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Hill Panels Slog Ahead on Health Care Despite Bailout Blues

By Rebecca Adams and John Reichard, CQ Staff

September 23, 2008 --Two congressional panels kept their focus Tuesday on overhauling the health care system despite the massive revenue drain likely to result from an expected congressional bailout of the nation's stricken financial system.

At least one key health lawmaker in the House was in denial about the impact on plans to widen coverage of the uninsured, but reality seemed to be settling in at the Senate Finance Committee, which held a wide-ranging hearing into problems with the nation's health insurance system.

The challenges of moving a comprehensive health care overhaul bill through Congress have become even greater with the troubled economy and the proposed $700 billion government bailout of Wall Street firms, committee members said Tuesday.

On the House side, the Ways and Means Health Subcommittee conducted its own inquiry into the ills of the insurance system, notably policies sold to individuals or individual families. But Chairman Pete Stark, D-Calif., cheerfully acknowledged after the hearing that he was in denial about the bailout's impact on his plans for the scope and timing of a health overhaul.

"I'm going to pretend that never happened," a smiling Stark said of the sudden likelihood that lawmakers will commit to several hundred billion dollars in new spending this year.

Moving Step by Step
Congress may not have the huge amount of time and money that would be needed to move a major health care bill and may instead turn to a series of incremental legislative steps to improve the nation's health care system, Finance Committee members said.

Sen. John D. Rockefeller, IV, D-W.Va., said even though the presidential candidates have not retreated from proposals to pass a major overhaul of the nation's health care system next year, "there's no way that's going to happen, financially or otherwise," in 2009.

Rockefeller then asked witnesses at the hearing, which was aimed at proposals to cover the uninsured, whether lawmakers would slow down momentum behind major health care legislation if they took a step-by-step approach, starting with a reauthorization of the State Children's Health Insurance Program (SCHIP), a state and federal grant program for low-income children, which expires in March.

Rockefeller said moving bills that chip away at the uninsured problem would actually build momentum for a larger overhaul by showing the public that Congress can take proactive steps that have a positive impact.

Other senators also expressed doubts about whether Congress could pass a major health care overhaul that would aim to tackle the problems of the 47 million people who don't have insurance, reduce costs, encourage the use of health information technology, boost payments for physicians, and deal with other health care issues in one fell swoop.

Sen. Ken Salazar, D-Colo., lamented that the Finance Committee might spend a great deal of time exploring the issues of the health care system "yet this ominous cloud" of a $700 billion bailout "may end up creating huge challenges for us as we try to deal with health care reform."

The comments came at a hearing featuring an academic, insurers, and an insurance regulator who discussed the best ways to update the health care system.

Challenges Abound
Finance Chairman Max Baucus, D-Mont., started the day with a grim checklist of challenges facing the panel other than health care, but nevertheless insisted it would be his top legislative priority next year. Speaking at a forum sponsored by U.S. News and World Report, Baucus said health care is a "deep concern" but "right now I hear more about gasoline prices. Iraq is a bit of an issue." The bailout "is a big issue." Tackling global warming is another costly problem that must be confronted by the committee.

But the health care problem is much worse than people think, with the United States paying much more for health care than other nations. "If this current trend continues we're going to be in a very, very deep hole," he said.

"That's the deck of cards we've been dealt—we're going to have to play [them] as best we can."

Baucus nonetheless pronounced himself an optimist and predicted a "renaissance" next year drawing on American ingenuity and creativity and "a can-do spirit—we kind of like to solve problems," he said.

Baucus said he will release a "white paper" by the end of the year listing principles he will embody in health legislation next year he plans to introduce next year. The legislation will include the goal of attaining universal coverage, a major effort to improve preventive care, and a cost control plan, he said.

Asked afterward what impact the Wall Street bailout would have on his legislative timetable for attaining universal coverage, Baucus said. "We're going to have to look and see. I don't know. It's a good question to ask today."

He joined other lawmakers in saying that a step-by-step approach may be necessary. Massachusetts' landmark law to provide near-universal coverage is being ushered in incrementally, he said.

The bailout "makes everything more challenging," said Senate Budget Chairman Kent Conrad, D-N.D. He agreed that one likely approach could be for Congress to pass a health care overhaul in a piecemeal way, starting with SCHIP reauthorization next year and increases for Medicare payments for physicians.

Witnesses at the Finance hearing discussed how health care overhaul is working on a state level in Massachusetts, but as Sen. Ron Wyden, D-Ore., noted, all of the major tools for dramatically revising health coverage in America are federal programs and mechanisms, including taxes, programs like Medicare, and the Employee Retirement Income Security Act.

Oklahoma Insurance Commissioner Kim Holland said business owners in her state are keenly aware of the costs that hospitals and providers pass on to people with insurance in order to pay for care for the uninsured. That amounts to a "hidden tax" in the system, she said, which may be one factor that could drive momentum for a larger overhaul in the future.

As Rockefeller asked witnesses about a more incremental approach, some said that method allows participants in the health system time to adjust to changes. Massachusetts Blue Cross Blue Shield executive vice president Andrew Dreyfus noted that one reason why revamping health care was easier to establish in Massachusetts than in some other states is because the state had undertaken a series of legislative changes over the years.

Pam MacEwan, executive vice president of an integrated health coverage and delivery system, Group Health Cooperative in Seattle, said that incremental changes involve "sometimes the more courageous" approach.

Health and Taxes
Testimony and remarks by lawmakers at the Ways and Means Health Subcommittee hearing suggested one of the key battles in the overhaul debate next year will be equalizing tax breaks to pay coverage costs. Panel Republicans showed strong interest in giving people who buy insurance on their own the same breaks received by those with job-based coverage.

"By equalizing the tax treatment, we can give millions of Americans in the individual market the ability to purchase quality health insurance," said Dave Camp of Michigan, the panel's top Republican.

"The tax subsidy for employer-sponsored insurance is seriously flawed," testified University of Minnesota professor Roger Feldman. "It distorts the choices of where people work; it encourages them to purchase insurance policies that are too generous, thereby subsidizing the purchase of too much medical care; and it is grossly unfair" because it subsidizes high earners more and because people who buy on their own go without subsidies. He said ending the tax subsidy for employer-sponsored coverage would get at the root of rising costs by having people pay more out of their own pockets for health care.

But Mila Kofman, Maine's insurance superintendent, warned against sending people to buy coverage on their own with new tax breaks in an individual market that has not been overhauled. "In most states, it is inaccessible, unaffordable, and inadequate," she declared.

With few exceptions, states do not guarantee that customers will be issued policies in the individual market, she said. "Insurers are allowed to deny coverage to people with past, present, or perceived future medical needs," she said. "In fact, people with relatively minor needs, like hay fever, have had insurance applications rejected."

Insurers "do not voluntarily make copies of policies available before a person enrolls. Imagine buying a car and being told you can't see the car, you can only look at the brochure of the car," said Kofman. Insurers also can drop benefits at any time and severely restrict what they pay even for covered services. In Maine, 72 percent of policies sold in the individual market in 2006 had deductibles of $5,000 or higher, she said.

In many instances people can't obtain coverage, she said. And "high-risk pools" for the uninsurable cover few people nationwide, have funding problems, unaffordable premiums, waiting lists, and inadequate benefits, she said.

Separately, the National Women's Law Center released a report Tuesday detailing problems women have finding coverage in the individual market. Women often face higher premiums than men, the study said, adding that the vast majority of policies examined by the center did not cover maternity care.

Bruce Bodaken, CEO of Blue Shield of California, acknowledged the flaws of individual policies but said insurers can't stay in business without "medically underwriting"—excluding coverage of certain conditions. The only way to fix the individual and small group market is to require everyone to have coverage and provide them financial help to do so. That approach would ensure that lower-cost enrollees are mixed in the same risk pools as higher cost enrollees.

Feldman said state requirements that applicants can't be denied individual coverage or have their coverage canceled should go hand in hand with new tax breaks to help people buy coverage on their own. And Camp acknowledged that "in order to make this work, we must study the shortcomings of the private health insurance market."

Commonwealth Fund President Karen Davis called for "setting national rules for the operation of individual health insurance markets" or creating an national insurance exchange making policies available to those without access to employer coverage.

Whether all the analysis and advice will come to anything anytime soon is unclear, however. One thing is certain though—talk of an overhaul won't fade away, even if its prospects may be dimming. Democratic presidential candidate Barack Obama said in a press conference Tuesday that even with a Wall Street bailout, the nation's health care system is still going to need adjusting. "We're going to have to make sure we deal with these issues," he said. There are priorities "we have to move on in order to strengthen the underlying economy."

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