In response to my Op Ed on health reform in this past week's Post Gazette and during a talk I gave on health reform last week, I received a number of questions expressing concerns about the bill.  In light of all the rhetoric from both sides, I think many, if not most people, simply want clearer answers about the proposals.  My stab at providing some answers is below:

Question 1: Does the current bill still call for a 40% surcharge/tax on "Cadillac" health insurance plans?  My wife and I are self-employed and we have chosen to have the best health insurance available. That cost has risen to nearly $1,800 per month...high, but we can still afford the plan and we LOVE the plan...but 1 40% tax on this would add $540 a month to my costs. I would have to look for a lesser plan. Why should we be punished for making our choice and paying for it ourselves? Is not The American Dream to be for the individual not the group or the state?

My Response: There would be an excise tax on employer sponsored health plans valued in excess of $10,200 for individuals and $27,500 for families (close to $2300 per month).  The tax would not go into effect until 2018 and it would not tax the full value of the plan but the amount above the threshold.  For example, if a plan's value was $2500 per month, the tax (which would be paid by the insurer not the business) would be 40% of $200 not of $2500--or $80 per month.  To the extent insurers pass along the increase to a small business, it would be deductible like other such expenses, so the net increase would be closer to $60.

Personally, I'm in the same situation as you.  My insurance now costs nearly $20,000 per year, and rates have not been announced for next year.  Because of concern about pre-existing conditions, I'm not able even to consider switching to an alternative or lower cost plan (if one were available). On balance though, I believe that unless the health care system is revamped, in a few years insurance will be out of reach in any event, and there won't be much left of the economy  when my kids grow up.  We are currently spending $2,700,000,000,000 a year on health care (over 17% of the economy).  In 15 years, this percentage is expected to double.  One of the reasons the auto industry failed is because each car included about $1500 in health care costs v. about $500 for japanese Cars).

One goal of the tax is to encourage the creation of lower costs options.  It's also notable that the tax, at least to some extent, is directed at overly rich union sponsored plans that arose historically after World War II, when Congress allowed companies to offer health insurance as a non-taxed benefits.  In other words, if a company increased wages the workers would be taxed, but if it put money into benefits, the workers would not be taxed.

On balance, I don't see the reform as an attack on the American Dream but a step toward trying to preserve it.

Question 2: Does the current health care bill require ALL companies of 25 employees or more to provide health care benefits to their employees or face an 8% payroll tax per employee? I know small business owners who say the 8% payroll tax penalty would be cheaper, but it will put such a squeeze on their business that they will have to cut employees. Is losing jobs a good idea? Why are we going to be forced into these situations by a demanding federal government? Do you see this as fair?

My Response: The President's plan exempts employers with less than 50 employees from any penalties, and rather than punish small businesses, it would provide a tax credit for small businesses with less 25 employees and average wages of less than $50,000 to encourage purchases of health insurance.  The credit would be 35% of the employer's contribution, if it contributes at least 50% of the cost.

Question 3: Is this health care bill addressing the inability to have portability with your health insurance and purchase health insurance across state lines?

My Response: The most important thing about the plan, is that it eliminates the ability of health insurers to deny coverage because of pre-existing conditions or to impose lifetime limits on coverage.  This make portability less of a problem, because if you move, there will always be an insurer that must provide coverage.  In addition, the law authorizes states to reach agreements that will allow insurers to provide coverage in multiple states (with a goal of increasing competition).  It is not clear whether the interstate health plan ideas will take hold, however.

Question 4: Is there anything in this bill to provide any type of tort reform? Some of the awards you read about for malpractice seem to be really exorbitant when it comes to the 2nd award or the punitive damages award. Would this help to reduce insurance costs or not? I really don't know

My Response: The plan does not directly provide for national tort reform, but it would provide funding for states to develop their own tort reform and dispute resolution programs.  I agree that tort reform is needed, but the problem is not unique to health care.  The studies that have looked at the issue have concluded that malpractice suits account for around 2 to 3 percent of total costs, and changing  he law would affect only part of that amount.    In short, tort reform might help a little bit, but it does not really address the biggest problems.

Question 5: Why can't the government do with pharmaceutical advertisements on TV that they did with cigarette ads? I find these ads to be ridiculous. They are being shown to the general public and we have no way to disseminate or use that knowledge...seems like a large waste of money that go into reducing the cost of the drugs themselves.

My Response: Although there is not good information, most people believe that the pharmaceutical industry now spends much more on advertising than on research.  The industry, though, spends a boat load of money on politicians/lobbying so it is very difficult to make significant changes that the industry doesn't like. 

Question 6: I'm worried that the President's plan is going to cut my Medicare benefits.  That isn't right.

My Response: The proposed bill will not cut Medicare benefits.  In fact, the bill specifically prohibits cuts. The bill would, however, reduce payments to insurance companies that offer  Medicare Advantage programs.  (These are Medicare HMOs that were created under Medicare Part C in the 1990s).  Those programs have been receiving payments that are 14% more for the same level of benefits that are provided under traditional Medicare Part A.   Much of that additional 14 percent has gone into the pockets of the insurance companies.  About 25% of Medicare recipients are covered under Medicare Advantage, instead of Part A (traditional fee for service payments).  Because of the overpayment, people under medicare part A are actually subsidizing Medicare Advantage.

If some change is not made, the Medicare Trust fund that covers Part A will go broke in about 9 years.    With the change (which does not affect benefits), it will still go broke, but not for 23 to 25 years.

Question 7: Does the plan do anything to control costs?

My Response: There is no single mechanism for controlling costs in the bill, and none is realistic.  The bill, however, would strive to control costs in a number of significant ways.

First, by eliminating pre-existing condition exclusions from health insurance, much of the time and money spent weeding out high-risk insured can be reduced.  The corollary to this change is the individual mandate -- i.e., a requirement that most people get insurance coverage.  The individual mandate may help reduce individuals costs by spreading healthcare costs over a larger base that includes more healthy people (who might otherwise wait to buy insurance until they thought they would need it).

Second, the plan including funding for pilot programs to change how providers are paid under government programs.  The new payment methods, which may involve paying a lump sum for a course of care rather than per procedure payments, are directed at both improving outcomes and reducing costs.  Although critics argue that such plans are not spelled out in detail, I don't think it would either be realistic or sensible to do so.  There is still much to learn about the types of payment methods that would be effective--it would not make sense to change make national changes to payment methods without first testing them out to see how well (or if) they work.

Third, investments in health information technology are intended to allow for better coordination of care and outcomes.  The plan would continue to promote standards for allowing providers to exchange information with each other more efficiently.

Fourth, the bill includes significant funding for states to develop or improve dispute resolution programs that could reduce defensive medicine.

Fifth, the bill would increase resources directed at reducing fraud.

Sixth, the bill would include funding for programs directed at "evidence based medicine,"--i.e., trying to find out what treatments actually work (as opposed to just cost a lot of money).

Seventh, the bill would impose controls over insurance price increases.  In the absence of a public option to serve as a ceiling on insurance costs, some means of reviewing and controlling price increases is essential.

Question 8: Isn't this a government take-over of health care?

By 2012, the government will pay for more than 1/2 of all health care costs in the country.  The industry is already regulated more than any other field with the possible exception of nuclear power.  Any concern about a government takeover is about 50 years too late.  And no, the plan will not require people to give up their current insurance.

Some additional Comments:

It really is pretty disturbing how all of these issues are handled in Congress.  There are legitimate concerns about the proposal--for example, not all of the proposal are clearly spelled out--but much of the opposition is based on fear mongering rather serious discussion.  The best example is the talk of death panels and the like, which were completely ridiculous but believed by many.  Similarly, anyone who thinks reform is a good idea is instantly called a socialist etc.  For what it's worth, I think I'm pretty moderate and disagree with democrats on many issues.  One of the reasons that I wrote the piece for the Post Gazette is that I think there a difference between being moderate, as Congressman Altmire claims to be, and refusing to take a stand on important issues.

The other thing that I think is important about the bill, but which is often overlooked, is that it would not be like flipping a switch and changing everything over night.  Some of the proposals would work, some would not, and if Congress could actually get over its gridlock, it could make changes over time.  Social Security is a good example.  It was much more limited when it was originally adopted, and changed significantly over time.  Health reform would need to work the same way, but I'm afraid if we don't get started soon, it will be too late.