Addressing a joint session of Congress last night, President Obama called on lawmakers to adopt a health reform plan featuring insurance market reforms, insurance mandates, Medicare reforms, and a public health insurance option. The President’s remarks came as Senate Finance Committee Chairman Max Baucus released the outline of his proposed health reform framework for consideration by a small group of Senators who have been working to forge a bipartisan agreement. Regardless of whether a bipartisan deal is reached, however, Chairman Baucus announced that his Committee will mark up health reform legislation the week of September 21, 2009.

President Obama’s Plan

Coming after a summer of rancorous public debate, President Obama addressed Congress last night to urge enactment of sweeping health reform legislation. While the President has previously expressed many of the same reform principles, last night’s address sought to clarify the President’s goals for the public and jump-start the legislative process. Key features of the President’s health reform plan include:

  • Expanding Access to Insurance – On the most controversial health reform issue facing lawmakers, the President reiterated his support for a public health insurance option to compete against private health insurers. The President did not, however, characterize this provision as non-negotiable. Instead, in his speech President Obama noted that “the driving idea behind reform has been to end insurance company abuses and make coverage available for those without it,” and that “the public option is only a means to that end.” The President therefore stated that he is “open to other ideas that accomplish our ultimate goal.” The President also proposed a new insurance marketplace, called “the Exchange” to allow people without insurance and small businesses to compare plans and buy insurance at competitive prices. In addition, the President called for tax credits to help individuals and small businesses purchase insurance. In a new development, President Obama endorsed a national “high risk” pool to provide coverage to individuals with preexisting conditions until the new Exchange is created.
  • Insurance Market Reforms – The President proposes to: prevent insurance companies from denying coverage for preexisting conditions; limit age-related premium variations; bar insurance companies from rescinding existing coverage except in cases of fraud; cap out-of-pocket expenses and eliminate annual and lifetime benefit caps; and require insurers to cover free preventive services.
  • Insurance Mandate – The President would require businesses with more than 50 workers to offer their workers insurance coverage or pay a fee to help cover insurance costs. Individuals also would be required to purchase insurance coverage, but there would be a "hardship exemption" for those who cannot afford coverage.
  • Controlling Health Care Costs – According to the President, his plan would “not add one dime to the deficit today or in the future,” since it is fully paid for through health system savings and new revenue, including a fee on insurance companies that sell very expensive insurance plans. Moreover, the plan would require future spending cuts if savings expected at the time of enactment do not materialize. With regard to Medicare, the President again endorsed reforms to promote quality and reduce costs, including incentives for hospitals to prevent avoidable readmissions, pilots for new "bundled" payments in Medicare, and new models of delivering care (e.g., medical homes and accountable care organizations). The President also endorsed creation of an independent commission to make recommendations to Congress annually on how to promote greater efficiency and higher quality in Medicare.
  • Medicare Drug Benefit Improvements – The President called for an immediate 50% discount on brand-name prescription drugs for seniors facing the Medicare prescription drug "donut hole" (or gap drug coverage), with elimination of the coverage cap by 2019.
  • Malpractice Reforms – In what is largely viewed as a concession to Republican lawmakers, President Obama announced that he is directing the Secretary of Health and Human Services to move forward immediately on a medical malpractice demonstration grant program to “help doctors focus on putting their patients first, not on practicing defensive medicine.”  

Chairman Baucus’s Draft Reform Framework

Also yesterday, Senate Finance Committee Chairman Baucus posted an 18-page discussion draft of his health reform plan, which is based on months of negotiations with a bipartisan group of six Senators. The draft overlaps the President’s proposal in a number of areas, including insurance market reforms, a health insurance exchange, tax credits to offset insurance costs, insurance mandates, and Medicare delivery reforms. The outline does not call for a public health option; instead it would establish nonprofit, member-run health insurance cooperatives to expand insurance options.

The Baucus plan includes more details than the President on Medicare and Medicaid reform provisions, such as: reductions in annual Part A and Part B payment updates; revisions to payment policies for hospitals, home health agencies, hospices, durable medical equipment suppliers, and Medicare Advantage plans; increased Medicaid drug rebates; new restrictions on specialty hospitals; expanded comparative effectiveness research; new reporting requirements regarding relationships between drug, device and biologic manufacturers and physicians and teaching hospitals; new transparency provisions regarding nursing home operations and staffing; and prescription drug sample transparency requirements. Revenue provisions in the outline include, among others, an excise tax on high-cost insurance plans and new requirements for nonprofit hospitals. In addition, the plan calls for a series of fees to be imposed annually on pharmaceutical manufacturing companies ($2.3 billion annually), medical device manufacturers ($4 billion annually), health insurance providers ($6 billion annually); and clinical laboratories ($750 million annually); the fee would be allocated by market share (except for small clinical laboratory businesses).

While the Chairman is continuing to seek the Senators’ input and agreement on the reform framework, he has declared that “now is the time to act.” To that end, he plans to release his long-awaited “Chairman’s Mark” next week, and to begin voting in the Finance Committee the week of September 21, 2009. After the Finance Committee completes action, its bill will need to be melded with the version approved in July by the Senate Health, Education, Labor, and Pensions Committee for consideration by the full Senate. In the meantime, the House leadership is working to reconcile bills approved by three different committees this summer before the legislation can come to the House floor for a vote.