Congress returns after Labor Day to debate health insurance reform

By DON McINTOSH, Associate Editor

For the first time in decades, Congress is looking at serious health insurance reform. The goal is to restrain costs and get more people insured.

In the U.S. House of Representatives, the vehicle is America’s Affordable Health Choices Act (HR 3200). Introduced July 14, the 1,017-page bill was sent to three House committees that have jurisdiction over different pieces. Each made amendments and recommended passage. House leaders must reconcile the versions, and then the bill can have a vote on the House floor. And in the U.S. Senate, the Health, Education, Labor and Pensions (HELP) Committee passed a bill with a similar name — the Affordable Health Choices Act. Details vary, but the House and Senate bills have the same key elements:

• Health insurance companies could no longer deny coverage to the sick, or refuse to renew their coverage, or charge them higher rates. They could no longer impose annual or lifetime claim limits. Policyholders would have the right to have claims paid in a timely manner, and they’d have a better process to appeal denied claims.
• All health insurance sold to individuals or small businesses would have to be sold through a regulated “exchange.” The idea is to lower administrative and marketing costs by standardizing the product, and to make it easier for consumers to compare health insurance offerings. Insurance sold through the exchange would have to meet minimum standards such as inclusion of mental health coverage, no co-pays for preventive care, and $5,000-per-year limits on out-of-pocket expenses.
• The exchange would include a “public health insurance option,” to give the private insurance companies a run for their money. It would be financed by premiums just like the private health insurance offerings but would be run by the government as a non-profit.
• A sliding scale subsidy would make insurance more affordable to individuals buying in the exchange. To help pay for the subsidies, the bill taxes the rich. Taxpayers with an adjusted gross income of over $350,000 a year would pay a 1 percent income tax surcharge, rising to 5.4 percent on income over $1 million.
• Medium and large employers would be required to either provide health insurance for employees — or pay a tax.
• Individuals would be required to purchase insurance if they're not otherwise insured — or face a tax penalty. In cases where buying insurance would still be a hardship, individuals could apply to be exempt from the requirement.

The bills also contain a series of changes to Medicare, including more generous drug benefits and an end to subsidies for the privatized “Medicare Advantage” option. The bills expand Medicaid eligibility for low-income individuals and families — anyone earning less than 133 percent of the poverty level would qualify. And the bills set up a system of government support for employer-sponsored early retiree health coverage; that’s a big deal for many union-negotiated health plans, because the government would be paying most of the costs of their most expensive cases.

The Affordable Health Choices Act bills are supported by the AFL-CIO, America’s largest labor federation, and by the major unions of the Change to Win labor federation.

AFL-CIO health care policy was spelled out in a 2006 meeting of the federation’s Executive Council, a policy-making body composed of the heads of the biggest unions. Universal health care should be labor’s goal, the AFL-CIO declared — “high quality, affordable health care coverage for all Americans.” And based on experience around the world, “a social insurance system is the most effective, efficient way to achieve universal coverage,” the Executive Council resolved. 

Medicare is an example of a social insurance system — a government health insurance program for seniors and the disabled that is supported by taxes and premiums. A separate bill in Congress, HR 676, would extend Medicare to all Americans, achieving universal health care with the greatest efficiency at one fell swoop. It would also just about put the private health-insurance industry out of business, relegating it to margins like vision and dental coverage. Democratic leaders of Congress made it clear to labor leaders that they have no more stomach for that than they did in 1940s, when a bill for universal public health insurance backed by President Harry Truman failed repeatedly to win approval in even a single congressional committee.

So AFL-CIO policy is to support a compromise: “Unless and until we have a national social insurance health care system,” the federation declares, “public policies should build upon that which works in our current system … employer-based coverage for working families and fully-financed public programs for the poor and elderly.”

America’s Fragmented Health Care System

In America’s fragmented system, nearly everyone over 65 gets government health insurance. Of the rest, 62 percent are covered by an employment-based health plan; 18 percent depend on publicly subsidized health plans; 7 percent buy coverage individually, and 17 percent are uninsured. The Congressional Budget Office estimates that the Affordable Health Choices Act would reduce the number of uninsured by about 37 million over the next 10 years, leaving about 17 million residents uninsured (nearly half of those would be unauthorized immigrants).

But what is to the AFL-CIO a compromise proposal is, to others, a frightening “government takeover” of health care. Problem is, what many critics have been fighting is a caricature of the actual bills, fed by misinformation. For example, a provision giving Medicare enrollees the right to consult a doctor about end-of-life plans was rendered as “Obama’s death panel,” by former Republican vice presidential candidate Sarah Palin.

To call the current proposals a government takeover is to ignore the tremendous extent to which the federal government is already involved in health care — funding research, protecting drug company patent monopolies, subsidizing medical education, regulating drug safety, and providing health coverage to more than 100 million Americans.

• 38 million seniors and 7.4 million disabled Americans get the government-run health insurance known as Medicare.
• 53 million low-income and disabled Americans are covered by Medicaid at any given time (children and pregnant mothers, recipients of Aid to Families with Dependent Children and Supplemental Security Income, and seniors in nursing homes who have used up their savings.)
• 8 million Americans are enrolled in the health care system run by the Department of Veterans Affairs; they get their health care directly from government-employed doctors in government-owned hospitals.

So government is involved in health care, just not in a way that ensures comprehensive coverage or that gives consumers adequate protection from insurance company practices. Health spending is expected to account for 17.6 percent of the U.S. economy in 2009. Yet according to the most recent data, 45 million Americans are uninsured. Above all, that’s because health insurance is unaffordable. Premiums for employer-sponsored family health insurance averaged $12,680 in 2008, and have more than doubled since 1999.

This works out well for insurance companies. Health Care for America Now — an advocacy group supported by the AFL-CIO and unions of the Change to Win labor federation — reports that profits at 10 of the country’s largest publicly traded health insurance companies rose 428 percent from 2000 to 2007. In 2008, profits at the five biggest health insurance companies totalled $10.8 billion, and revenues totaled $222 billion.

Jim Sinclair, president of the British Columbia Labor Federation, said he has been following closely the U.S. debate over the public insurance option. And what bothers him more than anything is the endless repetition of market dogma.

“Market ideology says you can distribute health care the same way you distribute cars and wine,” Sinclair said. “The theory is that privately-provided health insurance is going to be more competitive, more efficient, and serve people better. But the fact is, it fails. A public system is better on all counts.”

Sinclair points out that Canada went through the same kind of hysterical reaction when public health insurance was first introduced in Saskatchewan in 1962. Insurance companies launched a full-scale public relations assault, and doctors went on a 23-day strike during which patients died. Within a decade, public health insurance had been adopted all across Canada. It has become something no Canadian would part with, just as Medicare is regarded as politically untouchable in the United States.

Gerry Shea, government affairs assistant to AFL-CIO President John Sweeney, told the Labor Press the success of the reform will depend on the details of the final bill. Shea said the AFL-CIO can support the idea of an individual mandate, in the context of shared responsibility. The logic of the individual mandate is straightforward: If people don’t pay into the system when they’re healthy, the system won’t have the resources to pay for them when they’re sick.

“We’ve always supported the idea that everybody participates, just like in Social Security or Medicare,” Shea said.

But it won’t work to require individuals to purchase coverage, and for government to subsidize the coverage, if premiums keep rising as they have.

Getting a lid on costs is crucial if the reform is to succeed, Shea said. That’s why a vigorous public insurance option is the linchpin of the reform. The public plan has to get a better deal from doctors and hospitals in order to force the private insurance competitors to lower their rates.

The House versions specify that the public option pay the same rates as Medicare, or 5 percent more. But hospitals complained that the current mixed system only pencils out for them because private insurance pays at a higher level than Medicare. That’s why the Senate version of the bill mandates that the public option negotiate reimbursement rates that are higher than Medicare but lower than the average private insurance rates. Shea called that an acceptable compromise.

But insurance companies have been working to oppose the public option. And they’ve found a sympathetic audience among members of the Senate Finance Committee, which is also considering proposals for health insurance reform. Members of the committee reportedly favor state-level non-profit cooperatives as a substitute for the proposed public insurance option. Seattle- based Group Health is held up as an example of such a co-op.

In a July 13 letter to U.S. Sen. Maria Cantwell (D-Wash.), Washington State labor Council President Rick Bender wrote that there are things that are laudable about Group Health, which covers 500,000 Washingtonians, but it’s taken 60 years to develop.

“Creating a patchwork of state or regional cooperatives where none exist just seems like an extremely costly and very bad idea,” Bender wrote. “What you end up with, if you could even create it, would be a series of fragmented risk pools and duplicative administrative structures around the country.”

Led by the Sheet Metal Workers, a group of unions has paid for local radio ads criticizing four Democratic senators on the Finance Committee who haven’t said they will support the public option.

If the Senate Finance Committee approach holds sway and the public option is eliminated, the AFL-CIO would not support the bill. Neither would 60 members of the House Progressive Caucus, who signed a statement saying they would not vote for health insurance reform without the public option. Without the public insurance option, there would be too little restraint on what insurance companies charge, Shea said.

Opponents of the public option have been hoping to kill it using the Senate’s undemocratic filibuster rule, which requires that 60 senators vote to cut off debate on a bill before it can be voted on. That means a minority of 41 senators can kill a bill by voting not to cut off debate.

“Everybody is saying you’ve got to kowtow to the Senate, but the House leadership is certainly saying something different,” Shea said.

One option under consideration is a way to get around the filibuster. Senate leaders could allow passage of a weaker bill, and then favor the House version in the process of reconciling the two. In the Senate vote on the final version, only 51 votes would be needed. That’s how the Bush tax cuts were passed.

Democratic House and Senate leaders have said they are committed to passing something by the end of the year.