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Federal Legislative Issue Update and A Look at What the Future May Hold for Health Care Financing

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Title: Federal Legislative Issue Update and A Look at What the Future May Hold for Health Care Financing


1
Federal Legislative Issue Updateand A Look at
What the Future May Hold for Health Care Financing
  • Presented by
  • Janet Trautwein,
  • National Association of Health Underwriters

2
Lots of Unresolved Business in 2008
  • Reauthorization and possible expansion of or
    changes to the STATE Childrens Health Insurance
    Program (SCHIP)
  • Mental Health Parity
  • Long Term Care
  • Various reform bills
  • Presidential Candidates

3
State Childrens Health Insurance Program
  • NAHUs current top federal legislative priority
    is the SCHIP reauthorization, with our focus on
    increasing access to private premium assistance
    programs to minimize the effects of crowd out.
  • Substitution of public for private health
    insurance coverage occurs when public subsidies
    are provided. Crowd out is inevitable. CBO
    estimates SCHIP crowd out to be between 25-50.
  • The goal for policy makers should be to mitigate
    the effects of crowd out, to ensure that SCHIP
    plays a coordinated partnership role with
    existing private sector health insurance
    coverage.

4
State Childrens Health Insurance Program
  • The 1st Session of the 110th Congress produced a
    stalemate on SCHIP reauthorization
  • Funding for SCHIP expired on September 30, 2007
    Congress has passed short term extension of
    current law to buy more time for reauthorization
    agreement
  • President Bush and many Republicans objected to
    the size of SCHIP expansion being proposed in
    Congress

5
State Childrens Health Insurance Program
  • In July 2007, both the House and the Senate
    passed very different versions of SCHIP
    reauthorization legislation
  • The House measure H.R. 3162, significantly
    expanded the scope of SCHIP, including providing
    coverage to individuals up to age 25
  • Rather than improving the current premium
    assistance provisions of S-CHIP, it did just the
    opposite, by allowing employers to buy into the
    S-CHIP program
  • As a partial funding mechanism, it significantly
    cut funding to Medicare Advantage plans.
  • Passed mostly on party lines 225-204

6
Senate S-CHIP
  • The Senate-passed legislation, H.R. 976, also
    expands program funding, but would do so in a
    more limited way and primarily through an
    increase in the federal tobacco excise tax
  • Greatly improves current premium assistance
    provisions would help reduce crowd-out by phasing
    out SCHIP coverage of childless adults
  • Senate bill passed with a veto-proof margin of
    68-31
  • President Bush promised veto of both the Senate
    bipartisan measure and the House bill, citing too
    large an expansion of the government program and
    opposition to tobacco tax increases

7
House Senate Compromise Agreement
  • Congress attempted to send President Bush two
    different versions of SCHIP reauthorization (H.R.
    976 and H.R. 3963), essentially Senate bills 35
    billion expansion and tobacco tax funding
    increase
  • Newer versions sought to tighten income
    eligibility levels, speed termination of coverage
    of childless adults, make stronger proof of
    eligibility rules
  • President Bush vetoed both versions, and Congress
    failed to override vetoes (2/3 of each chamber
    needed)

8
S-CHIP
  • Still possible reauthorization compromise
    attempted again in 2008. But unlikely Bush
    says tobacco tax increase is non-starter, and he
    objects to size of expansion (35 billion)
  • Good resource on S-CHIP and crowd-out issues
    Alliance for Health Reform Toolkit
    www.allhealth.org/publications/Child_health_insura
    nce/Crowd-out_and_SCHIP_toolkit_70.pdf

9
What Health Issues is Congress Working on Now?
  • Reauthorization and possible expansion of or
    changes to the Childrens Health Insurance
    Program
  • Mental Health Parity
  • Other Congressional Efforts
  • Medicare for All and Various reform bills
  • Presidential Candidates

10
Mental Health Parity
  • Since 1996, current law has required parity for
    mental health coverage
  • Defines parity as no lower annual or lifetime
    dollar limit for MH coverage than any annual or
    lifetime dollar limits that may apply to medical
    and surgical benefits covered by a plan
  • Current law explicitly permits plans to have
    separate cost sharing provisions, limits on the
    duration of coverage and to define what benefits
    the plan chooses to cover
  • Also does not apply to coverage for substance
    abuse at all

11
Mental Health Parity
  • Current law included a 5-year sunset provision
  • Each year since the sunset, Congress has extended
    the 1996 provisions by one year
  • Proponents, led by the late Sen. Paul Wellstone
    (D-MN) and Sen. Pete Domenici (R-NM) have pushed
    each year to significantly expand current law to
    require parity in plan cost sharing provisions,
    limits on the duration of coverage of services,
    coverage of all conditions listed in the
    so-called DSM-IV manual, and limit plans ability
    to manage this benefit
  • Employers and health plans have (previously)
    vigorously resisted efforts to expand current
    law, leading to a stalemate where the temporary
    extension of current law was the only common
    ground action on which all sides could agree.

12
Mental Health Parity
  • 110th Congress -- Sen. Domenici and his new
    co-sponsors, Sen. Ted Kennedy and Sen. Mike Enzi
    (R-WY) agreed to take a fresh look at issue and
    work to find consensus.
  • More moderate bipartisan agreement reached (S.
    558) -- requires parity on all cost sharing and
    duration of coverage limits, but leaves plans and
    employers the ability to define benefits and to
    use medical management practices to control
    health costs, make sure enrollees receive the
    right care for their conditions.
  • The House sponsors of H.R. 1424 proceeded into
    the new Congress with essentially the same,
    highly restrictive version of parity legislation
    as before.

13
Major Differences in the Bills
  • Mandated Benefits
  • Definition of Mental Illness
  • Medical Management
  • The right care at the right time
  • Network Management
  • Requirement of out-of-network services
  • Expanded Remedies
  • State vs. federal
  • Effective Dates
  • January 1, 2008 vs. 12 months from enactment

14
What Health Issues is Congress Working on Now?
  • Reauthorization and possible expansion of or
    changes to the Childrens Health Insurance
    Program
  • Mental Health Parity
  • Other Congressional Efforts
  • Medicare for All and Various reform bills
  • Presidential Candidates

15
Other Issues Congress is Working On
  • Trade Adjustment Assistance Act
  • Authorization expired in 2007, but Congress
    extended current law for a few months to allow
    time for agreement
  • Trying to make it easier for states with
    purchasing options
  • Possible expansion to other populations S. 1848
    was introduced by Sen. Baucus to modify the bill
    and expand it to service workers and others
  • High-Risk Pools
  • FY08 appropriations bill provides 49 million in
    federal funding

16
Other Issues Congress is Working On
  • Health Information Technology (IT)
  • Significant interest in House and Senate to
    employ greater Health IT to improve the quality
    of patient care and lower costs
  • House and Senate measures would seek to establish
    national standards, provide grants and loans to
    health care providers and to states to spur
    adoption of health information technology
  • Failure to reach agreement in past couple of
    years due to funding amounts and privacy issues
  • E-Prescribing
  • S. 2048 and other measures being promoted as
    first step to Health IT -- would require all
    doctors to use electronic prescriptions for
    Medicare patients, starting in 2011
  • Proponents seek to make this part of any
    physician fee schedule fix under Medicare Part
    B

17
Other Issues Long-Term Care
  • NAHU is working with a coalition to pass
    legislation to allow long-term care insurance to
    be sold pre-tax under cafeteria 125 and FSA
    arrangements
  • Senators Grassley and Lincoln have sponsored S.
    2337 and Rep. Pomeroy sponsored H.R. 3363
  • Bipartisan but cost of bill must be paid for in
    other tax increases or spending reductions

18
Other Issues Congress is Working On
  • Insurance Producer Oversight in Medicare Sales /
    Ethics
  • Widespread press reports in 2007 of bad apples
    in our industry who have been behaving in what
    appears to be an unethical manner
  • NAHU led the way in getting out in front in
    communications with CMS and Congress, touting and
    reinforcing considerable time, effort and
    resources educating our membership about the
    rules concerning Medicare-related product sales.
    Also working closely with CMS and state
    regulatory agencies.

19
What Health Issues is Congress Working on Now?
  • Reauthorization and possible expansion of or
    changes to the Childrens Health Insurance
    Program
  • Mental Health Parity
  • Genetic Discrimination
  • Other Congressional Efforts
  • Various reform bills
  • Presidential Candidates

20
Health Reform Proposals
  • Senator Wyden Dismantles existing
    employer-based system, state pooling
    arrangements, community rating and guarantee
    issue, Individual Mandate, Employer Mandate
  • Senator Kennedy/Representative Dingell Medicare
    for All
  • Senator Bingaman/Representative Baldwin -- Grants
    to states to carry out any of a broad range of
    strategies to increase health care coverage
  • Senator Enzi Individual mandate, guarantee
    issue and tight rating requirements on all
    products, pooling of individual and group
    markets, required community rated and
    price-controlled products from each carrier,
    small business health plans, and standard
    deduction to pay for individual or employer
    coverage.
  • Senator Harkin Allows employers a 50 tax
    credit for the costs of providing employees with
    a qualified wellness program
  • Bush Tax Proposal Removing employer paid
    benefit tax exclusion and replacing it with a
    deduction

21
Changing Tax Exclusion of Employer-Sponsored
Insurance
  • Health benefits a big potential target for
    raising revenue
  • Currently, the amount that employers contribute
    toward health benefits and health insurance is
    generally excluded, without limit, from workers
    payroll and income taxes.
  • Tax treatment of health benefits established in
    the tax code through a series of laws and rulings
    that date back to the 1920s.

22
Changing Tax Exclusion of Employer-Sponsored
Insurance
  • Estimated value of the income tax exclusion
    100 billion per year payroll tax exclusion
    50 billion per year
  • Tax exclusion reduces the after-tax cost of
    health insurance to individuals and families
    almost 70 percent of workers and their dependents
    (more than 160 million individuals under age 65)
    are incentivized to acquire employment-based
    health insurance. ESI has take-up rate of about
    85, with fewer than 5 percent of workers
    eligible for health benefits being uninsured
  • Growing discussion across ideological spectrum to
    end current preferential tax treatment for
    employment-based health benefits and replace it
    with some other tax preference

23
What Congress is Working On
  • Reauthorization and possible expansion of or
    changes to the Childrens Health Insurance
    Program
  • Mental Health Parity
  • Genetic Discrimination
  • Medicare for All and Various reform bills
  • Other Congressional Efforts
  • Presidential Candidates

24
Presidential Candidates
  • Health care will be the top domestic policy issue
    during this extended campaign cycle.
  • Many candidates favor comprehensive reform that
    could dismantle the private market
  • Single payer, national exchanges, shift away from
    the employer-based system all under serious
    debate.
  • NAHUs analysis of presidential health care
    reform proposals is updated regularly and
    available online.

25
Presidential PlatformsSenator Barack Obama (D-IL)
  • Wants universal coverage by 2012
  • States, employers, and private plans to GI
  • Lower costs and improve quality
  • Focus on preventive care, wellness, and public
    health
  • Create national exchange with federal coverage
    standards
  • Mandate children covered up to age 25
  • Estimated 50-60 B a year
  • Strengthen anti-trust laws for tort reform
  • Private insurers must invest of premiums to
    patient care in non-competitive areas

26
Presidential PlatformsSenator Hillary Clinton
(D-NY)
  • Individual/Employer mandate
  • Estimated 110 B a year
  • Cost Containment preventive/chronic disease
    mgmt, paperless IT, reduce admin. Costs
  • Private Insurance insurers must cover
    preventive care and meet MLR
  • GI and modified community rating
  • Choice
  • 1) Keep current private coverage
  • 2) Buy into expanded FEHBP
  • 3) Health Care Choices (public FEHBP)

27
Presidential PlatformsSenator John McCain (R-AZ)
  • Eliminate fed income tax exclusion for
    employer-sponsored insurance
  • Replace the exclusion with a tax credits -
    2500/5000
  • Portable health insurance plans/multi-year plans
  • Coverage across state lines
  • Purchase health insurance through any association
    or organization they choose
  • Transparency with medical outcomes/quality of
    care
  • Expand the VA program to use benefits for timely
    high-quality care

28
Making a Difference
29
Constraining Medical Costs
Behavior Lifestyle Weight Gain 86-06
No Country Can Fund All the Consequences Hyperten
sion Type 2 Diabetes Osteoarthritis Stroke
Coronary Heart Gallbladder Sleep
Apnea Respiratory Issues Some Cancers
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Obesity Trends Among U.S. Adults (BMIgt30)
No Data lt10 1014
1519 2024 2529
30
  • Centers for Disease Control Prevention, 2006
    Behavioral Risk Factors Surveillance System

30
Constraining Medical Costs
How Much Can Private Insurance Costs Be Affected?
Administration 14
Other Claims Cost 45.1
Behavior 15
Inefficiencies 3.3
Government Cost Shift 9.5
Malpractice 5
Uninsured Cost Shift 8
31
Access For All
Most Uninsured Not A Crisis
46 Million Considered Uninsured
Eligible for Government Program (but not signed
up)

34
80
50,000 Annual Income

32
Temporarily Uninsured
14


Long-Term Uninsured
20
  • February 2005 Blue Cross Blue Shield Association
    analysis of Census Bureaus Income, Poverty and
    Insurance Coverage report

32
Access for All
Smart State Reforms Make a Difference
Varying regulatory climates can have a profound
impact on insurance affordability. Consider the
differences in individual rates for two
30-year-old males living in a Philadelphia suburb
located across the bridge from each other in
different states.
September 2007 Lowest and Highest Rates for PPO
Indemnity Plans 1000 Deductible 80/20
Coinsurance In Neighboring Philadelphia Suburbs
NJ
PA
599 - 6,009 Haddonfield, NJ 08033
70 - 260 Wayne, PA 19087
33
Who Will Pay For Health Care In the Future?
34
Who Will Pay?
  • Employers
  • Will they be required to pay?
  • Who will they be required to cover?
  • What type of benefit will they be required to
    provide?
  • How much will they pay or will they have to pay?

35
Who Will Pay?
  • Individuals
  • Will the employer based health insurance system
    change to one that is individually based?
  • Will employers still contribute to the cost?
  • How will that change markets?
  • Will individuals be required to carry health
    insurance?

36
Who Will Pay?
  • The Government
  • Will the government continue to provide coverage
    primarily for those who are low income or
    elderly?
  • Will the government also begin to subsidize the
    purchase of coverage in the private market for
    those with lower incomes
  • Will the government begin to subsidize the cost
    of high risk individuals?
  • Will the government provide a basic level of
    coverage or catastrophic coverage?
  • Will the government be the provider for all
    coverage, i.e., a single payer system?
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