Rxxx of the Day
A CRITICAL DEBATE FINALLY BEGINS
“We can no longer stand by while health care costs spiral out of control, leaving some 767,000 adult Pennsylvanians without the basic health care they need and creating a drag on our economy.” (Governor Ed Rendell, January 17, 2007)
Actually, if one relies on U.S. Census Bureau figures rather than somewhat idiosyncratic numbers developed by the Pennsylvania Insurance Department, there are more than 1 million uninsured in our state. But let’s not quibble about exactly how many Pennsylvanians don’t have health insurance. More important is that the very large population of uninsured is still growing because unprecedented numbers of Pennsylvania employers and workers who once had job-based health insurance can no longer afford it.
It was fashionable last year in some political quarters to blame declining rates of health care coverage on Wal-Mart. In fact, there were, at most, 7,500 Wal-Mart employees on the state’s Medicaid rolls last year – not a statistic to be proud of, to be sure, but less than 1% of the nearly 800,000 Pennsylvanians who have lost job-based coverage since 2000.
The real crisis is the skyrocketing costs of small employer coverage and the quickening pace at which these employers and their employees are being priced out of the health insurance market. Failure to address small employers’ health insurance affordability problems will doom the Governor’s health care reform plan. Unless small businesses get help (ASAP), our uninsured population will continue to swell, and larger and larger fractions of the state budget will be consumed by last resort, taxpayer-supported health care coverage programs.
A summary of Governor Rendell’s ambitious health care reform plan appears on page __. Important details have yet to be released (e.g., where the money will come from to pay for a series of proposed new programs). But it’s already apparent that many parts of the Governor’s plan will face opposition from powerful health care industry lobbies, including health insurers, hospitals, and pharmaceutical manufacturers.
Several aspects of the Governor’s “Prescription for Pennsylvania” will cause consternation among many small business owners, too. For instance, the proposed assessments on small businesses that don’t sponsor job-based health insurance coverage are already generating controversy. Nevertheless, I would argue (see page __) that business owners ought to consider carefully before making up their minds.
In the meantime, it’s important to note that Governor Rendell’s plan calls for action on two issues that are of special importance to SMC and small businesses generally: (a) modified community-pool rating for setting small businesses’ health insurance rates, rather than group rates based on individual employees’ health status (aka, medical underwriting); and (b) an explicit limitation on health insurer profits.
Ours is one of only two states that still allows medical underwriting, a practice through which health insurers effectively “red-line” (by doubling, tripling, quadrupling the premiums that would otherwise be charged) small businesses that employ one or more people with serious health conditions. Uncapped medical underwriting is the means through which insurers boost rates for some small businesses by 50-100% annually (or more). This extreme premium volatility is the reason that Pennsylvania is losing job-based coverage faster than any other state.
Banning medical underwriting and substituting community pool rating has been for several years SMC’s number-one health insurance priority in Harrisburg. Restraining insurers’ windfall profits has been a close second. Governor Rendell’s support is a big step forward for our legislative efforts, but hard fights in the General Assembly still remain on these and other issues.
Philosophy versus Practicality
In the context of any universal coverage scheme, the hottest political flash points is bound to be whether to mandate that employers offer job-based health insurance, or to levy assessments (aka, new taxes) on employers that don’t sponsor such benefits.
The Prescription for Pennsylvania chooses the latter course. A new state program (CAP -- Cover All Pennsylvanians) would be established. Employers that don’t offer job-based coverage could be assessed as much as 3% of payroll in order to underwrite state-sponsored coverage for the working uninsured, including a new state program (CAP – Cover All Pennsylvanians) that would be available to lower income workers and their employers.
What’s the difference between an explicit employer mandate and a de facto mandate in the form of assessments on employers that don’t provide coverage? Not much, in practical terms. If one is philosophically opposed to legislating a requirement that employers provide health insurance benefits, as most business seem to be, one is probably also opposed to the employer assessments Governor Rendell is proposing.
But there are practical considerations, too, that are revealed by following the money that employers currently spend on health care.
As depicted graphically below, Medicare beneficiaries comprise the largest share of hospital patients (47.6%), but Medicare payments to hospitals amount to just 38.5% of hospitals’ revenues. On the other hand, commercially insured patients account for only 32% of hospitalizations, but commercial insurance payments to hospitals are 42.4% of total hospital revenue. And by the way, Medicare patients are, on average, significantly sicker than commercially insured patients.
[Insert charts here, if possible]
The truth is that Medicare bankruptcy has been postponed by dint of the federal government paying hospitals substantially less than it actually costs to care for Medicare patients. Since hospitals can’t operate in the red indefinitely, they offset Medicare underpayments by overcharging commercially insured patients – by the equivalent of 15-20 cents on every premium dollar. Medicare was established on the basis of payroll tax that would be paid by all, but there is today a 15-20% surcharge on commercial health insurance premiums that is paid only by employers and employees who have job-based coverage. Is this fair?
There’s more. Hospital services for uninsured persons in our state total about $500 million annually -- categorized as “uncompensated care.” In actuality, however, such care isn’t uncompensated. Hospitals offset the costs of free care for uninsured patients by raising prices for commercially insured patients’ bills. Once again, these extra costs are borne only by employers and employees that have job-based health insurance. Is this fair?
In light of the above, the coming debate over the Governor’s proposal to impose new levies on employers that don’t offer coverage seems like the political intersection of philosophical purity versus practicality. Employers that don’t provide employee health insurance certainly won’t want to pay a new tax. But what about the dwindling numbers of employers that offer job-based coverage? Should they and their employees shoulder – alone -- a 20-25% surcharge on their health insurance premiums in order to give others (including Uncle Sam) a free ride?
THE RIGHT PRESCRIPTION FOR PENNSYLVANIA?
Pennsylvania Governor Ed Rendell’s sweeping health care reform proposal, entitled “Prescription for Pennsylvania," aims to increase significantly Pennsylvanians access to affordable health care coverage. Although the plan’s universal access provisions are similar to those put forward in other states (e.g., Massachusetts and California), it also includes unique and substantial emphases on health care quality, eliminating waste and re-work, and bringing down the costs of health insurance."We can no longer stand by while health care costs spiral out of control,” Governor Rendell said. "It is no longer a question of whether we can afford to act. The cost of inaction is far greater in terms of individual health consequences and from theincreasing burden on taxpayers.”
Rendell also is focusing on the economic consequences of skyrocketing health care costs, describing high health insurance costs paid by Pennsylvania employers as a “tremendous deterrent” to business development, particularly among small businesses.
Among the provisions of Prescription for Pennsylvania of greatest likely interest to business owners: Cover All PennsylvaniansOne of the most controversial parts of the new plan is the proposed Cover All Pennsylvanians (CAP) program, through which affordable basic health coverage would be offered to eligible small businesses and to individuals. Although Governor Rendell’s reform plan includes no individual or employer health insurance mandates, the CAP at least suggests the possibility of some type of mandate in the future.
All uninsured individuals would be eligible to purchase basic coverage through the CAP, with premiums set according to income. Certain businesses would be permitted to participate in CAP, too: if they have not offered group health insurance to their employees during the preceding six months, if they have fewer than 50 employees, and if their employees earn less than the state’s average annual wage (~$39,000). Eligible businesses that choose to join the program would pay approximately $130/employee/month; covered employees would pay on a sliding scale, ranging from $10 to $70, depending on income.Related to creation and financing of the CAP is the Governor’s proposed “fair-share assessment” of 3% of payroll on all employers that do not sponsor coverage (companies with fewer than 50 workers would be exempted from this assessment in the first year).Small Business Health Insurance Rates The Governor now endorses “adjusted community rating” for setting small business health insurance rates. This approach would preclude the use of individual health status and gender in setting small group rates, and eliminate much of the terrible rate volatility that causes thousands of small employers to drop coverage each year. Community rating is and has been SMC’s top health care priority in Harrisburg.
Also in the Governor’s plan is a proposed limitation on health insurer profits, via a requirement that at least 85% of premium revenue be expended on medical services for subscribers.
Waste, Errors, and Inefficiency
In his official announcement Governor Rendell asserted that, “Pennsylvania businesses, consumers and taxpayers pay at least $7.6 billion for unnecessary and avoidable health care costs.” This estimate includes more than $6 billion for treatment of preventable hospital-acquired infections; failures of chronic disease care that lead to unnecessary hospitalizations, and hospital readmissions due to avoidable complications and other medical errors. The Governor proposes to eliminate this waste and re-work by: (a) ceasing to pay health care providers for obvious flaws in care for state employees; and (b) embarking on an effort to improve health and wellness and chronic disease management.
Outlook
Details about how the Governor’s plan is to be financed aren’t to be released until after Dynamic Business goes to print. As many as four-dozen separate pieces of legislation will be required in order to implement the entire Prescription for Pennsylvania. SMC and others will push for additional components, including full transparency in health care pricing and quality of care, tax policy support for health savings accounts, tax credits for small businesses that implement active health and wellness efforts.
“We can no longer stand by while health care costs spiral out of control, leaving some 767,000 adult Pennsylvanians without the basic health care they need and creating a drag on our economy.” (Governor Ed Rendell, January 17, 2007)
Actually, if one relies on U.S. Census Bureau figures rather than somewhat idiosyncratic numbers developed by the Pennsylvania Insurance Department, there are more than 1 million uninsured in our state. But let’s not quibble about exactly how many Pennsylvanians don’t have health insurance. More important is that the very large population of uninsured is still growing because unprecedented numbers of Pennsylvania employers and workers who once had job-based health insurance can no longer afford it.
It was fashionable last year in some political quarters to blame declining rates of health care coverage on Wal-Mart. In fact, there were, at most, 7,500 Wal-Mart employees on the state’s Medicaid rolls last year – not a statistic to be proud of, to be sure, but less than 1% of the nearly 800,000 Pennsylvanians who have lost job-based coverage since 2000.
The real crisis is the skyrocketing costs of small employer coverage and the quickening pace at which these employers and their employees are being priced out of the health insurance market. Failure to address small employers’ health insurance affordability problems will doom the Governor’s health care reform plan. Unless small businesses get help (ASAP), our uninsured population will continue to swell, and larger and larger fractions of the state budget will be consumed by last resort, taxpayer-supported health care coverage programs.
A summary of Governor Rendell’s ambitious health care reform plan appears on page __. Important details have yet to be released (e.g., where the money will come from to pay for a series of proposed new programs). But it’s already apparent that many parts of the Governor’s plan will face opposition from powerful health care industry lobbies, including health insurers, hospitals, and pharmaceutical manufacturers.
Several aspects of the Governor’s “Prescription for Pennsylvania” will cause consternation among many small business owners, too. For instance, the proposed assessments on small businesses that don’t sponsor job-based health insurance coverage are already generating controversy. Nevertheless, I would argue (see page __) that business owners ought to consider carefully before making up their minds.
In the meantime, it’s important to note that Governor Rendell’s plan calls for action on two issues that are of special importance to SMC and small businesses generally: (a) modified community-pool rating for setting small businesses’ health insurance rates, rather than group rates based on individual employees’ health status (aka, medical underwriting); and (b) an explicit limitation on health insurer profits.
Ours is one of only two states that still allows medical underwriting, a practice through which health insurers effectively “red-line” (by doubling, tripling, quadrupling the premiums that would otherwise be charged) small businesses that employ one or more people with serious health conditions. Uncapped medical underwriting is the means through which insurers boost rates for some small businesses by 50-100% annually (or more). This extreme premium volatility is the reason that Pennsylvania is losing job-based coverage faster than any other state.
Banning medical underwriting and substituting community pool rating has been for several years SMC’s number-one health insurance priority in Harrisburg. Restraining insurers’ windfall profits has been a close second. Governor Rendell’s support is a big step forward for our legislative efforts, but hard fights in the General Assembly still remain on these and other issues.
Philosophy versus Practicality
In the context of any universal coverage scheme, the hottest political flash points is bound to be whether to mandate that employers offer job-based health insurance, or to levy assessments (aka, new taxes) on employers that don’t sponsor such benefits.
The Prescription for Pennsylvania chooses the latter course. A new state program (CAP -- Cover All Pennsylvanians) would be established. Employers that don’t offer job-based coverage could be assessed as much as 3% of payroll in order to underwrite state-sponsored coverage for the working uninsured, including a new state program (CAP – Cover All Pennsylvanians) that would be available to lower income workers and their employers.
What’s the difference between an explicit employer mandate and a de facto mandate in the form of assessments on employers that don’t provide coverage? Not much, in practical terms. If one is philosophically opposed to legislating a requirement that employers provide health insurance benefits, as most business seem to be, one is probably also opposed to the employer assessments Governor Rendell is proposing.
But there are practical considerations, too, that are revealed by following the money that employers currently spend on health care.
As depicted graphically below, Medicare beneficiaries comprise the largest share of hospital patients (47.6%), but Medicare payments to hospitals amount to just 38.5% of hospitals’ revenues. On the other hand, commercially insured patients account for only 32% of hospitalizations, but commercial insurance payments to hospitals are 42.4% of total hospital revenue. And by the way, Medicare patients are, on average, significantly sicker than commercially insured patients.
[Insert charts here, if possible]
The truth is that Medicare bankruptcy has been postponed by dint of the federal government paying hospitals substantially less than it actually costs to care for Medicare patients. Since hospitals can’t operate in the red indefinitely, they offset Medicare underpayments by overcharging commercially insured patients – by the equivalent of 15-20 cents on every premium dollar. Medicare was established on the basis of payroll tax that would be paid by all, but there is today a 15-20% surcharge on commercial health insurance premiums that is paid only by employers and employees who have job-based coverage. Is this fair?
There’s more. Hospital services for uninsured persons in our state total about $500 million annually -- categorized as “uncompensated care.” In actuality, however, such care isn’t uncompensated. Hospitals offset the costs of free care for uninsured patients by raising prices for commercially insured patients’ bills. Once again, these extra costs are borne only by employers and employees that have job-based health insurance. Is this fair?
In light of the above, the coming debate over the Governor’s proposal to impose new levies on employers that don’t offer coverage seems like the political intersection of philosophical purity versus practicality. Employers that don’t provide employee health insurance certainly won’t want to pay a new tax. But what about the dwindling numbers of employers that offer job-based coverage? Should they and their employees shoulder – alone -- a 20-25% surcharge on their health insurance premiums in order to give others (including Uncle Sam) a free ride?
THE RIGHT PRESCRIPTION FOR PENNSYLVANIA?
Pennsylvania Governor Ed Rendell’s sweeping health care reform proposal, entitled “Prescription for Pennsylvania," aims to increase significantly Pennsylvanians access to affordable health care coverage. Although the plan’s universal access provisions are similar to those put forward in other states (e.g., Massachusetts and California), it also includes unique and substantial emphases on health care quality, eliminating waste and re-work, and bringing down the costs of health insurance."We can no longer stand by while health care costs spiral out of control,” Governor Rendell said. "It is no longer a question of whether we can afford to act. The cost of inaction is far greater in terms of individual health consequences and from theincreasing burden on taxpayers.”
Rendell also is focusing on the economic consequences of skyrocketing health care costs, describing high health insurance costs paid by Pennsylvania employers as a “tremendous deterrent” to business development, particularly among small businesses.
Among the provisions of Prescription for Pennsylvania of greatest likely interest to business owners: Cover All PennsylvaniansOne of the most controversial parts of the new plan is the proposed Cover All Pennsylvanians (CAP) program, through which affordable basic health coverage would be offered to eligible small businesses and to individuals. Although Governor Rendell’s reform plan includes no individual or employer health insurance mandates, the CAP at least suggests the possibility of some type of mandate in the future.
All uninsured individuals would be eligible to purchase basic coverage through the CAP, with premiums set according to income. Certain businesses would be permitted to participate in CAP, too: if they have not offered group health insurance to their employees during the preceding six months, if they have fewer than 50 employees, and if their employees earn less than the state’s average annual wage (~$39,000). Eligible businesses that choose to join the program would pay approximately $130/employee/month; covered employees would pay on a sliding scale, ranging from $10 to $70, depending on income.Related to creation and financing of the CAP is the Governor’s proposed “fair-share assessment” of 3% of payroll on all employers that do not sponsor coverage (companies with fewer than 50 workers would be exempted from this assessment in the first year).Small Business Health Insurance Rates The Governor now endorses “adjusted community rating” for setting small business health insurance rates. This approach would preclude the use of individual health status and gender in setting small group rates, and eliminate much of the terrible rate volatility that causes thousands of small employers to drop coverage each year. Community rating is and has been SMC’s top health care priority in Harrisburg.
Also in the Governor’s plan is a proposed limitation on health insurer profits, via a requirement that at least 85% of premium revenue be expended on medical services for subscribers.
Waste, Errors, and Inefficiency
In his official announcement Governor Rendell asserted that, “Pennsylvania businesses, consumers and taxpayers pay at least $7.6 billion for unnecessary and avoidable health care costs.” This estimate includes more than $6 billion for treatment of preventable hospital-acquired infections; failures of chronic disease care that lead to unnecessary hospitalizations, and hospital readmissions due to avoidable complications and other medical errors. The Governor proposes to eliminate this waste and re-work by: (a) ceasing to pay health care providers for obvious flaws in care for state employees; and (b) embarking on an effort to improve health and wellness and chronic disease management.
Outlook
Details about how the Governor’s plan is to be financed aren’t to be released until after Dynamic Business goes to print. As many as four-dozen separate pieces of legislation will be required in order to implement the entire Prescription for Pennsylvania. SMC and others will push for additional components, including full transparency in health care pricing and quality of care, tax policy support for health savings accounts, tax credits for small businesses that implement active health and wellness efforts.
posted by SMC Business Councils @ 4:38 PM
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