Baucus White Paper on Coverage Expansions
Yesterday the Senate Finance Committee released its second white paper, this one on health coverage options. The document is attached, and below is a summary of the highlights of same.
Federal Regulation of Insurance: The paper proposes federal regulation limits on premiums and benefit designs for both individual and small group health insurance plans. Federal rating rules would mean carriers could only vary premiums based on tobacco use, age, and family composition, and could not vary premiums by more than a 7.5:1 ratio overall. The proposal would establish a nationwide Exchange — individuals could purchase outside the Exchange, but tax credits/premium subsidies would only be available to individuals using the Exchange. State insurance commissioners would be required to ”develop a plan to decertify and remove the seal of approval from certain health benefit plans.”
Health insurance plans would be required to cover “a broad range of medical benefits,” could not impose either annual or lifetime limits on benefits (as many currently do), and would only be permitted to charge nominal cost-sharing amounts for preventive services. The paper proposes four actuarial levels of benefits, based on the amount of annual health expenses paid by the plan — the levels range from 76-93%. (By comparison, the Blue Cross Blue Shield Standard Option in FEHB pays for 87% of health expenses.)
Tax Credits/Subsidies: The paper proposes refundable, advanceable tax credits/premium subsidies to individuals making between 100-400% FPL, with the amount of the credit tied to both premium levels and income. (In 2009, the federal poverty level is $22,050 for a family of four.) While individuals technically will not be forced out of their current coverage, ”no low-income tax credits would be provided to those enrolled in grandfathered plans” under the old (i.e. existing) regulatory regime. The paper also includes a tax credit — this one not advanceable or refundable — for small businesses equal to 50% of total premium cost for full-time employees; the full credit would be available to businesses with 10 or fewer workers where average wages are less than $20,000.
“Public Option”: On the government-run plan, the paper does discuss omitting this element entirely, but also lays out three scenarios for this “public option” — one where the plan would be directly administered by HHS, one with a third-party administrator that negotiates rates, establishes provider networks, and holds reserve funds, and a third allowing for states to create their own “public” plans. Note that the first scenario for a “Medicare-like” plan administered within HHS calls for provider reimbursement rates of “Medicare rates plus 0-10%” — which the Lewin Group has already stated will result in 120 million Americans losing their current coverage.
Medicaid Changes: The paper proposes both new incentives to and unfunded mandates on states. States would be required “to raise income eligibility for pregnant women, children, and parents…up to 150% FPL,” and to expand eligibility to childless adults (generally not eligible for Medicaid coverage under existing law) up to perhaps 115% FPL. While these expansions would be fully paid for by the federal government through 2015, states would gradually assume responsibility for these new populations thereafter. The paper also discusses a new requirement that Medicaid reimbursement rates not fall below 80% of Medicare payment levels — which could require states to spend more to pay providers than under their current plans. The paper would prohibit asset tests from being imposed on acute care Medicaid applicants, which could increase beneficiary rolls, and would require states to make prescription drug benefits available to all Medicaid beneficiaries (an expansion from current law).
The white paper also calls for changes to the Medicaid match (FMAP) formula, such that one-third of the formula would be based on states’ relative poverty levels, with two-thirds based on states’ relative per capita income levels. (Currently, the entire formula is based on income.) The FMAP formula would also be increased automatically whenever at least 23 states report a 10% increase in the quarterly unemployment rate (i.e. from 5% to 5.5%) when compared to two years previously; increases would be provided based on the increased Medicaid costs associated with increases in the unemployment rate. The proposal also includes several provisions relating to Medicaid waiver authority and eligibility.
Mandates: The paper includes discussion of both individual and employer mandates, and tax increases associated with same. On the former, the paper proposes various open enrollment periods, and reporting to the IRS that individuals obtained health coverage. Penalties would eventually include a tax equal to 75% of the cost of the lowest plan available through the Exchange. Individuals with income below the poverty line would be exempt from penalties, as would those who could not find a plan costing under 10% of the person’s income. Notably, undocumented aliens would also be exempt from the mandate.
On employers, the proposal discusses a “pay-or-play” option that would impose taxes based on the firm’s total payroll — firms with payroll under $500,000 would be exempt. Tax penalties would range from $100-500 per employee per month, or from 2-6% of payroll, with firms having payroll over $1,500,000 subject to the highest penalty levels. The paper does leave open the option of excluding the employer mandate (whereas the individual mandate is presumed as a given).
Other Provisions: The paper includes a variety of other proposals for health coverage reform or expansion, including:
- “Temporary” Medicare buy-in for individuals aged 55-64, until such time as the Exchange was established – premiums would equal expected costs plus 5%.
- Elimination of the five-year waiting period for legal immigrants to apply for Medicaid.
- Conversion of SCHIP into a “wrap-around” program, providing supplemental cost-sharing coverage (consistent with Medicaid rules) to children who purchase coverage through the Exchange — eligibility would be reduced to 275% FPL, with no income disregards permitted.
- Expansion of family planning services within Medicaid, with a new requirement that all states include family planning services.
- Reduction or elimination of the current 24-month waiting period for disabled individuals to become eligible for Medicare.
- Incentives related to long-term care, and specifically the promotion of home and community-based services, including expanded waiver authority, a 1% increase in the federal Medicaid match for home and community-based services, relaxation of Medicaid asset tests for long-term care eligibility, and new grant proposals.
- Various incentives (including lower or waived co-payments in Medicare and Medicaid) for preventive services, as well as new programs of grants to states for wellness programs and credits to employers providing wellness programs.
- Enhanced data reporting and grants regarding health care disparities, and an increase in the federal Medicaid match for translation services.