The Republican Leadership Health Plan: For The Healthy, While They’re Healthy

Boehner singsThe Republican leadership in the House has sent a health care bill to the Congressional Budget Office and the early details don’t look good:

– Insurers could circumvent state-based consumer protections by selling policies across state lines

– Health care costs could be reduced by less than 1/2 of one percentage point through malpractice reform

– Businesses with younger and healthy employees could band together and join association health care plans, while firms with older workforces wouldn’t have access to affordable coverage

– Individuals with chronic illnesses or pre-existing conditions could join very expensive and inefficient high risk pools

The Republican plan doesn’t “end insurance industry practices that discriminate against high-risk individuals or provide tax credits to help the uninsured purchase coverage.” It is designed for the healthy while they’re healthy.

Rather than driving down costs by expanding access, Republicans are hoping to expand access by driving down costs. “Our substitute aims at driving down costs,” House Minority Leader John Boehner (R-OH) told reporters Monday. “If you drive down costs, you can expand access.” But press reports suggest that this proposal doesn’t include any of the things we know can reduce costs over time — creating incentives for better coordination of care (accountable care organizations, medical homes, reducing unnecessary readmissions, etc), investments in prevention and comparative effectiveness research, other system modernizations.

The Republican legislation even undermines the existing consensus surrounding cost control. In May, a group of doctors, hospitals, drug makers and insurance companies came together to present President Obama with a letter promising to reduce the growth rate in annual health spending by 1.5 percentage points a year over the next 10 years — lowering spending overall health care spending by $2 trillion (this represents a 20 percent reduction in projected growth) — in the context of comprehensive health care reform. The hospitals promised to contribute “some $155 billion in Medicare and Medicaid savings over the 10 years” if more patients enter the hospital system as a result of health care reform. The insurance industry has said they would adopt cost containment strategies and accept anyone who applies for coverage if everyone entered the risk people. But the Republican plan doesn’t invest in comprehensive reform that opens up the system to more people and begins to control skyrocketing health care costs. It only marginally lowers the costs of insurance for the healthy — while they’re healthy:

Allowing insurers to sell policies across state lines: Allowing insurers to sell policies across state lines would allow companies to avoid state consumer-protection laws and solvency requirements. Insurance companies “would have little incentive to continue doing business” under certain state rules which “require that companies issue coverage to all new customers and not set higher rates for people who are already sick.” Companies will charter in states with scarce regulations, and will no longer have to provide mental health parity, cancer screenings, or abide by regulations that “limit the rates that can be charged to higher-cost consumers and that limit who can be excluded for a health plan.

Giving states incentives to establish high-risk insurance pools: Nationwide, high-risk pools cover fewer than 200,000 people. Often, enrollees face high premiums and are denied benefits for treatments related to their preexisting conditions— the very thing the plan will help. Because these pools will be full of only sick people, covering all high-risk Americans through these pools is likely to be prohibitively expensive. According to the Tax Policy Center, using high-risk pools “to prevent large losses in insurance coverage among the sick and needy could …[cost] on the order of $1 trillion over ten years given projected health care pay-costs.”

Allowing businesses to band together and purchase coverage: In theory, Association Health Plans (AHP) are intended to implement a laudable goal: allow small employers to pool their risk nationally so they can get the same economies of scale and negotiating power as large employers. But in reality, Association health care arrangements would allow businesses with healthier employees to pool risk, while excluding firms with sicker employees.

Lowering health care costs with malpractice reform: While medical malpractice reform is an important issue, malpractice costs represent only 0.46 percent of total health care expenditures. Republicans attempt to group the larger problem of practicing too much defensive medicine with liability reform, but as Kate Steadman explains, “the research that has been conducted indicates, for the most part, that defensive medicine has little effect overall and that states with tort reform only have slightly lower rates of spending than those without.” For instance, after Texas passed its landmark tort reform legislation in September 2003, the state continued to grapple with the highest uninsured rate in the nation. As the Houston Chronicle points out, “malpractice issues are a small scab on Texas’ ailing health care system. The cancer is the number of uninsured. Increasing the number of doctors and specialties only does so much good when many Texans can’t afford to make an appointment.”