Cost of health care reform emerges as ‘lightning rod’ issue

The cost of health care reform has emerged as a key battle in overhaul efforts. Attention is being paid to how costs will affect specific groups including the middle class and businesses.

The Wall Street Journal reports on the question of how the government will pay for subsidies and spending required to achieve near-universal coverage and focuses on the issue of exchanges. The Journal reports: "It's easy to understand a battle over whose taxes should be raised or fights that pit believers in the efficacy of government against skeptics. But health-care insiders are focusing just as closely on the workings of what are dubbed 'exchanges,' new marketplaces in which individuals and employers could comparison-shop for health insurance offered by private insurers and, perhaps, by a government plan. Bills pending in the House and Senate would require states to organize such exchanges and offer subsidies to help many families buy coverage there. If Congress fails to perfect the market for obtaining insurance, the health care experiment will flounder as well."

The Journal reports on the thoughts of David Cutler, a Harvard University health economist, who says there are two solutions: "Subsidize the purchase of insurance through the exchange generously to lure a lot of people, which will keep the pool of participants broad so premium costs are low enough to lure people who aren't eligible for subsidies because they can't get a better deal outside the exchange. Or use the regulatory hammer and force health insurers outside the exchange to play by all the rules that apply inside the exchange, such as requiring them to accept any applicant regardless of health without charging extra. Congress is leaning toward the first option, but it's expensive to taxpayers. So the Senate, for instance, has moved to dilute the subsidies to save money, a worthy goal given the federal deficit." The Journal notes: "Important but seemingly technical elements often are obscured by easier-to-follow debates that make the headlines. But the exchanges are more than an inconsequential detail. Their design will determine whether what emerges from Congress, if anything, actually works as intended" (Wessel, 7/16).

The News Hour with Jim Lehrer also reports on lawmakers' struggles to pay for reform, featuring a conversation with two analysts on the issue (7/15).

Businesses are beginning to worry about the financial burdens created by reform, according to the Wall Street Journal: "Executives across the country expressed concern Wednesday that health-care bills being hammered out in Congress this week would place onerous burdens on their businesses without doing enough to reduce their swelling medical costs. Small businesses were particularly vocal in decrying the emerging legislation. They said they would be especially hard-hit by provisions in a House bill introduced Tuesday that would place a surtax on those earning over $350,000 and penalize companies that don't offer health insurance to their employees with an 8% payroll tax. A key Senate bill offered a softer version of that employer mandate but one many businesses still found objectionable."

The Journal reports: "Under the bills unveiled so far, the biggest change employers would face is that all but the smallest ones would be required to provide their workers with health insurance or pay a penalty. The House plan would require companies with more than $400,000 in annual payroll that don't provide health insurance to pay a penalty equal to 8% of their payroll. The bill passed Wednesday by the Senate health committee places less responsibility on employers for providing coverage. That measure would require employers to pay up to $750 annually per worker if they don't provide coverage or if they cover less than 60% of employees' premiums. It would exempt firms with 25 or fewer workers. Many businesses see the Senate Finance Committee bill as their last hope to enact measures that would cut their costs without driving up their expenses. Business groups have voiced support for an individual mandate, improved health-information technology and an overhauled payment system for doctors and hospitals, but not an employer mandate" (Johnson and Adamy, 7/16).

The Dallas Morning News reports on small-business owners concerns: "The National Federation of Independent Business opposes both bills, saying neither would provide more choices, lower costs or increased competition for small businesses. The group estimates that the House measure could cost 1.6 million jobs - more than 1 million of them among small businesses - and depress wages as higher health care costs force business closings and layoffs. The bill also could hurt employers that already provide coverage by charging a penalty if they didn't meet premium contribution limits, said federation lobbyist Michelle Dimarob."

The paper also reports: "Health care premiums paid by employers have more than doubled since 1999, to an average of $4,704 a year for single coverage and $12,680 for a family in 2008. ... The median health care cost for businesses is about 11 percent of their payroll, according to the Employee Benefit Research Institute" (Jean, 7/16).

CBS News reports that small businesses may experience a "double whammy" created by an employer mandate and a surtax (Reid, 7/15).

Meanwhile, the Wall Street Journal reports on how a section of the middle class may also be affected: "Legislation moving forward in Congress would require nearly every American to carry health insurance. That could squeeze a small group of middle-income earners who make too much to get the government's help buying insurance, but aren't so wealthy they can easily absorb the high cost of coverage. ... Under a proposal unveiled this week in the House, the subsidies would be available to individuals with incomes as high as $43,000 a year and a family of four earning as much as $88,000 a year. Those who fail to comply would pay a penalty of 2.5% of their income, levied when they file their annual tax returns. Senate proposals differ in details but have the same basic requirement. People with incomes just above the subsidy line could consider the mandate a burden" (Adamy, 7/16).