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.
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.
0:00 /2:07Health reform and you
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. To top of page
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