MSA’s president, Chris Vickrey, recently launched a blog to provide timely commentary on important market developments. While not necessarily limited to healthcare topics, blog posts to date have focused on legislative initiatives for healthcare reform, with links to key primary documents.
As snowplows worked overtime in Washington DC over the weekend to clear the nearly two feet of snow that blanketed the city in a record snowstorm, Senate lawmakers, too, worked overtime, staying late night Sunday night and into the wee hours of Monday morning to pass, at slightly after 1AM this morning (December 21), the first of several procedural votes to avoid a filibuster of the Senate healthcare bill. The 60-40 vote on party lines sets the stage for a Senate vote on the bill that is currently scheduled for Christmas Eve.
Also over the weekend, the Congressional Budget Office released its analysis of the Senate bill as amended. According to the CBO, the bill is estimated to have the following effects:
Over the course of the first 10 years, through 2019, it would reduce the federal budget deficit by $132 billion.
It would reduce the number of legal US residents who lacked health insurance in 2019 by 31 million, leaving 23 million nonelderly people uninsured (about one-third of whom would be illegal immigrants).
Most Americans would continue to receive insurance coverage through their employers, but 26 million would receive coverage through newly-created insurance exchanges, with subsidies for individuals and families with incomes between 133% and 400% of the Federal Poverty Level (FPL). Individuals with incomes below 133% of the FPL would become eligible for Medicaid, resulting in an increase in the population covered by Medicaid and SCHIP to 50 million in 2019 (from 35 million in 2019 without the reforms).
It would establish an Independent Payment Advisory Board, which would be responsible for limiting growth in Medicare spending and whose recommendations automatically would go into effect unless blocked by Congress.
It would establish a voluntary federal program for long-term care insurance.
Beyond the first decade, the CBO expects the provisions of the bill to continue to slightly reduce the federal deficit after 2019, possibly by 0.25-0.5% of GDP. In contrast to the original language of the bill, which allowed a slight growth in physicians’ payments under Medicare Part B in 2010, the amended bill eliminates this increase, which would result in a cut of 21% in physician payments 2010 under the Sustainable Growth Rate (unless, as is likely, these cuts are subsequently overturned later in 2010). Among other changes, the amendments also cut the annual fees the medical device and insurance industries would have to pay, although there is no mention of cutting the fees the pharmaceutical industry would have to pay.
If the Senate bill passes as expected on Christmas Eve, the next step will be to reconcile the House and Senate versions and have each chamber vote on the final bill in time for President Obama to sign into law by his State of the Union address next month.
According to news reports, last night the 58 Democrats in the Senate held a closed door meeting with the two independent members of their caucus, Bernie Sanders and Joe Lieberman, in an attempt to reach a consensus on the healthcare reform bill. To secure Joe Lieberman’s support and apparently reach the 60 votes required to avoid a filibuster, the Democrats had to scrap a compromise deal reached last week on a limited expansion of Medicare to some individuals in the 55-65 age group and a private-sector approach to the public option.
From the start, some conservative Democrats had been opposed to the so-called “public option,” in which a government-run health plan would compete in the new-created insurance exchanges with private insurance companies in offering health insurance plans to individuals and small businesses. Last week, a group of Senate Democrats worked out a compromise in which, in lieu of a government-run plan, the White House Office of Personnel Management would oversee national health plans offered by private insurance companies, much like the current health insurance benefits for federal employees. In addition, certain beneficiaries in the 55-65 age group would be able to enroll in Medicare, although their premiums would not necessarily be subsidized.
Over the weekend, however, Joe Lieberman indicated that he would not be willing to support such an expansion of Medicare, leaving the Democrats without enough votes to avoid a filibuster. To win Senator Lieberman’s support, Senate Democrats apparently were willing to drop the public plan completely, including the previous compromise reached over the limited Medicare expansion. While there are still some hurdles to overcome, it appears that the Democrats now have the 60 votes they need to pass a bill in the Senate before Christmas. It would then be up to a Conference Committee to reconcile the House and Senate bills into a final bill for next month.
On Monday, November 30, the Congressional Budget Office released its analysis on the effect of the proposed healthcare reforms in the Senate’s version of the bill on health insurance premiums. Both Democrats and Republicans have seized on this report’s conclusions to support their positions on healthcare reform legislation. Democrats have emphasized that beneficiaries in the non-group market (beneficiaries who purchased individual or family policies on their own, not through their employer) would pay lower premiums, on average, under the Senate’s reform bill, once the impact of government subsidies is taken into account. Republicans, on the other hand, have emphasized the increase in premiums in the non-group market, excluding the impact of government subsidies.
While both of these positions are accurate, it should be emphasized that the non-group market, while expanding under healthcare reform, will still account for a relatively small share of the overall insurance market. The vast majority of the non-elderly will still receive insurance from their employers, with 70% in the large group market and 13% in the small group market (in the CBO’s analysis, “small group” is defined as employers with 50 employees or less). Only 17% of non-elderly beneficiaries would be covered in the non-group market, and these non-group policies would be purchased through the new insurance exchanges. Average premiums for both the small group and large group policies would essentially be unchanged, or may even decrease under the Senate bill, according to the CBO’s analysis.
For the non-group market, however, average annual premiums would increase from $5,500 to $5,800 for singles under the Senate bill, while average annual premiums for families would increase from $13,100 to $15,200 under the Senate bill. For 57% of beneficiaries, however, the actual cost would be substantially lower because their premiums would be subsidized by the federal government. Moreover, the biggest reason for the increase in premiums in the non-group market under the Senate reforms is because the insurance coverage provisions of the new policies would be much better, on average, than current policies in the non-group market. Under the reforms, the insurance coverage for policies in the non-group market would be essentially the same as current group market policies, in contrast to current policies in the non-group market, which often offer poor coverage. Other effects of reform, such as slightly lower administrative costs and a slightly healthier pool of beneficiaries, serve to slightly offset the increase in premiums associated with the more comprehensive coverage provisions. Therefore, according to the CBO’s analysis, average health insurance premiums for most beneficiaries would remain essentially unchanged under the Senate’s version of healthcare reform. In the non-group market, however, premiums would increase, primarily because of better insurance coverage, although 57% of beneficiaries in the non-group market would receive significant subsidies, so their costs would be much lower than the average premiums.
