February 24, 2010

White House Reform Proposal Overview

President Obama released on Monday, February 22, a summary of his $950 billion health reform proposal. The 11 page overview outlines a plan primarily based on the Senate-passed health reform bill (H.R. 3590) along with certain targeted provisions that incorporate some House passed bill (H.R. 3692) policies. The White House has described the proposal as an effort to "bridge the gap" between the House and Senate bills and has noted that it will be used as the "opening bid" for the February 25 White House health care summit discussions.

The following notes some of the key changes to the Senate bill:

Medicaid Expansion: Eliminates the Senate provision targeting full funding for Nebraska’s Medicaid expansion and extends 100 percent assistance to all states from 2014 to 2017, 95% assistance from 2018-2019, and 90 percent assistance from 2020 forward. Like the Senate bill, the Medicaid eligibility threshold is set at 133 percent for the federal poverty level (FPL). Normally, the federal government reimburses 50 percent of Medicaid expenditures in Illinois, although that amount was temporarily increased by the 2009 stimulus program.

Excise Tax on High-Cost Health Plans: Delays a proposed 40 percent excise tax on high-cost insurance plans to help finance an overhaul until 2018 and raises the threshold for the most expensive plans from $8,500 to $10,200 for an individual plan and from $23,000 to $27,500 for a family plan.

Payroll Tax: Raises the Medicare payroll tax 0.9 percent on earnings (designated to the Hospital Insurance Trust Fund) and imposes a new 2.9 percent assessment on unearned income such as interest, dividends and rents (designated to the Supplemental Medical Insurance Trust Fund) for individuals with incomes over $200,000 and couples making more than $250,000.

Medical Device Tax: Converts the Senate bill’s medical device fee of $20 billion over 10 years to an excise tax to take effect in 2013.

Tax Credits and Cost-Sharing: Reduces premiums for families earning less than 200 percent of FPL and those earning between 300 and 400 percent of FPL, and improves cost-sharing assistance for families earning below 300 percent of FPL.

Premium Increases: Creates a "Health Insurance Rate Authority" charged with working with the states to conduct "rate reviews" to determine if insurance premium increases are reasonable and justified. The Authority would provide federal oversight of insurance market behaviors and help the states determine how rate review will be enforced.

Individual Mandate: Like the Senate bill, requires individuals who elect to remain uninsured to make either a flat dollar payment or pay a percentage of their income, whichever is higher. However, the President’s proposal would lower the flat dollar amount from $495 to $325 in 2015 and from $750 to $695 in 2016 and set the index in subsequent years to $695 rather than $750. The percent of income would be raised from 0.5 to 1.0 percent in 2014, from 1.0 to 2.0 percent in 2015, and from 2.0 to 2.5 percent in 2016 and beyond.

Employer Mandate: Does not require businesses to provide employee coverage but does require companies with more than 50 employees that do not provide coverage to pay a $2,000 fee per employee. In addition, the President’s plan would allow business to subtract out the first 30 employees from the calculation.

Fee on Health Insurance Providers: Includes an assessment of $67 billion over 10 years beginning in 2014.

Other Insurance Requirements: Requires "grandfathered" health plans to cover dependents up to age 26; prohibits plans from rescinding coverage; and revises the appeals process. Beginning in 2014, prohibits annual and lifetime limits; bans exclusions for pre-existing conditions. Beginning in 2018, requires "grandfathered" plans to cover proven preventive services at no cost.

Fraud and Abuse: Also contained in the President’s proposal are a number of provisions related to fraud and abuse, including, among others: Creation of a Medicare and Medicaid sanctions database under the office of the HHS Inspector General to provide a central location for law enforcement to access information on sanctions on health care providers, suppliers and related entities; Allowing quality control, peer review organizations and private plans that provide services reimbursed by federal health plans greater access to the Healthcare Integrity and Protection Data Bank, and includes penalties for misuse; Increasing accountability for Medicare Administrative Contractors to ensure that they deny payment to individuals or entities excluded from federal health programs; Creation of a real-time system for analyzing claims and payment data for public programs; Sanctions for individuals who knowingly and with intent to defraud "purchase, sell or distribute" Medicare beneficiary identification numbers or Medicare or Medicaid billing privilege; and Requiring a report to Congress on the costs and benefits of using universal product numbers (UPNs) for select items and services under Medicare.

Medicare Prescription Drug "Donut Hole": gradually closes the so-called "donut hole" in Medicare’s prescription drug benefit by phasing down coinsurance to 25 percent by 2020.

Brand-Name Pharmaceutical Assessment: Increases the fee on brand name pharmaceuticals by $10 billion to a total of $33 billion over 10 years and delays implementation until 2011.

Community Health Centers: Invests $11 billion over five years versus $8.5 billion in the Senate bill and $12 billion in the House bill.

While the White House has indicated, as noted, that it will use this modified Senate-based proposal as a starting point for the health care summit, Republican leaders have consistently stated that they want to begin the discussions from scratch. IHA will follow the upcoming health summit and keep members appraised as additional information becomes available.