Obama Health Plan Would Expand Insurance Coverage

“Change” was the mantra of President Barack Obama’s campaign, and health care was a main arena he pledged to reform.

“The time has come for affordable, universal health care in America,” Obama said when he introduced his health-care initiative at the outset of the campaign. However, most observers agree that his plan would expand the reach of health insurance coverage, but not come close to making it universal. His strategy also includes measures aimed at decreasing costs, improving efficiency, and increasing the focus on chronic diseases.

Some experts believe that the intervening economic crisis will force Obama and his strategists to scale back their plans.

“Big-time health reform is very hard to do and given the budget deficit and economy, it will be even harder to enact something like Obama proposed during the campaign,” said Jonathan Oberlander, PhD, associate professor at the University of North Carolina Chapel Hill School of Medicine and School of Public Health. “So during the first year of an Obama administration there is a strong chance health reform will be incremental: expanding SCHIP (the State Children’s Health Insurance Program) will be a priority. After that, the administration will have to decide whether to take a risk on ambitious reform that could well fail.”

Oberlander published a side-by-side analysis of the health-care proposals of Obama and Republican presidential nominee John McCain in the New England Journal of Medicine during the campaign.

“I think the U.S. health care system would be in much better shape under the Obama plan than it is today,” he told ASN Kidney News. “The Obama plan would substantially expand insurance coverage and provide the uninsured with new public and private insurance options. At the same time, it has significant weaknesses, including the absence of both a realistic financing mechanism to pay for expanded coverage and reliable cost controls.”

The heart of the plan is an attempt to make health insurance more accessible and affordable through a combination of a new public insurance option, expansion of the SCHIP, employer mandates, tax credits, and greater regulation of insurance companies.

The provision that could stir the most controversy is the promise to introduce a “public plan” that would compete with private insurance plans, and “offer benefits similar to what every federal employee or member of Congress gets,” according to the campaign website.

A National Health Insurance Exchange would be created as a mechanism for businesses and individuals without access to other public programs or employer-based coverage to enroll in the new public plan or an approved private plan. Income-based sliding-scale tax credits will be provided for those who need them.

The plan requires that all children have health-care coverage, with young adults up to age 25 eligible to continue coverage through their parents’ plans. Expansion of SCHIP will make it easier for more parents to obtain coverage for their children, and individuals will be offered tax credits for purchasing insurance.

Except for the smallest businesses, employers will be subject to a “play or pay” provision, in which they will be required to “offer meaningful coverage or make a meaningful contribution to the cost of quality health coverage for their employees” by paying a percentage of payroll to help fund the national plan.

Small businesses would be eligible for a refundable tax credit for offering an approved health plan, and the government would provide a “reinsurance” pool, which would provide aid when the catastrophic costs of an employee or two threaten the firm’s ability to obtain affordable insurance.

Insurance companies would be required to cover pre-existing conditions as a part of making insurance more portable, so patients will be free to change jobs and change insurers in pursuit of the best coverage at the best price.

A study by The Lewin Group, a Virginia-based health-care consulting firm, projects that full implementation of the plan in 2010 would reduce the ranks of the uninsured by more than 50 percent, from a projected 48.9 million to 26.6 million. The study also projects a decline in the number of people enrolled in private plans, resulting from individuals and small businesses electing to enroll in the public plan.

Bringing down costs

A major objective of the plan is to take on health-care costs broadly, with a willingness to spend federal dollars in a way that reduces costs across the board.

The most ambitious step is to spend $50 billion over five years on the implementation of electronic health information systems and records. The Obama plan quotes a Rand Corporation study that the use of electronic health records could save $77 billion a year in reduced hospital stays, avoidance of unnecessary testing, better drug use, and other efficiencies. The Congressional Budget Office has rejected the Rand numbers, but The Lewin Group estimates that the $50 billion investment would lead to savings of $11 billion per year.

Other cost-cutting measures are much less specific, and include expansion of prevention and disease management programs, for example, by requiring that plans participating in the National Health Insurance Exchange be required to use proven disease management programs.

Increasing competition

The plan also promises to “lower costs by taking on anticompetitive actions in the drug and insurance companies.” The cost-cutting actions include:
  • allowing Medicare to negotiate with drug companies for cheaper prices by amending the 2003 Medicare Prescription Drug Improvement and Modernization Act.
  • allowing the importation of drugs from other developed countries where prices are lower.
  • preventing drug companies from blocking generic drugs.
  • reducing overpayments in Medicare’s private plan alternative, Medicare Advantage, which cost the government an estimated 12 percent more than traditional Medicare.
  • increasing competition by introducing the public plan in an industry that has become increasingly dominated by large companies, with two companies controlling a third of the national market.

The plan’s architects say that, taken together, these cost-containment measures could save about 8 percent of overall health spending, bringing the average annual cost of insurance down about $2500.

The Lewin Group estimates that together the measures in the plan could lower costs by about $50 billion a year.

Prevention

The plan also aims to address the country’s “epidemic of chronic disease,” including obesity, diabetes, heart disease, asthma, and HIV/AIDS. “Our health-care system has become a disease-care system,” the plan says, promising to address “underinvestment in prevention and public health.”

The plan is short on specifics or dollar amounts on how this will be done, but notes that “preventive care only works if Americans take personal responsibility for their health and make the right decisions in their own lives—if they eat the right foods, stay active, and stop smoking.”

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Outlook for passage

The plan’s architects say it would cost the federal government $50 billion to $65 billion a year when fully phased in, with the up-front costs “more than covered by allowing the Bush tax cuts to expire for people making more than $250,000 per year.” However, the Congressional Budget Office already factors the expiration of these cuts into federal deficit projections, so many observers question this as a funding mechanism. And congressional Democrats have emphasized “pay as you go” rules, requiring spending increases to be offset by revenue increases or compensatory cuts in other budget items.

The current economic climate is expected to restrict federal revenues available for any new programs, but with health insurance premiums doubling in the past eight years and a troubled economy likely to leave more people uninsured, there will also be pressure to act.

Nephrology angle?

There appears to be little in the plan directed specifically at nephrology, but Jonathan Himmelfarb, MD, director of the Kidney Research Institute and professor of medicine at the University of Washington in Seattle, said that the field would benefit from more widespread health insurance coverage and lower drug prices.

“Most people with chronic kidney disease are unaware that they have [it]. Many people . . . present to the health-care system with advanced disease which is often at that point irreversible. So if the Obama plan allows more people to achieve health-care coverage early and receive preventive care, that should be beneficial in terms of kidney disease in general,” Himmelfarb said. “Dialysis patients, kidney transplant patients, and people with chronic kidney disease are often on so many medications that they fall into what’s called the doughnut hole of Medicare part D coverage, and if costs of prescription drugs come down, this may turn out to be beneficial for some patients with kidney disease by eliminating the hole in coverage that they now experience.”

But the “big action” from the standpoint of nephrology in 2009 is likely to stem from legislation that has already passed, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).

“MIPPA has a number of very substantial provisions around the bundling of care for end-stage renal disease and dialysis, and provisions around reimbursement for education, for prevention, and stage 4 chronic kidney disease that are very important for nephrology practice. MIPPA leaves a lot of discretion in the hands of the secretary of health and human services, as to how these provisions are going to be implemented,” Himmelfarb said.

It is hard to divine what Obama’s appointment of former Senate majority leader Tom Daschle as secretary of health and human services bodes for MIPPA, but as for the greater agenda, Oberlander said: “The pick of Daschle is a sign that Obama is serious about comprehensive health reform. Daschle favors ambitious reforms similar to those proposed by the president. And it’s a sign they are serious about working well with Congress.” Daschle’s interest in health-care reform extends to publishing a book on the subject in 2008, Critical: What We Can Do About the American Health-Care Crisis.