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Cost Squeeze Raises Concerns About Health Benefits Package

Jul 27, 2009

As Congress continues to try to scale back the costs of health care legislation, some patient advocates, health care policy analysts and lawmakers fear the plan may be pared to the point of leaving millions of Americans with either inadequate benefits or large out-of-pocket costs.

Since June, leading lawmakers have been trying to lower the pricetag on legislation that would provide affordable coverage to 47 million uninsured Americans. After an initial estimate for a Senate plan came in at $1.6 trillion over a decade, lawmakers vowed to prune the cost to no more than $1 trillion.

Now, with President Barack Obama encouraging House and Senate leaders to find even more in savings, some health care advocates question whether lawmakers can preserve the core principles of the Democrats’ plan — including near-universal coverage, ample insurance subsidies for low-income families and a cap on out-of-pocket costs.

"We are very concerned that [lawmakers] have that fixed and arbitrary total dollar amount and this is it," said Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network. "Either it's not going to be enough to pay for adequate insurance or we just dumb down the level of benefits. We are concerned we could wind up with a package that is neither adequate nor affordable coverage."

From the beginning, Obama and his allies on Capitol Hill have stressed the importance of slowing health care spending, but now the push to save money has begun to divide the Democrats, with moderates and conservatives saying that tough spending constraints are critical to prevent further growth in the federal deficit, and liberals fretting that their ambitions for overhaul may be fatally compromised.

"People have got to be realistic about what is possible” to accomplish, said Senate Budget Committee Chairman Kent Conrad, D-N.D, a prominent deficit hawk. “We’ve got to live in the real world. We can’t do everything we’d like to do and pay for it and bend the cost curve the right way."

The effort to trim the costs of the legislation has come partly at the behest of the Blue Dog Coalition, a group of fiscal conservatives in the House. Rep. Mike Ross, D-Ark., a leader of the group, said that unless the U.S. manages to slow the increase in health care costs to the overall inflation rate, "it's going to bankrupt this country and it’s going to cost 160 million people…who have health care today their health care in the future, perhaps as early as 10 or 15 years from now."

But liberal lawmakers see it differently. Rep. Eliot L. Engel, D-N.Y., a senior member of the Energy and Commerce Committee, said, “There is a certain amount of money that has to be spent, and I will be loath to vote for something that doesn’t do the job. At some point you’re better off not doing it at all than doing a job that’s incomplete.”

Karen Pollitz, a research professor at the Health Policy Institute at Georgetown University, says she's already worried that under the current legislative drafts, a person with a serious illness such as cancer or diabetes could quickly run up charges for thousands of dollars in deductibles, co-payments and co-insurance.

Bill drafters are trying to protect people from such catastrophic costs by setting a maximum amount they would have to pay each year out of pocket—$5,000 a person and $10,000 a family in the House bill and a bit more in the Senate Health, Education, Labor and Pensions Committee version. But Pollitz said that even those levels may be too high for low-income people.

“It may be fine for families that don't need too much care, but God forbid somebody gets into a motorcycle accident," Pollitz says. "They're going to hit the $5,000 limit quickly. People with limited incomes, and particularly families, can easily drown in bills, even if there are co-pays."

Indeed, a report released last December by the Center for Studying Health System Change, a Washington research group, said that families experience substantial financial strain once they are paying more than 2.5 percent of their annual incomes on medical bills. For a family of three earning two-and-a-half times the federal poverty level, or $45,775 a year, that threshold would be reached once they spent more than $1,144 on health expenses.

But Congress appears to be moving toward more cost sharing by patients. In a bill recently approved by the Senate health committee, insurers would be required to cover at least 76 percent of health care expenses incurred by the average plan member, and the Senate Finance Committee is considering setting the requirement at 65 percent. The House Democratic bill would set the ratio, technically known as "actuarial value," at 70 percent.

That would be less than the standard health care plan available to federal employees and on par with what Medicare and high-deductible Health Savings Accounts pay, according to a recent report by the Congressional Research Service. Moreover, a typical private employer preferred-provider plan pays between 80 percent and 84 percent, and the typical health maintenance organization pays 93 percent, according to CRS.

A secondary concern of advocates is what benefits these plans would actually cover. The bills identify broad categories, including hospitalization, emergency treatment, outpatient services, doctors and nursing, prescription drugs, rehabilitative services, mental health and substance abuse, maternity care and preventive services. Yet dental coverage for adults is not guaranteed in either the House or the Senate health bills, and maximum out-of-pocket limits do not appear to apply to medical services obtained from a provider outside an insurer's preferred network.

Under the bills, the legislation would delegate to federal regulators the decisions about what specific procedures must be covered. The approach – similar to what Massachusetts did when it passed a statewide overhaul in 2006 -- is considered politically wise. It's intended to avoid setting off a feeding frenzy of interests lobbying Congress for the inclusion of their favored drug or medical treatment.

But the vagueness makes it harder to clarify what Americans will be getting for their money, some consumer groups say. Patient advocates are pressing lawmakers to give them a broader role in advising the officials who would ultimately decide specific benefits.

"You look at mental health and substance abuse and the question is, is this just for a certain set of clinical conditions like schizophrenia, or marriage counseling for couples who are having a hard time?" said Sabrina Corlette, director of health policy programs at the National Partnership for Women & Families, a nonprofit group based in Washington. "These are questions that families are going to have."

President Bill Clinton's 1993 health care proposal spent dozens of pages spelling out the services to which patients were entitled. For instance: People in their 40s would have been guaranteed cholesterol tests every five years. Those needing prosthetics would have been assured of artificial legs, arms and eyes, and children under three years old would have been provided rubella and eight other immunizations. That plan, however, became bogged down in Congress.

An additional concern of some about the bills is the level of subsidies that will be offered to low-income families to cover the cost of health care premiums. While both the Senate health and House plans have set that level at four times the federal poverty level—about $88,000 for a family of four—members of the Senate Finance Committee have been discussing dropping the threshold to 300 percent of poverty, which translates to about $66,000 for a family of four.

That would be a substantial savings to taxpayers. However, if if fewer subsidies mean fewer people could afford insurance, it could make it harder for lawmakers to justify requiring that almost everyone have coverage.

And that raises other issues, according to the insurance industry and others. Unless most people, including the healthy as well as the sick, are part of the insurance pool, it would be harder to restrain rising health costs. That, in turn makes it harder for the government to require insurers to guarantee coverage to everyone, even those likely to need costly care.

Because of that domino effect, Congress is not planning to make it easy to get a hardship exemption from the requirement that individuals have health coverage. The Senate health bill proposes exempting people from buying insurance if the premiums are more than 12.5 percent of their adjusted gross incomes, while the House bill sets that threshold at 11 percent. But Senate Finance is considering requiring people to buy insurance even if premiums amount to as much as 15 percent of their incomes.

“As Congress keeps lowering the money level of subsidies they're willing to provide, that by definition makes affordability a bigger problem," said Finan of the cancer society. "If they cut the subsidies too much, their promise won't be kept."

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