[Congressional Record Volume 156, Number 27 (Monday, March 1, 2010)]
[Senate]
[Pages S827-S836]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
HEALTH CARE
Mr. ALEXANDER. Mr. President, it was my privilege last Thursday,
along with some other Members of the Senate, to attend a health care
summit at the invitation of President Obama. It went on a long time. We
learned one thing we already knew, that our President is smart and
knows a lot about health care. So he stayed the whole time.
But it gave those of us on the Republican side a chance we do not
have the opportunity to have as often, which is, to be on center stage
and let the American people know, A, who we are, and, B, what our ideas
are. So it was a terrific way for us to show, for example, that our
goal is to reduce health care costs, that we wish to move step by step
toward that goal.
We identified a number of areas, such as being able to buy health
insurance across State lines, allowing small business health plans to
pool together, reducing junk lawsuits--all of which will tend to bring
down the cost of premiums, which is what most Americans want.
During the discussion, early on, actually, the President and I had a
little disagreement about whether his plan, which is based upon the
Senate bill, which passed on Christmas Eve, would raise premiums. What
I had said in my opening remarks on behalf of Republicans was that
millions of Americans, under the Democratic plan, would pay higher
insurance premiums in the individual market because of government
mandates and taxes. The President says that is wrong. I cited a
Congressional Budget Office report to show I was right. And rather than
dispute the President of the United States in public--I thought I had
enough time to make my case--I said I would send him a letter, which I
did that same day. So I ask unanimous consent, Mr. President, to have
printed in the Record the letter I gave to President Obama on Thursday.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Washington, DC, February 25, 2010.
Hon. Barack Obama,
President, The White House, Pennsylvania Avenue, Washington,
DC.
Dear Mr. President: During today's discussion on health
care, you and I disagreed about whether the health care bill
that passed the Senate on a party-line vote on December 24
would cause health insurance premiums to rise even faster
than if Congress did not act. I believe premiums will rise
because of independent analysis of the bill:
On November 30, the non-partisan Congressional Budget
Office (CBO) wrote in a letter to Senator Bayh that ``CBO and
JCT estimate that the average premium per person covered
(including dependents) for new nongroup policies would be
about 10 percent to 13 percent higher in 2016 than the
average premium for nongroup coverage in that same year under
current law.''
When you asserted that CBO says premiums will decline by 14
to 20 percent under the Senate bill, you are leaving out an
important part of CBO's calculations. These reductions are
overwhelmed by a 27 to 30 percent increase in premiums due to
the mandated coverage requirements in the legislation. CBO
added those figures together to arrive at a net increase of
10 to 13 percent--as shown in their chart in that same
letter.
In that same letter, CBO wrote, ``The legislation would
impose several new fees on firms in the health sector. New
fees would be imposed on providers of health insurance and on
manufacturers and importers of medical devices. Both of those
fees would be largely passed through to consumers in the form
of higher premiums for private coverage.''
On December 10, the chief actuary for the Centers for
Medicare and Medicaid Services--who works for your
administration--concurred with the CBO. In his analysis, the
actuary said, ``We anticipate such fees would generally be
passed through to health consumers in the form of higher drug
and device prices and higher insurance premiums.'' He also
said, ``The additional demand for health services could be
difficult to meet initially with existing health provider
resources and could lead to price increases, cost-shifting,
and/or changes in providers' willingness to treat patients
with low-reimbursement health coverage.''
For these reasons, the Senate-passed bill will, indeed,
cause Americans' insurance premiums to rise, which is the
opposite of the goal I believe we should pursue.
Sincerely,
Lamar Alexander.
Mr. ALEXANDER. But today what I wish to do in the next few minutes is
explain why I believe I am correct, that under the President's health
insurance plan, which is based upon the Senate plan, for millions of
Americans in the individual market, premiums would go up because of
one-size-fits-all government mandates, because of taxes that are passed
on to consumers; but for other reasons as well--by shifting costs.
When you dump 15 million people or 18 million people into a program
called Medicaid, what happens is, we do not pay the doctors and the
hospitals well enough to take care of those folks. So
[[Page S828]]
those providers shift the costs to people who are paying with private
insurance, and premiums go up.
Costs for young people in the individual market will go up under this
plan because if you put in a rule that says my insurance at my age
cannot go up more than a certain amount compared with my son's
insurance, then his insurance goes up, and because a scheme like the
Democratic plan depends upon requiring everybody to buy insurance.
There is a weak provision for that, and I suspect many young people
will rather pay the $750 fine rather than buy a $2,500 insurance
policy, which they think they cannot afford.
The President made the point in his usual very persuasive way that,
wait a minute, actually you would be getting better insurance. But that
is comparing apples and oranges. As George Will said on ABC's ``This
Week'' yesterday--he asked this question: If the government required
you to buy a better, more expensive car, even if it was better than the
car you have, it would still be more expensive, would it not?
That is the case with the President's health care plan. In fact,
premiums will go up for millions of Americans in the individual market,
up more than they otherwise would over the next several years--and we
all know how rapidly they are rising--and the whole exercise we have
been going through over the last year is to bring premiums down, not
help drive premiums up.
What I said to the President, with respect, was that the
Congressional Budget Office, on November 30, said this about the Senate
bill:
The Congressional Budget Office and the Joint Committee on
Taxation estimate that the average premium per person covered
for new nongroup--
That means individual policies--
would be about 10 to 13 percent higher in 2016 than the
average premium for nongroup--
That is individual coverage--
in the same year under current law.
In other words, if you buy an individual policy--that means not a
policy with your employer--by 2016 it will be at an average of 10 to 13
percent higher than it otherwise would.
I ask unanimous consent to have printed in the Record the relevant
parts of the Congressional Budget Office letter of November 30 to
Senator Evan Bayh on this point.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 30, 2009.
Hon. Evan Bayh,
U.S. Senate, Washington, DC.
Dear Senator: The attachment to this letter responds to
your request--and the interest expressed by many other
Members--for an analysis of how proposals being considered by
the Congress to change the health care and health insurance
systems would affect premiums paid for health insurance in
various markets. Specifically, the Congressional Budget
Office (CBO) and the staff of the Joint Committee on Taxation
have analyzed how health insurance premiums might be affected
by enactment of the Patient Protection and Affordable Care
Act, as proposed by Senator Reid on November 18, 2009.
I hope this information is helpful to you. If you have any
further questions, please contact me or the CBO staff. The
primary staff contact for this analysis is Philip Ellis.
Sincerely,
Douglas W. Elmendorf,
Director.
Attachment.
Summary of Findings
The effects of the proposal on premiums would differ across
insurance markets (see Table 1). The largest effects would be
seen in the nongroup market, which would grow in size under
the proposal but would still account for only 17 percent of
the overall insurance market in 2016. The effects on premiums
would be much smaller in the small group and large group
markets, which would make up 13 percent and 70 percent of the
total insurance market, respectively.
Nongroup Policies
CBO and JCT estimate that the average premium per person
covered (including dependents) for new nongroup policies
would be about 10 percent to 13 percent higher in 2016 than
the average premium for nongroup coverage in that same year
under current law. About half of those enrollees would
receive government subsidies that would reduce their costs
well below the premiums that would be charged for such
policies under current law.
[[Page S829]]
[GRAPHIC] [TIFF OMITTED] TS01MR10.001
[[Page S830]]
Mr. ALEXANDER. Now, the President said: Wait a minute. The premiums
in the individual market will go down 14 to 20 percent. That is also in
the same letter. Of course, he is right about that. They go down
because of administrative efficiencies and new enrollment, but he left
out that there are other factors involved so that the government
mandates will drive them up 27 to 30 percent or, in the end, the
average, as the CBO said, premium per person covered in an individual
policy would be up 10 to 13 percent.
The bill has subsidies in it for some Americans. The same letter says
about half of Americans who buy in the individual market will get a
subsidy. Well, we are paying for that subsidy, but let's concede that
point. Still, that leaves half of the people in the individual market
for whom premiums will go up on an average of 10 to 13 percent.
Why is that? One reason is because the Senate bill says people will
have to buy a richer policy than they have today. That means it has a
higher actuarial value. They call it in the bill ``minimum creditable
coverage.'' It means this is the amount of insurance I think you should
have before you buy a policy. That might be a good decision. It
undoubtedly would be good to have the insurance. It just costs 27 to 30
percent more than today's average.
The National Federation of Independent Businesses wrote a December 12
letter in opposition to the Senate bill saying the benefit mandates
will put small business owners ``at risk of having to drop coverage due
to cost increases that outpace their health budgets.''
I ask unanimous consent to have printed in the Record the letter from
NFIB to Senator McConnell and Senator Reid, dated December 8.
There being no objection, the material was ordered to be printed in
the Record, as follows:
National Federation of
Independent Business,
December 8, 2009.
Sen. Harry Reid,
Majority Leader, Hart Senate Office Building, Washington, DC.
Sen. Mitch McConnell,
Minority Leader, Russell Senate Office Building, Washington,
DC.
Dear Senators Reid and McConnell: As the Senate continues
to debate the future of comprehensive healthcare reform, the
National Federation of Independent Business, the nation's
leading small business association, is writing in opposition
to the Patient Protection and Affordable Care Act (H.R.
3590).
When evaluating healthcare reform options, small business
owners ask themselves two specific questions. First, will the
bill lower insurance costs? Second, will the bill increase
the overall cost of doing business? If a bill increases the
cost of doing business or fails to reduce insurance costs,
then the bill fails to achieve their No. 1 goal--lower costs.
In both cases, the Patient Protection and Affordable Care
Act (H.R. 3590) fails the small business test and, therefore,
fails small business. The most recent CBO study detailing the
effect that H.R. 3590 will have on insurance premiums
reinforces that, despite claims by its supporters, the bill
will not deliver the widely-promised help to the small
business community. Instead, CBO findings report that the
bill will increase non-group premiums by 10 to 13 percent and
result in, at best, a 2 percent decrease for small group
coverage by 2016. These findings tell small business all it
needs to know--that the current bill does not do enough to
reduce costs for small business owners and their employees.
Despite the inclusion of insurance market reforms in the
small-group and individual marketplaces, the savings that may
materialize are too small for too few and the increase in
premium costs are too great for too many. Those costs, along
with greater government involvement, higher taxes and new
mandates that are disproportionately targeted at small
business and are being used to finance H.R. 3590, create a
reality that is worse than the status quo for small business.
The shortcomings of the Patient Protection and Affordable
Care Act include:
A New Small Business Health Insurance Tax
Unlike large businesses, which self-insure and find
security under the blanket of ERISA, most small businesses
are only able to find and purchase insurance in the fully-
insured marketplace. The Senate bill includes a new $6.7
billion annual tax ($60.7 billion over 10 years) that falls
almost exclusively on small business because the fee is
assessed on the insurance companies. CBO's most recent study
reinforces those costs will ultimately be passed on to their
consumers, leaving the cost to be disproportionately borne by
small business consumers in the individual and small-group
marketplace whose only choice is to purchase those products
or forgo insurance altogether.
A New Mandate that Punishes Employers, Employees and Hinders Job
Creation
Employer mandates fail employers and employees in two ways.
First, mandates do nothing to address the core issue facing
small business--high healthcare costs. Second, mandates
destroy job creation opportunities for employees. The job
loss, whether through lost hiring or greater reliance on
part-time employees, harms low-wage or entry-level workers
the most. The employer mandate in H.R. 3590 sets up
potentially troubling outcomes for this sector of the
workforce. The multiple penalties assessed on full-time
workers will most certainly result in a reduction of full-
time workers to part-time workers and discourage the hiring
of those entrants into the workforce who might qualify for a
government subsidy, hardly an outcome that contributes to a
greater insured population.
A Poorly-Structured Small Business Tax Credit
As structured, the small business tax credit will do
little, if nothing, to propel either more firms to take up
coverage or produce greater overall affordability. Due to its
short-term temporary nature and the limitations based on the
business' average wage, its benefit is, at best, a temporary
solution to the long-term cost and affordability problem. A
tax credit that is poorly structured is not going to provide
sustainable and long-term relief from high healthcare costs,
and the recent CBO finding that the tax credit would benefit
only 12 percent of the small business population illustrates
its lack of effectiveness.
A Benefit Package that is Too High a Hurdle for Small Business
NFIB has voiced concern over establishing a benefit
threshold that is too high a price tag for small businesses
to meet. Small businesses are especially price sensitive.
They need purchasing choices that provide the flexibility in
coverage options that reflect their marketplace and business
needs. If Congress doesn't adjust the actuarial value
standards in the legislation, what may be affordable this
year may be unaffordable next year. As a result, small
business owners will be at risk of having to drop coverage
due to cost increases that outpace their healthcare budgets.
Destructive Rating Reforms and Phase-In Timelines that Threaten
Affordability for All
NFIB supports balanced federal rating reforms that protect
access and affordability, regardless of an individual or
group's health status. However, the excessively tight age
rating (3:1) in H.R. 3590 will increase more costs than it
will decrease, and make coverage unaffordable for the very
populations that are most beneficial to the insurance pool--
the young and the healthy. Independent actuaries have
analyzed the negative impact of such tight bands and have
indicated that there will be devastating effects to the long-
term viability of a pool without action to correct this
rating imbalance.
Additionally, to prevent volatile spikes in insurance
premiums, also known as ``rate shock,'' federal rating
reforms must be appropriately applied to all marketplaces and
phased in over a responsible period of time. If this is not
done, then certain plans, including ``grandfathered plans,''
will utilize different rating practices when underwriting
risk, which can create adverse selection issues. Those
selection problems will have a striking negative impact on
the new exchanges--exchanges that are meant to improve,
rather than decrease, affordability for small business and
individuals.
National Plans that Provide Limited Promise for Success
Leveling the playing field for small business starts with
allowing uniform benefit packages to be purchased across
state lines. If done right, this can provide a greater
security that, as people change jobs and move from state to
state, they can keep the benefit plan that meets their
healthcare needs. National plans would be particularly
helpful for states with smaller populations and where
consumers lack a robust marketplace with choice and
competition for private plans. Specifically, the state ``opt-
out'' language in the Patient Protection and Affordable Care
Act would create more disincentives than incentives for
carriers to embark on these new opportunities. If the
national plan section is not significantly restructured to
make national plans a viable option, then these new
opportunities will never materialize for small business.
Threatens Flexibility and Choice for Employers and Employees
Small employers need more affordable health insurance
options and new alternatives for employers to voluntarily
contribute to individually-owned plans. Provisions also need
to be structured to insure that options are widely available
to both employers and employees. The simple cafeteria plan
language in H.R. 3590 excludes the owners of many ``pass-
through'' business entities from participating in these
arrangements. If owners are unable to participate in the
plan, they will be less likely to provide insurance to their
workforce. Finally, small business needs the freedom and
flexibility to preserve options that are already proven to
work. Prohibiting the use of HSA, FSA and HRA funds to
purchase over-the-counter medications, along with the $2,500
limit on FSA contributions, diminishes that flexibility and
threatens to further limit the options employers have to
provide meaningful healthcare to their employees.
[[Page S831]]
New Paperwork Costs on Small Businesses
The cost associated with tax paperwork is the most
expensive paperwork burden that the federal government
imposes on small business owners. The Senate bill
dramatically increases that cost with a new reporting
requirement that is levied on business transactions of more
than $600 annually, leaving small business buried in
paperwork and increasing their paperwork compliance expenses.
An Unprecedented New Payroll Tax on Small Employers
Since its creation the payroll taxes that fund the Medicare
programs have not been wage-based and are dedicated
specifically to funding Medicare. The Senate bill changes the
nature of the tax and creates a precedent to use payroll
taxes to pay for non-Medicare programs.
The Absence of Real Medical Liability Reform
NFIB strongly supports medical liability reform as a means
to both inject more fairness into the medical malpractice
legal system, and to reduce unnecessary litigation and legal
costs. Taking serious steps to adopt meaningful medical
liability reform is a significant step toward restoring
common sense to our medical liability litigation system. It
also is especially critical to improving access to healthcare
for those living in rural areas, where it is becoming
increasingly difficult for those in need to locate
specialists such as OB/GYNs and surgeons.
The Creation of a New Government-Run Healthcare Program
A government-run plan will drive the private healthcare
marketplace out of business. Private insurers will be unable
to compete in a climate where the rules and practices are
tilted in favor of a massive government-run plan. This means
millions could lose their current coverage. This will
decrease choice and increase costs. On both accounts, the
government-run plan will leave small business with a single
option the government-run plan, which is the exact opposite
outcome small businesses want from healthcare reform.
There is near universal agreement that, if done right,
small business has much to gain from healthcare reform. But
if it is done wrong, then small business will have the most
to lose. The Patient Protection and Affordable Care Act,
which is short on savings and long on costs, is the wrong
reform, at the wrong time and will increase healthcare costs
and the cost of doing business. NFIB remains committed to
healthcare reform, and urges the Senate to develop common
sense solutions to lower healthcare costs while ensuring that
policies empower small business with the ability to make the
investments necessary to move our economy forward.
Sincerely,
Susan Eckerly,
Senior Vice President,
Public Policy.
Mr. ALEXANDER. The one-size-fits-all provision in the Democratic bill
says all individual and small group policies must have an actuarial
value of 60 percent.
Senator Susan Collins of Maine, who was the insurance commissioner of
Maine, made a speech on the Senate floor on December 18, and pointed
out that 87 percent of the individual policies that are purchased in
Maine today would cost more under the Reid bill.
I commend to my colleagues the Senator's testimony of December 18,
2010.
Senator Collins used the example that the most popular individual
market policy sold in Maine costs a 40-year-old about $185 a month.
Under the Senate bill that 40-year-old would have to pay at least $420
a month, more than twice as much for the policy that meets the new
minimum standard, or face a $750 penalty. It is true Maine citizens, as
is true for all Americans--about half of them--would receive subsidies
to help them buy that policy, but the average premium for the other
half of the 87 percent is going to go up under the Democratic bill.
We believe Americans ought to have more choices than that. That is a
fundamental difference of opinion. Should Washington decide you need to
buy a richer policy, or should you decide that for yourself based upon
the other needs of your family?
The Congressional Budget Office does state, as I have mentioned, that
there are a number of enrollees--about half--who would have the
subsidies, and that is in the letter I have already introduced into the
Record. But someone is paying for those subsidies: the taxpayers are
paying for them, which brings up the second reason I said on Thursday
that premiums for millions of Americans in the individual market will
go up.
The commonsense idea is that if you tax an insurance company or a
medical device company or a manufacturer of drugs, they will pass the
taxes on to whom? To us, who are buying insurance policies or medical
devices or drugs. So we end up paying. In fact, one part of the
President's proposal deliberately does that. It is a 40-percent excise
tax on insurance companies for what we call Cadillac plans, the high-
cost private insurance plans.
A letter from the Joint Committee on Taxation, dated February 24,
says the 40-percent excise tax will raise $32.7 billion, all of which
will be passed along to consumers in the form of higher insurance
premiums. That may be a good thing. In fact, I think it is because it
helps to discourage the purchase of more expensive policies. But it
does raise premiums in the individual market.
The Joint Committee on Taxation Memorandum on High Cost Plans, dated
September 29, says:
The excise tax would be mainly passed along through
increases in premiums.
Because the new tax is indexed to regular inflation plus 1 percent
instead of medical inflation, which goes up very much higher and
quicker, the new tax, like the alternative minimum tax, will pretty
soon start to hit Chevy and Buick insurance policies and not just
Cadillac policies.
But there are other taxes in the President's proposal. There are up
to $\1/2\ trillion in new taxes, which will be passed on to consumers:
$20 billion in excise taxes on lifesaving medical devices, $33 billion
on drugs, and $60 billion on health insurance companies. In the
previously mentioned CBO letter and a JCT letter to Senator Grassley in
October of last year, both said these taxes will be passed on to
patients, increasing health insurance premiums.
The Chief Actuary of the Center for Medicare and Medicaid Services,
who is a part of the Obama administration said:
We anticipate such fees would be generally passed through
to health consumers in the form of higher drug and device
prices and higher insurance premiums.
That was on December 10 of last year, about the Senate bill.
The Lewin Group, on October 30, said:
Employer spending would increase steadily under the
[Democratic] act, reflecting the cost of paying the various
excise taxes under the act. Total employer health spending
would increase by 2.1 percent by 2019.
I ask unanimous consent to have printed in the Record the executive
summary of the Lewin Group letter.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Executive Summary
In this study we estimate the impact of The America's
Healthy Future Act as adopted by the Senate Finance
Committee. The Act would require most Americans to have
health insurance. To assure access to affordable coverage,
the Bill expands the Medicaid program to 133 percent of the
Federal Poverty Level (FPL) for all adults. It also provides
a new premium tax credit for people living between 133
percent and 400 percent of the FPL (e.g., $88,000 for a
family of four).
In addition, the Act establishes an ``exchange'' that
presents consumers with a selection of health coverage
alternatives that is available to individuals and firms with
fewer than 100 workers. States would have the option to
extend eligibility to larger employers beginning in 2017.
Only people participating in the exchange who do not have
access to employer coverage would be eligible for the premium
tax credit. The Act also reforms insurance markets by
assuring guaranteed issue of coverage and prohibiting plans
from varying premiums with health status.
Employers with more than 50 workers are required to pay a
penalty for each uninsured worker receiving a premium tax
credit through the exchange. The Act also provides an
employer health insurance tax credit for up to two years for
firms with fewer than 25 workers with an average employee
earnings of less than $40,000. Workers offered coverage by an
employer are not eligible for premium subsidies offered in
the exchange unless the cost of employer coverage exceeds 10
percent of income.
The Act is funded with reductions in spending under
Medicare and Medicaid, a new excise tax on high cost health
plans (premiums over $8,000 for individuals and $21,000 for
families). It also includes a second excise tax on insurance,
new excise taxes on branded prescription drugs and device
manufacturers, and other changes in revenues.
In this study we provide estimates of the program's impact
on coverage and spending for the federal government, state
and local governments, private employers and consumers. To
demonstrate the long-term impact of the Act, we provide
estimates for a 20-year period from 2010 through 2029.
Mr. ALEXANDER. The National Federation of Independent Business letter
says the same. There are other reasons the premiums will go up.
[[Page S832]]
Mr. President, seeing no one else here, I wonder if I might ask
unanimous consent for 5 additional minutes.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. ALEXANDER. I thank the President.
Here is a third reason, in addition to government mandates and taxes,
that will cause premiums to rise. We call it cost-shift. Premiums will
increase because the bill dumps 15 million to 18 million more Americans
into the government program called Medicaid. This is the analysis of
the Chief Actuary on January 8, 2010.
I ask unanimous consent that the relevant portions be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Department Of Health & Human Services, Centers for
Medicare & Medicaid Services,
Baltimore, MD.
Date: January 8, 2010
From: Richard S. Foster, Chief Actuary
Subject: Estimated Financial Effects of the ``Patient
Protection and Affordable Care Act,'' as Passed by the
Senate on December 24, 2009.
The Office of the Actuary has prepared this memorandum in
our longstanding capacity as an independent technical advisor
to both the Administration and the Congress. The costs,
savings, and coverage impacts shown herein represent our best
estimates for the Patient Protection and Affordable Care Act.
We offer this analysis in the hope that it will be of
interest and value to policy makers as they develop and
debate national health care reforms. The statements,
estimates, and other information provided in this memorandum
are those of the Office of the Actuary and do not represent
an official position of the Department of Health & Human
Services or the Administration.
This memorandum summarizes the Office of the Actuary's
estimates of the financial and coverage effects through
fiscal year 2019 of selected provisions of the ``Patient
Protection and Affordable Care Act'' (PPACA) as passed by the
Senate on December 24, 2009 (H.R. 3590, as amended). Included
are the estimated net Federal expenditures in support of
expanded health insurance coverage, the associated numbers of
people by insured status, the changes in Medicare and
Medicaid expenditures and revenues, and the overall impact on
total national health expenditures. Except where noted, we
have not estimated the impact of the various tax and fee
proposals or the impact on income and payroll taxes due to
economic effects of the legislation. Similarly, the impact on
Federal administrative expenses is excluded. A summary of the
data, assumptions, and methodology underlying our estimates
of national health reform proposals is available in the
appendix to our October 21 memorandum on H.R. 3200.
summary
The table shown on page 2 presents financial impacts of the
selected PPACA provisions on the Federal Budget in fiscal
years 2010-2019. We have grouped the provisions of the bill
into six major categories:
(i) Coverage proposals, which include the mandated coverage
for health insurance, the expansion of Medicaid eligibility
to those with incomes at or under 133 percent of the Federal
poverty level (FPL), and the additional funding for the
Children's Health Insurance Program (CHIP);
(ii) Medicare provisions;
(iii) Medicaid and CHIP provisions other than the coverage
expansion and CHIP funding;
(iv) Proposals aimed in part at changing the trend in
health spending growth;
(v) The Community Living Assistance Services and Supports
(CLASS) proposal; and
(vi) Immediate health insurance reforms.
The estimated costs and savings shown in the table are
based on the effective dates specified in the bill as passed.
Additionally, we assume that employers and individuals would
take roughly 3 to 5 years to fully adapt to the insurance
coverage provisions and that the enrollment of additional
individuals under the Medicaid coverage expansion would be
completed by the third year of implementation. Because of
these transition effects and the fact that most of the
coverage provisions would be in effect for only 6 of the 10
years of the budget period, the cost estimates shown in this
memorandum do not represent a full 10-year cost for the
proposed legislation.
ESTIMATED FEDERAL COSTS (+) OR SAVINGS (-) UNDER SELECTED PROVISIONS OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT AS PASSED BY THE SENATE
[In billions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year--
Provisions -------------------------------------------------------------------------------------------------------------- Total, 2010-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total*....................... $11.6 $0.1 -$14.8 -$32.8 $14.7 $63.0 $71.4 $60.9 $55.8 $49.7 $279.5
Coverage .................... 4.7 6.6 1.7 ......... 86.5 128.0 150.1 156.4 167.9 180.7 882.5
Medicare..................... 2.2 -3.6 -12.1 -23.4 -62.6 -55.1 -70.2 -87.6 -104.6 -123.7 -540.7
Medicaid/CHIP................ -0.4 -0.1 0.2 -3.8 -3.1 -3.8 -3.9 -4.1 -4.0 -3.9 -27.1
Cost trend................... ......... ......... ......... ......... -0.0 -0.1 -0.2 -0.4 -0.6 -0.9 -2.3
CLASS program................ ......... -2.8 -4.5 -5.6 -5.9 -6.0 -4.3 -3.4 -2.8 -2.4 -37.8
Immediate reforms............ 5.0 ......... ......... ......... ......... ......... ......... ......... ......... ......... 5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Excludes Title IX revenue provisions except for section 9015, certain provisions with limited impacts, and Federal administrative costs.
Includes expansion of Medicaid eligibility and additional funding for CHIP.
Includes estimated non-Medicare Federal savings from provisions for comparative effectiveness research, prevention and wellness, fraud and abuse, and
administrative simplification. Excludes impacts of other provisions that would affect cost growth rates, such as the productivity adjustments to
Medicare payment rates, which are reflected in the Medicare line.
As indicated in the table above, the provisions in support
of expanding health insurance coverage (including the
Medicaid eligibility changes and additional CHIP funding) are
estimated to cost $882 billion through fiscal year 2019. The
net savings from the Medicare, Medicaid, growth-trend, and
CLASS proposals are estimated to total about $603 billion,
leaving a net cost for this period of $279 billion before
consideration of additional Federal administrative expenses
and the increase in Federal revenues that would result from
the excise tax on high-cost employer-sponsored health
insurance coverage and other revenue provisions. (The
additional Hospital Insurance payroll tax income under
section 9015 of the PPACA is included in the estimated
Medicare savings shown here.) The Congressional Budget Office
and Joint Committee on Taxation have estimated that the total
net amount of Medicare savings and additional tax and other
revenues would somewhat more than offset the cost of the
national coverage provisions, resulting in an overall
reduction in the Federal deficit through 2019.
The chart shown below summarizes the estimated impacts of
the PPACA on insurance coverage. The mandated coverage
provisions, which include new responsibilities for both
individuals and employers, and the creation of the Health
Benefit Exchanges (hereafter referred to as the
``Exchanges''), would lead to shifts across coverage types
and a substantial overall reduction in the number of
uninsured, as many of these individuals become covered
through their employers, Medicaid, or the Exchanges.
By calendar year 2019, the mandates, coupled with the
Medicaid expansion, would reduce the number of uninsured from
57 million, as projected under current law, to an estimated
23 million under the PPACA. The additional 34 million people
who would become insured by 2019 reflect the net effect of
several shifts. First, an estimated 18 million would gain
primary Medicaid coverage as a result of the expansion of
eligibility to all legal resident adults under 133 percent of
the FPL (In addition, roughly 2 million people with employer-
sponsored health insurance would enroll in Medicaid for
supplemental coverage.) Another 21 million persons (most of
whom are currently uninsured) would receive individual
insurance coverage through the newly created Exchanges, with
the majority of these qualifying for Federal premium and
cost-sharing subsidies. Finally, we estimate that the number
of individuals with employer-sponsored health insurance would
decrease overall by about 4 million, reflecting both gains
and losses in such coverage under the PPACA.
As described in more detail in a later section of this
memorandum, we estimate that overall national health
expenditures under this bill would increase by an estimated
total of $222 billion (0.6 percent) during calendar years
2010-2019, principally reflecting the net impact of (i)
greater utilization of health care services by individuals
becoming newly covered (or having more complete coverage),
(ii) lower prices paid to health providers for the subset of
those individuals who become covered by Medicaid, and (iii)
lower payments and payment updates for Medicare services,
together with net Medicaid savings from provisions other than
the coverage expansion. Although several provisions would
help to reduce health care cost growth, their impact would be
more than offset through 2019 by the higher health
expenditures resulting from the coverage expansions.
The actual future impacts of the PPACA on health
expenditures, insured status, individual decisions, and
employer behavior are very uncertain. The legislation would
result in numerous changes in the way that health care
insurance is provided and paid for in the U.S., and the scope
and magnitude of these changes are such that few precedents
exist for use in estimation. Consequently, the estimates
presented here are subject to a substantially greater degree
of uncertainty than
[[Page S833]]
is usually the case with more routine health care proposals.
The balance of this memorandum discusses these financial
and coverage estimates--and their limitations--in greater
detail.
Mr. ALEXANDER. The point is, Medicaid only pays doctors and hospitals
about 60 percent of the cost of serving the 60 million patients who are
now there. The Democratic bill would add 15 million to 18 million more
patients. So what do the doctors and hospitals do? They see these
patients, but then they shift the costs to the patients they see who
have private insurance.
The President himself said that adds about $1,000 to every policy
today, this cost-shifting. I have included that comment from the Chief
Actuary.
The PriceWaterhouseCoopers report on the Senate Finance Committee
bill in October of 2009 indicated that the net effect of the bills
before Congress will make the Medicare and Medicaid cost-shift even
more severe, raising the cost of private insurance premiums for large
employers by $255 a year between 2015 and 2019.
I ask unanimous consent to have printed in the Record the relevant
portions of the PriceWaterhouseCoopers report.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Potential Impact of Health Reform on the Cost of Private Health
Insurance Coverage
issue C--increased cost shifting
Today, certain costs (e.g., hospital expenses) are shifted
to the private sector (employers and consumers) as some
participants in the system pay less than their share of the
cost of their care. Public programs such as Medicare and
Medicaid reimburse less than the cost of care for hospitals'
services. In addition, the uninsured or underinsured may not
be able to cover the full cost of care, and this cost is then
also transferred to the private market.
The initial hope of health reform was that by improving
coverage of the currently uninsured, a significant percentage
of uncompensated care would be eliminated. This is still
anticipated to happen. However, the cost shift ``gains'' from
decreasing the numbers of uninsured now appear to be more
than offset by the losses from proposed cutbacks in Medicare
and Medicaid spending allocated to the hospital sector.
It should also be noted that the impact of covering the
uninsured may be different in communities constrained by
limited hospital capacity. In those communities, covering the
uninsured could actually increase cost-shifting if the newly
insured increase demand for healthcare services and the
overall mix of hospital patients migrates towards lower
paying government programs.
The net impact is likely to result in an increase in cost
shifting which translates into a 0.8 percent average annual
increase in the private sector spending between 2010 and
2019, or $145 on average per year for family coverage in a
large group plan (and $55 for single coverage). We note that
this cost burden ramps up over the projection period, with an
average annual increase in health costs of 1.2 percent over
the second five-year period. We assume that this increased
cost to the private sector will ultimately impact the cost of
coverage for individuals and businesses in both the insured
and self-insured market. As a result, premium costs for large
group plans will be $37 higher each year between 2010 and
2014 for family coverage ($14 for single coverage), and $255
higher each year between 2015 and 2019 ($96 for single
coverage).
Mr. ALEXANDER. Younger Americans in the individual market will pay
higher premiums under the Democratic plan because, as I mentioned
earlier, it will mandate for individual coverage that I can't pay more
than three times as much as my son can pay for an insurance premium.
That might help keep my premiums down, but it is going to send his up
pretty far because 42 States, including Tennessee, allow more variance
of that. So young people across America, who include about 30 percent
of the uninsured, are in for a big surprise when their individual
policies jump up 30 to 35 percent, which is what the Oliver Wyman
report on September 28 said theirs might do, or when, since they are
uninsured, they are required to buy insurance and they find the
insurance they are required to buy is very expensive.
I ask unanimous consent to have printed in the Record the conclusion
of the Oliver Wyman report.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Conclusion
As Congress considers approaches to maximize health
insurance coverage in the United States, it is important to
consider the impact of premium rate compression on current
purchasers and the uninsured. Providing affordable premiums
to young people is critical to encourage their participation
and ensure the long-term sustainability of the insurance pool
in the years following health insurance reform.
Requiring a young person to pay multiples of their expected
medical expenses for health insurance is likely to cause
these individuals to decline to purchase coverage.
Maintaining adequate flexibility in rating will minimize the
rate shock that many could see in the marketplace and
encourage higher levels of coverage over time. Moreover, the
elimination of health status as a rating factor will already
provide significant benefit to older individuals, who are
more likely to suffer from chronic health conditions.
In conclusion, our modeling demonstrates that the 5:1 age
band, as originally included in the Senate Finance
Committee's Chairman's Mark, will reduce disruption compared
to tight age bands. Maintaining 5:1 age bands will encourage
more young people to participate in the insurance market,
thereby keeping average rates more affordable. This, in turn,
will result in higher overall levels of participation in the
insurance market and fewer uninsured.
Mr. ALEXANDER. Finally, the young and the healthy can skip out of
this. That will drive up premiums. They may decide they would rather
pay a $750 fine than $2,500 for a health insurance policy they think
they don't need.
The American Academies of Actuaries wrote a letter on the Reid bill
on November 20 that said: ``Any premium variations by age limited to a
3.1 ratio between the highest and lowest premiums,'' and then it goes
on to say, ``would cause higher premiums on average relative to current
premiums.''
I ask unanimous consent to have printed in the Record the letter from
the American Academy of Actuaries of November 20, 2009.
There being no objection, the material was ordered to be printed in
the Record, as follows:
November 20, 2009.
Re: Patient Protection and Affordable Care Act.
Hon. Harry Reid
Majority Leader, U.S. Senate, Hart Senate Office Building,
Washington, DC.
Hon. Mitch McConnell,
Minority Leader, U.S. Senate, Russell Senate Office Building,
Washington, DC.
Dear Majority Leader Reid and Minority Leader McConnell:
The American Academy of Actuaries' Health Practice Council
commends members of the Senate as you prepare to debate and
vote on the Patient Protection and Affordable Care Act. We
share with you the goals of reducing the numbers of
uninsured, increasing the availability of affordable
coverage, controlling health spending growth, and improving
the quality of care. On behalf of the council, I appreciate
this opportunity to provide the following comments outlining
the three key criteria that need to be considered when
evaluating whether this legislation will lead to a viable
health insurance system, and how the legislation can be
improved to meet these goals. In particular:
For insurance markets to be viable, they must attract a
broad section of risks. Implementing market reforms to
prohibit insurers from denying coverage and to restrict how
much premiums can vary will result in adverse selection and
upward pressure on premiums unless lower-risk individuals
have incentives to purchase coverage. An individual mandate
can bring lower-risk individuals into the pool. To be
effective, however, the penalties for not complying with the
mandate must be meaningful relative to the premium faced. The
penalties in the Patient Protection and Affordable Care Act
are very low, which is especially problematic given the
bill's limits on premium variations by age, which will raise
premiums for younger individuals. Strengthening the bill's
individual mandate through higher financial penalties is
needed to reduce adverse selection that would arise due to
the new issue and rating restrictions.
Market competition requires a level playing field. All
plans, including any new public plans or health insurance
cooperatives must operate under the same rules. As written,
the public plan and cooperatives established under the
legislation would be subject to the same market rules and
benefit requirements that apply to public plans. They would
also be required to negotiate rates with providers. The bill
should retain these provisions and also ensure that start-up
funds provided to these plans are adequate to meet not only
pre-operational expenses but also solvency needs.
For long-term sustainability, health spending growth must
be reduced. Provisions to control health care spending should
include not only one-time improvements that will help address
short-term goals, but also options that permanently reduce
spending growth to address long-term goals. The Patient
Protection and Affordable Care Act includes provisions that
aim to reduce long-term spending growth by shifting the
health care payment and delivery systems to focus on cost-
effective and high-quality care. Many of these efforts take
the form of studies and demonstration projects. Policymakers
need to focus intently on finding ways to control spending
and ensuring that
[[Page S834]]
promising approaches and successful demonstration projects
are adopted on a broad scale in a timely manner. . .
To this end, the Act also includes provisions that would
help shift the health care payment and delivery systems from
rewarding quantity of care to rewarding quality of care. The
legislation includes many cost containment and quality
improvement strategies focused on the Medicare program,
including provider payment and delivery system reforms that
provide incentives for coordinated and cost-effective care.
Such a comprehensive and coordinated approach to addressing
quality and costs is needed to fundamentally transform the
health system to ensure its long-term sustainability.
However, acknowledging that the impact on health spending and
health outcomes of many potential programs is still unclear,
the legislation directs many of these efforts in the form of
studies and demonstration projects. Analyses from the Centers
on Medicare and Medicaid Services and from the Congressional
Budget Office suggest that at least in their current limited
form, these provisions will have only a minimal impact on
health spending growth. Policymakers need to focus intently
on finding ways to control spending and ensuring that
promising approaches and successful demonstration projects
are adopted on a broad scale and in a timely manner.
Summary
The American Academy of Actuaries' Health Practice Council
strongly supports three key considerations for a sustainable
health insurance system with increased access to affordable
health insurance. In particular, for insurance markets to be
viable they must attract a broad cross section of risks;
market competition requires a level playing field; and for
long-term sustainability, health spending growth must be
reduced.
Outcomes of the reforms before you, because they involve so
many complex interactions including market behavior, may not
be fully known until implementation. Even actuaries must make
certain assumptions in their projections, based on experience
and expertise, as to what the exact effects will be. However,
as the full Senate casts votes, we urge you to first and
foremost examine these criteria as a litmus for determining
the success of this reform effort. In particular, we believe
that strengthening the individual mandate through higher
financial penalties is needed to reduce the adverse selection
that would arise due to the new issue and rating
restrictions.
We welcome the opportunity to serve as an ongoing resource
to you as health care reform legislation is considered in the
Senate and through remainder of the legislative process. If
you have any questions or would like to discuss these
comments further, please contact Heather Jerbi, the Academy's
senior health policy analyst (202.785.7869;
J[email protected]).
Sincerely,
Cori E. Uccello,
Senior Health Fellow.
Mr. ALEXANDER. All in all, these factors suggest why, when Senator
Collins took a look at Maine, she found that 87 percent of people in
Maine are paying less for their individual policies than the policies
would cost under the Reid bill. It is true that half or more of them
would receive some subsidy, which would reduce their costs, but around
half of them will pay more. In Tennessee, Blue Cross Blue Shield, which
covers about one-third of Tennessee's individual market, estimates the
premiums for those individuals will increase by 30 to 45 percent under
the Reid bill.
I ask unanimous consent to include a chart which demonstrates that.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[[Page S835]]
[GRAPHIC] [TIFF OMITTED] TS01MR10.002
[[Page S836]]
Mr. ALEXANDER. At our summit on Thursday, there were a number of good
ideas about reducing health care costs that the President seemed to
share with Republican Members who were there. There was some obvious
irritation on the part of the majority leader and others when we said
things such as there is $\1/2\ trillion worth of cuts in Medicare,
which there are. Our real objection to it is that the cuts are not used
to save Medicare, which is going broke, but spent on a new program--
$\1/2\ trillion in new taxes. There is $\1/2\ trillion in new taxes.
As I have just said, they tend to increase premiums for millions of
Americans. There are premium increases. There is a deficit increase.
It is true the CBO has said that what was presented to them didn't
increase the deficit, but what was not included in what was presented
was paying doctors to serve patients in the government program we call
Medicare. That is like having a horse race without the horses. How are
you going to have a comprehensive health care bill and not include
within its costs paying doctors to serve patients in the government
program? When you put it in, the deficit goes up.
Then there is a problem of the passing off to States these expanded
Medicaid costs without paying for them. I know as a former Governor--
and I see the former Governor of Virginia in the chair--I struggled
with that every single year. All the Governors are today in both
parties. They don't want us sending them a bill for expanded health
care. They can't pay the bills they have. We shouldn't do that. If we
want to expand it, we should pay for it. That is another part of the
bill.
So I came to the floor today to, No. 1, express my appreciation to
the President for inviting us Thursday. It gave us a chance to show who
we are and what we are for. I thought it was a good discussion. I
believe there are 8 or 10, maybe a dozen different good ideas Senator
Coburn and people on both sides of the aisle suggested. There are some
differences between those ideas but, basically, they represent a way to
move forward to reduce health care costs. That is what we ought to do.
We don't do comprehensive very well in the Senate. Comprehensive
immigration failed of its own weight. Comprehensive economy-wide cap
and trade seems to be failing, again of its own weight. Comprehensive
health care is very difficult to pass. That shouldn't be a surprise to
any of us. This is a very big, difficult, complicated country with
people of many different backgrounds and, in my judgment, we are just
not wise enough for a few of us to rewrite the rules for 17 percent of
our economy.
I think the American people have tuned into that. They want us to fix
health care, but they want us to reduce costs. Again, we on the
Republican side are ready to set that goal and, as we said 173
different times on the Senate floor the last six months of last year,
we have offered 6 steps to move toward that goal. Maybe the President
can think of six more. Maybe we can think of six more. We did that with
the America COMPETES Act. We asked the national academies: What are the
10 steps that can help us become more competitive as a country? They
gave us 20, and we passed most of them. In clean energy, we are coming
together on nuclear power, offshore drilling, and energy development.
Those are steps toward a goal that would be a more sensible way for us
to work.
In the meantime, the unpleasant truth is, the current bill being
considered--will cut Medicare, not spend it on Medicare--will raise
taxes, and it will, as I have tried to demonstrate with respect to the
President, raise individual premiums because of the one-size-fits-all
government mandates and tax increases.
Finally, I commend to my colleagues today's editorial from the Wall
Street Journal detailing how the Massachusetts health care plan has
unexpectedly caused premiums to rise over the last couple years and
what lesson there might be in that for us.
I yield the floor and suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
____________________