Healthy Americans Act could be the place of compromise for health reform in 2008

Health care reform will be hard to do after the November election. I’ve even called it a long-shot.

Wyden_smilePolls clearly show the voters split evenly between the Democratic and Republican approach to health care reform. I can’t tell you who will win the presidency, but I am willing to make the bold statement that it will be a close election and neither very different approach to health care reform will enjoy any kind of mandate.

So finding common ground between these very different approaches will be more than tricky.

But we may already have an outline.

Sen. Ron Wyden (D-OR) and Sen. Robert Bennett (R-UT) have crafted a health care reform plan that gives both sides the most important things each are looking for.

For the Republicans, it gives them a plan that moves away from the third-party, employer-based payment system to one of individual responsibility. For the Democrats, it provides a plan that assures everyone will have access to coverage and provides the financing to get about everyone covered in the short-term.

But here’s the big one: Last week the Congressional Budget Office and the Joint Committee on Taxation said the Wyden-Bennett plan could be operational by 2012 and would be budget neutral by 2014! In health care terms, parting the Red Sea would be an easier accomplishment. (Download the CBO director’s letter to the Senators here.)

The key to the individual-based program’s financing is an employer contribution. Employers would be required to pay a tax based on a sliding scale of 3 percent to 26 percent, which is tied to their size and revenue per employee. Employers who now contribute would be required to convert their contributions to higher wages during the first two years and pay the sliding scale tax later.

Under the Wyden-Bennett plan, people with an income of less than 400 percent of poverty would be eligible for subsidies; everyone would have access to guaranteed and community rated coverage; and the feds would oversee a system of private individual-based insurance and collect the base-line premiums through the tax system.

In exchange for all of this consumer support, the Wyden-Bennett plan would also require individuals to have health insurance (an individual mandate), which must be purchased from a state-run purchasing pool that would require health policies to have substantial benefits (rich benefit mandates) and offer a choice of private policies. There would be a flat personal tax deduction ($12,000 for a couple) for consumer insurance payments, and low-income subsidies would be tied to the least expensive policy available.

While employers could offer plans created especially for them by the state purchasing pools, it is hard to see why they would other than to comply with existing labor contracts that required benefits outside the standard state pool offerings.

Those people in SCHIP and Medicaid would be converted to this private system. The private insurance sector would clearly have a lot more business, as they pick up the uninsured and those in these public programs.

Just as there is something for everyone to like, there is also something for everyone to dislike.

Conservatives still see too many benefit mandates, too little financial incentive for people to be better health care consumers, and too much federal regulatory control over how the private insurance market would work. (See the Heritage Foundation’s critical view of the Wyden-Bennett plan.)

Liberals, particularly the unions, will be concerned about moving away from the employer-based system. Liberals will also be concerned about continuing to base the system on private insurance — particularly the higher-cost individual form and ceding SCHIP and Medicaid to private insurance companies.

Employers will be hard hit to pay for it. Those who provide health benefits today will have to convert their existing health support to wages and pay another tax on top of that.

I would also label the proposal "cost containment lite." It clearly emphasizes access over cost control.

It will also be easier to pass this bill because it doesn’t directly take on any of the powerful health care special interests, such as insurers, drug companies, doctors, hospitals, or lawyers. However, the biggest losers would include insurance agents (out of business for health care), Medicaid and SCHIP program bureaucracies, and insurance company employees who do billing and eligibility work.

In exchange for all of the new business, insurers would be subject to a lot more regulation including minimum loss ratios and a complex bid process that could only narrow premium margins. This would likely be a business model less kind to Wall Street.

But for a country split right down the middle on health reform, watch this as a place to come together and begin a health care reform process.

Here’s the full The Wyden-Bennett "Healthy Americans Act"

See also: Matthew Holt’s post on the Wyden-Bennett plan when it was first announced in December, 2006.

8 replies »

  1. I am very intrigued by this legislation especially in the fact that the CBO believes it will be budget neutral. It will be interesting to see how this legislation is adopted by the next administration as there is no way something like this will pass prior to the election in November.

  2. I agree with most of what Robert says.
    I would add that one can play around with financial scheme to make the shift to individual insurance less of a burden to employers. In fact, it wouldn’t be too hard to make the impact neutral or better for all those who currently offer decent coverage, and you can do various things to lessen the impact for those who do not offer insurance. But these would come with a price and would add to the Federal deficit.
    I also agree with Robert and Peter that the interest in controlling costs is going to lose out in the short run. You can’t take on two massive reforms at the same time (universal coverage and getting costs in line with peer nations) because the allies you need to get universal coverage are mildly to wildly hostile to reducing total costs in the system. It’s their revenue, after all.
    That said, I am still not optimistic this bill will pass in anything like its present form. Moving from an employer-based to an individual-only system is a huge shift and I see no evidence employers and unions are ready to support it by and large. I think some will support it weakly, but many will oppose strongly. Those that oppose it will be companies at both ends of the spectrum: those that do not currently offer coverage or offer poor coverage and will have new costs, and those that offer excellent coverage that is used as a selling point by the company or union in attracting and retaining employees.
    A better route might be to set up the connector/insurance exchange system and allow companies to opt in (meaning employees now purchase insurance directly through the connector) or the companies can continue to offer insurance as they have in the past. If the connector is well-designed, all but the largest companies will gravitate towards the connector. It will have lower admin costs for the health plans and for the companies (no brokers to pay, etc.) and it will give employees a greater choice of insurance options than small companies can provide on their own.
    Even on this model, there is one group that will probably fight it as a matter of life or death: insurance agents and brokers. I’d guess 75% or more of those jobs would disappear within a few years. But if that is the only industry group that adamantly opposes universal health care, reformers are in good shape.

  3. Question? Will the W-B plan come up during the Health Affairs breifing on health reform and the 2008 election at the Willard in DC on Tuesday the 13th? Will the meeting be televised or podcast? I’m looking forward to the CBO’s and Brookings institute’s take on the plans and the candidates responses. The questions asked may be more impotant than the answers qiven. Example. There are roughly 50 million people,(approximately the population of England), in the US without health insurance and they carry an unknown disease burden. What makes you believe that your plan can provide quality health care for the cost estimates provided in your plan given the fact that no where in the industialized world nor for any insured population presently in America can care be provided for this number of people at your cost estimates? What historical evidence in America concerning healthcare and its financing can you point to as a bases for such a claim?

  4. “have crafted a health care reform plan that gives both sides the most important things each are looking for.”
    Side 1: Affordable health coverage.
    Side 2: Keep the cash coming.
    Not going to happen without disappointing one side. I pick the affordable health coverage side as being the one to be disappointed.