washington on health care reform, tough choices remain and there is significant work left to be done — particularly on controlling the costs.