Update on Health Reform & Texas A Pre-Summit Review February 24, 2010 You must dial in to hear the audio for this presentation! Please do not place the call on hold (hang-up & call back in) Phone number: 1.866.740.1260 Access code: 3200112 Anne Dunkelberg, Associate Director, dunkelberg@cppp.org Stacey Pogue, Senior Policy Analyst, pogue@cppp.org Kymberlie Quong Charles, Special Projects Coordinator, quongcharles@cppp.org Center for Public Policy Priorities – www.cppp.org www.texasvoiceforhealthreform.org 1

Texas Voice for Health Reform Principles Affordable access to good health care must be available for all Americans. It should: Be affordable for people at all income levels Remain available and affordable when family and economic circumstances change Establish both a responsibility for the public to contribute and an assurance of cost containment for individuals and families Eliminate health costs as the #1 cause of bankruptcy in America. A decent standard of comprehensive care must be established. It should: Keep people healthy and treat them when they’re ill Cover the whole person Not be lost or reduced based on pre-existing conditions or pregnancy To be effective, sustainable, equitable, and balanced with our other important priorities as a nation, national health reform should also address safe and high quality care; costs and cost-effectiveness of health care; consumer choice; and eliminating non-financial barriers to care

Options for Passing a Bill Most likely path is two-step: House adopts Senate reform bill. Both chambers pass a separate budget reconciliation bill that encompasses compromises with House, as reflected in President’s proposal. Many parliamentary technicalities. Budget Reconciliation: Provisions must be germane to federal budget, may not increase deficit. Budget Reconciliation was used to pass many of most important legislation of last 20 years: 1996 welfare reform Bush’s 2001 and 2003 tax cuts COBRA CHIP Most major Medicaid reforms including: community care waivers; Emergency Medicaid; Medicaid coverage of children, pregnant women, and newborns; and Texas’ community attendant program

President’s Proposal Shows how Administration would amend Senate bill through Budget resolution; that is, Obama proposal for House-Senate compromise Insiders say this really is the Administration’s proposal; signals intent of Administration to push hard for passage Additional tweaking expected but not major changes This webinar will point out changes to Senate bill proposed by Administration with highlighting and

Summit Tomorrow- Then What? On Thursday C‑SPAN3 will show LIVE coverage of the White House Health Care Summit starting at 9am CT/10am ET. They will also stream it live. Will also stream online www.WhiteHouse.gov/live All Chairs (D) and Ranking Members (R) from all the committees with jurisdiction invited Senate Finance, HELP; House W&M, E&C, E&L See www.whitehouse.gov/health-care-meeting/bipartisan-meeting Then? If majority party has adequate votes to pass House and Senate, two-step process may begin in next few weeks. Additional changes could be made in the reconciliation bill, but major changes could risk losing as many/more votes as they gain. Votes and timeline remain uncertain.

Webinar Format Focus is on coverage expansion and insurance regulation reforms Based on Senate bill, noting proposed Obama revisions with Follows format of CPPP’s What's in the Health Reform Bills? Immediate Benefits of Reform Medicare Improvements Good Coverage at a Fair Price Affordable Coverage Individual and Employer Responsibility Cost-Control measures and other reforms What YOU Can Do We note provisions we think may call for future “fixes”-- but are NOT grounds for opposing the bill– with Reminder: You must dial in to hear the audio for this presentation Phone number: 1.866.740.1260 Access code: 3200112 Please do not place the call on hold. Hang-up & call back in.

Immediate Benefits of Reform The following Senate bill provisions take effect 6 months after enactment: No lifetime limits. Restrictions placed on annual limits. Prohibits pre-existing condition exclusions for children. Requires insurers to devote 80-85% of premiums to medical benefits or provide rebates to consumers. Bans co-pays or other out-of-pocket expenses for preventive care. Prohibits rescission—retroactive cancellation of coverage because you used it—except in cases of fraud. Dependent coverage allowed on parent’s plan until age 26. HHS Secretary and states establish process for annual review of rate increases. Creates federal Health Insurance Rate Authority. Requires that unreasonable rates are reduced or rebates provided.

Immediate Benefits of Reform The following Senate bill provisions take effect 6 months after enactment unless noted: Creates nationwide high-risk pool coverage for uninsured individuals with pre-existing conditions (90 days after enactment). Grants to states to establish on Office of Health Insurance Consumer Assistance or Health Insurance Ombudsman. Invests $10 billion in Community Health Centers. President’s plan invests $11 billion in health centers.

Making Medicare Stronger New preventive benefits: comprehensive annual check-up and other prevention benefits with no out-of-pocket costs. Closing the Rx “Doughnut Hole”: Senate bill shrinks Doughnut Hole by $500 in 2010, provides 50% discount on brand-name drugs in the remaining gap. House phases out over 10 years. Obama plan closes doughnut hole entirely by 2020. Extends Solvency of Medicare Trust Fund by 5 years: Not by cutting current Medicare benefits or budgets, but “bending the curve”― slowing growth in Medicare spending from 2010 to 2019 from the predicted 88% to “just” 67%. Better Access to Community-Based Services and Supports: Medicare today does not cover community-based services to help seniors remain in their homes. Creates voluntary insurance program (CLASS) to provide community-based assistance services and support.

Good Coverage at a Fair Price Sweeping reforms that guarantee access to good coverage at a fair price take effect in 2014: Private Health Insurance Reforms Bans pre-existing condition exclusions for everyone. No one can be denied coverage or charged more because of health status. Wellness penalty loophole? Insurers must offer coverage to everyone and renew all policies in the individual and small employer market. Premiums for individuals and small businesses cannot be based on gender, number of people in group, occupation, etc. Premiums for individuals and small businesses can vary based on age (3:1 limit), tobacco use (1.5:1 limit), geographic area, and family structure. Coverage for individuals and small businesses must include “essential benefits.” No annual limits. President’s plan extends important consumer protections to existing employer-based and individual market plans.

Good Coverage at a Fair Price Sweeping reforms that guarantee access to good coverage at a fair price take effect in 2014: New Health Insurance Exchanges Competitive markets for health insurance with clear and comparable information on coverage options (like Travelocity, but for insurance). States-based, with federal fallback. All members of Congress and their staff would get coverage in Exchange. Open to: Individuals: U.S. citizens or legal immigrants and are not incarcerated Small businesses with <100 employees, 2014-2016. States may open up to firms with >100 employees in 2017. Office of Personnel Management multi-state plan in Exchange. Premium credits available only in Exchange. Plan in Exchange must meet standards and each plan will have a rating indicating relative value. Coverage offered in four benefit tiers. More on Exchanges in CPPP’s Health Reform Side-by-Side Analysis.

Affordable Coverage Medicaid for very low-income adults: cover all U.S. citizen adults up to 133% of the federal poverty level (< $14,404 for one person; $29,327 for a family of 4). Texas does not cover most parents or adults without children today, no matter how poor. CHIP Program Preserved: CHIP program extended to 2019, and CHIP block grant funded through 2015. Funded through 2016 under Obama proposal. Sliding-scale premium assistance: Uninsured above Medicaid limit and < 400% FPL ($43,320 for a single person, $88,200 for family of 4) can buy insurance through Exchange, protected from having to spend more than a set % of income on premium (ranging from 2% to 9.8%; 2%-9.5% under Obama proposal). Obama premium % more generous than Senate EXCEPT for 100-133% FPL (Medicaid).

Fiscal Benefit/Cost of Health Reform to State Medicaid expansion—up to 133% FPL; “Static” Illustration based on current US Census data and Texas Medicaid costs:  SENATE: in 2008, ~1.0 million uninsured Texas adults aged 19-64 who (a) are U.S. citizens and (b) have incomes below 133% FPL.  At 2009 cost of ~ $305 per adult/mo., covering 1.0 million more adults = about $3.7 billion in new health care spending.  Under Senate, Feds pay 100% of costs for 3 years: 2014, 2015, 2016 In 2017 the Texas would pay about 5.14%, in 2018 Texas would pay 6.14%; and in 2019 and thereafter, Texas would pay 7.14% or $261 million, with the federal share $3.4 billion—$13 federal dollars for each $1 the state spent President - federal budget pays full cost for 4 years (2014-2017); in 2018 & 2019 state would pay 5% share, and 2020 thereafter a 10% share or $9 federal dollars for each $1 the state spent. In static model, $3.33 billion federal share, $370 million state share.

Fiscal Benefit/Cost of Medicaid, Exchange Coverage to State “Welcome Mat” effect Based on other states, over time more currently-eligible Texas children will enroll in Medicaid. Because Texas has very limited eligibility for adults today, there is very low risk of Medicaid welcome mat effect for adults. State will be responsible for standard Medicaid share of just under 40% for welcome mat enrollment by already-eligible uninsured Texas children, adding another significant cost to the state budget. To illustrate, covering 400,000 more kids could cost about $1 billion for a year, and the state would pay $400 million of that. Economic multiplier of 3.25 per Dr. Ray Perryman. (↑State tax revenues + ↓Local taxes avoided) nearly = GR costs Medicaid expansion, while not “free” for Texas, will yield substantial economic benefits, but require new sources of revenue to fund state share.  Texas economy will also benefit from federal premium assistance and out-of-pocket cost help to families from 133-400% FPL, which will not require any state budget contribution at all.

President 1.5% 2.0% 2.0-3.0% 1.5-3.0% 4.0-4.6% 3.0-4.0% 3.0-5.5% Premium Help: Max % of Family Income for Premiums in Exchange Income for a Family of Four House Senate President From: To: $22,000 (100% FPL) $29,000 (133% FPL) 1.5% 2.0% 2.0-3.0% $33,000 (150% FPL) 1.5-3.0% 4.0-4.6% 3.0-4.0% $44,000 (200% FPL) 3.0-5.5% 4.6-6.3% 4.0-6.3% $55,000 (250% FPL) 5.5-8.0% 6.3-8.1% $66,000 (300% FPL) 8.0-10.0% 8.1-9.8% 8.1-9.5% $77,000 (350% FPL) 10.0-11.0% 9.8% 9.5% $88,000 (400% FPL) 11.0-12.0%

Affordable Coverage, Continued Out-of-pocket subsidies: lower out-of-pocket costs (co-payments, co-insurance and deductibles) for families up to 250% FPL (< $27,075 for one person, and $55,125 for a family of 4) covered through Exchange. House bill stronger out-of-pocket protections for more people than Senate. President’s proposal improves on Senate, less generous than House. Out-of-pocket caps for ALL persons with high medical expenses: Under Senate bill, new individual and group coverage, including new self-insured plans, must include annual out-of-pocket caps  $5,950 individual, $11,900 family, setting upper limit for families  400% FPL.

Out-of-Pocket Costs: Share of Health Costs Covered under Exchange Plans Income for a Family of Four House Senate President From: To: $29,000 $33,000 (150% FPL) 97% 90% 94% $44,000 (200% FPL) 93% 80% 85% $55,000 (250% FPL) 70% 73% $66,000 (300% FPL) 78% $77,000 (350% FPL) 72% $88,000 (400% FPL)

Texas Uninsured by Income Today… 6.1 million uninsured in 2008 682K 1.611 Million 622K 484K 1.06 Million 751K 898K Annual income limits given for a family of four, 2009 federal poverty level U.S. Census, CPS

…And if Senate Bill Implemented Tomorrow 682K 1.611 Million 622K 484K Up to 1.5 million in Medicaid: 1 million expansion to 133% FPL (adults) 500K already- eligible (kids) 1.6 Million 751K 2.3 million 133-400% FPL qualify for help w/premiums, out-of-pocket In Exchange 898K Impact on Uninsured U.S. Citizens

Individual Responsibility Keeping coverage affordable requires spreading risk over large pool that includes healthy people; individual responsibility to get insurance makes this possible. Individual mandate: Starting 2014, most U.S. citizens and legal residents will be required to obtain coverage meeting minimum standards for themselves and for their dependents. Who Is Exempt? No penalty for these: (1) uninsured if lowest-price Exchange plan costs > 8% of family income; (2) anyone with income below the poverty line; tax filing threshold in Obama proposal (3) excused for financial hardship (to be defined); (4) religious objectors; (5) Native Americans; (6) undocumented immigrants (also ineligible for Medicaid or premium help); (7) incarcerated persons; and (8) those with a gap in coverage of less than 3 months.

Individual Responsibility Penalties in Senate and President’s proposals are small fraction of cost of insurance. Penalty concept to create incentive to take responsibility; funds collected also help support safety net that uninsured rely on when sick or injured. How it Works. Unless exempt: federal income tax penalty based on # uninsured in a family. but family max is greater of: 3X individual penalty, or 2% of family income. 2.5% in Obama proposal. penalties phase in from 2014 to 2016. from 2016 on would be $750 for adults ( $695) and $375 for children under age 18. maximum of $2,250 per family or 2% of income. $2,085 per family or 2.5% of income. Annual inflation updates to penalty amounts after 2016.

Individual Responsibility Penalties for the uninsured are a fraction of the cost of getting insurance. average annual cost of a family group insurance premium in Texas today about $13,000, so: • the maximum family penalty of $2,250 ( $2,085) would be about one-sixth of the cost of insuring a family; and • a family would have to make more than $650,000 a year before 2% of income would cost as much as getting the family insured. or $520,000/yr @ 2.5% in Obama plan

Employer Responsibility Employer-sponsored insurance is the foundation for coverage today. Employer responsibility provisions encourage employers to maintain existing coverage. Senate bill and President’s plan do NOT require employers to offer coverage. But do require larger employers to contribute financially if their employees get tax-payer subsidized coverage in the Exchange. Penalties are a fraction of the cost of coverage. Small employers (50 or fewer full-time workers) have NO obligation to provide coverage and are exempt from penalties if they choose not to offer coverage.

Employer Responsibility Penalties for firms with more than 50 full-time workers: Senate Bill President’s Plan If NO coverage offered and at least 1 employee get subsidized coverage in the Exchange. Annual assessment of $750 per full-time worker. $750 penalty is ≈8% of employer’s cost for family coverage* Annual assessment of $2,000 per full-time worker, excluding the first 30 workers. $2,000 penalty is ≈23% of employer’s cost for family coverage* If coverage is offered, but at least 1 worker gets subsidized coverage in the Exchange (allowed if worker’s premium share exceeds 9.8% of family income). The lesser of $3,000 per subsidized employee OR $750 for each full-time employee. Max $3,000 penalty is ≈34% of employer’s cost for family coverage* *On average, Texas employers pay 68% of the cost of family coverage, or $8,840 of a $13,000 family premium.

Tax Credits for Small Businesses Only one-in-three small businesses in Texas offers health insurance today. Small employers cite cost as the primary reason they cannot provide coverage. The Senate health reform bill provides tax credits to small businesses to help them afford coverage. Eligibility: Small firms with 25 or fewer employees, average annual wages under $50,000, and employer covers 50% of the premium cost. Phase I, 2010-2013: Max credit of 35% of employer’s cost for businesses, and 25% for nonprofits. Phase II, 2014 and on: Max credit of 50% of employer’s cost for coverage through the Exchange, and 35% credit for nonprofits. Available for two years. Max credit available to small employers with 10 or fewer employees and average wages under $25,000, with phase out as size and wages increase.

Other Benefits for Small Businesses Options and peace of mind Small firms that want to sponsor health benefits will have a guaranteed source of stable, quality coverage, that is priced like coverage for large firms. Small firms that prefer not to sponsor a heath plan will not be penalized for that choice AND will know that their workers are guaranteed access to the same good coverage through the Exchange. Ends “job lock” Increases pool of employees available to small businesses. Frees entrepreneurs to start their own small businesses.

Bending the Health Care Cost Curve Senate bill contains a wide range of measures to improve the quality of care and slow the growth in health care costs. “The bills contain no shortage of ideas for reforming the delivery system, enhancing the quality of care, and slowing spending. Pretty much every proposed innovation found in the health policy literature these days is encapsulated in these measures.” John Iglehart, founding editor of Health Affairs New England Journal of Medicine, November 11, 2009 Will result in measurable economic benefits to governments, employers, and families. Ex: By 2019, the average cost of family coverage is projected to be $1,900 a year less than it would have been without reform. More information at: Why Health Reform Will Bend the Cost Curve, The Commonwealth Fund and the Center for American Progress Action Fund, December 2009. Side-by-side Comparison of Major Health Reform Proposals, Kaiser Family Foundation.

Reform Is “Paid For” & Reduces Deficit Congressional Budget Office (CBO) says both chambers’ health reform bills reduce federal deficit, both short-term and in long run. The Senate bill: Reduces federal deficit by $132 billion from 2010 through 2019; Further reduces deficits in 2020-2029 decade, reducing by $650 billion-$1.3 trillion over decade; and Slows the rate of growth in health care costs over time. Medicare is largest component of federal health spending. CBO projects that the bill will reduce annual growth rate in Medicare spending per beneficiary over the next two decades to 2%, compared to 4% experienced over the past two decades.

Reform Is “Paid For” & Reduces Deficit Pay-Fors High on List of House-Senate Differences Both bills save $396-$438 million/10 years by slowing Medicaid and Medicare GROWTH Senate opposed House tax on High-income households House opposed Senate excise tax on high-priced plans President’s proposal (1) reduces excise tax and delays it until insurance reforms have already eliminated much price variation; (2) Increases Medicare tax for over $200K/$250K, and extends their Medicare tax to UNEARNED income like interest, dividends, royalties, etc. When “Pay-Fors” are Cut, so are premium subsidies and help for states with Medicaid.

Take Effect 6 Months After Enactment (2010) Senate Health Reform Implementation Timeline Effective Immediately Take Effect 6 Months After Enactment (2010) Implement in 2014 Later Implementation Nationwide high-risk pool coverage for individuals with pre-existing conditions 90 days after enactment Prohibit lifetime benefit limits in all plans Prohibit pre-existing condition exclusions for children Ban Co-pays and other Out-of-Pocket expenses for preventive care and immunizations Prohibit Rescissions Permit dependent coverage up to 26th birthday Grants to states to for consumer assistance Expand access to Community Health Centers Tax credits to make coverage more affordable for small businesses Creation of Health Insurance Exchanges Medicaid Eligibility up to 133 % FPL Sliding-scale premium assistance up to 400 % FPL Out-of-Pocket subsidies (to reduce out-of-pocket costs) Out-of-Pocket caps for ALL persons with high medical expenses Ban annual benefit limits in all plans Individual Mandate Employer Responsibility January 2016: first benefits for community supports under CLASS Act

Leaders Committed to Passing Health Reform “We’ll go through the gate. If the gate’s closed, we’ll go over the fence. If the fence is too high, we’ll pole vault in. If that doesn’t work, we’ll parachute in but we're going to get health care reform passed for the America people.” House Speaker Nancy Pelosi on health reform (1/28/2010) "I've had many conversations this week with the president, his chief of staff, and Speaker Pelosi. And we're really trying to move forward on this… We’re going to have that done in the next 60 days.” Senate Majority Leader Harry Reid on health reform (2/19/2010) “We know the American people want us to reform our health insurance system... After debating this issue exhaustively for a year, let’s move forward together. Next week is our chance to finally reform our health insurance system so it works for families and small businesses.” President Barack Obama on the bipartisan health reform summit (2/20/2010)

State Advocates are Key to Successfully Passing Health Reform! It Is Our Job To: Make sure our friends, neighbors and communities know that there is still a strong commitment to pass health reform, Let members of Congress know that their constituents want and expect them to move forward with comprehensive reform, and Educate our communities about the positive benefits of reform.

Activities That We’ve Got To Do NOW Call your member of Congress! 1-877-264-HCAN (4226) Write a Letter to the Editor! Use TVHR’s Guide (http://www.texasvoiceforhealthreform.org/citizen-advocacy-center/letter-to-the-editor-guide-22210/) Educate your co-workers, family, friends, neighbors and congregations about the benefits of health reform! Use our background materials to guide the conversation! “I am calling today to urge Congressman _____________ to get the job done and pass comprehensive national health reform as soon as possible!”

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