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House Democratic Plan for Overhaul Would Require Individual, Employer Mandates

By John Reichard and Jane Norman, CQ HealthBeat

June 19, 2009 -- An 852-page "discussion draft" released Friday by the Democratic chairmen of three House committees would penalize individuals if they do not carry health insurance and employers if they do not offer it, while creating a new government-run insurance plan to compete with private health plans.

Americans going without coverage would have to pay a penalty equal to two percent of their adjusted gross income, while employers would have to pay a penalty equal to eight percent of their payroll expenses, according to the draft, released at a mid-day press briefing.

The plan would provide more generous subsidies to lower income Americans to buy coverage than are contemplated in the most recent version of a health overhaul plan under development by the Senate Finance Committee. Unlike the Senate proposals, the House draft maps out a clear public plan option and employer mandate, attempts to fix the physician pay rate in Medicare and makes changes in the Medicare Part D prescription drug law.

Doctors and hospitals could choose whether to participate in the new public plan, said House Energy and Commerce Committee Chairman Henry A. Waxman, D-Calif. But the bill says that providers who participate in both Medicare and the public plan would receive a 5 percent higher rate than Medicare for the first three years. If they don't participate in both, they would get just Medicare rates.

It also appears that in the House approach there would be just one "exchange," or marketplace for insurance plans, in contrast to Senate plans that would offer state-by-state localized exchanges.

Markup of the plan by the three committees is expected after the July 4 recess, the Democratic lawmakers said, with approval on the floor by the time the House recesses in August.

Under the House draft, families and individuals with annual incomes up to four times the poverty level would be provided subsidies to buy coverage through the new insurance exchange that eventually would be opened to all employers. "Affordability credits" to buy coverage would be phased out at an income level of $43,000 for individuals and $88,000 for a family of four. The aim is to provide the most generous credits to those who are just above new proposed Medicaid eligibility levels. The exchange would administer the affordability credits.

President Obama issued a statement praising release of the draft. "Today, the chairs of several committees in the House of Representatives unveiled their health care reform proposal," Obama said. "This proposal would improve the affordability, availability, and quality of health care and represents a major step toward our goal of fixing what is broken about health care while building on what works."

Individuals would have to purchase coverage under the plan but in return would be guaranteed a minimum level of benefits including mental health, dental, and vision care coverage. They would have the option of enrolling in the new government-run insurance plan that according to the Democratic authors of the plan would not have an unfair advantage over the private sector.
The public plan "will create a new choice in many areas of our country dominated by just one or two private insurers today," says a summary of the draft. The public plan "will be subject to the same market reforms and consumer protections as other private plans" offered in insurance exchanges, according to the draft.

Insurance companies would no longer be able to engage in discriminatory practices such as refusing to sell or renewing policies due to an individual's health status, and coverage of treatment could not be excluded due to pre-existing conditions. Lifetime and annual limits on benefits would be banned and the ability of insurance companies to charge higher rates due to health status, gender or other factors would be limited. Premiums could vary based only on age, geography and family size.

According to a Democratic aide, no Congressional Budget Office estimates would be released Friday of the cost of the plan, which is being closely watched because of sticker shock induced earlier in the week by estimates of Senate Democratic proposals. Democrats at the briefing did not explain how the overhaul will be paid for, but the fine print of the draft includes Medicare cuts. Democrats did not specify how many of the 47 million uninsured Americans would gain coverage in their plan.

Democrats at the briefing were mum about a whole slew of provisions in the text of the draft that have aroused great controversy in years past. For example, the draft would give the secretary of the department of Health and Human Services authority to negotiate prices of prescription drugs covered in the Medicare Part D prescription drug program. In addition, it would reduce to fee-for-service levels the payment rates paid to private health plans in the Medicare Advantage program. Health insurers have loudly protested those cuts in years past.

Also, within a year of enactment, insurance companies would have to meet a requirement that 85 percent of their premium revenue be spent on medical services.

Language in the draft also would cut Medicare payments in the home health, skilled nursing, long term care hospital, inpatient rehabilitation, psychiatric hospital, hospice, dialysis, and outpatient hospital sectors.

"We're going to take substantial steps to phase out the doughnut hole" and to phase out the controversial payment formula used to set Medicare payment rates to physicians, said Waxman. The "doughnut hole" is the gap in the Medicare drug benefit in which seniors must pay 100 percent of prescription costs. The Pharmaceutical Research and Manufacturers of America is negotiating with the White House over a plan to fill part of the gap, industry sources say.

The House Democratic plan would offer "affordability credits" for individuals and families with incomes between 133 percent of poverty, which is $29,327 for a family of four to 400 percent of poverty, which is $88,200 for a family of four. The amount of the credit is reduced as individual and family income increases.

Only those who seek coverage in the exchanges would receive the credits. In the fifth year after the exchange begins, childless adults eligible for Medicaid and who had health coverage for the previous six months would have the choice of enrolling in Medicaid or gaining access to coverage in the exchange with the assistance of affordability credits.

Individuals and families below 133 percent of poverty would be eligible for an expanded and improved Medicaid program, fully financed by the federal government in recognition of state budget problems, a summary says. Reimbursement rates for primary care providers would increase to improve participation in the Medicaid system.

All Americans would be required to hold insurance except in cases of hardship. Those who choose not to obtain insurance would be subject to a "modest penalty" based on two percent of adjusted gross income minus the "threshold amount," which is the total value of exemptions and standard deductions for the adults in the household. The total penalty is limited to the amount of the average national premium in the exchange. There is no penalty assessed on dependents who are not covered, on people living outside the United States, on non-resident aliens and on those with a religious conscience exemption.

Employers could choose between providing coverage for workers or contributing on their behalf. Employers that choose to contribute will pay a fee based on eight percent of their payroll. Those that refuse to do either would face a penalty of $100 a day per worker, beginning on the first day workers go without coverage.

Employers would contribute 72.5 percent of the cost of premiums for full-time employees' health plans and 65 percent for a family policy. For part-time employees, employers could contribute a share of the expense or contribute to the exchange for employees to seek coverage there.

An exemption would be put in place for certain small businesses and a new small business tax credit will be available for firms that want to provide health coverage but can't now afford it.

"Our discussion draft reflects months of hard work and the views of many of our colleagues," said Education and Labor Committee Chairman George Miller, D-Calif.

"The draft is a very practical one and it's a uniquely American proposal," Waxman said.

A new independent advisory board made up of practicing providers and other health care experts, headed up by the surgeon general, would recommend a new essential benefit package based on standards set in the law. It would serve as the basic benefit package for coverage in the exchange and over time would become the minimum quality standard for employer plans. The basic package would include preventive services with no cost-sharing, mental health services, dental and vision coverage for children and there would be a cap on the amount of money a person or family spends on covered services annually.

On prevention and wellness, community health centers would be expanded.

Increases would be made for the National Health Service Corps, and there would be more training of primary care doctors and scholarships and loans for individuals.

Major delivery system reform would be made in Medicare, including testing of concepts such as accountable care organizations and bundling of acute and post-acute provider payments. A centerpiece would be complete reform of the physician payment mechanism in Medicare, the Sustainable Growth Rate (SGR), with an update that wipes away accumulated deficits, and rewards primary care services. House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., said in an interview Friday afternoon that the SGR revision would be off budget, meaning pay-fors would not be required.

The bill funds the new comparative effectiveness research trust fund with a tax on health insurance plan. It uses transfers from various other health-care trust funds for the first three years then assesses a flat fee per covered person to generate enough money to produce $375 million in 2013.

Drew Armstrong, Richard Rubin and Alex Wayne contributed to this story.

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