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Cost, Coverage Estimates Rattle Health Industry Groups

By Drew Armstrong, CQ Staff

October 9, 2009 -- Some health care industry groups are becoming more vocal in their criticism of Congress' health care overhaul, and in the wake of a new cost and coverage estimate this week are saying that the terms of the deal have become unfair.

The industry has been asked to provide billions of dollars to the overhaul effort via fees on their companies, as well as accept new regulations—like one on insurers that would prohibit them from excluding people from coverage based on pre-existing conditions.

In return for those concessions, hospitals, insurers and drug makers expect to get millions of new customers — previously uninsured people who would get insurance either through government programs or who would buy coverage with new tax credits. That was enough, it seemed, to keep the health care industry's criticism muted.

But that's not necessarily the case any more. Wednesday's Congressional Budget Office (CBO) analysis of Finance Committee Chairman Max Baucus' proposal estimated that the draft would cover 94 percent of legal residents under age 65. While an improvement, that still leaves a substantial population of uninsured illegal immigrants and others without coverage.

"In terms of any definition of health reform, the coverage level is not sufficient," said Chip Kahn, president of the Federation of American Hospitals, which represents for-profit hospitals. Kahn said that the deal his group made with the Obama administration was to cover 97 percent of eligible Americans under age 65.

He also says that the 94 percent figure isn't representative of the actual picture of the uninsured, and that the real figure has to take into account people like uninsured illegal immigrants, who may not be eligible under the bill but still use doctors, hospitals and other health care services.

According to Wednesday's CBO estimate, in 2010, 81 percent of people in the United States will be covered—a percentage that includes illegal immigrants and others not eligible. And while the bill would eventually cover 94 percent of eligible, legal residents under 65, when illegal immigrants and other non eligibles are included—people who still use health care services—that figure drops to 91 percent. While a 91 percent coverage rate would cut the number of actual uninsured by more than half, it likely does not solve what industry groups saw as the problem in the first place—that the existence of a substantial number of non-paying uninsured patients drives costs up for the insured, costs health care providers money, and skews incentives around the entire system.

Insurance Industry
The insurance industry is also concerned.

Baucus' bill contains fees on health insurers totaling $45.3 billion over a decade. They would also not be allowed to prohibit people with pre-existing conditions from getting insurance, and would be strictly limited in how widely they are allowed to vary premiums based on things like age. In return, they were expecting to get millions of new customers through the expanded coverage the bill would provide.

Robert Zirkelbach, spokesman for America's Health Insurance Plans, doubts the coverage levels will be as high as CBO has estimated. And the result will be higher-than-expected premiums that will keep some uninsured people from buying coverage.

"The more people you leave out of the system, the more it drives up costs for everybody in" it, because hospitals, doctors and other providers pass on the costs of treating the uninsured to insurers, who pass it on to consumers, said Zirkelbach.

That problem already exists in the current health care market, of course, and covering some currently uninsured people will likely decrease it. But not to the extent that Zirkelbach says is necessary. "Unless you get everybody in the system, the market reforms don't work," said Zirkelbach. The insurance industry would like to see a mandate that would require people to buy coverage strengthened.

Baucus seemed unconcerned by the hospital industry's comments, and did not say that other industries had voiced similar issues to him. "All the groups, they're still on board," he said.

A lobbyist with ties to a physician lobby group said that he thought Kahn might be complaining about the bill publicly now in order to win other concessions. "They still got a very good deal," said the lobbyist. "The revenue increase they're looking at relative to their contribution is a big net win, even at 94 percent" coverage, said the lobbyist.

Other Senate Democrats admit they could do more to boost coverage levels in the bill, though they may have different reasons than the industry lobbies.

"No, it's not enough," said Sen. John D. Rockefeller IV, D-W.Va.

"It represents a dramatic improvement. Is there more way to go here? Yeah," said Sen. Kent Conrad, D-N.D.

Both lawmakers sit on the Finance Committee. Rockefeller, in particular, has been part of a bloc of Democrats aggressively pushing to lower the penalties on individuals who do not buy insurance under a mandate in the bill that would require it. Those same lawmakers have also pushed for greater subsidies to help people buy coverage.

The subsidies make insurance more available for people, but the lower penalties have the opposite effect that fewer people actually purchase insurance.

But other industries that have been part of the deal making downplayed any impact of the coverage numbers. "Ninety-four percent coverage is a huge step forward," said Ken Johnson, spokesman for the Pharmaceutical Research and Manufacturers of America. "We're still convinced that the Senate Finance Committee's bill is the best blueprint for comprehensive health care reform."

Johnson said that under the drug industry's projections, the health care overhaul bills being proposed by Congress will not have an enormous effect on their financial results. "Our best estimate of the net impact of health reform on industry revenues is modest, ranging from a potential upside of 1 percent to a loss of 2 percent."

The lobbyist with physician group ties said that doctors did not have the same level of concern that the hospital and insurer groups were expressing. "I think the coverage numbers are very important to them, but its balanced with other priorities," said the lobbyist. "It's not the only objective."

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