De-Sweetening Health Care Reform

The health care reform package being finalized by Congressional Democrats and the White House is chock full of benefits for specific states and interest groups. Some of that is inevitable in any legislation, regardless of the party in power. But the health care reform bill is widely viewed as an extreme example – we’re talking cotton candy level on the sweetness scale.

Now a Democratic Senator is trying to tone down the glucose level of the health care reform bill. Senator Russ Feingold has sent a letter to Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi requesting that “sweeteners” be removed from the final health care bill, January 14, 2010 “originally inserted to win over the support of certain members of Congress.” In the letter, Senator Feingold recognizes that there are “valid policy or fairness reasons why certain states or interests may receive seemingly different treatment.” However, he specifically cites “unmerited Medicaid assistance to certain states and carve-outs to avoid cuts to certain Medicare Advantage plans” he describes as “indefensible.” These provisions, he charges, “are intended to provide an undeserved windfall to specific states” and should be removed from the health reform bill.

Senator Feingold is right, both from a public policy perspective and from a political view. Both Democrats and Republicans engage in the practice of securing votes by inserting provisions into bills aimed at benefiting a specific Senator’s home state. That’s the American way. Really, it is.

But health care reform is complicated, controversial and sensitive. Hyper-sensitive. This is an issue that has generated charges of the American government threatening to kill old people, death threats against members of Congress, and outrageous hyperbole that only the CFO’s at Fox News and MSNBC could love. More significantly, this legislation is also going to impact every American in a highly personal way and significantly impact one-sixth of the nation’s economy. An issue like this should not be subjected to politics as usual. Removing the sweeteners makes sense.

Not that anyone asked, but I don’t think the deal struck yesterday with the unions yesterday falls into the sweetener category (at least not what we know so far. Apparently the deal postpones a tax on rich health plans until 2018, but only for coverage required by labor agreements and for state and local government workers. The compromise also removes vision and dental plans from the calculation of the value of a plan and raises the threshold for taxation from $23,000 for family coverage to $24,000. There are also adjustments for older workers and women.

The reason why I don’t view this deal as a pay-off for union support is because the nature of union agreements means a transition period make sense. Collective bargaining agreements have been made pursuant to the rules in effect today. These rules encourage unions to trade-off wage increases for enhanced (and more expensive) health benefits. To now change the rules without allowing time for new negotiations seems a bit unfair. Whether five years is needed for the transition or a shorter period of time would be sufficient is a level of detail I can’t address.

The same logic should apply to whatever mandated medical loss ratios wind up in the final bill. Health care reform is likely to require health plans to spend a minimum of 80 percent (for individual and small group coverage; 85 percent for large group plans) on claims payments. The legislation passed by the Senate would impose this requirement effective January 1, 2011. yet health plans have contracts in place with brokers, vendors and others that were made under the old rules. To now change those rules and impose spending requirements is both unfair and impractical. The disruption and pain resulting from failing to provide an adequate transition to mandated medical loss ratios will be felt not just by brokers and insurers, but by consumers and voters as well.

Should President Obama, Senator Reid and Speaker Pelosi eliminate the political sweeteners in the health care reform legislation they’re writing? Yes. Should they eliminate transition periods that ease the transition to the new world they’re creating? Yes. And those transition period should be offered to unions and health plans.

7 thoughts on “De-Sweetening Health Care Reform

  1. It is essential,both substantively and politically ,that the health insurance reform process moves forward.From a substantive standpoint,health reform must pass so that the stop increase in costs and number of people without health coverage is remedied

    • Sir,

      What, in the current bills guaratees the escalation of HEALTH CARE COSTS? Answer, NOTHING!

      The Health Insurance modifications will increase costs, that is fact.

      We must, for the sake of intelligent debate, separate the cost of care from the insurance. Politiciams have made an art out of blurribg and erasing the lines between the two.

      Health care costs are ruled greatly by science and `influenced greatly by the practice of defensive medicine, cost shifting due to government plans mainly and fraud.

      Health insurance is, in large part, one of many financing tools for care,,,reactive mainly to Health care costs and all that influences them.

      We all see the need for reform, but real reform not the impostors offered thus far.

      To quote from a recent film title “it’s Complicated” and even 6 to 9 months isn’t even time for critical thinkers from all walks of American life to help shape real redorm.

      And not laden with special perks for anyone, not: Congress, the White Houses, unions, Seniors in Florida, Medicaid in Nebraska, the Louisiana Purchase and others.
      And worked on in the light of day,,,no closed and locked doors.

      Let’s do reform correctly.

      Isn’t it only fair?


  2. Alan, you said: “The reason why I don’t view this deal as a pay-off for union support is because the nature of union agreements means a transition period make sense… These rules encourage unions to trade-off wage increases for enhanced (and more expensive) health benefits. To now change the rules without allowing time for new negotiations seems a bit unfair.”
    I confess that I find your reasoning puzzling. It appears that every deal cut to ultimately force this health care reform agenda through Congress to the President’s desk has been cut behind closed doors, in contradiction to every word uttered by Obama during the campaign regarding “transparency” and “open government”. That includes deals cut behind the President’s closed doors such as profit preserving deals with Big Pharma, the AMA, and the Unions, not to mention the deals cut with Senators Blanche Lincoln, Ben Nelson and others to buy their votes as is commonly done when corruption and secrecy play an important role in the “negotiations”.

    Unions have brought this country to its knees, whether the NEA, the AFL/CIO, the Teamsters, the Airline Unions, or many others. The Unions themselves exercise philosophies that are in contradiction to “Free market” “rules of engagement”. Suggesting that the Unions being protected from the financially punitive rules being proposed for those who have “Cadillac” plans is not a blatant form of “Pay-back” for support heretofore given to the current administration and the Democratic Party in general seems ludicrous.

    Where are the “Small Business” exemptions? Where are the “Individual Responsibility” (rewarding those who have demonstrated their unwillingness to saddle the taxpayers with paying Medicaid’s bills, by purchasing coverage, at greater costs, to negate running out of money) exemptions, where are the protections for those on Medicare for having responsibly paid into Medicare for decades, who are now being told that $500Billion (One half of a Trillion dollars) will be cut from Medicare funding?

    Of course this is “Payback”, and is “Paying forward”, in an effort to keep the Unions in the Democratic column. I have read nothing in any commentary or press-release since this deal was revealed to suggest otherwise.

    • Hello Spencer. Good to hear from you and thanks for the comment. The point I was trying to make is that there are existing contracts (union contracts, broker agreements, provider network agreements) that will no doubt change under whatever new rules are developed and that there needs to be a transition period to allow an orderly move to the new terms. I’m not sure I agree with you that “Unions have brought this country to its knees ….” Last I looked AIG, Lehman Brothers and the rest of the Wall Street gamblers who are the primary culprit for the current economic crisis are non-union. But again, my post wasn’t about unions per se. It was about the need for an orderly process to whatever the new world might be.

      You ask where the individual and small business exemption is. No one (not even the unions) are being exempted. The union health benefits would be covered by the excise tax in 2018 (and, as I mentioned in the post, that is probably longer than it needs to be). Similarly, the individual mandate will probably be pushed back to 2012 and even then the penalty is likely to be around $75. The full $750 penalty (which is pretty low) wouldn’t kick in until 2014 (assuming the final bill reflects the Senate’s proposal). There’s also a transition period for the business mandate to offer coverage.

      So what I was trying to say in this post: health care reform will require tremendous changes across one-sixth of the nation’s economy. Appropriate transitions should be provided for. These have nothing to do with deals like those struck to benefit Louisiana or Nebraska. Those should simply be removed.

      • Alan, hello to you, and thank you for the welcome. I appreciate your providing this “forum” for debate.
        You stated that you don’t consider the Administration/Union negotiated deal to be “payback” as unions whose contracts are still “in play” must be allowed transition period. Considering that to be the case, then all contracts currently in force between an employer and employee must be allowed that same transition period, even if the Employer/Employee are a group of two. A contract is a contract.

        That said, you used the phrase “payback”. Perhaps that word wouldn’t have been necessary had President Obama not negotiated this deal, behind closed doors, “in the dark”, “away from the light of day”, secretly, in an opaque environment, as has virtually every aspect of the badly conceived health care reform plan philosophically imagined by the President and poorly researched, fleshed out, and hurriedly jammed through both houses of Congress under both ill-defined and well defined threats by both House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.

        Whether the “payoff” for Senator Blanche Lincoln (the deal was not cut to “benefit Louisiana”, it was cut to bribe Senator Lincoln), Senator Ben Nelson (benefiting Nelson, not Nebraska, and now greatly regretted by Nelson), or the Unions (to guarantee their not opposing the Senate version of the health reform bill) is called anything else, it doesn’t alter the fact that these were “Backroom cut deals”, changing their complexion from clear and bright to dark, with the strong stink of corruption.

  3. Alan,

    With respect, the following just doesn’t pass the straight face test. “The reason why I don’t view this deal as a pay-off for union support is because the nature of union agreements means a transition period make sense, etc”. It is a pay-off, pure and simple. As for a special transition, the balance of the American people don’t get one, so the unions shouldn’t.

    I guess my point being is the bill is chock full of unfairness. Why not try and trim that?

    But to suggest unions are in need of this special exemption period seems disingenuous, in the least. The UAW received a gifted interest in GM for concessions over the legitimate needs of GM itself, public employee retirees in Indiana and the other states. Didn’t many keep their jobs thanks to American’s dollars to keep it from failing? Seems like that was a good reward for any concessions. What did the rest of America receive other than debt? Certainly no “concessions” for taxes due to pay for the debt.

    Additionally, this bill greatly diminishes many of the opportunities Medicare Advantage currently provides, except of course if you live in Senator Bill Nelson’s Florida or a few other select states should the “cotton candy” prevail. As one who is about to become Medicare eligible as well as a retiring 40 year veteran of the health insurance industry, I have felt Medicare Advantage Plans have been a great deal. Their superior care outcomes have been proven to provide better care, at less cost, with lower re-admission rates, higher medication compliance and an overall superior experience over Parts A, B, D with a Supplement seemed the best choice for me.

    Please, pardon the sarcasm in my post, but unions have been given way to many special perks for this to stay,,,even with some stretched rationale. And Florida doesn’t need a special Medicare Advantage perk if every state isn’t treated the same.

    How about some perks for average Americans? I am still waiting,,,

    Alan, today’s column is primed for debate. I appreciate the opportunity to engage.

    Happy New Year


  4. I disagree with you on the exemption period. The excise tax originally was to go into effect in 2013, it is now extended to 2018. I doubt there are very many labor agreements in place today that do not expire until 2018.
    I have been monitoring labor agreements in New York State, particularly the Teachers Union agreements, and I will be surprised if there is any reduction in employee health benefits for contracts that expire or have expired between now and 2018. The unfortunate problem, at least as far as municipal health plans go, is that the excise tax will just be passed along to the local taxpayer.

Comments are closed.