Drafters of a proposed Senate health bill manager’s amendment say Medicare should cut physicians’ reimbursement rates 21% in 2010, rather than increasing the reimbursement rates 0.5%, according to the Congressional Budget Office.

The proposed amendment also would make many other changes.

Health Insurance Consumer Protection Provisions

These provisions would:

- Prohibit wellness programs from asking or using information about the “presence or storage of a lawfully-possessed firearm or ammunition in the residence or on the property of an individual” or “the lawful use, possession, or storage of a firearm or ammunition by an individual.” (Section 2716(c))

- Limit insurers’ ability to cap annual coverage for “essential health benefits” from now until 2014, then ban annual coverage limits. (Section 2711)

- Require health insurers to cover out-of-network emergency services as if the services were provided in-network. (Section 2719A)

Health Insurance Plan Operations Provisions

These provisions would:

- Reduce the proposed annual health insurance provider fee for small insurers. Health insurers with less than $25 million in annual health insurance net written premiums would pay no annual fees, and insurers with health net written premiums in the $25 million to $50 million range would have to count only half of their health premiums when calculating the annual fees. (Section 10905)

- Require a health insurer to provide rebates if the share of premiums going to administrative costs exceeded specified levels. At the federal level, the minimum ratio of claims expenses to premiums would be 85% in the large group market, and 80% in the small group and individual markets. States could require higher minimums. (Section 2718(b))

Health Insurance Customer Provisions

These would:

- Expand access to a small business health insurance tax credit. (Section 10105)

- Authorize $200 million for small business wellness program grants. (Section 10408)

- Prohibit health insurance plans from discriminating in favor of highly compensated individuals. (Section 2716(a))

- Keep the proposed $2,500 annual cap on flexible spending account contributions, but index the cap for inflation for any taxable year after Dec. 31, 2011. (Section 10902)

- Require some employers to provide “free choice vouchers” for some employees who would have to pay 8% to 9.8% of household income for group coverage. (Section 10108)

- Increase the penalty for individuals who don’t have health insurance. (Section 10106(b))

Government Health Finance Administration Provisions

These would:

- Authorize the secretary of Health and Human Services to award demonstration grants to states that want to develop new approaches to handling medical malpractice claims. The original version of the Reid health bill includes only a provision stating that the Senate thinks something ought to be done about medical malpractice insurance costs. (Section 10607)

- Replace the original Reid bill proposal for creating a “public option” health plan run by the U.S. Department of Health and Human Services with a collection of multi-state plans that would be administered by the U.S. Office of Personnel Management. (Section 1334)

- Set rules for abortion coverage. (Section 1303)

- Call for the secretary of Health and Human Services to develop a methodology for assessing health plan value. (Section 10329)

- Require the secretary of Health and Human Services to work with the secretary of Labor to collect data on self-insured plans and large group plans, and to analyze “the extent to which self-insured group health plans can offer less costly coverage and, if so, whether lower costs are due to more efficient plan administration and lower overhead or to the denial of claims and the offering [of] very limited benefit packages.” (Sections 1253 and 1254)

General Tax Provisions

These would:

- Increase the proposed hospital insurance payroll tax to 0.9%, from 0.5%. (The tax would apply to individuals with incomes over $200,000 and families with incomes over $250,000.) (Section 10906)

- Eliminate a proposed 5% excise tax on cosmetic surgery, and add a 10% excise tax on indoor tanning services. (Section 10907)

BUDGET ANALYSTS WEIGH IN

The CBO estimates the manager’s amendment to H.R. 3590, also known as the Reid-Baucus-Dodd-Harkin amendment, or Senate Amendment 3276, would save about $2 billion during the 10-year period starting in 2010, and that the annual level of savings would grow over time.

But CBO Douglas Elmendorf notes in a letter summarizing the work of analysts at the CBO and the congressional Joint Committee on Taxation that the estimate depends on the assumption that the government would implement the amendment provisions as written.

“For example,” Elmendorf writes, “the sustainable growth rate … mechanism
governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments, and legislation to do so again is currently under consideration in the Congress.”

The manager’s amendment probably would increase government outlays by $10 billion and increase government revenue by about $12 billion, with increased penalty revenue accounting for about $7 billion of the revenue increase, the CBO predicts.

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