House Democrats Oct. 29 introduced a revised $894 billion health care reform bill (H.R. 3962) that would expand coverage to 96 percent of Americans.

The 1,990-page bill, the proposed Affordable Health Care for America Act, would expand coverage by broadening the Medicaid program, providing premium subsidies to help individuals and families purchase coverage, and creating an insurance exchange that offers private plans as well as a public option with negotiated provider reimbursement rates.

“Today we are about to deliver on the promise of making affordable, quality health care available for all Americans,” House Speaker Nancy Pelosi (D-Calif.) said at the bill's unveiling.

The bill is based on the original House health reform proposal (H.R. 3200) approved by the committees of jurisdiction in July but also includes changes designed to provide better coverage, lower the costs of the bill, and win the support of the Democratic caucus.

In a preliminary analysis, the Congressional Budget Office said the bill has a projected net cost of $894 billion during the budget window of 2010-2019 for the coverage provisions of the bill and would provide insurance to 96 percent of legal, nonelderly residents, up from about 83 percent currently.

To offset the costs of reform, the bill would include a 5.4 percent surtax on high-income households with a modified adjusted gross income of more than $1 million, as well as draw savings from changes to the Medicare and Medicaid programs.

President Obama applauded the release of the bill as a “critical milestone” during a speech on small businesses' need for health care reform.

“They forged a strong consensus that represents a historic step forward. This bill includes reforms that will finally help make quality insurance affordable. Importantly, this bill is also fully paid for and will reduce the deficit in the long term,” he said.

Upcoming Floor Action.

Democrats have pledged to provide a 72-hour viewing period for the bill as well as a manager's amendment to it, meaning floor consideration will not begin until late the week of Nov. 2. House Majority Leader Steny H. Hoyer (D-Md.) said on the floor that debate could begin on Thursday.

Republicans are not expected to support the bill, and House Minority Leader John Boehner (R-Ohio) slammed the legislation as a “government takeover of our health care system.”

“It's going to raise the cost of American health insurance. It's going to kill jobs with tax hikes and new mandates in it. And it's going to cut seniors' health care benefits,” he said at a press conference.

CBO Estimate.

The net cost of $894 billion reflects a gross total of $1.055 trillion in subsidies ($605 billion), increased net outlays for Medicaid and the Children's Health Insurance Program ($425 billion), and tax credits for small employers ($25 billion). The costs are partly offset by $167 billion in individual and employer penalties.

With the $894 billion net cost of the coverage provisions meeting Obama's goal of a $900 billion bill, Democrats focused on that number, while Republicans said it is misleading to not cite the gross coverage total of $1.055 trillion. For example, the Senate Finance Committee's reform legislation has a gross total for the coverage provisions of $829 billion, the figure which is most often cited when explaining its cost. The $894 billion net cost in the House bill corresponds to only $518 billion in the Finance bill.

Over the 10 years, the net cost of the coverage expansions in the House bill would be offset by $426 billion in spending reductions, such as those to Medicare and Medicaid, as well as revenue provisions, such as a surtax on high income earners, that would bring in $572 billion, according to CBO.

The bill would result in a net reduction in federal budget deficits of $104 billion during the 10-year window, according to CBO. The reduction reflects the inclusion of the Community Living Assistance Services and Support program (CLASS), a new voluntary long-term care benefit.

In the first decades of the CLASS program, it would bring in more in premiums than it would pay out in benefits, but the situation would flip eventually. CBO said the program's “cash flows would initially show net receipts in early years, followed by net outlays in later years. In particular, the program would pay out far less in benefits than it would receive in premiums over the 10-year budget window, reducing deficits by about $72 billion over that period.”

The CBO estimate said the legislation would reduce the number of uninsured by 36 million, leaving about 18 million uninsured, a third of whom would be illegal immigrants.

CBO said roughly 21 million people would purchase coverage through an exchange and 9 million would receive employer coverage through the exchange. In addition, 15 million more people would enroll in Medicaid than under current law.

Of the 30 million in the exchange in 2019, CBO estimated that 6 million would choose the public option. Compared with private plans in the exchange, the public plan would have comparable provider payment rates but lower administrative rates, and “probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees,” according to CBO.

“That estimate of enrollment reflects CBO's assessment that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges,” CBO said.

The Blue Dog Coalition, a group of anti-deficit Democrats, was expected to send a letter to CBO the evening of Oct. 29 requesting a further analysis of how well the bill would “bend the cost curve” of federal health spending in the long term, as well at its longer-term effects on national health spending and the federal deficit.

Access to Coverage.

As proposed, individuals would be required to obtain insurance coverage or face a penalty equal to the lower of 2.5 percent of their adjusted gross income above the filing threshold or the average premium offered through the insurance exchange.

To help those without employer coverage or with unaffordable employer coverage obtain a policy, the bill would create a health insurance exchange, where individuals and certain small businesses would be eligible to purchase policies. The newly released bill would allow larger businesses to enter the exchange more quickly than as originally proposed.

In 2013, businesses with up to 25 employees could enter the exchange, compared with businesses with 10 employees in the original bill. By 2015, firms with up to 100 employees could enter the exchange under the new bill, with further expansion possible.

All policies offered through the exchange--and eventually all employer-based policies as well--would be required to meet minimum benefit standards.

In addition, subsidies would be available to those with incomes up to 400 percent of the federal poverty level to help purchase insurance, on a sliding-scale basis. Those with incomes below 133 percent of the federal poverty level would be eligible for a subsidy if they have contributed 1.5 percent of their incomes toward premiums. At the highest end of the income scale, an individual or family would have to contribute 12 percent of their income toward a premium before they would qualify for a subsidy.

The amounts individuals would be required to contribute are slightly higher than those included in the original bill but reflect changes made by the Energy and Commerce Committee during the panel's markup of the legislation. The bill also would cap out-of-pocket expenses for individuals and families.

The bill would expand eligibility for Medicaid to all those with incomes below 150 percent of the federal poverty level, up from 133 percent in the original bill. Beginning in 2015 the states would be responsible for 9 percent of the costs of the expansion population, with the federal government picking up the tab prior to then.

Insurance Reforms.

The bill also would implement a series of consumer protection reforms, with many of the changes rolled out sooner than under the original proposal. In 2010, the bill would end insurance rescissions, reduce the window that insurance plans can look back for pre-existing conditions from six months to 30 days, and prohibit insurance companies from placing lifetime caps on coverage, among other reforms. It also would create a high-risk pool with financial assistance for those who were uninsured because of a pre-existing condition.

Beginning in 2013, the bill would prohibit insurance companies from discriminating based on pre-existing health conditions. The legislation also would prohibit insurers from charging higher rates due to health status or gender, or other factors, and permit premiums to vary based on age by a ratio of only 2-to-1.

Limiting Cost Growth.

The bill also contains a variety of provisions designed to lower health care cost growth in the long term, a goal of health reform and of particular concern for Blue Dogs.

The bill as first introduced would require pilot programs for accountable care organizations, medical homes, and payment bundling. But under the melded bill, the Department of Health and Human Services would be required to set benchmarks for the expansion of the pilots, and expand them on a large-scale basis if successful.

The bill also would establish a Center for Medicare Innovation to allow the Centers for Medicare & Medicaid Services to experiment with additional payment and delivery system reforms, and would create a prevention and wellness trust fund.

According to a summary of the bill, reforms to the Medicare program would extend the solvency of the Medicare trust fund for five years by attacking waste, fraud, and abuse. Two Institute of Medicine studies also would make recommendations to eliminate geographic variations in Medicare payment and shift the system toward one that rewards value over volume (see related item in this issue).

The bill does not include a permanent fix for the Medicare physician reimbursement formula, known as the sustainable growth rate, but House leaders Oct. 29 introduced a bill designed to reform the SGR (see related item in this issue).

Public Insurance Option.

For Democrats, one of the last issues to be resolved in the bill was whether provider reimbursement rates for the public insurance option would be based on Medicare payment levels or negotiated with providers--with the negotiated version finally winning out when the leadership could not find the votes to support the “robust” version.

The public option with rates tied to Medicare would have saved $85 billion more than negotiated rates, a difference made up in part by the larger Medicaid expansion.

“I think some members of the Congress are going to have to explain why they wanted less competition, less choice, and more cost for the taxpayer. But it's hard not to call the success of the public option a victory,” Rep. Anthony D. Weiner (D- N.Y.), a vocal supporter of the robust version, told reporters.

Although liberal members of the caucus had favored the robust option, more moderate members, especially those from rural areas, insisted they could not support that structure because Medicare already underpays providers in their districts.

Rep. Earl Pomeroy (D-N.D.), a Blue Dog, had said repeatedly that the inclusion of a public option with Medicare-based rates in the bill would cause him not to vote for it, and he told reporters the decision to go with negotiated rates has made him a supporter.

“Paying more people at Medicare rates would have jeopardized our existing health delivery structure. We had to get that changed,” he said. Pomeroy said he thinks the bill will garner the 218 votes needed for passage.

Pomeroy said he thought the Senate reform bills would do more to control costs, though he said the House bill is a drastic improvement over the status quo.

“I'm hoping that the bill will continue to improve as the process goes forward. But at its present point, it now represents a distinct improvement over where we are relative to the soaring costs, the out of control costs, and the increasing inability of people to get insurance,” he said.

Rep. Raúl M. Grijalva (D-Ariz.), a co-chair of the Congressional Progressive Caucus, said he would push for a floor amendment that would include the Medicare-based rates instead.

Insurer, Business Groups Criticize Bill.

The insurance industry criticized the bill, saying it would limit access and affordability, though representatives said they hope to continue working to enact reform.

“Without a greater focus on health care costs, families and employers will not be able to afford coverage and health care costs will rise at a rate much faster than the overall economy is able to sustain,” Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, a trade group for private health insurers, said in a statement.

She also said the public option would “bankrupt hospitals, dismantle employer coverage, exacerbate cost-shifting from Medicare and Medicaid, and ultimately increase the federal deficit.”

In addition to expressing concerns about affordability and the public option, the Blue Cross and Blue Shield Association (BCBSA) also criticized the structure of the insurance exchanges.

“While we agree that exchanges are needed to help individuals and small businesses shop, compare and enroll in coverage, the proposed federal exchange would result in a massive shift of authority to the federal government that would undermine existing state authority and create conflicting state and federal rules,” the group said in a statement.

A coalition of business groups also criticized the bill and said in a letter to Pelosi and Boehner that they oppose the legislation.

“The legislation falls short of the bipartisan goal of controlling costs and jeopardizes employer-sponsored coverage which now serves more than 160 million Americans,” the letter, signed by groups including the American Benefits Council, the Business Roundtable, the National Business Group on Health, the National Retail Federation, and the U.S. Chamber of Commerce, said.

Specifically, the groups objected to the weakening of the Employee Retirement Income Security Act (ERISA) and the inclusion of an employer mandate and the public option. They also said the minimum benefit standards for insurance policies would force employers to curtail other benefits and limit employer flexibility.

Consumer, Provider Groups More Receptive.

Rich Umbdenstock, president and chief executive officer of the American Hospital Association, said AHA is pleased the bill would expand coverage but has some concerns about expanding the Medicaid program while states face budget shortfalls, as well as the structure of the public option.

“While a public option with negotiated rates for those above 150 percent of the poverty level is an improvement, we remain concerned that the program would still, in part, be based on historically low Medicare rates,” he said in a statement.

Families USA, a health care consumer group, said the bill is the “gold standard” for reform legislation.

“The bill will provide America's families with peace of mind. It does so by ensuring that affordable, high-quality health coverage and care will not be taken away from them, even when they get sick, have a pre-existing condition, or lose their jobs,” Ron Pollack, executive director of Families USA, said in a statement.

By Sarah Barr

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The text of the bill is available at http://op.bna.com/dt.nsf/r?Open=csaz-7xak79.

A summary of the bill is available at http://op.bna.com/hl.nsf/r?Open=sfak-7xasey.

More information is available at http://waysandmeans.house.gov/MoreInfo.asp?section=52.

The CBO score is available at http://op.bna.com/hl.nsf/r?Open=sfak-7xartx.

The Blue Dog letter is available at http://op.bna.com/hl.nsf/r?Open=sfak-7xau4d.

Copyright 2009, The Bureau of National Affairs, Inc.