Congress has a wide range of health policy reforms to consider when it opens its 108th session this month. Among the issues it is expected to address are a Medicare prescription drug benefit, the uninsured, making health insurance affordable, medical malpractice reforms, Medical Savings Accounts, Association Health Plans, and Medicare and Medicaid reform.
One of the reasons so many issues remain to be addressed is the inaction of the 107th Congress. While many health-related bills passed one of the two houses, only the Trade Act of 2002 was signed into law. That measure gave tax credits for health insurance to trade-related displaced workers and other retirees, and financial aid to state high-risk pools.
The chances of passing free-market health policy reforms are better now than they were last year. Republicans’ success in the November 2002 elections means the same party now controls the White House, House, and Senate. That should help synchronize the agenda in the House and Senate, although bipartisan support still will be needed to pass any substantial health policy reform measure.
Medicare Prescription Drug Benefit
Passing a prescription drug benefit for senior citizens is a top priority for leaders of both parties. Republicans prefer reform proposals that use private competing drug insurance plans to deliver the drug benefit, with extra subsidies for low-income seniors. Democrats have called for a government-run benefit within the current Medicare program.
The cost of the drug benefit will be a major sticking point. Proposals currently under discussion would cost at least $350 billion over 10 years, with some more comprehensive proposals carrying a price tag as high as $1 trillion over that period. It may be difficult to find revenue sources for such expensive proposals.
The 108th Congress is also expected to tackle broader reforms to the Medicare program. Many House Republicans and President George W. Bush have expressed interest in reforming Medicare Plus + Choice, changing provider payment formulas, and initiating competitive bidding for medical equipment. The prescription drug benefit debate will open the door for debate on how to address the long-term stability of the program.
According to the Census Bureau, about 41.2 million people in the U.S. are without health insurance. This is a problem Congress cannot ignore.
Republicans, led by President Bush, would like to build on the example set by the trade bill to provide tax credits for the purchase of private insurance. Many Democrats, by contrast, are already preparing proposals that would expand current public programs, impose employer and individual mandates, or establish a single-payer system.
In his 2003 budget, Bush proposed a tax credit program for the uninsured that would provide a $1,000 tax credit for individuals, and $3,000 for families, who purchase private insurance. Bush is likely to include the plan in the 2004 budget.
Sen. Edward Kennedy (D-Massachusetts) is expected to offer a proposal that would force employers with five or more workers to provide health insurance coverage to workers and their dependents. A bill with an individual mandate is forthcoming from Sen. John Breaux (D-Louisiana).
Affordable Health Insurance
With health insurance premiums increasing about 12.7 percent in 2002, many employers are requiring employees to bear more of the premium cost … or they’re dropping coverage altogether. Congress needs to find ways to make health insurance more affordable, or many more Americans will join the ranks of the uninsured.
One especially effective measure Congress could take would be to expand the availability of Medical Savings Accounts. Under current law, MSAs are available only as a demonstration project that must be periodically renewed, and enrollment is limited to 750,000 people who are either self-employed or employed by small businesses. Insurers have been hesitant to offer MSA products to a market kept small by these rules.
Congress could also allow flexible deductibles in the insurance component of the plan to make MSAs more affordable. Currently the plans can be offered with only a narrow range of deductibles. Moreover, current MSA rules allow only the employer to contribute to the account. Allowing employees to contribute to their own spending accounts would make MSAs more attractive to consumers seeking more control over health care spending decisions.
Association Health Plans
The creation of new purchasing pools for small businesses, called Association Health Plans, would make health insurance more affordable for small businesses while giving them some of the advantages enjoyed by large employers.
Small businesses have been hit hardest by rising health care premiums. Few can afford premium increases of 12 percent or more each year, especially in a slow economy. Small businesses are hurt further by costly coverage mandates, from which large self-insured companies are exempt.
Census Bureau figures show Americans who work for businesses with fewer than 25 employees were half as likely to have health insurance last year as those who work for companies with more than 1,000 employees.
Association Health Plans would help alleviate this problem by allowing small businesses to band together to purchase health insurance through associations, reducing the costs to any one business through economies of scale. The availability of such purchasing pools would make it easier for small businesses to provide health insurance.
Medical Malpractice Reform
The cost of medical malpractice insurance is so high in some states that doctors are moving their practices to other states or retiring from the profession completely. [See “Medical Liability Reform: A Physician’s Perspective,” page 8.] The problem is particularly acute for high-risk specialists such as OB/GYNs and neurosurgeons.
Soaring malpractice insurance rates are caused by high jury awards, which can be in the millions of dollars. Jury Verdict Research, which tracks jury awards, reports awards have increased 175 percent since 1994, to a median of $1 million in 2000.
Congress can address this problem by passing a tort reform bill. In September of last year, the House passed a measure that capped pain-and-suffering awards at $250,000 and punitive damages at $250,000 or twice economic damages, whichever is greater. The Senate killed the measure by failing to act on it. [See “States Take Lead on Medical Malpractice Reform,” page 1]
More Work to Be Done
If Congress has the time and political will, it might also tackle Medicaid reform this session. The program’s antiquated funding formula and open-ending structure have made it the principal cause of budget deficits in states across the country. Congress could help address the problem by giving states the flexibility to use Medicaid funds for private coverage options and giving consumers more control over how that money is spent.
Finally, Congress could make Flexible Spending Accounts (FSAs) more consumer-friendly by eliminating the use-it-or-lose-it rule. FSAs allow employees to set aside a portion of their salary tax-free for out-of-pocket health costs. But the accounts are owned by employers, not employees, and current law allows employers to take back the balance in the account at the end of the year. By allowing the FSA to roll over tax-free from one year to the next, Congress would encourage consumers to save money for large medical expenses and end the perverse incentives that encourage inefficient spending at the end of the year.
|Health Policy Agenda for the 108th Congress|
|Adopt a Medicare Rx Benefit||Allow Drug Reimportation|
|Adopt Tax Credits for Uninsured||Weaken Drug Patent Reform|
|Expand MSAs||Adopt a Patients’ Bill of Rights|
|Create Association Health Plans||Impose Employer Insurance Mandates|
|Reform Medical Malpractice|
Some issues are best left untouched, lest Congress adopt “reforms” that take choices away from consumers or make health insurance more expensive.
Liberalizing restrictions on prescription drug reimportation from foreign countries and loosening legal protections for drug patents would discourage U.S. pharmaceutical companies from investing in new drug research and development, hurting consumers by making the industry less innovative.
After years of partisan wrangling, patients’ rights legislation appears to be a dead issue. Many states and HMOs have taken action to implement some parts of the proposed legislation, and any federal legislation at this point would likely be counterproductive, imposing costly mandates and tempting over-litigation by trial lawyers.
All the Right Moves
Even without pharmaceutical industry regulation and patients’ rights legislation, the 108th Congress has before it an aggressive agenda for free-market health care reform. By taking some or all of these actions, Congress can help put consumers back in charge of their health care decisions and make health insurance and prescription drugs more affordable and accessible.
President Bush, House Speaker Dennis Hastert (R-Illinois), and Senate Majority Leader Trent Lott (R-Mississippi) have said health care issues will be given a high priority in the 108th Congress. That may prove an excellent decision for them politically, if they can deliver. Voters will remember the promises made during the 2002 elections.
Joe Moser is a health policy analyst at the Galen Institute, a not-for-profit public policy research organization based in Alexandria, Virginia. The views expressed here are the opinions of the author and do not necessarily reflect the views of the Galen Institute.