What Health-Care Reform Means 

A look at what proposed health-care reform could mean in real life

ProPublica, an independent, non-profit journalism group focused on investigative journalism recently decided to look at what health-care reform means to people. Using a questionnaire done in partnership with American Public Media's Public Insight Network, journalists Olga Pierce and Sabrina Shankman looked at what the proposed health-care reforms would mean for those in some common health-care insurance situations.

Already Insured

Tracy Bullion, 46 • Fort Wayne, Ind.

Happy with her insurance—and worried about the cost of reform.

Household income: $110,000

Her story

Tracy Bullion and her husband—along with their three kids, ages 11, 14 and 18--are happy with their health insurance, which they get through her husband's employer. "We've got good eye, good dental," she said. "And we've worked a long time for it."

The Bullions pay about $350 a month for a premium. The family has enjoyed good health, except for a lump in Bullion's breast last year, which turned out to be benign. Their payments for tests on the lump amounted to "$50 here, $100 there," she said.

Bullion worries that an expanded government role in health care, including a public option, would negatively impact the coverage she has--and the federal budget.

"I just hope that we see a bill out there that makes sense, that isn't going to put us in such deep, deep debt to where our children and grandchildren are going to be paying for it for the rest of their lives," she said.

What changes would mean for her

Neither the House nor Senate bill would require the Bullions to change plans, and the cost of their health insurance probably wouldn't change much, but lenient penalties might lead some companies to drop their coverage.

Both the House and Senate bills allow people who are happy with their coverage to keep it, unless it is below a minimum standard, in which case they would have to pay a tax penalty. Since Bullion's coverage meets the minimum coverage standards set out in both bills, she and her family would not be affected.

There are concerns about employers pushing workers off to public programs, and indeed it has happened before.

The House and Senate bills include tax penalties for employers over a certain size that choose not to offer coverage, but the Senate's penalty would be much smaller.

Under the House plan, most employers--including Mr. Bullion's--would be required to provide health insurance, or else they would be fined 8 percent of their total payroll. But that might actually cost less than paying for insurance itself because more than half of employers currently pay 10 percent or more of their payroll for health insurance.

The Senate plan would take an even gentler approach. Large employers wouldn't have to offer health coverage. But for each employee who qualified for a government subsidy to buy insurance--those making less than four times the federal poverty level--the business would be fined $750 annually. That's far less than the roughly $4,000 that companies pay on average now for single employee coverage.

Again, employers would have to decide if the benefits of continuing to offer coverage, such as employee morale and avoiding the fine, make it worthwhile. But more businesses might decide that it makes sense to end coverage and instead just pay the relatively small fine.

Of course, currently employers can drop insurance benefits with no penalty, and many are doing so as the economy tanks and costs continue to rise.

The reforms being proposed could put some upward pressure on premiums, because both the House and Senate plans would require a comprehensive benefits package. That means all insurance plans would have to offer things like pediatric exams, hospitalization and prescription drugs. In general, the more comprehensive a plan's coverage, the more it costs. Rules against turning down people with pre-existing conditions are in both bills, and a cap on deductibles in the House bill could also drive up premiums.

On the other hand, proponents of health-care reform, including President Barack Obama, have argued that health-care providers charge insured people more for health care to recoup the cost of care for the uninsured. Reducing the number of uninsured people could reduce the cost of some kinds of care, potentially reducing premiums. But the evidence of this is somewhat limited.

An analysis of the Senate proposal, by the nonpartisan Congressional Budget Office, did indeed find that the cost of coverage in the individual market would go up about 10 to 13 percent, although that effect would be cancelled out for about half of the people buying insurance on their own because they would receive subsidies.

For people who, like Bullion, purchase insurance through the large group market--an estimated 70 percent of people under the Senate proposal--the CBO found the Senate bill would have a "negligible" effect on the cost of insurance.

The answer to how much the reform proposals would cost taxpayers is nearly as complicated. According to CBO estimates, the Senate plan would include $848 billion in new federal spending over 10 years, and the House plan calls for an eye-popping $1.05 trillion in new spending. Either way, it sounds like a huge drain on the federal budget.

But not so fast.

Both plans would offset the new spending with reductions in other federal health-care costs and new sources of revenue.

Under the Senate plan, changes to Medicare, the penalties individuals and businesses would pay for not having insurance, and revenue from taxes on so-called "Cadillac" insurance plans and the health-care industry, would generate $859 billion. Taking that into account, the Congressional Budget Office estimates that the Senate plan would actually reduce the deficit by $130 billion over the next 10 years.

The House plan would make many of the same changes, except it would impose a 5.4 percent surcharge on adjusted gross incomes of more than $500,000 for singles and $1 million for joint filers instead of the tax on high-cost insurance plans.

Taking that into account, the House plan would reduce the federal deficit by an estimated $138 billion over 10 years, according to the CBO.

The decades after 2010-2019 would be more expensive because many of the reform provisions would not kick in until halfway through this decade, but the cost savings and taxes would start much sooner. For 2020-2029, the CBO estimate is that the plans would basically break even, or result in a small decrease of the federal budget deficit.

This all presumes, of course, that the revenue-raising measures, some of which have already drawn ire, actually make it into the final legislation intact. As some longtime observers of health-care reform, like Washington Post columnist David Broder, have pointed out, Congress has struggled before to make some of the proposed changes--especially those pertaining to Medicare.

Covered by Medicare

Graydon DeCamp, 75 • Elk Rapids, Mich. • Retired

Income: about $75,000, including Social Security

About Medicare Advantage

Medicare Advantage has been a major flash point in the health-care reform debate, giving fodder to opponents of reform who say that Medicare would be cut to pay for the proposals. Our analysis of the impact of reforms on one very satisfied Medicare Advantage member finds the changes would be a loss for many seniors, but a win for taxpayers.

The elderly can participate either in traditional Medicare, which is administered by the government, or in Medicare Advantage, which subsidizes managed-care plans administered by private insurance companies.

The private plans offer many perks--low or zero cost-sharing, comprehensive prescription-drug coverage, even gym memberships. But they also have a downside: As in other managed care plans, prior authorization is needed for many services, and members are limited to certain doctors and hospitals.

The relatively new Medicare Advantage is more expensive for taxpayers, however. In 2003, the Republican-controlled Congress wanted to make sure that seniors, especially those in rural areas, had access to a range of managed-care plans. (This was a problem that plagued an earlier version of the Medicare managed care program.) So it agreed to pay health insurers more per person than it would cost if they were in traditional Medicare. Today that gap is about 12 percent.

Neither the House health-care reform bill nor the Senate Finance Committee bill eliminates Medicare Advantage, but both would reduce what the government is willing to pay. The boon for private insurers from higher premium subsidies has long been a prime target for budget savings, especially among Democrats in Congress. So--not surprisingly--cuts have turned up in the reform bills. Those provisions have proven to be some of the most contentious in the debate. Obama insists there are not cuts to Medicare in the health-care reform packages, though many don't see it that way.

His story

: Graydon DeCamp said he couldn't be happier with his Medicare Advantage plan. He switched to it after his premium for traditional Medicare and private supplemental insurance skyrocketed to more than $1,000 a month even though, DeCamp said, he's a healthy guy.

Now, in Medicare Advantage, he pays $148 per month for a plan that also features low co-payments. A few years ago, he had detached retinas, which resulted in five surgeries. His out-of-pocket expenses, he said, didn't go over $500 or $600. Prescriptions that he takes for ongoing eye problems cost him $55 every three months.

"I've got no complaints," he said.

What health reform may mean for him

DeCamp's premiums will probably increase, and he may have fewer plans to choose from. If the government decreases its subsidies to Medicare Advantage plans, the plans will likely pass their increased costs on to people like DeCamp, resulting in higher premiums. The House bill calls for $172 billion in savings over the next 10 years from reducing Medicare Advantage payments to insurers to the same amount paid for traditional Medicare--a significant chunk of the roughly $570 billion in savings from changes to Medicare overall. Likewise, the Senate Finance Committee's bill calls for $470.2 billion in Medicare savings, of which 25 percent ($117.6 billion) would come from Medicare Advantage cuts. The bill would generate those savings by establishing a bidding process for plans.

Because DeCamp lives in northern Michigan, he may also see fewer Medicare Advantage plans to choose from as subsidies under both proposals decrease.

Overall, DeCamp would likely fare better under the Senate Finance Committee proposal, which includes more protections to soften the impact of reduced subsidies. If the bids include significant cuts to benefits, the government would temporarily step in.

The proposed reforms also call for some improvements to Medicare Advantage coverage. The Senate Finance bill prohibits managed care plans from charging people more than traditional Medicare for certain services, such as chemotherapy, renal dialysis and skilled nursing care. It also offers bonuses to plans that offer superior quality of care and care coordination. And the House bill provides bonus payments to high-quality plans, and requires that a list of high-quality and improved-quality plans be provided on the Medicare Web site.

If his plan becomes too expensive, DeCamp could switch back over to traditional Medicare. Under both bills, preventive services would be free (see the Senate provision and the House's). And both have provisions for reducing fraud and waste, which drive up Medicare costs.

Small Businesses

Fairfield Lighting and Design, Office Manager Barbara D'Agostino Fairfield, Conn. • Employees: 12 (10 receiving health insurance)

Sales: $2 million annually • Payroll: $384,000 annually

Their story

Fairfield Lighting and Design has been in business since 1972, but it is struggling to cope with tough economic times. It has 12 employees, whose average wage is about $20 an hour. Because of the recession, opportunities to work overtime have dwindled, and the regular hours of some employees have been cut.

The recession has also made it difficult to keep paying their health-care costs: Fairfield offers health insurance to 10 of its employees, at a company cost of $550 per employee each month.

The costs to each employee are relatively low. They pay only 20 percent of the premium, or $110 per month. Their co-payments are $15 to see a doctor or $500 for a hospital, and medications cost them $15, $25 or $50, depending on the type of drug.

But that could change. Fairfield Lighting and Design was recently notified that its coverage will be taken over by a new company, probably around the beginning of the year.

"Hopefully when this whole thing goes through, maybe we can find something less expensive," D'Agostino said. "Otherwise, the employees may have to contribute a bit more."

What health-care reform would mean for them

Two of the reform bills require that employers provide some minimum health insurance to employees or pay a penalty. The exception is the Senate Finance Committee bill, which has no employer requirement.

But small businesses are exempt. Because Fairfield Lighting and Design has only 12 employees and a payroll of less than $500,000, it would not be required to provide health insurance under any of the health reform bills.

Each of the three bills gives small businesses tax credits for several years to provide relief from high insurance premiums until more comprehensive reforms are in effect--until 2015 for the House bill, and 2017 in the Senate Finance bill. The Senate health committee bill would offer a credit until state exchanges are up and running--up to three years. But some plans offer a lot more help than others. The health-committee bill would offer Fairfield a tax credit of about $10,000 per year. The others use sliding scales based on employee income, and because Fairfield pays near the top of those scales, it would get a credit of only about $5,000 under the House bill and $2,500 under the Senate Finance Committee bill.

Small businesses would also have the option under all three bills to buy insurance through a health-insurance exchange, a pooling mechanism that would allow them to choose from a menu of private plans, which the Congressional Budget Office projects would be cheaper than private plans currently out there for small businesses.

Help won't arrive right away under any of the proposals. The House bill, which phases small businesses into the exchange based on their size, would make Fairfield wait until 2013. The Finance Committee plan would make Fairfield wait even longer--it won't set up exchanges for small businesses until 2017. The Senate health committee plan would authorize the Health and Human Services secretary to start giving grants to states to start up exchanges right away, but it is unclear how quickly states would move.


Anne Johnson, 41 • Corona, Calif.

Unemployed • Income: $0

Her story

Anne Johnson lost coverage for herself and her 18-year-old son in February when she lost her job as a secretary at a solar energy company, where she was earning about $25,000 per year.

Shortly before she was laid off, a cardiologist told her she needs her aortic valve replaced, but without insurance, she can't afford the surgery. She is supposed to get checkups every six months, but that is also too expensive--so she has put them off. Her last visit to the cardiologist was in January, so she is already three months overdue.

"Right now, I have no idea what type of condition I'm in," Johnson said.

What health care reform would mean for her

Johnson's son may already qualify for Medi-Cal, the state's Medicaid program, which covers low-income children if they do not have private insurance, because her son is under age 21. (We let Johnson know that her son may be eligible.)

But if she gets a job that pays roughly the same as she earned before but does not provide health insurance, he would most likely lose his Medi-Cal coverage. The House reform plan and the Senate Finance Committee plan would standardize Medicaid eligibility across states to 133 percent of the federal poverty line, which amounts to $19,378 for a family of two. The plan from the Senate Health, Education, Labor and Pensions Committee (known as the HELP committee) would expand it to 150 percent of the poverty line, still only $21,855.

Johnson would be able to purchase private health insurance from a gateway or exchange, a state-based pool offering a menu of private insurance plans. The House and the Senate HELP bills would also offer her a public plan.

Her low income would qualify her for a subsidy to help buy insurance through the exchange, according to all three reform proposals.

The House plan and the Senate Finance Committee plan would allow Johnson to choose from four levels of coverage ranging from basic to premium, while the Senate Health, Education, Labor and Pensions Committee does not specify levels of coverage.

But if Johnson remains uninsured, she will have to pay a hefty tax penalty: All three plans impose a highly controversial tax penalty on uninsured individuals. The HELP bill would impose a penalty of $750 per year per person, so Johnson would have to pay $1,500. The Senate Finance plan phases in a penalty of $750 per year per uninsured adult, so Johnson would pay the same amount since her son is 18. The House bill would fine families the cost of a basic health-insurance plan from the health exchange, up to 2.5 percent of their taxable income.

Critics of the requirement that all individuals have health insurance say it would in effect increase taxes for poor and middle-class people for not being able to afford health insurance.


Mary, 53, and Mack, 57, Kroner • Austin, Texas • Employed

Health-care status: underinsured with a high deductible

Income: combined $50,000 per year

Their story

Mack is a self-employed cab driver and Mary is a self-employed writer; they both pay for their own health insurance. Though together they pay about $600 a month in premiums, they have what Mary Kroner calls "junk insurance."

Rapidly rising premiums have forced them to increase their deductible every year, and now they have a policy with a $5,000 deductible per illness per year. That means that they've been paying essentially all their health-care costs out of pocket. Mary pays $100 for her annual mammogram--a must because her sister had breast cancer--but she skips recommended pelvic exams. A recent colonoscopy recommended for Mack after he showed signs of bowel cancer cost them $1,376, roughly half their monthly income.

What health-care reform means for them

"We just bite the bullet and don't attend to things because we can't afford it," Mary said.

The Kroners would qualify to purchase insurance through a health-care exchange because they are not part of a government program and do not have insurance through their employers. They could choose from an array of private plans, and one public plan, that conform to set levels of coverage.

The House plan would create a national exchange, the Senate plan state-based exchanges, and states would be able to opt out of the public option.

The plans in the exchange are likely to cost less for individuals like the Kroners because they pool risk, much the way that employer policies do. Setting levels of coverage also encourages plans to compete based on price.

Both the Senate and House plans would help the underinsured by requiring generous coverage for preventive care, like Mack's colonoscopy and Mary's mammograms. They would also cap out-of-pocket costs.

The Kroners would also qualify for government help in paying their premiums, but would fare slightly better with the Senate plan. Both plans offer subsidies on a sliding scale, which would ensure that people making less than 400 percent of the Federal Poverty Line would spend only a certain percentage of their salary on premiums. Mary and Mack make about 300 to 350 percent of the poverty line, which in 2009 is $14,570 for a family of two. Under the Senate plan, the Kroners' premium would be capped at 9.8 percent ($4,900). That's $2,300 less than they pay now. Under the House plan, their premium would be capped at 10 to 11 percent of their income ($5,000 to $5,500), which would save the Kroners between $2,200 and $1,700 from their current premium.

Under the Senate and House plans, the Kroners would also qualify for cost-sharing credits.

If the Kroners decided to keep buying private insurance outside the exchange, they would have to buy a policy that covered preventive services, pre-existing conditions, hospitalization and a series of other services ("essential benefits" in official jargon) or they would face a steep tax penalty under both proposals.

Under the House bill, that tax would equal 2.5 percent of their annual income, or $1,250. Under the Senate bill, which phases the penalty in over the next six years, by 2016 they would owe $750 a person, or $1,500.

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