Health Care Reform

September 16, 2009

Federal Legislative Overview:

Last week Congress returned from its August recess with an incredibly busy schedule on health care reform. Max Baucus (D-MT), Chairman of the Senate Finance Committee, released the Finance Committee's $856 billion health care reform bill and will proceed with amendments due no later then this Friday, September 18, and opening statements and markup beginning September 21.

The Senate Health, Education, Labor and Pensions (HELP) Committee also released the final legislative language for its health care reform bill, “Affordable Health Choices Act” initially approved by the Committee on July 15.  Information on the HELP Committee and its legislation can be found on the Committee’s web site at:  http://help.senate.gov/

Senator Tom Harkin (D-IA) will assume the Chairmanship of the Senate HELP Committee vacated by Senator Edward Kennedy (D-MA) upon his death late last month.  Former Acting Chairman, Christopher Dodd (D-CT) will continue to lead the Committee’s health care reform efforts over the next few months.

Overview: President Barack Obama Addresses a Joint Session of Congress on Health Care Reform

President Obama delivered a speech to the full Congress on Wednesday, September 9 laying out his goals for health care reform and reiterating that reform measures must happen this year and that it would take the combined efforts of both sides of Congress to make it happen.  President Obama called for more stability and security for people who have health insurance; access to quality, affordable insurance for those who don’t by creating a new health insurance marketplace exchange; and control of the cost of health care by ending existing waste, implementing reforms and adding employer responsibility requirements.

Our position on President Obama’s remarks is below:

I share President Obama’s desire to achieve bipartisan health care reform.  Additionally, I am pleased to hear the President say that reform should build on what already works in the health care system and fix what doesn’t. That has always been my position

However, I do not agree that a new government-run health plan is necessary to achieve health care reform. In fact, it will have unintended harmful consequences to reform goals. I would like to see a greater emphasis on wellness in all the reform proposals. With 75 percent of the health care spending in the United States going to chronic disease treatment, we must pay more attention to the main drivers of these diseases by encouraging all Americans to eat better, exercise more and smoke less.

I agree that this historic opportunity to improve our health care system should not be lost. And so we urge the President and members of Congress from both parties to find common ground and move ahead on health care reform.

Fact vs. Fiction:  Health Insurance Reform

Claim: There is inadequate competition in the insurance market and insurer profits are high

Fact:  There is significant competition in local health insurance markets. There is a median of 27 carriers serving the small group market in each state, with a range varying from four insurers in Hawaii to more than 300 in Indiana (GAO, 2009). Moreover, health plan profits are much lower than most other industries – averaging 2-3 percent per year. Health plan profits have declined in 2009.

Claim: A high percentage of premium dollars go towards private plans’ administrative costs.

Fact: Private health plans’ administrative expenses are much lower than commonly perceived.  Based on 2007 data from Sherlock Co., administrative expenses represented 9 percent of premiums and costs for small employers and individual insurance were 11 percent and 16 percent of premiums respectively, amounts that are two to three times lower than commonly cited.

Additionally, according to a PriceWaterhouse Coopers report, the health care premium increases between 2004 and 2005 were driven by increased utilization (43 percent), general inflation (27percent) and health care price increases in excess of inflation (30 percent).  The last category was driven by increased costs of labor, higher-priced technologies, provider consolidation and movement among purchaser toward broader-access health plans.  Administrative costs are not cited as a cost driver.