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.