A Form Letter Response from Senator Tom Harkin

Strange, I got a response from John Spratt and he did not answer the two simply questions I ask. Where in the Constitution does it give Washington the authority to mandate/fine/imprison and american for not purchasing a product or service? How can you justify voting for Healthcare and Cap&Trade with the unemployment rate in your on district at 17.2% and the added debt of these two programs only will bankrupt this great nation? His stupid response below:

January 15, 2010

Dear Mrs. Graham:

Thanks for letting me know your concerns about the bills moving through Congress to reform our nation’s health care system. I am sorry for the delay in responding, but three House committees and two Senate committees have had a part in drawing this legislation, and it is not only complex, but continually changing. Because of the complexity, this letter goes to some length. I want to share with you what I have learned about the issues at stake. I also want to explain the state of play and the biggest bones of contention, as well as where I stand as the House and Senate head to conference.

We are blessed as Americans with the best medical care in the world, but it is also the most expensive. The cost this year is likely to reach $2.3 trillion, close to 17% of the gross domestic product (GDP). Although we are spending over $2 trillion a year, 46 million people do not have the insurance they need to be certain of care when they are sick. If the health care system is reformed to rein in cost growth, this gap has to be closed. Otherwise, the cost of treating the uninsured will continue to be incurred, and the burden of uncompensated care will be borne by providers, who will pass it on to those who are able to pay.

The Obama Administration is not the first to tackle this problem. Beginning with Teddy Roosevelt in 1912, eight presidents—Roosevelt; Eisenhower; Kennedy; Johnson; Nixon; Carter; and Clinton—have taken up the cause and fallen short. Their dilemma was the same as ours: How do we make coverage available to the millions who don’t have it and still slow down the cost growth in health care? In Office of Management and Budget (OMB) terms, how do we bend the cost curve downward?

One way to bend the curve is to search for savings among the medical programs run by the federal government. Folks tell me they do not want medical care made in Washington, and I understand the sentiment. But here is the reality. The federal government has a huge stake in health care. Federal programs include Medicare, Medicaid, Children’s Health Insurance Program (CHIP), Tricare, VA Health Care, Military Health Care, Indian Health Care, the Public Health System, and the Federal Employees Health Benefit Program.

Around 46% of all health care is provided or paid for through the federal and state government. Altogether, the cost of federal, state, and local programs totaled one trillion dollars in 2008. On top of that, the National Institutes of Health and the Center for Disease Control fund the vast majority of medical research at a cost of $40 billion dollars a year, and federal subsidies for graduate medical school total $9 billion or about $100,000 per resident.

In addition to the health care benefits paid for or provided by the federal government, most private sector medical insurance is favored by the tax treatment of medical insurance, most notably the exclusion of employer-provided medical insurance premiums from an employee’s taxable income. The tax revenues forgone to this tax concession were $226 billion in 2008.

As a result of this tax policy, most medical insurance is obtained through employers. 160 million Americans, or about 60% of those below the age of 65, receive health care coverage through their jobs. Obviously, if savings could be realized in some of these programs, they could be used to help make insurance affordable to the uninsured.

Another place we can look for savings is preventive care. The House bill (H.R. 3296) sets up a Prevention and Wellness Trust Fund, and authorizes $35 billion in preventive medicine and wellness initiatives. Most of us believe intuitively that an ounce of prevention is worth a pound of cure, but savings of this sort have a long horizon. The New England Journal of Medicine tested that old adage, and concluded that only 20% of all preventive measures actually recover the cost. That’s not to say the other preventive measures are not worthy; they just haven’t been shown to save more than they cost.

A third place to go for savings is information technology. The National Recovery Act appropriates $19 billion toward the development of interoperable hardware and software, covering everything from appointments to billings to patient histories to practice protocols—in effect, networking the whole health care system. The goal is a quantum leap in efficiency. But the jury will be out for some time before rendering a verdict on the net savings of health information technology.

Another way to save is to crack down on waste, fraud, and abuse in Medicare, Medicaid, and CHIP. Fraud is flagrant in some parts of the country. Phony health care firms bill Medicare and Medicaid for non-existent services to fictitious beneficiaries, and run scams that stay one step ahead of the authorities. The National Health Care and Anti-Fraud Association estimates that fraud amounts to 3% of total health care spending, or more than $60 billion. The Medicare improper payment rate for 2008 was $10.4 billion. HR 3296 authorizes an extra $100 million a year to ferret out fraud and beef up enforcement.

Finally, there are savings to be derived from a discipline called “comparative effectiveness.” When Medicare payments are mapped all over the country, it becomes clear that there is dramatic disparity; some areas are far more cost efficient than others in delivering health care, and with no apparent difference in outcomes.

The same procedure in Minneapolis (such as a coronary by-pass) tends to cost twice as much in Miami. What Medicare managers seek through “comparative analysis” is lower-cost practices that can be imported into higher-cost areas.

I have run through all of these examples to show that over time there are potential savings, and that the reform bills pending make an earnest effort to tap these savings in order to bend the cost curve.

So, how do we pay for health care reform? All of the above. The problem with these cost-reduction efforts is that the Congressional Budget Office (CBO) cannot “score” many of them. CBO cannot venture an estimate as to what they are likely to save, though clearly, they have the potential of saving a lot. How much, only time will tell.

HR 3296 is really three bills in one. Divisions B and C set up ways of instituting wellness, building up the medical workforce, and dispensing preventive care. Division A sets up the mechanism for expanding insurance coverage and changing insurance underwriting. Though it’s only part of the bill, it is the most important, and I will concentrate on Division A.

First, Part A would change the underwriting rules to strengthen your insurance coverage. Part A would:

-Prevent insurance companies from denying coverage for pre-existing medical conditions.

-Prevent insurance companies from dropping coverage or running up premiums when the insured suffers major illness or injury.

-Require insurance companies to continue coverage of young people on parents’ policy up to the age of 27.

-Close the donut hole on Medicare prescription drug coverage over time.

-Provide immediate help for uninsured through high-risk pool.

-Set annual caps on what insured must pay out-of-pocket, and lift caps on what insurance companies must pay.

-Waive co-pays for preventative care, such as mammograms or colonoscopies.

Next, Part A would lay down the goals of health insurance reform:

(1) To make medical insurance affordable.

(2) To build on what works, not to launch a long leap forward, but to go step by step, with incremental reforms.

The House and Senate bills both build on the system we have, in which coverage is largely provided employees by their employers. 94% of all firms with more than 100 workers have employer-provided coverage. Only 43% of small businesses of 50 or fewer employees provide coverage. To close the gap, the bill lays the basis for more employer-sponsored coverage among small businesses.

(3) To offer options allowing citizens coverage that fits their circumstances.

(4) To emphasize preventive care and wellness.

(5) Finally, to do all of the above, without adding to the budget deficit over the next 10 years.

This is a proviso I plugged into this year’s budget resolution, and a constraint shared by the President and the Democratic leadership in both houses. Health care reform must be deficit-neutral. This means finding savings in the wide array of existing health care programs or raising revenues.

Given these goals, this is how Part A and H.R. 3296 generally would expand insurance coverage:

-Most of those with incomes below 150% of the poverty level in the House bill and 133% in the Senate bill will qualify for Medicaid. Medicaid coverage will be enhanced and will become the first tier of coverage. To make private insurance affordable, the House bill and Senate bill both provide “affordability credits.” The credits are allocated on a sliding scale, with incomes that begin at 150% of the poverty level and extend to 400% of the poverty level.

-Business firms with payrolls over $500,000 will be allowed to “pay or play.” If the employer chooses not to play, not to offer insurance and pay its share of the premium, the employer will have to pay a penalty starting at 2% of payroll and rising to 8% once payroll reaches $750,000. These revenues help fund an Insurance Exchange. The firm’s employees can then seek coverage in the exchange. They will enjoy the benefit of large group rates and subsidized premiums, related to income.

-Insurance Exchanges would begin operation in 2013 and would offer a choice of private plans, alongside a public option. Individuals would be eligible to enroll in an Exchange plan only if they were not enrolled in another acceptable plan, such as employer-provided insurance or Medicare, Medicaid, or Tricare. The Senate bill defers to the states in setting up Insurance Exchanges. The House bill includes a National Exchange with a State option to operate the Exchange if it meets the federal standards.

-Small business firms—firms defined as having 25 or fewer employees and $40,000 or less in average wages—would qualify for tax credits of up to 50% of the cost of insurance, if provided. This tax concession would phase down and eventually out as average wages go up.

-Individuals who are not offered coverage through their employer may select a plan from the Insurance Exchange, and the premium will be subsidized at a rate that declines as income rises. Employees who do not buy coverage in the Insurance Exchange will have to pay a fee equal to 2.5% of adjusted gross income above the filing threshold.

-Individuals who retire before age 65 may be able to buy into employer-provided care. This is an open issue. HR 3296 will not fund that coverage but will facilitate it through tax breaks.

-Business firms with a payroll of less than $500,000 would be exempted from the pay or play mandate, but their employees could still seek coverage in the Insurance Exchange.

What I have described is the House bill, HR 3296. The Senate has a counterpart along the same lines, but with different provisions.

The House and Senate bills are still a work in progress. Core provisions still differ significantly. There is no consensus on a public option, no agreement on funding, and no agreement on a Super MedPac, which could set rates and health care policies. There is a consensus on one thing?”that we cannot expect health care to evolve by chance to the system we need.

Division B makes changes in Medicare and Medicaid that favor primary care and prevention. For example, it removes co-pays for preventive procedures such as mammograms and colorectal screening.

This is another example of an action we would take—maybe not all at once, but year by year— without Division A and health insurance reform. Division B also makes incentive payments to physicians who practice in cost-efficient areas, as well as under-served areas. It makes special payments to Accountable Care Organizations, if they save money and achieve quality goals as well. It makes other changes to the market basket index, a cost index that applies to everything from Skilled Nursing Home Facilities to imaging. In the future, market basket adjustments will assume that providers have achieved productivity gains, and pare down price adjustments accordingly. There are other changes, as in Medicaid and Medicare Disproportionate Share Hospitals (DSH) supplementary payments. These programs supplement the rates of hospitals that admit a disproportionate number of Medicaid and Medicare patients. The DSH supplements now cost billions, much of which can be recaptured because hospitals should have less uncompensated care if we have health care reform.

Division C addresses the health care workforce, with special loan forgiveness to primary care physicians, nurses, public health workers, and dentistry professionals who practice in under-served areas. More medical care professionals are likely to be needed if forty million more people gain insured access to hospital, physicians, and other health care professionals.

Division C funds more community health care centers, sets up new centers of excellence, creates a prevention and wellness trust, and calls for a national prevention and wellness strategy.

I mentioned earlier that health care reform has to be deficit-neutral. The House and Senate have not agreed upon specific ways to save and cut, but it is understood that a substantial share will come from savings in the existing system. For example, Medicare Advantage is the Medicare managed care option which you can choose in lieu of Medicare fee for service. Medicare Advantage is supposed to save money; instead it is costing 14% more than traditional fee-for-service Medicare. If the playing field is leveled, CBO tells us that $175 billion can be saved over ten years and used to fund health care reform.

Whenever anyone starts moving around the elements of a health care system that costs 17% of our economy, we can expect friction; but there are flaws in our health care system that have to be fixed. I have mentioned a few of the options for change now on the table; and there are many more; but over the long run, there is one option we don’t have, and that’s doing nothing.

The House bill (H.R. 3296) and the latest Senate bill are a long way from being perfect, but they are also a long way from being final. I voted for the House bill because I wanted to send it to the Senate in the hope that a conference would iron out the differences and make the bill better.

Here are the issues I will be watching as the two bills move to conference:

-Medicaid: The House bill makes Medicaid available to all earning less than 150% of the poverty level. The Senate bill does the same up to 133% of the poverty level. Both bills spare the states from any additional cost for Medicaid expansion for two years and then institute a lower match-the allocation in the House is 9% state / 91% federal. (I can support these provisions, but I think all the stakeholders should be contributing, and in that regard, the state share at 9% is too low, and the Nelson amendment needs to be cut from the bill completely.)

-Employer Mandates: The House bill exempts small employers with payrolls of less than $500,000 from having to pay in part for health insurance. As to larger firms, the House bill imposes a graduating fee on payrolls ranging from $500,000 to $750,000. The ultimate fee is 8%-not enough to pay for full coverage, but enough to make someone consider it. (I am concerned about the impact of the House provisions on small business, and lean toward the original Senate provisions which define a small business as a firm with 50 or fewer employees. I think the Senate requirements need to be stiffer to be effective, and ought to be thoroughly reworked in conference. I also think that the Merkley amendment draws the line too tightly when it defines construction firms as five or fewer employees.)

-Employee Mandates: The House bill (H.R. 3296) requires nearly all individuals to have health insurance by 2013, or otherwise pay an excise tax of 2.5% on adjusted gross income. The tax is capped at the level of the average premium under the applicable insurance exchange. The House bill exempts fewer individuals from obtaining insurance, but extends assistance to more individuals who seek insurance on their own, such as through CHIP for children or Medicaid for individuals with incomes at or below 150% of the poverty level. The House bill provides tax credits equal to 50% of the premium for low-wage employees of small business individuals. (The employee mandates strike me as more balanced than the employer mandates.)

-Affordability: The House bill is subsidized to help low-income workers and small business employees obtain coverage at premiums they can afford. Under the House bill, a family of four earning $33,000 would qualify for affordability credits, and would pay $530 in premiums. The premiums payable under the Senate bill would be $1,531. The same family would bear $1,100 in cost-sharing under the House bill and $4,100 under the Senate bill. (I think these credits are useful and help make the employee contribution more affordable.)

-Senate Pay or Play: The Senate bill does not impose insurance requirements on small firms, which it defines as firms with 50 or fewer employees. On larger firms not offering coverage, the Senate bill imposes a fee of $750 per full-time worker. (I do not know what the exact fee should be, but $750 strikes me as more reasonable than 8% of payroll.)

-Insurance Exchanges: The House bill (H.R. 3296) sets up a national insurance exchange with state options to operate a state exchange if it meets federal standards and is subject to federal oversight. All participating insurance companies will have to submit a package with minimum benefits set by a federal board. The exchanges merge individuals and small businesses into a large pool, so as to spread the cost of being sick over as many people as possible. They make comparison shopping possible, and pit health insurance companies in competition, aimed at lower premiums. (The Insurance Exchanges are a key to health care reform, and need to be included. I favor making the Insurance Exchanges national and under federal law, so long as the states can eventually set up state-wide exchanges.)

-Public Option: If in spite of competition, insurance companies continue to raise premiums, the House has an alternative, a public plan that would negotiate lower prices. The public option in the House bill has been greatly diluted, and the Senate version is even weaker. But both serve as a warning to insurance companies that the government can intercede if they raise premiums or co-pays and deductibles at rates far above reasonable cost. (The House provision is a fair compromise, and it, or something like it, should be part of the bill. I agree with the House leadership in insisting if the public option has to be forgone, some substantial concessions should be made.)

-Donut Hole: The House bill phases out the donut hole in Medicare Part D (drug coverage) by 2019 with drug rebates and PhARMA discounts. The Senate has a one-year, one-time $500 reduction. (The House bill should prevail, and the provisions of the Senate bill authorizing the Secretary of Health and Human Services to negotiate drug prices should be used to bargain down the cost of pharmaceuticals.)

-Grandfather Periods: The House bill allows a five-year grace period for employers that maintain existing insurance which meets minimum standards. The Senate bill grandfathers existing employer plans and is more lenient on the level of coverage and compliance with reforms. (I support these provisions, so long as the “grandfathered” policies should provide basic coverage.)

-Cost: The Budget Resolution dictates that the cost of expanding insurance coverage shall not increase the deficit over 2010-2019. The Congressional Budget Office and the Joint Tax Committee have assessed the latest Senate bill and found that the cost of insurance subsidies is $614 billion over 2010-2019. Against this cost, CBO and JCT estimate new revenues and cost savings totaling $747 billion. The net effect is a $132 billion reduction in the 10-year deficit. (The CBO and JCT analyses show that the latest Senate Bill is deficit-neutral. I think every proposal should be held strictly to this minimum standard.)

-Funding: To add to system savings and help fund subsidized coverage, the House bill imposes a tax of 5.4% on taxable incomes above $1,000,000 on joint returns and $500,000 on individual returns. The Senate imposes an excise tax on high-cost medical insurance, to the extent premiums exceed $8,500 on individual policies and $23,000 on family policies. The Senate bill also adds .9% to the Medicare Hospital Insurance payroll tax on wages exceeding $200,000. (I think that the tax proposals in both bills should be compromised and more savings included, such as capping non-economic and punitive damages at $500,000 in malpractice suits.)

-Cost Containment: The Senate bill sets up an Independent Payment Advisory Board to supplant MedPAC. IPAC would have authority to make Medicare payment changes which will take effect if Congress does not intervene. (I think the Senate bill is preferable. If strengthened, it too could generate savings to keep the bill deficit-neutral.)

-Timing: The House bill is concerned about the complexity of these reforms, and delays full implementation until 2013. The Senate shares these concerns and slips the effective date until 2014. (I can vote for either date.)

-Physicians’ Payments: In the House, a companion bill would repeal the sustainable growth rate (SGR) formula that sets physicians’ pay. Twelve years ago, Congress created a cost-control measure called the “sustainable growth rate factor.” The SGR reduced updates in physicians’ pay and hospital rates. If outlays in one year exceeded spending targets set in a previous year, the sustainable growth rate formula sets physicians’ fees in future years to recoup the overage. The SGR formula has not worked as intended, at least for physicians, and has not been applied since 2003. If left as is, the SGR would cut payments to physicians by 21% next year, and by $248 billion over the next ten years. That train wreck is avoided by a companion bill in the House which repeals the SGR. The House repeals the SGR; the Senate provides one year of relief.

The SGR issue is not necessarily connected with health care reform. With or without reform, the SGR has to be extensively repaired or replaced. (I think something should be done to suspend the SGR in the short-run, at least until an alternative is devised for the long run. Congress cannot allow a 21% cut in physicians’ Medicare payments to go into effect, but this will happen in 2010 if the SGR is not repealed or suspended).

As you can see, the bills moving health care reform deal mainly with coverage of those who do not have it. If you have a major medical policy provided by your employer, or other coverage like Medicare or Tricare, you will keep this coverage, and see very little difference if the pending reforms pass.

The House and Senate differ on a number of issues. I voted for health care when it came through the House, but did so expecting it to be strengthened in conference. I am still hopeful that we can resolve these differences by adopting the best from both bills, and I am working to that end in the House. I think we need to reform health insurance, but we need to reform it the right way.

Thank you for your message, and please feel free to write or call whenever anything of interest or concern comes before Congress.

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Should you wish to contact me, please visit my website:
http://www.house.gov/spratt/.

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"Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators or Representatives, and Congress shall make no law that applies to the Senators or Representatives that does not apply equally to the citizens of the United States ."
They got a raise and cut social security