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Five Questions On Health Reform Americans Should Be Asking Now

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Five Questions On Health Reform Americans Should Be Asking Now

Investor's Business Daily December 9, 2009
Health PolicyOtherMedicare/Medicaid
Legal ReformOther

“We’re not going to not pass a bill.” So says New York Sen. Chuck Schumer, echoing Democrats’ determination to pass health reform legislation. But it may be premature to declare victory.

Failure is still very much an option, particularly if the Senate doesn’t address serious concerns about the 2,074-page bill designed to rewrite the rules governing one-sixth of the U.S. economy for decades to come.

With that in mind, here are five key questions that lawmakers should press in the coming days:

How will health reform legislation affect existing insurance coverage?

Key regulations in the legislation called community rating (limiting prices that can be charged to older and sicker applicants) and guaranteed issue (requiring insurers to offer policies to all applicants regardless of health status) have driven up health insurance premiums in state markets where they have been tried, as higher costs have pushed younger and healthier policyholders to drop coverage.

Democrats hope that by requiring everyone to purchase coverage they can avoid this problem, called adverse selection. However, that strategy may not work as advertised. In Massachusetts, which has had an individual mandate since 2006, insurance premiums are among the most expensive in the nation.

Democrats have also loaded their legislation with limits on deductibles, out-of-pocket spending and lifetime spending that will likely drive up premiums — along with new taxes on health insurance, drug and diagnostic companies. These costs are all likely to be passed along to policyholders in both the individual and employer-based markets.

For the 85% of Americans who have health insurance coverage now, costs may rise.

Does the final bill lower the government’s unsustainable spending commitments for existing programs (Medicare and Medicaid) or expand them?

Both the House and Senate bills slash Medicare spending, but neither uses the savings to pay for Medicare’s impending bankruptcy. Instead, the savings are used to set up a new entitlement (extensive subsidies to buy health insurance) for the uninsured.

Estimated savings coming from Medicare alone will be around $500 billion between 2010 and 2019, if the legislation is enacted as it reads today. But most of these savings will come from reductions in the popular (and private) Medicare Advantage health plans and through changes to payments for prescription drugs.

Given that regular Medicare is set to start going bankrupt in 2017, it makes no fiscal sense to use the savings to pay for yet another new entitlement instead of shoring up the main program. These congressional prescriptions will only produce more deficit spending.

Given Congress’ track record on spending, what is the realistic projection for the cost of health reform when it’s fully implemented?

The Congressional Budget Office has performed admirably in producing its cost analysis of extraordinarily complex legislation in a very short time. But the CBO is statutorily constrained in its analysis of pending legislation.

If Congress tells the CBO that it will cut 20% from Medicare physicians’ payments starting in 2011, the CBO must score this as a savings — even if Congress has never done this before and is unlikely to do so now.

Senators concerned about costs should press the CBO for a score with all of the potential gimmicks removed — like the physicians’ payment cut — which will give a better estimate of the program’s true cost when fully implemented.

If this isn’t possible because of the time constraints, the CBO should instead convene its expert academic advisers — influential, bipartisan economists with over 100 years of collective policy expertise — and let members of Congress and their staffs solicit their candid opinions about the true cost of the legislation in an open forum. These experts won’t be subject to the artificial constraints facing the CBO.

If health reform does generate a surplus, will this money be used to pay down the debt — or fund new government spending?

In 2009, the U.S. government ran a $1.9 trillion dollar deficit, the highest since the Second World War. If President Obama and Congress are serious about reducing the deficit — and confident in the CBO score that projects savings beginning in 2015 — reform legislation should mandate that any savings from health care reform be targeted to paying down the federal debt.

How will adding a new, government-run insurance program increase competition in private insurance markets?

Today there are more than 1,000 insurers nationwide. It’s hard to see how adding a new public plan would make that market any more competitive.

The president has pointed out that in some states one or two insurance companies dominate the market.

But this is an argument for interstate competition — creating a national health insurance market where companies compete — not having the government compete with private companies.

The prohibition on interstate sales of health insurance is based on a 60-year-old Supreme Court case that is irrelevant in the age of the Internet and aggregate marketplaces like We have national electronic markets for banking and homeowner’s insurance. We should have one for health insurance, too.

Most Fortune 500 companies already have multistate insurance contracts with national health insurers, since they can opt out of state regulations under federal ERISA law. In fact, well over half of Americans with private health insurance get their insurance in this way.

The answers to these five critical questions will determine whether health reform will lower health care costs, reduce the deficit and make health insurance more affordable for the vast majority of Americans — achievements that Democrats and Republicans alike could be truly thankful for.

On the other hand, if the bill can’t meet these goals, policymakers should head back to the drawing board — because, with all due respect to Sen. Schumer, passing a bad bill is a worse option than failure.

This piece originally appeared in Investor's Business Daily