House announces health care reform bill which will cost you even if you don’t earn half a million

October 30, 11:59 AMEconomic Policy ExaminerJoseph Hight

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House Speaker Nancy Pelosi announces retooled health care bill Oct. 29, 2009, Washington
(AP Photo/Charles Dharapak)

On Thursday, October 29, House Speaker Nancy Pelosi announced the fruits of her work in bringing together proposals from three different House committees. The proposed health care bill, H.R. 3962, is 1900 pages. It will cost the federal government $894 billion over the next ten years, largely paid for by increasing taxes on individuals earning more than $500,000 per year and on couples earning more than $1 million.

The cost is largely attributed to (1) expanding coverage of Medicaid (the health care program for the poor), so that it covers more families and individuals, (2) increases in the Children’s Health Insurance Program (CHIP), (3) tax credits for small employers and (4) providing subsidies ($1,055 billion over ten years) for individuals who are below specified income cutoff rates and who will have to buy their own health care coverage.

Requirements on health insurance providers include (1) they would have to accept all applicants, (2) could not limit coverage for preexisting medical conditions, and (3) could not vary premiums to reflect differences in enrollees’ health.

But just because you earn less than half a million, don’t expect that this legislation will end up not costing you. For example, I looked at the cost of my family health care coverage – a good Blue Cross – Blue Shield preferred provider plan or PPO (preferred provider organization) in the health care coverage jargon. It is costing me $400 per month (my employer pays $800 per month towards the cost of this plan). There is almost nothing in this legislation that will prevent this from continuing to increase faster than the rate of inflation, and that is likely to make me feel poorer as time passes, whether or not Congress passes any version of health care reform now being considered.

The newly constructed House bill includes a public option health care plan, but the CBO analysis of the bill includes an estimate that the public plan would actually have slightly higher premiums than competitive private plans, concluding that “The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees.

While there are no strong provisions that would lead to definite restraints on the rise in health care costs that result in large part from our ‘fee for service’ system (and therefore on health care plan premiums), there are some tantalizing attempts at tackling this in a very limited way. For example, the bill included provisions for an Accountable Care Organization program that allows health care providers to share in Medicare savings they help create through care coordination and quality improvement initiatives, and ensures that doctors can join with hospitals and others when forming these organizations. The bill also includes bundled payments for Post-acute care that encourages providers to coordinate a patient’s care from the doctor’s office, to the hospital, through a rehabilitative or nursing facility stay, and back to home.