• Senate Finance Committee approves health reform bill
• Senate Finance, White House dispute findings of health industry report on reform
• CBO projects reduced deficit from enactment of Finance committee's health reform proposals
• Millions of HIT and CHIP funds released

• Medicaid enrollment grew by an average of 5.4% in 2009
• Massachusetts health care reform has expanded employer coverage, improved quality

• Health care cost increase remains steady at 6.0%
• Costs of health reform failure would be felt in every state, Urban Institute says

Senate Finance Committee approves health reform bill

The Senate Finance Committee (SFC) on October 13 approved the "America's Healthy Future Act" by a vote of 14 to 9. All Democrats and one Republican – Olympia Snowe (Maine) approved the legislation. The Congressional Budget Office estimated that the SFC bill would make an $829 billion investment in the health care system over ten years and during that time would reduce the deficit by $81 billion. When the legislation is in full effect, after 2013, an estimated 94 percent of the population will have insurance coverage through an employer-sponsored program, the individual insurance market, or through a public program such as Medicare or Medicaid.

The legislation includes insurance market reforms, including the establishment of state-based insurance exchanges to provide more coverage options to individuals. Individuals, in most cases, would be required either to purchase health insurance, or, starting in 2014, pay an annual penalty. There are exemptions from this penalty based in income. A health care insurance affordability tax credit would be available for individuals and families with incomes up to 400 percent of the federal poverty level. While there is no employer mandate to offer insurance coverage, starting in 2013 employers with more than 50 employees who do not offer health insurance would have to pay a penalty based on the number of employees who are eligible for the health insurance affordability tax credit.

There are also provisions to encourage collaboration among health care providers; to reduce costs and increase quality; to expand primary care availability; as well as Medicare and Medicaid reforms.

Next step: creating a unified bill combining the Senate Finance bill and legislation approved this summer by the Senate Health, Employment, Labor, and Pensions (HELP) Committee. The work to create one bill to bring to the Senate floor for a vote is being headed up by Senate majority leader Harry Reid (Nev.), Finance Committee chairman Max Baucus (Mont.), and Sen. Christopher Dodd (Conn.), who directed the HELP Committee's work in passing its version of health reform.

Speaker of the House Nancy Pelosi (Cal.) also is working with leaders of the House Ways and Means, Energy and Commerce, and Education and Labor committees to craft a health reform bill based on the proposals of the three committees, that can be presented to the full House.

Current versions of the five health reform proposals are available here:

• Senate Finance Committee, http://finance.senate.gov/sitepages/legislation.htm;
• Senate HELP Committee, http://help.senate.gov/;
• House Ways and Means Committee, http://waysandmeans.house.gov/;
• House Education and Labor Committee, http://feeds.feedburner.com/edlabordems/markups;
• House Energy and Commerce Committee, http://energycommerce.house.gov/.

CCH Chicago Bureau, Oct. 13, 2009.

Senate Finance, White House dispute findings of health industry report on reform

The Senate Finance Committee and the White House on October 13 disputed findings of a study conducted by PricewaterhouseCoopers for the America's Health Insurance Plans (AHIP) which concluded that the health care reform plan being considered by the Senate would lead to much higher insurance premiums for individuals and families.

The report looked at four provisions of the Senate Finance Committee legislation: (1) insurance market reforms and consumer protections; (2) an excise tax on employer-sponsored high value health plans (or "Cadillac plans"); (3) cuts in payment rates in public programs; and (4) new taxes on health sector entities. The report concluded that these changes would lead to higher premiums and taxes or greater cost shifting from public to private insurance plans.

Both the White House and the Senate Finance Committee noted that the AHIP study looked too narrowly at the Senate Finance proposal – focusing on the aspects of the bill concerning stricter insurance market reforms and taxes, and not taking into account subsidies and other reforms that analysis has shown would increase coverage and potentially reduce individual health care spending. CCH Chicago Bureau, Oct. 13, 2009.

CBO projects reduced deficit from enactment of Finance committee's health reform proposal

In the wake of the Congressional Budget Office's (CBO) October 7 preliminary estimate of the cost of the Senate Finance Committee's America's Healthy Future Act), committee chairman Sen. Max Baucus (Mont.) said, "Our balanced approach to health reform has paid off yet again with the news today that the Act remains fully paid for, begins to reduce the federal deficit within ten years, and makes significant reductions in federal debt over the next several decades."

According to the CBO and the Joint Committee on Taxation (JCT), enacting the bill would result in a net reduction in the federal budget deficits of $81 billion over the 2010-19 period. The report also estimates that federal budget deficits in the ensuing decade would be reduced "in a broad range between one-quarter percent and one-half percent of GDP [gross domestic product]."

Over the first ten-year period, the government would spend a gross total of $829 billion in credits and subsidies provided through health insurance exchanges, increased net outlays for Medicaid and the Children's Health Insurance Program (CHIP), and tax credits for small employers. Those costs would be partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources.

The remainder, a projected net cost of $518 billion over ten years for the proposed expansions in insurance coverage, would be more than offset by the combination of other spending changes that the CBO estimates would save $404 billion over the ten years and other provisions that the JCT and CBO estimate would increase federal revenues by $196 billion over the same period.

The CBO noted that the estimates "are all subject to substantial uncertainty."

Insurance Coverage, Employer Effects. The $518 billion in spending for insurance expansion reflects federal outlays, subsidies, and receipts or savings. The costs include $345 billion in additional federal outlays for Medicaid and CHIP; $461billion in federal subsidies that would be provided to purchase coverage through the new insurance exchanges and related spending; and a tax credit for small employers who offer health insurance, which is estimated to reduce revenues by $23 billion over ten years.

Those costs would be partly offset by receipts or savings, totaling $311 billion over the ten-year budget window, from four sources:

• net revenues from the excise tax on high-premium insurance plans, totaling $201 billion;
• penalty payments by uninsured individuals, which would amount to $4 billion;
• penalty payments by employers whose workers received subsidies via the exchanges, which would total $23 billion; and
• other budgetary effects, mostly on tax revenues, associated with the expansion of federally subsidized insurance, which would reduce deficits by $83 billion.

By 2019, the CBO and JCT estimate that the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83% currently to about 94%. Approximately 23 million people would purchase their own coverage through the new insurance exchanges, and there would be about 14 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people either purchasing individual coverage outside the exchanges or obtaining coverage through employers would decline by several million.

According to the CBO, "The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments. As a result, CBO estimates that of the $6 billion in federal funds that would be made available, about $3 billion would be spent over the 2010–2019 period."

For more information, visit http://www.cbo.gov/.

Millions of HIT and CHIP funds released

HHS on Sept. 29 released $27.8 million to 27 health center networks and multi-site health centers to implement specific electronic health records (EHR) and health information technology (HIT) programs. The grants are part of funds provided under the American Recovery and Reinvestment Act of 2009 (ARRA) (PubLNo 111-5).

Related to HIT, David Blumenthal, HHS' national coordinator for HIT, announced on Oct. 1 that CMS will issue a proposed rule by December 31, 2009, defining "meaningful use" in the context of the adoption of HIT. As part of ARRA's Health Information Technology for Economic and Clinical Health (HITECH) Act, physicians and hospitals can receive financial incentive payments for the adoption and meaningful use of health information technology.

Blumenthal noted that "the concept of meaningful use is simple and inspiring, but we recognize that it becomes significantly more complex at a policy and regulatory level. As a result, we expect that any formal definition of `meaningful use' must include specific activities health care providers need to undertake to qualify for incentives from the federal government. He noted that HHS also will be defining "certified electronic health records," the adoption of which is another requirement to quality for HIT incentives.

HHS also provided $40 million in grants to 69 grantees in 41 states and the District of Columbia to help them find and enroll children who are uninsured but eligible for either Medicaid or the Children's Health Insurance Program (CHIP). The funds were authorized under the Children's Health Insurance Program Reauthorization Act of 2009 (PubLNo 111-3)). Twenty percent of the finds released will target Hispanic children; 11 percent will focus on homeless children and 7 percent on Native American/Alaska Native children.

HHS also awarded $7.6 million to 63 grantees to help states recruit new health care clinicians and alleviate their debt burden. The funds were provided under ARRA.

Finally, HHS also released $120 million provided for under ARRA for prevention and wellness programs funded by states. The funds will be used for programs focusing on statewide policy and environmental change, tobacco cessation, and initiatives to create health-promoting policies and environments. CCH Chicago Bureau, Oct. 6, 2009.

Medicaid enrollment grew by an average of 5.4% in 2009

According to a recently released report from the Kaiser Commission on Medicaid and the Uninsured, states estimated that Medicaid enrollment grew by an average of 5.4% in 2009, the highest rate in six years. For 2010, states estimate that enrollment will grow by 6.6% above 2009 levels. Similarly, total Medicaid spending growth averaged 7.9% in 2009, the highest rate in five years. For 2010, states estimate that Medicaid spending will grow by an average of 6.3%. The report, The Crunch Continues: An Update on Medicaid Spending, Coverage, and Policy in the Midst of a Recession is available at http://www.kff.org/medicaid/7985.cfm.

Massachusetts health care reform has expanded employer coverage, improved quality

Contrary to previous concerns, under Massachusetts' 2006 health care reform law, employers have not dropped coverage or reduced benefits, according to the results of a study published in the October 1 online issue of Health Affairs. Instead, as of the fall of 2008, the rate of coverage through employers had risen and the scope and quality of coverage also improved, even among small employers (those with 50 or fewer workers), the researchers from the Urban Institute noted. However, workers' premiums and out-of-pocket costs have become an issue for workers at small firms, although this does not seem to have negatively affected participants' access to needed medical care.

Among the Massachusetts health care reform requirements for employers were those to establish an IRC Sec. 125 cafeteria plan to allow employees to pay health insurance premiums on a pretax basis, and a requirement that employers with more than ten employees must make "fair and reasonable" contributions toward workers' health insurance or pay a $295 assessment per full-time equivalent worker per year.

The state also merged the individual and small group health insurance markets and established "minimal creditable" standards for health insurance to meet the individual coverage mandate. The minimal creditable standards require a comprehensive benefit package, including mental health and substance abuse services and prescription drugs; a maximum on annual deductibles; and a maximum on out-of-pocket spending, among other provisions.

In the fall of 2008, the share of workers with Sec. 125 medical flexible spending accounts rose by 9.1% to 28.5% for all workers, and by 8.4% to 20.5% for workers at small employers.

"A recent national study, which used simulation methods to examine trends in the comprehensiveness of coverage and out-of-pocket spending, found declines in the former and increases in the latter (including premium costs) for U.S. adults with employer coverage between 2004 and 2007," the researchers pointed out. In Massachusetts, coverage is comprehensive, as required by the reform law, and premiums and out-of-pocket costs rose mostly for participants in small group plans.

The higher costs are a reflection of increasing health care costs overall, the expansion of covered benefits, and higher premiums for small employers due to the merger of the individual and small group insurance markets, the researchers explained.

The article, "Massachusetts Health Reform: Employer Coverage From Employees' Perspective," is available free of charge from http://www.healthaffairs.org.

Health care cost increase remains steady at 6.0%

Health care costs increased 6.0% in 2009, consistent with 2008, according to recent research from Hewitt Associates. The Hewitt Value Initiative, a cost analysis data base including 325 employers, also projects a 6.0% increase for employers through the end of 2010. This translates into an average total health care premium per employee of $8,607 in 2009, which will increase to $9,120 in 2010.

Of the health care premium, Hewitt found that employees will be expected to contribute $2,085 in 2010, or 23% of the total health care premium. The survey noted that this is up 10% from 2009, when employees contributed $1,890 per year. In addition to premium costs, average employee out-of-pocket expenses, such as copayments, coinsurance, and deductibles, are expected to increase to $1,938 in 2010. These increasing costs for employees are likely to continue: the survey found that 65% of employers are asking workers to bear a greater burden of health care costs in the next year.

According to the survey, in 2009, average cost increases were 7.4% for HMOs, 5.4% for point-of-service (POS) plans, and 5.2% for preferred provider organizations. Hewitt projects that from 2009 to 2010, the average cost per person will increase from $8,264 to $8,677 for PPOs; $8,869 to $9,579 for HMOs; and $9,320 to $9,786 for POS plans.

For more information, visit http://www.hewitt.com.

Costs of health reform failure would be felt in every state: Urban Institute

Failure to enact federal health reform would place a tremendous economic strain on individuals and businesses in all 50 states and the District of Columbia, according to a new study by the Urban Institute. Over the next decade, in every state, the percentage of the population that is uninsured would increase; employer-sponsored coverage would continue to erode; spending on public programs would balloon; and individual and family out-of-pocket costs could increase by more than 35 percent.

Using the Urban Institute's Health Insurance Policy Simulation Model, the researchers examined the effects on health coverage and costs for three alternative scenarios:

(1) Worst case: slow growth in incomes and continuing high growth rates for health care costs;

(2) Intermediate case: somewhat faster growth in incomes, but a lower growth rate for health care costs; and

(3) Best case: full employment, faster income growth and even slower growth in health care costs.

Under any scenario, the analysis shows that the cost of failure would be substantial and felt in every state. While all income levels would be affected, middle-class working families would be hardest hit. In 29 states, the number of people without insurance would increase by more than 30 percent. Under this worst-case scenario, the number of uninsured could grow by at least 10 percent in every state. All told, the number of uninsured Americans would reach 65.7 million.

Businesses would see their premiums continue to increase --more than doubling in 27 states.

Even in the best case scenario, 46 states would see employer premium costs increase by more than 60 percent.

Every state would see a smaller share of its population with employer-sponsored insurance.

Half of the states would see the number of people with employer-sponsored coverage fall by more than 10 percent.

Every state would see its Medicaid/CHIP spending rise by more than 75 percent by 2019. Half

the states would face cost increases of more than 100 percent.

The amount of uncompensated care in the health system would more than double in 45 states.

Even in the best case, uncompensated care would increase by more than 50 percent in 48 states.

To read the full report, see http://www.urban.org/UploadedPDF/411965_failure_to_enact.pdf.

Source: Urban Institute; http://www.urban.org.

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