Thoughts on Burr, Coburn, Hatch Health Reform Plan

Republican Senators Richard Burr, Tom Coburn and Orrin Hatch released “The Patient Choice, Affordability, Responsibility, and Empowerment Act” today. I am going to call it PCARE. A few quick thoughts/highlights:

  • It acknowledges gravity, while making changes. While PCARE talks of repeal of the ACA, it locks in a good deal of the structure of the ACA, and addresses changes from that new status quo. For example, no lifetime limits (sec 201) is retained from the ACA, as is keeping people up to 26 on their parents health insurance, while the current 3-to-1 age banding premium regulation is replaced with 5-to-1 (now a 64 year old could not be charged more than 3 times what a 20 something could be charged;now they could be charged 5 times as much). Winner 20-somethings, loser 60-somethings. Eventually they say they plan to allow States to set these rules with a looser federal touch, meaning a state could decide to stick with the 3-to-1 premium banding by age, for example. I want to hear more about guaranteed renewability and related insurance market regulations as the 2nd full paragraph of page 2 is a bit slippery. For example, it contains this quote: “Insurance companies would also be banned from making unfair coverage terminations of health coverage.” (emphasis mine). What might “fair” ones be?
  • Continuous coverage provisions could provide lots of incentive for people to sign up. Section 202 seeks (I think) to replace the ban on pre-existing conditions as a forever standard with an “everyone has a chance to come in once” and then continuous coverage provides you with protection once you do so. This is more along some of the earlier individual mandate logic of responsibility.
  • Subsidies to buy private insurance (or health care directly) are pared back to 300% of poverty level. Down from the 400% of poverty max in the ACA, and the credit could be used to pay directly for health care under PCARE. They have dropped the Patients’ Choice Act flat tax credit for singles and families and gone to an age banded structure, with the table below being for those at 200% of poverty.

ScreenHunter_02 Jan. 27 14.31

Duke’s employer sponsored plan costs about $1,450 per month, so the tax credit for my age ($6,600) is less than half of that. At my income there would be no subsidy (as with the ACA), but the no subsidy level now will be around $35,000 for singles, and $65,000 for families. These credits will finance catastrophic levels of coverage compared to what most now have, but of course advocating catastrophic coverage with people paying more is a policy approach. Lets see if they own up to what this will purchase. I would love to see a comparison of OOP and premiums of what these subsidies will finance as compared to the ACA. However, this could mute some of the incentive to move out of employer sponsored coverage to exchanges that tax treatment of ESI changes proposed will kick off (see below). [update: a data driven comparison really is needed; Larry Levitt via twitter was pointing out many details will have to be clarified to allow this].

  • Transition to capped Medicaid amounts given to States. The Medicaid section (301, p. 5-6) covers lots of complicated territory and many more details are needed. However, I am going to grant the benefit of the doubt and say lets talk more about this. The parts of what they write that I like include acknowledging the distinct “sub programs” within Medicaid and the fact that they are not the same and do not have the same needs. The part I like the least is that for the dual eligibles and the disabled, the acute care financing stays the same, while providing a capped amount for the long term care costs of such persons to be given to the States, with the States retaining the responsibility for the remainder of the long term care. This locks in the two-payers problem with these sickest people in the nation, while shifting LTC burden to states. I am willing to listen here, but would rather Medicare federalize the acute care side of the duals if they want to shift LTC responsibility to states (there is lots of policy in that last sentence, I will clarify later).
  • Medical Malpractice reform. This is not a great place for federal intervention, and that has always been a problem for Republicans. However, their writing about it puts back in play a piece that has always been one of the political stepping stones to a health reform deal (I wrote this in 2009). The latest issue of Health Affairs has lots on Medical Malpractice, an issue that went nearly completely away for several years, which was a sign Republicans didn’t want a deal. It coming back means some of them want one. I included Medical Malpractice and patient safety (two sides of the same coin) in my white paper on N.C. Health Reform that I put out two weeks ago. Most of the action here will be state level.
  • Title VIII of PCA is dead. This makes me sad.What a strange chapter of health reform was the appearance of unelected boards in a Republican bill one month before the first version of HR3200 was passed out of the Commerce committee, and then unelected boards became such a rallying cry for Republican opposition to the ACA. It was also hilarious how none of the sponsors would own up to it being their idea, but I digress.
  • Cap the tax exclusion of ESI at 65% of an average plan’s costs and grow at CPI+1%. Sign me up; let’s replace the caddy tax in the ACA with this. I’ve written about this over and over. Keep in mind that this will be quite dislocating for employer sponsored health insurance. That is where I want to go down the road, but 3-5 Million people with cancelled indy policies just about ground health reform to a halt in November/December with an assist from a screwed up website. 165 Million people have employer sponsored health insurance, most of them have no idea that get tax free income from it, but all of them will be sure that they deserve it, once they find out they are going to lose some of it.
  • Sponsors/Politics. Interestingly, Bur and Coburn lost Paul Ryan and Devin Nunes in the House as co-sponsors (these 4 co-sponsored the Patients’ Choice Act). Burr and Coburn introduced the Seniors Choice Act in 2012, and those Medicare-specific reforms are not contained in today’s-released PCARE. Do they still support Seniors Choice Act? Senator Hatch last year introduced his own bill with a mix of things (his Medicaid ideas seem to have come through most clearly in PCARE). My political analysis goes two ways on this. First, if members of the House co-sponsor then people like me say mark up the bill and get a CBO score since they control the House, and they don’t want to do that (and Dems aren’t going to mark this in the Senate). It is a definite advantage to have a plan that is not subjected to such scrutiny. At the same time, when there is a deal someday, it seems almost certain to pop out of the Senate, just like the fiscal cliff deal did. Not sure when that will be, but this is a step towards that day, and I welcome it.

cross posted on freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

6 thoughts on “Thoughts on Burr, Coburn, Hatch Health Reform Plan”

  1. There seems to be guaranteed issue for those with continuous coverage (I might ask what happens to those who for some reason don’t sign up. Tough luck?) but there doesn’t seem to be community rating or minimum benefits for those who take advantage of this. In practice this means that people with pre-exising health conditions will not only be be paying for higher deductible plans (especially with that close to non-existant credit) but exorbitant premiums as well. Am I wrong here? How does this not simply stiff the poor and sick? If you are going to do catty you have to have some wrap around for those with certain chronic conditions like france. Also what about kids on Medicaid? Right now they are subject to minimal cost sharing, here they get no care if their parents don’t wanna go through the deductible. A lot of this strikes me as not ok.

  2. I personally am beggining to come around to many of the principles of Consumer Directed Healthcare but I still feel that regardless of you’re health status you should be able to get the same care for the same price. Yes this will lead to some rationing. How to combine all these instincts I don’t know.

  3. Without subsidies for the non-group plans, and with a drastic cutback in tax preferences for group plans, it Looks at first glance as if catastrophic-care policies are pretty much what would be left. Given that we know having “skin in the game” leads people to avoid getting necessary-but-nonemergency care, what effect would this kind of setup have on morbidity and mortality?

    I’m also wondering what effect it would have on the economy — clobbering employer-provided healthcare would shrink the size of the health sector substantially. (And yes, I’m assuming that employers will mostly just place the burden of paying the non-tax-preferred portion of policy costs on employees without increasing their compensation substantially, much less offering the “gross-up” that they do when upper managers are adversely affected by tax law.)

  4. Arrrg. Comment eaten. Again. This keeps happening.

    Short version: do not like the change to pre-existing conditions, suspicious of block-granting Medicaid, ok in theory with limiting tax deduction for employer-provided healthcare but the way this all fits together translates to: as against the ACA, the poor take it on the chin, the middle class pays more and the rich pay less. Shocker.

    Also key: write it up properly and send it to the CBO. Years of experience tell me that it is highly likely there is a hefty dose of magic pixie dust in there somewhere. When subjected to serious analysis, GOP plans almost never add up.

  5. WE HAVE THE BEST GOVERNMENT THAT THE 1% CAN BUY!!!!

    LETS CONTINUE TO REDUCE UNEMPLOYMENT BENEFITS AT THE FEDERAL AND STATE LEVEL..
    CHANGE ELIGIBLITY REQUITEMENTS SO THEY HAVE TO WORK 20 HOURS PER WEEK
    AND PASS DRUG TESTS TO QUALIFY!

    SINCE WE CAN NOT REPEAL OBAMACARE LETS REPLACE IT WITH THE REPUBLICAN PLAN=

    LET THE INSURANCE COMPANIES BE ABLE TO CANCEL AND INCREASE PREMIUMS IF YOU MISS A PAYMENT!

    ELIMINATE OBAMACARE CORPORATE TAXES ON INSURANCE AND REPLACE WITH TAX ON EMPLOYEES WHO GET EMPLOYER BASED POLICIES!

    INCREASE INSURANCE PREMIUM FOR OLDER FOLKS TO 5 TIMES WHAT A 25 YEAR OLD WOULD PAY!

    ELIMINATE CORPORATE TAXES AND REPLACE WITH A FLAT TAX!

    I CAN NOT WAIT UNTIL THE NEXT ELECTION IN 2014!!!!!!!!

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