CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq....
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Transcript of CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq....
![Page 1: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/1.jpg)
1 CONSTANGYBROOKS & SMITH, LLP
Healthcare Reform:The Gathering Storm
David A. Pearson, Esq.
Constangy, Brooks & Smith, [email protected]
(813) 222-1367
September 10, 2009
Tampa Bay Association of Tampa Bay Association of Health UnderwritersHealth Underwriters
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2 CONSTANGYBROOKS & SMITH, LLP
“Change is Coming”
– Background:• New administration pledged to change
• Financial turmoil – Wall Street, autos, banks, etc.
• Unprecedented deficits
• Perception that programs must be expanded
• More government oversight
• Lurking disaster in the healthcare system
– Result:• Intense battle to reform healthcare system (or not)
• Many interest groups
• Outcome uncertain
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3 CONSTANGYBROOKS & SMITH, LLP
Recent Healthcare Legislation
– Michelle’s Law• Extends health coverage to certain students who take
medical leave from college
– Troubled Assets Relief Program (“TARP”)• Expands mental health and substance abuse coverage
– Children’s Health Insurance Program (“CHIP”)• Premium subsidies for private insurance coverage
– American Recovery and Reinvestment Act (“ARRA”) – the “stimulus package”
• COBRA premium subsidies; TAA extension
![Page 4: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/4.jpg)
4 CONSTANGYBROOKS & SMITH, LLP
The Coming Healthcare Train Wreck
– Lack of Insurance Coverage• From 10 to 45 million uninsured Americans
– Inefficiencies• Nonstandard procedures, billing, etc.
• Underutilization of computer resources (e.g., medical records not available on-line)
• “Pay per procedure” and defensive medicine
– Confusion• Many different health care products
• Frequently hard to understand exactly what’s covered
• Cost comparisons are difficult
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5 CONSTANGYBROOKS & SMITH, LLP
Train Wreck (Cont.)
– The biggest problem: The high costs of
healthcare coverage and inflation in those costs:
• Average total annual per-employee cost of employer sponsored health care in 2009 (family coverage):
$9,660 [Reported by Towers Perrin]
[$4.64 per hour]
• Average annual employee cost (family coverage):
$2,160 [Reported by Towers Perrin]
[$1.04 per hour]
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6 CONSTANGYBROOKS & SMITH, LLP
Inflation in Healthcare Costs
– Healthcare costs have increased by 160% of the CPI from 1983 to 2001:
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7 CONSTANGYBROOKS & SMITH, LLP
Inflation (Cont.)
– From 2004 through 2008:
• Average increase in total corporate health costs:
33% [Reported by Towers Perrin]
• Average increase in employees’ share:
42% [Reported by Towers Perrin]
• Average increase in CPI-U:
15% [Reported by DOL]
![Page 8: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/8.jpg)
8 CONSTANGYBROOKS & SMITH, LLP
Inflation (Cont.)
– Expected average increase in total healthcare
costs in 2009:
6% [Reported by Towers Perrin]
• CPI-U increase in the 12 months ending July, 2009:
2.1% [Reported by DOL]
![Page 9: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/9.jpg)
9 CONSTANGYBROOKS & SMITH, LLP
Health Reform in Congress
– Senate Committee on Health, Education, Labor & Pensions (HELP)
• “Affordable Health Choices Act” [June 9, 2009]
– Senate Finance Committee• “Gang of Six” – Bill to be unveiled next week
– House Tri-Committee proposal• “America’s Affordable Health Choices Act of 2009
[June 19, 2009]
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10 CONSTANGYBROOKS & SMITH, LLP
Comparison of Draft Bills
– Overall Approach:• Senate:
– Individual mandate to have insurance
– State-based “gateways” to help individuals and small businesses purchase insurance
– Subsidies for low-income individuals
– “Pay or play” for large employers
– Credit to offset coverage costs for small employers
– New regulation of individual and small group insurance markets
– Increase income eligibility limits for Medicaid
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11 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Overall Approach (Cont.):
• House:
– Individual mandate to have insurance
– Create “insurance exchange” to help individuals and small businesses purchase insurance
– Subsidies for low-income individuals
– “Play or pay” for large employers
– Credit to offset coverage costs for small employers
– New regulation of individual and small group insurance markets
– Increase income eligibility limits for Medicaid
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12 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Individual Mandate:
• Senate:
– Individuals must obtain insurance
– Tax penalty of up to $750 per year
– Exemptions where state doesn’t have “gateway,” affordable insurance is not available, and short gaps in coverage
• House:
– Individuals must have “acceptable health coverage”
– Tax penalty of 2.5% of AGI up to average cost
– Exceptions for dependents, religious, and hardship
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13 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Employer Requirements:• Senate:
– Employers required to offer health coverage and contribute at least 60% of premium, OR
– Pay $750 for each uninsured full-time employee and $375 for each uninsured part-time employee
– Small employer exception
• House:
– Employers must offer health coverage and contribute at least 72.5% of the premium for single (65% of family), OR
– Pay 8% of payroll into the “exchange”
– Small employer and hardship exception
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14 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Expansion of Public Programs:
• Senate:
– Increase Medicaid income threshold
– Individuals eligible for CHIP may also enroll in a “gateway” plan
• House:
– Increase Medicaid income threshold
– Extend Medicaid to all newborns who lack acceptable coverage
– Require CHIP enrollees to obtain coverage through the “exchange” until transition to CHIP feasible
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15 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Premium Subsidies to Individuals:
• Senate:
– Premium credits for incomes up to 400% of poverty level
– Amount sufficient to cap individual payments at 12.5% of income [between 150% PL and 400% PL], and 1% of income [less than 150% PL].
– Credit only for excess over 12.5% if employer plan
• House:
– Provide premium and cost-sharing credits up to 12% of income [up to 400% PL]
– Subsidies limited to citizens and legal immigrants
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16 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Premium Subsidies to Employers:
• Senate:
– $1,000 (single) and $2,000 (family) annual credit for employers with < 50 employees, < $50k average wage, and at least 60% employer paid (phase out for larger employers)
– Reinsurance program for 80% of retiree health claims (from $15,000 to $90,000) for employees age 55 to 64
• House:
– Similar credit, but lower limits
– Similar reinsurance program
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17 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Tax Changes:
• Senate:
– Minimum tax of up to $750 per year on individuals without “qualifying” health care coverage
• House:
– Tax of 2.5% of modified AGI per year for individuals without “acceptable” health care coverage
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18 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Insurance Pooling:• Senate:
– State-based “gateways”
– No coverage if other coverage available
– Create community health insurance option to be offered through the gateways
– 3 benefit tiers of plans to be offered
– Guaranteed issue and no pre-existing condition exclusion
– Minimum standards for benefits offered through plans
– Initial federal support, followed by 4% premium surcharge to help fund the plans
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19 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Insurance Pooling (Cont.):
• House:
– Federal health insurance “exchange”
– No coverage if other coverage available
– Public health insurance option to be offered through exchange
– 4 types of benefit plans to be offered
– Guaranteed issue and no pre-existing condition exclusion
– Minimum standards for benefits offered through plans
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20 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Benefit Design:
• Senate:
– Create an essential health care benefits package, with comprehensive array of services, and prohibition of annual or lifetime limits
– Specify standards for determining the minimum coverage that will meet the individual mandate
• House:
– Similar regarding creation of plan package
– Similar regarding requirement for minimum benefits
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21 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Changes to Private Insurance:
• Senate:
– Extend “gateway” standards to private insurance regarding guaranteed issue, premium rating, and prohibition of PEC exclusion
– Health insurers must offer incentives to providers to improve coordination, case management, and wellness and health improvement activities
– Provide dependent coverage for up to age 26 in all insurance policies
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22 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Changes to Private Insurance (Cont.):
• House:
– Generally treats individual insurance as not satisfying the mandate to have insurance; can purchase qualifying insurance through the “exchange”
– Extend “exchange” standards to private insurance regarding guaranteed issue, premium rating, and prohibition of PEC exclusion
– Establish the “Health Choices Administration” to establish and enforce standards, and to administer the “exchange”
![Page 23: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/23.jpg)
23 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– State Role:
• Senate:
– States must establish “gateways” meeting federal standards
– States must implement eligibility expansion in Medicaid
– States must establish temporary “Right Choices” program to provide uninsured individuals with immediate access to preventive care and treatment for chronic conditions (federal grants are intended to fund this)
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24 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– State Role (Cont.):
• House:
– Similar for implementing eligibility expansion in Medicaid
– States must enter into a memorandum of understanding with the “exchange” to coordinate enrollment of individuals
![Page 25: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/25.jpg)
25 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Cost Containment:
• Senate:
– Various administrative changes to increase efficiency of health plans, including standards for timely and transparent claims and denial management processes
– Create a “Health Care Program Integrity Coordinating Council” to oversee efforts
• House:
– Similar regarding administrative changes and standards
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26 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Prevention and Wellness:
• Senate:
– Develop national preventive and health promotion strategy, and provide various grants and incentives to encourage prevention and wellness programs
– Create temporary “Right Choice” program to provide uninsured adults with access to preventive services
• House:
– Similar regarding preventive and health promotion efforts
![Page 27: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/27.jpg)
27 CONSTANGYBROOKS & SMITH, LLP
Comparison (Cont.)
– Long-term Care:
• Senate:
– Establish a national, voluntary insurance program to provide individuals who have functional limitations with a cash benefit to purchase non-medical services, and to support community residence
– Financed by voluntary payroll deductions
– Automatic enrollment for all working adults unless they opt out
• House:
– Similar
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28 CONSTANGYBROOKS & SMITH, LLP
Unanswered Questions
– Costs of the legislation:• Senate estimates $1 trillion plus over ten years
• $3,000 for every man, woman and child in America
– Financing the costs:• New taxes?
• Borrow more money?
• Print more money?
– Speed of the legislation (“haste makes waste”)
![Page 29: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/29.jpg)
29 CONSTANGYBROOKS & SMITH, LLP
Unanswered Questions (Cont.)
– Tort reform:• Reduce the cost of physician malpractice insurance
• Cut down on “defensive medicine”
– Health care providers:• Enough providers to provide health care to 45 million
additional users?
– Public option:• Government starring as “The Blob”?
• Medicare for everyone?
• The demise of private insurance?
• Alternatives: Co-op? Public option trigger?
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30 CONSTANGYBROOKS & SMITH, LLP
Unanswered Questions (Cont.)
– Stirring the pot:
• Abortion coverage
– House bill prohibits discrimination against any provider in health exchange because of willingness or unwillingness to perform abortions
• Illegal alien coverage
• Rationing
• “Death panels”
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31 CONSTANGYBROOKS & SMITH, LLP
The Legislative Lottery
– Supermajority required in Senate to pass most legislation
• Debate continues unless 60% vote to cut off
• Consequence: Minority can “filibuster” legislation to prevent it coming to a vote unless the majority can garner 60 senators
– Issue with the vacant seat in Massachusetts
– “Budget reconciliation” only requires 51 senators• Only applies to mandatory spending (entitlements) or
revenue programs (tax laws)
• Is the health reform legislation too broad?
• The “nuclear option”?
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32 CONSTANGYBROOKS & SMITH, LLP
The Wild Card
– 5 committees in Congress must approve the health reform legislation
– All but Senate Finance Committee have acted
– SFC “Gang of Six” still to be heard from
– Chairman Baucus has given clues: • Most of the structural changes in other proposals
• No public option
• Possible co-op or trigger
• 35% tax on insurance companies who offer insurance packages valued at more than $8,000
![Page 33: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/33.jpg)
33 CONSTANGYBROOKS & SMITH, LLP
The Obama Intervention
– President Obama has now joined the debate
– Goals:• Security and stability for those who have insurance
• Access for those who do not
• Slow the rate of growth of health care costs
– Insurance requirements:• No one who has insurance will be forced to change
• No pre-existing condition exclusion
• No annual or lifetime cap on benefits
• Annual limit on out-of-pocket expenses
• Must offer preventive care
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34 CONSTANGYBROOKS & SMITH, LLP
The Obama Intervention (Cont.)
– Access to insurance
• Quality, affordable insurance for all
• Establishment of insurance exchange
• Tax credits based on need
– Individual mandate
– Employers must “play or pay”
– Public option should be included in the exchange, but “not essential” to reaching goals
![Page 35: CONSTANGY B ROOKS & S MITH, LLP 1 Healthcare Reform: The Gathering Storm David A. Pearson, Esq. Constangy, Brooks & Smith, LLP dpearson@constangy.com (813)](https://reader036.fdocuments.us/reader036/viewer/2022062421/56649d155503460f949eaa6b/html5/thumbnails/35.jpg)
35 CONSTANGYBROOKS & SMITH, LLP
The Obama Intervention (Cont.)
– Financing health reform
• The legislation will be vetoed if it’s not revenue neutral
• The bill should contain automatic cutbacks if expected savings don’t materialize
• Financing will come from limiting waste and abuse, and making the health care system more efficient
• Nothing will be taken from the Medicare system
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36 CONSTANGYBROOKS & SMITH, LLP
Conclusion
“Fasten your seat belts, it’s
going to be a bumpy night.”
[With apologies to Bette Davis
in “All About Eve”]
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37 CONSTANGYBROOKS & SMITH, LLP
Questions?Questions?