If you read
the fine print in the Congressional plans, you'll find that a lot of cherished
aspects of the current system would disappear.
NEW YORK (Fortune)
-- In promoting his health-care agenda, President Obama has repeatedly reassured
Americans that they can keep their existing health plans -- and that the benefits
and access they prize will be enhanced through reform.
A close reading
of the two main bills, one backed by Democrats in the House and the other
issued by Sen. Edward Kennedy's Health committee, contradict the President's
assurances. To be sure, it isn't easy to comb through their 2,000 pages of
tortured legal language. But page by page, the bills reveal a web of restrictions,
fines, and mandates that would radically change your health-care coverage.
If you prize
choosing your own cardiologist or urologist under your company's Preferred
Provider Organization plan (PPO), if your employer rewards your non-smoking,
healthy lifestyle with reduced premiums, if you love the bargain Health Savings
Account (HSA) that insures you just for the essentials, or if you simply take
comfort in the freedom to spend your own money for a policy that covers the
newest drugs and diagnostic tests -- you may be shocked to learn that you
could lose all of those good things under the rules proposed in the two bills
that herald a health-care revolution.
In short, the
Obama platform would mandate extremely full, expensive, and highly subsidized
coverage -- including a lot of benefits people would never pay for with their
own money -- but deliver it through a highly restrictive, HMO-style plan that
will determine what care and tests you can and can't have. It's a revolution,
all right, but in the wrong direction.
the five freedoms that Americans would lose under Obamacare:
to choose what's in your plan.
The bills in
both houses require that Americans purchase insurance through "qualified"
plans offered by health-care "exchanges" that would be set up in
each state. The rub is that the plans can't really compete based on what they
offer. The reason: The federal government will impose a minimum list of benefits
that each plan is required to offer.
states require these "standard benefits packages" -- and they're
a major cause for the rise in health-care costs. Every group, from chiropractors
to alcohol-abuse counselors, do lobbying to get included. Connecticut, for
example, requires reimbursement for hair transplants, hearing aids, and in
The Senate bill
would require coverage for prescription drugs, mental-health benefits, and
substance-abuse services. It also requires policies to insure "children"
until the age of 26. That's just the starting list. The bills would allow
the Department of Health and Human Services to add to the list of required
benefits, based on recommendations from a committee of experts. Americans,
therefore, wouldn't even know what's in their plans and what they're required
to pay for, directly or indirectly, until after the bills become law.
to be rewarded for healthy living, or pay your real costs
As with the
previous example, the Obama plan enshrines into federal law one of the worst
features of state legislation: community rating. Eleven states, ranging
from New York to Oregon, have some form of community rating. In its purest
form, community rating requires that all patients pay the same rates for their
level of coverage regardless of their age or medical condition.
pre-existing conditions need subsidies under any plan, but community rating
is a dubious way to bring fairness to health care. The reason is twofold:
First, it forces young people, who typically have lower incomes than older
workers, to pay far more than their actual cost, and gives older workers,
who can afford to pay more, a big discount. The state laws gouging the young
are a major reason so many of them have joined the ranks of uninsured.
Under the Senate
plan, insurers would be barred from charging any more than twice as much for
one patient vs. any other patient with the same coverage. So if a 20-year-old
who costs just $800 a year to insure is forced to pay $2,500, a 62-year-old
who costs $7,500 would pay no more than $5,000.
bills would ban insurers from charging differing premiums based on the health
of their customers. Again, that's understandable for folks with diabetes or
cancer. But the bills would bar rewarding people who pursue a healthy lifestyle
of exercise or a cholesterol-conscious diet. That's hardly a formula for lower
costs. It's as if car insurers had to charge the same rates to safe drivers
as to chronic speeders with a history of accidents.
to choose high-deductible coverage
The bills threaten
to eliminate the one part of the market truly driven by consumers spending
their own money. That's what makes a market, and health care needs more of
it, not less.
of companies now offer Health Savings Accounts to about 5 million employees.
Those workers deposit tax-free money in the accounts and get a matching contribution
from their employer. They can use the funds to buy a high-deductible plan
-- say for major medical costs over $12,000. Preventive care is reimbursed,
but patients pay all other routine doctor visits and tests with their own
money from the HSA account. As a result, HSA users are far more cost-conscious
than customers who are reimbursed for the majority of their care.
The bills seriously
endanger the trend toward consumer-driven care in general. By requiring minimum
packages, they would prevent patients from choosing stripped-down plans that
cover only major medical expenses. "The government could set extremely
low deductibles that would eliminate HSAs," says John Goodman of the
National Center for Policy Analysis, a free-market research group. "And
they could do it after the bills are passed."
to keep your existing plan
This is the
freedom that the President keeps emphasizing. Yet the bills appear to say
otherwise. It's worth diving into the weeds -- the territory where most pundits
and politicians don't seem to have ventured.
divides the insured into two main groups, and those two groups are treated
differently with respect to their current plans. The first are employees covered
by the Employee Retirement Security Act of 1974. ERISA regulates companies
that are self-insured, meaning they pay claims out of their cash flow, and
don't have real insurance. Those are the GEs (GE, Fortune 500) and Time Warners
(TWX, Fortune 500) and most other big companies.
The House bill
states that employees covered by ERISA plans are "grandfathered."
Under ERISA, the plans can do pretty much what they want -- they're exempt
from standard packages and community rating and can reward employees for healthy
lifestyles even in restrictive states.
But read on.
The bill gives
ERISA employers a five-year grace period when they can keep offering plans
free from the restrictions of the "qualified" policies offered on
the exchanges. But after five years, they would have to offer only approved
plans, with the myriad rules we've already discussed. So for Americans in
large corporations, "keeping your own plan" has a strict deadline.
In five years, like it or not, you'll get dumped into the exchange. As we'll
see, it could happen a lot earlier.
is worse for the second group. It encompasses employees who aren't under ERISA
but get actual insurance either on their own or through small businesses.
After the legislation passes, all insurers that offer a wide range of plans
to these employees will be forced to offer only "qualified" plans
to new customers, via the exchanges.
who got their coverage before the law goes into effect can keep their plans,
but once again, there's a catch. If the plan changes in any way -- by altering
co-pays, deductibles, or even switching coverage for this or that drug --
the employee must drop out and shop through the exchange. Since these plans
generally change their policies every year, it's likely that millions of
employees will lose their plans in 12 months.
to choose your doctors
The Senate bill
requires that Americans buying through the exchanges -- and as we've seen,
that will soon be most Americans -- must get their care through something
called "medical home." Medical home is similar to an HMO. You're
assigned a primary care doctor, and the doctor controls your access to specialists.
The primary care physicians will decide which services, like MRIs and other
diagnostic scans, are best for you, and will decide when you really need to
see a cardiologists or orthopedists.
Under the proposals,
the gatekeepers would theoretically guide patients to tests and treatments
that have proved most cost-effective. The danger is that doctors will be financially
rewarded for denying care, as were HMO physicians more than a decade ago.
It was consumer outrage over despotic gatekeepers that made the HMOs so unpopular,
and killed what was billed as the solution to America's health-care cost explosion.
The bills do
not specifically rule out fee-for-service plans as options to be offered through
the exchanges. But remember, those plans -- if they exist -- would be barred
from charging sick or elderly patients more than young and healthy ones. So
patients would be inclined to game the system, staying in the HMO while they're
healthy and switching to fee-for-service when they become seriously ill. "That
would kill fee-for-service in a hurry," says Goodman.
the flexible, employer-based plans that now dominate the landscape, and that
Americans so cherish, could disappear far faster than the 5 year "grace
period" that's barely being discussed.
have the option of paying an 8% payroll tax into a fund that pays for coverage
for Americans who aren't covered by their employers. It won't happen right
away -- large companies must wait a couple of years before they opt out. But
it will happen, since it's likely that the tax will rise a lot more slowly
than corporate health-care costs, especially since they'll be lobbying Washington
to keep the tax under control in the righteous name of job creation.
The best solution
is to move to a let-freedom-ring regime of high deductibles, no community
rating, no standard benefits, and cross-state shopping for bargains (another
market-based reform that's strictly taboo in the bills). I'll propose my own
solution in another piece soon on Fortune.com. For now, we suffer with a flawed
health-care system, but we still have our Five Freedoms. Call them the Five