Senate health care plan to create winners, losers

[September 14, 2009]  WASHINGTON (AP) -- Hospitals and drug makers like what they see in the early version of a health care plan that may evolve into the one that ends up on President Barack Obama's desk.

But insurers and doctors say they aren't happy. Neither are advocates for low-income workers and some business groups representing employers.

Senate Finance Committee Chairman Max Baucus, D-Mont., has promised a formal proposal within days and plans to convene a bill-drafting session the week of Sept. 21. The Baucus plan is important for two reasons: It's the only proposal that's been worked out in close consultation with Republicans, and it also seems to be headed in the general direction Obama wants to take.

"It's the logical starting point for negotiations," said Dan Mendelson, president of Avalere Health, an information company serving industry and government clients. An 18-page summary of an early version of the Baucus plan circulated last week.

His proposal is widely seen as making major concessions to industry. There's no government insurance plan to compete with private carriers, and no requirement on employers to provide coverage -- as legislation drafted by House Democrats would provide.

In another significant break with House Democrats, Baucus wouldn't raise taxes on upper-income earners to pay for health care. That should please tax-averse Republicans. Instead, he uses a series of "fees" on medical industries to help pay for his plan.

"There are no deal killers in here," said Robert Laszewski, a health care industry consultant.

But it looks like there's still going to be plenty to argue about in the fine print. Here's a sampling of initial concerns already being raised by groups and some lawmakers:

Consumers

The Baucus plan would require individuals and families to get health insurance from an employer, a government plan or by buying it on their own. Because coverage is so expensive, it would provide tax credits for millions of middle-class people, mainly those who have to purchase their own plans. Ignoring the requirement would result in a stiff fine.

But Sen. Jay Rockefeller, D-W.Va., says the way eligibility for the tax credits is being computed might result in a meager benefit that leaves many consumers with insurance sticker-shock.

The credits would be based on the percent of family income that's eaten up by health insurance premiums. But Rockefeller points out that premiums are only one part of health care costs. People with insurance also face an annual deductible and co-payments every time they go to the doctor or pharmacy. That can add up for someone in poor health.

Rockefeller says the tax credits should be based on an individual's total medical costs, including premiums and out-of-pocket expenses.

"Affordable health care is about more than your monthly insurance premium," said Rockefeller. "It's also about whether you can afford the co-payment for your prescription drug or 20 percent of the cost of a test or scan that you need. Health reform must reflect that reality."

Employers

Employers won't get off free under the Baucus plan, says Kathryn Bakich, a senior vice president with the Segal Group, a benefits consulting firm.

Although there's no requirement to offer insurance, an employer will be charged a $400 fee if their workers receive a tax credit from the government to purchase coverage. But here's the catch, Bakich said: Even if just one employee gets help, the fee would be multiplied by the total number of employees at the firm.

"This is a very hard provision to understand," said Bakich. Advocates for the poor say it could discourage some companies from hiring low-income workers.

There may also be a problem for big companies that provide generous benefits.

Large companies typically don't buy coverage, but "self insure" by setting aside enough to cover employee medical costs. Then they hire an insurance company to administer their plan.

Under the Baucus plan, high-cost insurance worth more than $8,000 for an individual and $21,000 for a family would pay a 35 percent tax on any amount over those thresholds. The tax would be levied on a big company's insurance administrator and presumably passed through to the company itself.

"People do seem startled at the tax," said Bakich. "Thirty-five percent is not a minor thing."

R. Bruce Josten, a lobbyist for the U.S. Chamber of Commerce, complained the Baucus plan will drive up the cost of coverage. "He'll tax anything and everything that moves in health care," Josten said.

Insurers

Some critics say the Baucus plan amounts to a government bailout of the health insurance industry.

Not only would the government subsidize tens of millions of new customers, but insurers wouldn't have to worry about competing with a new public plan that could draw consumers away with the promise of lower-cost, nonprofit health care.

Yet Robert Zirkelbach, spokesman for America's Health Insurance Plans, isn't smiling. In addition to the tax on high-cost plans, Baucus has proposed cuts in a lucrative arrangement insurers have under Medicare and a $6-billion annual "fee" on the industry, allocated according to each company's market share.

Dreams of fat profits from a health care overhaul may vanish.

"What we do see is the insurance industry being forced to shoulder a significant share of the cuts in health care reform," said Zirkelbach, who represents the main health insurance trade group.

How interest groups respond to the Baucus plan will require a combination of hard calculation and political finesse.

Hospitals and drug makers are satisfied that Baucus has upheld the deals they struck with him to make contributions to the health care overhaul. Doctors are upset Baucus has not given them as much relief from scheduled Medicare fee cuts as have Democrats in the House.

Consumers and low-income people will have help from liberals like Rockefeller, who argue that the interests of average folks have not been adequately taken into account.

But health industry groups and other business interests will have to contend with the perception that Baucus has already cut them a good deal. Asking for more could come off as being greedy.

"We are still only in the second act of this play," said Alexander Vachon, a Washington health policy consultant. "Industry still has time to step up if they feel it's not workable."

Starting this week, they'll all be running their spread sheets.

[Associated Press; By RICARDO ALONSO-ZALDIVAR and ALAN FRAM]

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