Healthcare Overhaul Is Quietly Underway

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Healthcare Overhaul Is Quietly Underway

 

Mon Jan 31, 7:55 AM ET

 

By Ricardo Alonso-Zaldivar Times Staff Writer

 

WASHINGTON — Emboldened by their success at the polls, the Bush

administration and Republican leaders in Congress believe they have a

new opportunity to move the nation away from the system of

employer-provided health insurance that has covered most working

Americans for the last half-century.

 

n its place, they want to erect a system in which workers — instead of

looking to employers for health insurance — would take personal

responsibility for protecting themselves and their families: They

would buy high-deductible " catastrophic " insurance policies to cover

major medical needs, then pay routine costs with money set aside in

tax-sheltered health savings accounts.

 

Elements of that approach have been on the conservative agenda for

years, but what has suddenly put it on the fast track is GOP

confidence that the political balance of power has changed.

 

With Democratic strength reduced, President Bush (news - web sites),

Senate Majority Leader Bill Frist (R-Tenn.) and House Ways and Means

Committee Chairman Bill Thomas (R-Bakersfield) are pushing for action.

 

Supporters of the new approach, who see it as part of Bush's

" ownership society, " say workers and their families would become more

careful users of healthcare if they had to pay the bills. Also, they

say, the lower premiums on high-deductible plans would make coverage

affordable for the uninsured and for small businesses.

 

" My view is that this is absolutely the next big thing, " said former

House Speaker Newt Gingrich, whose consulting firm focuses on

healthcare. " You are going to see a continued move to trying to get

people involved in the process by owning their own health accounts. "

 

Critics say the Republican approach is really an attempt to shift the

risks, massive costs and knotty problems of healthcare from employers

to individuals. And they say the GOP is moving forward with far less

public attention or debate than have surrounded Bush's plans to

overhaul Social Security (news - web sites).

 

Indeed, Bush's health insurance agenda is far more developed than his

Social Security plans and is advancing at a rapid clip through a

combination of actions by government, insurers, employers and individuals.

 

Health savings accounts, known as HSAs, have already been approved.

They were created as a little-noticed appendage to the 2003 Medicare

prescription drug bill.

 

HSAs have had a strong start in the marketplace. Although regulations

spelling out how they would work were not issued until mid-2004, as of

Sept. 30, about 440,000 people had signed up. And more than

one-quarter of employers say they are likely to offer them as an option.

 

The accounts are available only to people who buy high-deductible

health insurance, either through an employer or individually.

Consumers can set aside tax-free an amount equal to their deductible.

Employers can contribute to workers' HSAs but do not have to. Unused

balances can be rolled over from year to year, and employees take

their HSAs with them when they switch jobs.

 

The idea that losing one's job would not automatically mean losing

protection for medical costs has bipartisan appeal. " Portability " was

a key feature of President Clinton (news - web sites)'s ill-fated

healthcare reform plan. But the GOP approach is significantly

different: Whereas Clinton would have required all employers to chip

in for universal health insurance, Bush wants to leave responsibility

primarily to individuals.

 

" This is certainly getting a lot of attention from employers, " said

Jack Rodgers, a healthcare analyst for PricewaterhouseCoopers LLP.

 

One reason is potential cost savings to employers.

 

A typical catastrophic health insurance plan carries an annual

deductible of about $1,600 for an individual when purchased through a

large employer. That means the worker pays the first $1,600 of

healthcare expenses each year. By contrast, under the more

comprehensive, employer-provided health insurance programs common

today, the company begins to pay after about $300 in expenses have

been incurred. Deductibles for families are considerably higher under

both types of plans.

 

" There's an issue about whether these things will work, " Rodgers said.

" [but] we could end up coming back 10 years from now and everybody

will have high-deductible plans and [health savings accounts]. "

 

Sen. Ron Wyden (news, bio, voting record) (D-Ore.), who agrees with

Bush that individuals should take more responsibility for controlling

health costs, is nonetheless skeptical that HSAs, coupled with

high-deductible insurance, will prove workable as a substitute for the

present system.

 

 

 

" I think the American people are going to want more of a safety net

than the administration has been willing to commit to this far, " Wyden

said.

 

Still, catastrophic health insurance is gaining credibility as a

policy option.

 

The California Medical Assn. supports a plan that would require all

residents of the most populous state to carry at least high-deductible

coverage — just as automobile liability insurance is often mandatory.

White House spokesman Trent Duffy said Bush was not contemplating such

a requirement at the federal level.

 

But the existence of health savings accounts may make it easier to

enact state mandates such as the California proposal.

 

Despite the record federal budget deficit, Bush on Wednesday proposed

additional tax breaks and subsidies for HSAs, particularly for

low-income families. He also called for a tax credit to help small

businesses offer the plans to their employees. The low-income aid

would be worth a maximum of $3,000 per family.

 

" Health savings accounts all aim at empowering people to make

decisions for themselves, owning their own healthcare plan, " the

president said. Consumer-driven decision-making is more likely to

control costs than having bills paid by a third party, such as an

employer, he added.

 

" If a third party makes that payment, [the consumer] never gets to ask

the question [about cost], " Bush said. " He just accepts the decision.

And all of a sudden, when you have consumers starting to ask questions

about cost, it is a governor on cost, at the very minimum. "

 

During his confirmation hearings, incoming Health and Human Services

(news - web sites) Secretary Michael Leavitt called for renewing the

national debate over the future of the healthcare system and spoke of

" the transformational need of detaching healthcare and employment. "

 

Critics say that Bush's vision represents wishful thinking at best,

and at worst, a perilous new direction in national health policy.

 

" One danger with this is that people will not get needed care because

they want to save a few thousand bucks, " said Rep. Pete Stark

(D-Hayward), a leading lawmaker on healthcare.

 

" Healthcare isn't like buying a Chevrolet, " Stark added, disputing

Bush's assertion that individual patients can be empowered to control

costs. " You can go to Consumer Reports and read about the new Malibu,

but if I asked you to describe a regimen of chemotherapy for someone

who has colon cancer, you'd be out of gas.

 

" We are talking about highly technical services that 99% of the public

doesn't even know how to spell the names of, " he said. " Secondly,

there is no uniformity within the medical community as to what

services ought to be used. It's a 'by guess and by gosh' sort of

practice. "

 

The combination of HSAs and catastrophic insurance is too new for any

definitive data on how consumers are faring.

 

A study released Thursday by the Commonwealth Fund, a private

foundation that supports research on healthcare policy, found that

people with high-deductible policies were more likely to have trouble

paying medical bills than those in traditional insurance plans. They

were also more likely to skip care because of cost.

 

The study did not look at the combination of high-deductible plans

with HSAs, but the report cautioned that the savings accounts might

not solve all the problems.

 

Many experts believe HSAs could quickly become one of the main ways to

obtain health insurance for people working in small companies or

buying coverage on their own.

 

Workers at large companies with standard health plans may be less

likely to experiment with HSAs, although many large employers are

already requiring their workers to shoulder a bigger share of health

insurance costs. The existence of a government-sanctioned alternative

to the traditional system might accelerate that trend.

 

" We are not trying to do one big change for the whole country, all at

once — like what sunk Hillary-care, " said Grace-Marie Turner,

president of the Galen Institute, a research organization that

promotes conservative, market-based health reform.

 

" We want to let people choose this if it meets their needs, and not

rip out the underpinnings of the current system. "

 

But even the most ardent backers of HSAs concede that the country is

not fully ready for them. They say critics such as Stark are correct

to point out that there is little information available to consumers

for comparing the costs of various medical options.

 

In a recent article in the New England Journal of Medicine (news - web

sites), Frist called for what would amount to a healthcare information

revolution. Within the next decade, he said, patients should be able

to gain online access to performance rankings and prices for doctors

and hospitals.

 

" Increased access to more accurate information about care and pricing

will make possible … the transformation of the healthcare system, "

Frist wrote. " Whether selecting their physician, hospital or health

plan, consumers must be able to choose what best meets their needs. "

 

A comprehensive system of healthcare information would be costly to

create, and perhaps challenging for patients to navigate. On Thursday,

Bush proposed some initial steps, such as computerized medical records

and standardized information technology for medical offices.

 

His vision of an empowered patient calling the shots may stand little

chance without a new information infrastructure.

 

Gingrich acknowledged: " You can't have an informed marketplace in a

setting where you don't have any information. "