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December 13, 2006

The Healthy Americans Act

It's been some time since I've run across a genuinely new health care proposal, but the comprehensive reform legislation Ron Wyden's unveiled today is just such a beast. Wyden, a gangly goofball of a Senator who last turned heads for his tax reform ideas, must have decided fully restructuring the tax code was thinking too small, so this morning, he took over the Senate Finance Committee's hearing room, brought in an array of union leaders, CEOs, and health wonks, and argued to totally scrap the employer-based health system.

Here's how it would work: The Healthy Americans Act of 2007 would begin by dissolving all employer-based insurance. Instead, it would mandate that every employer who had covered his employees in 2006 convert the total they spent on insurance into salary increases creating, in one day, the single largest pay raise America has ever seen. Now, why would employers go along with that? Well, legislatively they'd have to, but, as Len Nichols explained to me, they'll also want to: Health costs are accelerating, every year costs 10 or so percent more than they ear before. By freezing the total at what employers paid in 2006, Wyden's plan would exempt them from 2007's increase.

Meanwhile, an individual mandate would be implemented, forcing every American to purchase one of the options offered by their state's newly formed Health Help Agency (HHA). The HHA's will have a menu of private insurance plans, all of which must provide coverage equal to or better than the Blue Cross Blue Shield Standard Plan used by Congress. All plans will be community rated by the state, meaning an end to adverse selection and preexisting condition problems. The only acceptable variables for price will be geography, family size, and smoking status. Subsidies will be offered up to 400 percent of the poverty line, will full coverage provided to those below 100 percent. Employers will contribute through a set equation related to business size and yearly profits. There's quite a bit more, but that's the basic outline.

I have to spend some more time with the legislation ("c'mon baby, open up to me, tell me your secrets..."), but my snap reaction is heavily favorable. It isn't everything I'd want, but imposing the combination of community rating and an insurance floor will be a huge step forward. The cost stability offered to employers seems very, very savvy, as does the forced conversion of 2006 health costs into salary increases. The Lewin Group, the gold standard in health care actuarial data (I can't believe I just wrote that sentence), has evaluated the plan. Their conclusion? The plan would cover more than 99 percent of Americans, we'd save $4.8 billion in the first year and $1.48 trillion over the next decade. How's that sound? To me, it sounds like precisely the sort of big thinking Democrats need to be doing now that they're back in the majority.

For those want to dive in, there are more materials at Wyden HQ.

December 13, 2006 | Permalink


Being too lazy to dig in myself, but knowing you're going to be reading more, how will this impact small businesses (say the type that only offer the reimburse up to X dollars a month because of the IRS rule that lets them)? This sounds like it'd be hard on people that don't have insurance today. Or maybe the pool that's not around the poverty line, and doesn't have some sort of employer-given health insurance option is that 1%.

Posted by: Tom in AZ | Dec 13, 2006 3:36:38 PM

What are you going to do about preexisting condition exclusions? I am without health insurance for exactly that reason -- unless those rules are hereby prohibited even for private insurance companies (discrimination based on disability? in many cases at least) then all the best and cheapest private plans in the world aren't going to do the entire population right.

Posted by: Amanda | Dec 13, 2006 3:46:47 PM

Sounds great! Throw in subsidies for poor people based on the 5% spending rule (healthcare shouldn't account for more than 5% of income), and it's perfect.

Posted by: anonymous | Dec 13, 2006 3:47:15 PM

Hello, reading comprehension -- feel free to delete both comments.

Posted by: Amanda | Dec 13, 2006 3:48:04 PM

The law forbids preexisting conditions exclusions -- that's what the community rating does.

Posted by: Ezra | Dec 13, 2006 3:48:13 PM

What about employees whose employers do not currently offer health insurance? Sounds like they'd be royally screwed -- no raise to cover the cost of being forced to purchase insurance, yet a legal mandate to buy some.

Granted, many of them would likely fall into the "up to 400%" category and receive some subsidies, but it's something to take a hard look at.

Posted by: fiat lux | Dec 13, 2006 3:52:24 PM

As much as I hate to let the market work this out, I would count on those employers giving raises so their workers show up the next day.

Posted by: skewter | Dec 13, 2006 4:11:47 PM

Based upon what you've said, Ezra, I would like this plan without mandated raises of any kind. The number of people who would be able to finally get insurance coupled with the savings this plan would posssibly represent sounds good enough for me.

I wonder if this is what Wyden is betting on - making it a much more palatable piece of legislation by eventually "compromising" with the business community on the mandatory raise issue, while keeping the truly important parts of the legislation intact.

Posted by: Stephen | Dec 13, 2006 4:46:03 PM

The more I read and hear about Wyden's plan, the better it sounds. And he's clearly done some major homework and made provisions to cover the objections that will be raised.

Health Care is a major issue here in Oregon, and Oregon's Legislature (Dem. controlled) and Dem. Governor are committed to a statewide solution in the coming session. I'd bet they enact something that looks a lot like Wyden's plan even if Congress drags its heels (almost typed heals LOL).

As I said in the post below on Speed Reading, I'd much prefer eliminating the insurance companies completely, but that's just not in the political cards. But forcing a mandate to ensure all applicants (community rating), and allowing premium differences only for geography, family size, and smoking status, plus a firm mandate on minimum coverage being equal to the US Govt. employee package. takes much of the sting out of private insurance. It will be hard for the insurance companies to game this approach - but I'm sure they'd try. I can't wait to hear their response to Wyden's plan.

I'd expect that the medical provider groups (including hospitals) to get on board since this approach would eliminate the major headache and moral/ethical dilemma posed by uninsured sick people.

And note, the plan is aimed squarely at promoting preventive medicine (and thereby cost reduction) with solid prohibitions against deductibles and co-pays for preventative medicine and lifelong illnesses.

I surely hope the progressive forces, including the netroots blogs get on this pony and ride ride ride. This is the best we could hope to get pre-2008, and would be a great triumph is we get it. For that reason alone, the GOP faces a major dilemma: support a plan that is likely to be very popular (but aids the Dems - unless the GOP joins in as a party), or oppose it and risk the wrath of the voters in 2008.

My guess is that the GOP will attempt to put in some poison pills (like the anti-union provisions in the Homeland Security Dept creation) to try to undermine Dem. unity.

Let's beat the drums for this plan, progressive folks! Write/email your Senators and Congressmen now and demand this bill be considered and passed right after Pelosi/Reid's 100 hours marathon.

Posted by: JimPortlandOR | Dec 13, 2006 5:38:46 PM

Hold on Amanda, dont delete just yet. We havent excluded all the ways the friendly insurance industry could deny you health care because you are sick. Yes, the prices and coverage are regulated, but that doesn't mean they can't JUST SAY NO. And does the community rating and coverage floor apply if you lose your coverage and have to buy a second time? And then of course there is the "stealth underinsurance." Private health insurance companies have an incentive to deny your claim and will often just arbitrarily refuse to pay, illegally discourage provision of health services, etc... These are parasites, and they capture the agencies that regulate them.
Hold the champaigne bottle, fellow travelers.

Posted by: RW | Dec 13, 2006 7:16:12 PM

Interesting indeed. Maybe I'll work up the energy to dig in.

I'd like to see obesity be an additional basis for raising rates, though. Obesity-driven health problems (from diabetes-related pathologies to spinal fusions) are a *huge* driver of cost. Tobacco actually drives down costs to the system (although not to the economy), because it kills people before their expensive senior citizen years. We definitely need to permit higher costs for the morbidly obese.

Posted by: TigerHawk | Dec 13, 2006 9:26:41 PM

anonymous, Whose theory is it that "healthcare shouldn't account for more than 5% of income"? Even the Brits spend more than that, and nobody wants their system.

May I humbly suggest that there is no percentage of either national or personal income that is a priori inappropriate to spend on healthcare. For starters, a huge proportion of "health care" is really health services, and substantial unrelated to one's mortality or even morbidity. Much of health care is a luxury or purely a function of personal preference (do I really need that pylar cyst removed?), and any system needs to recognize that.

Posted by: TigerHawk | Dec 13, 2006 9:49:54 PM

So employers pay this year's costs agin, plus premiums for next year? Who pays for the subsidies for people with no employer? Does this do away with Medicaid? What about recent immigrants, legal and illegal? (Medicaid now won't cover anyone who can't show that they have been here legally for at least 5 years). Does it cover Dental?

Maybe insurance companies can make up some of their lost revenue by doing claims processing, like for Medicare. Does it do away with Medicare?

Posted by: Michelle Meaders | Dec 14, 2006 12:03:07 AM

How are these private companies mandated to offer the same quality of service (or better) going to compete? By denying claims by whatever means possible?

Posted by: Phoenician in a time of Romans | Dec 14, 2006 2:11:21 AM

Hey everybody... My name is Kari Chisholm, and I'm helping Senator Wyden with his netroots site on this - Stand Tall for America.

I'm no policy wonk -- Ezra would kick my butt in that dept -- but let me try and answer some questions. (I've been living with all the background materials for a few days now.)

Tom in AZ: This sounds like it'd be hard on people that don't have insurance today. (And fiatlux asked the same thing.)

Well, folks who are low-income and middle-income (up to 400% of poverty line, which is roughly $40,000/year) would get subsidies. But if you're asking about higher-income folks who don't get it through work and don't pay for it themselves (like my buddy who bartends at an upscale bar, making 60 grand a year)... those guys will end up paying for health care, but they're the ones that are taking chances every day - hoping they don't get in a car wreck, hoping they don't have some calamity hit. Of course, part of the reason they don't buy their own is that it's expensive and there aren't many choices. Now, they'd have plenty of affordable choices.

RW: Yes, the prices and coverage are regulated, but that doesn't mean they can't JUST SAY NO.

Actually, under the Healthy Americans Act, they would be explicitly prohibited from turning anyone down. And everyone in a state pays the same rate for a given plan.

Michelle Meaders: Does this do away with Medicaid?

Yes. All low-income folks would get health insurance now - the same health insurance as everyone else. If you're under the poverty line, it would be fully subsidized. The subsidy extends on a sliding scale to everyone up to 400% of poverty (roughly $40,000 a year for a single, double that for a family.)

Phoenician: How are these private companies mandated to offer the same quality of service (or better) going to compete? By denying claims by whatever means possible?

By keeping their people healthier. Remember, preventative care reduces costs dramatically. You can imagine a plan where they work really hard to test people early for cancers, high blood pressures, cholesterol, etc. -- those companies will save money because that stuff is cheap compared to cancer treatment and pacemakers.

Jim in Portland: I surely hope the progressive forces, including the netroots blogs get on this pony and ride ride ride.

Yes! Come on over and join us at Stand Tall for America.

Posted by: Kari Chisholm | Dec 14, 2006 3:10:21 AM

Tiger Hawk, you're falling prey to a common misperception. The costs of obesity are vastly overrated, the number of obesity-related casualties in the most-often cited CDC study (400,00) was admitted later to have been ridiculously inflated. There are many reasons why people are overweight, from genetics (yes, people do naturally come in different sizes), to glandular disorders, to not having access to healthy food (research urban food deserts - places with no supermarkets for 20 miles).

A number on a scale is *not* an indicator of someone's health, nor is it an indicator of the amount of healthcare they will use. Basing someone's insurance rates upon that number is nothing more than discrimination.

Someone's diet and activity level, and general health cannot be determined by weight. Though that assumption has been reinforced by one of the most wildly successful industries in history.

Posted by: cellar door | Dec 14, 2006 4:11:11 AM

Cellar door, all your points are true, but really only at the margin.

First, I *wasn't* talking about weight, I was talking about obesity. No, I was not proposing the use of the Body Mass Index.

Second, I know the casualties for obesity were overstated in that original CDC report, but it isn't the casualties that burden the healthcare system. If you actually die of a heart attack at a John Belushi, Chris Farley, John Candy-like age, you leave the system and probably cost insurers less in your lifetime than a vegetarian marathon-runner who lives to be 100 (and, yes, I realize that the economy also loses your productivity, so we are worse off in total if you die young, even if your aggregate healthcare costs are lower).

Third, there is simply no getting around the fact that the costs to the healthcare system that derive from the fact that people are "sedentary and eat too much food" (if you prefer that description) are *huge.* The fact that some small percentage of those people would also have been fat in, say, 1920, is really beside the point. Same with your people who don't live within 20 miles of a supermarket. What percentage of the American population fits that description? I'd be surprised if it were even 2% at this point. And that, by the way, is also a choice that those people have made, so I'm not sure why the healthcare system should not charge them a bit more for it. They surely make a bit of it back with much lower homeowners insurance rates, owing to the lack of crime in places that are 20 miles from the nearest supermarket.

I think a smart feature of this scheme would be the taking of a medical history during the enrollment process. That way we can separate people who are sedentary and eat too much food from the few people with genetic disorders who are obese as an immutable fact (or a barely mutable fact). Enforce truth by saying that anybody found to have lied in the submission of their medical history faces a 20% surcharge for five years, or something like that. Most people will be honest.

Posted by: TigerHawk | Dec 14, 2006 6:25:21 AM

"Of course, part of the reason they don't buy their own is that it's expensive and there aren't many choices. Now, they'd have plenty of affordable choices."

Maybe there is detail in this plan that alleviates my concenr, but, Ms. Chisolm, I don't see anything in this plan that ensures the coverage will be affordable. I have been a contractor, and I can assure you that plans for indivudals are expensive and come with ridiculously high deductables. Why would that not continue to be the case?

And since you mentioned that Medicare would go away, what in this plan guarentees that the private insurance plans would provide cheaper, better quality care than what already exists? I don't think that commuity rated features or the requirments that plan price variation meet those standards, as the starting points for individual plans are already exhorbinantly high.

Again, I haven't had time to read the details, but nothing in the descriptions of the plan I have seen says to me "cost control." And without that, you are forcing people to either pay fines to do without, and ending all hope of ever getting health insurance through work, or forcing them to pay money that they cannot afford for probably less coverage than they have now.

Posted by: kevin | Dec 14, 2006 8:43:52 AM

Community rating takes into account behaviorally acquired health problems (probably a lot more than we know about already) as well as other pre-existing conditions. I'd say let the free market worry about those.

For kevin, what makes individual plans exorbitant, is the restricted pool of insureds.
Bringing all the healthy uninsureds into the system lowers prices for everyone.
Deductibles and co-pays make premiums cheaper also, as well as preventing over-utilization. It would be fair, and more economical I believe to preserve Health Savings Accounts and high deductible policies for those who want them.

Has somebody figured out how to guarantee that everybody purchases health insurance? Here in CA everybody is required to have can insurance, but a lot of folks don't.

Posted by: SR | Dec 14, 2006 8:59:12 AM

Why would I want to buy insurance if I've never been hospitalized? I'm perfectly healthy and don't want to waste my money on insurance, why force me to take the risk, which ammounts to my spending my very limited disposable income subsidizing some smoker's cancer? I jog, I eat well, and I make rational decisions . . . to save myself the money.

Besides, I don't want people assuming that I'm insured. It's like the bicyclists-with-helmets article recently blogged here: if people think I'm covered, they'll take more risks with my saftey or health. My employer has insurance for anything that should happen to me at work, I have insurance if I get hurt in my vehicle, and those are the two most dangerous things I do.


Posted by: Toby | Dec 14, 2006 8:59:44 AM

For those progressives who want gold plated health care for all at no "cost," (somebody mentioned dental). This just is not possible. Even Canada has sharp restrictions on the benefits offered by their almost broken single payer system. Settng the benefit package to equal Congress's is fair. Many states mandate benefits which increase the cost of insurance to purchasers. I am as right wing on healthcare as they come, but this has great merit. firgure out how to get everybody to buy it, and I'm there.
One thing? Won't all the "Single Payer" "Progressives" out there scream bloody murder when their reason to take over a quarter of US GDP is removed? Hillary?

Posted by: SR | Dec 14, 2006 9:09:43 AM

Right now we have the problem where insurers avoid investing in preventative care and outreach because it's a good bet that the insured will be at another job, with another insurer, before that would pay off. Does this address that problem at all? With multiple competing insurers in a geographic region, it sounds like it would have exactly the same problem, with people potentially switching plans (based on advertising or lower rates - plus the high possibility of moving outside of the region).

Posted by: Nathan Williams | Dec 14, 2006 10:07:04 AM

I'd propose two improvements:

1) Instead of using "what Congress's plan covers", use something like the Oregon list from a few years ago, that covers procedures based on cost/benefit. Make the mandated coverage be everything up to some specified cost/benefit ratio. (Make Congress buy off the same list--but there's no point leaving out high cost/benefit services because Congress doesn't have them now.)

2) Require insurers selling through HHA's to all use the same claims forms, to simplify the paperwork in doctor's offices.

Posted by: SamChevre | Dec 14, 2006 10:36:08 AM

I can't believe that $40K is 400% of the poverty rate. Before anything is enacted, the poverty rate should be adjusted based on current costs of housing, food and energy. My husband and I together make more than $40K, but we are just making ends meet every month - our gas bill increased 71% last year and it's not going down this year, for example. We're not poverty stricken, we're not even poor, but we're not quite middle class, either - no new cars or vacations or big screen TVs.

Posted by: maurinsky | Dec 14, 2006 11:21:46 AM


You are right about the justification for the cost of individual plans, but consideirng that they are goning to sell indvidual plans to people who are required to buy them, what is to keep them form pricing them similarly to the individual plans that exist now? Nothing in the plan seems to guarentee that.

Posted by: kevin | Dec 14, 2006 11:59:39 AM

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