Still Confused? A Refresher on the Basics of the Health Debate

By David M. Herszenhorn
It may feel endless, but the health care debate in many ways is just getting started – the various bills are nearly ready, and full debate in the House and Senate lies just ahead. And yet, according to the latest New York Times/CBS News Poll, 6 out of 10 people in the United States are confused about the plans to overhaul the health system.
Nearly half say they don’t know enough about the plans to have an opinion. And one-third can’t fathom a guess as to whether, if the proposed changes are adopted, the system would be better or worse in the years ahead.
So here’s a quick refresher of some of the basic parameters in the health care debate. Please pay attention, there will be a quiz – another poll – and if 59 percent of you are still confused, somebody ought to get fired. Maybe me.
Let’s start with two overarching issues: About 46 million people in the United States do not have health insurance. And health care costs – doctor visits, medicine, hospital care, lab tests, etc. – are rising way too fast. The proposals by President Obama and Congress try to tackle both problems.

First: The Insurance

To cover the uninsured, the government would do two main things:
  • Increase the number of people on Medicaid, the federal-state insurance program for the lowest-income Americans.
  • Give subsidies to help moderate-income people buy insurance.

To make sure insurance is obtainable, there would be new rules, such as barring insurers from denying coverage based on pre-existing medical conditions.

With a few exceptions, the majority of Americans who already have insurance through an employer — about 160 million people — would have to stay with that coverage.

And starting in 2013, nearly everybody would be required to obtain health coverage, or pay a penalty for not doing so. The logic is the same as in requiring auto insurance: anyone without coverage poses a risk of high costs for everyone else. But the proposed “mandate” is also a political flashpoint: Americans tend not to like being told what to do by their government, and Republicans are attacking the penalty as a “tax.”

In any event, without government action, the Congressional Budget Office estimates that the number of uninsured people would rise to 54 million by 2019.

Under the Senate Finance Committee bill, the number of uninsured would be cut by 29 million. About 11 million people would be covered by Medicaid, and the other 18 million would buy policies through new government-regulated marketplaces, or exchanges.

At that point, according to the nonpartisan Congressional Budget Office, 94 percent of Americans would have health insurance, up from about 83 percent today.

But there would still be 25 million people without coverage. About 8.3 million of them would be illegal immigrants.

There has been much debate over the idea of a government-run insurance plan, or public option, to compete with private insurers. The Senate Finance Committee on Tuesday voted down two such proposals, but the other four Congressional committees working on health care legislation have included a public option in their bills.

While there are differences between those plans, there are some basic common points. The public plan, if created, would only be offered to people buying policies in the new exchanges. It might be cheaper than private plans, but it would not be free.

The majority of people already on Medicaid or who have employer-sponsored insurance could not drop it in favor of a new public plan. So, for all the uproar, the public plan would not be available to most people, at least initially.

The fight is really about what it might mean in the future. Because it would not have to earn profits or pay private-sector salaries, Republicans say the public plan would have an unfair advantage and ultimately drive private insurers out of business.

Democrats say the competition would make private insurers more efficient and pressure them to offer better coverage at lower prices.

Second: Paying for It

Central to understanding the debate — and deciding whether you are for or against whatever plan emerges from Congress — is the question of whether it will be affordable. And that means affordable on two levels:

  • For taxpayers and the government
  • For individuals and families 

    • Health coverage is expensive, now averaging more than $13,000 a year per family for the kind of group coverage that would be available under the proposed legislation. And health care costs generally are rising much faster than regular inflation. In other words, the amount of money we earn and the taxes we pay have not kept up.

    The Congressional Budget Office estimates that adding 11 million people to Medicaid would cost about $287 billion over 10 years. And the subsidies to help people buy insurance could cost another $500 billion or more.

    So the new coverage will cost roughly $80 billion a year to insure 29 million people. For context, consider that the government spends more than $600 billion a year on defense, and about $500 billion a year on Medicare for about 44 million Americans, mostly over age 65.

    Medicare, by the way, is going broke. Incoming taxes no longer exceed expenses. Estimates are that by 2019, its hospital insurance trust fund will be exhausted.

    To help offset the cost of a health care overhaul, Mr. Obama and Congress want to reduce the growth of Medicare spending — not by cutting services but by pressuring providers like doctors and hospitals to offer the high-quality, cost-effective care found in parts of the country that stretch their Medicare dollars the furthest.

    A proposed new tax on the most expensive health plans would also help control medical costs, by limiting the incentive for corporations to give employees tax-free health benefits instead of cash raises. That would raise more than $200 billion, the budget office says.

    But even if the government can afford the plan, and even if it would help ease budget deficits down the line, there is a separate question: Will individuals and families be able to afford insurance? That will depend on what premiums cost in years ahead, and the level of subsidies to be offered by the government.

    The Congressional Budget Office’s preliminary analysis of the Senate Finance Committee’s bill found that after subsidies, premiums and out-of-pocket costs could run from 8 to 18 percent of income for individuals, and from 10 to 20 percent of income for families.

    Many experts say that is too high, and Senate Democrats have already taken steps to reduce those numbers.

    But in deciding whether the health overhaul is a good idea, the question of affordability is a crucial one to keep in mind.

    The Billion-Dollar Questions

    If there is one thing that Democrats and Republicans agree on these days it is the complexity of the health care issue. Many lawmakers say this is the most far-reaching legislation they have ever worked on, potentially reshaping an industry that accounts for one-sixth of the American economy, and with serious implications for every single American citizen.

    Less confused, but still trying to make up your mind? Here are some other questions to consider.

    • Is expanding Medicaid the best way to cover the lowest-income Americans? Democrats note that it’s an easy way, because the system already exists, and it is relatively cheap. But Republicans say Medicaid has a stigma and that it pays providers such low rates that doctors increasingly refuse to accept it.
    • What’s a bigger risk: That the proposed reductions to slow Medicare spending are more likely to lead to cuts in services than increased efficiency? Or that political stalemate will force more drastic changes to Medicare when the trust fund is finally exhausted, as projected in 2019?
    • Is maintaining the current system of mostly employer-sponsored health insurance a common-sense solution, or a bandage on a fractured leg?
      Some liberals still argue that a single-payer system, like the kind in Canada, England or Spain, is a better way to go. Some conservatives contend that the government is already too involved in health care, and the existing system should be replaced by one in which everybody buys their own coverage.
    • Is it reasonable for the government to require nearly all Americans to obtain health insurance? Or is it an intrusion by the government into private affairs? Is a proposed penalty on those who fail to obtain insurance a reasonable step or is the penalty an unjustifiable tax?
    • Is it reasonable to think that the overall growth in health care costs can be slowed as a result of the bill? Or are Americans destined – absent strict price controls not included in the legislation – to spend as much money as they possibly can on the thing they value most: their health?
    • Given the partisan acrimony that prevails in Washington regardless of which party is in charge, is some form of health legislation better than nothing, especially since the costs of inaction are clear? Or, given the partisan acrimony that prevails in Washington regardless of which party is in charge, is nothing better than something that may cost a lot but might not work?

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