“HHS cannot both make the plans extremely generous, and also make them affordable so that they cover millions more Americans. Those goals contradict one another.”
- Jonathan Gruber, an MIT economist who helped design health care reform in Massachusetts, and a strong supporter of the original Obama bill.
Fortune’s Shawn Tully examines the provision of the ACA that could have the biggest impact on costs for small employers and taxpayers: the essential benefits package. As Tully writes, if the categories and benefits are too specific and too broad it would drive up costs for small employers who have to “buy up” and purchase more coverage for their employees and drive up costs for taxpayers because the cost of subsidies will increase to cover the cost of the mandated benefits in the exchanges.
Here are some highlights from Tully’s piece:
- “Its true costs, and the number of people it insures, depend on decisions still to be made — and none is more important than deciding what goes into the Essential Health Benefits packages.”
- “The medical industry is currently lobbying en force to get expensive treatments not required in the original bill covered under the packages that HHS is empowered to establish.”
- “If HHS gets the requirement wrong by stuffing those plans with such expensive mandates, it will bust future federal budgets and give small business owners a powerful incentive to cancel coverage. It will also push young people to go uninsured when they’re healthy, then buy policies when they’re sick — the reverse of the Obama administration’s goal of getting as many workers as possible paying into a giant insurance pool.”
- “The broad design could still prove a good idea, if insurers could fill in the details themselves by offering a wide variety of plans ranging from ones that cover virtually every ailment to leaner, less costly options that leave out, say, smoking cessation or obesity treatments.”
- “Unfortunately, the PPAC didn’t require that the categories remain general, and that specific offerings be left to the marketplace. Instead, the legislation took a middle position. It gave full authority to a single official, the Secretary of HHS, to determine the composition of the essential packages, including how specifically to define what the packages must include. Indeed, that opening is a magnet for the medical lobbyists, and makes the bill’s eventual cost extremely uncertain.”
- “…the more of them that pack the plan, the more expensive and potentially unaffordable it becomes. That presents a potentially big problem for both of the markets the bill is designed to address: small businesses and individuals who buy policies on their own.”
- “The danger is that HHS will force employers to offer packages far richer than the ones they provide today. ‘If that happens, the economic logic could lead employers to drop coverage. Their employees would then buy subsidized policies in the exchanges,’ says Dr. Robert Graboyes, an economist with the National Federation of Independent Business.”
- “A rich essential package could also defeat the reform plan’s objectives for individuals, a market where some 40 million Americans lack insurance…Adding even more requirements would further lift the cost for the very folks the administration wants to bring under its health care umbrella.”
- “A costly package would also radically rewrite the administration’s budget projections. It’s crucial to understand that the PPACA caps what Americans at different salary levels must pay for coverage at a fixed dollar amount annually. A family of four making around $67,000, for example, pays $6365 a year, whether the premium is $12,000 or $20,000. The entire difference between an extremely rich, generous plan and a lean one, just what HHS must determine, is paid by the federal government in the form of higher taxes or bigger deficits. In effect, the government is taking all the risk if the plans explode the forecasts. According Gruber of MIT, a 10% increase in the cost of the Essential Health Benefits Package — as evaluated by the Congressional Budget Office from the original bill — would increase federal spending by $67 billion through 2019 and reduce the number of Americans with insurance by 1.5 million. A 20% increase would wipe out the $132 billion deficit reduction the administration, and the CBO, now forecast.”
- “One fascinating twist is that the states already require some 2000 mandates, from hair transplants to fertility treatments. The PPACA stipulates that if the mandate isn’t included in the new federal law, the state must pay for the extra benefit. So the providers know that if they can’t get their pet benefits into the national bill, the states may drop them rather than shoulder the extra expenses. That threat is putting intense heat on medical groups to enshrine their therapies in the essential package. If they succeed, they’ll be even better off. They’ll accomplish at the federal level what’s impossible to do on a state-by-state basis — to get their counseling, injections and procedures covered from coast-to-coast. That’s why this debate isn’t an exercise for wonks, but the contest that will chart the future of health care in America.”
For the full story, click here.