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News April 2012

Washington Watch

Implementing Health Care Reform, Despite Opposition

By Alan M. Schlein

Republicans have been campaigning in Congress and in the presidential campaign to “repeal and replace” Obama’s health care law. But so far, they have failed to answer a central question. Replace it with what?

So far, many states have begun establishing exchanges, but a few states – most notably Florida, Alaska and Louisiana have said they absolutely will not establish exchanges of their own. So a state with perhaps more seniors than almost any other, Florida, is leaving this up to the federal government to set up an exchange.

c_stingeralzresearch2In a bid to prevent further political backlash, President Obama and his administration are trying to soften the impact of last year’s health reform law at the same time as they are working toward implementing provisions of the new law.

Coming as the 2012 presidential race moves into high gear, the Obama administration has quietly been working to ease requirements for insurers, employers, doctors and others. That effort has been gaining cautious praise from some of the law’s toughest critics. At the same time, efforts to implement provisions of the law are facing harsh criticism from supporters and critics.

Many patient and consumer advocacy groups who championed the new law had hoped the administration would use its new powers to aggressively remake the nation’s health care system. They argue that by being timid and tentative, the Obama administration will lose out on a once-in-a-generation opportunity.

Meanwhile, Republicans have been campaigning in Congress and in the presidential campaign to “repeal and replace” Obama’s health care law. But so far, they have failed to answer a central question. Replace it with what?

In January 2011, the then-new Republican-led House took a symbolic vote to repeal the law. But since then nothing has happened. The House hasn’t passed anything new to take its place. Leading presidential candidates have said they all want to repeal the law and have reused several ideas from 2008 GOP nominee John McCain. Instead of a mandate to buy insurance, some of the Republican candidates would offer ways to make insurance cheaper – new tax credits, new bargains on policies from out of state. But even some conservatives say these ideas might not work as planned.

As one lawmaker told the Washington Post recently, “it’s a whole lot easier to demagogue the ‘con’ than it is to defend the ‘pro.’”

The only new idea being floated is actually a slight change on the version of Medicare “premium support,” a model that would convert the program into subsidies to help seniors buy private health insurance plans.

While the proposal has been made by liberal Sen. Ron Wyden (D-Ore.) and conservative Republican Rep. Paul Ryan (R-Wis.), Wyden’s democratic colleagues have blasted the new plan as a threat to Medicare’s guarantees for seniors. It involves a framework that would offer traditional government-run Medicare as an option for future retirees along with a variety of private plans Seniors would still receive a set amount of money from the government to buy insurance, as they would under the Ryan Medicare proposal. But the new Wyden-Ryan approach would let that subsidy, known as premium support, rise or fall along with the actual cost of the policies — creating more protection for seniors and saving potentially far less in the budget.

Essential Benefits

One of the most politically explosive decisions currently facing the Obama administration involves which medical benefit insurers will have to offer individuals and small businesses beginning in 2014, a key protection treasured by consumer groups.

The health care law requires insurers to offer, at a minimum, a set of “essential” benefits like hospital coverage and doctors’ visits to individuals and small groups including coverage for hospitalization, outpatient care and prescription drugs. But it also requires them to offer some that aren’t always covered by individual insurance like maternity care and mental health benefits.

The details of what is or is not essential were left to the Department of Health and Human Services to decide how specific to get when it sets its benefit package.

After a year of intense lobbying, the department, in December, HHS put out a bulletin proposing to let each state come up with its own definition.

The move, which shielded the administration from a political firestorm of criticism from patient advocates on one side and business groups on the other – was politically deft in a tough election year.

But creating a patchwork of 50 different standards for health coverage would be viewed as bad policy by many. So the administration followed up by saying that the move is merely temporary.

What was at stake in this battle was a lose-lose for the administration. It risked disappointing its closest allies by giving health plans too much wiggle room or giving the law’s fiercest critics another reason to say it will lead to rationing and bankrupt the country.

Business groups, for the most part, were against a comprehensive package of benefits, arguing that loading up a package with too many goodies would make the most basic health plan too rich for millions of Americans to afford. But consumer groups wanted to make sure the package wasn’t too skimpy and are worried that a state-friendly approach won’t set enough ground rules to ensure that the coverage is meaningful.

Perhaps it just came down to which group the administration wanted to offend the least in a politically charged election year where health care costs tie directly to the jobs creation issues.

The law establishes 10 categories of services that must be covered but also says benefits must mirror a “typical employer plan.” Doctors and patient advocates want to maximize coverage while insurers and employers want to minimize it in order to limit costs. Complicating the issue, some states currently require insurers to cover more medical services than others.

Establishing one national standard would result in some states’ residents receiving and paying for broader coverage than they have now with other states potentially having to mandate fewer benefits.

The HHS policy calls on states to define their own essential benefit plans, using as a benchmark one of the most popular insurance plans being offered in their state.

Federal officials point out that there’s not a lot of difference across the country among such plans or in their costs. But the law clearly says that HHS shall define the essential health benefit – in effect, a national standard.

There’s also a question of fairness. Because the law requires the federal government to provide subsidies to make the basic policy affordable for the working poor, a state that defines more benefits as “essential” will draw larger federal subsidies.

As the HHS bulletin says, the agency will reevaluate its approach in 2016, but it doesn’t commit the agency to have a national standard in place by that time. What the delay does is buy time for the states to focus on other important requirements of the law, including creating exchanges for the uninsured to shop for policies.

With many states unwilling or unable to get insurance exchanges operation by the health law deadline of Jan 1, 2014, pressure is growing on the federal government to do the job for them.

The federal exchange, like the state models, would be a one-stop place, most likely a website, where individuals and small businesses could compare insurance policy offerings on price, coverage and quality. The exchanges will also help applicants determine whether they are eligible for Medicaid or for federal subsidies or tax credits to help offset premium costs.

Most states have accepted initial federal planning money for exchanges and other grants. So far, many states have begun establishing exchanges, but a few states – most notably Florida, Alaska and Louisiana have said they absolutely will not establish exchanges of their own. So a state with perhaps more seniors than almost any other, Florida, is leaving this up to the federal government to set up an exchange.

And of course, adding politics back into the mix, no one knows what the Supreme Court will do when it hears the health law case with an expected ruling in June 2012. In addition, Congressional efforts to delay or derail the implementation of the law could become a factor before the November elections.

The White House strongly defends their implementation of the law, to date, arguing they have been careful to give consumers new protections including increased government oversight of insurers’ prices. Obama officials also point to new mandates barring insurers from denying coverage to sick children and the elimination of lifetime limits on coverage.

Among the benefits that have already taken place:

  • 2.5 million more young adults are now covered by their parents' healthcare plans;
  • Insurance plans have to publicly justify rate hikes of 10 percent or more;
  • Insurance plans have to spend at least 80 percent of premiums on medical care or offer rebates to customers;
  • An array of preventive services now have to be offered without copays;
  • Medicare deductibles are dropping even as seniors gain access to free preventive measures and pay less for their prescription drugs;
  • New fraud-fighting tools helped the government recover $2.9 billion from the healthcare sector.

But to no one’s surprise, other parts of the implementation are also causing controversy. Since the health care law was signed in March 2010, the Obama administration has exempted almost 1500 employers and health care plans from rules designed to eliminate so-called mini-med plans that cap coverage at as little as a few thousand dollars a year.

This has raised red flag warnings from consumer advocates who argue that these plans offer few protections. Facing the prospect that some employers would eliminate coverage altogether, the administration delayed the mandate that annual limits on coverage be lifted for more than 3 million people.

One thing most everyone agrees on is that there are good reasons to proceed carefully with the implementation of the law. John Rother, former policy director at AARP, who now is president of the National Coalition on Health Care, a DC-based nonprofit group representing businesses unions and healthcare providers, told the LA Times recently that the drive to expand coverage to millions of Americans in just two years could collapse if major healthcare players rebel or if prices rise too quickly. “Clearly the administration is trying to get as many stakeholders as possible to cooperate,” Rother argues. “That is an unprecedented challenge.”


Also contributing to this report were The Los Angeles Times, the Washington Post, Politico and Kaiser Health News.

Alan Schlein has been covering the national Washington beat for Senior Wire News Service for over two decades.

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