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You Call This a Better Idea?

Timothy Jost is a professor at Washington and Lee University School of Law. He posts regularly on the Politico health reform arena and on Georgetown University’s Legal Issues in Health Reform blog.

Although President Obama's primary health reform message in his State of the Union was "do not walk away from reform,” “finish the job” and “let’s get it done,” he also said, “But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know.” At this invitation, congressional Republicans rose to their feet with John Boehner waving his hand, as Newsweek reports, “appearing to almost expect being called upon.” 

So what are the Republican’s “better ideas”?

In November, 2009, the House Republicans submitted to Congress HR 4038, “The Common Sense Health Care Reform and Affordability Act.” It weighs in at 220 pages, less than one tenth the size of the current Senate bill. It is mostly a compendium of the same tired health reform proposals that Republicans have offered for years: association health plans, interstate insurance sales, limits on the ability of people injured by medical negligence to obtain justice, and more tax benefits for health savings accounts. It also repeals the federal comparative effectiveness council established by the stimulus bill, repeals the individual market guaranteed issue provision of HIPAA, undermines HIPAA’s group health plan health status discrimination prohibition by allowing reductions in premiums of up to 50% for participants in wellness programs, and adds yet one more prohibition against federal funding of abortion (which is already illegal). 

It does include a few newer ideas: support for state reinsurance programs, incentives to the states to reduce premiums in the individual and small group markets and to reduce the number of uninsured, internet “health plan finders” to help people find and compare insurance, and a handful of insurance reforms.

Let's take a closer look at these proposals, one by one:

Association health plans are plans offered by groups--such as business or professional associations and chambers of commerce--to their members or to the employees of their members. Association plans are already common in the United States, but the regulation of them varies from state to state. The Republican bill would subject them to federal regulation, largely preempting the existing state regulations. Consumer protection under the federal law, however, would be quite minimal, focusing primarily on financial solvency. 

Congress has rejected Republican association health plan proposals in the past. The main reason has been concerns that association plans could pick off the best health risks, making it more difficult for higher risk individuals and groups to find coverage. Another concern has been the lack of consumer protection and fraud prevention in association health plan proposals. (See here and here.)

The Republican bill would also permit an insurer licensed in one state to sell insurance across state lines, largely free from regulation in the states in which the insurance was sold. The idea is to increase competition among insurers and to free insurers from burdensome state regulations. Both the House and Senate health reform bills also permit interstate insurance sales. But those bills would give the states substantially greater power to protect its consumers--because there is a very real concern that the sale of insurance across state lines could lead to a race to the bottom in insurance regulation, with a significant increase in risk segmentation in insurance markets and in fraud.

High risk pools, another idea endorsed by the Republican bill, already exist in 34 states and provide needed help to many Americans excluded from insurance markets because of their health status. (See here.) Too often, though, they offer insurance with high deductibles and out-of-pocket costs. The Republican bill would allow them to charge premiums of up to 150 percent of a standard premium. This coverage would simply be unaffordable to many of the uninsured.

It is hard to argue against malpractice reform. Our current system leaves most victims of medical negligence uncompensated while it infuriates doctors and primarily benefits malpractice insurers and plaintiff and defense attorneys. There is ample evidence, however, that simply capping recovery of non-economic damages and attorneys fees at low levels, as the Republican bill would do, has the primary effect of making it difficult for victims of malpractice to get legal representation and nearly impossible for those who suffer no-neconomic loss (such as loss of reproductive capacity, disfigurement, the death of a child, or loss of functional capacity by a person who is not employed) to get any compensation. 

Although it is commonly believed that defensive medicine is a major contributor to medical costs, there is little empirical evidence the support this belief. The CBO estimates that reductions in the utilization of medical care due to the Republican tort reforms would reduce national health care expenditures by only three tenths of one percent. The CBO also acknowledged that the Republican reforms might result in worse patient outcomes. We need malpractice reform, but it must do more than simply turn victims away from the courthouse door.


So what is the verdict on HR 4038? Would the Republican reforms “bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses”? The CBO scored the Republican bill in a letter dated November 4, 2009, which addresses these questions.

The CBO found that the bill would result in 3 million Americans gaining health insurance by 2019, leaving 52 million Americans uninsured, 17 percent of the population excluding unauthorized immigrants. By contrast, the Senate bill would reduce the number of uninsured by 31 million, leaving only 6 percent uninsured. The Republican bill neither expands Medicaid nor offers help to lower- or middle-income Americans who cannot afford health insurance, and thus fails to cover the uninsured.  It also does less to reduce the deficit than either the House or Senate bill. The Republican bill would, according to the CBO, reduce the deficit by $68 billion over the 2010 to 2019 period.  The Senate bill would reduce the federal deficit by $132 billion.

The CBO projected that the Republican bill would, by 2016, decrease premiums in the small group market by 7 to 10 percent and by 5 to 8 percent in the individual market. But these reductions would largely be the result of a decay in health benefits--the plans would have lower "actuarial value," which means fewer benefits and higher cost-sharing. And the mix of the insured would change, too: The market might become more accessible to people with lower medical risks, but only because it was becoming less accessible for people with higher medical risks.

By contrast, the CBO examination of the Senate bill determined that it would actually raise actuarial values in the individual market--that is, it would lead to policies that offer more protection rather than less. And while that would ultimately increase the sticker cost of insurance, subsidies would more than offset the effect for the majority of people, effectively reducing what they pay in premiums.

Notwithstanding the GOP's boasts, the Republican bill would do nothing to strengthen Medicare--because it doesn't touch the program. Nor would it "stop insurance company abuses." If anything, it would have the opposite effect, by freeing insurers from state regulation.

Having read the bill, all one can say is, John Boehner, put that hand down. 

One last comment. It is also worth examining the Republican bill to understand how little bipartisan agreement there is in fact on which to build a scaled down reform bill, an idea some have floated in recent days. I can find six areas where the Republican bill meets the House and Senate bills. First, HR 4038 would eliminate lifetime and annual limits on insurance coverage.  The bill would prohibit “unjust cancellation of insurance coverage”--a practice known as "rescission." It would allow parents to continue coverage for their dependents to age the end of the year in which they turn 25 (the Senate bill would continue coverage to 26). 

The Republican bill contains provisions on health information technology and administrative simplification, although not as extensive as what the Senate bill has. The Republican bill includes some provisions for addressing health care fraud. And, finally, it provides for the licensing of biosimilars, as do the House and Senate bills.

That's not a lot of common ground--too little, surely, to build meaningful bipartisan reform. The Democrats have the votes to get it done, and must do it.