Senate Health Care Bill Puts Cost Burdens On Low-Income People

December 5, 2009

Bear with me for a moment. There’s been such an over-plus of proposals, polls, pontificating and  propaganda that I’ve half-forgotten why we decided to plunge into health care reform to begin with. And it seems I’m not the only one.

As I recall, the idea was to make good health insurance affordable for everyone because most people can’t get the health care they need without it. Bringing down health care costs was a means to this end, though it’s taken on a life of its own.

I’ve gone back to the basics because I think they’re a lens for looking at what the bill the House passed and the bill the Senate’s debating will do to ensure that low-income people can get sufficient, affordable health care.

I’ve already put in my two cents on the employer responsibility provisions. So what about affordable health insurance for those who won’t be able to get it through their jobs?

On this score, the House bill does more for poor and near-poor people. It would extend Medicaid, which offers good coverage at very low cost, to individuals and families up to 150% of the federal poverty line. The Senate bill would cut off Medicaid eligibility at 133% of the FPL.

Above these thresholds come a range of actuarial values, i.e., levels of subsidized coverage provided by insurance purchased through the exchange. These decrease as income brackets go higher. Put them together with the Medicaid cut-offs and you’ve got significant cost differences.

The Center on Budget and Policy Priorities has updated its comparative table. As it shows, the Senate bill would keep costs lower for individuals and families at higher income levels by shifting the costs to those who have less.

  • Individuals and families who would be covered by Medicaid under only the House bill would pay nearly two-thirds more under the Senate bill–$613 more for families and $362 more for individuals.
  • Those at 150% of the FPL would pay somewhat over a third more under the Senate bill–$462 more for families and $252 more for individuals.
  • The situation reverses at 300% of the FPL, with families paying $100 less and individuals $65 less under the Senate bill.
  • By 400% of the FPL, the point spread has increased to $1,611 less for families and $953 less for individuals.

Similarly, the House bill would provide cost-sharing assistance to families up to 350% of the FPL, while the Senate bill would cut it off at 200% of the FPL. At the same time, actuarial values are lower under the Senate bill at all levels except for 400% of the FPL.

This means that low-income households would have to pay larger deductibles and co-pays than under the House bill. And again, the differences would be greatest for those in the lowest income brackets.

CPBB estimates that a family of three at 175% of the FPL would be responsible for $3,867 in deductibles and co-pays if the Senate plan were in effect now. That would be more than 10% of its annual income. And it would already have paid $2,307–6.3% of its income–for the premium.

Yes, the family would have insurance. But would it be able to afford the health care services it needs. I rather doubt it. And there goes one of the bill’s two main objectives–“to provide affordable, quality health care for all Americans.”

And if the family can’t afford the out-of-pockets, its members are likely, as now, to wind up in emergency rooms–a very costly alternative to preventive and maintenance care. Or it may decide simply to pay the relatively modest penalty for not having health insurance. One way or the other, there goes the bill’s other main objective–“to reduce the growth of health care spending.”

Will the bill that comes out of the Senate come closer to these objectives? More likely getting those precious 60 votes will mean even more compromises at the expense of those who need health care reform most.

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Senate Finance Committee Health Care Bill Better and Worse

October 21, 2009

The Senate Finance Committee worked hard, if not collaboratively, on the health care bill introduced by its chairman, Senator Baucus. A whopping 564 amendments considered. What it’s come up with has something for everyone to dislike. And I’m no exception.

Set aside the hot button issues like the lack of a public option and prospective cutbacks in Medicare. The committee failed to resolve two major problems in the Baucus bill that would adversely affect low-income people. In fact, it made at least one of them worse.

One big problem is affordability. The Finance Committee bill made some improvements here. However, both premiums and out-of-pocket expenses for low and moderate income households would still be much higher than under either the main bill pending in the House of Representatives or the bill passed by the Senate Health, Education, Labor, and Pensions Committee.

The Center on Budget and Policy Priorities has again crunched the numbers. As its new brief shows, for people below 200% of the federal poverty line, premiums would be two to four times greater.

If the bill were effective now, deductibles and co-pays for families at 250% of the FPL could be as high as $5,800 a year. For a family of three, this would be on top of an initial $4,349 premium–9.5% of its total income. And, for reasons explained in my earlier posting, premiums would eat up an increasing percentage of income over time.

The Finance Committee apparently recognized that health care would still be hard for many people to afford. But rather than adopt a different cost-sharing scheme, it waived the penalty for not having insurance for households whose premium costs for the lowest-cost plan in the insurance exchange would exceed 8% of their income.

CBPP says the waiver would apply to people with incomes between about 220% and 400% of the FPL. Given the costs of the insurance, many might decide to remain uninsured. Others might opt for the expanded “young invincible plan,” which isn’t just for young people any more. Under this plan, coverage would kick in only after people have met a high deductible–$5,800 for individuals and $11,600 for families.

One way or the other, a lot of low to moderate income people would still not have insurance that enables them to get the health care they need. Those most likely to opt out would be the healthiest–those who feel they’re invincible. But of course they’re not. Major illnesses and injuries can happen to anyone. And if the healthiest opt out, the risk pool would include mostly people with higher health costs. Up go the premiums. Up go the number of people who can opt out.

Another big problem in the Baucus bill was the “free rider” provision, i.e., the requirement that employers who don’t offer health insurance with benefits up to a minimum standard pay a fixed amount only for employees who are eligible for subsidies and work at least 30 hours. The fee would also apply if the insurance they offered was unaffordable for these employees.

Needless to say, this provision give employers a strong incentive to hire only people who don’t qualify for subsidies. It could also prompt them to convert current full-time, low-wage employees to part-time. Hardest hit would be near-poor single parents with dependent children because fees for them will be highest.

The Finance Committee bill strengthens this perverse incentive in two ways. First, it denies employers the right to deduct the costs of the fees as a business expense, even though health insurance is deductible. Second, it changes the formula for calculating the fees in such as way as to make them more costly.

The Finance Committee was trying to reduce the impacts of health care reform on the federal budget. Impacts on low-income people seem to have been of less concern. It could have done a better job if it had adopted a standard pay-or-play option for employers and tapped revenue sources outside the health care system, as the Coalition on Human Needs has recommended.

Senate Majority Leader Harry Reid has the thankless task of reconciling the Finance Committee bill with the Senate HELP Committee bill–and with an eye toward getting the 60 votes needed to get his version passed. It’s bound to have something that everyone–not just the all-but-solid Republican opposition–dislikes.

But will so many Senators, organized interest groups and we grassroots Americans dislike so much of it so much that it fails?