18 January 2007

A Growing Health Care Reform Consensus

The Washington Post is reporting on back door negotiations between some of the biggest players in D.C., including big business, labor and seniors, on reforming health care. Steven Pearlstein details the terms of the emerging political consensus on the issue:

It starts with universal coverage, accomplished either through a mandate on everyone to purchase basic health insurance or a mandate on all employers to offer it.

It includes subsidies for families with incomes up to 300 percent of the poverty level to help defray the cost of that insurance and the deductibles and co-payments that go with it.

It involves changes in tax law so that individuals who purchase health insurance enjoy the same tax benefits as those who get it as a fringe benefit at work.

It sets up a pooling arrangement in every state to allow individuals and small businesses to buy health insurance at the same price as large corporations.

Finally, it sets a deadline for physicians and hospitals to switch to computerized health records, along with a program to provide no-interest loans to buy the necessary hardware and software. . . .

Doctors would have to agree to have their compensation from insurers tied, in part, to how well they conform to treatment protocols established by the various medical specialties.

Hospitals and insurers would have to agree that 85 percent of their revenue would go to providing direct care, capping profit and administrative expenses at 15 percent.

Health insurers would have to accept the obligation to sell insurance to everyone, with only modest variation in rates for age and health status.

And to raise some money and hold down the growth in insurance premiums, union members and high-income workers would have to accept a cap on the amount of health benefits they receive tax-free.

To avoid government "negotiated" prices, drug companies would have to submit new drugs to a rigorous cost-benefit test by an independent agency, such as the Institute of Medicine, as a condition for being included on the Medicare and Medicaid formularies.

Conservatives and their small-business allies would have to swallow some form of "pay or play" -- either providing employer-paid health insurance or paying a tax to the state subsidy pool.

And liberals would have to accept a "basic" insurance package that provides full coverage for preventive care and catastrophic illness but requires patient cost-sharing for routine care.

A 2-1 decision by the United States Court of Appeals for the 4th Circuit (summarized here) holding that Maryland's requirement to impose minimum health insurance expenditures on Wal-Mart based on payroll pre-empted by ERISA, makes it much harder to implement this kind of consensus at the state level.

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