The Wonk Room

Defining Affordability In Health Care Reform

A higher than expected preliminary Congressional Budget Office estimate of the Senate Finance Committee’s health care reform bill — and the trouble surrounding the HELP bill — has led Chairman Max Baucus (D-MT) to postpone action on the bill until after the July 4 recess:

Committee Chairman Max Baucus said yesterday lawmakers need more time to work on bringing the bill’s cost to below $1 trillion and to reach a bipartisan compromise on it….[Sen. Kent] Conrad said the finance committee is considering a variety of ways to reduce the cost of its plan to below $1 trillion. He said the costs could drop dramatically if members limit subsidies to lower-income Americans seeking insurance.

The Washington Post’s Ezra Klein reports, “Right now, I’m told Finance is going down the road of less reform. They’re cutting the subsidies, cutting the generosity of the basic benefit package and cutting the number of people who will ultimately be insured by their proposal.” Of course, affordability and adequacy are the tents of health care reform. Progressives have rightly argued that a new public health insurance option would lower costs and insert competition into the health insurance marketplace, but hyper focus on the public option may lead reformers to miss the forest for the trees.

Health reform that fails to make insurance more affordable is at best an incremental improvement. The great irony, of course, is that a robust public option that uses Medicare-like rates would actually lower premiums and health care costs. But Democratic legislators seem unwilling or unable to stand behind a strong public option. Should they also sacrifice affordability of care in an effort to please conservatives concerned about the budget deficits, they would be placing themselves in between you and any kind of doctor.

The problem of unaffordability is most apparent for the nearly 47 million Americans who lack health insurance. The Agency for Healthcare Research and Quality found that while “15.8 percent of adults spent more than 10 percent of their family income on health care services in 1996, by 2003 the proportion of adults bearing what has historically been considered catastrophic financial burdens had increased to 19.2 percent of the population, or 48.8 million individuals.” According to the Center for Studying Health System Change, one in five Americans had trouble paying their health care bills in 2007. In fact, even moderate levels of out-of-pocket spending — spending that is well below the 5 or 10 percent of family income —created medical bill problems.

Thus, health care reform must expand safety net programs like Medicaid and SCHIP for low income families and provide help with premiums for families with incomes above approximately 400 percent of the federal poverty line. Also:

- Families pay minimum cost sharing and out of pockets expenses.

- All families should be protected from excessive premiums. The government should provide subsidies on a sliding scale. Everyone must pay their fare share and the system should gradually phase out assistance so that slightly-wealthier families don’t face a cost-cliff

- Subsidies should vary by geographical location and adjust for cost of living