Connecting Federal Legislation to Oregon Health Care Reform

United States Senator Max Baucus (D-Montana), chair of the Senate Finance Committee, unveiled his long-awaited health reform proposal last week.  At this point, the bill has no Republican supporters, and Democrats are grumbling; nevertheless, work on the proposal begins this week.

With a price tag of  $856 billion over 10 years, the cost of the proposal is somewhat less than others circulating in congress—most of those cost at least $1 trillion for the same time period.  The number of people receiving health care coverage is also lower—the Baucus bill would leave an estimated 25 million people without insurance.  By contrast, the Congressional Budget Office estimates that other bills would leave roughly 17 million uninsured.  At least 46 million people are currently without insurance.

Like other proposals in circulation, Baucus' plan would require insurance companies to sell coverage to all seeking it, without denying coverage for pre-existing conditions.

The legislation would create insurance exchanges in the states, through which companies could sell policies that meet criteria set by the government, with federal subsidies available for lower-income individuals and families who would otherwise be unable to afford coverage. This part of the bill appears to piggy-back on Oregon’s own health reform legislation, which mandates that the state begin to set up an exchange in the next few years.

Under Baucus’ proposal, any policy offered for sale in the exchanges would have to cover preventive and primary care as well as dental, prescription drug, mental health and vision services. In general, consumer co-pays on preventive coverage would be banned.

Additionally the plan envisions cutting in half a coverage gap in the Medicare prescription drug program over a decade; although not as deeply as President Obama called for in last week's prime-time speech.

To pay for coverage expansions, Baucus used a combination of cuts and new taxes.  To hold down costs, the bill includes only one year of a 10-year, $230 billion increase in doctor fees under Medicare. 

The legislation calls for a new tax on high-cost insurance plans, a series of fees and taxes on insurance companies, the pharmaceutical industry and other health care providers, and penalties assessed on people who refuse to purchase coverage or large companies that refuse to offer it to their employees.

Planned Medicare spending would be cut by roughly $500 billion over a decade, with about one-quarter of that money coming from private plans sold as an alternative to traditional government coverage. The House Bill calls for far deeper cuts in the alternative program, to the point that industry officials say it could disappear. 

Over the past decade, health care costs in Oregon have increased dramatically, but wages have not kept pace.  This situation was not improved by the recession, which has made it harder for employers to meet those rising insurance costs. Complicating the problem is the fact that many people have been laid off, and have consequently lost their employer based coverage.  Consider the following points:

• Health Insurance premiums in Oregon rose by 101% between 2000-2009 according to a national health care consumers group, Families USA, while median income in Oregon rose by 23.8%.
• Family coverage in Oregon rose from an average annual premium (combined employer and employee share of premium) of $6,654 to $13,378;
• Single employee coverage rose from $2467 to $4660 annually.
• Nationwide, 40% of small-business employees enrolled in individual health plans pay annual deductibles of $1,000 or more in 2008. That's almost twice the number who paid that much in 2007, according to a recent study by the Kaiser Family Foundation.

The Oregon Legislature worked to address these problems during the 2009 session.  One change was an attempt at better coordination across government entities—new legislation created an entity called The Oregon Health Authority that will manage most aspects of publicly funded health care in Oregon.  Other changes included an increase in the number of people covered by the Oregon Health Plan, a re-designed and expanded health plan for kids, and changes to the way insurance companies are regulated.  Expanded health care coverage will be paid for with two new taxes:  one on hospitals, and another on commercial health insurance premium.

The conclusion is obvious: it's possible that health care costs will be contained -  at a higher cost. The solution is basic: To cut costs, we must start by spending less, not more.