[StBernard] 5 freedoms you'd lose in health care reform

[Westley Annis]

5 freedoms you'd lose in health care reform
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.
By Shawn Tully, editor at large
July 24, 2009: 10:17 AM ET
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.

Let's explore the five freedoms that Americans would lose under Obamacare:

1. Freedom 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.

Today, many 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 vitro fertilization.

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.

2. Freedom 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.

Americans with 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.

Second, the 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.

3. Freedom 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.

Hundreds 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."

4. Freedom 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.

The legislation 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.

The outlook 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.

The employees 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.

5. Freedom 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.

In reality, 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.

Companies would 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 Endangered Freedoms. 
 

  
 
  
 

  
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