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Reality and reason in health reform legislation

Addressing the myths about rationing, penalties and punishment in the health reform bills
Safer care brings better health at a lower cost.
No one is proposing to ration care, but we do need to be smarter about how we spend our money.

It’s quality care, not rationing care: Getting hospitals to treat you right the first time.
Opponents are claiming that a provision designed to encourage hospitals to improve how they care for patients is actually a form of rationing. Not true. Right now, we pay billions when people have to be readmitted to the hospital because they got poor care. What the bill does is make sure hospitals treat you right the first time – so you don’t have to return and pay more to get well.

How does the legislation achieve this? By using financial incentives, or plain old money (SEC. 1151. REDUCING POTENTIALLY PREVENTABLE HOSPITAL READMISSIONS).

Hospitals won’t be allowed to charge you – or the government – for care if you have to be readmitted because you didn’t get quality treatment the first time around. So, if a patient is treated and released, but is forced to return to the hospital shortly afterward for the same condition because they didn’t good care the first time, or they picked up an infection while in that hospital, or the treatment actually made them worse, the hospital not only would have to readmit them for treatment, they would have to foot that cost. The hospital couldn’t charge the patient for that second round of care that is attributable to their poor treatment. And they couldn’t charge the government for it, either.

The reality is, if this financial incentive is successful (and recent tests of this approach show it is), billions in taxpayer dollars will be saved each year, and most important, countless lives will be saved and patients will actually get better care, not worse care.

Right now, nearly 100,000 Americans die each year from preventable infections they get while in the hospital. And treating these patients costs us $45 billion each year. Hospital-acquired infections can be prevented through inexpensive and well-known techniques such as hand-washing between patients, appropriate cleaning techniques, and screening patients for suberbugs they may be carrying. Hospitals have known for decades about their infection problems. Research shows when hospitals have something at stake – in this case, financial incentives – they will take the necessary steps to prevent the spread of infection, or improve their procedures, so patients get quality care the first time around.

Medicare recently stopped paying hospitals for the treatment of infections caused when catheters weren’t changed properly, and hospitals began changing their procedures. While many hospitals do a great job, unfortunately, many others do not voluntarily change their procedures without financial incentives or actual mandates. This provision will give them a strong incentive to provide quality care the first time, make sure you still get treatment if you need to be readmitted, and will save us all billions we now spend paying to treat illnesses caused by our healthcare system in the first place.

Will the plan punish Americans who try to opt out of getting insurance?
(Or, if I think I’m healthy enough, can’t I just take my chances and buy coverage when I need it?)

The plan requires everyone to pitch in for health coverage unless they can’t afford to do so. Unlike some forms of insurance which protect against rare and unlikely acts like a house fire or a flood, health insurance covers expenditures we all make eventually. Everyone gets sick. Even the healthiest among us age.

Health insurance companies spread that risk and cost among the young and old, the sick and well, so that everyone can afford to pay their share – a little now will make sure no one must bankrupt themselves paying for care when they get sick or injured. While opponents argue that getting health insurance is an individual decision, the idea behind requiring everyone to get coverage is that we all benefit in the long run. It would end the current practice of “shifting” the cost of treating the uninsured onto those who have insurance. Right now, it’s estimated families with coverage pays an extra $1,000 a year for picking up care for those who don’t have insurance – it gets built into our premiums, our co-pays, our hospital bills, etc. Getting everyone covered would stop this cost shifting, and start putting us on a path of really paying our own way.

The legislation (Sec. 401, TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTHCARE COVERAGE) calls for a financial incentive – or a penalty tax, if you will, of 2.5 percent – on those who refuse to get coverage. But there also is a provision that this penalty will be waived for “hardship exemptions” for those people who cannot afford to get coverage. That hardship exemption is important, because it allows people who want insurance, but can’t afford it, to not have to pay any sort of penalty for not having insurance they can’t afford.

What is “acceptable” insurance coverage?
(Or, ‘hey, I’m a dude, I’m never going to have a baby” so can’t I just get a bare-bones plan?)

To make sure that there is a set floor of benefits that everyone can access – insurance companies can always offer more or better benefits if they want, as can your employer – there is a generally accepted package of benefits included in most bills that sets a standard of coverage that people should expect when buying a policy (SEC. 122, ESSENTIAL BENEFITS PACKAGE DEFINED):

(1) Hospitalization.
(2) Outpatient hospital and outpatient clinic services
(3) Professional services of physicians and other health professionals.
(4) Such services, equipment, and supplies incident to the services of a physician’s or a health professional’s delivery of care
(5) Prescription drugs
(6) Rehabilitative and habilitative services
(7) Mental health and substance use disorder services
(8) Preventive services
(9) Maternity care
(10) Well baby and well child care

This is pretty much the essential list. Clearly, if you’re not going to have a baby you don’t benefit from maternity coverage. On the other hand, if you’re a woman, you won’t see any benefit from prostate cancer treatment. But as an overall package – this is the standard level of services that members of Congress enjoy – it gets everyone coverage that they’ll need if they face illness or accident.

This is important for several reasons. First, there are countless policies on the market right now with tricks and traps and loopholes in fine print. Consumer Reports exposed many of them here, including one that doesn’t pay for your first day in the hospital – usually the most expensive day of treatment. Having a base level of coverage is important to protect you from these tricks that will cost you big money if you don’t have the legal background to make sense of insurance language.

Second, coverage includes preventive services. This could save us all a ton of money in the future. By catching and treating early diabetes, heart disease, high-blood pressure, obesity and the like, we can drive down costs, not watch them balloon as we do now when people don’t take care of their problems early.

Also, it’s important to note that the legislation does not mandate every detail of coverage, just certain benchmarks of coverage must be met. It’s also important that the proposed bills do not eliminate existing tax advantages associated with Health Savings Accounts. This is an account employees can put money in to save for future medical expenses, and can only be opened in conjunction with an HSA-qualified “high deductible health plan,” which must have deductibles of at least $1,150 for individual coverage and $2,300 for family coverage.

The House bills call for an “actuarial equivalent” of 70 percent – which is fancy talk that the insurance plan must pay for at least 70 percent of the medical bills across an average population – both big and low spenders on healthcare. Health plans that feature HSA-type deductibles meet this criteria, so they would be allowed for folks who want to buy them.

Will small businesses really benefit? Or will they be hurt because they have to offer insurance to their employees or else pay a penalty?
Small businesses are struggling under skyrocketing health insurance costs. They pay three times the administrative costs of large businesses for health insurance. In some states, only one health insurance company dominates more than 70 percent of the small-group market, meaning a small-business owner has no where to turn for more affordable choices. More business owners are finding they can’t afford to insure employees, because they have a smaller ‘risk-pool’ to insure, which means if just one employee gets seriously ill, that can drive up costs for all employees.

The legislation would mean small businesses would no longer be at a disadvantage because of their size. Owners could get coverage for their employees through a national insurance exchange, which couldn’t discriminate based on employees’ health, or a company’s size. They’d also have many more choices of plans, and could easily and simply compare the prices, benefits and performance of health plans, and make companies compete on price. They also may be able to select a public insurance option for employees if that is included in the final legislation.

In addition to removing current obstacles of getting fair, affordable coverage from private insurers, the bills include tax credits for those companies that provide health benefits to encourage participation. Depending on the bill, businesses with low-wage workers would be eligible for substantial tax credits –up to 50 percent of the cost of coverage – to subsidize the cost of covering employees.

To further encourage covering employees, small businesses that refuse to offer insurance would have to pay a penalty of up to 8 percent of payroll– which is expected to help defray the cost of lower-income employees getting insurance on their own. However, there are big exemptions to this penalty depending on the bill — business that have 25 or fewer workers in the Senate health bill, or annual payrolls of $500,000 or less in the House version — would not have to pay anything. And the penalty would be phased in to those companies with payrolls up to $750,000.

Will the government be looking at my financial affairs to decide if I can get health coverage?
This one is pretty much common-sense. If your income qualifies you for a subsidy to buy insurance – basically a discount on the cost of a policy– then the government needs to verify your income. And they’ll do that by looking at your income tax return when you apply. Only those folks who qualify for the subsidy would go through this process (Congress is still debating the amount you can make to qualify for financial help). Anyone who gets insurance through their job, or makes more than the subsidy level and buys a policy on their own, would not do this. (SEC. 431. DISCLOSURES TO CARRY OUT HEALTH INSURANCE EXCHANGE SUBSIDIES)

Do I get ‘automatically enrolled’ in a government insurance plan?
The short answer: No, unless you basically live at the poverty level and you don’t chose a coverage plan. In an effort to get everyone covered, the legislation takes two approaches – first, it makes sure that very low-income Americans who qualify for Medicaid actually get it; and second, it makes sure that if you have insurance through your job, you take full advantage of that option.

Right now, there are a lot of people who qualify for Medicaid who don’t enroll, in part because the application process can be daunting. To reduce some of this paperwork anxiety, the legislation says that if you apply for an insurance policy through the national insurance exchange, and it turns out your income is so low that you instead qualify for Medicaid (and you don’t select a plan in the exchange), you would be automatically enrolled in the program, and not have to repeat the paperwork hassles to get Medicaid. Medicaid is essentially government-sponsored healthcare for those living at or near the poverty level – depending on the bill, a couple would be eligible for Medicaid if they make from $19,500 to $21,900 annually. (Sec. 205, OUTREACH AND ENROLLMENT OF EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS IN EXCHANGE-PARTICIPATING HEALTH BENEFITS PLAN)

Further down the bill addresses those companies offering insurance to their employees. Currently, employees decide to opt-in to coverage through their jobs – in other words, you have to actively select a policy with your Human Resources department. The legislation would flip that process, your employer would automatically enroll you in a policy unless you actively “opt-out” and say you don’t want one. This is designed to get as many Americans covered as possible, while still giving the employees the option to turn down coverage, in case a spouse has a better policy, or they’ve purchased a policy on their own, etc.

Are we’re paying for reform by taxing the successful? Or is not doing so failing to invest in our future?
Whether the costs of health reform should come in the form of additional taxes on higher earning people is really a two-part question. First is a philosophical question about whether you agree with increasing taxes on anyone, at any income level – and some people believe that should never (or almost never) happen. For those people, good arguments about how fixing our healthcare system could help everyone are irrelevant.

But if you agree that there are times when higher taxes on some – in this case those earning more than $350,000, $500,000 or $1.5 million, depending on the proposal – may be appropriate, here’s why using those taxes to pay for health reform is a good idea:

We pay more, far more, than every other major country to provide healthcare that is no better than theirs. True, we have a lot of high-cost interventions, but overall, most agree that we fail to emphasize prevention, primary care or chronic diseases. About one in six of our GDP dollars goes to healthcare, and in not very long it will be one in five at this pace. For our economy to grow, we must reform the system, there will be costs, but over time, overall savings. Paying for a reformed system is a good investment.

Bringing everyone into the system means we can begin to claw back the rapidly spiraling costs of care. Catching disease early, avoiding very high cost interventions at the emergency room, managing chronic disease instead of waiting until expensive problems develop, is essential to controlling costs overall. Getting a person with diabetes on a healthy diet is a lot cheaper – and more humane – than having to amputate a limb because the person couldn’t afford to see a doctor. And a great deal less expensive than the recovery and rehabilitation costs.

Investing in a system that makes coverage affordable – even young people who consider themselves “invincible” – means we do what insurance is supposed to do, spread risk over a large pool. Though we’re sicker when we’re older usually, everyone is at risk for an expensive disease like cancer or an accident that can medically bankrupt you.

Investing in objective research makes care better, safer, and can lower costs too. Often, the pill you get is the one your doctor just heard about from the Drug Company rep who saw the doc before you, but when doctors and patients have objective information – studies not just from the drug companies but also from independent researchers – they can make decisions about drugs and treatments based on what’s safest and most effective, not what is newest and most expensive. Consumer Reports does this kind of independent analysis for all kinds of consumer products and services, and we’ve recently started using independent data to help consumers find lower cost alternatives for the medicines they need. Investing in objective information for doctors and patients helps make care better, and thus can lower costs.