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Carol Aarhus Alpha Files
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Originally Processed With FOIA(s):
FOIA Number:
S; 1999-0118-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection: George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Aarhus, Carol, Files
Subseries:
Alpha File, 1990-1992
OA/ID Number:
13863
Folder ID Number:
13863-005
Folder Title:
Health Care [1]
Stack:
Row:
Section:
Shelf:
Position:
G
19
2
5
4
The President's Comprehensive
Health Reform Program
OF
SEAL OF THE THIB
&
February 6, 1992
Table of Contents
Page
1. Overview
1
2. Principles for Reform: Building on American Strengths
5
3. Expanding Access and Increasing Affordability Through Market Re-
form
17
4. Expanding Access Through Tax Measures to Help People Pay for
Insurance
27
5. Making the System More Cost-Effective
31
A. Overview
31
B. Encouraging Coordinated Care
36
C. Providing Comparative Value Information for Health Purchasing
42
D. Encouraging Personal Responsibility and Prevention
45
E. Malpractice Reform: Changing Incentives for Provider Behavior
50
F. Reducing Administrative and Paperwork Costs
56
G. Making Public Programs More Efficient
60
(1) Reforming the Medicaid Program by Enhancing State Flexibility
60
(2) Phasing-Out Duplicate Subsidies and Increasing Efficiency in
Other Federal Programs
65
6. Problems With Alternative Approaches
69
A. The Canadian Model
69
B. Play-or-Pay
77
7. Examples of Impacts on Individuals and Families
85
References
89
i
Chapter 1
Overview
HIGHLIGHTS: The President's Plan For Comprehensive Health Care
Reform
The President's Plan is a comprehensive, market-based reform that builds on the strengths of our
current system to provide access to affordable insurance for all Americans.
The President's plan guarantees access to health insurance for all poor families
through a transferable health insurance tax credit (certificate)-available even to those too
poor to file taxes-that is large enough to purchase a basic health package ($3,750 for a fam-
ily).
The President's plan provides insurance security for all Americans. The fear of "job
lock"-where workers can't move to another job without losing access to insurance-is elimi-
nated. Limits on the availability of insurance for those with "preexisting conditions" are
eliminated.
The President's plan will reduce the cost of health insurance through major market
reforms. Smaller businesses and individuals would be pooled into larger groups-so they can
receive the same favorable health coverage enjoyed by large employers. Millions of people
who now can not find affordable insurance will be helped.
The President's plan provides new help to the middle class to pay for health care. Up
to $3,750 in health insurance costs can be deducted by families with incomes less than
$80,000. Over 90 million Americans will receive new assistance for health costs.
The President's plan encourages the growth of coordinated care-in private plans, Med-
icare and Medicaid. Laws limiting coordinated care would be prohibited-as would costly
State mandated benefit laws. The comprehensive plan encourages individuals, employers and
health providers to use coordinated care systems.
The President's plan will use the power of an informed marketplace to help control
costs by providing consumers with better information and by giving individuals the resources
to choose the coverage that best meets their needs.
The President's plan would reduce administrative costs through regulatory reforms that
will streamline the current paperwork maze, and through market reforms that allow small
employers to share-and thereby substantially reduce-administrative costs.
The President's plan includes major malpractice reform. A comprehensive liability re-
form plan is proposed to reduce the costs of malpractice and the resulting defensive medicine
that burdens the U.S. health system.
The President's plan would expand services in underserved areas. Many inner city and
rural areas have acute shortages of doctors and clinics. The President's budget expands fund-
ing for Community Health Centers, Migrant Health Centers and the National Health Service
Corps to increase preventive care in these areas.
The President's Plan Does Not:
-
include governmental price regulation or rationing of health care;
-
burden small business with new and costly mandates that will stifle the creation of new jobs
and be passed on in higher product costs and higher taxes for all Americans;
- require massive tax increases like "play or pay" and national health insurance;
-
threaten poor older Americans with benefit reductions or premium increases.
1
2
The President's Comprehensive Health Reform Program
The President's Plan builds on a system
benefit package. To reduce the rapid growth
that provides the world's best health care.
of health spending, the plan makes radical
The plan provides all Americans access to
reforms in the health insurance system and
affordable health care coverage through a
includes strong incentives for the development
transferrable health insurance credit (cer-
and expansion of coordinated care systems
tificate)-available even to low-income Ameri-
and other efficient arrangements for delivering
cans who do not file tax returns-that can
high quality health care.
be applied to the purchase of a basic health
Summary Highlights
Expanding Access to Health Care (See
Health Insurance Networks (HINs)-
Chapters 3 and 4)
Pooled-Purchasing Power.-When it comes
to health insurance, small businesses do
Transferrable Health Insurance Credits (cer-
not have many of the advantages of large
tificate) and Deductions-Benefitting Approxi-
businesses. Large companies can self in-
mately 95 Million Americans-
sure and avoid expensive benefit mandates
A transferrable health insurance credit
and premium taxes. Large firms are sold
(certificate) or tax deduction would be
coverage similar to that purchased by
available to ensure access to affordable
small firms, but at much lower prices. A
health care coverage for moderate and
new way of purchasing insurance, HINs
low-income families. About 95 million
would enable small firms to purchase low
Americans would receive assistance. When
cost, high quality health insurance. HINs
fully implemented, families with incomes
would enable small businesses to buy
below the tax filing threshold, approxi-
lower priced insurance by reducing admin-
mately the poverty line, would receive a
istrative costs and by exempting insurance
credit of up to $3,750, sufficient to pur-
purchased from HINs from excessive State
chase basic health benefits. Similarly, in-
mandates, anti-managed care laws, and
dividuals would receive $1,250 and two-
premium taxes. For the first time, groups
person families $2,500. A health insurance
like the National Federation of Independ-
credit (certificate) or deduction (also up to
ent Business, National Small Business
$3,750 per family) would be available to
United, and the U.S. Chamber of Com-
individuals, two-person, and larger fami-
merce would be able to offer affordable
lies with annual incomes up to $50,000,
health plans to their members nationwide
$65,000 and $80,000, respectively.
or join with other groups to increase pur-
chasing power in State or local markets.
Market Reform-
Insurance Affordability.-In the near
Basic Benefits.-States would be required
term, premium costs for similar policies
to develop a basic health insurance pack-
sold to firms in a single block of business
age equal to the value of the health insur-
could vary by no more than 50 percent.
ance credit. This would enable low-income
A health risk adjustment across insurers
families to purchase adequate health care
would be phased in-removing premium
coverage.
disparities and allowing for plan flexibility
Insurance Security.-Workers changing
within a new insurance market driven by
jobs would no longer face concerns about
competition on quality and costs.
"job lock"-the inability to change jobs for
Containing Health Care Costs (See Chapter
fear of losing access to insurance. Health
5)
insurers would be required to provide cov-
erage to all employers requesting it. Cov-
Malpractice Reform.-The threat of mal-
erage would be guaranteed, renewable,
practice litigation prompts physicians to
and preexisting condition limits would be
order tests and perform procedures, ena-
eliminated.
bling them to assert that every effort has
Overview
3
been made to provide the best health care.
also be required to adhere to uniform
These defensive practices are extremely
claims processing procedures, a source of
costly to the system. To address this, the
additional administrative savings.
President's plan would provide incentives
Expanded Use of Coordinated Care-
to States to: (i) eliminate joint and several
liability for non-economic damages, (ii) cap
-In 1990, approximately 40 million Amer-
non-economic damages, (iii) eliminate
icans were enrolled in a coordinated care
rules that permit double recovery, (iv) re-
system-up from 10 million in 1980. The
quire structured awards, (v) promote pre-
President's plan encourages broader use
trial alternatives, and (vi) implement new
coordinated care including preferred pro-
procedures to improve quality of care.
vider organizations, point-of-service
Also, standards of care, developed in con-
choice plans, case management, HMOs,
junction with the medical community,
and other forms of coordinated care.
would be explored as a means to remove
-States would be encouraged to develop
physician uncertainty over malpractice
coordinated care systems and would be
litigation.
prohibited from having laws that hinder
effective operation of these systems. Ex-
Improving Consumer Information.-To as-
cessive State-mandated benefits-that
sist individuals and employers in evaluat-
increase the cost of insurance-would be
ing various health insurance policies, con-
sumers would have access to information,
prohibited.
that would provide information like that
-Medicare reforms would encourage in-
creased coordinated care enrollment and
in "blue books" on the average cost of serv-
increase incentives for coordinated care
ices and the quality of care provided by
systems to contract with Medicare. The
physicians, hospitals, clinical laboratories,
and other health care providers. This will
President's plan also would make it easi-
help control costs by providing consumers
er for beneficiaries of retiree group
with comparative value information that
health benefit plans to be served by co-
will enable them to make more informed
ordinated care systems.
choices.
Increased Flexibility for State Programs.-
Reducing Administrative Costs.-The
States are encouraged to implement a co-
President's plan will reduce administrative
ordinated care-based Medicaid program.
costs, which now total $43 billion a year,
They also would have the flexibility to re-
by more than 25 percent through elec-
design their entire health care systems.
tronic billing for providers, electronic bene-
-States could choose to combine current
fit cards for policyholders, simplified utili-
Medicaid funding with the new benefits
zation review, and insurance market re-
provided through the health insurance
forms.
credit (certificate) to develop a single
Insurance law changes and market re-
unified health plan for their low-income
residents.
forms will cut back the paperwork blizzard
-With the new Federal health insurance
that confronts all insured Americans-and
costs billions of dollars. Standardized
credit (certificate), all poor residents are
claims procedures and other reforms will
guaranteed basic health coverage-with-
reduce administrative costs. For small em-
out any further fiscal burden on the
States. This will allow States to more
ployers, administrative costs may account
for as much as 40 percent of the cost of
effectively allocate their health re-
insurance purchased. Marketing to and
sources for Medicaid and for the nonpoor
servicing small employer policies is costly.
population.
HINs, which unite many purchasers,
Cost-Effective Services are Expanded in
would reduce the cost of insurance admin-
Underserved Areas.-The inner city and
istration and premiums. These costs are
rural areas have acute shortages of doctors
usually under 10 percent for large busi-
and clinics. The President's fiscal year
nesses. Federally certified HINs would
1993 Budget expands funding for Commu-
4
The President's Comprehensive Health Reform Program
nity Health Centers, Migrant Health Cen-
faster than in the U.S.; patients endure
ters, and the National Health Service
long lines and wait for surgery and access
Corps to expand preventive care in these
to advanced technology; and, high quality
areas.
care is rationed. A Canadian-style plan
Prevention.-The President's fiscal year
would require from $250 billion to $500
1993 Budget includes $26.4 billion, an in-
billion a year in new taxes. For quality
crease of nearly $4 billion (18 percent),
care, many Canadians go to the U.S.
for preventive health activities. Prevention
Play-or-Pay Model.-"Play-or-pay" would
funding has increased by more than $11
hurt workers by increasing unemployment
billion (74 percent) since 1989. The Presi-
and forcing employers to cut wages to off-
dent's fiscal year 1993 Budget proposes in-
set mandated costs. One study indicates
creases of 18 percent for childhood immu-
that under "play-or-pay" between 400,000
nizations and infant mortality reduction,
to 700,000 jobs would be lost in the short-
a 27 percent increase for Head Start and
Early Childhood Development, a 24 per-
run, and up to 2 million jobs could be lost
cent increase for breast and cervical can-
in the long-run. The "play-or-pay" system
cer mortality prevention, and a 90 percent
is structurally unsound and guaranteed to
increase for childhood lead poisoning pre-
degenerate into national health insurance.
vention.
Upon enactment, 59 million privately-in-
sured Americans would fall into the public
Alternative Approaches (See Chapter 6)
plan and the plan's instability would
quickly force universal public coverage.
The two alternative approaches to health
Play-or-pay is a tax on low-wage workers
care reform have fundamental structural
and would result in millions of lost jobs.
weaknesses:
Finally, at least $37 billion per year in
Canadian Model.-In Canada neither pro-
new and additional taxpayer-financed sub-
viders nor consumers have incentives for
sidies would be required to adequately
efficiency; health care costs are growing
fund the public plan.
Chapter 2
Principles for Reform: Building on American Strengths
Overview
Reform should preserve the strengths of
the U.S. system while addressing its weak-
The cost growth of the U.S. health care
nesses. Reforms should not destroy its in-
system is unsustainable, both for individ-
centives for choice, quality, and innova-
ual Americans and for the economy as a
tion.
whole.
The President's Principles for Reform es-
Even with rapidly increasing health
tablish guidelines for a comprehensive re-
spending, 13 percent of Americans do not
structuring of a market-based health sys-
have access to health insurance.
tem.
Most federal health care support goes to
Americans need and deserve adequate access
the non-poor, the segment of society that
to affordable high quality medical care. Health
least needs government assistance.
care in the United States has evolved into
Despite the shortcomings of the American
the world's most sophisticated and advanced
system, it delivers the world's best quality
system.
care, and the world's most sophisticated
Our health care system has strengths and
health technology.
weaknesses. A clear understanding of both
is essential in guiding policy development.
Principles for Reform
The President has determined that several principles should guide the development of a com-
prehensive approach to health reform. The reform should:
Build on the strengths of an American health system that provides the highest quality health
care in the world;
Assure access to basic health insurance for Americans, and increase the affordability of such cov-
erage;
Promote consumer choice to ensure that the health care system continues to respond to the
needs and concerns of Americans;
Strengthen market incentives for providers and health plans to improve quality while controlling
costs;
Emphasize prevention and personal responsibility;
Reduce abuse and wasteful excess;
Meet the requirements of fiscal responsibility and budget discipline.
The approach should not:
Force the American people to give up the choice and diversity that makes the American health
system unique;
Lead to comprehensive governmental price controls and rationing health care by government;
Create new spending mandates for States and employers;
Require a net increase in taxes; or
Threaten older Americans with the prospect of either benefit cuts or premium increases.
These tests cannot be met by either "Canadian-style" or "Play-or-Pay" approaches to reform. Such
approaches necessarily involve major tax increases, comprehensive governmental price controls, or ra-
tioning.
5
6
The President's Comprehensive Health Reform Program
Understanding the Cost and Access
continues unchanged, health care could
Problems
consume over 16 percent of GDP by the year
2000, and between 27 and 43 percent of GDP
Health care costs are increasing too fast
by 2030 under mid-range and high-range pro-
and too many Americans have inadequate
jections (Sonnefeld et al., 1991).
access to health care. The causes of the
cost and access problems are complex. Unfortu-
These costs are shouldered by everyone-
nately, simplistic proposals, such as reducing
individuals, business and government. The
administrative costs to fund a universal access
federal government is spending increasing
program, are unrealistic (Doherty, 1991).
proportions of the federal budget on mandatory
health outlays. Before the year 2000, health
Moreover, the cost and access problems
entitlement programs (Medicare and Medicaid)
are not easily solved simultaneously. The
will surpass Social Security as the single
political system tends to trade cost-control
largest component of federal spending. Federal
for access, and vice-versa. Addressing the
Medicaid spending alone has grown from
access problem inescapably means re-allocat-
$14 billion in 1980 to $37 billion in 1989
ing tens of billions of dollars each year.
to a projected $84 billion in 1993. These
Addressing the cost problem requires correct-
figures reflect a 43 percent increase for
ing perverse incentives and market distor-
last year alone, an increase of 227 percent
tions-to encourage more efficient behavior
since 1989, and an increase of 600 percent
by individuals, insurers, and health providers.
since 1980.
Unsustainable Cost Growth.-Currently,
Medicare spending will have grown from
total health care expenditures are about 13
$34 billion in 1980 to about $131 billion
percent of the Gross Domestic Product
by 1993-an increase of nearly 300 percent.
(GDP)-up from less than 6 percent of GDP
Unrestrained, Medicare will grow at an aver-
only three decades ago. If the current system
age rate of 12 percent per year from 1993
Chart 1. HEALTH SPENDING
IS PROJECTED TO REACH 16.4% OF GDP
PERCENT
BY 2000 -- RISING FROM 5.3% IN 1960
50
40
CURRENT LAW EXTRAPOLATION
OF CURRENT TREND
CURRENT LAW
30
MID-RANGE PROJECTION
20
HISTORIC
10
0
1960
1970
1980
1990
2000
2010
2020
2030
FISCAL YEAR
SOURCE: Health Care Financing Administration, Office of the Actuary
Principles for Reform: Building on American Strengths
7
Chart 2. PROJECTED SOCIAL SECURITY AND
HEALTH ENTITLEMENTS FOR 1990-2030
$ BILLIONS
8,000
7,000
6,000
HEALTH ENTITLEMENTS (MEDICARE/MEDICAID)
ASSUMES CONTINUATION OF SPENDING GROWTH RATES
5,000
HEALTH ENTITLEMENTS (MEDICARE/MEDICAID)
4,000
ASSUMES SIGNIFICANT SLOWING OF SPENDING GROWTH
3,000
2,000
1,000
SOCIAL SECURITY
0
1990
1995
2000
2005
2010
2015
2020
2025
2030
FISCAL YEAR
Note: Health entitlement projections based on data provided by Health Care Financing Administration,
Office of the Actuary, October, 1991.
through 1997. By 2025, Medicare is expected
percent of poverty (Needleman et al., 1990).
to exceed 27 percent of the federal budget.
Despite this, most of the massive federal
Even if it were possible to sustain health
spending on health care goes to the non-
spending at nearly 30 cents of every dollar,
poor. In 1992, only 21 percent of total
it is difficult to imagine who would pay
federal health care spending is estimated
these enormous costs. Most individuals already
to be spent for the poor. Almost 90 percent
feel that they are overburdened with health
of Medicare spending goes to individuals
above the poverty level.
care costs. Businesses are spending increasing
percentages of wages and other compensation
Uninsured Americans receive some health
on health care premiums-currently in excess
care, either by paying for it out-of-pocket,
of 100 percent of after-tax profits.
or in the form of "uncompensated" or "charity"
Clearly, health care costs must be contained,
care (Needleman et al., 1990). "Uncompen-
both in public programs and in the private
sated" care is not free, in the sense that
sector. Neither individuals, business, nor gov-
insured individuals must pay higher fees
ernment can afford to pay for the currently
and thus higher premiums, and hospitals
projected growth.
receive public (such as Medicare and Medicaid
"disproportionate share" payments and non-
Inadequate Access Despite Increasing
profit tax treatment-now over $15 billion
Spending.-Despite this rapid rise in health
per year) and private (such as charitable
care spending, 13 percent of Americans-34.7
contributions) subsidies to cover the costs.
million-are without health care insurance.
The uninsured are more likely to receive
Most of the uninsured are lower-income
health care in hospital emergency rooms,
Americans-30 percent of the uninsured have
rather than in physicians' offices and clinics
incomes below the poverty level, and 32
(NMES, 1987). This form of care can be
percent have incomes between 100 and 200
harmful to the individual, who may only
8
The President's Comprehensive Health Reform Program
Chart 3. BUSINESS SPENDING ON HEALTH PREMIUMS
PERCENT OF
PERCENT OF
PAYROLL
PROFITS
11
110
10
100
9
90
8
80
7
70
AS A PERCENT OF
6
PAYROLL
60
5
50
4
40
3
30
AS A PERCENT OF
AFTER-TAX PROFITS
2
20
1
10
0
0
1965
1970
1975
1980
1985
1989
FISCAL YEAR
SOURCE: Health Care Financing Administration, Office of the Actuary
receive care for serious illnesses instead of
been level or increased only slightly. This
coordinated, preventive care from a physician
suggests that the intensity (e.g., more tests
familiar with the patient. Emergency room
and procedures per hospital stay or per
care is also a more expensive and inefficient
office visit) is the primary cause of spending
use of resources, since emergency room visits
growth. International comparisons confirm this
are much more costly than physician office
conclusion (Schieber et al., 1991).
visits.
In addressing the growth in service inten-
No Easy Solution-Rising health care ex-
sity, it is difficult to know how much of
penditures are a function of many interrelated
the increase is due to advances in medical
factors. These include: general inflation, popu-
technology, and how much is attributable
lation growth, relative aging of the population,
to excessive defensive medicine, poor health
growth in volume and intensity of medical care
care management, and gaming of a public
(HCFA, 1989), and "cost shifts" that re-allocate
price-regulated system.
the costs of caring for the uninsured. The re-
sulting medical inflation is consistently more
For preventable illnesses and conditions,
than double the growth rate of the Consumer
though, the issues are more apparent. For
Price Index.
example, at 13.8 per 100,000, the male homi-
cide rate is more than 12 times that of
General inflation, population growth and
Germany and 5 times that of Canada. More
relative aging necessarily occur. Other factors
than 200,000 AIDS cases have been reported
can be addressed, such as the growth in
in the US. In 1989, the rate of incidence
the intensity of medical services and of
of AIDS was more than three times that
preventable illnesses. Despite increasing per
of Canada and six times that of then-West
capita U.S. costs, utilization as measured
by hospital admissions, length of hospital
Germany. And, there are about 375,000 drug-
stay, and medical visits per capita have
exposed babies in this country. This problem
Principles for Reform: Building on American Strengths
9
Chart 4. MEDICARE FISCAL FINANCING GAP
PERCENT
18
16
14
12
PERCENT OF PAYROLL
(PESSIMISTIC ASSUMPTIONS)
10
PERCENT OF GNP
8
(PESSIMISTIC ASSUMPTIONS)
6
PERCENT
4
OF PAYROLL
(INTERMEDIATE
ASSUMPTIONS)
2
PERCENT OF GNP
(INTERMEDIATE ASSUMPTIONS)
0
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
FISCAL YEAR
Note: The Medicare Fiscal Financing Gap is the projected HI trust fund deficit and SMI revenue requirements above 1987 levels.
Source: Holohan, J. and J. L. Palmer, Journal of Health Politics, Policy and Law, Spring 1988
is negligible in most other countries (Schwartz,
The health care market is further distorted
1991).
by limited consumer information about the
treatments patients receive and the efficiency
Rising costs are also the result of market
of their care. Consumers and large purchasers
distortions. Because medical treatment is
currently have few objective sources of infor-
largely in the hands of doctors and hospitals
mation on which to base cost and quality
(who have financial and defensive incentives
comparisons.
to provide more medical care) and not the
consumer, consumer-based market discipline
The problems of access and cost are inex-
has been weak.
tricably linked. Access ultimately is an issue
of affordability. Many low-income Americans
Under the current system, Americans with
need help to be able to afford coverage.
insurance are often overinsured and have
Cost growth needs to be slowed to assure
few incentives to use medical care prudently.
continued affordability for others. Thus, the
Instead, consumers tend to be risk-averse
access and cost problems must be addressed
where health is concerned. Insulated from
together in a comprehensive series of reforms.
the real cost of medical treatment by employer
Only then can all Americans begin to enjoy
and government subsidized insurance, Ameri-
efficient health care at affordable prices.
cans tend to over-consume health care. More-
over, because insurance itself is SO highly
subsidized for most Americans, they have
Building on American Strengths
little reason to prefer forms of coverage
Most Americans today have ready access
that are more efficient (e.g., coverage with
to state-of-the-art medical care. Breakthrough
higher cost sharing or coordinated care cov-
treatments spread rapidly from our Nation's
erage)
finest hospitals and laboratories and quickly
become routinely available throughout the
10
The President's Comprehensive Health Reform Program
Chart 5. FEDERAL HEALTH SPENDING
$ BILLIONS
(OUTLAYS AND TAX EXPENDITURES IN 1993 DOLLARS)
350
300
250
TO NONPOOR
200
150
TO POOR
100
50
o
1965
1970
1975
1980
1985
1990
1995
FISCAL YEAR
NOTE: Federal spending for Medicare, Medicaid, hospital and medical care for veterans, and other payments to individuals for
health purposes; and tax expenditures for employment-provided health plans and for deductions of health expenses.
Spending share to poor reflects percent of recipients with money incomes below poverty thresholds.
SOURCE: Census Bureau
Chart 6. MOST OF THE GROWTH IN REAL PER CAPITA SPENDING IS DUE TO SERVICE
INTENSITY-MORE TESTS AND SERVICES ARE BEING PROVIDED PER ENCOUNTER
HOSPITAL ADMISSION AND PHYSICIAN VISIT RATES HAVE CHANGED LITTLE
WHILE HOSPITAL STAYS HAVE SHORTENED
LEVEL RELATIVE TO 1960
400%
350%
REAL PER CAPITA
SPENDING -- HOSPITAL
AND PHYSICIAN CARE
300%
250%
EXCESS MEDICAL INFLATION
200%
150%
100%
MEDICAL VISITS PER CAPITA
50%
INPATIENT ADMISSIONS PER CAPITA
AVERAGE HOSPITAL LENGTH OF STAY
0%
1960
1965
1970
1975
1980
1985
1988
FISCAL YEAR
Sources: Utilization data from OECD, Health Care Financing Review, Annual Supplement, 1989; per capita spending
data from Health Care Financing Administration, Office of the Actuary.
Principles for Reform: Building on American Strengths
11
country. We must preserve this excellence
of lowering deaths due to major killers such
in our efforts to solve our problems.
as heart disease and cancer.
Vast improvements in health over the last
This success is based on several key features
few decades are unmistakable. Charts 7 and
of the U.S. health care system.
8, for example, show dramatic improvements
Choice.-Individuals and families are free
over the past 40 years in life expectancy
to choose their own physician and hospital and
and in mortality rates. Overall mortality
an increasing number of Americans are able
rates have decreased from 840.5 deaths per
to choose among a variety of health plans.
100,000 in 1950 to 535.5 per 100,000 in
This, in turn, encourages physicians, hospitals,
1988. Mortality rates for heart disease and
and health plans to compete to provide better
for cerebrovascular disease have declined by
health care at a lower cost. As a result, our
46 percent and 66 percent respectively during
health care system reflects the needs and con-
this period.
cerns of ordinary Americans as expressed in
Advances in medical treatment are SO fre-
the choices they make. This dynamic should
quently reported that they seem almost rou-
be nourished and strengthened.
tine. Today, Americans from all walks of
Diversity and Flexibility-Choice and the
life have ready access to these medical ad-
vances. (See Chart 12.)
open competition by providers for patient care
also assures diversity and flexibility in the fi-
These trends neither reverse nor even pla-
nancing, organization and delivery of care. The
teau. Prevention and greater personal respon-
last two decades have witnessed unparalleled
sibility could increase average life expectancy
innovation in the organization and manage-
from about 73.8 years to 77.6 years (Hahn
ment of health care in the United States. The
et al., 1990). At the same time, new drug
most important development is the growth of
regimens and technologies offer the promise
coordinated care. Health maintenance organi-
Chart 7. LIFE EXPECTANCY IN THE U.S.
LIFE EXPECTANCY AT BIRTH
76
74
72
70
68
66
1950
1960
1970
1975
1980
1985
1989
YEARS
SOURCE: U.S. DHHS, "Health United States, 1990'; PHS, March 1991
12
The President's Comprehensive Health Reform Program
Chart 8. MORTALITY RATES FOR SELECTED CONDITIONS, 1950-88
AGE-ADJUSTED
DEATHS PER 100,000
350
300
250
200
150
100
50
0
DISEASES
MALIGNANT
CEREBROVASCULAR ACCIDENTS AND
CHRONIC
PNEUMONIA AND
OF HEART
NEOPLASMS
DISEASES
ADVERSE EFFECTS
PULMONARY
INFLUENZA
MAJOR DISEASES BY YEAR
DISEASES
1950
1960
1970
1980
1988
SOURCE: US DHHS, National Center for Health Statistics, "Health USA, 1990"
zations (HMOs) and preferred provider organi-
clinics; caring for AIDS patients and their
zations (PPOs) now serve over 40 million
families; participating in drug abuse preven-
Americans. These health plans combine the fi-
tion, education, and rehabilitation; delivering
nancing and delivery of health care and inte-
meals to the homebound; providing hospice
grate quality management across the entire
care; and assisting victims of debilitating
continuum of care-from prevention to care for
diseases and supporting their families.
chronic illnesses. Through competition, coordi-
Biomedical Research-The U.S. leads the
nated care plans are driven to respond to
world in biomedical research. America's contin-
consumer needs leading to better quality care
ued dominance of the competition for Nobel
at lower costs.
prizes reflects that pre-eminence. Advances in
Skilled Medical Professionals.-U.S. phy-
biomedical research over the past four decades
sicians and health professionals are the best
have improved the quality of health care while
educated and most skilled health care work
saving billions in health care costs. With an
force in the world. U.S. Hospitals and medical
increasingly thorough understanding of basic
schools are world leaders for particular special-
disease mechanisms, researchers are likely to
ties and treatments.
achieve additional breakthroughs within the
next twenty years.
Caring Volunteers.-Hundreds of thou-
sands of groups and organizations engaging
Federal investment in biomedical and ap-
millions of volunteers assist in providing qual-
plied behavioral research has increased as
ity health care.
a proportion of GDP from 0.12 percent in
1970 to 0.16 percent in 1992. U.S. public
Health care volunteers improve access to
health services and help to control health
and private funding provides the lion's share
care costs. These volunteers provide such
(Chart 10) of the funding for such research
worldwide.
services as: working at community health
Principles for Reform: Building on American Strengths
13
The Success of American Health Care-Examples
Cancer.-Deaths from childhood cancers have been reduced 38 percent since 1973, with almost two-
thirds of children with cancer surviving beyond five years. There has been astonishing progress
against Hodgkin's disease, with a 50 percent reduction in deaths, and against testicular cancer with
a 60 percent reduction in deaths.
Heart attacks.-In the early 1960s, almost a million Americans a year died from heart attacks.
Today, deaths from heart attacks have been dramatically reduced to less than half that number due
to better prevention and better treatment. Major advances in treatment include therapy to dissolve
blood clots that cause heart attacks and balloon angioplasty to relieve chest pain during con-
valescence and beyond. Patients are now commonly discharged after 8-10 days, and return to full
activity within 4-6 weeks.
Hypertension.-High blood pressure affects 58 million Americans and can lead to heart disease and
stroke. Since the National High Blood Pressure Education Program was launched in 1972, age-ad-
justed stroke mortality in the U.S. has declined by more than 50 percent. Recommendations from a
recent study of hypertension in the elderly could further prevent 6 strokes and 11 major cardio-
vascular events a year per 1,000 seniors treated. Cost savings could total one-half billion dollars a
year.
Diabetic Retinopathy.-Damage to the blood vessels of the retina from diabetes accounts for ap-
proximately 12 percent of the new cases of blindness each year. Until the late 1960s this condition
was untreatable. Within the last two decades, laser surgery has been widely adopted as an effective
treatment. By the year 2000, $2.8 billion dollars will be saved and 279,000 years of vision preserved
as a result of this advance.
Paralysis due to Spinal Cord Injury.-This year 10,000 Americans-most of them young-will suf-
fer a spinal cord injury, often resulting in life-long paralysis. Today, many patients recover thanks
to a recently discovered treatment that involves high dose methylprednisolone therapy.
Technology.-Similarly, new technologies
unparalleled access that Americans enjoy to
developed by the U.S. drug and medical device
sophisticated diagnostic and therapeutic tech-
companies have grown exponentially over the
nology. A difference in access to advanced
last three decades. This innovation has im-
technology is often the critical difference
proved the quality of health care for Americans
between health and disability, life and death.
and has strengthened our nation's inter-
national economic competitiveness. The U.S.
Quality Assurance.-Finally, leadership in
accounts for nearly half of the $65 billion dol-
the development and implementation of new
lar global market for medical devices. Medical
methods for assuring quality care has been a
equipment exports have grown about 20 per-
hallmark of health service delivery in the
cent per year since 1985. In 1991, exports of
United States for over a decade. Peer review,
such products reached nearly $7 billion.
practice guidelines, research on patient out-
comes, and other activities mean that appro-
A comparison with other prosperous Western
priate interventions are applied correctly to
nations-Canada and Germany-in Chart 12
the individual's clinical condition.
presents some astonishing implications of the
14
The President's Comprehensive Health Reform Program
Chart 9. PREDICTED DEATHS FROM HEART DISEASE WITH AND
WITHOUT CONTINUED INNOVATION
THOUSANDS OF DEATHS
1,400
1,180
1,200
1,100
1,040
970
1,000
890
800
800
800
698
604
600
522
452
391
400
200
0
1990
1995
2000
2005
2010
2015
BASELINE WITH
FORECAST WITH
CURRENT TECHN OLOGY
CONTINUED INNOVATION
NOTE: With aging of the population, deaths from heart disease would increase over the next three decades.
But this increase can be dramatically reversed with continued technological innovation.
SOURCE: Ruth Brown, et al., "The Value of Pharmaceuticals;" Batelle, 1991
Potential Future Breakthroughs in Medical Treatment
Cancer.-Despite recent progress, more than 500,000 Americans will die of cancer in 1992. There is,
however, a new feeling of optimism among researchers. Clinical trials using a new drug, taxol, in
women with breast cancer have shown very high response rates. Another new approach, use of
chemotherapy before surgery can change an inoperable tumor to one that can be removed sur-
gically. And there is potential for major advances in gene therapy and anti-cancer vaccines during
the next 10 to 20 years
Alzheimer's Disease.-Alzheimer's Disease (AD) affects an estimated four million people in the U.S.
at a cost of $90 billion a year. Aging of the population could result in a five-fold increase in the dis-
ease over the next fifty years. At present, there is no treatment. In the last 12 months, however,
three major breakthroughs have occurred that give promise that research into the causes of AD will
soon yield definitive results. This, in turn, is likely to lead to new concepts for developing treat-
ments.
Cystic Fibrosis.-Over 30,000 children and young adults suffer from cystic fibrosis (CF). Discovery of
the CF gene in 1989 led to a new understanding of the disease. Recently, researchers successfully
used a cold virus to implant a normal human CF gene into the lungs of live animals. This advance
is likely to lead to an effective gene therapy in the foreseeable future.
Diabetes.-Despite insulin, millions of diabetics are at risk of disabling complications. Transplanting
pancreatic islet cells could "cure" the disease preventing these complications. Preliminary studies
have successfully demonstrated that enclosing the transplanted cells in an artificial covering blocks
rejection of the transplant by immune attack. A real cure for diabetes may be just a matter of time.
Principles for Reform: Building on American Strengths
15
Chart 10. FUNDING FOR HEALTH CARE RESEARCH AND DEVELOPMENT, 1990
UNITED STATES
REST OF WORLD
55.0%
45.0%
SOURCE: US DHHS/PHS/Office of International Health
Chart 11. PRODUCTION OF MEDICAL EQUIPMENT
UNITED STATES AND THE WORLD, 1991
REST OF WORLD
(7.0%)
JAPAN
(18.0%)
UNITED STATES
(48.0%)
EUROPE
(27.0%)
SOURCE: Medicine & Health, January 27, 1991
316-608 0 - 92 - 2 : QL 3
16
The President's Comprehensive Health Reform Program
Chart 12. COMPARATIVE AVAILABILITY OF SELECTED MEDICAL TECHNOLOGIES
PER MILLION PERSONS
6
UNITED STATES
5.1
5
CANADA
WEST GERMANY
4.0
4
3.7
3.3
3.1
3
2.6
2
1.5
1.2
1.3
1.1
1
0.9
0.9
0.7
0.5
0.5
0.3
0.5
0.2
0
OPEN-HEART
CARDIAC
ORGAN TRANS-
RADIATION EXTRACORPOREAL MAGNETIC
SURGERY CATHETERIZATION PLANTATION
THERAPY
SHOCK WAVE
RESONANCE
LITHOTRIPSY
IMAGING
SOURCE: Dale A. Rublee, "Medical Technology in Canada, Germany and the U.S." Health Affairs, 1989
Chapter 3
Expanding Access and Increasing Affordability Through
Market Reform
Overview
spread health risks evenly across insurers
and thereby allow insurers to charge uni-
The President's proposal for reform of the
form premiums for the sick and the
health insurance market will make coverage
healthy. On an interim basis, pending
more secure, available, and affordable for
phased implementation of this new sys-
millions of Americans.
tem, insurers would be subject to limits
Everyone-young and old, healthy and
on their ability to vary premiums.
sick-will benefit from the assurance of
the availability of affordable health insur-
Encourage group purchasing of health in-
ance regardless of future changes in their
surance by small businesses to give them
health.
the same cost advantage enjoyed by larger
businesses. Small businesses could pool
Workers will be able to change jobs with-
their purchasing power through Health In-
out fear that insurance coverage will be
surance Networks (HINs). This will help
denied due to a preexisting illness.
small businesses negotiate discounts and
Premium costs will be reduced by as much
save on overhead and marketing costs.
as 20 percent for at least 70 million work-
Moreover, the Employee Retirement In-
ers and their dependents affected by small
come Security Act (ERISA) preemption
group reforms.
that allows larger self-insured firms to
avoid cost-increasing State laws will be ex-
Five million Americans currently without
tended to small businesses purchasing cov-
health insurance will have insurance as
erage through HINs. For the first time na-
a result of these market reforms.
tional and regional small business associa-
The market reform proposal has four major
tions and other groups will also be able
components. These components will:
to establish inter- and intra-State HINs
to better assist their membership.
Assure availability and security of cov-
erage. Insurers would offer coverage with-
Give health plans increased flexibility to
out regard to health status. Coverage
control costs. Health plans would be pro-
would be renewable, and preexisting con-
tected from mandated benefit and
dition limits would be eliminated. Employ-
"anticooridnated care" laws that hinder
ers would provide information and facili-
designing cost-effective benefit packages to
tate access to group coverage to all em-
meet individual and family needs and
ployees and dependents, but would not be
drive up costs. Health plans would also
required to administer or contribute to the
be protected from laws and regulations
cost of coverage. Further, colleges and uni-
that hinder innovative cost control meas-
versities would provide continued access
ures, such as utilization review and selec-
to group coverage to recent graduates and
tive contracting.
other students for six months after leaving
An important benefit of these reforms is
school.
strengthening significantly competition among
Assure affordability of coverage for indi-
health plans. In today's environment, health
viduals and small businesses through
plans can gain a significant premium cost
broad risk pooling. Insurers would partici-
advantage by avoiding high risk individuals
pate in broad pooling arrangements to
and groups. Under the Administration's reform
17
18
The President's Comprehensive Health Reform Program
proposal, such "risk avoidance" will be stopped.
This disparity in coverage reflects three
As a result, competition will focus on price,
main problems. First, many small businesses
value, and quality, leading to long-term gains
cannot afford to provide costly fringe benefits.
in efficiency and improvements in quality.
Second, health insurance is more costly for
small businesses due to (i) higher overhead
Strengths and Weaknesses of the Current
and marketing costs and (ii) costs resulting
System
from State mandated benefit laws and pre-
153 million working age Americans and
mium taxes which generally do not apply
their dependents-62 percent of the total
to self-insured coverage ("ERISA exempt" from
population-are covered primarily through pri-
State insurance laws) typically provided by
vate health insurance. Most of these are
larger businesses. Finally, the market for
covered through employment. This system
health insurance for small business is in
has worked well because employment can
turmoil due to risk selection.
be a stable basis for risk-pooling, particularly
Erosion of Risk Pooling.-For people with
for medium and large firms and because
serious illness, the cost of medical care can
substantial administrative savings and econo-
mies of scale are possible through employment-
easily consume a substantial share of family
based group coverage.
income. With broad risk pooling, through in-
surance, the costs of illness are spread across
Special Problems for Small Business.-
a broad pool of premium payers, making costs
While generally successful, there are signifi-
more uniform, thus more affordable. The value
cant problems with the current system, espe-
of risk pooling is particularly great because
cially for small group and individual coverage.
spending on health care is highly skewed. At
Workers at small firms are much more likely
any given time, most of the population is
to be uninsured than workers at medium and
healthy, and has little need for medical care.
large firms.
However, a small percent of the population is
Chart 13. INSURANCE COVERAGE OF THE POPULATION UNDER 65
UNINSURED
(11.6%)
MEDICAID
(10.4%)
SELF INSURED
(6.6%)
EMPLOYER
PROVIDED
(71.0%)
MEDICARE
(0.3%)
SOURCE: Agency for Health Care Policy and Research, NMES, 1987
Expanding Access and Increasing Affordability Through Market Reform
19
Table 3-1. Number of Uninsured Workers and Dependents By
Establishment Size-1987
(Source: AHCPR, 1991)
Number of
Percent of
Percent of
Number
Percent
Establishment Size
Workers and
Workers and
Uninsured
Uninsured
All Working
Dependents
Dependents
Uninsured
Less than 25
74.2 m
44
17.2 m
23.1
68
26-100
34.6 m
21
4.3 m
12.3
17
Greater than 100
59.2 m
35
3.9 m
6.6
15
Totals
168.0 m
100
25.4 m
15.1
100
Note: Interventions affecting groups below a threshold, such as a hundred workers, will generally affect all
firms below the threshold, as well as workers in establishments below that threshold, where firms have
establishments in one or more States that fall below the threshold. Even limiting to the strict "firm"-based
definition of size it is estimated that about 70 million workers and their dependents fall below a size of 100.)
seriously ill, and requires extremely costly
average per capita cost when compared with
care. The top 5 percent of the population in
other pools.
terms of health care use (i.e., the 95th percent-
Risk selection is extremely difficult to pre-
ile) have per capita health expenditures
vent. This is because healthy and sick people
($7,100) 26 times greater than costs ($270) for
have different needs for health insurance
people at the midpoint of the population in
and choose different health plans to meet
terms of health care use (i.e., the 50th percent-
these needs. Generally, healthy people are
ile).
attracted to leaner benefit packages (higher
Insurance risk pooling is valuable for every-
cost sharing, fewer covered benefits) because
one because even those who are healthy
they expect that they will not have a need
today may develop a serious illness at some
for more extensive coverage. In contrast,
point in their life. However, risk selection
sicker people prefer richer benefit packages
can undermine insurance as a pooling mecha-
because of their expected needs. Moreover,
nism. Risk selection occurs whenever a par-
certain features of coordinated care, such
ticular pool has a skewed selection of risks.
as a greater emphasis on preventive care,
Such a pool will have a higher or lower
could be more attractive to the healthy.
As a result, sick and healthy people will
Table 3-2. Distribution of Per Capita Health Spending By Age and
Within Age Categories, 1987
(Source: AHCPR, 1991)
(In dollars)
25th
50th
75th
95th
Age
Mean
Percentile
Percentile
Percentile
Percentile
0-6 years
1,133
50
180
600
3,800
7-18 years
643
15
120
400
2,500
19-24 years
839
0
150
550
4,000
25-54 years
1,238
50
260
860
5,500
55-64 years
2,469
160
570
1600
11,424
Greater than 65 years
4,551
330
960
3,500
22,528
Total
1,591
50
270
1,000
7,100
20
The President's Comprehensive Health Reform Program
sort themselves into different plans,
even
Assuring Availability of Coverage
without any effort at selective marketing
by insurers. The result will be that sick
The President's reform proposal contains
people will face high premiums due to the
several initiatives to assure that health insur-
non-random distribution of health risks.
ance coverage is readily available. These
reforms apply broadly to all private health
Risk selection is especially likely in the
insurance coverage regardless of group size
market for small group because a single
and to coverage provided by employers who
small business cannot serve as a stable
self-insure.
risk pool. One or two sick workers can
Prohibition on Exclusion from Coverage
greatly increase average per employee health
Due to Health Status.-All insurers wishing
benefit costs. Insurers originally combined
to sell group health insurance in a State would
many small businesses into a single risk
be required as a condition of doing business
pool and charged all members of the insured
to (i) accept every employer group in the State
group a uniform (or age-adjusted) premium
that applies for coverage and (ii) provide cov-
that did not vary based on health risk.
erage to individuals within an employer group.
This approach helped to make coverage afford-
In addition, all employers would be prohibited
able for individuals with chronic illnesses.
from excluding any individual from health in-
surance coverage for reasons of health status.
However, in today's market, some insurers
Finally, any insurer selling coverage to indi-
have developed strategies for attracting low
viduals receiving health insurance tax credits
risk groups, while leaving higher-risk groups
would be prohibited from excluding any credit
without coverage or with unacceptably high
recipient from coverage.
premiums. Favorable risk selection provides
an opportunity to make a profit by offering
Guaranteed
Renewability.-Insurers
low premiums to attract healthy groups while
wishing to sell group coverage in a State would
discontinuing coverage (or increasing pre-
be required to renew coverage for a group ex-
miums to a prohibitive level) once a group
cept in the case of nonpayment of premiums,
becomes more costly. Some insurers are also
fraud, or misrepresentation.
using medical information (health screening)
Portable Access.-Under the proposal,
to exclude higher-risk groups or individuals
workers would be able to change jobs without
from coverage. Some insurers exclude preexist-
loss of coverage due to a preexisting coverage
ing medical conditions from coverage. In
exclusion. Currently, some health insurance
some cases, even individuals with relatively
does not cover costs related to any illness or
mild health problems have been denied cov-
disease diagnosed prior to the initial date of
erage.
coverage. As a result, many working Ameri-
cans with chronic illnesses have been afraid
As some insurers succeed in attracting
to change jobs for fear that the insurance pro-
low-risk groups and avoiding high-risk groups,
vided at their new job would no longer cover
other insurers face an upward premium spiral,
their medical expenses.
and must risk select to keep up with competi-
The use of preexisting condition exclusions
tive pressures. Similar-possibly even more
would be eliminated. This will assure that
severe-problems affect the market for individ-
all workers can change jobs without losing
ual non-group coverage.
access.
These problems are increasingly common.
Access to Group Coverage for Workers
Moreover, there appears to be no natural
and Dependents.-All employers would be re-
end to current trends. Thus, if left unchecked,
quired to provide information on affordable
broad risk pooling seems likely to unravel
basic health insurance plans available in their
in the small group and individual coverage
respective States. This information is to be
markets. If this were to happen, health
prepared and provided by State insurance com-
insurance would become unaffordable for many
missioners. This will expand access to plans
Americans-especially those most in need
that provide individual and family coverage to
of coverage.
all employees-but employers would not be re-
Expanding Access and Increasing Affordability Through Market Reform
21
quired to administer a health plan or make
Assuring Access to Coverage for Individ-
any contribution towards the cost of health
uals and Families Receiving Health Insur-
coverage. States would assist employers by
ance Tax Credits (certificates).-Each State
making available information regarding the
would define a "basic" benefit package or a
availability and cost of "basic" coverage from
series of packages with an estimated actuarial
various health plans. Employers would be re-
value equal to the value of the health tax cred-
quired only to arrange for deduction of pre-
it. A number of benefits packages are provided
miums from paychecks if employees so re-
as illustrative examples (See Table 3-3).
quested, but would have. no other administra-
Any health plan in a given State could
tive burden. Health insurance networks-
offer the State-defined "basic" benefit package
group purchasing arrangements for small em-
to credit recipients and to others. To ensure
ployers-would facilitate this process and it is
that credit recipients have a variety of plans
anticipated that most small employers would
available, if no insurers offer the "basic
join a HIN (see below).
plan" the State insurance commissioner could
Access to Group Coverage for College
require two or more health plans with a
substantial market share to offer the "basic"
Graduates.-To help fill a significant unin-
sured gap for new work force entrants, all col-
benefit plan. Health plans could charge a
leges and universities that provide group cov-
market price for the "basic" benefit package.
erage to students would be required to offer
The State and Federal Governments would
extended group coverage for new graduates
implement outreach programs with the goal
and other students for six months after they
of securing 100 percent participation among
leave undergraduate and graduate programs.
credit eligibles. Broader participation would
The college or university need not make any
help prevent unnecessary and costly emer-
contribution toward the cost of coverage under
gency care by encouraging primary and pre-
such a plan.
ventative care.
Table 3-3. Basic Benefit Plan Examples for Approximate Amount of the Full
Health Insurance Tax Credit in 1993
(Plans are illustrative only-States will design benefits)
"Coordinated" Fee-For-Service Plans
Plan A-Unlimited inpatient hospital, inpatient physician care, prescription drug coverage,
3 ambulatory physician visits and associated diagnostic services with a $10 co-pay per
visit.
Plan B-Unlimited inpatient hospital, inpatient physician care, and 5 ambulatory physi-
cian visits and associated diagnostic services with a $10 co-pay per visit.
Plan C-Unlimited inpatient hospital, inpatient physician care, 10 ambulatory physician
visits and associated diagnostic services with a $10 co-pay per visit.
Plan D-Inpatient hospital up to 15 days, inpatient physician, lab, emergency room, and
ambulatory physician visits and associated diagnostic services covered for $5 fee per visit
for the first three physician visits, then a 10 percent co-pay up to a $500 out-of-pocket
limit.
Plan E-Includes all services under Plan D, but with a 20 percent co-pay on physician vis-
its after 3 visits.
Plan F-Includes all services and co-payment under Plan E, but would offer prescription
drug coverage.
Model HMO Benefit Plan
Plan G-Unlimited inpatient hospital and inpatient physician services, emergency room,
and unlimited ambulatory physician visits with associated diagnostic services (subject to
a $10 copayment), prenatal care, and prescription drugs (subject to a $5 copayment).
22
The President's Comprehensive Health Reform Program
In cases where a hospital emergency room
Delayed implementation in the small group
is an individual's first point of contact with
market is appropriate to permit an orderly
the system, rotating assignment would be
transition and to avoid undue disruption
used to enroll an uninsured credit-eligible
of existing arrangements. Immediate imple-
individual to a specific health plan if the
mentation of health risk pooling would, how-
individual were unable to make a choice.
ever, be possible for credit recipients since
So for example, a homeless person entering
this is a new market.
the hospital and having no preference for
any carrier would be assigned to an insurer
Transition Measures for Small Group
by rotation and the credit would automatically
Coverage.-These transition measures would
flow to the insurer.
apply to all insurance provided to small busi-
nesses employing fewer than 100 workers. The
Assuring Affordability of Coverage
premium standards (or "bands") limit variation
Through Risk-Pooling
in premiums within each insurance company's
overall set of offerings. They would not con-
As noted above, broad risk pooling is essen-
strain premium variation between insurers.
tial if health insurance is to be affordable
The premium standards would be temporary
for the sick as well as for the healthy.
and would be phased-out with full implementa-
The President's market reform proposal pro-
tion of a system to equalize risk among insur-
vides both interim and longer-term solutions.
ers.
Transition measures, including "premium
bands" would be implemented immediately
Premium Standards Across and Within
to stabilize the small group market pending
Demographic Categories.-Insurers could
full implementation of longer-term measures.
vary premiums by age. This means that
younger workers would not be forced to
In the near term, premium bands will
subsidize older workers (who typically
spread risks within an insurer's pool by
have higher income and higher health
limiting the difference in premiums that
risks). But, insurers would be limited in
an insurer may charge to groups with different
their ability to vary premiums based on
health risks. This will make coverage less
health status or prior use of care. Pre-
costly in the near term for higher risk
miums could not differ by more than 50
groups. However, premium bands may be
percent within age/sex categories in the
unstable in the longer term. Because an
first year decreasing to 35 percent by the
insurer would be unable to vary premiums
third year.
to reflect fully actual differences in expected
health care costs, healthy enrollees would
Rate of Increase Standard for Renewal
have incentives to shift to other insurers
Premiums.-Insurers could not increase
that have fewer sick people in their pools.
premiums excessively for groups with de-
teriorating health status or claims experi-
Health risk pooling would assure affordable
ence. The maximum percent increase in
coverage over the long term both for small
renewal premiums would be set at 5 per-
groups (under 100 employees) and for individ-
cent plus the percent change in the "base
uals and families receiving health insurance
premium rate." The "base premium rate"
tax credits. Under this approach, health plans
is the lowest premium the insurer could
insuring a sicker than average population
have charged under the relevant block of
would receive a net transfer from the risk
business for a group with similar demo-
pool while other insurers will be net payers
graphic characteristics, excluding factors
into the pool. This will assure stable risk
related to health status, claims experience,
pooling over the long-term and will level
industry, occupation, or duration of cov-
the competitive playing field among insurers
erage.
to focus competition on efficiency and quality.
Premium Standards Across "Blocks of
The health risk pooling approach would
Business"-Premiums could vary by up to
be implemented immediately for tax credit
20 percent across different blocks of busi-
recipients and would be phased-in over a
ness. A carrier may establish different
five year period for small group coverage.
blocks of business: (i) for business acquired
Expanding Access and Increasing Affordability Through Market Reform
23
from another carrier, (ii) for business ob-
pool. Payments from and to the pool would
tained through a distinct system of mar-
be based on the difference between the ex-
keting (e.g., brokers VS. associations), and
pected health care costs for the entire covered
(iii) for business obtained through dif-
population and the expected health care costs
ferent associations (for example, HINS).
for the population covered by the insurer.
Carriers could establish three different
As a result, insurers would no longer
blocks of business for each of the three
have an incentive to deny coverage to individ-
reasons, for a total of nine different blocks
uals with chronic disease. Moreover, insurers
of business.
would be able to provide coverage at a
Enforcement.-An independent actuary
near uniform premium for the sick and
would certify compliance. Failure to have
the healthy. The health risk pool would
a valid certification would trigger a vio-
have this effect because a health plan that
lation. The State enforcement agency
enrolls an individual with a high-cost chronic
could conduct an investigation to verify
illness will receive a transfer of funds from
certifications.
the pool equal to the difference between
the expected health care costs for the individ-
States could also implement a prospective
ual involved and the average expected cost.
reinsurance or risk allocation system on an
This moves the system back toward a flexible
interim basis to pool risks among insurers.
community rate-where choice in plans is
Under a prospective reinsurance model, an
maintained, but risk is truly pooled.
insurer could obtain optional reinsurance
A number of methods have been developed
for any group or newly eligible group
for measuring expected health care costs
member. The primary insurer would be
based on the health characteristics of the
liable for an individual's health costs up
population involved. These methods include
to a threshold amount. Above the thresh-
the Diagnostic Cost Group system developed
old, the reinsurance program would be re-
at Boston University and the Ambulatory
sponsible for most of the cost. The pro-
Care Group system developed at Johns Hop-
gram would be funded by reinsurance pre-
kins. Other systems are available for use
miums and an assessment on all small
by the States. The Department of Health
group insurers.
and Human Services would fund research
Under risk allocation, each insurance car-
to refine these systems and to develop im-
rier would have a quota of assigned risks
proved systems for adjusting for health risk.
based on the carrier's market share. Insur-
The Department would also provide technical
ers could initially refuse to provide cov-
support to assist States in establishing the
erage based on health risk. However, the
risk pools.
rejected group or individual would have
As is true for any system that varies
a right to select any insurer from an as-
payment according to health status, some
signed risk list maintained by the State
degree of overreporting is possible, but such
provided that the insurer's allotment has
overreporting would not have an adverse
not been filled.
effect on the pooling system unless some
Health Risk Pools.-Each State would im-
insurers were more successful at it than
plement two broad health risk pools: one for
others. If necessary, to prevent this outcome,
small group coverage and another for coverage
a random sample audit of insurance claims
provided to individuals and families receiving
and other records could be used to verify
transferrable health insurance tax credits.
the accuracy of health risk assignments.
These pools would spread risk broadly across
The health risk pools for small group
all health plans providing such coverage with-
coverage and for credit recipients would be
in a State.
similar in most respects. Participation would
Under this system, health plans that cover
be required for all health plans providing
a sicker than average population would receive
coverage to small groups and to credit recipi-
a net payment from the pool, while other
ents. If an individual purchases the basic
health plans would be net payers into the
benefit package, the insurance company re-
24
The President's Comprehensive Health Reform Program
ceives the credit plus or minus an amount
by as much as 16 percent through efficiencies
related to the individual's age (and possibly
of scale, lower administrative costs, and
gender). These adjustments mitigate the prob-
through pooling of purchasing power that
lem of adverse selection for the basic benefit
helps small businesses negotiate better rates
packages.
with insurers.
Amounts received by an insurance company
Cleveland's Council of Smaller Enterprises
would also be subject to health status adjust-
(COSE) operates a successful health insurance
ments. On an annual basis, each credit
group purchasing program for small firms.
recipient would be assigned to a health
While COSE has been successful, surprisingly
status category. Each health category would
little of this type of group purchasing is
have a corresponding weight based on expected
going on nationwide. The reforms described
health care costs defined relative to the
in the preceding sections will spur group
population average. Each insurer would cal-
purchasing by protecting against some of
culate an average weight for all credit recipi-
the abusive practices that have daunted some
ents covered by the insurer. Insurers with
local purchasing groups. Additional assistance
an average weight greater than the statewide
is provided as well to encourage rapid forma-
average would receive net transfers from
tion of group purchasing arrangements.
the pool, while insurers with an average
weight less than the statewide average would
ERISA Reform/Incentives for Group Pur-
be required to make contributions to the
chasing.-The federal preemption of State
pool.
regulation of self-insured health benefit plans
under ERISA that benefits virtually all large
States would implement pools for credit
employers would be extended to small busi-
recipients simultaneously with federal imple-
nesses that purchase coverage on a group basis
mentation of the transferable health tax credit
through a Health Insurance Network (HIN).
system. Implementation of health risk pools
This would protect against (i) State mandated
for small group coverage would occur over
benefit laws that require firms to provide cer-
a five-year period on a phased-in basis,
tain costly services, (ii) excessive State health
starting in the third year after enactment
insurance premium taxes, (iii) and State anti-
of the reform proposal. Transition measures,
coordinated care laws. These laws typically in-
including premium limits, would apply in
crease premium costs by 2 to 5 percent. HINs
the small group market in the interval.
could also still self-insure, but in this case,
enhanced insurance State solvency and in-
Encouraging Group Purchasing For Small
creased Department of Labor standards would
Employers: Health Insurance Networks
apply to ensure the economic stability of the
The President's reform proposal will help
plans.
reduce insurance costs for small businesses
Functions.-HINs could contract with in-
by encouraging group purchasing. Group pur-
surers to provide coverage to members or could
chasing can reduce health insurance
costs
self-insure subject to enhanced State solvency
Table 3-4. Savings From Small Market Reforms:
Administrative and Bargaining Effects
(Expressed as percent of total premium, by firm size)
Firm Size
Claims
Total Savings
<4
15.9
5-9
13.1
10-19
10.9
20-49
8.5
50-99
6.0
Expanding Access and Increasing Affordability Through Market Reform
25
regulation (if State solvency standards are in-
will simplify marketing and administration
sufficient, Department of Labor solvency
and sharply reduce costs.
standards would operate as a backup oversight
system). All federally approved HINs would be
Increasing Flexibility for Health Plans
required to offer at least one coordinated care
States would no longer be allowed to man-
option and to use a standard claims form.
date benefits that unduly limit flexibility
for health plans, thereby increasing health
Organization.-HINs would be structured
care costs and restrict coordinated care.
as non-profit voluntary membership organiza-
tions with a board of directors elected by the
State Mandated Benefits.-Many State
membership. HINs would be registered and
laws require insurers to cover certain optional
qualified, as applicable, by a State agency or
or ancillary services. These mandated benefits
by the Department of Labor. There would be
drive up premium costs up by at least 3 to
no limit on the number of HINs that could
5 percent.
be established in a given area. HINs could be
Provisions that Restrict Coordinated
established along the lines of professional soci-
Care.-Some State laws impose restrictions
eties, industry, or trade associations and would
which prevent the development of coordinated
be subject to all of the market reforms listed
care-and the competitive pressure it imposes
in the preceding sections. By buying coverage
on fee-for-service providers. Anti-managed care
through a HIN, small businesses would be able
laws include:
to achieve more effective purchasing power in
the market, thereby helping reduce the cost
Restrictions on reimbursement rates or se-
of insurance to their employees.
lective contracting: Laws that restrict the
ability of a carrier to negotiate reimburse-
HINs will provide the mechanism for pooling
ment rates with providers or contract se-
large numbers of individuals and employees
lectively with a limited number of provid-
of small firms, an advantage that is now
ers.
only available to large companies. These
Restrictions on differential financial incen-
plans have not grown in the past because
tives: Laws that limit the financial incen-
of State laws. To allow for federal preemption,
tives that a health benefit plan may re-
plans had to "self insure". Small groups
quire a beneficiary to pay when a non-
have difficulty raising capital to self insure
plan provider is used on a non-emergency
risk. This system allows "imputed ERISA
basis.
exemptions"-small firms can join together
without self-insuring, and have insurers carry
Restrictions on utilization review: Laws
the risk.
that (a) prohibit utilization review of any
or all treatments and conditions, (b) re-
Intrastate and Regional Pooling.-The
quire that such review be made by an in-
State or Federal government could certify an
State physician or by a physician in a par-
HIN. For example, Pennsylvania (or the Fed-
ticular specialty, (c) require the use of
eral government) could certify an HIN of 1,000
specified standards of health care practice
small employers who pooled market power to
in such reviews, or require the disclosure
negotiate with local providers in Philadelphia,
of the specific criteria used in such re-
or the Federal government could certify a simi-
views, or (d) require payment to providers
lar HIN for the Philadelphia area (PA, NJ,
for the expense of responding to utilization
and DE) that would pool market power in the
review requests.
entire region.
Federal/State Relationships
Multi State Pooling.-HINs would allow
for the first time, multi State pooling of small
Most of the reforms described in the preced-
firms. Groups like NFIB, National Small Busi-
ing section would be implemented by the
ness United and The Chamber of Commerce
States. Thus, the responsibility for regulating
(or any other group) could offer the same basic
health insurance would remain primarily with
plans to members nationwide. In the past,
the States. However, federal legislation would
State barriers have prevented such plans. This
be amended to provide States with clear
26
The President's Comprehensive Health Reform Program
incentives to enact laws that will achieve
As stated above, federally certified HINs
national goals. In many cases, as with HIN
would be protected from State mandated
certification and oversight, there would be
benefit laws and State premium taxes in
backup federal certification and oversight pro-
the same manner as an ERISA-qualified
cedures.
self-insured plan. Federally certified HINs
Under this approach, after an initial period
would, however, be subject to additional State
to allow State action, if a State's health
requirements to assure solvency. States could
insurance laws do not meet prescribed federal
provide an alternative process for certification
guidelines, then insurance sold in-State would
of HINs. If State laws and State premium
be certified through a federal back-up mecha-
taxes were excessive, a HIN could apply
nism.
to the Department of Labor for federal cer-
tification-pre-empting State law. As a result,
Other reforms would be implemented di-
State would be encouraged to facilitate market
rectly by Federal Government through amend-
pooling and access to coverage for small
ment of the Federal Employee Retirement
business-or risk losing their traditional insur-
Income Security Act (ERISA) or through
ance oversight and regulatory role to a federal
other appropriate legislation. Certification of
backup system.
HINs would fall into this category.
Chapter 4
Expanding Access Through Tax Measures to Help People
Pay for Insurance: Health Insurance Tax Credit and De-
duction
Overview
Other federal programs-including Medicare
and Medicaid-provide health insurance cov-
The cornerstone of the President's plan
erage directly to eligible groups including
to increase access to health insurance is
the elderly, disabled, and certain low-income
a new transferable tax credit and deduction
individuals. However, many low income indi-
designed to help most of the Nation's unin-
viduals-including many unemployed individ-
sured obtain health insurance. The plan places
uals and the working uninsured-do not
the highest priority on providing health insur-
qualify for any of these benefits and do
ance for low-income individuals, but also
not receive any direct or indirect Federal
would provide substantial benefits to middle-
contribution to their health insurance.
income individuals who enjoy little or no
employer contributions for health insurance
Overall, there are estimated to be 34.7
and to self-employed individuals.
million Americans without health insurance
(CPS, March 1991). Lack of coverage has
a number of adverse consequences. Health
Policy Background
may be at risk because of reduced access
Current tax law provides substantial bene-
to primary and preventive care. Moreover,
fits to individuals whose employers contribute
uninsured people often seek medical care
to their health care insurance costs. The
in hospital emergency rooms, which is costly
entire amount of the employer's contribution
and inefficient. The cost of providing care
is excluded from taxable income and from
to the uninsured produces large cost-shifting
the FICA wage base.
within the health care system, increasing
costs for the insured-by up to 15 percent
Self-employed individuals are able to deduct
for some services. For these and other reasons,
25 percent of their premium payments. And
expanding insurance coverage is an important
all taxpayers are able to deduct out-of-pocket
goal for the Nation.
medical expenses and premium payments to
the extent that these expenses exceed 7.5
Analysts have suggested a variety of options
percent of adjusted gross income; however,
as means of expanding insurance coverage.
this deduction is of limited value to most
These options include national health insur-
taxpayers because few have medical expenses
ance (see Chapter 6, section A), and a
significantly in excess of the AGI threshold.
"play or pay" mandate to require employers
95 Million Americans Will Benefit
To make health insurance more affordable, the President's plan includes:
A tax credit of up to $3,750 for low-income families;
A tax deduction of up to $3,750 for middle-income families;
An increase to 100 percent in the deduction for health insurance available to self-em-
ployed individuals.
27
28
The President's Comprehensive Health Reform Program
to provide coverage or to pay a tax
(see
CHAMPUS, and selected other federal health
Chapter 6, section B). Both of these alter-
programs) would not be eligible for the credit.
natives will lead to higher costs for American
The transferable tax credit would replace
taxpayers, rationing of care, and inefficient
the supplemental earned income tax credit
delivery in an unstable system. The Presi-
available under current law for certain low-
dent's proposal instead relies on significant
income taxpayers who contribute toward the
reforms of the health insurance market, a
purchase of health insurance coverage for
new transferable health insurance tax credit
their children.
for low-income families, and a new health
insurance tax deduction for middle-income
Amount.-The maximum amount of the
families.
credit is $1,250 for single persons, $2,500 for
married couples and other two-person families,
The President's plan will promote individual
and $3,750 for families of three or more. These
choice. With a system of health insurance
credit amounts would be sufficient to purchase
tax credits and deductions, low- and middle-
a basic health insurance benefits package (See
income families will be free to choose among
Table 3-3). The amount of the credit would
a variety of health plans with increased
phase down to a minimum at increasing in-
availability due to the market reforms. This
come levels.
helps ensure that coverage meets individual
and family needs.
Individuals, couples, and families may also
elect to claim a deduction instead of the
Moreover, providing choice is a critical
credit. The deduction will be available to
prerequisite of competition in any market
persons without regard to whether they item-
system-and competition among health plans
ize or claim the standard deduction and
is the best way of assuring continuous im-
will be equal to $1,250 for single persons,
provements in quality of care, service, and
$2,500 for married couples and other two-
cost-effectiveness. None of the alternative op-
person families, and $3,750 for families of
tions for expanding insurance coverage pro-
three or more.
mote choice or enhance competition. Indeed,
Both the credit and deduction amounts
they generally have the opposite effect. Other
will be increased to account for inflation.
disadvantages are detailed more fully in Chap-
Applicable credit and deduction amounts will
ter 6.
be reduced by the amount of any contribution
made by the employer to the employee's
Tax Credits and Deductions for Low-
health plan. Individuals with employer con-
Income and Middle-Income Individuals
tributions exceeding the applicable credit or
Low- and middle-income persons who are
deduction amount will receive neither the
not covered by other federally subsidized
credit nor the deduction.
health insurance programs will be eligible
As noted above, the amount of the tax
for a tax credit or deduction for the purchase
credit would vary based on modified adjusted
of insurance.
gross income in relation to the tax filing
Eligibility.-Eligibility for the credit or the
threshold. The tax filing threshold is the
deduction is related to income and extends up
sum of the standard and taxpayer and depend-
to a modified adjusted gross income of-
ent exemptions and approximates the poverty
level. Modified adjusted gross income equals
$50,000 for single persons
the sum of adjusted gross income, plus non-
$65,000 for persons filing as heads of
taxable Social Security payments, Railroad
households, and
Retirement payments, and tax-exempt inter-
est.
$80,000 for married persons filing jointly.
The tax credit would be implemented over
These income levels will be increased to
a five-year period. When fully implemented-
account for inflation.
All eligible individuals, married couples,
Individuals who receive other federal sup-
or families with incomes below the tax
port (e.g., covered by Medicare, Medicaid,
threshold (100 percent of poverty) will re-
Expanding Access Through Tax Measures to Help People Pay for Insurance
29
ceive the maximum credit (e.g., to $1,250,
in payment for coverage. The insurance pro-
for individuals, $2,500 for married couples,
vider will then reconcile the amount of the
and $3750 for families).
advance credit on their tax return.
All eligible individuals, married couples,
Credits would be used to purchase a "basic"
or families with incomes above the tax
benefit package (or other health plans of
threshold will receive a partial credit, de-
their choice). States would ensure that insur-
creasing to 10 percent of the maximum
ance companies would make basic benefit
credit (e.g., to $125 for individuals, $250
plans available (See Chapter 3).
for married couples, and $375 for families)
at 150 percent of the tax threshold.
Tax Credits and Deductions for Self-
Employed Individuals
All eligible individuals, married couples,
or families with incomes above 150 per-
The self-employed would be entitled to
cent of the tax threshold, will receive the
deduct 100 percent of the cost of their
greater of the minimum credit or the de-
health insurance premiums or receive the
duction of up to $3,750 as described above.
applicable credit, whichever is greater.
As noted previously, individuals, married
Using the Tax Credit/Deduction to
couples, and families with incomes above
Purchase Insurance
$50,000, $65,000, and $80,000, respectively,
The market reforms described in Chapter
would be ineligible for either the credit
3 would apply to help assure that coverage
or the deduction. Also, as noted previously,
is both available and affordable for individuals
individuals, couples and families could take
the health insurance deduction instead of
and families receiving health insurance tax
the credit. Moreover, the amount of the
credits. Specifically, guaranteed issue, guaran-
credit and the deduction would be phased
teed renewability, and elimination of preexist-
out over the range of $40,000 to $50,000
ing condition exclusions would all apply.
for single persons, $55,000 to $65,000 for
Moreover, broad based health risk pooling
married couples and other two-person families,
would apply to insurance sold to credit recipi-
and $70,000 to $80,000 for families of three
ents to ensure affordability of coverage for
or more. The tax credit and deduction would
recipients with chronic illnesses. Finally, credit
cost about $35 billion in 1997 when fully
recipients would be able to buy low cost
phased-in.
coverage through health insurance networks
or HINs.
Administration.-For filers, credits and de-
ductions could be claimed on the tax return
a The initial credit amounts of $1,250, $2,500,
at the end of the year in the usual manner
and $3,750 for individuals, couples and fami-
used for other credits and deductions.
lies were selected to cover the cost of an
efficiently-run health plan that provides
Alternatively, low-income credit recipients
"basic" services. Each State would define
could receive a transferable credit certificate
a basic benefit plan or plans that could
during the year by applying to a governmental
be purchased for the approximate amount
office. States may select a State agency,
of the credit. Any insurer in the State
such as the Employment Service or contract
could offer basic benefits to credit recipients.
with the Social Security Administration to
Credit recipients would be able to buy coverage
certify applicants' eligibility and to notify
other than the State-defined basic benefit
the Internal Revenue Service of the issuance
package if such other coverage would better
of the advance credit.
suits their needs.
This mechanism would immediately qualify
Achieving the Goal of Expanded Access
the individual or family for assistance in
purchasing health insurance; people would
The health insurance tax credit and deduc-
not have to wait until they file their tax
tion will help millions of low- and middle-
returns to benefit. Transferable credit holders
income families afford health insurance. When
would transfer the credit to an employer
fully implemented, approximately 86 percent
or insurer who provides health insurance
of all individuals not receiving Federal medical
30
The President's Comprehensive Health Reform Program
support have income in the range of eligibility
Self-employed workers would also be helped.
for a credit or deduction; the remaining
In 1993, 3.1 million self-employed taxpayers
14 percent are higher-income individuals or
currently buying health insurance would bene-
families.
fit from the increase in the deduction available
Individuals who have employment based
to the self-employed. Still more self-employed
coverage, but who pay much of the cost
individuals will benefit because they qualify
themselves, would receive a substantial
for the health insurance tax credit. And,
new deduction or credit.
the insurance market reforms discussed in
Chapter 3 will reduce the cost of health
A total of 95 million individuals would
insurance for self-employed individuals at
benefit from the health insurance tax credit
all income levels.
and deduction when the President's program
is fully phased in.
After five years, 29 million Americans will
become newly covered. The number of unin-
About 25 million low-income individuals
sured will be decreased from 34.1 million
would receive the maximum credit (ad-
to 4.9 million-or less than 1.8 percent of
justed for any employer contributions).
the total population. Twenty-four million
Approximately 13 million individuals with
Americans will gain coverage primarily as
incomes between 100 percent and 150 per-
a result of the new health insurance tax
cent of the tax filing threshold would re-
credits and deductions. And, by reducing
ceive a partial credit or deduction.
premium costs substantially, the health insur-
ance market reforms and other cost-contain-
Finally, about 57 million middle-income
ment reforms will encourage employers to
individuals would receive a partial credit
expand coverage voluntarily to an additional
or deduction. Of these, 51 million would
five million Americans.
receive a deduction.
Table 4-1. Effect of Overall Reform Proposal on the Number of Uninsured
Americans
(People in millions; projected to population)
Below 100
Between
As
Income Level
100 and 150
Percent
Percent of
Totals
Poverty 1
Percent of
of Total
Poverty 1
Popula-
tion
Current Law Uninsured
15.4
5.7
34.1
12.8%
Covered Through Tax Credits and Deductions
14.9
5.0
24.1
9.1%
Covered Through Market and Other Reforms
0.4
0.6
5.0
1.9%
Total Newly Covered
15.3
5.6
29.2
11.0%
Remaining Uninsured
0.1
0.2
²4.9
1.8%
1 Poverty here is the income level at which individuals, couples, and families must begin paying income taxes.
2 Many of the 4.9 million remaining uninsured are eligible for a credit or deduction.
Chapter 5
Making the System More Cost-Effective
A. Overview
Over the past several decades, per capita
More efficient forms of health insurance
health care costs in the United States have
coverage are available. These include fee
increased more than 4 percent per year
for-service coverage with modest cost sharing
faster than general inflation. Since 1960,
and coordinated care coverage, where the
real per capita health spending has grown
health plan strives to buy the best package
as a share of GDP from 5.3 percent in
of health care at the lowest cost on behalf
1960 to an estimated 13.1 percent in 1991.
of plan enrollees. Due to distortions in the
If current trends were to continue, total
health insurance market, however, demand
health spending could reach 26.1 percent
has been relatively weak for these more
to 43.7 percent of GDP by 2030 under
efficient forms of coverage.
alternative assumptions (Waldo et al., 1991).
Clearly, these trends are unsustainable if
There are three principal distortions in
the United States is to improve its economic
the market for health insurance which support
base and standard of living.
inefficient forms of coverage: (i) government
subsidies which reduce consumer sensitivity
This rapid growth reflects a number of
to cost, (ii) opportunities for favorable risk
factors that cannot easily be changed or
selection-or "cream-skimming"-which can
controlled: the demographics of the U.S. popu-
give inefficient health plans an unfair cost
lation, the labor-intensive nature of health
advantage, and (iii) limited consumer informa-
care services, and the introduction of bene-
tion regarding the quality of care in competing
ficial-but highly costly-new technology.
health plans which can lead consumers to
Other causes of rising health care costs—
mistake higher price (or more intensive service
market failures in health care and health
delivery) for better care or superior outcomes.
insurance-can and should be addressed
through enhanced competition.
There are other weaknesses in our current
system as well. Substantial consumer and
Currently, the mix of health services pro-
provider uncertainty exists regarding the effec-
vided is not necessarily that which fully
tiveness of a broad range of alternative
informed consumers would purchase under
diagnostic and therapeutic procedures. More-
optimal conditions and services are not pro-
over, prevention often is neglected resulting
duced at minimum cost. A key issue is
in needless illness and greater cost. Finally,
the role of insurance. While health insurance
our current legal system increases health
has important benefits-it protects individuals
care costs by fostering "defensive medicine"
and families from unexpected high health
and excessive litigation costs.
care costs and it reduces financial barriers
to care-traditional fee-for-service insurance
Against this background, the outlines of
with low cost-sharing stimulates over-utiliza-
a comprehensive reform strategy become ap-
tion of services. The reason is straightforward:
parent. The key initiative is to shift health
with insurance paying most of the cost,
care delivery to a more market-based, competi-
health care is perceived to be a free good
tive system. Other critical elements include
for patients and demand for medical care
reducing administrative costs, coordinated care
increases above optimal levels. Moreover, insu-
initiatives, more prudent purchasing of care
lated from the cost of care, consumers have
(particularly through public programs), preven-
little reason to shop for the best price.
tion, and malpractice reforms.
31
316-608 0 - 92 - 3 : QL 3
32
The President's Comprehensive Health Reform Program
Each of these elements move the system
likely to provide more efficient forms of
toward greater efficiency. Together, these ele-
insurance coverage to all employees-not just
ments form the building blocks of a more
those directly affected by the change in
fully integrated market-based system.
tax policy. Because coverage does not correlate
highly with income (Taylor and Wilensky,
Strengthening Competition
1985), this spillover effect is plausible.
The President's reform proposal has three
Non-medical areas will experience spillover
main elements which will strengthen com-
benefits as well. By subsidizing health insur-
petition. These elements will lead to greater
ance for low-income workers, the tax credit
efficiency and a more equitable allocation
will encourage re-entry into the work force-
of resources. The nature of competition will
particularly for Medicaid recipients who may
shift. Providers and the mix of services
fear losing insurance coverage if they resume
will be chosen based more on price relative
employment. Broader health insurance should
to quality and meaningful outcomes.
also lead to productivity gains from improved
health status for the uninsured unemployed/
Changes in Tax Policy.-The President's
working poor.
Plan contains two changes in tax policy that
make health care moare widely available and
Insurance Market Reforms.-The insur-
affordable: (i) a transferable tax credit for low-
ance market reforms will help make com-
income individuals and families, and (ii) a de-
petition more effective as a means of encourag-
duction for self-paid health premiums of up
ing greater efficiency. The market reforms will
to $1250/$3750 for middle income individuals
effectively block "cream skimming" or favor-
and families.
able risk selection. This will cause competitors
to focus on cost-containment and quality.
The transferable tax credit is a crucial
Group purchasing through Health Insurance
reform. For the first time, government assist-
Networks ("HINs") will also give small busi-
ance for low-income individuals and families
nesses greater market "clout." And, pre-
will be provided through tax credits rather
emption of State-mandated benefit and anti-
than through a publicly administered health
managed care laws will give health plans new
insurance program. Reliance on tax credits
flexibility to respond to market pressures for
will allow increased consumer choice. Tax
greater efficiency and cost savings.
credits to low-income individuals will permit
them to shop among plans and coverage
Improved Information.-Comparative cost
options. Moreover, because the credit is set
and quality information would be made avail-
as a fixed dollar amount rather than as
able to purchasers through a new series of
a percent of premium costs, consumers will
State and local initiatives. Providing this infor-
be cost-sensitive and purchase additional cov-
mation is a critical element for a pro-com-
erage only when the benefits of such coverage
petition reform strategy. Comparative informa-
tion for individual and institutional purchasers
at the margin outweigh competing goods
and services.
will enable purchasers to shift demand to-
wards high-value health plans and providers.
Consumers affected by the tax credit and
This, in turn, will provide powerful incentives
the capped deduction can be expected to
for plans and providers to compete by control-
be more cost-conscious. Restoring marginal
ling costs while improving quality. Even a mi-
cost sensitivity in this way could result
nority of well-informed consumers can influ-
in a 5 percent one-time reduction in health
ence other consumers and the direction of the
care costs for those affected (Chernick, Holmer,
market (Pauly, 1978). Plans and providers that
and Weinberg, 1987). This estimate is consist-
demonstrate equivalent or superior outcomes
ent with other studies which indicate one-
at lower cost would gain a competitive edge.
time savings of between 2 percent and 13
Service utilization and costs could be cut ap-
percent (EBRI, 1989).
preciably with no deterioration in outcomes.
While these reforms will directly affect
Funding will increase for outcomes research.
only a portion of the population, a broader
This research will better define the safety
spillover effect seems likely. Employers are
and effectiveness of key medical and surgical
Making the System More Cost-Effective
33
procedures and will facilitate more appropriate
The Secretary of Health and Human Serv-
use of costly technologies. Funding also will
ices is leading a number of initiatives to
increase for efforts to develop practice guide-
streamline administrative procedures. These
lines for practitioners. By specifying a "best
include accelerated development of data stand-
practice" approach for specific conditions,
ards for electronic claims processing, and
guidelines can help prevent unnecessary or
encouragement of electronic medical records
potentially harmful care.
for insurance enrollees.
Administrative Savings
Coordinated Care
Some administrative costs (e.g., spending
The President's reform proposal would en-
on utilization review) can result in net savings
courage greater use of coordinated care ar-
by identifying and preventing costly, un-
rangements through increased enrollment in
needed, and potentially dangerous care. The
public programs-Medicare and Medicaid-
U.S. leads the world in health care quality
and eliminate State laws that hir der develop-
assurance. Quality assurance increases admin-
ing these arrangements.
istrative costs, but adds important value
"Coordinated care" refers to a diverse-
for consumers.
and still evolving-set of alternative delivery
Nonetheless, there are areas where overhead
models introduced over the last two decades.
costs in the U.S. are excessive and savings
Examples include Health Maintenance Organi-
are possible. One area of concern is adminis-
zations (HMOs) and Preferred Provider Orga-
trative and marketing costs for health insur-
nizations (PPOs). Coordinated care plans offer
ance sold to small businesses. Overhead costs
the potential of: lower cost, improved outcomes
can be as high as 40 percent of total
through better quality assurance, and ex-
premiums for small businesses compared with
panded consumer choice among health service
less than 6 percent for large businesses.
delivery options. Coordinated care systems
Another area of concern relates to the high
closely integrate the financing and delivery
cost of paperwork associated with billings
of health care. Unlike fee-for-service medicine,
and claims forms.
clinical decisions are coordinated across the
full continuum of care.
Under the Administration's proposal, group
purchasing arrangements, or Health Insurance
Accumulating evidence presented in sub-
Networks, for small businesses will help re-
section B shows direct savings from coordi-
duce administrative and marketing costs. And
nated care as high as 30 percent. Other
market reforms will reduce overhead costs
studies show significant "spillover" savings:
by prohibiting insurers from refusing coverage
as coordinated care systems gain market
to particular individuals in a group due
share in local markets, fee-for-service costs
to their health status and by discouraging
are reduced as providers are forced to compete
frequent changes of insurers.
more vigorously. And, it is important to
Table 5-1. Savings From Small Market Reforms:
Administrative and Bargaining Effects
(Expressed as percent of total premium, by firm size)
Total Adminis-
Total Savings
Firm Size Claims
tration Savings
with Bargaining
Effects
Fewer than 4
12.6
15.9
5-9
10.6
13.1
10-19
9.1
10.9
20-49
7.4
8.5
50-99
5.5
6.0
34
The President's Comprehensive Health Reform Program
stress that the cost containment potential
(iii) health promotion activities, such as cam-
of coordinated care is dynamic. Further sav-
paigns to reduce smoking, increase seat belt
ings are likely as management systems im-
use, or encourage early prenatal care for
prove and as better techniques for delivering
low-income women.
medical care are developed.
Medical Professional Liability Reform
Prudent Purchasing in Public Programs
Medical malpractice reform is a key element
Expenditures for both Medicare and Medic-
of health system reform. Malpractice pre-
aid programs have continued to grow at
miums more than doubled from approximately
double digit rates. Medicare baseline growth
$2.7 billion in 1984 to $5.6 billion in 1989.
for fiscal year 1992 is projected at 11.8
And, the threat of malpractice forces doctors
percent; expenditures under Medicaid have
to practice "defensive medicine"-ordering un-
increased at nearly 25 percent on average
necessary tests and procedures simply as
over the last four years, making it the
documentation to protect against litigation.
fastest growing domestic program. Prudent
Defensive medicine costs are estimated at
purchasing and other measures to improve
about $21 billion a year. The current system
efficiency could reduce growth in Medicare
also involves lengthy delays and excessive
costs. Medicaid cost growth would be slowed
litigation costs.
by encouraging greater reliance on coordinated
care and by providing States with greater
To address these problems, the Administra-
flexibility. These savings will be achieved
tion is proposing comprehensive reform. States
with no reduction in benefits for program
would be encouraged to reform medical mal-
recipients.
practice litigation by: (i) capping the amount
of allowable non-economic damages; (ii) elimi-
The Administration also supports measures
nating joint and several liability for non-
to stop abuses in the current system. For
economic damages; (iii) eliminating the collat-
example, payment for physician self-referrals
eral source rule that allows for double recov-
would be prohibited under the Medicare and
ery; (iv) requiring structured payments for
Medicaid programs. Physicians and other pro-
malpractice awards, as opposed to lump sum
viders increasingly refer patients for tests
payments; (v) promoting pretrial alternative
or to diagnostic centers in which they hold
dispute resolution to encourage reasonable
some financial stake-a clear conflict of inter-
settlements; and (vi) implementing procedures
est. Recent evidence indicates these "self-
to enhance quality of care. These reforms
referral" arrangements can increase costs per
would also be applied to Federal courts,
episode by as much as 400-700 percent
and alternative means of resolving medical
(Florida Cost Containment Board, 1991;
malpractice claims would be piloted within
Hillman et al., 1990).
the Federal Employees Health Benefits Pro-
Prevention
gram.
Prevention is a "win-win" investment.
In addition, the President's reform proposal
Health care costs can be cut while improving
supports amending State and federal rules
well-being and increasing worker productivity.
of civil procedure to provide that a party
Healthy behaviors can prevent between 40
who refuses to engage in alternative dispute
and 70 percent of all premature deaths,
resolution and who loses at trial must pay
a third of all cases of acute disability,
the other party's attorneys' fees. Finally,
and two-thirds of all chronic disability. Accord-
the Department of Justice will provide addi-
ingly, the President's plan focuses on preven-
tional guidance concerning the application
tion efforts which have maximum return
of the antitrust laws to certain aspects of
the health care system.
on investment. Specific initiatives include in-
creased funding for: (i) vaccine research and
Practice guidelines and standards of care
other research targeted at preventing specific
have assumed growing importance in providing
diseases; (ii) screening programs such as
quality assurance. Such guidelines and stand-
blood lead level testing, pap smears, mammo-
ards also may play an important role in
grams, and blood cholesterol testing; and
reducing defensive medicine. Their implica-
Making the System More Cost-Effective
35
tions for malpractice litigation will be the
marginally useful care, including cost-increas-
focus of scrutiny by the Secretary of Health
ing technologies.
and Human Services.
Increased use of coordinated care by Medi-
Overall System Effects
care and Medicaid would reinforce these mar-
Each of the individual elements will encour-
ket shifts. Public and private activity combined
age greater efficiencies and a more fair
could make coordinated care plans the domi-
allocation of resources across the U.S. health
nant system. The market power enjoyed by
care system.
coordinated care approaches would further
mean that norms of care (and consumer
Tax policy changes, health insurance market
and physician expectations) would increasingly
reform, and greater availability of comparative
be established by this sector.
value information will together generate in-
creased cost sensitivity and increased con-
sumer shopping across all income and occupa-
Projected Savings Estimates
tional groups. Suppliers can be expected to
The President's health care reform proposals
respond with more affordable benefit packages
can reduce the rise in health expenditures.
and a more efficient mix of services. For
The individual savings estimates, both static
example, use of cost-sharing and coordinated
and ongoing, are presented in Chart 14.
care plans could increase. As coordinated
By 1997, total health expenditures could
care plans achieve greater premium cost
be cut by 6 to 14 percent if the proposals
advantages, more individuals would switch
are adopted.
to these plans from fee-for-service coverage.
And, coordinated care plans would have incen-
In dollar terms, projected system-wide sav-
tives to increase savings by making provider
ings through 1997 would total $394 billion.
networks more selective and by reducing
Projected estimates of cumulative savings
Chart 14. IMPACT OF HEALTH REFORMS ON PROJECTED U.S. HEALTH SPENDING
PERCENT OF GDP
30
BASELINE WITHOUT REFORM
25
LOW SAVINGS ESTIMATE
20
15
HIGH SAVINGS ESTIMATE
10
5
0
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
SOURCE: Office of Management and Budget
36
The President's Comprehensive Health Reform Program
through the end of the decade total nearly
Incentives for coordinated care;
a trillion dollars-$954 billion.
Making information available to consum-
Over the longer term running into the
ers;
next century, many of the President's proposed
reforms can be expected to reduce the growth
Increases for prevention programs and
rate of real per capita medical expenses.
higher levels of personal responsbility;
As shown in Chart 14, the long-term rate
Malpractice reforms;
of growth in the Nation's health care costs
Reductions in administrative costs;
can be cut from 10 to 19 percent. A lower
growth rate in per capita costs, will eventually
Increased efficiency, reduction in waste,
restrain the share of medical costs in the
and increased cost-effectiveness of publicly
total economy. By 2030, the share of GDP
funded programs.
devoted to health care will be 4 to 8 percentage
points lower. Instead of 27 percent (the
The combination of these reforms will yield
middle range projected estimate), it could
public sector savings that would be sufficient
be 19 percent.
to offset the new health insurance tax credit
and deduction.
Summary
Health care savings are to be achieved
through implementation of the following re-
forms:
B. Encouraging Coordinated Care
Overview
care through a coordinated care arrangement
as opposed to less than 2 percent in 1980.
Rapid increases in health care costs have
The trend is based on the realization that
focused attention on the inflationary incentives
coordinated care systems offer better incen-
inherent in fee-for-service and cost-based reim-
tives for appropriate, less costly, high-quality
bursement, which traditionally have character-
health care.
ized American medicine. Under fee-for-service
arrangements, physicians and other providers
Coordinated care plans redirect incentives.
have incentives to perform more, not fewer,
The organization is placed at financial risk
services, because practitioners receive higher
for the entire continuum of patient care.
levels of income by providing additional care.
Many of these extra services offer little
As a result, coordinated care plans have
or no additional health benefit. Moreover,
incentives to organize their systems and
under these systems, health care delivery
deliver care in the most efficient manner
is often fragmented, with patients receiving
possible. Selective contracting to obtain
services from different providers without any
discounts, exclusive use of providers, and
means of coordination.
provider payment incentives are ap-
proaches utilized to improve efficiency.
In the past decade, health care delivery
in the United States has been moving away
Importantly, there are also incentives to
from fee-for-service medicine toward "coordi-
ensure that the plans deliver high quality
nated care" plans. The term refers to a
care:
diverse-and still evolving-set of delivery
-Unlike fee-for-service medicine, the
models that integrate the financing and deliv-
plans are responsible for the entire epi-
ery of care and alter the incentives for
sode of any illness and for the future
both providers and consumers of care. As
welfare of the patient. Thus, plans have
Chart 15 indicates, by 1989, some 27 percent
of workers in medium and large firms received
incentives to keep patients healthy and
Making the System More Cost-Effective
37
Chart 15. COORDINATED CARE ENROLLMENT IN MEDIUM AND LARGE FIRMS
PERCENT OF WORKERS
35
30
27
26
25
20
14
15
10
5
4
5
2
0
1980
1982
1984
1986
1988
1989
HEALTH MAINTENANCE ORGANIZATIONS PREFERRED PROVIDER ORGANIZATIONS
SOURCE: Interstudy, BLS Annual Survey
to ensure the most rapid and complete
Models of Care
recovery from illness.
An important byproduct is that plans
An array of coordinated care plans currently
have incentives to offer preventive serv-
exist. A popular example is the preferred
ices.
provider organization (PPO), in which a net-
-Moreover, plans must maintain high
work or panel of providers contracts with
standards of quality because plans com-
the entity. Many consumers have favored
PPOs because they allow greater freedom
pete for patients and patients can choose
to enroll elsewhere.
of choice in selecting providers. Typically,
providers are reimbursed for services based
Coordinated care plans employ a variety
on a negotiated fee schedule. Providers gen-
of mechanisms to ensure high quality care
erally accept lower fees in exchange for
and coordination of services. These include
directed access to increased numbers of pa-
utilization review to determine whether serv-
tients. Utilization review programs ensure
ices are medically necessary and appropriate,
that physicians do not offset lower fees with
pre-admission certification, second surgical
inappropriately increased volume. Consumers
opinions, patient case management, and the
may choose a provider outside the PPO
use of primary care physicians as coordinators
network, but face additional out-of-pocket pay-
and managers of care.
ments.
Coordinated care plans are "win-win" or-
A second example is point-of-service (POS)
ganizations for providers and consumers.
plans that utilize a network of participating
Consumers can receive high quality care
practitioners. Beneficiaries select a primary
with additional benefits such as preventive
care physician, who makes all referrals for
services. Efficiency gains can mean better
specialty care. If individuals seek care from
returns for providers and lower premiums
a participating provider, they incur little
for consumers.
or no additional costs. Individuals opting
38
The President's Comprehensive Health Reform Program
to seek care outside the plan face higher
service results in substantial savings while
deductibles and copayments.
ensuring quality care.
A third well-known example is the health
A number of studies indicate cost savings
maintenance organization (HMO), in which
associated with the use of coordinated care
a defined, comprehensive set of health services
(Luft, 1980; Luft, 1981; Manning et al.,
is provided to an enrolled group of individuals.
1984, 1987; McCaffree et al., 1976; Luft,
The organization assumes financial risk for
1978; Roemer and Shonick, 1973; Wolinsky,
part or all of the group's health care. In
1980)-as high as 30 percent (Luft, 1981).
the "group model" HMO, a physician group
Other studies (Dowd, 1986; Robinson, 1991;
contracts with the entity at financial risk.
Rossiter, 1989; Scheffler et al., 1988; Welch,
Under the "staff model" HMO, physicians
1990) have shown "spillover" cost-savings into
are employees of the HMO.
the fee-for-service sector as coordinated care
Perhaps not surprisingly, other countries
plans increase their market share in an
such as Canada and the United Kingdom
area and stimulate competition among a
are now emulating the characteristics of co-
variety of plans, thereby driving down costs.
ordinated care arrangements:
Evidence regarding cost savings from coordi-
The United Kingdom has recently imple-
nated care is ongoing, in part because of
mented the most thorough reform of its
the newness of plans and their changing
system since its founding, by installing
organizational nature. Further savings are
likely as management systems improve and
elements of market responsiveness by pro-
viders, especially by HMO-like private
as better techniques for delivering medical
physician groups;
care are developed.
While there has been debate about whether
Canadians are experimenting with
"Health Service Organizations" which are
some of the savings associated with HMOs
similar to HMOs in concept but which do
can be attributed to favorable selection (i.e.,
not always have the prepaid, locked-in en-
healthier people enrolling in HMOs), the
rollment features that can increase effi-
Rand Health Insurance Experiment (Manning
et al., 1984) demonstrated that HMOs provide
ciency.
significant potential savings over fee-for-serv-
ice medicine. Assessment of health outcomes
Evidence: Cost and Quality
between the HMO group and the traditional
Evidence indicates that coordinated care
fee-for-service group showed no difference.
plans offer health care to enrollees that
In this multi-year demonstration in which
is as good as, or superior to that of fee-
individuals were randomly-selected into an
for-service medicine. Studies have generally
HMO, reported savings over 5 years were
shown comparable quality based on assess-
as high as 25 percent, compared to patients
ments of medical records between fee-for-
randomly selected into fee-for-service arrange-
service medicine and HMOs (Cunningham
ments.
and Williamson, 1980; Luft, 1981). In addition,
studies have shown that beneficiary satisfac-
Trends in Enrollment
tion is very high in Medicare HMOs and
Private Sector Growth-The shift toward
equal to that found in Medicare as a whole
(Rossiter, 1989). Moreover, Medicare HMOs
coordinated care over the past decade has been
clear. As Chart 15 illustrates, in 1989 over
offered more supplemental benefits, including
27 percent of all employees in medium and
preventive services, for a lower premium
large firms receive care through HMOs or
than that of traditional Medigap policies
PPOs. The most significant growth has oc-
(which pay deductibles and co-payments not
curred in those coordinated care plans that
covered by Medicare). In general, HMOs
offer consumers substantial flexibility to
have been able to reduce hospitalization and
choose their own physicians.
increase the use of primary care. A lower
number of hospital patient days for coordi-
Public Programs.-Enrollment in public
nated care plans versus traditional fee-for-
programs has been less robust. Medicare began
Making the System More Cost-Effective
39
to enter into fixed price contracts ("risk con-
A final problem is that until 1992, the
tracts") with HMOs in the mid-1980s. How-
only coordinated care option available to
ever, HMO enrollment has stalled since 1986,
the elderly has been HMOs, a structure
with risk enrollees only increasing from 1.0
that is too rigid and inflexible for many
to 1.3 million beneficiaries. Only 3 percent of
Americans. As more flexible options be-
Medicare beneficiaries currently are enrolled
come available, this could dramatically
in alternative plans, in striking contrast with
change their interest in coordinated care.
the under 65 population.
For Medicaid, HMOs have had legislative
The most serious problem is that the el-
authority to enter into contracts with State
derly have typically not used HMOs dur-
agencies since 1967. However, Congress adopt-
ing their nonelderly years and have some
ed measures in the 1980s inhibiting HMO
reluctance to become involved in a new
contracting with Medicaid.
delivery system during a time when they
Current law authorizes use of new forms
can expect to become heavy users of health
care. As more individuals with experience
of alternative delivery arrangements, such
in coordinated care plans turn 65, this
as primary-care case management (with an
problem will diminish.
appointed physician or other primary care
provider serving as a gatekeeper to specialist
A second problem is that HMOs have a
and inpatient services) and health insuring
limited ability to offer seniors a more at-
organizations (a fiscal intermediary that func-
tractive benefit package than what is of-
tions much like the insurance portion of
fered by FFS Medicare. This is especially
an HMO by providing strong utilization con-
true for seniors (about 40 percent) who
trols). This meant States had a variety of
have employer-based supplemental bene-
alternatives for testing the cost-effectiveness
fits. These supplemental benefits can over-
of Medicaid recipients into coordinated care
lap with HMO-based benefits under Medi-
plans.
care coverage. Moreover, HMOs cannot
offer cash rebates to seniors because they
By 1991, nearly two and one-half million
are prohibited from doing SO by anti-kick-
Medicaid recipients across 28 States received
back provisions. Nor can they lower Part
care under coordinated care arrangements
B premiums.
(Hadley and Langwell, 1991; Wilensky and
Rossiter, 1991). Nevertheless, these gains in
A third problem is that HMOs compete
enrollment still account for less than 10
with a large, government program that
percent of Medicaid recipients nationally.
has near monopsony power in most mar-
ket areas. Medicare purchases FFS care
Increasing Incentives
for most of its beneficiaries and obtains
deep price discounts due to its large mar-
The President's reform proposal emphasizes
ket share. These price discounts may over-
greater use of coordinated care arrangements
whelm potential savings that HMOs can
through increased enrollment in the private
obtain from discounts and better control
sector and through public programs.
over utilization.
In the private sector, millions of Americans
A fourth problem has been that HMOs are
eligible for the transferable tax credit (cer-
paid only 95 percent of comparable FFS
tificate) would have the choice of enrolling
costs (because of presumed efficiencies).
in coordinated care plans offered within their
Nevertheless, HMOs face marketing and
State. Because of efficiencies of care provided
enrollment costs unlike government. They
by HMOs and other alternative delivery ar-
further face greater financial risk on aver-
rangements, premiums offered by these plans
age due to full prospectivity, relatively
would be expected to be very competitive
small numbers of enrollees, and an Aver-
relative to traditional fee-for-service plans.
age Annual Per Capita Cost (AAPCC) pay-
From a quality and continuity of care perspec-
ment methodology which currently fails to
tive, plans could provide more primary/preven-
predict resource use and can fluctuate sub-
tive and comprehensive benefits relative to
stantially year-to-year.
fee-for-service plans.
40
The President's Comprehensive Health Reform Program
Medicare and Medicaid.-Through the
A summary of the individual initiatives
public programs, incentives for coordinated
are listed in the table below.
care will be pursued more aggressively. As
Chart 16 demonstrates, the percent of Medi-
Creating New Options.-New options,
care and Medicaid recipients currently enrolled
such as Point of Service (POS) and Employer
POS would be initiated. Under current law,
in coordinated care programs lags significantly
behind private sector enrollment. Medicaid ini-
a beneficiary who wants to receive benefits
tiatives will be encouraged through increased
through an HMO must enroll with that plan.
State flexibility and federal matching rates
Beneficiaries enrolling in HMOs with risk con-
tracts are required to receive all of the Medi-
that are based on a per capita basis-discussed
care covered services through the HMO.
in greater length in section G of this chapter.
Medicare is discussed in more detail here.
In recent years, employers have moved
toward health plans where individuals make
HCFA will initiate a two-pronged approach
a choice at the point of service of whether
because the only coordinated care alternative
to receive care through the plan's network
currently is the HMO option. Medicare will:
of providers or outside that network. These
create new options, as alternatives to the
plans have been popular with employees
most structured form of coordinated care
and have achieved the desired results of
(HMOs), that would provide beneficiaries
moving a significant percentage of services
with greater provider choice while intro-
into the preferred provider network.
ducing them to the benefits of coordinated
Under POS, HCFA would enter into multi-
care; and
year contracts with POS contractors to create
take steps to strengthen the existing HMO
comprehensive preferred provider networks
option.
(primary care physicians, specialists, hospitals,
labs, etc.) for beneficiaries not enrolled in
Chart 16. PUBLIC PROGRAMS LAG IN COORDINATED CARE
PERCENT ENROLLED IN
COORDINATED CARE
35
30
27
25
20
15
11
10
3
5
0
MEDICARE
MEDICAID
MEDIUM AND LARGE
EMPLOYERS
Making the System More Cost-Effective
41
Table 5-2. Summary of Medicare Corodinated Care Initiatives
General Approach
Initiative
Features/Comments
Create New Options
Point-of-Service
multi-year contracts
preferred provider networks
negotiated discounts
Employer
union/employer-sponsored plan
Point-of-service
provide medical review/utilization review
coordination of services/benefits
Case Management
high cost/chronic cases
voluntary
plan of care
medical/utilization review
Strengthen Risk-Based
100 Percent AAPCC
2 options:
Program.
(1) increase AAPCC payment
(2) outlier payments/beneficiary rebates
Reform AAPCC Methodology
(1) use USPCC to update rates in high penetration
areas
(2) experiment with competitive bidding approaches
Increased Flexibility
(1) large group contracts
(2) multi-year contracts
(3) continuous open enrollment
(4) comparative information materials
Refine Current AAPCC
Methodology
(1) working aged adjustor
(2) health status adjustor
Reform Cost Contract Options
advantage: introduces beneficiaries to plan option
disadvantages:
poor incentives for efficiency
would over time phase-out
Strengthen Oversight
expand sanction authority for:
(1) prohibited marketing practices
(2) illegal marketing material
(3) non-compliance with quality review
risk plans. POS contractors would negotiate
ing coordinated care program. The President's
discounts for combined Part A and Part
plan will initiate several actions that will in-
B payments for high cost/high volume surgical
crease investment in the current program.
procedures. They would also negotiate other
discounts from providers and suppliers. POS
For example, one important approach will
physicians would have incentives to make
increase payments to HMOs with risk con-
referrals only within the POS network.
tracts. This could either be done by (i)
directly increasing payments from 95 to 100
For employer POS, HCFA would contract
percent of the AAPCC or by (ii) indirectly
with employer or union-sponsored plans to
increasing payments to 100 percent through
provide medical review/utilization review (MR/
a combination of payments through an outlier
UR) for Medicare covered services for retirees.
pool and provision of beneficiary rebates.
This would enable employers and joint union/
management Taft-Hartley trusts to coordinate
Under the first option, the additional 5
benefits to retirees through the same adminis-
percent AAPCC payment could encourage
trative structure used to coordinate care for
entry into the Medicare market of HMOs
active employees and/or under-65 retirees.
that currently are not participating. Existing
plans could use the additional 5 percent
Strengthening Existing Risk-Based Pro-
to improve their competitive edge against
gram.-For the longer run, the more signifi-
Medigap plans by offering additional benefits
cant initiative will be to strengthen the exist-
or providing rebates to beneficiaries.
42
The President's Comprehensive Health Reform Program
Under the second option, Medicare would
percent enrollment the AAPCC actually de-
make additional payments to HMOs through
creased over the past three years.
an outlier pool for a portion of the costs
Several options are available such as (i)
of high cost cases above a predetermined
recomputing the rates for high penetration
threshold. For example, if Medicare paid
areas based on the growth in the USPCC
for 60 percent of the costs for cases that
rather than changes in the geographic factor,
exceeded $61,000 in 1993, payments to HMOs
and (ii) experimenting with competitive bid-
would increase on average by 2.5 percent.
ding to establish payment rates.
In addition to outlier payments, Medicare
Several other initiatives to strengthen the
could provide rebates to beneficiaries enrolled
current risk-based program are not detailed
in HMOs as a concrete sign of the support
here but are summarized in the table above.
of the risk contract program. The rebate
could equal 30 percent of the Part B premium.
Anti-Coordinated Care Laws
A second general approach to strengthen
Currently, many State-based laws and regu-
the current program will be through reform
lations discourage greater use of coordinated
of the current AAPCC payment methodology.
care arrangements. Examples of these barriers
Although the AAPCC methodology is accurate
include restrictions on reimbursement rates,
in predicting the costs for an HMO's total
restrictions on selective contracting for provid-
enrollment, its predictive power in regard
ers and services, restrictions against certain
to individual enrollees is extremely low.
financial incentives arrangements, and utiliza-
tion review activity. The President's plan
Even though enrollment in risk plans as
would protect health plans from anti-coordi-
a percent of total Medicare enrollment is
nated care laws and regulations.
low, in some counties enrollment is greater
than 25 percent. Over the past few years
Second, federal waivers are currently ap-
the increases in the AAPCCs for these counties
plied to demonstrating and evaluating new
coordinated care approaches, in effect des-
has lagged behind the national average
in-
ignating them as exceptions to mainstream
crease (USPCC). For example, while the na-
health care policies and practices. Under
tional average increase in rates for the past
the President's Plan, these waivers of excep-
three years was 22.6 percent, in one county
tion would be "flipped." States would have
with 34 percent enrollment the increase was
to apply for exceptions to coordinated care
15.5 percent. In another county with
27
policies instead.
C. Providing Comparative Value Information for Health
Purchasing
Background
People now routinely make many decisions
about insurance coverage and medical care.
Providing useful information for purchasing
Strengthening competition through the tax
health care is a critical element for a pro-
credit and through health market reforms
competition health reform strategy. Informed
will encourage more direct comparisons with
consumer choices should guide the delivery
costs and outcomes-that is, assessing the
of medical care. In a market of coordinated
value of their health care dollar.
care organizations, consumer choice could be
exercised through selection of a health plan
Currently, meaningful information about
in which to enroll. With traditional fee-
comparative costs and outcomes is not rou-
for-service coverage, consumer choice would
tinely available to consumers. Consequently,
be exercised through decisions about providers
consumers are unable to assess the value
and procedures.
of their health care dollars by making compari-
sons of costs and outcomes across health
Making the System More Cost-Effective
43
care providers and health plans. This lack
ployee Health Benefits Plan (FEHB) makes
of consumer information has potentially harm-
consumer choice relatively easy, and this
ful effects on consumers and the Nation.
is something of a model for improved consumer
Anecdotal information is unreliable.
involvement. Since 1979, Washington Consum-
As a result, consumers and purchasers
ers' Checkbook has prepared an annual guide
of care often do not know what they are
to federal plans in the Washington, D.C.
buying. In the absence of information, consum-
area. The guide compares plan benefits, special
ers are apt to rely on higher price or
features such as dental coverage or customer
more intensive service delivery as proxies
service, eligibility, premiums, and out-of-pocket
costs, and draws conclusions on values. The
for quality. Thus, limited consumer informa-
results of the comparisons have influenced
tion can insulate providers from competition
and can lead to excessive prices and inefficient
market share during each federal employee
delivery of care.
open season. For example, during the 1980
enrollment period, a plan that was ranked
Wider availability of cost and outcomes
highly in terms of benefits relative to costs
information will strengthen incentives for effi-
increased its Washington D.C. enrollment
ciency, especially when coupled with changes
by 120 percent, compared with less than
in government subsidies for insurance. Health
a 20 percent increase nationally.
plans that demonstrate equivalent (or superior
outcomes) at lower premium cost would gain
More sophisticated prototype systems for
a competitive edge. Similarly, people want
comparing costs and quality are available
to know, for example, if Hospital A provides
as well. The Pennsylvania Health Care Cost
better care than Hospital B and would choose
Containment Council publishes information
accordingly, if they could. Because consumers
about what hospitals charge and comparisons
tend to mistake higher cost or more intensive
of mortality rates for every hospital in the
State.
service delivery as proxies for better quality,
service utilization-and costs-could be cut
This information allows consumers to learn,
appreciably with no deterioration if consumer
for example, that two hospitals within 40
choices were guided by valid cost in quality
miles of each another charge very different
and quality information.
prices for the same procedure. For coronary
Through concerted public/private sector ac-
artery bypass surgery, one hospital charged
$17,490 while the other charged $28,059
tion, it should be possible to implement
in 1989.
information systems that would enable health
care purchasers to make meaningful compari-
The Council also calculates actual mortality
sons of cost and quality between health
rates and projected mortality rates following
plans and health care providers. The long-
hospital stays for hospitals that take into
run potential to control costs while improving
account age and sickness when admitted,
quality is substantial. Even a minority of
two of the many variables that determine
well-informed consumers can influence other
how sick a population a hospital treats.
consumers and the direction of the market
This data shows that for the same two
(Pauly, 1978). With better information, health
hospitals, the lower cost hospital had a
plans that manage cost-increasing technologies
lower mortality rate than expected and the
could pass the savings on to purchasers.
higher cost hospital had a higher than ex-
Cost-increasing technologies would be utilized
pected mortality rate.
only if consumers believe that the resulting
improvement in health outweighs the added
To encourage greater employee support for
selective contracting and to provide hospitals
cost.
with stronger incentives to improve quality
Comparative value information can change
while controlling costs, a group of major
consumer decision making. For example,
employers in Cleveland, Ohio, is sponsoring
Washington Consumers' Checkbook, a maga-
the Cleveland Health Quality Choice (CHQC)
zine published by a nonprofit organization,
project. CHQC is developing a state-of-the-
illustrates that consumer's use of information
art system for measuring and comparing
changes market behavior. The Federal Em-
the quality of care in Cleveland-area hospitals.
44
The President's Comprehensive Health Reform Program
The system will include a survey to measure
delegate this responsibility to private sector
perceptions of quality from the patient's stand-
groups. States could give preference to local
point and a system for measuring quality
health care purchasing coalitions, such as
from a clinical standpoint. Patient outcomes
the Cleveland Quality Health Choice coalition.
(e.g., death and complications) in hospital
intensive care units and for selected medical
Within one year of enactment, States would
and surgical admissions will be monitored
develop and make broadly available informa-
with detailed clinical adjustments to account
tion regarding average prices and costs for
for differences in severity of illness.
common health care services. Information
could include mean and median prices and
CHQC hopes to be producing quality reports
a measure of the variability across and
on a routine basis starting in 1992. CHQC
within market areas. This information could
expects that participating employers would
be especially useful for large purchasers of
use this information to guide their health
care for preferred provider arrangements and
purchasing decisions. Employers would share
negotiated discounts. Sufficiently discrete defi-
this information with their employees to
encourage use of the selected providers. While
nitions (e.g., utilizing standardized profes-
it will be several years before the full impact
sional codes like CPT-4 codes) of a broad
of the program can be assessed, and the
range of representative services could be
Cleveland group must overcome many hurdles,
developed to permit meaningful comparisons.
use of outcomes data to compare quality
Within five years, States would develop
is growing in its popularity and its impact.
systems to provide comparative quality and
Other systems for measuring outcomes have
outcomes data for health care purchasers
been developed as well. A consortium of
and for consumers choosing health plans
HMOs is working with leading researchers
and hospitals.
from RAND corporation to develop indicators
The Federal Government would implement
of quality that could guide consumers in
these information systems directly in the
selecting between competing HMOs. The
case of inaction by the State and would
MedisGroups system is routinely used
by
charge a user fee to defray the cost.
over 500 hospitals nationwide to monitor
quality. And, the Health Care Financing
The Secretary of Health and Human Serv-
Administration will begin to implement the
ices (HHS) would develop prototype systems,
Uniform Clinical Data Set (UCDS) system
such as Medicare's Uniform Clinical Data
to monitor the quality of hospital care provided
Set (UCDS), to facilitate data gathering and
to Medicare patients in the Nation's hospitals.
comparisons of outcomes. There would be
an emphasis on experimentation to test dif-
Proposal
ferent methods for gathering and analyzing
Under the Administration's proposal, each
outcomes and quality information. HHS would
State would implement programs to help
fund evaluations to determine the most cost
make comparative value information more
effective methods (e.g., those methods that
readily available for health care purchasers.
yield the most useful information at lowest
This initiative would be included as part
cost).
of the health insurance market reform pro-
When appropriate, national standards could
posal.
be established to facilitate uniform data gath-
States could develop information systems
ering that would facilitate analysis and com-
directly, as Pennsylvania has done, or could
parisons across the Nation.
Making the System More Cost-Effective
45
D. Encouraging Personal Responsibility and Prevention
Personal Responsibility
Public and private efforts to promote healthy
Reform of the U.S. health care system
behavior have already achieved dramatic re-
can neither be fully effective nor complete
sults:
until there are basic changes in how Ameri-
Smoking.-The Nation has witnessed a dra-
cans view responsibility for their own health.
matic change in behavior as the incidence
Individuals must choose, for example, to im-
of one of the leading contributors to pre-
prove eating habits and increase exercise;
ventable deaths, smoking, has declined
to reduce consumption of alcohol and tobacco;
from 40 percent in adults in 1965 to 28
to end substance abuse; to avoid the high
percent in 1990. This change was brought
risk behavior that spreads HIV; to seek
about through a combination of actions by
the necessary medical examinations and vac-
individuals, private industry, health pro-
cinations; to seek early prenatal care; to
viders, and all levels of government.
wear seat belts and take other necessary
precautions; and to learn to resolve conflicts
Traffic Accidents.-Increased use of safety
without resort to violence. Personal decisions
belts, declines in drunk driving, and better
about how to live may have the most impor-
vehicle crashworthiness have cut the traf-
tant effect on the Nation's health and the
fic fatality rate by 50 percent since 1973.
cost of caring.
If the traffic fatality rate had remained
About half of the 2.2 million deaths which
at the 1973 level, an additional 40,000
occur in the U.S. every year are potentially
lives would have been lost in 1991 alone.
preventable, as are many of the illnesses
One of the most important factors in re-
that afflict millions of Americans. Many of
ducing the traffic fatality rate has been
the "risk factors" for these diseases involve
the growing use of seat belts and child
freely-made individual choices. Better control
safety seats. As shown in the accompany-
of fewer than 10 factors-such as diet, pre-
ing chart, simply accepting the personal
natal care, exercise, the use of tobacco, alcohol
responsibility for using these safety de-
and illegal drugs, and the use of seat belts-
could prevent between 40 and 70 percent
vices has saved many lives. As people in-
of all premature deaths, a third of all cases
crease their use of seat belts, child safety
of acute disability, and two-thirds of all
seats, and air bags, the Nation will see
cases of chronic disability. Since the preserva-
more lives saved every year. Air bags will
tion of individual choice is a cornerstone
be installed in an estimated 90 percent
of American democracy, disease and injury
of all new cars sold in the United States
prevention must become individual as well
by 1995.
as national priorities. In this, the Nation
Heart Disease and Stroke.-During the
must encourage a culture of character, which
1980s, death rates declined for two of the
actively promotes responsible behavior and
leading causes of death among Americans:
the adoption of lifestyles that are conducive
heart disease and stroke. Much of this
to good health.
progress is attributable to changes in be-
Benefits of Taking Responsibility for
havior. The more than 40 percent decline
Health.-Personal behavior can have a dra-
in heart disease mortality since 1970 re-
matic effect on the quality and length of life.
flects dramatic increases in high blood
Regardless of access and costs, families and
pressure detection and control, the decline
individuals are and will remain our first line
in cigarette smoking, and increasing
of defense in preventing illness. Indeed, any
awareness of the role of blood cholesterol
strategy for constraining costs must include a
and dietary fat. Stroke death rates, which
plan to reduce the need for medical interven-
have dropped by more than 50 percent in
tion. The average American could live almost
the same period, also reflect gains in hy-
four years longer if currently available preven-
pertension control and reductions in smok-
tive measures were followed fully.
ing.
46
The President's Comprehensive Health Reform Program
Investing in Prevention
health care spending, yet there is mounting
Prevention is an important element of an
evidence that prevention is cost-effective.
increased emphasis on personal responsibility.
Investing in Our Economic Future.-Dis-
Preventive practices are, by and large, simple,
ease prevention presents the opportunity to
inexpensive and effective. Prevention makes
dramatically cut health care costs, prevent the
sense for a number of reasons. Many preven-
premature onset of disease and disability, and
tive interventions are proven to be cost
help all Americans achieve healthier, more
effective. And prevention is a good investment
productive lives. Although the emphasis on
for the market place, resulting in fewer
prevention has led to overall health improve-
productive days lost and in reduced morbidity
ments, the U.S. is still burdened by prevent-
and cost to the health care system.
able illness, injury, and disability. Injury now
Costs of Preventable Health Problems.-
costs the U.S. well over $100 billion annually;
There is ample research estimating the costs
cancer, over $70 billion; and cardiovascular
of illness and disability, in terms of diminished
disease, $135 billion.
longevity, productivity foregone, and money
Directions for Prevention.-In recognition
spent treating illness and disability. These
of the clear advantages of aggressive preven-
costs are particularly sobering when the illness
tion activities, the government is supporting
or condition could have been prevented.
and enhancing prevention programs with
Prevention is Cost Effective.-In 1987,
known benefit, and, through demonstrations,
primary prevention and health promotion ac-
testing interventions for their efficacy and effi-
counted for less than 5 percent of overall
ciency. The Federal Government spent over $8
Table 5-3. Preventable Health Costs
Health Problem
Years of Life
Costs (in millions of
Lost
dollars)
Cardiovascular Disease
15,000,000
135,000 (1985 $)
Alcohol Abuse
3,140,178
7,672 (1980 $)
Smoking
534,870
4,509 (1980 $)
High Blood Pressure
319,499
6,289 (1980 $)
Cholesterol
159,333
7,655 (1980 $)
Glucose Intolerance (Diabetes Mellitus)
133,627
5,239 (1980 $)
Cancer
18,000,000
72,000 (1985 $)
Injury
2,300,000
180,000 (1988 $)
Table 5-4. Return on Investments in Prevention
Savings per
Total Savings per
Preventive Activity
Dollar Spent
Year (in millions of
dollars)
Immunization:
Measles, Mumps, Rubella
14.40
0
Polio
10.00
400 (1990 $)
Hib
-
-
Prenatal Care
3.40
-
Universal Breast Cancer Screening (30 percent women age 65-74)
-
3,538 (2020 $)
Hypertension Screening and Effective Followup
80,000 (1986 $)
Note: "_" means not available.
Making the System More Cost-Effective
47
Table 5-5. Social Costs of Preventable Risks
Lives Lost
Disease or Condition
Preventable Risk Factors
(1988)
Heart Disease
Tobacco use, obesity, elevated blood pressure, elevated
765,156
cholesterol, sedentary lifestyle.
Cancer
Tobacco use, improper diet, alcohol abuse, environmental
485,048
exposures.
Cerebrovascular Disease
Tobacco use, elevated blood pressure, elevated choles-
150,517
terol, sedentary lifestyle.
Unintentional Injuries
Safety belt nonuse, alcohol abuse, home hazards
97,100
Chronic Lung Disease
Tobacco use, environmental exposures
82,853
billion for prevention in fiscal year 1992. This
Helping Vulnerable Populations
will rise to nearly $9 billion in fiscal year 1993.
Table 5-6 describes the substantial funding
These programs fall into three basic categories:
increases proposed in the President's fiscal
(i) measures to help vulnerable populations at
year 1993 budget for prevention programs.
high risk of preventable disease, (ii) measures
to make primary care more readily available
Childhood Immunizations.-Childhood im-
to disadvantaged or geographically isolated
munizations are among the most cost-ef-
Americans, and (iii) measures to encourage
fective prevention activities. A $1 invest-
healthier lifestyles.
ment in Measles-Mumps-Rubella (MMR)
vaccine may return $14 in averted medical
care costs. Other routinely administered
Table 5-6. The Budget Provides Substantial Increases for Programs
Focused on Prevention and the Next Generation
(Obligations in millions of dollars)
Percent
Percent
1989
1992
1993
Initiative
Change:
Change:
Actual
Enacted
Proposed
1992 to
1989 to
1993
1993
CDC Childhood Immunization
141
297
349
+18%
+148%
Infant Mortality Reduction
5,681
7,950
9,365
+18%
+65%
(Healthy Start)
-
64
143
+123%
N/A
Women, Infants, and Children Nutrition Assist-
ance (WIC)
1,929
2,600
2,840
+9%
+47%
Head Start
1,235
2,202
2,802
+27%
+127%
Access to Primary Health Care Services
4,184
6,334
7,643
+21%
+83%
(Community/Migrant Health Centers)
482
594
684
+15%
+42%
(National Health Service Corps)
48
100
120
+19%
+150%
Nutrition Education
138
152
178
+17%
+23%
Breast and Cervical Cancer Mortality Prevention
-
416
515
+24%
N/A
Smoking Cessation
78
106
111
+5%
+42%
Physical Fitness and Diet
68
100
102
+2%
+50%
Injury Prevention
1,482
1,862
2,026
+9%
+37%
Family Planning
333
461
498
+8%
+50%
CDC Lead Poisoning Prevention
-
21
40
+90%
N/A
Tuberculosis Control
21
32
66
+106%
+214%
48
The President's Comprehensive Health Reform Program
vaccines such as Diphtheria-Tetanus-Per-
Food Program for Women, Infants, and
tussis (DTP) and Oral Polio are reported
Children (WIC) found that for each dollar
to have similarly high rates of return.
spent on nutritionally at-risk pregnant
Through coordinated efforts at all levels
women and infants, Medicaid spending fell
of government and the private sector, the
by between $1.92 and $4.21 during the
Nation has achieved a 98 percent immuni-
first 60 days after birth.
zation rate for children entering school.
Head Start/Early Childhood Develop-
The President's initiative will increase fed-
ment.-Head Start provides a range of
eral support to target efforts toward rais-
comprehensive early childhood develop-
ing immunization levels in inner cities and
ment services, including education, nutri-
other areas where health returns on these
tion, health and other social services. Chil-
activities are certain to be high.
dren who enroll in Head Start experience
Healthy Start/Infant Mortality Preven-
immediate gains in cognitive growth, so-
tion.-The Nation's infant mortality rate
cial development, and health status. For
continues to decline, having reached its
every dollar invested, Head Start may
lowest level ever (9.1 deaths per 1,000 live
eventually save $6 in averted costs associ-
births) in 1990. But while the overall in-
ated with special education, crime, and in-
fant mortality rate continues to decline,
come support.
mortality for African-American infants re-
The President's initiative contains the
mains twice that for white infants-dem-
largest single-year funding increase in the
onstrating the need for more intensely tar-
history of Head Start, proposing an addi-
geted assistance.
tional $600 million for a total of $2.8 bil-
Additional investment in prenatal care
lion. With the Administration's proposal,
and nutritional assistance targeted to low-
Head Start will serve an estimated
income women also continues to yield high
157,206 more children in 1993. This un-
returns. Overall, nearly 25 percent of all
precedented increase in Head Start sup-
women and nearly 40 percent of African-
ports participation of all eligible and inter-
American and Hispanic women do not
ested disadvantaged children for one year,
begin prenatal care during their first tri-
complementing the 36 States (plus the
mester of pregnancy, the most crucial time
District of Columbia) which also support
for prenatal care. Investment in prenatal
pre-school programs.
care can yield significant returns: each
The President's initiative also proposes
dollar invested in prenatal care for high-
$850 million for the child care and devel-
risk women might save $3 in treatment
opment block grant, which was part of the
costs.
child care legislation that the President
The President's initiative proposes over
proposed and subsequently signed in 1990.
$9.3 billion for all federal activities to re-
Low-income families receive vouchers they
duce infant mortality, including $143 mil-
can use with the child care provider of
lion for Healthy Start, an important pro-
their choice; block grant funds provide ad-
gram that targets federal resources to 15
ditional early childhood development serv-
areas with exceptionally high rates of in-
ices for pre-school age children.
fant mortality.
The proposal further includes $6 million
Women, Infants, and Children Nutrition
for a new initiative in HHS to use local
Assistance (WIC).-The proposal continues
schools as a way to bring primary health
the President's strong commitment to WIC
care services to children from low-income
with the largest one-year increase ever
families who might not already have ac-
proposed for the program, $240 million (9
cess to these services. These "Ready to
percent), for a total of $2.84 billion-suffi-
Learn" grants will enable community
cient funds for full participation by eligible
health centers and local schools in selected
pregnant women and infants. A recent
low-income communities to provide health
evaluation of the Special Supplemental
outreach services through local schools.
Making the System More Cost-Effective
49
Lead Poisoning Prevention.-Lead poison-
cervical cancer screening, NIH predicts
ing is the most common environmental
that over 45,000 women are expected to
disease of young children, disproportion-
die from these two diseases in 1993. The
ately affecting poor, minority children in
key to successful treatment of breast and
the inner cities. Yet childhood lead poison-
cervical cancer remains early detection.
ing is preventable through detection and
The sooner treatment can begin, the great-
abatement. This initiative includes $40
er the chance of survival.
million to support about 30 Statewide lead
The President's initiative will invest $515
poisoning screening and referral programs.
million for screening through the Medicare
In addition, the Department of Housing
program and through the Public Health
and Urban Development (HUD) will con-
Service. This investment will focus re-
tinue assisting low- and moderate-income
sources on screening low-income, high-risk
private residential property owners abate
women in age groups for which screening
lead-based paint by providing grants to
is recommended.
States and localities. HUD's public hous-
HIV/AIDS Funding.-Under the Presi-
ing modernization program will continue
dent's initiative, total federal HIV/AIDS
lead-based paint testing and abatement
funding increases by 13 percent, to $4.9
activity in public housing. Approximately
billion.
$50 million will be spent on these activi-
ties in 1993.
Tuberculosis Control.-The Nation has
made great strides toward eliminating tu-
Expanding Cost-Effective Primary Care
berculosis (TB). The disease has been cur-
able and preventable for almost four dec-
Access to Primary Health Care/Expanding
ades. The long-term decline in TB morbid-
Community Health Centers.-Comprehen-
ity enjoyed by the United States ended,
sive primary health care services include
however, in 1984.
diagnosis and treatment as well as edu-
cation designed to encourage healthy be-
The President's Plan attacks the recent
havior. Continued investment in improv-
growth of TB levels head on. The initiative
ing access to primary health care is impor-
includes a 106 percent increase over 1992
tant to many communities and can yield
for CDC Tuberculosis Control Grants.
sizable returns. Increased access in low-
Promoting Lifestyle Changes
income communities can improve overall
health status and reduce the use of emer-
Smoking Cessation.-Smoking during
gency services.
pregnancy retards fetal growth, reduces
birthweight, and doubles the risk of hav-
To put primary health care services within
ing a low-birthweight baby. Studies have
the reach of people who do not currently
shown a 25-50 percent higher rate of fetal
have adequate access, the President's 1993
initiative includes an additional $1.3 bil-
and infant deaths among women who
smoke during pregnancy compared with
lion for programs supporting primary and
those who do not. Each dollar invested in
preventive health care.
smoking cessation for pregnant women
The initiative also contains $120 million
may yield as much as $6 in averted costs
for the National Health Service Corps
for neonatal intensive care and extended
(NHSC). This 19 percent increase will en-
care for low-birthweight infants. Beyond
able the NHSC to expand the program and
the damage tobacco use during pregnancy
train additional physicians to provide
may cause, smoking is also a factor in the
health services in low income and under-
deaths of over 400,000 Americans every
served areas, increasing the availability of
single year.
primary case-particularly in low-income
underserved areas.
The President's initiative expands smoking
cessation education activities for specific
Breast and Cervical Cancer.-Despite in-
at-risk populations, including minority and
creasing federal investment in breast and
low-income pregnant women.
50
The President's Comprehensive Health Reform Program
Injury Prevention.-Every one percent in-
Medicaid payments, an increase of 8 per-
crease in seat belt use saves more than
cent.
160 lives per year. If the U.S. were to
Physical Fitness and Diet.-The Presi-
increase the national average of seat belt
use from the 1990 rate of 48 percent to
dent's initiative for 1993 increases funding
the Administration's goal of 70 percent by
for health education, disease prevention,
the end of 1992, 3,800 lives could be saved
and physical fitness activities. It also fo-
annually and 100,000 injuries could be
cuses on bringing health promotion and
prevented-yielding potential economic
disease prevention activities to older
benefits of $2.5 billion.
Americans. The Administration on Aging
will provide more health risk assessments,
The initiative increases funding for injury
nutritional counseling, group exercise pro-
prevention to almost $2 billion, a 9 percent
grams and other health promotion activi-
increase over 1992. These funds will be
ties. These activities can improve the
used primarily within the Department of
health and quality of life of older Ameri-
Transportation (DOT) for aviation, rail,
cans and allow many older people to re-
highway, marine, and pipeline and haz-
ceive these services regularly.
ardous material transportation safety. An
estimated 50,000 lives are lost annually
In summary, to confront the problems of
access to health care and the continued
in incidents in the transportation sector.
The initiative also includes increased em-
escalation in health care costs, efforts are
phasis on reducing drunk driving and in-
underway to address the problems of the
uninsured and the underinsured and to tackle
creasing occupant protection.
the country's growing health care expendi-
Family Planning.-Evidence attributes re-
tures. No matter what path is ultimately
ductions in infant mortality achieved over
chosen, it is clear that prevention will play
the last 20 years in part to effective family
a critical role in the future health of Ameri-
planning. Recognizing the importance of
cans. It is also apparent that prevention
these services, the President's initiative
can only be accomplished in partnership
contains an additional $37 million for
among individuals, the business community,
HHS family planning grants and federal
and government.
E. Malpractice and Antitrust Reform: Changing Incentives
for Provider Behavior
Our legal system distorts health care deliv-
Proposal
ery in America. These distortions derive in
part from perverse incentives that encourage
In May 1991, the President proposed the
malpractice litigation. Unnecessary and costly
"Health Care Liability Reform and Quality
defensive medicine has increased. Fear of
of Care Improvement Act" to address the
antitrust liability has helped produce an
costs of malpractice insurance, the transaction
often inefficient and duplicative distribution
costs of malpractice litigation, and the length
of sophisticated services and equipment. Fi-
of malpractice dispute resolution proceedings,
nally, the quality of health care is diminished
and to reduce the incidence of malpractice
through increasing the quality of care.
by the reluctance of professional review boards
and hospitals to discipline poorly performing
The Administration's reform package in-
physicians because of potential antitrust liabil-
cludes proposals that encourage States to:
ity.
Cap the amount of allowable non-economic
damages. In the 26 States that have lim-
ited total damages, malpractice rates have
declined significantly;
Making the System More Cost-Effective
51
Eliminate joint and several liability for
ever, our malpractice system creates incentives
noneconomic damages;
for physicians to engage in defensive medi-
Eliminate the collateral source rule that
cine-excessive tests, failure to delegate cer-
tain tasks to other qualified professionals,
allows for double recovery;
and in general a more elaborate style of
Require structured payments for mal-
care than is necessary for the provision
practice awards, as opposed to lump sum
of sound medical care.
payments;
In 1989, defensive medicine accounted for
Promote pretrial alternative dispute reso-
an estimated $20.7 billion, 17.6 percent of
lution, including mediation and pretrial
total physician expenditures (Moser and
screening panels, to encourage reasonable
Musacchio, 1991). In addition, of all medical
settlements;
practice growth components, professional li-
ability premiums exhibited the fastest annual
Implement procedures to enhance the
percentage growth between 1982 and 1989-
quality of care.
increasing 15.1 percent annually (AMA Socio-
Additionally, at the Federal level the Admin-
economic Monitoring System, 1982; 1989).
istration proposes to apply these tort reforms
Charts 17 and 18 present increases in profes-
to Federal courts to begin a pilot program
sional liability premiums relative to other
in the Federal Employees Health Benefits
physician practice costs and impact on total
Program that offers alternative dispute resolu-
physician service expenditures over time.
tion; and to improve the quality of medical
Often, unnecessary defensive medicine may
care through enhanced effectiveness research
result from a misperception on the part
and improved peer review.
of providers of the real potential for liability.
The proposed Act is based on three prin-
A recent study found that physicians in
ciples:
New York State tend to overestimate the
risk of being sued by a factor of three
Medical malpractice reform should seek
(Harvard Medical Practice Study, 1990). For
both improved quality of care for patients
that reason, efforts should be made to commu-
and lower litigation costs.
nicate the true level of liability risk to
Legal reforms should reduce the incentives
providers.
for physicians to practice unnecessary de-
Not all unnecessary defensive medicine is
fensive medicine or to abandon practice in
attributable to fear of liability. In some
inner city and rural areas.
cases, as in fee-for-service medicine, health
Incentives for states to act are preferable
care providers may have a strong economic
to Federal preemption of current state
incentive to engage in such activity. The
law. Federal preemption should be used
fear of liability, however, does result in
only selectively and narrowly.
an increase in the degree and kind of diag-
nostic testing, the reluctance to delegate
The elements outlined below supplement
certain basic functions, and the abandonment
this proposal. They address three areas: (i)
of care for some high risk patients or in
the delay associated with malpractice litiga-
high risk areas of treatment such as obstetrics.
tion, (ii) the increasingly common practice
Based on a 1984 study, 41.8 percent of
of engaging in unnecessary defensive medicine,
physicians made at least one change in
and (iii) the effects of our antitrust laws
their practice patterns in response to risk
on costs and the quality of care activities.
of malpractice liability. The average physician
increased record keeping costs by 2.9 percent,
Medical Malpractice Reforms
prescribed 3.2 percent more tests and treat-
The costs associated with malpractice litiga-
ment procedures, increased follow-up visits
tion have contributed to the rapid growth
by 2.6 percent, and spent 2.4 percent more
of health care spending. These costs include
time with patients (Reynolds et al., 1987).
the direct costs of insurance, litigation, and
In addition to the monetary costs associated
settlements. Perhaps most importantly, how-
with medical malpractice litigation, there are
52
The President's Comprehensive Health Reform Program
Chart 17. PROFESSIONAL LIABILITY COSTS AS A PORTION OF
TOTAL PHYSICIAN SERVICE EXPENDITURES
$ BILLIONS
140
120
WITH PROFESSIONAL
LIABILITY COSTS
100
80
WITHOUT PROFESSIONAL
60
LIABILITY COSTS
40
1982
1983
1984
1985
1986
1987
1988
1989
SOURCE: Expenditures including professional liability costs, HCFA; expenditures excluding professional liability costs, AMA
Chart 18. GROWTH IN MEDICAL PRACTICE COST COMPONENTS
(AVERAGE ANNUAL PERCENTAGE CHANGE, 1982 TO 1989)
PERCENTAGE CHANGE
20
15.1
15
12.2
9.4
10
9.2
8.3
7.2
5.9
5
0
PROFESSIONAL
MEDICAL
OFFICE
MISCELLANEOUS
NON-
PHYSICIAN
MEDICAL
LIABILITY
SUPPLIES
EXPENSES
PHYSICIAN
PAYROLL
EQUIPMENT
PREMIUMS
PAYROLL
SOURCE: AMA Socioeconomic Monitoring System, 1983 and 1989 core surveys
Making the System More Cost-Effective
53
other costs that cannot be quantified. Both
the dispute from a traditional trial setting
providers and patients suffer from the pro-
altogether.
tracted process of litigation. Patients who
Encouraging the Use of ADR Through Party
ultimately gain a recovery must wait years
Choice. The Administration supports amending
to recover the damages due them. Physicians
state and Federal rules of civil procedure
are often as troubled by the process of
to permit either party to litigation to make
litigation as its results.
an offer to use ADR. If the party refusing
Collectively, these monetary and emotional
to engage in ADR loses at trial, that party
costs erode one of the most important aspects
must pay the others attorney's fees. This
of health care, the doctor-patient relation-
change in the rules will provide a strong
ship. What should be a cooperative relation-
incentive for parties to consider seriously
ship marked by trust between the doctor
the desire of the other party to resolve
and patient is sometimes wary and somewhat
the dispute without the necessity of a full
adversarial. Reduced communication may un-
trial.
dercut the patient's confidence in the physician
State Contract Law. The Administration
and breed passivity in a patient, leading
seeks to encourage agreements between pa-
to a decrease in patient information about
tients and providers, made prior to the deliv-
treatment.
ery of health care services, to use out-
Reform of the medical malpractice system
of-court dispute resolution mechanisms if a
offers the prospect of not only reducing
dispute arises. It is unclear, however, whether
monetary costs but, as importantly, helping
such contracts are valid in all states. The
to restore patient confidence in the medical
President's plan proposes to permit contracts
system and provider confidence in our legal
between patients and providers that require
system.
non-binding arbitration before a lawsuit can
be filed notwithstanding conflicting state law.
Beyond the provisions in the Health Care
Liability Reform and Quality of Care Improve-
Promising Areas for Innovation. Although
ment Act the Administration endorses the
the proposals discussed below address the
following approaches to reduce the delay
issue of delay and the merit of increasing
of malpractice dispute resolution, reduce the
the expertise of those who decide malpractice
amount of unnecessary defensive medicine,
cases, each has its shortcomings and critics.
and clarify the application of antitrust laws
The Administration believes, however, that
in the provision of health care:
it is important that these issues become
an integral part of the debate on reforming
Alternative Dispute Resolution (ADR).-
our malpractice system. The Administration
The desire of physicians to avoid malpractice
will cooperate with Congress, state legisla-
litigation extends beyond the issue of liability
tures, medical associations, and others to
and the perception that outcomes are unpre-
explore whether such proposals can remedy
dictable. Removing malpractice suits from the
the problems of the current system.
adversarial forum of the courtroom offers at
least three benefits. It will lessen the sense
Mandatory ADR for Federal Beneficiaries.
of confrontation of the dispute. In many, if
Several malpractice reform proposals
not most, cases it will speed resolution of the
would make the receipt of Federal health
dispute. And, it will vest resolution of often
care benefits implied consent to enter into
complex medical issues in a person or persons
ADR if a dispute arises out of the health
who will likely have more experience with
care provided. The added cost of health
medical issues than the typical member of a
care resulting from the shortcomings of
jury.
our malpractice litigation system is di-
rectly reflected in the cost of these pro-
The Administration supports two approaches
grams to the treasury. The Federal gov-
to persuade or require parties to use ADR
ernment thus has a legitimate interest in
and seeks to work with Congress to consider
finding ways, such as ADR, to reduce
two other approaches that would remove
those costs.
54
The President's Comprehensive Health Reform Program
Mandatory ADR for All Claimants.
To
cumstances, and what use and legal force,
avoid the judgment of lay juries and the
if any, should be given to such guidelines
delay inherent in our current civil justice
or standards.
system, some have called for taking medi-
cal malpractice cases out of the courts en-
The Omnibus Budget Reconciliation Act
tirely. The American Medical Association,
of 1989, Public Law 101-239, established
for example, has proposed that every state
the Agency for Health Care Policy and Re-
search within the Public Health Service to
create an administrative tribunal to hear
medical malpractice claims with courts
promulgate guidelines and standards of quality
permitted only appellate review. Although
and other "performance measures." No provi-
the theoretical benefits of such a system
sion was made for giving any legal effect
are obvious, serious questions of con-
to such standards in litigation, however.
stitutionality, practicality, and increasing
The Secretary of Health and Human Serv-
bureaucracy must be resolved before any
ices will intensify his efforts to develop these
large-scale proposal moves forward.
guidelines and standards. The Secretary will
Offers of Settlement.-The Administration
also consult with experts in the field, including
also proposes to permit either party to a mal-
providers, medical associations, legal scholars
practice action to make a formal offer of settle-
and others, to study the feasibility and desir-
ment. This provision has been discussed for
ability of giving some legal force to such
application in other areas of civil justice in
guidelines. The Secretary's study should in-
need of reform, such as product liability. In
clude a discussion of the process for forming
effect, the provision makes Rule 68 of the
such guidelines or standards, and the degree
Rules of Civil Procedure available to plaintiffs
to which the guidelines would have to be
as well as defendants.
specific and/or take into account variations
in practice geographically, because of re-
Standards of Care.-Medical associations,
sources, or the age and condition of the
authors, and commentators have attempted to
patient.
provide guidance to physicians on appropriate
standards of medical care. It is the tort sys-
The Administration believes that practice
tem, however, through the judgments of lay
guidelines and standards offer great promise
juries, that too often defines the standards of
in reducing the level of unnecessary defensive
care physicians must meet. The precedential
medicine without compromising the quality
value of the jury's determination and the un-
of medical care. Physicians knowledgeable
certainty generated in gray areas, can effect
about the practice guidelines and standards
profoundly provider behavior.
can look to them in determining the adequacy
of care provided to their patients.
Variation is inherent in case-by-case deter-
minations by different juries. This translates
Guidelines and standards of care could
into a perceived lack of predictability in
offer the added benefit of enhancing the
our medical malpractice litigation system.
value of alternative dispute mechanisms. As
This uncertainty and the role of lay persons
alternative dispute resolution is increasingly
in determining what is adequate medical
used, practice guidelines and standards of
care has encouraged overly cautious behavior
care will heighten confidence that the mediator
and some resentment of the litigation system
or arbitrator will reflect accurately the behav-
in the medical community.
ior of a jury if the case proceeds to trial.
Thus, parties will be better positioned to
In recent years, there has been increased
judge the consequences of rejecting the pro-
interest in the development of guidelines
posed determination.
or standards of care as references for physi-
cians by medical groups, insurers, and legisla-
Antitrust Law
tors. The debate has centered on who would
develop such standards, the degree of specific-
In addition to the issues of medical liability
ity required to make the standards useful,
and dispute resolution, antitrust issues bring
the degree of flexibility necessary to reflect
law and medicine together. For instance,
the individuality of patients and cir-
professional peer review has always reflected
Making the System More Cost-Effective
55
a tension between the necessity to weed
cian should be limited, denied, or revoked. Pre-
out those who do not meet the standards
sumably, the goal is to ensure an appropriate
of the profession and the possibility that
level of quality of care. Often, however, the
such review could be used unfairly and
physician whose privileges are curtailed will
illegally to limit competition in the profession.
sue the reviewing physicians and witnesses on
With the emergence of new methods of health
the grounds that the review is really a veiled
care delivery, like HMOs and PPOs, and
attempt to limit competition.
increasingly sophisticated and costly tech-
Some commentators suggest that the cre-
nology, confusion about the proper application
ation of certain safe harbors for actions
of the antitrust laws in the health care
limiting physician privileges can avoid litiga-
field has grown.
tion costs and the chilling effect of potential
The Administration proposes a series of
litigation without unduly limiting competition.
steps to assure that the new emphasis on
The Administration does not believe changes
quality of care is not undermined by concerns
in substantive law are necessary. Rather,
of unwarranted allegations of collusion, that
the Department of Justice will provide en-
concerns of antitrust liability do not chill
hanced guidance for state peer review boards
the evolution of a more organized and efficient
and hospitals with respect to actions to
health care delivery system, and that the
deny, revoke, or suspend the license of privi-
cost of health care is not raised unnecessarily
leges of any physician.
because of duplication of costly technology
PPOs, HMOs and Other Pooling Ar-
and services.
rangements of Providers.-The emergence of
The President's initiative includes legislation
managed care is creating new issues in health
to address the issue of the unnecessary
care. For instance, if physicians in an area
duplication of technology and the provision
band together to form a PPO, thus fostering
of guidance by the Federal government on
price reductions and managed care, it may be
the issue of the application of the Federal
alleged that they are nonetheless reducing the
antitrust laws to peer review and managed
number of competitors for physician services
care issues.
in the marketplace. At the same time, diligent
enforcement of the antitrust laws is necessary
Medical Technology.-Much of the in-
to prevent price fixing and illegal tie-ins in
creased cost of health care has resulted from
the provision of health care. Reducing the fear
the high costs associated with advanced tech-
of liability for certain beneficial activities while
nology. Often expensive equipment is dupli-
maintaining the deterrent effect of the anti-
cated by competing health care organizations
trust laws for traditional anticompetitive en-
because of concern over the application of the
deavors is the challenge for antitrust enforce-
antitrust laws to the sharing of equipment and
ment agencies, particularly the Department of
services. As a result, the acquisition of expen-
Justice and the Federal Trade Commission.
sive technology may far exceed what is needed.
To reduce the costs of high technology equip-
The Administration will clarify the antitrust
ment and services, the Administration will
standards that apply to provider pooling
again urge Congress to pass the joint produc-
arrangements such as PPOs and HMOs.
tion venture legislation, S. 1163, transmitted
Additionally, the Department of Justice will
by the Departments of Justice and Commerce
increase its enforcement efforts against those
on April 29, 1991.
in the health care industry who boycott
such provider organizations. Together with
Peer Review Activities.State disciplinary
the efforts of the Federal Trade Commission,
boards and hospital medical staffs often review
the actions of the Department should provide
physicians qualifications to determine whether
the guidance that these evolving entities
a license or hospital privileges for the physi-
need to prosper.
56
The President's Comprehensive Health Reform Program
F. Reducing Administrative and Paperwork Costs
Overview
duce the "hassle" factor for physicians,
Recent studies suggest that paperwork sav-
focus review efforts on problem areas, and
ings of $67 to $100 billion a year would
improve quality.
be possible if the United States shifted to
Use of electronic cards for billing and eligi-
a Canadian-style national health insurance
bility determinations will reduce paper-
program (GAO, 1991; Woolhandler and
work and confusion for consumers at the
Himmelstein, 1991). A critical review of avail-
point of service.
able information by OMB indicates that poten-
tial savings are much lower, at most $31
Development of computerized medical
to $49 billion (Director Darman, October
record systems will reduce paperwork bur-
1991, Testimony, House Ways and Means
dens for providers while improving qual-
Committee). Other analyses have concluded
ity.
that any administrative savings under a
Market reforms will reduce administrative
nationalized health plan would be more than
costs in the small group market by up to
offset by an increase in benefit costs. One
$9 billion a year by providing efficiencies
analysis estimated total savings in administra-
of scale through group purchasing for
tive costs in the United States under a
small businesses (HINs) and by eliminat-
Canadian-style system would be $47 billion;
ing medical underwriting costs.
however, these administrative efficiencies of
a common benefit package would be less
These reforms will bring the administration,
than the $78 billion increase in benefit costs
billing, and record-keeping in our health
that would come with the common package
care system into the twenty-first century,
(Sheils and Young, 1991).
through a system-wide movement to automa-
tion and more standardized billing, claims
Moreover, simple administrative cost com-
adjudication, eligibility determination, and
parisons are misleading because they fail
clinical information. The effective implementa-
to capture the value added by effective admin-
tion of market pooling mechanisms will con-
istrative measures. The United States spends
solidate consumers into more streamlined,
between $2 billion and $4 billion a year
better managed groups that have more lever-
on various quality assurance programs, meas-
age in the health market.
ures that improve health care and reduce
costly and potentially dangerous inappropriate
Background
care. And, as a recent study points out,
delays in treatment under the Canadian
Health care overhead is a diverse category
system lead to "hidden" costs of up to 0.6
that embraces a wide range of activities
percent of GDP-or more than $34 billion
including: claims processing costs for insurers,
dollars a year if translated to the United
billing costs for providers, utilization review,
States (Danzon, 1991).
quality assurance, maintenance of enrollment
and eligibility records, premium collection,
Nonetheless, significant administrative sav-
marketing costs, and profit. Public and private
ings are possible while maintaining choice
insurance and billing costs totalled almost
and diversity for our citizens. Moreover, paper-
$80 billion in 1991, or about 12.2 percent
work burdens, hassles, and confusion associ-
of total personal health spending. Insurance
ated with obtaining health care can be re-
administration accounts for $43.6 while pro-
duced. The reform proposal contains five
vider billing costs account for the remaining
initiatives to accomplish these goals:
$36.2 billion.
Electronic billing using standardized for-
Of the total of $43.6 billion for insurance
mats will dramatically reduce paperwork
administration in 1991, $32.8 billion is for
and reduce administrative costs.
private insurance, $5.7 in federal costs, and
Shifting from costly case-by-case medical
$5.0 billion in State and local costs. The
review to pattern of care review will re-
bulk of this spending (77.5 percent) is for
Making the System More Cost-Effective
57
Table 5-7. Insurance Administration and Provider Billing Costs in the
U.S., 1991
(Source: HCFA, OMB staff estimates)
As Percent
Y
Cost in
As Percent
of Total
Billions
of Total
Personal
of
Adminis-
Health
Dollars
tration
Spending
Insurance Administration
$43.6
54.6%
6.7%
Hospital Billing Costs
$17.1
21.5%
2.6%
Physician Billing Costs
$10.4
13.0%
1.6%
Billing Costs for Other Providers
$8.7
10.9%
1.3%
Total Insurance and Billing Costs
$79.8
100.0%
12.2%
claims processing, quality assurance, and gen-
of benefit payments, ranging from up to
eral administration. Marketing costs and prof-
40 percent of benefit costs for very small
its total $6.0 billion while taxes paid by
firms to under 6 percent for very large
private insurers account for the remaining
firms. This disparity in costs reflects the
$3.7 billion.
fact that large businesses enjoy efficiencies
of scale in the purchase and administration
Insurance administration costs have in-
of insurance benefits. Risk premiums are
creased from 5.3 percent of total personal
lower for large groups coverage because benefit
health spending in 1965 to 6.7 percent in
costs are much more predictable. Commissions
1991. This change primarily reflects an in-
for brokers also are higher for very small
crease in insurance coverage during the inter-
firms due to the retail nature of this segment
val. Out-of-pocket spending, as a percent
of the market.
of total personal health spending, decreased
from 55.9 percent in 1960 to 23.3 percent
Proposal
in 1990 (Levit et al, 1991). With this decrease,
administrative costs were bound to increase.
Administrative costs could be cut by as
much as 25 percent under five major reform
Private insurance administrative costs vary
initiatives. Four of the initiatives would
substantially with firm size as a percentage
streamline paperwork. The first four of these
Table 5-8. Administrative Costs for Public and Private Insurance in
the U.S., 1991
(Source: HCFA, HIAA, BCBS, OMB staff estimates; excludes billing costs for providers)
As Percent
Cost in
As Percent
of Total
Billions
of Total
Personal
of
Adminis-
Health
Dollars
tration
Spending
Total Public and Private Insurance Administrative Cost
43.6
100.0%
6.7%
Claims Processing, Quality Assurance and General Administration
(private and public)
33.8
77.5%
5.2%
Taxes Paid by Private Insurers
3.8
8.6%
0.6%
Marketing and Commissions
3.8
8.8%
0.6%
Profit
2.2
5.1%
0.3%
58
The President's Comprehensive Health Reform Program
Table 5-9. Health Insurance Overhead Cost as Percent of Benefit
Payments
(Source: CRS, 1989)
Claims
General
Interest
Risk
Com-
Firm Size
Adminis-
Adminis-
Credit
and
Premium
mis-
tration
tration
Profit
sions
Taxes
Total
1 to 4
9.3
12.5
-1.5
8.5
8.4
2.8
40
5 to 9
8.6
11.2
-1.5
8.0
6.0
2.7
35
10 to 19
7.2
9.2
-1.5
7.5
5.0
2.6
30
20 to 49
6.3
7.6
-1.5
6.8
3.3
2.5
25
50 to 99
4.3
4.8
-1.5
6.0
2.0
2.4
18
100 to 499
4.1
4.0
-1.5
5.5
1.6
2.3
16
500 to 2,499
3.9
3.2
-1.5
3.5
0.7
2.2
12
2,500 to 9,999
3.8
1.4
-1.5
1.8
0.3
2.2
8
10,000 or more
3.0
0.7
-1.5
1.1
0.1
2.1
5.5
initiatives are already underway under
the
tion and HCFA. Task Force participants in-
leadership of Secretary Louis Sullivan of
cluded representatives of every major third-
the Department of Health and Human Serv-
party payer. While use of the HCFA-1500
ices. These four paperwork reduction ini-
is voluntary, wide acceptance is expected.
tiatives could reduce administrative costs by
Similar efforts have led to near universal
as much as 8 percent, saving up to
$4
acceptance of the UB-82, as the standard
billion a year. These initiatives would be
form for inpatient hospital bills.
complemented by reform of the small group
At Secretary Sullivan's recent Forum on
market. As described more fully in Chapter
Administrative Costs, Blue Cross/Blue Shield
3, health insurance market reform could
of America and the Travelers Insurance Com-
reduce administrative costs for small group
pany agreed to head up a public/private
coverage by as much as 40 percent, saving
group to increase electronic claims and to
up to $9 billion a year.
standardize data elements and electronic
Reducing Claims Processing and Billing
transmission rules. The group is meeting
Costs Through Standardization and Auto-
already. Its recommendations are expected
mation.-Paper claims are expensive. Esti-
soon.
mates suggest that providers and insurers
HCFA is actively working with the private
save up to $2 per claim through electronic bill-
sector to develop technical standards to pro-
ing, and more is saved when claims are re-
mote greater use of electronic billing. Cur-
viewed electronically. Since over three billion
rently, 75 percent of Medicare Part A and
claims are submitted on paper every year, sub-
42 percent of Part B claims are submitted
stantial savings are possible just by increasing
electronically. Electronic billing also reduces
electronic submission rates.
costs for providers and helps reduce clerical
Standardization of claims forms can reduce
errors. Comparable savings can be achieved
billing costs and reduce provider billing costs
for private sector claims. HCFA has set
to levels comparable to those that might
100 percent electronic submission for hospitals
be achieved under single payer systems. In
and 75 percent for others within three years—
December, 1990, the Health Care Financing
the private sector must drive toward similar
efficiencies.
Administration's HCFA-1500 claims form was
finalized. This form-which is used for physi-
The combination of electronic claims submis-
cian and outpatient services-was developed
sion and standardization of the data elements
by the Uniform Claim Form Task Force,
required for claims will reduce provider cost
co-chaired by the American Medical Associa-
and frustration. Providers submitting claims
Making the System More Cost-Effective
59
electronically benefit from faster and clearer
to consumers through lower premiums and
resolution of claims. Moreover, electronic sys-
out of pocket costs. Eventually, electronic
tems will help avoid technical mistakes, such
cards could be used for storage of the card
as missing one line on a form, that often
holder's medical records. This would help
delay payment.
prevent duplication of tests, medication errors,
and other quality of care problems.
Streamlining Medical Review.-A third
area-improving medical review-can reduce
Developing Computerized Medical Rec-
the "hassle factor" for physicians while reduc-
ord Systems.-Secretary Sullivan also has ini-
ing costs for unnecessary care. The goal would
tiated a task force to accelerate development
be to shift away from claim-by-claim denials
of computerized medical record systems.
toward monitoring and encouragement of cost-
Computerization will facilitate rapid access
effective practice patterns. Claim-by-claim re-
to critical information regarding an individ-
view is burdensome and costly-sometimes the
ual's past medical record. Once computerized
cost of the review can exceed the potential sav-
patient records and related information net-
ings.
works are in widespread use, providers will
HCFA has developed and is now testing
have access to state-of-the-art information
the Uniform Clinical Data Set (UCDS) a
on the effectiveness of various care paths
new system that would permit a shift to
as well as more complete, accurate patient
pattern review for inpatient hospital care.
medical records.
The UCDS is a state-of-the-art system for
"Expert" systems can be built-in as part
abstracting critical medical information for
of these systems to alert physicians to poten-
hospital records. Once this information is
tial problems, such as the need to follow-
abstracted and entered into a computerized
up on an abnormal test result. Computerized
system, "expert" system programs can identify
records will also strengthen quality assurance
patterns of care that suggest a systematic
by providing hospitals and health plans with
problem that might warrant further targeted
review and corrective action.
reliable statistical information regarding out-
comes and complication rates.
If the UCDS system proves to be successful
Health costs could be reduced as well.
in practice, it would serve as a model for
Up to 20 percent of all medical care performed
use by private insurers. In a complementary
in the United States may be unnecessary
effort, the Public Health Service is devoting
$130 million in 1991-1992 to outcomes re-
or harmful. Computerized patient records will
search to increase information about what
capture clinical data for effectiveness research.
This research will help physicians better
patterns of care are most effective in improv-
understand when certain costly therapies
ing health outcomes and at what cost.
should be used.
Developing Electronic Cards.-Secretary
Sullivan has launched an initiative to acceler-
Early reports are encouraging. The General
Accounting Office has reported that an auto-
ate development of electronic cards for use by
mated medical record system reduced hospital
consumers.
costs by $600 per patient in a Veterans
Electronic cards would be used by patients
Affairs hospital. Other studies have dem-
at the point of service to provide com-
onstrated reduced lengths of stay associated
prehensive insurance information to providers.
with computerized patient records. If broadly
This would eliminate the need for patients
implemented, computerized patient records
to repeatedly fill out confusing forms. Such
could reduce unnecessary care by about 5
cards also would streamline billing procedures
to 10 percent, saving $20 billion a year
for doctors and hospitals by providing imme-
by. the end of the decade. More significant
diate information regarding eligibility, cov-
savings are likely in later years.
erage, benefits, copayments and deductibles.
Reducing Overhead Costs Through
Dollar savings will accrue directly to insur-
Health Insurance Market Reform.-Finally,
ers and providers through more efficient
health insurance market reform will reduce
administrative procedures, and be passed on
administrative costs for small group coverage
60
The President's Comprehensive Health Reform Program
by an average of 40 percent. Savings will be
fewer than 100 workers will be provided
even higher for groups with 10 or fewer work-
through HINs.
ers. The bulk of this savings will be achieved
through health insurance networks (HINs)-
Even outside of HINs, substantial savings
will be achieved through elimination of costs
group purchasing associations for small busi-
associated with medical underwriting. More-
ness and individual coverage. It is projected
over, by refocusing competition on costs, the
that 67 percent of coverage sold to firms with
reforms will also help to reduce marketing
costs.
G. Making Public Programs More Efficient
Government health care programs at all
new transferable health insurance credit
levels account for 44 percent of national
system (see Chapter 4).
spending on personal health services. Costs
for these programs have been increasing
Coverage of all non-Medicaid poor for
even more rapidly than for the population
basic services will be fully financed by the
Federal Government. States would be able
as a whole. Accordingly, no comprehensive
health system reform proposal can be complete
to retain their share of savings from Med-
without measures to help make these pro-
icaid program reform. Federal savings
grams more efficient. Indeed, thoughtful re-
would revert to State residents to provide
health insurance for the non-Medicaid
form now is needed to prevent future problems
that could threaten these programs.
poor, without any State match.
Medicaid currently provides health insur-
1. Reforming the Medicaid Program By
ance benefits for 26 million low-income Ameri-
Enhancing State Flexibility
cans. Recently, Medicaid also has become
the primary vehicle for funding "uncompen-
Overview
sated care" provided by disproportionate share
The President's reform proposal would dra-
hospitals (DSH)-hospitals that have high
matically modernize the twenty-six year old
charity care case loads ($12 billion in federal
Medicaid program and provide States with
payments matched by the States-in 1993).
significant new flexibility for reform.
These DSH payments would not be affected
by this proposal.
Medicaid recipients will benefit from en-
hanced access and improved quality
Medicaid has been widely criticized as
through coordinated care plans.
providing fragmented, episodic, and often sub-
standard care. Moreover the program is viewed
States will have new flexibility to take ad-
as wasteful and inefficient. These problems
vantage of innovation, program efficiencies,
stem primarily from continued reliance on
and better methods for cost control. As
an outdated fee-for-service delivery system.
Medicaid costs have risen by over 23 per-
In addition, the program is overly rigid
cent a year since 1989 (from $61.2 billion
and bureaucratic.
to $92.1 billion in 1991), States have
strained to keep up. Thus, the federal and
Under the proposal, Medicaid would be
State governments must be partners in
restructured to rely primarily on delivery
cost containment and reform.
of health care through coordinated care sys-
tems. Moreover, States would have new flexi-
Enhanced State flexibility and greater use
bility to respond to local needs and concerns.
of coordinated care can reduce Medicaid
States would have the option of choosing
cost growth from a projected 16 percent
between two broad approaches.
a year and result in significant savings
that can help fund expanded insurance
A State could maintain existing Medicaid
coverage for an additional 24 million low
eligibility and benefit levels while shifting
and modest income Americans through the
enrollment into coordinated care pro-
Making the System More Cost-Effective
61
grams. Under this approach, the new
aid under current rules, no matter how
transferable tax credit (certificate) system
poor or how sick they are (non-disabled
would operate separately from the existing
single adults and childless couples, for exam-
Medicaid program, though States would
ple). Only about 45 percent of the poor
play an important role in qualifying indi-
are covered by Medicaid. Another 26 percent
viduals for the tax credit.
have other insurance. Twenty-nine percent,
Alternatively, a State could combine its ex-
therefore, are without insurance.
isting Medicaid programs with the new
Problems With the Current Program.-
health insurance credit system to develop
Most Medicaid recipients receive health care
a new universal access program covering
through traditional and costly fee-for-service
all State residents with incomes below
arrangements. Physicians, hospitals, and other
poverty. Under this approach, a State
providers are paid on the basis of itemized
could operate a single public insurance
bills for the services they render. As a result,
program or could provide credits for pur-
strong incentives exist to provide additional
chase of private coverage.
services regardless of benefit. Providers are not
Coincident with these reforms, federal fund-
paid on the basis of outcomes: no one is paid
ing for acute care for the non-elderly (exclud-
to keep patients in good health. Nor is there
ing DSH payments) would shift to a new
anyone responsible for coordinating services to
per capita payment to the States. This would
avoid duplication and to improve quality. As
provide States with new incentives to maxi-
a result of this perverse mismatch of incen-
mize program efficiencies through coordinated
tives and responsibilities:
care and other measures. Overall, the reforms
would improve quality and access for program
The care many Medicaid patients receive
recipients while greater efficiency would free
is often fragmented-too little, too much,
up funds to expand access for other low
inappropriate, or too late;
income individuals and families through the
Too many recipients use hospital emer-
new tax credit system.
gency rooms as their primary entry point
to the medical care system, often for non-
Background
emergency conditions; and
Medicaid currently is a joint federal/State
Too many people are deterred from seek-
program designed to meet the health insurance
ing treatment in the early stages of a med-
needs of certain low-income individuals. States
ical condition. Receiving treatment in the
set most program rules within broad federal
later stages often leads to hospitalization
guidelines, determine beneficiary eligibility,
and other care that could have been avoid-
and pay provider claims.
ed.
In general, Medicaid eligibility is linked
to other cash assistance programs such as
The Medicaid program also has been
Aid to Families with Dependent Children
strained due to frequently added service and
(AFDC) or Supplemental Security Income
eligibility mandates, increased caseloads, court
(SSI). In recent years, mandatory eligibility
mandated payment levels, and overall health
has been extended to certain groups with
care inflation. As a result of these forces,
incomes above the cash welfare program
Medicaid is the fastest rising portion of
standards (for example, poor and near poor
both federal and State budgets.
pregnant women and children). Optional cov-
Program Costs.-In 1993, combined fed-
erage extends to certain other groups, such
eral/State spending on Medicaid will surpass
as the "medically needy," whose illnesses
$158 billion, up from $61.2 billion in 1989-
force them to "spend-down" to meet Medicaid
a 250 percent increase. The federal con-
eligibility criteria.
tribution, based on State median income rang-
Current Medicaid eligibility requirements
ing from 50 to 83 percent of program expenses,
leave many poor without coverage. Certain
will exceed $84.5 billion in 1993, or a 245 per-
categories of persons cannot qualify for Medic-
cent increase since 1989 ($34.5 billion).
62
The President's Comprehensive Health Reform Program
Chart 19. GROWTH IN FEDERAL MEDICAID COSTS
$ BILLIONS
160
140
120
100
80
60
40
20
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
SOURCE: HCFA Medical Bureau
As Table 5-10 shows, there are three
sible reforms can improve the health care
main components to federal Medicaid program
available to the disadvantaged while mod-
costs: (1) acute care for the non-elderly,
erating cost growth. Three examples under-
(2) long-term care and services to "dual
score this point:
eligibles" (those eligible for both Medicare
and Medicaid), and (3) program administra-
A Detroit-based health maintenance orga-
tion.
nization (HMO), Comprehensive Health
Services, provides care for the 60,000 Med-
Coordinated Care.-While the current pro-
icaid recipients and has saved the Medic-
gram is exploding, causing a crisis at the fed-
aid program at least $6.9 million in 1990.
eral and State level, successful experience with
These savings are due to a reduction in
coordinated care programs show that respon-
unnecessary hospitalizations and in-
Table 5-10. Projected Federal Medicaid Costs Under Current Law
(Dollar amounts in billions, Federal Share)
1992
1993
1994
1995
1996
1997
1993-1997
Total Medicaid
72.5
84.5
98.3
113.8
131.2
150.9
578.7
Percent Increase
-
16.6%
16.3%
15.8%
15.3%
15.0%
15.8%
Acute Care (including DSH)
31.0
36.5
42.9
50.2
58.5
67.9
255.9
Percent Increase
-
17.7%
17.5%
17.0%
16.5%
16.1%
17.0%
DSH Payments (non-add)
8.4
9.8
11.4
13.2
15.2
17.2
75.5
Long-Term Care and Dual-Eligibles
38.9
45.0
52.0
59.8
68.5
78.2
303.7
Administration
2.6
3.0
3.4
3.8
4.2
4.8
19.1
Making the System More Cost-Effective
63
creased attention to preventive care, par-
plans reflects a number of factors. Most
ticularly for high risk pregnant women
importantly, under current law, States must
and infants.
go through a waiver process to secure federal
Under Kentucky's Primary Care Case
approval to establish coordinated care pro-
Management (PCCM) program, each Med-
grams. Complex statutory waiver requirements
icaid recipient has a primary care physi-
are overly rigid and have blocked a number
cian responsible for providing or authoriz-
of initiatives that long have been underway
ing all non-emergency care. By emphasiz-
in the private sector. Moreover, State Medicaid
ing primary and preventive care through
programs are subject to political resistance
a single physician, cost and quality prob-
from entrenched interests, a factor that is
lems associated with overuse of emergency
not significant in the private sector.
rooms and duplication of medications or
It is important to note that Medicaid
tests have been avoided. As a result, the
also has become a vehicle for funding "uncom-
Kentucky program has reduced infant
pensated" or "charity" care provided by hos-
mortality rates and has achieved savings
pitals to individuals without Medicaid or
of $25 million a year, or approximately
other insurance coverage. Under recently en-
10 percent of program costs.
acted legislation, States will be able to provide
Until 1982, Arizona was the only State
higher Medicaid payments to "disproportionate
that did not participate in Medicaid. Coun-
share hospitals" (DSH) that provide care
to a disproportionate number of uninsured
ty governments provided acute and long-
term care for the poor. In 1982, Arizona
patients. Over the next five years, the Federal
established a Medicaid program and ob-
Government will provide $75.5 billion in
DSH payments.
tained a waiver to operate this through
the Arizona Health Care Cost Contain-
While this is a reasonable stop-gap ap-
ment System (AHCCCS).
proach, it has two disadvantages when com-
AHCCCS is unique in that all care is pro-
pared with a direct expansion of insurance
coverage. First, there is no assurance that
vided through coordinated care arrange-
ments. There is no fee-for-service option.
DSH payments are used exclusively for patient
Arizona contracts with participating
care. More importantly, DSH payments for
health care organizations (HCOs) through
inpatient hospital care fails to provide access
a bidding/negotiation process. Modest sav-
to ambulatory care and primary and preven-
tive services that could avert the need for
ings have been achieved-estimated by
HCFA at 5.7 percent in the fourth year
a disabling illness and costly hospital care.
of the program compared to fee-for-service
Proposal
alternatives.
The President's proposal focuses reform
While programs of this type hold promise,
on the acute care portion of Medicaid for
less than 3 million Medicaid recipients receive
the non-elderly. Long-term care and acute
care through coordinated care programs: 1.4
care programs under Medicaid for seniors,
million receive care through HMOs and other
including Medicare/Medicaid dual eligibles and
prepaid health plans, while an additional
qualified Medicare beneficiaries, would remain
1 million receive care through PCCM pro-
unchanged. Disproportionate share hospital
grams. The remaining 23 million (89 percent)
(DSH) payments under Medicaid also would
continue to receive care through fee-for-service
remain unchanged.
systems. In contrast, 27 percent of workers
and dependents with employment-based pri-
Federal financial participation for acute
vate insurance are covered through coordi-
care (excluding DSH) would be shifted from
nated care plans, and this percentage contin-
open-ended cost-based reimbursement to a
ues to grow rapidly (see Chart 15, Chapter
prospectively determined per capita payment.
5, section B).
This change would provide important incen-
tives for program efficiency. The resulting
The comparatively small share of Medicaid
savings reflect the potential for significant
recipients covered under coordinated care
improvements in efficiency through either
64
The President's Comprehensive Health Reform Program
of the two major reform options that
the
per capita payment while still yielding the
States would have under the proposal.
same aggregate savings as those proposed.
The per capita payment would be State-
State Option 1.-Separate Medicaid and
specific, based on total per capita costs for
Tax Credit Programs.-As noted above,
the acute care portion of Medicaid in a
States would have two broad options regarding
State in 1992. Acute care costs related to
reform of their Medicaid programs for acute
Medicare recipients would be excluded from
care services provided to the non-elderly.
this calculation as would DSH payments.
Under the first option, States would shift all
The State's 1992 per capita cost would then
non-elderly Medicaid recipients into coordi-
be indexed for general inflation, using the
nated care programs, over a five year period.
percent increase in the consumer price index
Otherwise, program rules would remain sub-
for urban areas (CPI-U) plus an additional
stantially unchanged.
amount for medical cost inflation.
Coordinated care programs would include
From 1960 to 1990, per capita health
health maintenance organizations (HMOs),
care costs for the entire United States popu-
preferred provider organizations (PPOs), pri-
lation increased by about 4 percent a year
mary care case manager (PCCM) programs
faster than the CPI-U. Thus, an add-on
and other cost effective alternative delivery
of 2 to 4 percent in addition to the CPI-U
systems. Current restrictions that impede
for 1997 and future years seems reasonable.
access to coordinated care plans under Medic-
Savings of this magnitude should be possible
aid would be relaxed. Because enrollment
through coordinated care and increased flexi-
would be shifted to coordinated care, State
bility for State programs. A phase-in would
waivers to continue significant fee-for-service
provide time for States to take advantage
enrollment would be necessary.
of the new programmatic flexibility provided.
Eligibility rules would remain the same
Actual federal payments to a State would
as under the current Medicaid program. States
equal the product of the total number of
would be required to continue to cover all
Medicaid recipients in the State times the
current mandatory eligibility groups under
Medicaid, as well as any optional groups
inflation indexed State per capita acute care
costs times the Federal Matching Assistance
they covered as of January 1, 1992.
Percentage (FMAP). The FMAP formula would
States would continue to provide mandatory
remain unchanged from current law and
Medicaid benefits. States that currently pro-
is intended to reflect a State's relative need
vide optional Medicaid benefits would be
for federal assistance. (The federal matching
able to adjust these benefits, but would
assistance percentage (FMAP) = 100 - .45
be required to maintain the actuarial value
X [(State per capital income)/(U.S. per capita
of the total benefit package (e.g., an optional
income)]².) Different per capita payment
benefit could be dropped if another benefit
amounts could be used for different age-
of equivalent value is added). States also
sex or other groupings to adjust for changes
could modify the amount, duration, and scope
in the population covered by a State program
of mandatory or optional benefits subject
over the years.
to a requirement that the actuarial value
of the benefits be maintained. As under
Although the proposal does not affect DSH
current law, providers would be required
payments, the need for DSH payments would
to accept Medicaid rates as payment-in-full
decrease dramatically. With a projected in-
with no significant cost sharing or balance
crease in insurance coverage of 29 million
billing.
Americans resulting from tax credits and
other reforms, fewer uninsured patients would
Under this option, States would be respon-
burden hospitals with "charity" care costs.
sible for coordinating certain aspects of the
Thus, additional funds could be available
health insurance credit program. The tax
to further expand the credits. At State request,
credit would be used for the purchase of
the payment formula could be revised to
private insurance coverage. States would cer-
include DSH payments within the federal
tify eligibility for and the amount of the
Making the System More Cost-Effective
65
health insurance credit for those who wish
paid had it maintained a separate Medicaid
to obtain their tax credit prospectively.
program, as under option 1.
States also would be required to define
To help finance these programs, States
a "basic" benefit package with an actuarial
would receive a lump sum payment from
value equal to the tax credit amount. And,
the Federal Government. This payment would
if a sufficient number of insurers do not
equal the sum of federal per capita payments
offer the basic plan, States would be required
for those who meet Medicaid eligibility re-
to assure that at least two private health
quirements and health insurance credit pay-
plans offer this basic plan to credit recipients
ments for those who are eligible for them.
within the State. Federal/State quality assur-
Payments would be based on estimates of
ance programs would continue to assure prop-
the Medicaid and health insurance credit
er program administration, e.g, proper eligi-
eligible populations within the State. Esti-
bility determination for Medicaid and tax
mates would be base year eligibility rates
credit recipients and prevention of fraud
updated to reflect changes in population and
and abuse.
changes in unemployment and other factors
likely to influence the size of the eligible
State Option 2-Unified Program.-
population. Adjustments would be made to
Under this option, States could establish a uni-
reflect actual participation.
fied program that combines Medicaid with the
new federal health insurance credit to provide
To the extent practical, States would no
health insurance coverage for all State resi-
longer apply complex Medicaid eligibility
dents with incomes below poverty. Coverage
standards. Eligibility would be based simply
would be phased-in in tandem with the phase-
on individual or family income in relation
in for the health insurance credit.
to poverty. States would help to administer
the federal health insurance credit and would
States would have broad flexibility in estab-
assure availability of "basic" benefit coverage
lishing these programs. They could operate
from at least two private health plans, as
a unified public insurance program or estab-
under option 1.
lish a State health credit program to supple-
ment federal health insurance credit pay-
ments. Any eligible individual or family could
2. Phasing-Out Duplicate Subsidies and
opt-out of the State's public insurance program
Increasing Efficiency in Other Federal
to purchase private insurance. Those who
Health Programs
opt out would receive the full amount of
the federal health insurance credit that they
Medicare Program History
would otherwise be eligible to receive. The
credit could be higher if the State supple-
Since enactment in 1965, Medicare has
mented the health credit.
successfully reduced the financial burden of
health costs for the nation's elderly. However,
States that provide insurance directly would
the Medicare program also has experienced
cover all Medicaid mandatory benefits and
unsustainable increases in costs that have
as well as prescription drugs. States would
far outpaced both initial projections, and
have flexibility to modify the amount, scope,
inflation (far exceeding the CPI), and even
and duration of benefits and could add or
the medical component of the CPI.
drop optional benefits provided that the actu-
arial value of the benefit package is main-
Medicare outlays were $3.4 billion in 1967,
tained when spread over all individuals who
and at the time, projected 1990 outlays
are eligible to participate in the program.
were $15.7 billion. Actual 1990 Medicare
outlays totalled $110 billion. The average
States that operate a unified health insur-
annual rate of growth in Medicare expendi-
ance credit program would be subject to
tures between 1970 and 1990 was over 14.7
a maintenance of effort requirement. The
percent, well above the rate of inflation
State's financial contribution would be set
and beneficiary increases (about 8.2 percent).
to equal the amount the State would have
The following table compares actual Medicare
66
The President's Comprehensive Health Reform Program
growth rates to inflation and beneficiary
reasonable efficiencies must be found in Medi-
growth.
care growth to avoid draining American tax-
payer resources-regardless of the beneficial
Medicare has outpaced the Medical-Con-
private sector effects of the President's plan's
sumer Price Index (MCPI) and the Consumer
Price Index-Urban (CPI-U) by an average
private market reforms.
annual rate of 6.3 percent and 8.4 percent,
Reforms will not affect benefits for sen-
respectively, over the 1970-1990 period. Over
iors.-Because important efficiencies are pos-
the next five years, if not reformed, it
sible in the Medicare program, no senior will
will continue to surpass general inflation
have any benefits reduced as part of health
rates, as indicated in the graph and chart
care reform. In fact, senior citizens could save
below.
money as a result of possible Medicare re-
With almost 12 percent a year growth
forms-due to the lower coinsurance payments
anticipated for each of the next five years,
and lower Part B premiums that automatically
Table 5-11. Average Annual Medicare Growth Compared to CPI-U and
Beneficiary Growth, 1970 through 1990
Excess over
Annual Growth
CPI-U and
Rate
Beneficiary
Growth
CPI-U+ Beneficiary Growth
8.2%
-
Medicare
14.7%
+80%
Chart 20. GROWTH IN FEDERAL MEDICARE COSTS
AVERAGE ANNUAL INCREASE -- 11.5%
(OUTLAYS)
$ BILLIONS
240
220
200
PROJECTED MEDICARE SPENDING
180
160
140
120
100
1991
1992
1993
1994
1995
1996
1997
FISCAL YEARS
Making the System More Cost-Effective
67
result from many supplemental medical insur-
Medicare also makes graduate medical edu-
ance (SMI) reforms.
cation (GME) payments to help cover the cost
of intern and resident salaries and the cost
Hospital Insurance (HI) Reforms
of teaching physicians. GME payments should
Under current law, the Medicare Hospital
be reshaped to help ensure that teaching hos-
Insurance program will grow at 10.6 percent
pitals meet the Nations needs for primary care
per year from 1993 to 1997. Numerous policy
physicians in the next century. Teaching hos-
changes exist to reduce this high annual
pitals should be encouraged through payment
rate of growth-without affecting services.
policy to shift the primary care/specialist train-
ing mix back towards more sensible ratios that
Recapturing Unreimbursed/Uninsured
will produce more primary care physicians.
Care Subsidies as Health Insurance Tax
Credits Expand Access.-Many hospitals re-
Other Possible HI Reforms.-Other re-
ceive Medicare "disproportionate share pay-
forms could further reduce the excessive
ments" (DSH) to help cover the cost of the
growth rate in HI costs. These reforms would:
uncompensated care they provide to uninsured
ensure that Medicare pays only once for cer-
patients. Medicare DSH payments will total
tain hospital procedures; phase out unequal
over $2.3 billion in 1992. A significant portion
and special return on investment payments to
of the $3.2 billion provided to teaching hos-
for-profit skilled nursing facilities; create spe-
pitals in fiscal year 1992 through the "indirect
cific categories of payment to recognize more
medical education" (IME) adjustment also is
home health professions; and create additional
intended to help defray uncompensated care
incentives to Medicare beneficiaries to enroll
costs.
in coordinated care organizations.
As the new health insurance tax credits
Preventing Program Abuse
and tax deductions are phased-in-to ensure
that nearly everyone coming into a hospital
Other policy changes should be considered
has insurance-these subsidies would, for the
to address areas where there have been
most part, be unnecessary. With insurance,
documented abuses of the Medicare program.
low-income families will be able afford primary
Durable Medical Equipment.-A notable
care on an ambulatory basis-to maintain
example is in the area of durable medical
good health and prevent serious illnesses
equipment (DME). Numerous reports of fraud
that result in the need for costly hospital
and abuse have prompted calls for DME pay-
admissions. (Some indigent care subsidies
ment reform. Attempts to correct overcharges
could be retained as "gap fillers"-to provide
by instituting a fee schedule for DME have
for the small number of remaining cases
failed.
where people still fall through the cracks.)
A recent GAO (1991) study of six DME
Adjustment of IME payments is justified
suppliers found that the suppliers' average
on other grounds. Major studies by the Gen-
profit margin in 1988 was 19 percent for
eral Accounting Office (1991) and the Congres-
Medicare business, significantly more than
sionally-appointed Prospective Payment As-
for non-Medicare business. The GAO pro-
sessment Commission (ProPAC, 1990) have
jected that Medicare profits would be even
consistently shown that these payments are
higher in 1993-34 percent overall. The
excessive even under the existing system.
GAO study also found that Medicare pay-
Therefore, a phase-down in IME payments
ments in 1989 were 24 percent higher
to rates already recommended by ProPAC
under the new fee schedules than they
(on the basis of excessive payment under
would have been under the previous sys-
current law) should be possible without any
tem, which was based on reasonable
harm to teaching hospitals as the burden
charges.
of uncompensated care decreases with the
tax credit phase-in.
To bring these excessive payments under
control, the Secretary of the Department
Reforming Graduate Medical Education
of Health and Human Services should be
Payments.-In addition to IME payments,
authorized to revise DME payment rates
68
The President's Comprehensive Health Reform Program
to reflect market considerations, using such
interests (Florida Cost Containment Board,
procedures as competitive bidding to establish
1991). The result is a significant increase
payment rates for oxygen and oxygen products.
in public and private sector health care
costs.
Growth of Physician Payments and
In addition, self-referrals are viewed by
Related Services (SMI)
many as involving an unethical conflict of
Current projections of Supplementary Medi-
interest. The American Medical Association
cal Insurance (SMI) program costs (primarily
(AMA) has recognized self-referrals as an
doctor's fees) show it growing at an average
area of abuse in need of reform and has
annual rate of 14.6 percent from 1993 to
taken the position that self-referrals should
1997. Over the past decade, Medicare Part
generally be discouraged except in situations
B payments have grown at an average annual
where physician investment is needed to
increase of 15 percent-twice as fast as
make services available (AMA, 1991).
the Consumer Price Index for urban areas
Reform legislation should consider prohibit-
(CPI-U), adjusted to take into account bene-
ing Medicare payment in the case of "self-
ficiary growth.
referrals" in areas such as radiology, radiation
With the ongoing five-year phase-in of
therapy, durable medical equipment, home
physician payment reform, many physician
health, physical therapy, and rehabilitation
payments are in the process of being adjusted
where abuses have been found. Current law
significantly. While it is important to let
already prohibits Medicare payment for self-
this process proceed, the payment system
referrals involving clinical lab tests.
should be examined to remove inappropriate
A number of other policy options could
incentives.
be developed to help restrain growth of
A recent study done by the State of Florida
physician fees and other SMI expenses to
has focused attention on the abusive practice
a rate below 14.6 percent a year. Controlling
of physician "self-referrals." Physicians "self-
the costs of physicians payments and related
refer" when they order health care services
services (SMI) is critical. All seniors and
from a facility in which they have an invest-
general taxpayers are at risk when SMI
ment or other financial interest. The Florida
costs grow at 14.6 percent a year, because
study showed that physicians who self-refer
75 percent of SMI costs are borne by the
utilize services at a far higher rate than
general taxpayers and 25 percent from seniors'
physicians who do not have these financial
premiums.
Chapter 6
Problems with Alternative Approaches
Many of the proposals for health system
if they were adopted, they would have enor-
reform are patterned after one of two basic
mous consequences not only for our health
models: a centralized Canadian-style national
care system but for our way of life and
health insurance system or an employer "play-
the fabric of American society. This chapter
or-pay" mandate. Both of these alternative
analyzes these approaches.
approaches deserve careful analysis because,
A. The Canadian Model
Overview
Central planning inevitably wastes re-
While apparently successful in many re-
sources and places quality at risk.
spects and highly popular with the Canadian
These flaws are now increasingly apparent
people, the Canadian system-like all other
in the experience of the Canadian system:
universal public insurance systems-suffers
from two basic structural flaws that are
Costs have not been controlled effectively
bound to lead to serious long term problems
despite the enormous power that a single
with cost, access, and quality.
payer has under a universal public insur-
ance program. Indeed, Canadian health
First, there are no demand side incentives
care costs have risen slightly faster than
for efficiency. Because medical care is free
health care cost in the U.S.
to consumers, consumers do not play the
same role they play in normal markets.
Non-market means can moderate the
growth of costs, but with significant ineffi-
Market forces that normally produce
ciency. Resources are often wasted on low-
greater economic efficiency simply do not
priority care while blunt cost containment
exist. Moreover, consumers are unable to
measures limit spending where added re-
express their preferences through market
sources could make a real difference in
choices.
outcomes.
Second, major resource allocations are
Supply-side constraints have led to artifi-
made centrally through the political proc-
cial shortages of critical personnel and
ess. Health care is too complex and too
equipment.
sensitive to micro-level conditions, for cen-
tralized management to be effective.
Canadians have significantly less access to
state-of-the-art technologies and often
The Canadian system relies on blunt,
must wait weeks or months for treatments
macro-level, supply-side constraints such
that are readily available to Americans.
as an aggregate level of expenditures, lim-
And, certain procedures, such as coronary
its on high-tech equipment, and limits on
bypass surgery, appear to be rationed, es-
physician supply.
pecially for senior citizens.
But, efficiency-high quality care at the
Lost productivity and other costs associ-
lowest possible cost-requires making opti-
ated with delays in surgery are estimated
mal decisions at the hospital bedside and
at 0.6 percent of Canadian GDP. These
in the physician's office.
losses could be even higher if delays for
69
70
The President's Comprehensive Health Reform Program
other medical services are taken into ac-
and physician care. The Canadian system
count.
itself, and American proposals to implement
a Canadian-style approach, share a number
Incentives for Canadian physicians and
of basic structural features:
hospitals often reward additional care re-
gardless of its appropriateness. As a re-
Health insurance is provided to all citizens
sult, utilization rates have increased rap-
through a centralized, publicly adminis-
idly wasting resources.
tered program. Health care services are
provided by private-sector hospitals, physi-
Reliance on crude global budgets as a
cians, and other providers. Private insur-
means of controlling costs has forced Ca-
ance is prohibited, except for services not
nadian hospitals to cut back on staffing
in critical areas. As a result, post-opera-
covered by the public program.
tive death rates in Canada are 40 percent
Covered benefits include hospital, physi-
higher than in U.S. hospitals for certain
cian, mental health, and preventive care.
high-tech, life-saving surgical operations.
(Some Canadian provinces also cover pre-
Even if the Canadian system were an
scription drugs and long-term care.) Care
unqualified success, its successful adoption
is free with no cost-sharing at the point
of service.
in the United States could not be assured.
Each Nation has its own unique political,
Hospitals and other institutional providers
cultural, and economic environment. Experi-
are paid on the basis of global budgets
ence with the Medicare and Medicaid pro-
that cover all patient care costs during a
grams in the United States suggests several
year. Global budgets are set annually by
difficulties in adopting a Canadian-style uni-
government authorities, through a process
versal public insurance system.
that involves some element of negotiation.
Over the past decade and a half, effective
Physicians and other non-institutional
management of Medicare and Medicaid
practitioners and providers are paid on a
has been stymied by increasing politiciza-
fee-for-service basis according to a govern-
tion. Virtually all payment rates are fixed
ment-established fee schedule. Overall
by law. Thus, an Act of Congress is needed
payments for physician services are lim-
to change the amount that Medicare pays
ited by a global budget or "expenditure
for a routine lab test or X-ray.
target."
As a result of this inflexibility, Medicare
To control costs, the supply of facilities,
and Medicaid per capita costs continue to
equipment, and providers is strictly regu-
grow more rapidly than per capita costs
lated. Hospitals are limited to govern-
for the remainder of the population.
ment-set budgets for capital expenses.
If the U. S. political process has been un-
Construction projects and high-cost equip-
able to control 30 percent of health spend-
ment purchases require special approval.
ing, there is little reason for optimism that
Physician supply is limited and the spe-
it could be more successful in controlling
cialty distribution is regulated to encour-
costs for the entire health system.
age general practice.
Indeed, the thought that as much as 16
Financing is primarily through broad
percent of the GDP by the year 2000 (32.7
based taxes (including a payroll tax). Some
percent if non health-related federal spending
Canadian provinces also require small pre-
is included) could be subject to direct political
mium payments. Others place a special
control should give most Americans pause
tax on employers.
for serious concern.
The Canadian system is administered
through the provinces with supplemental
Basic Features of the Canadian Model
Federal financing. A Canadian-style sys-
For the past two decades, the ten Canadian
tem in the U. S. could be jointly adminis-
provinces have operated government-based
tered by federal and State governments
health insurance plans that cover hospital
(as proposed by Senator Kerrey) or pri-
Problems with Alternative Approaches
71
marily by the national government (as pro-
ment arrangements that have been developed
posed by Congressman Russo).
in the United States over the past decades
have taken root in Canada.
Basic Structural Flaws in the Canadian
Model
Overall, Canadian citizens as individuals
Lack of Demand-Side Incentives.-The
are relegated to a diminished role in decision
Canadian system lacks effective incentives for
making in the health care system. Because
efficiency. Because medical care is free to con-
they cannot make their own choices in the
sumers, market forces that normally drive eco-
market, they are forced to rely on the
nomic systems to greater efficiency simply do
vagaries of the political process.
not exist. This flaw could be partly remedied
Supply-Side Controls.-Because incentives
by requiring some cost-sharing at the point
for needed, appropriate care only are poorly
of service. The RAND health insurance experi-
structured, the government is left with control-
ment has conclusively shown that modest lev-
ling costs through overall supply side controls.
els of cost-sharing reduce demand with little
There are at least three main problems with
or no measurable impact on health status
this approach.
(Brook et al., 1983). But, the flaw in the Cana-
dian system is much deeper than a simple lack
Macro-level supply side controls cannot
of cost-sharing.
achieve micro-level efficiency. Resources
are invariably wasted. Needed services are
Because consumers do not have a choice
often caught in the squeeze compromising
of alternative health plans and do not pay
quality and good medical care.
any portion of the premium cost, there is
no dynamic that could lead to the development
Every day, medical personnel make hun-
of more efficient systems for delivering high
dreds of decisions that affect resource allo-
quality care at low cost. It is no accident
cation. Should a particular test be pro-
that innovative health care delivery systems,
vided? What level of staffing should be
such as Kaiser Permanente or Group Health
provided in a busy emergency room? Con-
of Puget Sound, have emerged in the United
sumers also must make important deci-
States, but not in Canada.
sions regarding their care.
In the U.S., employers and individuals,
For efficient decisions to result, all of the
concerned about getting good value for their
participants must have appropriate incen-
health care dollars, have incentives to demand
tives and must have critical information.
better forms of health care delivery. This,
Macro-level budget constraints do nothing
in turn, creates a market for such systems,
to assure that proper incentives and accu-
and organized health plans then compete
rate information are brought to bear.
with one another for market share, leading
Supply side measures are often arbitrary
to progressive improvements in cost-effective-
and inflexible. Regulators must make
ness and quality. This consumer-driven process
thousands of decisions each year-deci-
of progressive improvement simply cannot
sions that involve billions of dollars to im-
occur in a Canadian-style system. All signifi-
plement global budgets, limits on high-
cant change in Canada requires legislation.
tech equipment, and similar measures.
As a result, the Canadian health care
Regulators must decide whether to in-
system is less dynamic, resembling the U.S.
crease a hospital's budget or to approve
health care system as it existed in the
the construction of a new cardiac surgery
mid-1960s. Medical care continues to be an
facility. A centralized allocation process
unorganized cottage industry. Physicians are
can be cumbersome, expensive and politi-
subject to little oversight to assure efficiency
cized, without resulting in an efficient allo-
and quality of care. And physicians continue
cation of resources. (Deber and Leatt,
to be paid exclusively on a fee-for-service
1987; Feeny et al., 1986).
basis despite clear evidence that this approach
Third, a centralized allocation process may
is inflationary. None of the improvements
be too removed or too politicized to effec-
in health systems delivery or innovative pay-
tively contain costs. Broad-based political
72
The President's Comprehensive Health Reform Program
support for cost-containment is unlikely.
pared with 10.5 percent in the U.S. (OECD,
Lobbying by providers and special interest
1990; Schieber et al., 1991).
groups, partisan disputes, and a host of
Cost-containment also has become more
other complications make success in con-
difficult in Canada in recent years. Rising
taining costs problematic, at best.
demands on the system resulting from free
universal access have placed increased finan-
Canada: The Evidence to Date
cial burdens on the government.
The preceding discussion suggests that the
Declining national contributions and cost-
design inherent in any centralized, govern-
containment measures have initiated a recent
ment-controlled health insurance scheme will
round of hospital staff layoffs and bed closings.
have adverse impacts on costs, access, appro-
Ontario, for example, the richest and most
priate use of resources, and quality. In fact,
populous province, where more than a third
a growing body of evidence strongly suggests
of the Canadians live, has lost nearly 5,000
these are characteristics of the current Cana-
hospital jobs and 3,500 beds over the last
dian system.
two years. In Toronto, the provincial capital,
Failure to Control Cost Growth-Even
2,900 of 15,000 acute-care beds have been
taken out of service (Media Digest, November
with strict global budgeting and some ration-
ing of care, Canadian health costs continue to
25, 1991).
grow faster than U.S. costs. Between 1970 and
To contain costs, Canada has cut payments
1980, Canada's annual compound rate of
to providers, making the yearly price negotia-
growth for per capita health expenditures was
tions more and more difficult. The rising
12.4 percent, compared with 11.9 percent in
Canadian costs, kept artificially under control
the U.S. Between 1970 and 1990, Canada's ex-
by government price and spending caps, have
penditures grew annually 10.8 percent, com-
been described as "a pressure cooker that
Chart 21. COMPOUND ANNUAL PERCENTAGE RATES OF
PER CAPITA NOMINAL GROWTH
PERCENT RATE OF GROWTH
16
14
12.4
11.9
12
10.8
10.5
10
8
6
4
2
0
1970-1980
1970-1990
CANADA / UNITED STATES
SOURCE: OECD, "OECD Health Systems: Facts and Trends" (Paris: OECD forthcoming)
Problems with Alternative Approaches
73
is building steam on a hot stove" (Iglehart,
has been estimated at 0.6 percent of Canadian
1986).
GDP (Danzon, 1991).
Treatment Delays.-Reliance on supply
Limited Access to Advanced Tech-
constraints to control costs inevitably leads to
nology.-Government control of hospital cap-
shortages and delays in treatment. Canadians
ital and operating budgets limits the adoption
must often wait to receive treatment. For ex-
of medical technology in Canada. For example,
ample, Canadians wait on average 4.9 months
U.S. citizens have access to more open heart
for open heart surgery, and 5.5 months for
surgery, cardiac catheterization, organ trans-
bypass surgery (Globerman, 1990).
plants, radiation therapy, extracorporeal shock
These waiting times for medical treatment
and lithotripsy, and magnetic resonance imag-
can have potentially adverse effects on a
ing.
patients' health. Patients not receiving timely
Data from Anderson et al. (1989) also
access to diagnostic procedures-such as MRIs,
suggest rationing of selected expensive proce-
CT scans and mammograms-can suffer set-
dures for older age groups. Heart valve
backs due to delayed treatment. Those waiting
surgery and bypass surgery for patients ages
for acute procedures-such as open heart
65-74 and 75+ were consistently performed
surgery-can risk death waiting for care.
less often in Canada. For patients age 75
Waiting for treatment also results in a
and above, a full 4 times as many bypass
direct economic loss. If unable to work while
procedures were performed in the U.S. as
waiting for care, individuals may face financial
in Canada for the same age group of patients.
setbacks. Some may even lose their jobs.
Limited availability of medical technology
There is the additional social loss of productiv-
has prompted the Canadian government to
ity. The overall cost of delays in surgery
send some patients to the U.S. to seek
advanced medical care. For example, the
Chart 22. AVERAGE WAITING TIMES IN BRITISH COLUMBIA
Cystoscopy
23.5
Cataract Removal
18
Myringatomy Tonsillectomy
13.8
Prostatectomy
30.5
Rhinoplasty Septal Surgery
32.5
Hand Surgery
11.5
Disk Surgery
12
Coronary Artery Bypass
24.1
Mammoplasty
19.2
Menisectomy
12
Laparoscopy
13.5
Tubal Ligation
16
Hysterectomy
16.9
Tonsillectomy
16
Tympanoplasty
19.2
D&C
6
Rhinoplasty
19.1
Scar Revision
13
Bladder Fulguration
29.5
Elective Cranial Bone Flaps, etc.
16
Other
15.8
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
WEEKS
SOURCE: Steve Globerman, Waiting Your Turn: Hospital Waiting Lists in Canada (Vancouver: Fraser Institute, 1990)
74
The President's Comprehensive Health Reform Program
Chart 23. ACCESS TO MODERN MEDICAL TECHNOLOGY
UNITED STATES (1987) VS. CANADA (1989)
PER MILLION PEOPLE
6
UNITED STATES
5.06
5
CANADA
3.97
4
3.69
3.26
3
2
1.5
1.23
1.31
1.06
0.94
1
0.54
0.46
0.16
0
OPEN-HEART
CARDIAC
ORGAN TRANS-
RADIATION EXTRACORPOREAL MAGNETIC
SURGERY CATHETERIZATION PLANTATION
THERAPY
SHOCK WAVE
RESONANCE
LITHOTRIPSY
IMAGING
SOURCE: Dale A. Rublee, "Medical Technology in Canada, Germany and the United States," Health Affairs, Fall 1989, Table 1, p. 180
British Columbia Health Association has con-
Ineffective Use of Resources Resulting
tracted with Seattle hospitals for coronary
from Inappropriate Incentives.-Because
bypass surgeries (Washington State Hospital
Canada continues to rely primarily on fee for
Association, 1990), and Ontario and Alberta
service payment, physicians are rewarded for
have similarly contracted with U.S. hospitals
additional care regardless of need or quality.
for high technology care (Goodwin, 1990;
As a result, utilization per physician increased
Sherlock, 1990).
by 25.1 percent in Canada between 1971 and
1985, compared with only 7.0 percent in the
While these instances may be rationalized
United States (Barer et al., 1988). Overall, Ca-
as temporary problems, the Canadian system
nadian physicians provide a much higher vol-
is able to use access to U.S. technology
ume of services than U.S. physicians. While
as a "safety valve." Since the U.S. provides
data is not available on rates of appropriate-
an available supply of medical technology
ness, these substantially higher levels of medi-
just across the boarder, Canada may have
cal utilization raise concerns about the amount
an incentive not to invest in sufficient supply.
of inappropriate and unnecessary care being
If the U.S. were to adopt a Canadian system,
delivered and paid for by the Canadian tax-
this safety valve would no longer exist for
payer.
Canada, nor would one exist for Americans
(HIAA, 1990).
Hospitals also face perverse incentives. Be-
cause hospitals are paid a fixed aggregate
Limited hospital budgets for capital improve-
budget, they have a financial incentive to
ments also have meant that the physical
use available beds for patients with the
plant and equipment in many hospitals is
lowest cost. As a result, Canadian hospitals
nearing obsolescence (Iglehart, 1986). This
are filled with chronically ill, but low cost,
lessens some Canadian hospitals' ability to
patients, termed "bed blockers."
provide the highest quality care.
Problems with Alternative Approaches
75
Table 6-1. Relative Use of Physician Services in Canada
and the United States
(Services per capita)
Canadian Rate
Service Type
as Percent of
U.S. Rate
Diagnostic and Therapeutic Procedures
120
Office Visit and Consultations
156
All Physician Services
139
Source: Fuchs, 1990.
These incentives affect quality and hospital
atively undeveloped in Canada compared with
staffing decisions. Canadian hospitals have
the United States. Similarly, Canadian hos-
lower average staff-to-patient ratios than do
pitals have few incentives to compete on
U.S. hospitals, (1.87) versus (3.47) (Newhouse
increased quality of care. Because of tight
et al., 1988). Quality for high-risk patients,
budgets, hospitals in Canada do not invest
however, can suffer as a result of these
to any significant level in data collection
staffing patterns (see below).
and quality review.
Pressures on Quality.-Roos et al. (1989)
recently compared Canadian and U.S. post-op-
Could a Canadian-Style System Be
erative mortality rates. Interestingly, Cana-
Successfully Implemented in the United
dian hospitals did as well as U.S. hospitals
States?
on low risk surgical procedures. Post-operative
Critical Differences Between the United
mortality, however, is 44 percent higher in
States and Canada.-The notion of simply
Canada than in the U.S. for high risk proce-
adopting the Canadian system is simplistic.
dures including heart surgery. This outcome
Each nation has its own unique political, cul-
may result from hospital budgeting practices
tural, and economic environment and history.
which encourage lower staff-to-bed ratios. This
means that patient care resources might not
One major difference between the United
be available when critically needed.
States and Canada is our form of government.
We rely on a system of checks and balances,
Quality assurance activities such as peer
with independent executive, legislative, and
review, second opinion, utilization manage-
judicial branches. Canadians, in contrast, have
ment and outcomes information also are rel-
a parliamentary form of government, which
Table 6-2. Comparison of Hospital Care in Canada and the United
States
(Use rates for people aged 65 and older)
Canadian
Unites States
Canada
Rate as
Percent of
U.S. Rate
Admissions Per Capita
0.33
0.35
106
Length of Hospital Stay (in days)
7.96
13.32
167
Hospital Days Per Capita
2.63
4.66
177
Hospital Staff Per Occupied Bed
3.47
1.87
54
Source: Newhouse, 1988.
76
The President's Comprehensive Health Reform Program
Chart 24. POST-OPERATIVE MORTALITY FOR HIGH RISK SURGICAL PROCEDURES
FOR PATIENTS 65 AND OLDER
DEATHS PER 100
12
10
8.4
8
5.8
6
4
2
0
30-DAY MORTALITY
MANITOBA / NEW ENGLAND
SOURCE: Roos, et al., JAMA, Vol. 263, No. 18, May 9, 1990
effectively combines legislative and executive
prehensible only to a handful of Congressional
functions. There is less potential in Canada
staff and executive branch experts.
for the political deadlock that has character-
With the increasing complexity of the legis-
ized health policy in the United States over
lation, few Members of Congress even have
the past decade.
an opportunity to vote on the issues involved.
Experience with the Medicare and Med-
Over the past decade, the full House and
icaid Programs.-Experience with the Medi-
Senate have only had a handful of opportuni-
care and Medicaid programs suggests that a
ties to debate and vote on critical pro-
Canadian-style universal public insurance pro-
grammatic issues.
gram could not be translated successfully into
the United States. While these programs have
Micromanagement of program details by
succeeded in expanding access to the elderly,
legislators may be inevitable because it ex-
the disabled and many low income Americans,
tends the political power and influence of
these programs have become increasingly po-
key committee members. The technical details
liticized over the past 10 years thwarting effec-
of payment policy often are highly arcane
tive program management.
but of great monetary significance. Many
payment policies are somewhat arbitrary.
When enacted in 1965, Congress delegated
broad responsibility for management of Medi-
Per capita health care costs for Medicare
care and Medicaid to the executive branch
and Medicaid recipients have grown consist-
and to the States. Congress legislated only
ently faster than per capita health care
the broad outlines of the programs and
costs for the remaining population.
limited its role to oversight. Today, virtually
If the political process has been unable
every detail of operation of Medicare and
to control 30 percent of health spending,
Medicaid is dictated in hundred of pages
there is little reason for optimism that it
of dense legislative language that are com-
Problems with Alternative Approaches
77
Chart 25. ANNUAL GROWTH IN PER CAPITA HEALTH CARE
EXPENDITURES
ANNUAL GROWTH RATE
16
14
13
12
11.1
9.1
10
8.7
8
6
4
2
0
1970'S
1980'S
GROWTH PERIOD
MEDICARE/MEDICAID
PRIVATE
SOURCE: HCFA, Office of the Actuary, Office of National Health Statistics
could be more successful in controlling costs
rise by the same amount. Using 1992 dollars
for the entire health system.
or cost controls would have to cut enlisting
Potential for Massive Transition Costs
problems and expenditures by an equivalent
and Disruptions.-Establishing a universal
amount. Either tax increases or program costs
public insurance program in the United States
of this magnitude would have devastating ef-
would involve massive transition costs and dis-
fects. If coverage is financed through a payroll
ruptions. Either taxes and government spend-
tax that would increase the cost of employ-
ment, job losses could exceed two million work-
ing (federal and/or State) would have to in-
ers. Millions of people currently satisfied with
crease by $250 to $500 billion per year, and
their current insurance arrangements would
either taxes or government borrowing would
be forced to switch their coverage.
B. Problems with "Play-or-Pay"
Overview
and by Representative Rostenkowski, among
others.
"Play-or-pay" is a widely discussed approach
for expanding health insurance access. Em-
While "play-or-pay" would expand insurance
ployers would be required to "play", e.g.,
coverage, it suffers from four serious draw-
provide private insurance for workers and
backs. "Play-or-pay" would:
dependents, or "pay" a payroll tax to fund
public insurance for their workers and depend-
Hurt workers by reducing jobs and by forc-
ents. Variants of this approach have been
ing employers to cuts wages to offset man-
proposed by Senators Mitchell and Kennedy
date costs. While "play-or-pay" seems to
put the burden on employers, this is large-
78
The President's Comprehensive Health Reform Program
ly an illusion. Employers will inevitably
force would have a strong incentive to opt
shift the burden to employees. Between
into the public plan, further undermining
350,000 and 750,000 jobs could be lost in
the solvency of the plan.
the short-run, with a long-term potential
as high as two million. These job losses
How Play-or-Pay Plans Operate
are about 50 percent to 100 percent of
those endured during the recession. More-
"Play-or-pay" employer mandates are de-
over, cash wages for many of the "bene-
signed to provide coverage for workers and
ficiaries" of the mandate would decrease
their dependents with little direct cost to
by 7 to 9 percent depending on the payroll
government. Employers are required to provide
tax rate, and would fall by about another
coverage directly or pay a payroll tax. Man-
1 percent as newly unemployed workers
dates typically apply for all workers employed
compete for increasing scarce jobs.
more than 17.5 hours a week.
Cascade into a form of national health in-
To "play," employers would be required to
surance. "Play-or-pay" is inherently unsta-
provide "basic" health coverage. Typical
ble. According to the Urban Institute, 60
employers could require workers to pay up
million workers and dependents who now
to 20 percent of premium costs as well
have private coverage would be shifted
as make modest copayments upon the re-
into the public plan. Overall, 58 percent
ceipt of health care.
of Americans would be insured publicly.
Employers not providing health benefits
At this point, the public could use its near-
directly would be required to pay a payroll
monopsony position to gain deep discounts
tax to cover a portion of the cost of bene-
from providers resulting in a massive cost-
fits provided through a public insurance
shift that would rapidly price the remain-
program. Estimated payroll tax rates are
ing private coverage out of the market.
in the range of 7 to 9 percent. Generally,
Hurt small business. While the $30 billion
there is no cap on the taxable wage base.
cost of the mandate will be shifted to
"Play-or-pay" mandates usually are accom-
workers, in the near-term, employers will
panied by an expanded public insurance pro-
bear the burden. Some employers may try
gram to replace Medicaid and provide sub-
to pass this added cost on to consumers
sidized coverage on a sliding-scale basis for
in the form of higher prices. But many
those without employer-paid coverage or Medi-
businesses that do not currently provide
care. Some form of price regulation also
coverage have low profitability, are en-
generally accompanies "play-or-pay" proposals
gaged in competitive markets and may fail
as a means of restraining costs. The regulation
as a result of the higher costs. Small busi-
may involve some form of payer/provider
ness will suffer disproportionately.
negotiations or may be administered directly
Increase costs for government over and
by a regulatory agency.
above the new payroll tax receipts. "Play-
or-pay" is not self-financing. A federal sub-
Characteristics of the Working Uninsured
sidy would be needed to fund the gap be-
tween payroll tax receipts and actual
The working uninsured are the intended
costs, and this gap is likely to grow rap-
beneficiaries of "play-or-pay" mandates. In
idly. Although premium costs average 7
1987, almost half (47.4 percent) of uninsured
percent of payroll, actual costs vary wide-
workers earned $5 or less an hour. Sixty
ly. Low-wage firms incur costs well in ex-
percent were employed in small establish-
cess of 7 percent. These firms will dis-
ments with 25 or fewer workers. Most worked
proportionately opt to "pay," but the tax
in low-skilled occupations and in industries
will be inadequate for health coverage for
that are characterized by intense competition
these firms. This problem will be
and comparatively low profitability. Many
compounded by the fact that premium
of these low-wage workers will be those
costs also vary widely. Firms with higher
who would lose their jobs under play-or-
premiums due to an older or sicker work
pay.
Problems with Alternative Approaches
79
Consequences of "Play-or-Pay"
billion for employers with a 9 percent tax.
Effects on Insurance Coverage.-From
Premiums paid by individuals would increase
the standpoint of expanding insurance cov-
by less than $1 billion, while uncompensated
erage "play-or-pay" appears to be a success.
hospital care would decrease by $15 billion.
According to a simulation conducted by ana-
The Effects on Wages and Employment.-
lysts at the Urban Institute, an estimated 33
"Play-or-pay" mandates appear to put the bur-
million uninsured Americans and their de-
den on employers, but in the long-run, the bur-
pendents would receive insurance coverage as
den falls primarily on workers. The effects are
a result of the mandate-22 percent through
two-fold: lower real take-home pay and fewer
their employer and 78 percent through the
jobs.
new public plan.
The reason is straightforward. At the mar-
Assuming a 7 percent "play-or-pay" tax,
gin, the total compensation an employer is
insurance costs would increase by $30 billion
able to pay (including wages and fringe
for employers, in 1989 dollars, and by $37
benefits) must equal the marginal value to
Table 6-3. Shifts In Insurance Coverage for the Under 65 Population
Employer
Govern-
Private
ment
Sponsored
Uninsured
Insurance
Nongroup
(Excluding
Medicare)
Number of People Covered in Millions:.
Current System
142
18
23
33
Under Pay-or-Play:
With a 7 percent tax
105
0
112
0
With a 9 percent tax
132
0
85
0
Percentage of Population Covered:.
Current System
66
8
11
15
Under Pay-or-Play:
With a 7 percent tax
48
0
52
0
With a 9 percent tax
61
0
39
0
Table 6-4 Insurance Costs
(Billions of 1989 dollars)
Total
Individ-
Govern-
Employers
uals
ment
Total Insurance Costs:
Current System
202
129
46
28
Under Pay-or-Play:
With a 7 percent tax
269
159
46
64
With a 9 percent tax
272
173
46
53
Added Insurance Costs:
With a 7 percent tax
67
30
0
36
With a 9 percent tax
70
44
0
26
Less Savings from Reductions in Uncompensated Care:
With a 7 percent tax
15
I
-
-
With a 9 percent tax
15
-
-
-
Net Added Insurance Costs:
With a 7 percent tax
52
I
-
-
With a 9 percent tax
55
-
-
-
80
The President's Comprehensive Health Reform Program
the employer of the labor that is provided.
A review of the characteristics of the unin-
If an employer is forced by a government
sured workers makes these predictions seem
mandate to increase benefits, the employer
even more realistic. Most of uninsured workers
will reduce employment or reduce cash wages.
are low-wage, low-skilled workers. These work-
A mandate simply cannot force an employer
ers have little ability to command costly
to pay more in compensation than the value
fringe benefits.
of the labor to the employer. This conclusion
is supported by a number of empirical studies
A better approach is to provide direct
analyzing other mandates (see, e.g., Gruber
assistance for low-income workers through
and Krueger, 1990).
tax credits, as the President has proposed.
This approach is more "progressive" in terms
For uninsured workers, the cost of keeping
of income distribution. Income is transferred
their jobs with a 7 percent "play-or-pay"
directly to assist low-income workers, without
payroll tax would be a 7 percent reduction
the risk of job loss or a reduction in wages
in gross wages, and a larger proportionate
that a mandate inevitably involves.
drop in after-tax income. In addition, wages,
corrected for inflation, would fall by about
"Play-or-pay" has other disadvantages for
workers as well.
another 1 percent as newly unemployed work-
ers compete for fewer jobs. The burden would
With a 7 percent payroll tax, 52 million
be particularly great because most of the
currently insured workers and dependents
working uninsured are low-wage workers al-
with employer-based plans would be forced
ready struggling to make ends meet. For
to change coverage. Another 14 million
example, the mandate would result in-
Americans would be forced to give up their
A pay cut of $1,680 a year for the average
private insurance and would be forced into
30 year old male high-school graduate,
a "one size fits all" public insurance plan.
currently earning $24,000 a year in wages;
These shifts in coverage are illustrated in
Table 6-5.
and
A pay cut of $1,260 a year for the average
Families that depend on supplemental in-
come from part-time employment of a
30 year old male high-school dropout, cur-
rently earning $18,000 a year in wages.
spouse could be hurt. If the mandate ap-
plies to part-time work. Employers will cut
For other workers, 350,000 to 700,000 jobs
back on part-time jobs because of the
would be lost. Moreover, if the "play-or-
added cost. On the other hand, if the man-
pay" mandate evolves into a universal public
date does not apply, it would fail to close
insurance program, available to all regardless
an important gap in coverage and govern-
of employment, job losses could reach two
ment would be forced to pick up the costs
million.
through the back-up public plan.
Table 6-5. 66 Million Lose Choice of Plan Under Play-or-Pay
(Coverage under new public plan in millions)
Workers
Dependents
Nonworkers
Total
With a Pay-roll Tax of 7 Percent
Former Source of Coverage:
Employer
37
15
0
52
Private Insurance
6
2
6
14
Government
2
4
13
19
Uninsured
12
6
8
26
Total
57
27
28
112
Problems with Alternative Approaches
81
A Backdoor to National Health Insurance
In the absence of other reforms, health
care costs are likely to increase much more
Advocates present "play-or-pay" as means
of providing universal coverage while avoiding
rapidly than wages. As a result, the public
national health insurance with all of its
plan will become increasingly underfunded
shortcomings. (See Chapter 6.A.) But, this
unless the payroll tax is increased to keep
argument is flawed. "Play-or-pay" is inherently
up with health care inflation. But, due to
unstable and will likely collapse into a full
political pressures, the Congress is unlikely
blown national health insurance system.
to let this happen. So, the Congress is
likely to turn increasingly to general revenues
Many employers who now provide private
to subsidize the public plan. Or the Congress
health insurance to their workers will have
may try to use some form of blunt price
strong incentives to shift coverage to the
regulation to hold down public plan costs.
public plan "pay" option because a 7 or
Either way, the public plan would gain
even 9 percent payroll tax will be significantly
an increasing competitive advantage over pri-
less costly than private coverage. The incen-
vate health plans, and private health plans
tives are particularly great for small firms
would rapidly lose market share.
with comparatively low average wages. A
recent study conducted for the Labor Depart-
Effects on Employers
ment by policy analysts at the Urban Institute
reaches some startling conclusions on the
In the short-run, employers will not be
potential size of such a shift.
able to react fully to the mandate by reducing
wages or employment. As a result, the initial
With a 7 percent payroll tax, total enroll-
harmful effects of the mandate will fall
ment in public insurance (including Medicare)
mainly on employers. Small firms would
would be 144 million or 58 percent of the
population. Sixty-six million Americans with
be especially hard hit.
private coverage would be shifted to the
Health insurance costs for employers
new public plan. Twenty-six million of the
would increase by $30 billion under a
33 million who are currently uninsured would
mandate with a 7 percent payroll tax-
end up in the public plan. Only 7 million
a 23 percent increase in current health
would actually receive health insurance
insurance costs. With a 9 percent tax, the
through their employers.
added cost for employers would be $44 bil-
For workers in small firms, private health
lion-a 34 percent increase in insurance
insurance would quickly become a thing of
costs.
the past under "play-or-pay". At a 7 percent
The largest proportional increases would
tax, 81 percent of the workers in firms
be for small employers. For firms employ-
with 25 workers or less would be enrolled
ing fewer than 25 workers, costs would
in the public plan. Even with a 9 percent
rise by 71 percent with a 7 percent payroll
payroll tax 117 million, or 47 percent of
tax rate, and by 101 percent with a 9 per-
the total population would be covered by
cent tax. As noted, 60 percent of currently
public insurance. Thirty-two million Americans
uninsured workers are employed in estab-
who currently have private employer-paid
lishments with 25 or fewer workers.
coverage would shift into the new public
plan as would 22 million of the currently
In the short run, a "play-or-pay" mandate
uninsured.
will lead to somewhat higher prices and
an increase in the inflation rate. For firms,
It is important to note that the Urban
that cannot pass on increases in costs through
Institute study focused only on the "static"
higher prices, there would be a fall in
effects of a "play-or-pay" mandate. Once a
profits. Assuming the monetary authorities
"play-or-pay" system is in effect, however,
maintain their existing targets for inflation,
dynamic forces will be set in motion that
the effect of the mandate would be to lower
drive the system further toward universal
employment and lower real GDP.
public coverage.
82
The President's Comprehensive Health Reform Program
Chart 26. SOURCE OF HEALTH INSURANCE
COVERAGE FOR U.S. POPULATION
CURRENT SYSTEM
UNINSURED
13.3%
PRIVATE
64.5%
PUBLIC
22.2%
PAY-OR-PLAY WITH A 7% TAX
PRIVATE
PUBLIC
42.2%
57.8%
SOURCE: The Urban Institute, "Pay or Play Employer Mandates: Effects on Insurance Coverage and Costs," January 8, 1992
Problems with Alternative Approaches
83
The Cost to the Government of "Play-or-
to a Canadian-style system in relying on
Pay"
supply-side constraints to control costs. Nei-
A "play-or-pay" mandate would give rise
ther approach addresses the dynamic factors
to a vast new federal health insurance pro-
that are driving up health care costs.
gram, four times as large as Medicaid and
In the absence of meaningful reforms, impos-
inadequately funded.
ing price controls is like putting lid on
The Urban Institute estimates that a pay-
a pressure cooker. If the heat remains, the
or-play mandate with a 7 percent payroll
lid eventually blows off and the pot boils
tax would not be adequately funded. The
over. The disadvantages of the Canadian
new payroll tax would not cover the full
system are discussed in detail elsewhere.
cost of the new public plan. A subsidy
Problems with all-payer rate setting are briefly
of $37 billion would be needed from general
summarized here (see Table 6-6).
revenue. A 9 percent payroll tax would lower
the subsidy to $25 billion. The subsidy is
Although advocates often argue that all-
likely to grow over time for reasons noted
payer rate setting would encourage coordi-
previously.
nated care plans, the opposite seems more
likely to be the case. All payer rate setting
"Play-or-Pay" Fails to Address Cost-
robs coordinated care plans of their cost-
Control Effectively
savings advantage relative to traditional fee-
Play-or-pay proposals are often coupled with
for-service arrangements by artificially holding
"all-payer" price regulation schemes that at-
prices down.
tempt to limit aggregate payments by all
The more rate setting succeeds in controlling
public and private insurers to hospitals, physi-
costs, the less incentive that consumers (and
cians, and other providers to pre-set global
therefore providers) will have to switch to
budget targets. These schemes are closely
coordinated care. So, all-payer rate setting,
related to Canadian-style national health in-
like Canadian-style national health insurance,
surance plans and share the same drawbacks.
seems likely to preserve inefficient forms
All-payer rate setting preserves a role for
of service delivery.
private insurers, but is otherwise identical
Table 6-6. Potential Problems with All-Payer Rate Setting
1. Supply constraints will lead to shortages and waiting lines. Tight global budgets will
force hospitals to cut back on personnel in critical areas-jeopardizing the quality of
patient care.
2. Rate setting fails to reward efficient physicians while creating incentives for
overutilization.
3. Rate setting fails to reform incentives/structure/organization at the micro-level and so
will lose effectiveness with time.
4. Rate setting will reduce the competitive edge of coordinated care-thereby retarding
critically needed change in the delivery system.
5. Primary reliance on all-payer regulation to control costs opens up a broad range of is-
sues to political interference and manipulation.
Chapter 7
Examples of Impacts on Individuals and Families
The President's plan will allow all Ameri-
another private plan) when they no longer
cans to have access to affordable health
qualify for Medicaid.
insurance. The following are illustrative exam-
The President's plan removes the current
ples of how the President's plan would work.¹
incentive for AFDC families to remain on
welfare because they fear losing Medicaid
Case #1
coverage-the President's plan will ensure
A family of two parents and a child with
continued coverage for welfare recipients
one working parent without employer cov-
who return to work.
erage, and a total family income of $10,000
(just below the poverty level):
Case #3
[Full Credit of $3,750]
A family of four with a modified adjusted
gross income of $60,000 (in which the filer
Under the current system, this family is
is married and filing jointly), and no employer
not eligible for Medicaid and cannot afford
sponsored health insurance:
private health insurance.
[Full Health Care Deduction of $3,750 and
Under the President's plan, this family
Access to Group Coverage]
would qualify for a $3,750 transferable
credit to buy basic health insurance
Under the current system, they often can-
through the State designed group health
not find affordable coverage.
plan (or another of their choice).
Under the President's plan they would re-
ceive a $3,750 tax deduction (a benefit of
Case #2
approximately $1,050) to help with the
A mother with two children who was
purchase of insurance.
on welfare (AFDC) in the past, and has
In addition, their employer(s) would pro-
returned to a job earning $8,500 per year.
vide information and arrange access (but
No employer health insurance is provided:
not be required to contribute) to group cov-
[Full Credit of $3,750]
erage. For example, the employer could ar-
range coverage through a Health Insur-
Under the current system, a mother re-
ance Network (HIN), SO that the family
ceiving AFDC who returns to work contin-
could buy more affordable coverage
ues to receive Medicaid for six months;
through a large group-with larger risk
after the six-month period, the family may
pools rather than costly individual cov-
be charged three percent of the family in-
erage.
come as a Medicaid premium in this case,
$255 for six months of coverage. After one
Case #4
year, the family is no longer eligible for
Medicaid.
A single individual with intermitent income
at the minimum wage and not eligible for
Under the President's plan, the family
Medicaid (e.g. most males or a woman who
would qualify for a $3,750 transferable
is not a mother):
credit to buy basic health insurance
through the State group health plan (or
[Individual Credit of $1,250]
1 The examples presented assume the fully-phased in program,
Under the current system, this individual
and use 1993 income thresholds.
has no access to health insurance, and
85
86
The President's Comprehensive Health Reform Program
usually receives "unreimbursed
care"
Under the current system, small employ-
through hospital emergency rooms.
ers have difficulty finding affordable cov-
Under the President's plan, this person
erage. The problem becomes worse when
would receive a $1,250 transferable credit
one member of a small group has a poor
for the purchase of group health insurance
medical history or current high medical
costs.
through the basic State health plan, or
some other private plan.
Under the President's plan, small employ-
ers would have access to larger group cov-
Case #5
erage through Health Insurance Networks
(HINs) spurred by major insurance and
A family of four with a modified adjusted
gross income of $50,000, and a $1,000 em-
ERISA reform. Large group coverage is
less expensive and more efficient, since in-
ployer contribution to health insurance:
surance administrative costs are much
[Health Care Deduction]
lower and risk is more effectively distrib-
uted.
Under the President's plan, this family
would receive a health care tax deduction
In addition, the plan would set limits on
of $2,750 ($3,750 minus employer con-
the variation of premiums insurers could
tribution of $1,000), making their health
charge to different groups. Insurers would
insurance much more affordable.
not be able to deny coverage to any indi-
vidual, or drastically increase premiums
Case #6
when one member of a group becomes ill.
An individual with a serious health problem
Case #8
is considering changing jobs, but is
afraid
of giving up current employer coverage:
A small employer with an employee just
diagnosed with a serious health problem
[Portability and Security of Health Care]
applies for health insurance for the first
Under the current system, a person chang-
time:
ing jobs may not be covered under a new
[Guaranteed Coverage Issue]
employer's policy because of health status.
A pre-existing condition exclusion may
Under the current system, uninsured per-
also apply, interrupting coverage.
sons with serious health problems are
often denied health insurance-at any
Under the President's plan, regardless of
price.
the employee's health status, the new in-
surer would be required to offer unre-
Under the President's plan, insurers would
stricted access to the new employer's
be required to offer coverage to any group,
group coverage.
regardless of health status. Premium lev-
els would be limited S0 that costs would
In addition, insurers would not be per-
not be prohibitive.
mitted to deny coverage due to health sta-
tus, and persons with previous health ben-
Case #9
efits could not be denied coverage of pre-
existing conditions. (So long as no insurer
A family of four with a modified adjusted
can avoid pre-existing conditions, and all
gross income of $17,000 has no employer
must accept new risks, no insurer will be
coverage and currently cannot afford health
disadvantaged.)
insurance:
[Partial Health Credit]
Case #7
Under the President's plan, this family
An employer of a small firm of 20 workers
would receive a partial health tax credit
would like to offer employees health insurance,
towards the purchase of health insurance
but cannot find affordable coverage:
(or a $3,750 deduction-whichever pro-
[Small Market Reforms]
vides the greater benefit) because their in-
Examples of Impacts on Individuals and Families
87
come faces between 100 percent and 150
included in the plan-or of the relative
percent of the tax threshold.
quality of local hospitals and doctors.
Affordable group coverage would be made
Under the President's plan, comparative
available through a State coordinated
information on quality and price of health
"basic plan" pool that would guarantee ac-
care will be available to consumers and
cess to basic health insurance coverage.
large purchasers of care. State insurance
commissioners will collect information on
Case #10
area providers, and also on individual pro-
viders such as physician, hospitals, labs
An individual is planning on choosing a
and other facilities-both on price and
health plan and wants to get the best
quality. This information will be made
quality plan for the best price. But he
available by employers. A type of local
is unsure of which plan to choose:
health care market "blue book" will allow
consumers to identify the best health
[Consumer Information]
plans, and providers. As a result, consum-
Under the current system, consumers have
ers will be better equipped to choose the
limited knowledge of the relative prices of
health plan or provider best suited to their
insurance an health care services. Nor are
needs and the best value for their health
they aware of the hospitals and doctors
care dollar.
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MAGIC JOHNSON, AIDS, AND BLACK AMERICA
DECEMBER 2, 1.991 . $2.95
FIRE
Managed health care scams Does Cuomo give good phone? Post-nuclear families
WASP AGONY
John Updike
on the secret life of
John Cheever
Camille Paglia
on the Presbyterian report
on human sexuality
48
49140
0
787445
1
ica's ability to exert pressure on them-whether to
secure trade concessions or acquiescence to U.S. leader-
ship-will be sharply reduced. No one wants to kick the
The failings of 'managed' care.
United States out, as the administration complains
After all, it's always good to have an insurance policy.
But most of them know that the Americans won't stay
on indefinitely anyway. And they feel that an economi-
cally powerful European Community ought to have a
greater say in its defense than a U.S.-dominated NATO
SICK JOKE
allows. The Europeans do not all, of course, view the
issue through the same lens. The French see a Euro-
pean army, based on a Franco-German core, as a way of
I
By Robert Kuttner
dissuading the Germans from any temptations to act on
their own. The Germans want to show that they are
good Europeans who are willing to join forces with their
O
n April 11, 1990, Lawrence Megge, a 34-year-
neighbors. And the British, ever reluctant to merge
old machine-part designer, rammed his car
their sovereignty into Europe, prefer a U.S.-dominated
into a highway stanchion near Detroit, killing
NATO to a European force run by France and Germany.
himself and his wife. Megge had repeatedly
sought treatment for extreme depression, suicidal ten-
dencies, delusion, and sexual abnormalities. He
W
ith the Soviets flat on the mat, the unavoid-
able question for Americans is: What do we
believed his boss was the archangel Michael, and that
get out of NATO? In the past the answer was
his colleagues were out to kill him. Megge's health plan,
easy: advance bases, leverage against Moscow,
SelectCare, provided generous mental health benefits.
deference from dependent Europeans. Now the answer
However, in an effort to cut its costs, SelectCare had
is different: the bases are unnecessary, the leverage irrel-
recently contracted with a company called American
evant, and the deference gone with the wind. The NATO
Biodyne, which specializes in an aggressive brand of
si
bureaucracy is still firmly in place, providing employ-
"managed care."
ment and pleasant European assignments for an army of
Biodyne assumed SelectCare's entire financial risk for
al
military and civilian administrators. But they're now
mental health claims, in exchange for a flat per-patient,
tending a monument rather than manning a battlefront.
per-month payment. Biodyne thus capped SelectCare's
NATO was set up to keep the Russians out of Western
costs-and made Biodyne's own earnings dependent on
W
Europe and, as a real but unexpressed subtext, to keep
its ability to keep patients out of the hospital and other-
the Germans in check. Now the Europeans are trying to
wise minimize their treatment costs. According to medi-
p'
figure out a way of bringing the Russians into a wider
cal records, on two occasions Biodyne psychologists had
Europe, without bankrupting Brussels in the process,
overruled emergency room doctors who suggested that
d
and of building a Community both tight and large
Megge be hospitalized, recommending instead that he
b
enough that even the new united Germany won't domi-
use a drop-in therapy group, or stay in touch by phone.
nate it.
Megge's family says that in the two days before his death,
n.
Unfortunate though it may be, there isn't much place
calls to his Biodyne therapist went unreturned. They are
ic
for NATO in all this. The Europeans know that the
suing Biodyne, SelectCare, three psychologists, and a psy-
ai
United States, because of budget constraints and the
chiatrist for $21 million, for breach of contract and gross
disappearance of the Soviet threat, is going to pull most
negligence. All of the defendants deny any wrongdoing.
m
of the GIS out of Europe. They're acting accordingly to
Managed care-the free enterprise solution to medi-
build, through a Franco-German nucleus, a European
cal inflation touted by the private insurance industry,
defense force. They don't need a briefing to see that
the Bush administration, The New York Times, and con-
NATO hasn't been of much help in dealing with their
servative health experts-has more than a few glitches.
new security problem: regional wars in the detritus of
In some cases, as illustrated by the Megge affair, it can
the Soviet internal and external empire. Nor is this an
pinch far too tightly and tragically deny needed treat-
area in which Americans are going to expend their lives,
ment for which people are presumably covered. At the
in
honor, and sacred fortune. George Bush may have got-
same time, managed care as currently practiced fails to
fo
ten the folks cheering for a war to liberate Kuwaiti oil,
do what its proponents claim: significantly reduce med-
ical inflation.
but the "freedom fighters" from Chechen-Ingush in the
n.
deepest Caucasus will be on their own. Let Moscow, or
Employer medical costs are rising at about 18 percent
CH
Brussels, worry about that one.
annually. At this rate health care would consume 100
Deprived of a foe, of a mission, of a strategy, NATO,
percent of the gross national product by the year 2050.
now demoted in its ambitions to such mundane and eas-
In response to this chronic inflation, insurance carriers,
in
ily evaded tasks as "crisis management," will nonetheless
large employers, and specialty companies like Biodyne
linger on for a few more such extraneous summits,
have pursued a number of cost containment strategies,
O
demonstrating once again that the first law of every
all under the general heading "managed care." These
C.
bureaucracy is survival.
include restricting what will be reimbursed; increasing
subscriber out-of-pocket payments; giving subscribers
OI
20 THE NEW REPUBLIC DECEMBER 2, 1991
incentives to choose health maintenance organizations
staff clinicians and a much larger network of contract
(HMOS), which limit doctors and treatments, rather than
therapists, often part time, who agree to follow the "Bio-
"indemnity plans" (traditional forms of insurance that
dyne model," which stresses limited forms of treatment.
reimburse bills); organizing networks of "preferred
According to Waxman, "We typically cut the hospital
providers" who agree to serve subscribers at cut rates;
admits in half, and cut the average length of stay from
shifting to company on-site clinics; or hiring outside
fifteen or twenty days to six or seven." Biodyne's other
"utilization reviewers" such as Biodyne who often over-
basic approach is to contract with employers, insurers,
rule doctors in an effort to keep patients out of the hos-
or HMOS to function as a gatekeeper to insured medical
pital or limit hospital stays or promote less costly forms
treatment, reviewing doctors' decisions, discouraging
of treatment. Many large employers, in an effort to save
hospitalizations, and limiting their duration. Biodyne's
money, have become self-insured, using large insurance
clients include Blue Cross/Blue Shield plans in Ari-
companies such as Prudential or John Hancock simply
zona, Ohio, Indiana, and Massachusetts, several
to organize and manage their health plans but not to
Humana HMO plans in Texas and Florida, and other
bear the actuarial risk. And many insurance companies
individual insurance companies. As the fastest-growing
now view utilization review and managed care as their
company in its field, Biodyne's revenues nearly tripled,
most promising product line.
from $10.7 million in 1989 to $27.7 million in 1990, and
ly
Some of this works well for insurer and patient alike.'
are expected to double again this year to upward of $50
For example, Harvard Community Health Plan, an
million. Biodyne went public last July.
HMO, gently bribes healthy maternity patients to accept
sixteen hours' worth of home health care visits in
exchange for one night less in the hospital-cutting the
B
iodyne's approach has produced an outcry
from the mental health profession-some of it
S.
health plan's costs in half and offering a sensible service
deserved, some of it purely self-serving. In gen-
to new mothers. A number of insurance companies and
eral, Biodyne reviewers insist on visiting
large corporations also provide a relatively benign ver-
patients in the hospital, and a number of psychiatrists
sion of managed care, though this is a very costly propo-
have filed complaints alleging that unqualified Biodyne
sition. Prudential, for example, manages cases individu-
personnel undermined treatment. Dr. Rigoberto
ally in its blue-chip policies; if a patient is entitled to
Rodriquez, a child psychiatrist, was treating a depressed
sixty days of hospitalization, Prudential is flexible about
12-year-old boy in the psychiatric unit of Charter Hos-
converting that into more days of outpatient treatment
pital in Miami. He was startled when a Biodyne case
while preserving the cash value of the benefit. The
reviewer talked her way into the unit, ostensibly to
newer, more entrepreneurial managed-care companies
review records, and attempted to persuade the patient
promise the same flexibility at lower cost.
and his parents that he would be better off out of the
Unfortunately, the general trend seems to be in the
hospital. In San Antonio, Texas, a teenage girl was hos-
direction of the more aggressively entrepreneurial
pitalized for an addiction to heroin. According to the
brand of cost containment, which saves money not by
attending psychiatrist, Dr. John Peake, the Biodyne
finding the most medically appropriate means of treat-
reviewer managed to get into the unit and suggested
ment, but simply by limiting patient care. And if Amer-
that the girl would be happier if she left the hospital.
ica ever does rise up to demand universal health insur-
"She became so agitated that she had to be sedated,"
ance, it will be not because of an outbreak of solicitude
said Peake. "We barred the Biodyne reviewer from the
for the uninsured, but because it dawns on the insured
unit."
middle class that managed care is eroding the coverage
According to Waxman at Biodyne, the managed-care
they think they have.
industry is still maturing, and any such misunderstand-
ings are to be expected in its early stage. "Our current
he managed-care industry includes some 300
T
philosophy is to provide a continuum of care," he says.
companies. Biodyne is typical of the new-wave
"The basic idea is to keep moving patients to the most
n
firm. It specializes in cost control of mental
appropriate and most cost-effective level of care." Wax-
health and substance abuse, two of the most
man adds that "we don't make decisions about hospital-
e
inflation-prone areas of health care. Biodyne was
ization without consulting a psychiatrist. It's not our job
0
founded in 1985 by Dr. Nicholas Cummings, a psychol-
to talk the patient out of going into the hospital. If
ogist who spent most of his career at Kaiser-Perma-
that's what we said, that's wrong. Waxman says Biodyne
nente, one of the nation's oldest HMOS. The current
is now organizing comprehensive mental health net-
it
CEO, Dr. Albert Waxman, whose doctorate is in electrical
works in several states-everything from crisis interven-
0
engineering, initially put up the capital to launch Bio-
tion to hospitalization to day treatment to outpatient
dyne and then took over as chief executive in 1989, cit-
therapy and "wellness" programs. However, for the most
ing concerns about marketing and quality control.
part this ideal is still more a vision than a reality, and
Biodyne markets a variety of managed-care products.
because of the intense pressure to cut costs, managed
One basic strategy is the approach offered to Select-
firms that take this high road risk losing business to
Care-Biodyne in effect becomes the provider of men-
competitors that market mainly reduced costs.
tal health care with a financial incentive to economize
Ironically, this round of medical entrepreneurship,
S
on costs. Under this plan, Biodyne hires a small force of
which is selling cost containment, stems partly from the
DECEMBER 2, 1991 THE NEW REPUBLIC 21
trend of for-profit psychiatry that flourished in the
patients, leaving traditional indemnity policies and
1980s. Because insurance policies were typically gener-
Medicare with older, sicker patients. High-quality emer-
ous with hospital benefits and stingy with other forms of
gency rooms and trauma centers are being over-
treatment, private psychiatric hospitals proliferated in
whelmed by the high percentage of indigent care they
the 1980s, and the less scrupulous ones aimed to maxi-
provide. You need a universal payment policy to avoid
mize hospital stays. "It's a bit like the S&L scandal," says
cost-shifting, and a national approach to reviewing new
one psychiatrist. "The sharks spoiled it for everybody.
technology to make sure it adds value."
Now the crackdown is hitting even the people who need
treatment-the deserving cases-just like the credit
bviously a universal system would also have to
crunch is hurting legitimate businesses."
The law is very murky on who is ultimately responsi-
O
manage care. Every universal system does pre-
cisely that. But only in a system comprehensive
ble when a bad decision by a reviewer harms a patient.
enough to ensure the most appropriate treat-
Insurance policies provide coverage of treatment that is
ment option at the least possible cost is genuine man-
deemed "medically necessary." Before the cost contain-
aged care-rather than cost shifting and case dump-
ment era, that judgment was left to the doctor. But now
ing-realizable.
the insurance industry and its managed-care allies
Unfortunately, benign, paternalistic companies with
argue that if an insurance reviewer makes a misjudg-
long-term commitments to their employees are a van-
ment, it is up to the doctor and the hospital to appeal it,
ishing breed. Although it is possible to construct what
and even to hospitalize the patient at their own expense
amounts to social medicine in one company, few com-
if they think it medically essential. "If the physician
panies seem willing to bear the expense; most are more
thinks the patient should be put in the hospital, he has
interested in shedding costs. And, as Taylor observes,
the ultimate call," says Waxman.
"While some individual companies have excellent, com-
Although insurance companies are heavily regulated,
prehensive managed health care systems that get the
due to quirks in the law, managed-care companies such
rate of inflation down to about 10 percent, one
as Biodyne are largely unregulated. In response, several
employer just can't control all the underlying factors as
states have enacted such minimal consumer safeguards
an individual employer."
as requiring the use of qualified medical personnel and
Any system of medical care necessarily entails some
a clear procedure for appeals. And the managed-care
form of rationing; our system also cries out for some
industry, meanwhile, is attempting to pre-empt govern-
rationalizing. The best alternative is one that internal-
ment regulation by policing itself. Last spring the
izes the hard choices to clinic and hospital, rather than
American Managed Care and Review Association set up
using an external, for-profit reviewer. That describes a
a group called the Utilization Review Accreditation
well-run HMO; it also describes most universal health sys-
Commission (URAC), to set minimal standards and drive
tems, in which hospitals are given overall annual
out sleazy operators. To date, about 170 managed-care
("global") budgets, populations to serve, and then are
companies have applied for URAC accreditation.
told to go out and deliver the best possible medicine
within those constraints. These systems reap cost savings
ut even if the managed-care industry does clean
B
by driving out the inefficiency, not by driving out the
up its act, it is doubtful whether this approach,
care. Yet as generous companies keep being squeezed
grafted onto a patchwork system, can cure med-
by competitive pressures, the trend is for the bad brand
ical inflation other than by reducing care. Dr.
of managed care to drive out the good.
Roger Taylor, the physician and health policy consul-
The New York Times thinks "managed competition" is
tant who organized URAC, admits that managed care by
the answer to America's health problems. In a series of
itself can reduce medical inflation by only a few per-
editorials, most recently on October 29, the Times hails
centage points-in part because of the pressure to
corporations and insurers with the market power to
replace hospital benefits with other benefits. The
ratchet down costs, and paints a rosy picture of man-
underlying forces driving inflation in health care,
aged competition leading to greater consumer choice.
according to Taylor and other experts, are the shifting
But the Times fails to acknowledge that the competition
of costs from the uninsured parts of the system to its
occurs at the level of companies like Biodyne compet-
insured parts; the largely unregulated use of ever more
ing with one another by promising to save insurance
expensive technology; the demographics of an older
carriers and corporations money-not at the level of
and sicker population; the fact that the present system
the individual shopping around for the best policy. Too
largely rewards medical providers in proportion to how
often the consumer is locked in to his present plan by
much they can bill; and the fact that the overall system
worries about a pre-existing medical condition, or by
has numerous missing links. Managed care, by itself,
the fact that blue-chip policies are beyond his pocket-
can't make up for those gaps until the overall system
book, or because he's stuck with whatever deal his
insures everybody. As a result, the system often treats
employer made. Lawrence Megge, for one, did not reap
patients in the most expensive venues-emergency
any benefits from managed competition. All health sys-
rooms and psychiatric hospitals-because nobody is
tems will involve some form of case management. It
willing to pay for less expensive settings. As Taylor
remains to be seen whether our approach will squeeze
observes, "HMOS tend to attract younger, healthier
out costs, or just squeeze out care.
22 THE NEW REPUBLIC DECEMBER 2, 1991
Health & Welfare Practice
Legal & Research
Ed Davey & Henry Saveth
July 15, 1991
EMPLOYER-SPONSORED HEALTH COVERAGE FOR THE 1990s: PLAY OR
PAY?
1.
Summary
A key group of Senate Democrats has introduced a bill that would
impose a "play or pay" health benefit program on employers. Employers
would have to either "play," by giving employees a minimum level of
health benefits, or "pay," by contributing to a government-sponsored
insurance plan. People not covered by an employer plan, including the
unemployed, would participate in a public plan called AmeriCare. The
legislation also includes a comprehensive program intended to control
health care costs.
Since most larger companies already provide benefits equal to the
proposal's mandated minimum (except, possibly, preventive benefits), the
required benefits may not be a problem for them. Of greater concern is
whether the public plan would create a larger than anticipated deficit and
whether new health benefit taxes would be used to finance such a
shortfall. Finally, whether the initiative's ambitious cost containment
provisions would work is questionable.
2.
Political Outlook
The proposal certainly puts universal health coverage into play.
However, many think the old adage, "When all is said and done in
Washington, much is said, but little is done," applies to this proposal.
Indeed, although the measure's sponsors deny it, some cynics feel that
the initiative is designed not to pass this year, but to inject the health
care issue into the 1992 presidential campaign.
A key difficulty with the measure is that first-year operation would cause
an estimated $6 billion revenue loss. And under last year's pay-as-you-
go budget agreement, passage couldn't occur without accompanying
revenue gains or spending cuts. A logical revenue target would be a
limit on tax-free employer-paid medical premium, but both labor and
management would strongly object to this approach.
Republicans point out that the bill resembles the Pepper Commission
Report, which not even all Democrats endorsed. Some also say the bill
is a mere political ploy designed to provoke the President's veto, which
would be used to claim he is against health. The White House has
responded to the initiative with what has been called a blank stare. For
their part, the various constituencies of the health care community have
greeted the proposal with polite but unenthusiastic applause.
Congress, having only recently suffered a case of political indigestion as
a result of Medicare Catastrophic and Section 89, may prefer to nibble
around the edges of this Big Mac of an issue, rather than try to swallow
it whole.
3.
Playing
The legislation covers employers subject to the minimum wage
provisions of the Fair Labor Standards Act of 1938. State and local
governments are specifically included.
For employers who "play," rather than pay the "tax" described below, the
bill sets out a fairly standard medical benefit structure that would have to
be provided for employees.
A variety of special rules (not included in this release) would apply to
employers with fewer than 100 employees.
Eligibility
Employees who work at least one hour a week (and their families)
must be eligible after a waiting period of no more than 30 days.
During the waiting period the employee can purchase coverage by
paying the combined employer and employee premium.
Benefits: Mandatory "basic plan" provisions
These expenses for "basic benefits" would have to be covered:
Inpatient/outpatient hospital care and physician charges,
diagnostic tests, prenatal and well baby care (under 12 months
old), certain preventive services (well child care, Pap smears, and
mammograms), and mental illness benefits. Inpatient care for
mental illness could be limited to 45 days annually, outpatient care
to 20 visits annually; the employee copayment share for outpatient
care could be as high as 50 percent.
Cost Sharing
The following "standard" cost sharing items are suggested, but they
could be varied under an actuarial equivalence rule described on page 3.
Deductible
In general, annual deductibles would be capped at $250 for
individuals and $500 for families. Both amounts would be indexed
yearly for consumer price increases. As an alternative, other
deductible structures that don't exceed 1 percent of wages (2
percent for family coverage) could be used.
Copayments and Out-of-Pocket Limit
For the basic benefits, the employee's copayment share couldn't
exceed 20 percent. The copayment and deductibles would be
subject to an out-of-pocket limit of $3,000. As an alternative, an
annual 10 percent of pay out-of-pocket limit would be permitted.
While the $3,000 limit would be indexed for inflation, it would be
the same amount for individual or family coverage.
Special rules would apply to mental illness (previously specified),
out-of-plan services under plans with preferred providers, and for
utilization review penalties.
Employee Contributions
Employee contributions couldn't exceed 20 percent of total
premium. (Employers would pay at least 80 percent.) A special
discounted premium rate would have to be figured when
dependent spouses have other primary coverage.
An employer could withhold employee contributions from wages.
Any state laws that might prevent this without employee consent
would be preempted. Special prorated contribution rates would
apply to employees who work fewer than 25 hours a week.
Managed Care
Managed care programs and fee schedules that provide
reasonable access to benefits generally wouldn't be considered as
violating the minimum benefit requirements of the basic plan.
Alternative Plan Designs: Actuarial Equivalence
Employers would have to offer all of the basic benefits. Some
flexibility could be available, however, in setting employee
contributions, deductibles, coinsurance, and out-of-pocket limits.
If the actuarial value of a particular plan's benefits were greater
than that of a plan with the standard cost-sharing provisions, the
cost-sharing provisions could be varied. Thus, a plan with a lower
deductible could have a higher out-of-pocket limit. Also, a plan
providing extra, non-mandated benefits could ask employees to
pay a larger share of the premium or a higher deductible. But the
plan would have to retain some out-of-pocket limit, couldn't
lengthen the prescribed eligibility waiting period and, as indicated,
would have to include the prescribed basic covered services. For
mental illness a "reasonable combination" of both inpatient and
outpatient charges would have to be covered in an amount
actuarially equivalent to the "standard" mental health benefit.
Employers who don't like the standard cost-sharing design could
use the actuarial equivalence provision instead. These employers
could use their current plan's additional optional benefits
(presumably including dental and prescription drugs) as
justification for designing their own, nonstandard cost-sharing
features. The legislation would establish an actuarial equivalence
advisory board (no pay but they would get bus fare) to develop
guidelines.
Exclusions
The legislation would permit plans to exclude: items and services
that aren't medically necessary, routine physical examinations and
preventive care not specifically required as basic benefits, and
experimental treatments.
Basic benefits couldn't otherwise be limited in amount, scope, or
duration (that is, no "inside" or "outside" limits). However,
regulations would allow some limits on preventive services on the
basic benefits list.
Preexisting condition limitations wouldn't be allowed.
Benefits Mandated by State Law
The bill would amend ERISA to preempt state laws mandating
benefits for insured plans that meet the proposal's requirements.
Self-insured plans would continue with existing ERISA preemption
rules.
Subsidies for Lower-Income People
The public plan, described below, would subsidize premiums and
cost-sharing amounts lower-income people would otherwise be
responsible for.
4.
Paying: The Public Plan
Instead of providing employee coverage themselves, employers could
elect to contribute to a state-administered public plan covering their
employees. The contribution would be about 5 - 8 percent of payroll,
with 7 percent viewed as most likely. Employees would contribute 20
percent of the actuarial value of coverage. Lower-income people
(earning under $27,000 for a family of four) would be subsidized by the
public plan.
Public plan benefits would be essentially the same as the basic private
plan's. Because medical benefit cost is related more closely to
demographics other than salary (for example, age), employers with a
high concentration of low-paid employees may find it more economical to
pay into the public plan than to provide their own coverage. This would
be particularly true if the workforce were both older and lower paid.
In addition to covering people for whom employers contribute, the public
plan would cover the unemployed and would replace Medicaid (except
for long-term care benefits).
A major concern about the public plan is whether the employer
contribution could stay within the predicted 5 - 8 percent range. The
employer contribution looks an awful lot like a payroll tax. Under the
constitution only Congress can authorize taxes. However, this bill would
delegate authority to raise the contribution tax to the Secretary of Health
and Human Services. Some fear that antiselection and other factors
would result in poor experience in the public plan and sharply escalating
employer contributions, which HHS could quickly increase without
Congressional approval. A more general concern, one observer noted,
is that any government insurance plan (whether state, federal, or
combined) would be administered with the efficiency of the Post Office,
the cost-effectiveness of the Pentagon, and the compassion of the IRS.
5.
Cost Containment
A special concern of the legislation's sponsors is cost containment.
They hope that one result of the bill's universal coverage provisions
would be to reduce the high fees that providers charge people who can
pay, to make up for "uncompensated care" (expenses incurred by people
who can't pay).
A major portion of the legislation (110 pages) is devoted to specific
initiatives designed to contain costs.
The bill takes a three-pronged approach by attempting to regulate
unnecessary care, administrative costs, and price and utilization.
Reducing Unnecessary or Ineffective Care
The government would develop provider practice guidelines, and
government programs would be required to follow them in
utilization review activities.
Providers who are certified by state agencies as "practicing
efficient, quality care" would be exempt from insurer utilization
review.
Technology assessment and managed care also would be
encouraged. State barriers to managed care would be
preempted. Small business and the public plan would be
guaranteed access to managed care techniques.
Eliminating Unnecessary Administrative Costs
The legislation's sponsors feel that mandated standardized claim
forms would be easier for doctors and other providers to
complete, and therefore would reduce costs. Additional
administrative savings are projected from the elimination of
medical underwriting (evaluation of insurance applicants' health)
and more stable coverage (avoiding plan installation and
termination costs) in the small business market.
Small insurance companies would be required to combine into
consortia for claims processing to achieve economies of scale,
facilitate electronic processing, and reduce the number of different
insurers health care providers must deal with. It appears that the
consortia boards of directors would be made up of insurers,
providers, and consumers appointed under state guidelines.
Price and Volume Controls
An independent agency (to be called the Federal Health
Expenditure Board and intended to have the stature and
independence of the Federal Reserve Board) would be established
to set national and local health expenditure goals, in total and by
health care industry sector. The Board would convene providers
and purchasers to conduct negotiations on rates and other
methods of achieving expenditure goals. Negotiators could
recommend adjustments of the goals. The Board would publish
recommended rates and other measures to achieve the goals for
purchaser and provider use. Recommended rates and other
measures would be binding (i.e., enforceable by civil penalties on
providers) if negotiations were successful, but apparently could be
overridden by the state- level consortia of insurance companies,
which could use other methods to achieve the Board's goals.
The Board also would release data to help consumers evaluate
provider quality and efficiency.
Experimental programs for reducing abuse of the medical
malpractice system and research for general cost control would
be established.
6.
Implications
Much of the employer community has accepted, at least in theory, the
concept of "play or pay." They understand that a failure to provide
coverage for the approximately 35 million (mostly employed) uninsured
people within the current system will spark demands for a government
takeover of the private health insurance industry. But since most large
companies already provide at least the minimum mandated benefits
required under the proposal, the new law would have very little effect on
them.
The government's attempts to contain costs systemwide is sure to stir
wider concern, however. The problem of the uninsured is caused
primarily by the high cost of health care. If the government's cost
containment program isn't effective, the larger issue of skyrocketing
costs will remain unresolved. And the prognosis for this program is iffy
at best.
Under the bill, the government would develop practice guidelines,
partially effective in 1992, for clinical conditions that "have a significant
variation in the frequency or type of treatment provided." This is a
worthy goal since it is intended to promote consistency and quality in
medical standards. However, the field of practice guidelines is still very
much in its infancy and it is hard to see how they can significantly reduce
the cost of thousands of different clinical treatments in the near future.
The proposal also would empower state agencies to certify some
providers as "practicing efficient, quality care," exempting them from
utilization review activities. Again, this is a worthy goal, but the standards
necessary to measure efficiency and quality are today quite fuzzy.
Finally, the proposal would establish an independent agency to set
national and local health expenditure goals and negotiate with providers
and payors on the methods necessary to achieve these. This would
represent a significant expansion of federal regulatory powers in setting
payment rates, which to date has largely been left to the states. In fact,
the federal government would be wise to study further the systems a few
states have designed to achieve these exact goals -- with mixed results
at best.
In sum, the Democratic proposal would solve the problem of the
uninsured --though at what long-term cost we don't know. Although the
cost containment goals are admirable, the efficiency and quality
standards on which they are based are essentially undeveloped at this
point. In addition, regulating payment rates as a means of controlling
costs has a dubious track record at best.
7.
Conclusion
The 350-page bill is an ambitious attempt to address one of the most
difficult issues of the 1990s. Some feel the bill's magnitude would require
a national debate, perhaps in the context of a Presidential campaign,
before Congress could act. Others say the nation's health care needs
shouldn't depend on election dates. It has even been suggested that
given the divergence of opinion and political nature of the controversy,
we could wind up with an exhaustive debate on an initiative that dies with
a presidential veto. As one politician noted, the problem is largely
defined by the fact that the vast majority of Americans wants a high
quality, widely available health system, but an even larger majority
doesn't want to pay for it.
amc.617
s791b
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7175
fuel assistance, library hours, fire pro-
This legislation is the culn ation
tection services, and other programs at
of
advances in medical treatment and
nearly 2 years of work by the Senate
the same time that they must spend
technology, our health outcomes com-
thousands and sometimes millions of
working group on the uninsured, and
pare poorly with many other industri-
dollars to address problems associated
reflects input from a wide range of in-
alized
tions. When the United
with drinking water contamination
terest groups including health-care
States
compared with Canada in
and sewage treatment.
providers, insurers, consumer groups,
health status, the Canadians fare
the States, and many others.
I wish there was a way we could help
better in ]
r infant mortality rates,
all communities facing these problems,
Access to affordable, quality health
lower mate al mortality rates, lower
care should be a right for all Ameri-
not just those under 5,000 in popula-
mortality rates for low-risk and moder-
tion. However, I certainly und rstand
cans, not merely a luxury for those
the need to establish a reasonable
who have the economic means to pur-
ate-risk surgery, and higher life ex-
chase health insurance. As many as 37
pectancy for
h men and women.
cutoff point at-this time in order to set
It is not
million Americans have no health care
gh that we find a way
up a workable program, and in Maine
to add those
coverage, and millions more have in-
10 are uninsured to the
this standard will cover about 90 per-
surance coverage which is inadequate
existing health care system. We must
cent of Maine's communities. I will
to protect them against the costs of se-
make fundamental reform in that
continue to work on solutions to the
rious illness.
system including effective cost con-
financial burdens faced by Maine's
larger communities in the hope of de-
Furthermore, the rising cost of
tainment efforts and insurance market
health insurance threatens coverage
reform.
vising a reasonable approach to com-
pliance with Federal environmental
for all who are currently insured. The
I believe we must build upon the ex-
Department of Labor estimates that
isting public-private health care
laws.
nearly 1 million Americans lose their
system which asks employers to share
I believe Maine's small communities
and their residents will benefit signifi-
health insurance coverage each year,
the responsibility of providing access
cantly from the provisions of the
often because their employers drop
to health care for their employees and
coverage because of the rising costs of
their dependents.
STEP Act. A priority sysem needs to
premiums, or because insurers refuse
Currently that burden is not shared
be established so that the most impor-
to cover persons with preexisting con-
equitably by all employers. While it is
tant work is accomplished first. Towns
ditions.
often difficult for small businesses to
will still have to comply with the laws
The problem of the uninsured is not
provide health coverage to their em-
that have been enacted to address seri-
principally a problem of the poor; the
ployees and their dependents, most al-
ous water, sewer, toxic waste, and
Office of Management and Budget es-
ready do so. Health insurance cover-
other problems. However, ratepayers-
timates that 70 percent of the unin-
age is offered by 80 percent of busi-
especially the elderly and poor-will
sured are above the poverty level.
nesses with 25 or fewer employees;
not be too heavily burdened with in-
Nor is the lack of health insurance
coverage is offered in 46 percent of
creased costs under this legislation. A
coverage principally a problem if the
businesses with 10 or fewer employees.
more reasonable and gradual approach
unemployed-two-thirds of the unin-
Unfortunately it has become more
to compliance will relieve these citi-
sured are working persons or their de-
difficult and more expensive for small
zens from the burden of immediate
pendents whose jobs do not provide
business to insure their employees. If
rate increases of 50 percent, 100 per-
what was once considered a routine
we are going to expect small business
cent, and more.
benefit-health insurance.
to provide health coverage to their
Senators JEFFORDS and CONRAD are
One-third of the uninsured are chil-
employees, we must make it more af-
to be commended for their initiative
dren-one of four children in the
fordable do so.
on this issue. I am joining them in
United States has no health insurance.
their effort because I believe small
The legislation we are introducing
If we ignore the health care of our
towns need some real assistance in
today will require all employers to
children now, it will cost us more to
dealing with the many requierments
either provide private health insur-
deal with the effects later.
they face now and will continue to
ance to their employees or contribute
The underlying crisis in our Nation's
face in the future. This legislation is a
to a public program which will provide
health care system is the rapidly
starting point for discussion on this
coverage. This "play or pay" model
rising cost which is eroding the very
issue, and we welcome all comments in
will be phased-in over a 5 year period
foundation of the system for all Amer-
an effort to provide the best solution
in an effort to give small employers an
icans, regardless of income.
to this difficult problem.
opportunity to adjust to the new re-
Clearly, the tremendous amount of
I hope this legislation will receive
quirement.
money our Nation is spending on
the attention it deserves in the Senate,
Businesses with employees between
health care is not buying quality
and I commend it to my colleagues for
25 to 100 will be required to play or
health care for all Americans. We
their consideration.
pay after 4 years of the bill's enact-
must find a way to bring health care
ment if fewer than 75 percent of em-
By Mr. MITCHELL (for himself,
costs under control or we risk adding
ployees in small businesses not previ-
Mr. KENNEDY, Mr. RIEGLE, and
millions more to the rolls of the unin-
ously insured are not covered. This re-
Mr. ROCKEFELLER):
sured, and ultimately face a total col-
quirement also applies to firms with
S. 1227. A bill to amend the Public
lapse of the health care system.
fewer than 25 employees after 5 years.
Health Service Act, the Social Securi-
In 1990, the United States spent
The legislation also includes a
ty Act, and the Internal Revenue Code
$671 billion on health care, approxi-
number of provisions which are in-
of 1986 to provide affordable health
mately 12.2 percent of gross national
tended to provide financial assistance
care of all Americans, to reduce health
product, up from 11.6 percent-$604
to small businesses in the form of tax
care costs, and for other purposes; by
billion-in 1989. Real per capita health
credits to help them adjust to the new
unanimous consent ordered held at
expenditures have not only risen dra-
requirements.
the desk until the close of business on
matically in the United States, they
Small businesses with fewer than 60
June 7, 1991.
have also far exceeded the per capita
employees would be provided with a
expenditures of all other industrial-
HEALTHAMERICA: AFFORDABLE HEALTH CARE FOR
25-percent credit on the first $3,000 of
ized nations.
ALL AMERICANS ACT
health insurance expenses for each
Mr. MITCHELL Mr. President,
The United States per capita spend-
full-time employee with an income
today I join with a number of my col-
ing on health is approximately one-
under $20,000, except for high-profit
leagues to introduce comprehensive
third higher than Canada's, double
firms. The 25-percent tax credit would
legislation to reform the Nation's
the spending of Japan and the former
be in addition to the deduction cur-
health care system to assure access to
West Germany, and three times the
rently available for the cost of such in-
affordable health care for all Ameri-
amount spent in the United Kingdom.
surance.
cans.
Yet, in spite of the amount of GNP
The bill also increases the tax deduc-
spent on health care and our Nation's
tion for self-employed firms from 25 to
7176
CONGRESSIONAL RECORD - SENATE
June 5, 1991
100 percent for the cost of health in-
the State level. Because we are con-
for. We must assure that each dollar
surance. New businesses will be given a
cerned about the financial burdens
spent gives us its best return. I believe
grace period of 2 years with no play or
faced by many States, our proposal in-
that we can get more value for the
pay requirement. In the third year,
cludes an enhanced Federal match for
over $600 billion we spend each year
new businesses will pay-one-half of the
AmeriCare, to be phased-out after 5
on health care.
payroll contribution.
years.
It is estimated that between 10 to 30
Small businesses that have not pre-
While this legislation is primarily in-
percent of treatment for illnesses pro-
viously provided coverage will be al-
tended to assure access to health care
vided by physicians is either unneces-
lowed to use Medicare reimbursement
for all Americans by assuring each
sary or ineffective.
rules for the first 5 years. Medicare
person a means of payment for care,
We believe that the outcomes re-
rules will result in lower costs to busi-
we are aware some persons with
search initiatives being conducted
nesses purchasing private insurance
health insurance coverage may not
through the Agency for Health Care
for their employees.
have access to a delivery system, par-
Policy and Research, will improve the
In addition, this legislation includes
ticularly in rural or urban underserved
quality of care while reducing or elimi-
a provision to reform the small group
areas.
nating unnecessary or ineffective
insurance market. This reform is criti-
In an effort to respond to this prob-
treatments. Therefore, C legislation
cal to small businesses who currently
lem, we have included a provision to
includes an expanded e; ,rt for out-
cannot afford insurance or whose em-
expand the Community Health Cen-
comes research and the development
ployees are excluded from coverage be-
ters system throughout the United
of practice guidelines.
cause of preexisting conditions.
States, which includes both rural and
Similarly, we must evaluate new and
The insurance market reform provi-
urban centers. While this expansion
sions will provide for the continued
existing technology in the same way if
does not fully address the problems
regulation of health insurance by
we are going to control the rapidly es-
with the current health-care delivery
States within new, Federal standards.
calating costs of MRI's, CT Scans, and
system, it is an attempt to recognize
The Federal standards are designed to
the problem and begin to improve
other revolutionary technologies in
medicine.
remove barriers to access to group
access to health-care providers for per-
health insurance, promote equity in
sons in medically underserved areas.
Our bill includes an expanded effort
insurance premiums, and improve the
If this legislation is to accomplish
in technology assessment through the
affordability of coverage for small em-
our goal of providing quality, afford-
Office of Technology Assessment and
ployers.
able health care for all Americans it
with Federal grants to private entities
While this legislation places signifi-
must have as its underlying founda-
to encourage research in the private
cant responsibility on employers to
tion meaningful cost containment.
sector. The information gathered
expand access to health insurance
The cost containment provisions in-
through the improved technology as-
through the workplace, it recognizes
cluded in this bill are intended to put
sessment would be taken into consider-
that the Federal and State govern-
in place a structure which will result
ation by both public and private
ments must share the burden in re-
in significant reductions in the rate of
payers in setting reimbursement for
forming the health care system and
increases throughout the system.
technology and making decisions
assuring access to care for all of our
Over the last decade a variety of cost
about coverage.
citizens. Even under the best case sce-
containment strategies have been at-
The legislation also includes man-
nario, not all Americans will have
tempted by both the government and
aged care initiatives in both the pri-
access to employer-based health insur-
private sectors. These strategies have
vate sector and in AmeriCare.
ance.
had mixed results, but overall there
While there are different estimates
Therefore, our legislation also re-
appears to have been little impact on
as to the extent of the problem-we
forms and expands the existing public
the growth in total health spending.
are convinced that the administrative
program. A new public program called
In the development of this legisla-
costs of the existing private health
AmeriCare, will replace the existing
tion, we have evaluated these cost con-
care industry are excessive. We believe
Medicaid Program for all services
tainment strategies and have sought
that cost savings can and must be
except long-term care. All persons who
additional ones. It is important that
achieved in this area and have there-
are not eligible for employer-based
we look at the entire health care
fore, included a provision to require
health insurance will be eligible to re-
system-at both the price and volume
the Secretary of Health and Human
ceive health benefits through Ameri-
of services. In the past, controlling
Resources to collect, analyze and dis-
Care.
costs in one segment of the health-
seminate data and move toward uni-
AmeriCare is a dramatically new
care market has often meant cost
form billing and electronic claims
public program. Federal standards will
shifting to other payers.
processing.
be set for eligibility, benefits, and re-
Our legislation includes the estab-
Our Nation's health care system is
imbursement. Traditional categorical
lishment of a National Health Care
on the critical list. If we do not work
eligibility and income requirements
Expenditure Board, designed as an in-
together in good faith to control the
for eligibility under Medicaid will be
dependent agency which establishes
soaring costs of care and to provide
eliminated under AmeriCare.
voluntary annual goals for national
access to care for millions of Ameri-
Benefits under AmeriCare will be
health care expenditure totals and
cans now uncovered, we will all fall
identical to those provided in the em-
convenes negotiations between pur-
victim to the collapse of the system.
ployer-based basic benefit package.
chasers and providers of care.
Reforming the health care system
Persons with incomes below 100 per-
Working in conjunction with the Na-
will be difficult. While most believe
cent of poverty will have their out-of-
tional Health Care Expenditure
there is a serious problem, few can
pocket costs completely subsidized by
Board, each State will be required to
agree on the solution. A perfect solu-
the Federal Government. Persons with
establish a State consortium, which
tion does not exist. Some argue that
incomes between 100 to 200 percent
must enroll insurers with a small
the United States should adopt a Ca-
will have out-of-pocket costs subsi-
share of the market for the purpose of
nadian model. Others argue that tax
dized on a sliding scale.
reducing administrative costs. State
incentives to businesses with no re-
Most importantly, provider reim-
consortia may add optional functions
quirement to provide coverage is the
bursement rates will be set using Med-
including negotiating rates for provid-
answer.
icare rules. This improvement in reim-
ers and allocation of capital, among
The legislation we are introducing
bursement will eliminate the problem
other functions; within the overall
today represents a compromise be-
of access to providers currently faced
annual goal set by the National
tween those two views, keeping in
by Medicaid beneficiaries.
Health Care Expenditure Board.
mind our own traditions and values as
We propose that AmeriCare be joint-
In our effort to contain health-care
Americans. A new health care system
ly financed by the Federal and State
costs, we must have better information
for our Nation must be developed
governments with administration at
about what we as a nation want to pay
based on our own needs, history and
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7177
traditions. Every nation with compre-
Subtitle E-Additional Assistance to Small
"TITLE XXVII-BASIC HEALTH BENEFITS
hensive health care for all of its citi-
and Medium-Sized Businesses
FOR EMPLOYEES AND THEIR FAMILIES
zens has developed a system over time
Sec. 351. Opportunity to buy coverage at
which is unique to that nation. These
"PART A-REQUIREMENTS OF HEALTH
medicare rates.
BENEFITS
systems have evolved as our system
Sec. 352. Special provisions for new small
must evolve.
businesses.
"SEC. 2701. HEALTH BENEFITS.
I believe the time to act is now.
Sec. 353. Small and medium-sized business
"(a) REQUIREMENT.-
Health care reform is critical if we are
advisory committee.
"(1) IN GENERAL.-Except as provided in
going to assure that all Americans are
part B, each employer shall-
TITLE IV-REDUCING HEALTH CARE
ready for the challenges of the 21st
"(A) enroll each of its employees (other
COST INFLATION
than part-time employees) and their fami-
century. Children must be healthy and
Subtitle A-Outcomes Research and Prac-
lies in a health benefit plan in accordance
alert in order to learn. As our citizens
tice Guideline Development and Dissemi-
with part B; or
live longer we that their
nation
"(B) make a contribution under title V of
health is good and their lives are pro-
Sec. 401. Initial guidelines and standards.
the HealthAmerica Act, for the coverage for
ductive.
Sec. 402. Amendments to the Social Securi-
such employees and their families under the
I look forward to working with my
ty Act.
public health insurance plan established
colleagues in the Congress to enact
under title XXI of the Social Security Act.
meaningful health care reform in this
Subtitle B-Federal Health Expenditure
"(2) PART-TIME EMPLOYEES.-In meeting
Board
Congress. I challenge the Bush admin-
the requirements of paragraph (1) with re-
istration to work with the Congress to
Sec. 411. Federal
Health
Expenditure
spect to part-time employees, an employer
Board.
may, except as provided in part B-
accomplish this goal which is vital for
the future of our nation.
Subtitle C-State Purchasing Consortia
"(A) enroll all of its part-time employees
and their families as required under para-
I ask unanimous consent that a sum-
Sec. 421. State purchasing consortia.
graph (1)(A); or
mary of the bill, and the text of the
Subtitle D-Cost Control Grant Program
"(B) make a contribution to the public
bill be printed in the RECORD.
Sec. 431. Cost Control Grant Program.
health insurance plan referred to in para-
There being no objection, the mate-
graph (1)(B) on behalf of all such employ-
rial was ordered to be printed in the
Subtitle E-Malpractice Reform
ees.
RECORD, as follows:
Sec. 441. Malpractice reform.
"(3) LIMITATION.-An employer providing
Sec. 442. Study of medical malpractice.
health insurance coverage for pregnancy-re-
S. 1227
lated services and for services for children
Be it enacted by the Senate and House of
Subtitle F-Reducing the Administrative
in the 1-year period prior to the date of en-
Representatives of the United States of
Cost of Assuring Appropriate Utilization
actment of this section may not terminate
America in Congress assembled,
of Health Care Services and Improving
coverage for such services or reduce the fi-
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
the Quality of Health Care Services
nancial contribution provided for the cost of
(a) SHORT TITLE.-This Act may be cited
Sec. 451. Establishment of a quality im-
coverage for such services prior to the time
as the "HealthAmerica: Affordable Health
provement board.
such employer is required to provide or con-
Care for All Americans Act".
Subtitle G-Use of Practice Guidelines in
tribute to coverage under paragraph (1).
(b) REFERENCE TO AcT.-Hereafter this Act
Federal Health Insurance and Service
"(b) COORDINATION WITH PUBLIC HEALTH
may be referred to as the "HealthAmerica
Programs
INSURANCE PLAN.-An employer making a
Act".
contribution for coverage under the public
(c) TABLE OF CONTENTS.-The table of con-
Sec. 461. Use of practice guidelines in Fed-
health insurance plan as provided for in
tents of this Act is as follows:
eral health insurance and serv-
subsection (a)(1)(B) shall follow such proce-
ice programs.
dures as the Secretary may prescribe to fa-
Sec. 1. Short title; table of contents.
Subtitle H-National Standards for the
cilitate the enrollment of its employees in
Promotion of Managed Care
such public health insurance plan. Such
TITLE I-AMENDMENTS TO PUBLIC
HEALTH SERVICE ACT
Sec. 471. National standards for the promo-
procedures shall include-
"(1) the distribution of enrollment forms
Sec. 101. Basic health benefits for employ-
tion of managed care.
and information to employees;
ees and their families.
Subtitle I-Expansion of Technology
"(2) notifying in writing each employee of
Sec. 102. Obligation to secure health insur-
Assessment
the availability of premium and cost-sharing
ance.
Sec. 481. Expansion of technology assess-
subsidies for low-income families;
TITLE U-REQUIREMENTS FOR
ment.
"(3) notifying the State in which an em-
HEALTH BENEFIT PLANS
TITLE V-CONTRIBUTION TO PUBLIC
ployee resides concerning the identity of an
Sec. 201. Requirements for health benefit
employee on behalf of whom a contribution
PLAN BY EMPLOYERS NOT PROVID-
plans.
ING HEALTH COVERAGE
is being made;
"(4) submitting enrollment forms and in-
TITLE III-SPECIAL ASSISTANCE FOR
Sec. 501. Contribution by employers not
formation to the State agency administering
SMALL AND MEDIUM-SIZED BUSINESS
providing required private
the public health insurance plan established
Sec. 301. Preemption of State mandated
health benefit plans.
under title XXI of the Social Security Act
benefit laws.
TITLE VI-ASSURING PROVISION OF
on behalf of the employee and the employ-
Subtitle A-Reform of Small Group
HEALTH BENEFITS TO ALL AMERI-
ee's family, if required by the State in
Insurance
CANS
which the employee resides;
Sec. 311. Group health insurance stand-
Sec. 601. Establishment of AmeriCare.
"(5) withholding, in the form of payroll
deductions, an employee's share of the
ards.
TITLE VII-DEVELOPMENT OF HEALTH
public health insurance plan premium and
Subtitle B-Tax Equity for Small and
SERVICE CAPACITY
submitting such withholding to the adminis-
Medium-Sized Businesses
Sec. 701. Grants for expansion of availabil-
tering State agency on behalf of the em-
Sec. 321. Deductible health coverage provi-
ity of primary care services.
ployee, if required by the State in which the
sions.
employee resides; and
Sec. 322. Excise tax for violation of health
TITLE VILI-EFFECTIVE DATE
"(6) notifying the appropriate administer-
benefit plan requirements.
Sec. 801. Effective date.
ing State agency of the public health insur-
Subtitle C-Opportunity for Voluntary
Sec. 802. Policy respecting additional bene-
ance plan when an employee ceases to be an
Provision of Coverage
fits.
employee.
Sec. 331. Medium-sized employers.
TITLE I-AMENDMENTS TO PUBLIC HEALTH
"(c) ENFORCEMENT.-Any employer that
Sec. 332. Measurement surveys.
SERVICE ACT
does not comply with subsections (a) and (b)
shall be subject to section 2732.
Sec. 333. Small employers.
SEC. 101. BASIC HEALTH BENEFITS FOR EMPLOY-
"(d) DEFINITIONS.-The terms used in this
Sec. 334. Failure to make surveys.
EES AND THEIR FAMILIES.
section shall have the meanings prescribed
Subtitle D-Small Business Tax Credit
(a) REQUIREMENT.-The Public Health
for such terms by section 2713."
Service Act is amended-
Sec. 341. Allowance of a credit for small
(b) CONFORMING AMENDMENTS.-
(1) by redesignating title XXVII (42
and medium-sized business
(1) Sections 2701 through 2714 of the
U.S.C. 300cc et seq.) as title XXVIII: and
group health plan expendi-
Public Health Service Act (42 U.S.C. 300cc
tures.
(2) by inserting after title XXVI the fol-
through 300cc-15) are redesignated as sec-
lowing new title:
tions 2801 through 2814, respectively.
S 7178
CONGRESSIONAL RECORD - SENATE
June 5, 1991
(2)(A) Sections 465(f) and 497 of such Act
(42 U.S.C. 286(f) and 289(f)) are amended by
benefit plan under this part for the spouse
mines that the consulting arrangement or
striking out "2701" each place that such ap-
or a child of the employee but only for such
contract was entered into to avoid the re-
period as the employee demonstrates that
pears and inserting in lieu thereof "2801".
quirements of this part.
(B) Section 305(i) of such Act (42 U.S.C.
such spouse or child, respectively, is actual-
"(F) PART-TIME EMPLOYEE.-The term
242c(i)) is amended by striking out "2711"
ly covered under & health benefit plan.
'part-time employee' means, with respect to
"(2) CHILD EMPLOYED.-A child who is em-
each place such appears and ; serting in
lieu thereof "2811".
ployed (or a parent on behalf of the child)
an en Bloyer, an individual who no rmally
performs on a monthly basis-
may waive enrollment in a health benefit
SEC. 102. OBLIGATION TO SECURE HEALTH INSUR-
plan provided by the employer of such child
"(i) less than 17.5 hours per week; and
ANCE.
during any period in which the child other-
"(ii) 1 hour or more per week for that em-
(a) FEDERAL PROGRAMS.-Beginning with
ployer.
the seventh full year after the date of en-
wise is covered under a health benefit plan.
"(3) EMPLOYER.--
"(c) NONDISCRIMINATION BASED ON FAMILY
actment of this Act, to be eligible for bene-
STATUS.-An employer shall not fail or
"(A) IN GENERAL.-Except as otherwise pro-
fits under a Federal program, an individual
refuse to hire, and shall not discharge or
vided in this paragraph, the term 'employer'
seeking benefits under such program shall
means-
otherwise discriminate against, any individ-
certify to the administrator of such pro-
ual because the individual has a spouse or
"(i) an entity that is required to pay-the
gram that such individual and the depend-
child that would be required under this part
individuals it employs the minimum wage
ents of such individual possess health insur-
to be enrolled by such employer in a health
prescribed by section e of the Fair Labor
ance coverage that meets the applicable
benefit plan.
Standards Act of 1938 (29 U.S.C. 206) (or
minimum standards under this Act.
"(d) WAIVER IN CASE OF MULTIPLE EMPLOY-
would be required to pay such wage but for
(b) INTERNAL REVENUE EXEMPTIONS.-To be
eligible to claim the exemption amount to
ERS.-In the case of an individual who is an
the dollar volume standards prescribed in
employee with respect to more than one em-
section 3(s) of such Act (29 U.S.C. 203(s)) or
which an individual is entitled under section
ployer and who is required to enroll in a
the exemptions prescribed in section 13(a)
151 of the Internal Revenue Code of 1986,
health benefit plan, such employee may
of such Act (29 U.S.C. 213(a)); and
such individual shall certify, as part of the
waive enrollment in the health benefit plan
"(ii) any State or political subdivision
personal income tax return filed by such in-
of any such employer, but only if such em-
thereof, or any agency or instrumentality
dividual with the Internal Revenue Service,
that such individual is covered under a
ployee is, and certifies to the employer that
thereof; but such term does not include the
such employee is, enrolled in the health
Federal Government or a subdivision there-
health insurance plan that meets the appli-
benefit plan of one employer.
of.
cable minimum standards under this Act. A
"SEC. 2713. DEFINITIONS.
"(B) OWNER-OPERATORS.-An owner-opera-
parent shall make such certification on
tor of a business shall be considered to be
behalf of a dependent child.
"(a) IN GENERAL-Unless otherwise specif-
ically provided, as used in this title:
both an employer and employee with re-
TITLE II-REQUIREMENTS FOR HEALTH
spect to himself or herself if the owner-op-
BENEFIT PLANS
"(1) CHILD.-The term 'child' means, with
respect to an employee, an individual-
erator has one or more other employees.
SEC. 201. REQUIREMENTS FOR HEALTH BENEFIT
"(A) who-
"(C) SMALL AND MEDIUM-SIZED EMPLOYERS.-
PLANS.
"(i) is under 19 years of age;
The term 'small employer' means, with re-
Title XXVII of the Public Health Service
"(ii) is under 23 years of age and a full-
spect to a calendar year, an-employer that
Act (as added by section 101) is amended by
time student; or
normally employs fewer than 25 employees
adding at the end thereof the following new
"(iii) is an unmarried, dependent child, re-
during the calendar year, and the term
part:
'medium-sized employer' means, with re-
gardless of age, who is incapable of sélf-sup-
"PART B-REQUIREMENTS FOR HEALTH
port as a result of a mental or physical dis-
spect to a calendar year, an employer that
BENEFIT PLANS
ability that existed prior to the individual
normally employs 25 or more employees,
"Subpart -Requirement and Definitions
reaching 22 years of age; and
but not more than 100 employees, during
the calendar year.
"SEC. 2711. REQUIREMENT TO ENROLL EMPLOYEES
"(B)(i) who is the biological, adopted, or
AND FAMILIES.
foster child of the employee or the spouse
"(D) APPLICATION OF CONTROLLED GROUP
of the employee, or of the dependent child
RULES.-Section 607(4) of the Employee Re-
"(a) IN GENERAL-This part shall apply to
employers required to enroll employees and
of the employee or the spouse of the em-
tirement Income Security Act of 1974 (29
ployee;
U.S.C. 1167(4) shall apply in the determina-
their families in health benefit plans under
section 2701(a).
"(ii) who is the legal ward of the employee
tion under this part of whether an employer
"(b) TYPES OF PLANS PERMITTED.-Except
or the spouse of the employee; or
is a small or medium-sized employer and the
as required under chapter 2 of subtitle A. of
"(iii) with respect to whom the employee
number of employees an employer normally
employs.
title III of the HealthAmerica Act (relating
or spouse of the employee, stands in loco
"(E) FAI: FARMERS.-
to small and medium-sized business insur-
parentis during the course of an adoption
ance), an employer may meet the require-
application.
"(i) PRICE SUPPORT GREATER THAN 70 PER-
CENT OF PARITY.-The term 'employer' shall
ments of this part by means of enrollment
"(2) EMPLOYEE.-
not include the owner or operator of a
in any health benefit plan.
"(A) IN GENERAL-Except as otherwise pro-
"(c) EXCEPTION FOR EMPLOYERS
vided in this paragraph, the term 'employee'
family farm unless the level of agricultural
prices, or the minimum level of agricultural
HAWAII.-Employers that have employees IN in
means, with respect to an employer, an indi-
vidual who normally performs at least 1
price support provided by the Secretary of
the State of Hawaii shall be exempt from
the requirements of this part with respect
hour of service per week for that employer.
Agriculture for loans and purchases, for the
to such employees, for so long as the Hawaii
"(B) HANDICAPPED WORKERS.-The term
major commodity produced on the farm is
Prepaid Health Care Act (Hawaii Rev. Stat.
'employee' does not include an individual
equal to or greater than 70 percent of the
described in section 14(c) of the Fair Labor
parity price of the commodity as maintained
Chapter 393) remains in effect. This subsec-
Standards Act of 1938 (29 U.S.C. 214(c)).
by the Secretary during the preceding 2
tion shall not apply if the proportion of the
crop years.
population with health care coverage pro-
"(C) CERTAIN EMPLOYEES.-The term 'em-
"(ii) PRICE SUPPORT LESS THAN 70 PERCENT
vided under such Act that is at least actuari-
ployee' means, with respect to an employer
ally equivalent to the coverage required
described in section 3(37) of the Employee
OF PARITY.-Owners and operators of a
under this title is, or becomes, less than that
Retirement Income Security Act of 1974 (29
family farm who do not receive minimum
required to be provided in other States
U.S.C. 1002(37)), an individual who per-
agricultural price support through loans
forms-
and purchases that is equal to or greater
under this title or the HealthAmerica Act.
"(i) 17.5 hours or more of service per week
than 70 percent of parity for the major com-
"SEC. 3712. COVERAGE OF EMPLOYEES AND
for the employer; or
modity produced on the farm from the Sec-
FAMILY MEMBERS.
"(a) REQUIREMENT.-Except as permitted
"(ii) an equivalent amount of service
retary of Agriculture for the preceding crop
2723(c)- under subsections (b) and (d) and section
during a 1-, 3-, or 6-month period for the
year shall be included within the definition
of the term 'employer' only if, based on a
employer. as determined under regulations
issued by the Secretary.
national referendum conducted by the Sec-
"(1) the enrollment of an employee in a
"(D) LESS-THAN-FULL-TIME EMPLOYEE DE-
retary of Agriculture, a majority of the
health benefit plan under this part shall in-
FINED.-The term 'less-than-full-time em-
owners and operators vote in favor of man-
clude the enrollment of the family of such
ployee' means, with respect to an employer,
datory participation in the small business
employee in the plan; and
an employee who normally performs on a
insurance program provided by part C and
"(2) the enrollment of an employee or the
the HealthAmerica Act.
family of an employee in a health benefit
monthly basis less than 25 hours of service
"(iii) No COVERED EMPLOYEES.-Owners and
plan may not be waived by the employee.
per week but more than 17.5 hours per week
"(b) EXCEPTIONS To AVOID DUPLICATE
for that employer.
operators of family farms with no employ-
FAMILY COVERAGE.-
"(E) CONSULTANTS AND CONTRACTORS.-The
ees required to be enrolled in health benefit
term 'employee' shall include an individual
plans under this part, shall be included in
"(1) SPOUSE OR PARENT EMPLOYED.-An em-
ployee may waive enrollment in a health
who is a consultant or independent contrac-
the definition of 'employee' under this part
tor of an employer if the Secretary deter-
if, based on a national referendum conduct-
ed by the Secretary of Agriculture, a majori-
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7179
ty of farmers in the commodity
up vote
assures continuity, and (bb) when medically
value of benefits provided under the plan
in favor of mandatory participa
in the
necessary, available and accessible twenty-
small business insurance progr.
(as defined in paragraph (8)) is not less than
movided
four hours a day and seven days & week; and
by part C and the HealthAmerics DC.
the equivalent of the actuarial value of ben-
"(II) provides benefits for covered items
"(iv) DEFINITION OF FAMILY FARM used
efits provided under the plan that would
and services not furnished by participating
in this subparagraph, the term 'family farm'
have applied if the plan met the require-
providers if the items and services are medi-
means a farm with respect to which-
ments described in subsection (a).
cally necessary and immediately required
"(I) the operator or the family of the op-
"(2) MINIMUM REQUIREMENTS.-Nothing in
because of an unforeseen illness, injury, or
erator, or both (or, if the operator is a coop-
this subsection shall be construed as not re-
condition.
erative, corporation 1, partne ship, or joint
quiring each plan--
"(C) PARTICIPATING PROVIDER.-The term
peration, the members, stockholders, part-
"(A) to meet the requirements of section
'participating provider' means a physician,
'S, or joint operators, respectively) devote
2723; or
hospital, health maintenance organization,
ibstantial amount of time daily to the
"(B) to establish a limit on out-of-pocket
pharmacy, laboratory. or other appropriate-
nagement or operation of the farm;
ly licensed provider of health care services
expenses under section 2724(d), except that
"(II) a majority of the hours of labor re-
or supplies, that has entered into an agree-
this subparagraph shall not be construed to
quired annually for the-(farm and nonfarm)
require the establishment of the out-of-
ment with a managed care entity to provide
enterprise of the farm is provided by the op-
pocket limit : described in section
such services or supplies to a patient en-
erator or the family of the operator, or both
rolled in a managed care plan.
2724(d)(5)(B).
(or, if the operator is a cooperative, corpora-
"(D) UTILIZATION REVIEW.-The term 'uti-
"(3) MENTAL HEALTH BENEFITS.-Notwith-
tion, partnership, or joint operation, by the
lization review' means a program for review-
standing any other provision of this part or
members, stockholders, partners, or joint
ing the necessity and appropriateness of
of the Health America Act, a health benefit
operators, respectively, and the families of
such individuals); and
health care services provided or proposed to
plan may meet the requirements of section
be provided to'a patient.
2722(a)(6) by including payment for any
"(III) the value of the gross annual sales
"(8) MENTAL DISORDER.-The term 'mental
reasonable combination of benefits de-
of agricultural commodities produced on the
disorder' has the same meaning given such
scribed in subparagraphs (A) and (B) of
farm is not more than $750,000.
"(4) FAMILY AND FAMILY MEMBER.-The
term in the International Classification of
such section if the plan includes payment
Diseases, 9th Revision, Clinical Modifica-
for-
terms 'family' and 'family member' mean,
tion.
"(A) benefits the value of which is at least
with respect to an employee, the spouse and
"(9) NONGOVERNMENTAL EMPLOYER.-The
actuarially equivalent to the value of the
children of the employee.
term 'nongovernmental employer' means an
benefits for which payment is otherwise re-
"(5) HEALTH BENEFIT PLAN.-The term
employer not described in paragraph
quired under such subparagraphs; and
'health benefit plan' means an employee
(3)(A)(ii).
"(B) both types of benefits described in
welfare benefit plan (as defined in section
3(1) of the Employee Retirement Income
"(10) PHYSICIAN SERVICES.-The term 'phy-
each such subparagraph.
sician services' means professional medical
"(4) ADVISORY BOARD.-
Security Act of 1974 (29 U.S.C. 1002(1))
that-
services lawfully provided by a physician
"(A) ESTABLISHMENT.-The Secretary shall
under State medical practice acts, and in-
establish an Advisory Board to provide
"(A) provides medical care to participants
cludes professional services provided by a
advice to the Secretary concerning the de-
or beneficiaries directly or through insur-
ance, reimbursement. or otherwise; and
dentist, licensed advanced-practice nurse,
velopment of actuarial equivalency stand-
"(B) meets the requirements of section
optometrist, podiatrist, or chiropractor
ards and such other matters relating to the
acting within the scope of their practices (as
administration of this part as the Secretary
2721.
determined under State law) if such services
or the Board considers appropriate.
"(6) INSURER.-The term 'insurer' means
would be treated as physician services if fur-
"(B) MEMBERSHIP.-The Advisory Board
an entity qualified under the laws of a State
to offer insurance or provide health benefits
nished by a physician, except as provided in
shall consist of 15 members appointed by
the Secretary. of whom-
in that State.
section 2722(e).
"(7) MANAGED CARE.-
"(11) STATE.-
"(i) four members shall be representatives
"(A) MANAGED CARE ENTITY.-The term
"(A) IN GENERAL.-The term 'State' means
of employers, who shall be experienced in
managed care entity' means an insurer,
each of the several States and the District
the administration of and knowledgeable
of Columbia.
about health insurance and actively en-
health maintenance organization, preferred
provider organization, dental plan organiza-
"(B) ELECTION.-If the Governor of the
gaged in the management or design of
tion, or other entity licensed to do business
Commonwealth of Puerto Rico or of any
health insurance programs, of which-
in a State, that markets managed care plans
territory of the United States certifies to
"(I) two members shall be representatives
the President that Puerto Rico or such ter-
of large businesses, as determined by the
to groups or individuals or an employer,
labor union or other State licensed entity
ritory has enacted legislation stating that
Secretary; and
that provides managed care plans for its em-
Puerto Rico or such territory desires to be
"(II) two members shall be representatives
ployees or members.
included under the provisions of this Act,
of small and medium-sized businesses;
"(B) MANAGED CARE PLAN.-The term 'man-
Puerto Rico or such territory shall be in-
"(ii) two members shall be representatives
aged care plan' means a health benefit
cluded under the definition of State for the
of labor organizations, who shall possess
plan-
purposes of this part beginning with Janu-
qualifications of the type required for repre-
"(i) in which the insurer-
ary 1 of the first calendar year which begins
sentatives under clause (i);
"(I) utilizes explicit standards for the se-
later than 90 days after the President re-
"(iii) four members shall be representa-
lection and recertification of participating
ceives such notification.
tives of the insurance industry, at least one
providers;
of whom shall be knowledgeable about
"Subpart 2-Requirements for Health Benefit
"(II) has organizational arrangements, es-
small group policies;
Plans
tablished in accordance with regulations of
"(iv) two members shall be actuaries, who
"SEC. 2721. GENERAL REQUIREMENTS: PERMITTING
the Secretary, for an ongoing quality assur-
shall be experienced in the administration
ACTUARIALLY EQUIVALENT PLANS.
ance program for its health services, which
of and knowledgeable about health insur-
"(a) GENERAL REQUIREMENTS.-Subject to
program (aa) stresses health outcomes, and
ance programs; and
subsections (b) and (c), in order for a health
(bb) provides review by physicians and
"(v) three members shall be representa-
benefit plan to meet the requirements of
other health professionals of the process
tives of consumers not described in clauses
this section, such plan shall-
followed in the provision of health services;
(i) through (iv).
"(1) provide benefits for items and serv-
and
"(C) TERMS.-Each member of the Adviso-
ices in accordance with section 2722;
"(III) contains significant incentives to
ry Board shall serve for a term of 4 years,
"(2) provide coverage of employees and
use the participating providers and proce-
except that members initially appointed
family enrolled in the plan in accordance
dures provided for by the plan; and
shall serve for staggered terms, as designat-
with section 2723; and
"(ii) which, if it limits coverage of services
ed by the Secretary. A member may serve
"(3) provide for premiums. deductibles, co-
to those provided by participating providers
on the Board after the expiration of the
payments, and coinsurance in accordance
or permits deductibles and coinsurance with
term of the member until a successor has
with section 2724.
respect to basic health services provided by
taken office as a member of the Board.
"(b) ACTUARIALLY EQUIVALENT PLANS PER-
persons who are not participating providers
"(D) COMPENSATION.-The members of the
MITTED.-
which are in excess of those permitted
Advisory Board may be allowed travel ex-
under health benefit plans-
"(1) VARIATIONS IN PREMIUMS, DEDUCTIBLES,
penses, including per diem in lieu of subsist-
"(I) has a sufficient number and distribu-
AND COST-SHARING.-A health benefit plan
ence, as authorized by section 5703 of title 5,
tion of participating providers to assure
shall meet the requirements of this section,
United States Code, while away from their
notwithstanding that such plan does not
that all covered items and services are (aa)
homes or regular places of business, for
meet one or more of the requirements of
available and accessible to each enrollee,
each day (including travel time) during
section 2724 (relating to premiums, deductl-
within the area served by the plan, with rea-
which they are attending meetings or con-
bles, copayments, coinsurance, and limit on
sonable promptness and in a manner which
ferences of the Advisory Board or otherwise
out-of-pocket expenses) if the actuarial
engaged in the business of the Board.
7180
CONGRESSIONAL RECORD - SENATE
June 5, 1991
"(E) DEVELOPMENT OF ACTUARIAL EQUIVA-
least equivalent to the actuarial value of the
LENCY VARIATIONS.-Not later than 6 months
develop such regulations after consultation
before the effective date of this part, the
benefits of the approved health benefit
with appropriate medical experts.
plan.
Advisory Board shall develop and transmit
"(e) LIMITATIONS.--
to the Secretary-
"(8) ACTUARIAL VALUE OF BENEFITS DE-
"(1) PANELS AND MANAGED CARE SYSTEMS.--
"(i) at least three model health plans each
FINED.-For purposes of this subsection, the
Nothing in this title or the HealthAmerica
with an actuarial value of benefits that is
"actuarial value of benefits" of a plan is the
amount by which the total of the amounts
Act, shall prohibit a health benefit plan
equivalent to the actuarial value of benefits
from providing benefits for the items and
of a basic plan (as defined in paragraph (9));
payable as benefits under the plan exceeds
"(ii) a table of actuarial equivalency de-
the amount of the premiums, deductibles,
services described in this section through a
copayments, and coinsurance pay ble by
managed care system, and from selecting
scribing permitted expansions in covered
particular health care providers or types,
services and variations in copayments, de-
the employee under the plan, as deta: mined
ductibles, limits on out-of-pocket expenses,
on an actuarial basis per enrollee for a plan
classes, or categories of health care provid-
year.
ers to participate in such managed care
and an employer's share of the premium or
premiums under a health plan, as a percent-
"(9) BASIC PLAN DEFINED.-For purposes of
system. Such managed care system shall
this subsection, the term 'basic plan' means
provide, in accordance with regulations
age increase or decrease in the actuarial
value of the basic plan, with the table de-
a health benefit plan that only provides the
issued by the Secretary, reasonable access to
scribing as many expansions and variations
basic benefits required under this part.
care by plan enrollees.
as practicable in order to facilitate compli-
"SEC. 2722. REQUIREME 3 RELATING TO COVERED
"(2) DIFFERENT LEVELS OF PAYMENTS.-
ITEMS AND SERVICES.
Nothing in this title or the HealthAmerica
ance with this section: and
"(a) IN GENERAL.-Except as otherwise
Act, shall prohibit a health benefit plan
"(iii) recommendations for procedures to
facilitate the process by which an employer
provided in this section, a health benefit
from establishing a different level of pay-
plan shall include payment for-
ments for reimbursement for different
may certify actuarial equivalency for plan
variations not provided in the model health
"(1) inpatient and outpatient hospital
health care providers furnishing the bene-
care, except that treatment for a mental dis-
fits for the items and services described in
plans or the table of actuarial equivalency
and for the certification of multiple plans
order is subject to the special limitations de-
this section.
scribed in paragraph (6)(A);
"(3) HEALTH CARE PROVIDERS.-Nothing in
offered by the same employer.
"(F) REVIEW OF CHANGES.-The Advisory
"(2) inpatient and outpatient physician
this title or the HealthAmerica Act, shall be
Board shall review proposed changes to the
services, except that psychotherapy or
construed to require a health benefit plan
basic benefit package required of health
counseling for a mental disorder is subject
to utilize any health care provider (or type,
to the special limitations described in para-
class, or category of health care provider) to
benefit plans and transmit a cost benefit
graph (6)(B);
provide benefits for the items and services
analysis of such changes, along with recom-
"(3) diagnostic tests;
described in this section that were provided
mendations, to the appropriate committees
of Congress and the Secretary.
"(4) prenatal care and well-baby care pro-
by the plan before the effective date of this
"(5) TABLE OF ACTUARIAL EQUIVALENCY.-
vided to children who are 1 year of age or
part, other than the health care providers
The Secretary shall publish, at least 3
younger;
being utilized by the health benefit plan on
months prior to the effective date of this
"(5) preventive services, limited to-
such effective date, except that this para-
part, a table that specifies the percentage
"(A) well child care;
graph shall not apply to duly licensed or
increase or decrease in the actuarial value
"(B) pap smears; and
certified clinical psychologists (acting
of benefits under a health benefit plan pro-
"(C) mammograms; and
within the scope of State law) after the end
viding only the required benefits that would
"(6)(A) inpatient hospital care for a
of the 5-year period beginning on the effec-
result from variations in covered services,
mental disorder for not less than 45 days
tive date of this part. This paragraph shall
copayments, deductibles, limits on out-of-
per year, except that days of partial hospi-
not apply to plans offered under part C.
pocket expenses, an employer's share of the
talization or residential care may be substi-
"(4) DENIAL OF PAYMENT TO EXCLUDED PRO-
premium or premiums under a health bene-
tuted for days of inpatient care according to
VIDERS.-Nothing in this title or the Health-
fit plan, or any combination thereof. The
a ratio established by the Secretary; and
America Act, shall require a health benefit
table shall describe as many variations as
"(B) outpatient psychotherapy and coun-
plan to make payment to any health care
feasible. In developing the table, the Secre-
seling for a mental disorder for not less
provider that is excluded from participation
iary shall consider the recommendations of
than 20 visits per year provided by a provid-
in any Federal health care program.
the Advisory Board established under para,
er who is acting within the scope of State
"(f) BASIS OF PAYMENT MAY DIFFER FROM
graph (4).
law and who-
ACTUAL CHARGES.-The requirement of pay
"(6) COMPLIANCE WITH FIDUCIARY DUTIES.-
"(i) is a physician; or
ment for services described in subsection (a)
In the case of health benefit plan variations
"(ii) meets the standards of subsection
shall not prevent an employer from estab-
for which relative actuarial values are not
(g)(2)(B) and is a duly licensed or certified
lishing & fee schedule or other basis of pay-
expressly provided for in the table pub-
clinical psychologist or a duly licensed or
ment that is different from actual charges,
lished under paragraph (5) or in the case of
certified clinical social worker, a duly li-
but only if such fee schedule or other basis
variations in which one or more elements of
censed or certified equivalent mental health
provides, pursuant to regulations of the Sec-
covered services, copayments, deductibles,
professional, or a clinic or center providing
retary, for payment at a level sufficient to
and limits on out-of-pocket expenses are
duly licensed or certified mental health
achieve adequate access to services covered
services.
given a relative actuarial value by the plan
by the plan without additional out-of-pocket
administrator that is different from that
"(b) EXCEPTIONS-Subsection (a) shall not
expenses for the covered service (but for co-
provided by such table, the plan shall not be
be construed as requiring a plan to include
payments and deductibles permitted under
considered out of compliance with this sec-
payment for-
section 2724).
tion-
"(1) items and services that are not medi-
"(g) MENTAL HEALTH CARE.-
"(A) if. under a process consistent with
cally necessary;
"(1) INTATIENT CARE-Subject to the provi-
the duties of a fiduciary under part 4 of title
"(2) routine physical examinations or pre-
sions of subsection (e), inpatient hospital
I of the Employee Retirement Income Secu-
ventive care (other than care and services
care described in subsection (a)(6)(A) shall
rity Act of 1974, it is established that, and
described in paragraphs (4) and (5) of sub-
section (a); or
include reimbursement for professional care
an actuary meeting credentials established
provided to the individual while the individ-
by the American Academy of Actuaries or
"(3) experimental services and procedures,
ual is receiving such inpatient care, by a
by the Secretary has certified that, the ac-
except that this paragraph shall not apply
physician or duly licensed or certified clini-
tuarial value of the benefits of the plan is at
to routine medical costs associated with
cal psychologist operating within the scope
least equivalent to the actuarial value of the
peer-reviewed and approved protocols con-
ducted in connection with peer-reviewed
of practice of the physician or psychologist,
benefits of a basic plan; and
as determined appropriate under State law.
"(B) until and unless the Secretary has
and approved research programs, pursuant
Nothing in this subsection shall be con-
determined that such variations are not in
to standards established by the Secretary.
strued to modify hospital practices with
compliance with the requirements of this
"(c) AMOUNT, SCOPE, AND DURATION OF CER-
section.
TAIN BENEFITS.-Except as provided in sub-
regard to scope of practice. admitting privi-
leges, or billing arrangements.
"(7) MULTIPLE PLANS.-In the case of an
section (b), & health benefit plan shall place
"(2) OUTPATIENT CARE.-
employer that has a health benefit plan
no limits on the amount, scope, or duration
"(A) USE OF PROVIDERS.-Subject to the
that meets the requirements of paragraph
of benefits described in paragraphs (1)
through (3) of subsection (a).
provisions of subsection (e), a health benefit
(6)(A) or is otherwise determined to have an
"(d) AMOUNT, SCOPE, AND DURATION OF PRE-
plan that provided benefits with respect to
actuarial value of benefits that is at least
outpatient psychotherapy described in sub-
equivalent to the actuarial value of a basic
VENTIVE SERVICES.-A health benefit plan
may limit the amount, scope, and duration
section (a)(6)(B) prior to January 1, 1991.
plan, the Secretary shall establish by regu-
of preventive services described in subsec-
shall not be required under such subsection
lation streamlined procedures for the a.p-
tion (a)(5) pursuant to regulations of the
to provide benefits for outpatient psycho-
proval of additional health benefit plans the
actuarial value of the benefits of which is at
Secretary specifying the amount, scope, and
therapy provided by any health care provid-
duration of such care. The Secretary shall
er (or type, class, or category of health care
provider) described in subsection
June 5, 1991
CONGRESSIONAL RECORD - SENATE
S7181
(a)(6)(B)(ii), other than duly licensed or cer-
the basis that the individual has (or at any
"(II) for employees who have a covered
tified clinical psychologists and health care
time has had) any disease, disorder, or con-
spouse but no covered children; and
providers being utilized by the plan on Jan-
dition.
"(III) for employees who do not have a
uary 1, 1991. This subparagraph shall not
"(c) RIGHT To WAIVE ENROLLMENT.-
covered spouse but have one or more cov-
apply to plans offered under part C.
"(1) LESS-THAN-FULL-TIME OR PART-TIME EM-
ered children
"(B) STANDARDS FOR CERTAIN PROVIDERS.-
PLOYEES WITH INCREASED PREMIUMS.-In the
"(D) ADJ
TENT FOR COVERED SPOUSE
The Secretary shall establish standards that
case of a less-than-full-time or part-time em-
WITH OTHER
BRAGE.-For purposes of this
providers referred to in subsection
ployee who is subject to, and is charged, an
paragraph, ii
health benefit plan charges
(a)(6)(B)(ii) must meet to be eligible for
increased premium under section 2724(b)(5),
an employee for a share of the premium,
payment under a health benefit plan and
the employee may, notwithstanding any
the plan shall establish a separate premium
such standards shall require that such pro-
other provision of this part, waive enroll-
category (or categories) for family coverage
viders have training and education equiva-
lent to a licensed clinical social worker (as
ment under this part. Such waiver shall be
in the case of a covered spouse who is re-
exercised in such form and manner as the
defined in title XVIII of-the Social Security
ceiving primary health insurance coverage
Act).
Secretary shall specify and shall terminate
from another health benefit plan. The pre-
"(h) STUDIES.-
on the date the employee is no longer being
mium for such categories shall be estab-
"(1) SERVICES.-The Secretary shall peri-
subject to, and charged, such an increased
lished based,on actual or projected plan ex-
odically review the appropriateness of the
premium.
perience or according to a formula estab-
preventive services required to be covered
"(2) EMPLOYER CONTRIBUTION TO PUBLIC
lished by the Secretary, and shall take into
under this section and prepare and submit
HEALTH INSURANCE PLAN.-In the case of a
account the reduction in health insurance
to the apprópriate committees of Congress a
less-than-full-time or part-time employee
costs resulting from such coverage.
report concerning any recommendations for
who waives enrollment under paragraph (1),
"(E) ADJUSTMENT OF PREMIUMS FOR EM-
changes in the list of such services that are
the employer shall, in a manner required by
PLOYED RETIREES UNDER HEALTH BENEFIT
required to be covered.
the Secretary, make a payment under title
PLANS.-If an employer provides a health
"(2) COVERAGE FOR CERTAIN SERVICES.-Not
V of the HealthAmerica Act equal to the
benefit plan with respect to retirees and the
later than 1 year after the date of enact-
minimum amount the employer would have
plan charges a retiree for a share of the pre-
ment of this part, the Secretary shall pre-
made towards the actuarial cost of coverage
mium of the plan, in the case of such a re-
pare and submit to the appropriate commit-
of the employee if the employee had not
tiree who is enrolled as an employee (or de-
tees of Congress a report concerning the
waived such enrollment.
pendent) under another health benefit plan
cost-effectiveness and desirability of cover-
"(d) CONTINUED COVERAGE.-If an employ-
under this part, the health benefit plan
age of colorectal cancer screening, prostate
ec's coverage or coverage for the family
with respect to the retiree shall provide for
cancer. screening. osteoporosis screening,
members of an employee would normally
an adjustment of the amount of the premi-
and outpatient prescription drugs.
terminate during a period of hospitalization,
um paid by the retiree to take into account
"SEC. 2723. REQUIREMENTS RELATING TO TIMING
such coverage shall continue until the em-
the reduction in health insurance-costs re-
OF COVERAGE AND PROHIBITION OF
ployee or family member is discharged from
sulting from such coverage.
PREEXISTING CONDITION LIMITA-
the hospital.
"(2) PAYMENT OF PREMIUMS.-An employee
TIONS.
"SEC. 2724. REQUIREMENTS RELATING TO PREMI-
enrolled under a health benefit plan is
"(a) DATE OF INITIAL COVERAGE.-In the
UMS. DEDUCTIBLES, COPAYMENTS,
liable for payment of premiums required
case of an employee (and family members)
COINSURANCE. AND LIMIT ON OUT-OF-
under that plan in accordance with this sub-
enrolled under a health benefit plan provid-
POCKET EXPENSES.
section.
ed by an employer, the coverage under the
"(a) ENROLLEE COST-SHARING PERMITTED.-
"(3) WITHHOLDING PERMITTED.-No provi-
plan shall begin not later than the latest of
A health benefit plan may require an enroll-
sion of State law shall prevent an employer
the following:
ee to pay for premiums, deductibles, copay-
of an employee enrolled under a health ben-
"(1) 30 days after the date on which the
ments, and coinsurance amounts for cover-
efit plan established under this part from
employee first performs an hour of service
age under the plan, but only if such premi-
withholding the amount of any premium
as an employee of that employer, or in a
ums, deductibles, copayments, and coinsur-
due by the employee from the payroll of the
case where an employer does not provide
ance do not exceed the limitations imposed
employee.
immediate coverage under the plan, on the
under this section.
"(4) SPECIAL RULE FOR LESS-THAN-FULL-TIME
day on which an employee who has per-
"(b) LIMITATION ON PREMIUMS.-
EMPLOYEES.-In the case of a less-than-full-
formed an hour of service for the employer
"(1) MONTHLY PREMIUM LIMITED TO 20 PER-
time employee (as defined in section
agrees to pay 100 percent of the normal em-
CENT OF ACTUARIAL RATE.-
2713(3)(D)), a health benefit plan may re-
ployer and employee premium for the
"(A) IN GENERAL.-Subject to paragraphs
quire the employee to pay a premium the
period prior to the normal beginning of cov-
(4) and (5), a health benefit plan shall not
amount of which (on a monthly basis) does
erage under the plan. The employer shall
require an employee to pay a premium-
not exceed-
notify the employee on the first day on
"(i) for coverage for a period of longer
"(A) 100 percent, minus
which the employee first performs an hour
than one month; or
"(B) 80 percent, multiplied by the ratio
of service for the employer of the rights of
"(ii) the amount of which on a monthly
of-
the employee under this subsection.
basis exceeds 20 percent of the monthly ac-
"(i) the average number of hours per week
"(2) The first day on which the employer
tuarial rate defined under subparagraph
the employee is normally employed by the
is required to meet the requirements of this
(B).
employer in the calendar quarter; to
part.
"(B) MONTHLY ACTUARIAL RATE DEFINED.-
"(ii) 25,
"(3) In the case of an employer described
For purposes of this subsection, the term
of the monthly actuarial rate (as defined in
in section 2713(a)(2)(C)-
'monthly actuarial rate' means, with respect
paragraph (1)(B)).
"(A) 90 days after the date on which the
to a health benefit plan in a plan year, the
"(5) PART-TIME EMPLOYEES.-In the case of
employee first performs an hour of plan-
average monthly per enrollee amount that
a part-time employee, a health benefit plan
covered service as an employee of the em-
the employer providing the plan estimates,
may require the employee to pay a premium
ployer. except that If the Initial waiting
based on actuarial calculations conducted in
amount that does not exceed 50 percent of
period is greater than 30 days, coverage
conformity with requirements established
the monthly actuarial rate (as defined in
under the plan shall continue for an equiva-
by the Secretary. for enrollees under the
paragraph (1)(B)).
lent period after the last day on which the
plan during the year, would be necessary to
"(c) LIMITATION ON DEDUCTIBLES.-
employee performs an hour of plan-covered
pay for the total benefits required under
"(1) IN GENERAL.-Except as permitted
service as an employee of the employer; or
the plan (including administrative costs for
under paragraph (2), a health benefit plan
"(B). 180 days after the date on which the
the provision of such benefits and an appro-
shall not provide, for benefits provided in
employee first performs an hour of plan-
priate amount for a contingency margin)
any plan year, for a deductible amount that
covered service. except that if the initial
during the year.
exceeds-
waiting period is greater than 30 days, cov-
"(C) APPLICATION ON BASIS OF FAMILY
"(A) with respect to benefits payable for
erage under the plan shall continue for an
STATUS.-For purposes of this paragraph, a
items and services furnished to any employ-
equivalent period after the last day on
health benefits plan may provide for the
ee with no family member enrolled under
which the employee performs an hour of
premium to be applied, and the monthly ac-
the plan, for a plan year beginning in-
plan-covered service.
tuarial rate to be computed-
"(i) the first calendar year that begins
"(4) Subject to section 2712(b), in the case
"(i) separately for employees who have
more than 1 year after the effective date of
of a child, coverage applies for any period
family members covered under the plan and
this Act, $250; or
during which the employee, who is the
for employees who do not have family mem-
"(ii) for a subsequent calendar year, the
parent of the child, is covered.
bers covered under the plan; and
limitation of deductions specified in this
"(b) PROHIBITION OF PREEXISTING CONDI-
"(ii) with respect to employees with such
subparagraph for the previous calendar
TION PROVISIONS.-A health benefit plan
covered family members, separately-
year increased by the percentage increase in
shall not exclude or otherwise limit any in-
"(I) for employees who have a covered
the consumer price index for all urban con-
dividual from coverage under the plan on
spouse and one or more covered children;
sumers (United States city average, as pub-
S 7182
CONGRESSIONAL RECORD
June-5, 1991
lished by the Bureau of Labor Statistics) for
under the plan and furnished in the plan
the 12-month period ending on September
"(4) FAILURE TO PAY PREMIUMS.-With re-
30 of the preceding calendar year; and
year on behalf of the employee and family
spect to & health benefit plan, the insurer
covered under the plan.
"(B) with respect to benefits payable for
Issuing such plan shall notify the employee
"(B) OUT-OF-POCKET LIMIT DEFINED.-As
items and services furnished to any employ-
and the Secretary of the failure of the em-
ee with a family member enrolled under the
used in this section and except as provided
ployer to make timely premium payments
plan, for a plan year beginning in-
in subparagraph (C), the term 'out-of-
on behalf of the employee and the employ-
"(i) the first calendar year that begins
pocket limit' means for a plan year begin-
ee's family members as required under such
ning in-
more than 1 year after the effective date of
plan. Such notification shall be provided not
this part, $250 per family member and $500
"(i) the first calendar year that begins
less that 30 days prior to any termination of
per family; or
more than 1 year after the effective date of
coverage by the insurer as the result of such
"(ii) for a subsequent calendar year, the
this part, $3,000; or
nonpayment of premiums.
limitation of deductions specified in this
"(II) for a subsequent calendar year, the
"(5) FINANCIAL STATEMENT.-An employee
subparagraph for the previous calendar
out-of-pocket limit specified in this subpara-
shall be entitled to receive, on request, a
year increased by the percentage increase in
graph for the previous calendar year in-
copy of the most recent financial statement
the consumer price index for all urban con-
creased by the percentage increase in the
prepared for the health benefit plan under
sumers (United States city average, as pub-
consumer price index for all urban consum-
lished by the Bureau of Labor Statistics) for
ers (United States city average, as published
which such employee is covered. An employ-
by the Bureau of Labor Statistics) for the
ee shall be entitled to no more than
the 12-month period ending on September
12-month period ending on September 30 of
such request during each 1-year. period.
30 of the preceding calendar year.
"(6) AVAILABILITY OF INFORMATION.-
the preceding calendar year.
If the limitation of deductions computed
"(A) FILING WITH SECRETARY AND PROVI-
under subparagraph (A)(ii) or (B)(ii) is not a
If the out-of-pocket limit computed under
SION TO STATES.-A copy of each health ben-
multiple of $10, it shall be rounded to the
clause (ii) is not a multiple of $10, it shall be
efit plan provided under this part, and any
next highest multiple of $10.
rounded to the next highest multiple of $10.
additional information prepared under this
"(2) WAGE-RELATED DEDUCTIBLE.-A health
"(C) ALTERNATIVE OUT-OF-POCKET LIMIT.-A
subsection concerning such plans, shall be
benefit plan may provide for any other de-
health benefit plan may provide for an out-
filed with the Secretary who shall make
ductible amount instead of the limitations
of-pocket limit other than that defined in
such information available to the State or
under-
subparagraph (B) if, for a plan year with re-
States in which the employees eligible for
"(A) paragraph (1)(A), if such amount
spect to an employee and the family of the
benefits under such plans are employed.
does not exceed (on an annualized basis) 1
employee, the limit does not exceed (on an
"(B) PROVISION TO EMPLOYEES.-Empl
percent of the total wages paid to the em-
annualized basis) 10 percent of the total
not receiving the information required
ployee in the plan year; or
wages paid to the employee in the plan
under this subsection may request such in-
"(B) paragraph (1)(B), if such amount
year.
formation from the State, or, if the program
does not exceed (on an annualized basis) 1
"SEC. 2725. ENROLLEE PROTECTION.
in such State is administered by the Secre-
percent per family member or 2 percent per
"(a) ADMINISTRATION.-
tary, from the Secretary.
family of the total wages paid to the em-
"(1) INSURANCE COMMISSIONER-The re-
"(c) STANDARDS AND TECHNICAL ASSIST-
ployee in the plan year.
quirements and standards established under
ANCE.-
"(d) LIMITATION ON COPAYMENTS AND COIN-
this section shall be administered in a State
"(1) MODEL PLANS AND SUMMARIES.-Not
SURANCE.-
by the insurance commissioner of that
later than 9 months after the date of enact-
"(1) IN GENERAL-Subject to paragraphs
State, or by any other State agency, as des-
ment of this part, the Secretary shall estab-
(2) through (4), a health benefit plan shall
ignated by the chief executive officer of the
lish and make available model language for
not-
State.
health benefit plans and the summaries of
"(A) require the payment of any copay-
"(2) NONCOMPLIANCE.-If the State fails to
such plans.
ment or coinsurance for an item or service
"(2) PLAN INFORMATION.-Not later than 9
for which coverage is required by this part
comply with the requirements of paragraph
in an amount that exceeds 20 percent of the
(1), or, in the judgment of the Secretary,
months after the date of enactment of this
cost of the item or service; or
fails to adequately perform the administra-
part, the Secretary shall promulgate regula-
"(B) require the payment of any copay-
tive functions required under such para-
tions that describe the health benefit plan
graph, the Secretary shall assume the ad-
information that shall be provided to em-
ment or coinsurance for items and services
required under section 2722 to be furnished
ministrative responsibilities and duties re-
ployees under this section, that shall in-
in a plan year for an employee after the em-
quired under such paragraph in that State.
clude-
plovee has incurred out-of-pocket expenses
"(b) INFORMATIONAL REQUIREMENT.-
"(A) the name and address of the adminis-
"(1) SUMMARY OF HEALTH PLAN.-
trator of the plan;
under the plan that are equal to the out-of-
"(A) REQUIREMENT.-Not later than 30
"(B) the requirements of the plan with re-
(5)(B)). pocket limit (as defined in paragraph
days after the date on which the coverage
spect to eligibility;
of an employee under a health benefit plan
"(C) the benefits to be provided under the
"(2) EXCEPTION FOR PREFERRED PROVID-
ERS.-If a health benefit plan establishes
under this part begins, the employer of such
plan;
employee shall provide the employee with a
"(D) the procedures for filing claims for
reasonable classifications of participating
and nonparticipating providers of items and
copy of the health benefit plan and a sum-
benefits under the plan;
services, the plan may require payments in
mary of such plan in accordance with sub-
"(E) the procedures for appealing the
paragraph (B).
denial of any claim filed under the plan; and
excess of the amount permitted under para-
graph (1) in the case of items and services
"(B) CONTENTS.-The plan and summary
"(F) other information determined appro-
furnished by nonparticipating providers.
provided under subparagraph (A) shall be
priate by the Secretary.
written in a manner reasonably assumed to
"(d) RIGHT TO ASSISTANCE.-
"(3) EXCEPTION FOR IMPROPER UTILIZA-
TION.-A health benefit plan may provide
be understandable by the average individ-
"(1) DESIGNATION OF INDIVIDUAL.-Each
for copayment or coinsurance in excess of
ual. Such summary and plan shall be suffi-
health benefit plan provided under this part
the amount permitted under paragraph (1)
ciently accurate and comprehensive to rea-
shall designate an appropriate individual or
for any item or service that an individual
sonably apprise individuals of their rights
individuals who shall be available to answer
obtains without complying with any reason-
and obligations under the plan.
questions concerning the plan or the appli-
able procedures established by the plan to
"(2) AVAILABILITY OF SUBSIDY.-Not later
cable plan requirements.
ensure the efficient and appropriate utiliza-
than 30 days after the date on which cover-
"(2) TIMELY RESPONSE.-Eployees shall
tion of covered services.
age of an employee under a health benefit
have the right to receive a timely written re-
"(4) MENTAL HEALTH CARE.-In the case of
plan under this part begins, the employer
sponse to any questions that such employ-
care provided under section 2722(a)(6)(B), a
shall notify the employee of the availability
ees may submit concerning their rights
health benefit plan shall not require pay-
of low-income subsidies for employees,
under the health benefits plan. Employees
ment of any copayment or coinsurance for
through the public health insurance plan
shall be able to rely on such written re-
an item or service for which coverage is re-
established under title XXI of the Social Se-
sponses.
quired by this part in an amount that ex-
curity Act, to cover all or part of the cost of
"(3) ASSISTANCE BY ADMINISTERING AUTHOR-
ceeds 50 percent of the cost of the item or
the employee's share of the premium for
ITY.-The authority designated under sub-
service.
such health benefit plan and of any cost-
section (a) shall provide assistance to em-
"(5) LIMIT ON OUT-OF-POCKET EXPENSES.-
sharing under such plan. Such notification
ployees in that State with respect to their
"(A) OUT-OF-POCKET EXPENSES DEFINED.-As
shall be provided in such form as the Secre-
rights under such plans and under Federal
tary shall require.
used in this section, the term 'out-of-pocket
or State law.
expenses' means, with respect to an employ-
"(3) CHANGES IN PLAN.-An employee shall
"(e) RIGHT TO REVIEW DENIED CLAIMS.-
ee in a plan year, amounts payable under
be notified in writing of any changes in the
"(1) NOTICE.-An administrator under a
the plan as deductibles and coinsurance
terms of their health benefit plan, not less
health benefit plan under this part shall
with respect to items and services provided
than 30 days in advance of the implementa-
provide an employee with written notice
tion of such changes.
concerning the denial of a claim submitted
June 5, 1931
CONGRESSIONAL RECORD chases SENATE
7183
by such employee. Such notice shall include
"(2) INVESTIGATIONS.-The Secretary may
"PART C-GROUP HEALTH INSURANCE
the reasons for such denial.
conduct Investigation under this section. In
STANDARDS
"(2) PROCESS FOR REVIEW.-Each health
conducting such investigations, the Secre-
benefit plan provided under this part shall
tary-
"Subpart 1-General Standards; Definitions
utilize a fair process for the timely review of
"(A) shall have reasonable access to exam-
"SEC. 2741. APPLICATION OF REQUIREMENTS TO
claims denied under such plan.
ine evidence of any person or entity being
HEALTH BENEFIT PLANS.
"(3) CLAIM FOR CARE NEEDED FOR LIFE-
investigated; and
"(a) PLAN UNDER STATE REGULATORY PRO-
THREATENING ILLNESS.-In cases in which the
"(B) may, if necessary, compel by subpoe-
GRAM OR CERTIFIED BY THE SECRETARY.-
failure to provide health care promptly
na the attendance of witnesses and the pro-
"(1) IN GENERAL.-No health benefit plan
would be life-threatening or result in 8. risk
duction of evidence at any designated place.
may be issued in a State on or after the ef-
of permanent disability, the beneficiary
"(3) ASSESSMENT PROCEDURE.-A civil
fective date specified in subsection (c) (and
under the health benefit plan shall be enti-
money penalty under this subsection shall
tled to.a decision as to whether care will be
no new contract may be offered under such
be assessed by the Secretary and collected
provided under such plán not later than 1
plan with respect to any small employer be-
in a civil action brought by the United
ginning on or after such effective date)
day after supplying the insurer, with all-re-
States in a United States district court. The
unless-
is
quested information. In the event of 3
Secretary shall not assess such a penalty on
denial of coverage for such care, the benefi-
"(A) the Secretary determines that the
an employer until the employer has been
clary shall be entitled to an expedited
given notice and an opportunity for a hear-
State has establishe a regulatory program
review of an appeal of such denial within 5
ing on such charge.
that provides for e application and en-
days.
"(4) AMOUNT OF PENALTY.-In determining
forcement of the in, licable standards estab-
"(4) APPEALS.-Individuals shall be enti-
the amount of the penalty, or the amount
lished under section 2742 (to carry out the
tled to appeal the denial of a claim submit-
agreed on in settlement, the Secretary shall
requirements of this part) and that meets
ted by such individual to the authority ad-
consider the gravity of the noncompliance
the requirements of section 2742(b) by such
ministering the requirements and standards
and the demonstrated good faith of the em-
effective date, or
under subsection (a). The Secretary shall
ployer charged in attempting to achieve
"(B) if the State has not established such
promulgate regulations establishing proce-
rapid compliance after notification of non-
a program, the plan has been certified by
dures to be utilized for appealing denials of
compliance by the Secretary.
the Secretary (in accordance with such pro-
claims under a health benefit plan under
"(5) JUDICIAL REVIEW.-In any civil action
cedures as the Secretary establishes) as
this part that are similar to the procedures
brought to review the assessment of such a
meeting the applicable standards estab-
established under title XVIII of the Social
penalty or to collect such a penalty, the
lished under section 2742 by such effective
Security Act for appealing denials of claims
court shall, at the request of any party to
date.
under such title XVIII, including the right
such action, hold a trial de novo on the as-
"(2) PLAN DISAPPROVED UNDER LOOK-BEHIND
to a trial de novo.
sessment of the penalty, unless in a prior
AUTHORITY.-If the Secretary determines,
"(f) RIGHT TO CHOICE.-
action such a trial de novo was held on the
under section 2742(c), that a health benefit
"(1) NONMANAGED CARE PLANS.-An employ-
assessment.
plan does not meet the applicable require-
er may offer its employees a nonmanaged
"(6) USE OF AMOUNTS COLLECTED.-Civil
ments of this part on or after such effective
care plan that meets the requirements of
money penalties collected under this subsec-
date, regardless of whether or not the State
this part as well as a managed care plan.
tion shall be credited to the account main-
has taken any action with respect to such
"(2) USE OF PROVIDERS.-If a nonmanaged
tained to provide health benefits under the
noncompliance, no new contracts :ay be of-
care plan is not offered by an employer, the
program established under title XXI of the
fered to small employers under the plan on
managed care plan or plans offered by such
Social Security Act.
or after the date of the determination.
employer shall permit the utilization of pro-
"(b) LIABILITY TO INDIVIDUALS FOR DAM-
"(b) SANCTIONS.-
viders not participating in the plan for serv-
AGES.-Any employer that knowingly does
"(1) COMPLAINTS AND INVESTIGATIONS.-The
ices otherwise covered under the plan. If an
not comply with section 2712(c) or the rè-
Secretary shall establish procedures-
employee elects to utilize such out-of-plan
quirements of section 2701(a) shall be liable
"(A) for individuals and entities to file
providers, the plan may provide for cost
for damages (including health care costs in-
written, signed complaints with the Secre-
sharing that shall not exceed 200 percent of
curred) to the employee or the family of the
tary respecting potential violations of the
the normal cost-sharing imposed under the
employee resulting from such failure to
requirements of this part;
plan or 200 percent of the cost-sharing per-
comply. Such an employee or family
"(B) for the investigation of those com-
mitted under the minimum plan established
member may bring a civil action to recover
plaints which have a substantial probability
under this part, whichever is greater.
damages resulting from an employers fail-
of validity; and
"(g) RIGHT TO CONFIDENTIALITY OF MEDI-
ure to comply with such requirements.".
"(C) for the investigation of such other
CAL RECORDS.-Health benefit plans under
TITLE III-SPECIAL ASSISTANCE FOR
violations of the requirements of this part
this title shall provide for the confidential-
SMALL AND MEDIUM-SIZED BUSINESSES
as the Secretary determines to be appropri-
ity of any medical records released under
SEC. 301. PREEMPTION OF STATE MANDATED BENE-
ate.
such plan.
FIT LAWS.
"(2) AUTHORITY IN INVESTIGATIONS.-In
"Subpart 3-Regulations and Enforcement
(a) IN GENERAL-Section 514(b)(2) of the
conducting investigations and hearings
Employee Retirement Income Security Act
under this subsection-
"SEC. 2731. REGULATIONS.
of 1974 (29 U.S.C. 1144(b)(2)) is amended-
"(A) agents of the Secretary and adminis-
"(a) PROPOSED RULES.-Not later than 4
(1) in subparagraph (A), by striking out
trative law judges shall have reasonable
months after the date of enactment of this
"subparagraph (B)" and inserting in lieu
access to examine evidence of any person or
part, the Secretary shall publish in the Fed-
thereof "subparagraphs (B) and (C)"; and
entity being investigated; and
eral Register a notice of proposed rulemak-
(2) by adding at the end thereof the fol-
"(B) administrative law judges, may, if
ing to carry out this part.
lowing new subparagraph:
necessary, compel by subpoena the attend-
"(b) FINAL RULES.-Not later than 9
"(C) Nothing in subparagraph (A) shall be
ance of witnesses and the production of evi-
months after the date of enactment of this
construed to exempt from subsection (a)
dence at any designated place or hearing.
part, the Secretary shall promulgate final
any provision of the law of any State to the
In case of contumacy or refusal to obey S
rules to carry out this part. Such notice and
extent that such provision regulates, or oth-
subpoena lawfully issued under this subsec-
final rules shall be made in accordance with
erwise provides any requirement relating to,
tion and upon application of the Secretary,
section 553 of title 5, United States Code.
the benefits to be provided under contracts
an appropriate district court of the United
"(c) EFFECT OF FAILURE To PROMULGATE
or policies of insurance issued to or under a
States may issue an order requiring compli-
RULES.-The failure of the Secretary to pro-
health benefit plan under part B of title
ance with such subpoena and any failure to
mulgate final rules under this part shall not
XXVII of the Public Health Service Act.".
obey such order may be punished by such
relieve any person or entity to which the
(b) CONFORMING AMENDMENT.-Paragraph
court as a contempt thereof.
provisions of this part apply of any obliga-
(1) of section 3 of such Act (29 U.S.C.
"(3) HEARING.-
tions under this part.
1002(1)) is amended by adding at the end
"(A) IN GENERAL-Before imposing an
"SEC. 2732. ENFORCEMENT.
thereof the following new sentence: "Such
order described in paragraph (4) against &
"(a) CIVIL MONEY PENALTY AGAINST PRI-
terms include a health benefit plan estab-
carrier under this subsection for a violation
VATE EMPLOYERS.-
lished in accordance with part B of title
of the requirements of this part, the Secre-
"(1) 15 PERCENT OF TOTAL WAGES.-Any em-
XXVII of the Public Health Service Act.".
tary shall provide the carrier with notice
ployer that does not comply with section
Subtitle A-Reform of Small Group Insurance
and, upon request made within a reasonable
2712(c) or the requirements of section
time (of not less than 30 days, as established
SEC. 311. GROUP HEALTH INSURANCE STANDARDS.
2701(a) in any calendar year shall be subject
by the Secretary) of the date of the notice,
(a) PUBLIC HEALTH SERVICE Acr.-Title
to a civil penalty of not more than 15 per-
a hearing respecting the violation.
XXVII of the Public Health Service Act (as
cent of the total amount of the expendi-
"(B) CONDUCT OF HEARING.-Any hearing so
tures of the employer for wages for employ-
added under section 101 and amended by
requested shall be conducted before an ad-
ees in that year.
section 201) is further amended by adding
ministrative law judge. If no hearing is so
at the end thereof the following new part:
requested, the Secretary's imposition of the
7184
CONGRESSIONAL RECORD SENATE
June 5; 1991
order shall constitute a final and unappeala-
ble order.
come into compliance with the applicable
standards within 30 days after the date of
standards and requirements, the Secretary
"(C) ISSUANCE OF ORDERS.-If the adminis-
shall assume responsibility under section
trative law judge determines, upon the pre-
the initial determination of such 9. violation,
such carrier shall be subject to the pro i-
2741(a)(1)(B) with respect to plans in the
ponderance of the evidence received, that a
State.
sions of this subsection:
carrier named in the complaint has violated
the requirements of this part, the adminis-
"(c) EFFECTIVE DATE:-The effective date
(2) LOOK-BEHIND AUTHORITY.-In the case
specified in this subsection is January 1 of
( I State with a regul tory program found
trative law judge shall state the findings of
the third full year that begins after the date
by the Secretary to meet the standards and
fact and issue and cause to be served on
of the enactment of this subpart.
requireme is under this part, the Secretary
such carrier an order described in para-
graph (4).
"SEC. 2742. ESTABLISHMENT OF STANDARDS.
nonetheless is authorized to determine
"(4) ENFORCEMENT AND CIVIL MONEY PENAL-
"(a) ESTABLISHMENT OF STANDARDS.-
whether or not health benefit plans offered
by carriers in the State have failed to
TY.-
"(1) NAIC.-The Secretary shall request
"(A) ENFORCEMENT.-Subject to the provi-
the NAIC-
comply with the applicable requirements of
this part.
sions of this paragraph, an order issued
"(A) to develop specific standards, in the
form of a model Act a model regulations,
"(d) GAO AUDITS.-The Comptroller Gen-
under this subsection-
"(I) shall require the carrier-
to implement the requirements of this part;
eral shall conduct periodic audits on a
"(I) to cease and desist from such viola-
and
sample of State regulatory progra is to de-
tions; and
"(B) to report to the Secretary on such de-
termine their compliance with the require-
velopment;
ments of this section. The Comptroller Gen-
"(II) to pay a civil penalty as required in
eral shall report to the Secretary and Con-
paragraph (9); and
by not later than October 1- of the year fol-
gress on the findings in such audits.
"(ii) may require the carrier to take such
lowing the year in which: this: part is en-
other corrective action as is appropriate.
acted. If the NAIC develops such standards
"SEC. 2743. TRANSITIONAL REQUIREMENTS APPLI-
"(B) CORRECTIONS WITHIN 30 DAYS.-No
within such period and the Secretary finds
CABLE: TO ALL HEALTH BENEFIT
order shall be imposed under this subsection
that such standards implement the require-
PLANS TO SMALL EMPLOY-
ERS.
by reason of any violation if the carrier es-
ments of this part, such standards shall be
the standards applied under section 2741.
"(a) APPLICATION.-The requirements of
that- tablishes to the satisfaction of the Secretary
"(2) SECRETARY.-If the NAIC fails to de-
this section shall apply only to health bene-
"(1) such violation was due to reasonable
velop and report on such standards by such
fit plans offered to small employers during
cause and not to willful neglect; and
date or the Secretary finds that such stand-
the period that begins on the effective date
"(ii) such violation is corrected within the
ards do not implement-t: e. requirements of
of this part and end in the case of 2 small
30-day period beginning on earliest date the
this part, the Secretary shall develop and
employer, on the date that begins the fifth
carrier knew, or exercising reasonable dili-
publish, by not later than November 15 of
full year after the date of enactment of this
part.
gence could have known, that such a viola-
the year following the year in which this
tion was occurring.
part is enacted, such standards. Such stand-
"(b) No DISCRIMINATION BASED ON HEALTH
"(C) WAIVER BY SECRETARY.-In the case of
ards shall then be the standards applied
STATUS FOR CERTAIN SERVICES.-
a violation which is due to reasonable cause
under section 2741.
"(1);- IN GENERAL.-Except as provided
and not to willful neglect, the Secretary
"(b) ADDITIONAL ELEMENTS OF REGULATORY
under. ragraph (2), health benefit plans
may waive part or all of the civil money
PROGRAMS.-
offered to small employers by carriers may
penalty imposed by paragraph (9) to the
"(1) IN GENERAL-A State regulatory pro-
not deny, limit, or condition the coverage
extent that payment of such penalty would
gram shall include the following:
under (or benefits the plan with respect
be grossly excessive relative to the violation
"(A) The enforcement under the pro-
to basic health services based on the health
involved and to the need for deterrent of
gram-
status, claims experience, receipt of health
violations.
"(i) shall be designed in manner SO as to
care, medical history, or lack of evidence of
"(5) ADMINISTRATIVE APPELLATE REVIEW.-
secure compliance with's the standards
insurability, of un individual.
The decision and order of an administrative
within 30 days after the date of & finding of
"(2) TREATMENT OF PREEKISTING CONDITION
law judge under this subsection shall
noncompliance with such standards; and
EXCLUSIONS FOR ALL SERVICES.-
become the final agency decision and order
"(ii) shall provide for notice to the Secre-
"(A) IN GENERAL -Subject to the succeed-
of the Secretary unless, within 30 days, the
tary in cases where such compliance is not
ing provisions of this paragraph, health
Secretary modifies or vacates the decision
secured within such 30-day period.
benefit plans provided to small employers
and order, in which case the decision and
"(B) A toll-free tele₁ hone number which
by carriers may exclude coverage with re-
order of the Secretary shall become Eb final
provides-
spect to services related to treatment of a
order under this subsection.
"(i) for a system for the receipt and dispo-
preexisting CO ition, but the period of such
"(6) JUDICIAL REVIEW.-A carrier adversely
sition of consumer complaints or inquiries
exclusion may not exceed 6 months.
affected by a final order Issued under this
regarding compliance. of health benefit
"(B). NONAPPLICATION TO NEWBORNS AND
subsection may, within 45 days after the
date the final order is issued, file a petition
and plans with the requirements of this part;
SUNSET OF PREEXISTING CONDITION EXCLU-
SIONS FOR BASIC HEALTH SERVICES.-The ex-
in the Court of Appeals for the appropriate
circuit for review of the order.
"(ii) information to SIT 11 employers and
clusion of coverage permitted under sub-
consumers about carriers that offer health
paragraph (A) shall not apply to-
"(7) ENFORCEMENT OF ORDERS.-If a carrier
benefit plans in the area covered by the reg-
"(i) services furnished to newborns, or
fails to comply with a final order issued
ulatory authority.
"(ii) basic health services furnished on or
under this section against the carrier. the
Secretary shall file a suit to seek compliance
Such system shall provide for the recording
after July 1 of the sixth full year beginning
with the order in any appropriate district
of consumer complaint in accordance with
after the date of the enactment of this part,
"(C) CREDITING OF PREVIOUS COVERAGE.-
court of the United States. In any such suit,
a uniform methodology developed by the
NAIC and recognized by the Secretary.
"(1) IN GENERAL.-A health benefit plan
the validity and appropriateness of the final
order shall not be subject to review.
"(2) SECRETARIAL AUTHORITY.-In the case.
issued to a small employer by a carrier shall
provide that if an individual under such
"(8) USE OF AMOUNTS COLLECTED.-Civil
of a State without a regulatory program ap-
money penalties collected under this subsec-
proved under subsed Non (a), the Secretary:
plan is in period of continuous coverage:
tion shall be credited to the AmeriCare
shall provide for the establishment of the
(as defined in clause (ii)(I) with respect to:
Trust Fund.
toll-free telephone information and com-1
particular services as of the date of initial
plaint system described in paragraph (1),
coverage under such plan, any period of ex-
"(9) AMOUNT OF CIVIL MONEY PENALTY.-
The amount of any civil money penalty im-
"(c) SECRETARIAL REVIEW.-
clusion of coverage with respect to a preex-
posed under this subsection shall not exceed
"(1) PERIODIC REVIEW OF STATE REGULATORY
isting condition for such services or type of
$25,000 for each carrier with respect to
PROGRAMS.-The Secretary periodically shall
services shall be reduced by 1 month for:
review State regulatory programs to deter-
each month in the period of continuous-cov-
which a violation occurs. Such amount may
erage.
take into account the penalties imposed by
mine if they continue to meet the standards.
tion. a State with respect to the same such viola-
referred to in subsection (a) and the re-
"(ii) DEFINITIONS.-As used in this sub-
paragraph:
quirements of subsection (b): If the Secre-
"(10) NOTICE TO CARRIER IN THE CASE OF IN-
tary finds that a State regulatory program
"(I) PERIOD OF CONTINUOUS COVERAGE.-The
no longer meets such standards and require--
term period of continuous coverage! means,
SURED PLANS.-As part of any order issued
under this subsection in the case of a health
ments, before making & final determination,
with respect: to particular services, the
the Secretary shall provide the, State an op-
period beginning on the date an individual
benefit plan, the order shall require that
notice be provided to the carrier of the find-
portunity to adopt such & plan of correction
is enrolled under a health benefit plan
ings in the order.
as would permit the program to COL Inue to
issued to a small employer by a carric
"(11) Loss OF STATUS AS A HEALTH BENEFIT
meet such standards and requirements. If.
which provides the same or substantially
the Secretary makes & final determination
similar benefits with respect to such services,
PLAN.-If a carrier is not in compliance with
that the State regulator program, after
and ends on the date the individual is not SO
subsection (a) and is not determined to have
such an opportunity, fails to meet such
enrolled for a continuous period of more.
than 3 months.
June 5, 1991
CONGRESSIONAL RECORD SENATE
S 7185
"(II) PREEXISTING CONDITION.-The term
"(5) SELF-INSURED HEALTH BENEFIT PLAN.-
'preexisting condition' means, with respect
employer, an employee who normally per-
The term 'self-insured health benefit w
to coverage under a health benefit plan
forms on a monthly basis at least 25 hours
means 8. health benefit plan in which the
issued to a small employer by a carrier, a
f.service per week for that employer.
small employer or employment-related
"(5) NAIC.-The term 'NAIC' means the
condition which has b. n diagnosed or
group assumes the underwriting risk for the
National Association of Insurance Commis-
treated during the 3-mo h. period ending
plan. (whether or not there is any reinsur-
sioners.
on the day before the first date of such cov-
ance 0" similar mechanism to underwrite &
"(6) REFERENCE PREMIUM RATE.-The term
erage, except that such term does not in-
portic of that risk).
'reference premium rate' means, for each
clude a condition which was first diagnosed
"(b) CARRIER: EALTH M INTENANCE ORGA-
block of business for 8. rating period in a
or treated during a period of continuous
NIZATION; AND )ther-Definitions RELATING
cóverage.
community, the lowest premium rate
TO CARRIERS.-As used in this part:
charged or which could have been charged
STANDARDS FOR SIMILAR BENEFITS.-
"(1) CARRIER.-The term 'carrier' means
by the small employer carrier to small em-
The' standards established under section
any person that offers 8 health benefit
ployers in that block under a rating system
2742 shall establish such criteria for deter-
plan, whether through insurance or other-
for that block of business in the community
mining if benefits substantially similar
wise, including a licensed insurance compa-
for health benefit plans with the same or
as may be necessary to carry out this sub-
ny, & prepaid hospital or medical service
similar coverage. The reference premium
paragraph.
plan, 8 health maintenance organization, a
rate is determined without regard to any ad-
"(c) PERMITTING COVERAGE DURING WAIT-
self-insurer carrier, a reinsurance carrier,
justment for age or sex described in section
ING PERIOD.-
and a multiple small employer welfare ar-
2752(c) and without regard to any adjust-
"(1) IN GENERAL.-If a health benefit plan
rangement (a combination of small employ-
ment effected under section 2752(d).
issued to a small employer by a carrier im-
ers associated for the purpose of providing
"(7) STATE-The term 'State' means the
poses a waiting period before an eligible in-
health benefit plan coverage for their em-
dividual may be covered under the plan, the
ployees).
50 States and the District of Columbia.
plan-
"(2) EMPLOYER CARRIER.-The term 'em-
"Subpart 2-Small Employer Health Insurance
"(A) must make available to the individual
ployer carrier'-
Reform
coverage (including coverage of dependents)
"(A) means any carrier which offers
"SEC. 2751. ENROLLMENT PRACTICE AND GUARAN-
equivalent to the coverage available to the
health benefit plans, and
TEED RENEWABILITY REQUIREMENTS
employee upon the completion of any appli-
"(B) includes (unless the context other-
FOR HEALTH BENEFIT PLANS ISSUED
cable waiting period; and
wise requires)-
TO SMALL EMPLOYERS.
"(i) a self-insurer carrier offering such a
"(a) REGISTRATION WITH APPLICABLE REGU-
"(B) may not impose for such coverage
plan, or
LATORY AUTHORITY.-
charges that exceed the cost under the plan
of providing such coverage with respect to
"(ii) a reinsurance carrier offering an
"(1) IN GENERAL.-Each carrier (as defined
the employee if such waiting period did not
health benefit plan that is an reinsurance
in section 2744(b)(1)) shall register with the
apply.
plan.
applicable regulatory authority for each
"(3) HEALTH MAINTENANCE ORGANIZATION.-
State in which it Issues or offers a health
Nothing in this paragraph shall be con-
The term 'health maintenance organization'
benefit plans to small employers.
strued as requiring a health benefit plan
has the meaning given the term 'eligible or-
"(2) No PREEMPTION OF STATE INFORMATION
issued to a small employer by 8 carrier to
ganization' in section 1876(b) of the Social
REQUIREMENTS.-Nothing in paragraph (1)
make coverage available to an individual
Security Act.
shall be construed RS preventing the appli-
who no longer has an employment relation-
"(4) REINSURANCE CARRIER.-The term 're-
cable regulatory authority from requiring,
ship (or who is the spouse or dependent of
insurance carrier' means the entity assum-
in the case of carriers that are not self-in-
such an individual) with respect to the plan.
ing responsibility for underwriting under an
surance carriers, such additional informa-
"(2) ELIGIBLE INDIVIDUAL DEFINED.-In
employment-related reinsurance plan; but
tion in conjunction with, or apart from, the
paragraph (1), the term 'eligible individual'
does not include a carrier insofar as it di-
registration required under paragraph (1) as
means, with respect to a health benefit
rectly offers 9, health benefit plan.
the applicable regulatory authority may be
plan, an individual who, but for a waiting
"(5) SELF-INSURER CARRIER.-The term
authorized to require under State law.
period, would be eligible for immediate cov-
'self-insurer carrier' means a carrier that is
"(b) GUARANTEED ISSUE.-
erage under the plan.
not a licensed insurance company, & prepaid
"(1) IN GENERAL.-Subject to the succeed-
"SEC. 2744. DEFINITIONS.
hospital or medical service plan, or a health
ing pr. visions of this subsection, a carrier
"(a) HEALTH BENEFIT PLAN AND OTHER
maintenance organization, that offers a
that offers & health benefit plan (including
DEFINITIONS RELATING TO HEALTH PLANS.-
health benefit plan directly with respect to
a reinsurance plan) to small employers lo-
As used in this part:
an employment-related group.
cated in a community must offer the same
("(1) HEALTH BENEFIT PLAN.-The term
"(c) GENERAL DEPIKITIONS.-As used in
plan to any other small employer located in
'health benefit plan' means any hospital or
this part:
the community.
medical expense incurred policy or certifi-
"(1) APPLICABLE REGULATORY AUTHORITY.-
"(2) TREATMENT OF HEALTH MAINTENANCE
cate, hospital or medical service plan con-
The term 'applicable regulatory authority'
ORGANIZATIONS.-
tract, health maintenance subscriber con-
means, with respect to & health benefit plan
"(A) GEOGRAPHIC LIMITATIONS.-A health
tract, other employee welfare plan (as de-
offered in a State, the State commissioner
maintenance organization may deny cover-
fined in the Employee Retirement Income
or superintendent of insurance or other
age under 8. health benefit plan to & small
Security Act of 1964), or any other health
State authority responsible for regulation of
employer whose employees are located out-
insurance arra gement, and includes an em-
health insurance, or, if the Secretary is ex-
side the service area of the organization, but
ployment-related reinsurance plan (as de-
ercising authority under section
only if such denial is applied uniformly
fined in paragraph (3)), but does not in-
2741(a)(1)(B) in the State, the Secretary.
without regard to health status or insurabil-
clude-
"(2) BLOCK OF BUSINESS.-The term 'block
ity.
"(A) accident-only, credit, dental, or dis-
of business' means all, or a distinct grouping
"(B) SIZE LIMITS.-A health maintenance
ability income insurance,
of, small employers as shown on the records
organization may apply to the applicable
"(B) coverage issued as a supplement to 11-
of the small employer carrier, if established
regulatory authority to cease enrolling new
ability insurance,
consistent with section 2752(b)(3).
small employer groups in its health benefit
"(C) worker's compensation or similar in-
"(3) COMMUNITY.-The term 'community'
plan (or in a geographic area served by the
surance, or
means a geographic area designated by the
plan) if it can demonstrate that its financial
"(D) automobile medical-payment insur-
Secretary as-
or administrative capacity to serve previous-
ance;
"(A) encompassing one or more adjacent
ly enrolled groups and individuals (and addi-
that is offered by a carrier.
metropolitan statistical areas; or
tional individuals who will be expected to
"(2) SMALL EMPLOYER.-The term 'small
"(B) the remaining area within each State
enroll because of affiliation with such previ-
employer' means, with respect to a calendar
(that is not designated within any communi-
ously enrolled groups) will be impaired if it
ty under subparagraph (A));
year, an employer that normally employs
is required to enroll new groups.
fewer than 100 employees on during the cal-
except that the Secretary may designate an
"(3) GROUNDS FOR REFUSAL TO ISSUE OR
endar year.
entire State as & community if such a desig-
RENEW.-
"(3) MANAGED CARE PLAN.-The term 'man-
nation would better carry out the purposes
"(A) IN GENERAL.-A carrier may refuse to
of this part. The Secretary from time to
aged care plan' has the same meaning given
Issue or renew or terminate & health benefit
such term by section 2713(7).
time may change the boundaries of commu-
plan under this part only for-
"(4) REINSURANCE PLAN.-The term 'rein-
nities designated under subparagraph (A) or
"(i) nonpayment of premiums,
(B) for such purposes. There hall be no ad-
surance plan' means any reinsurance or
"(ii) fraud or misrepresents -ion, and
similar mechanism that underwrites a por-
ministrative or judicial review of the desig-
"(iii) failure to meet minimum participa-
tion of the risk for a health benefit plan, if
nation of communities under this subsec-
tion rates (consistent with subparagraph
tion.
the mechanism is offered directly to a small
(B)).
employer.
"(4) FULL-TIME EMPLOYEE.-The term 'full-
"(B) MINIMUM PARTICIPATION RATES.-A
time employee' means, with respect to an
carrier may require, within the transition
S7186
CONGRESSIONAL RECORD SENATE
June 5, 1991
period described in section 2743(a), with re-
"(1) IN GENERAL-The premiums (includ-
mium rate for such plans in the same com-
spect to a health benefit plan. that a mini-
ing reference premium rate, as defined in
munity for similar benefits in the same
mum percentage of full-time, permanent
section 2744(c)(6), age adjustments under
block of business.
employees eligible to enroll under the plan
subsection (c), and reductions provided
be enrolled, SO long as such percentage is
"(3) ESTABLISHMENT OF BLOCKS OF BUSI-
under subsection (d)) for all health benefit
enforced uniformly for all employment
NESS.-For the purpose of establishing pre-
plans offered to small employers by carriers
groups of comparable size.
miums for small employer health benefit
shall-
"(c) MINIMUM PLAN PERIOD.-A carrier
plans with similar coverage, the carrier may
"(A) be established based on a single colie-
may not offer to, or issue with respect to, a
sive rating system which is applied consist-
establish blocks of business based only on
small employer a health benefit plan with a
ently for all small employer groups and is
one or more of the following characteristics:
term of less than 12 months.
designed not to treat groups, after the
"(A) Plans that are marketed by clearly
"(d) GUARANTEED RENEWABILITY.-
second effective year (as defined in subsec-
different sales forces.
"(1) IN GENERAL.-
tion (f)), differently based on health status
"(B) Plans that have been acquired from
"(A) GENERAL RULE.-Subject to the suc-
or risk status; and
another carrier as a distinct group.
ceeding provisions of this subsection, a car-
"(B) be actuarially certified annually.
"(C) Plans that are managed care-plans.
rier shall ensure that a health benefit plan
"(2) ACTUARIAL CERTIFIED DEFINED.-For
"(D) Plans within another distinct group,
issued to a small employer be renewed, at
purposes of paragraph (1)(B), a health ben-
if the applicable regulatory authority finds
the option of the small employer. unless the
efit plan is considered to be actuarially cer-
that establishment of such a group will en-
plan is terminated for the reasons specified
tified' if there is a written statement, by a
hance the efficiency and fairness of the
in subsection (a)(3)(A) or under subpara-
member of the American Academy of Actu-
small employer insurance marketplace.
graph (B).
aries or other individual acceptable to the
"(c) ADJUSTMENTS TO COMMUNITY-
"(B) TERMINATION OF BLOCK OF BUSINESS.-
applicable regulatory authority that a carri-
RATING.-
A carrier need not renew a health benefit
er is in compliance with this section, based
"(1) IN GENERAL.-Subject to paragraph
plan with respect to such a small employer
upon the individual's examination, includ-
if the carrier--
(2), a health benefit plan offered by a carri-
ing a review of the appropriate records and
er to a small employer may provide for an
"(i) is terminating the block of business
of the actuarial assumptions and methods
that includes the plan: and
adjustment to the reference premium rate
utilized by the carrier in establishing premi-
"(ii) provides notice to the small employer
based on the age and gender of covered indi-
um rates for applicable health benefit plans.
covered under the plan of such termination
viduals. Any such adjustment shall be ap-
"(b) USE OF COMMUNITY-RATING.-
at least 90 days before the date of expira-
plied by the carrier consistently to all small
"(1) IN GENERAL.-Except as provided in
tion of the plan.
employers, except that gender adjustments
paragraph (2) and subsection (c):
may only be made during the transition
In the case of such a termination, the carri-
"(A) COMMUNITY RATING WITHIN A BLOCK
period.
er may not provide for issuance of any
OF BUSINESS.-The reference premium rate
health benefit plan in any block of business
"(2) LIMITATION ON ADJUSTMENT.-
charged for health benefit plans offered
during the 5-year period beginning on the
with similar benefits to small employers in a
"(A) IN GENERAL-The adjustment under
date of termination of such block of busi-
community within a block of business for a
paragraph (1) may not result, with respect
ness.
type of family enrollment (described in sub-
to health benefit plans with similar benefits
"(C) CONSTRUCTION RESPECTING ADDITIONAL
section (e)) shall be the same for all small
offered by carriers to small employers in the
STATE DISCLOSURE REQUIREMENTS.-Subpara-
employers.
same block of business in a community. in a
graph (B)(ii) shall not be construed as pre-
"(B) LIMITING VARIATION ON REFERENCE
premium rate for the most expensive age
venting the applicable regulatory authority
PREMIUM RATES AMONG BLOCKS OF BUSINESS.-
group exceeding the applicable percent (as
from specifying the information to be in-
"(i) IN GENERAL.-Except as provided in
defined in subparagraph (B)) of the-premi-
cluded in the notice under such subpara-
clause (iii), the reference premium rate
um rate for the least expensive age group.
graph or in requiring such notice to be pro-
charged for health benefit plans offered
"(B) APPLICABLE PERCENT DEFINED.-In sub-
vided at an earlier date.
with similar benefits to small employers in
paragraph (A) but subject to subparagraph
"(2) NOTICE AND SPECIFICATION OF RATES
any community for a type of family enroll-
(C), the term applicable percent' means-
AND ADMINISTRATIVE CHANGES.-
ment for the most expensive block of busi-
"(i) for the first effective year (as defined
"(A) NOTICE.-A carrier offering health
ness shall not exceed 120 percent of such
in subsection (f)), 200 percent,
benefit plans to small employers shall pro-
rate charged for such plan for the same
"(ii) for the second effective year, 150 per-
vide for notice, at least 30 days before the
type of family enrollment for the least ex-
cent, and
date of expiration of the health benefit
pensive block of business.
"(iii) for any subsequent year. 110 percent.
plan, of the terms for renewal of the plan.
"(ii) ROLE OF REGULATORY AUTHORITY.-An
"(C) ROLE OF REGULATORY AUTHORITY.-An
Except with respect to rates and administra-
applicable regulatory authority that is a
applicable regulatory authority that is a
tive changes, the terms of renewal (includ-
State may reduce or eliminate the percent
State may reduce or eliminate the applica-
ing benefits) shall be the same as the terms
variation otherwise permitted under clause
of issuance.
ble percent otherwise applied.
(i).
"(d) ADJUSTMENT IN RATES PERMITTED IN
"(B) RENEWAL RATES SAME AS ISSUANCE
"(iii) EXCEPTION.-Clause (i) shall not
CASE OF MEDICARE REIMBURSEMENT ELEC-
RATES.-The carrier may change the terms
apply to health benefit plans offered by car-
for such renewal, but the premium rates
TION.-A health benefit plan offered by &
riers to small employers in a block of busi-
charged with respect to such renewal shall
carrier to a small employer may compute
ness-
be the same as that for a new issue.
"(I) If the block is one for which the carri-
premiums based upon a percentage of the
"(C) RATES CANNOT CHANGE MORE OFTEN
er does not reject. and never has rejected.
reference premium rate otherwise applica-
THAN MONTHLY.-
small employers included within the defini-
ble if the small employer to which the plan
"(1) IN GENERAL-A carrier may not change
tion of small employers eligible for the
is being offered makes the reimbursement
the premium rates established with respect
block of business or otherwise eligible em-
election described in section 2744. Any such
to health benefit plans offered for any
ployees and dependents who enroll on a
adjustment shall be applied consistently to
block of business more often than monthly.
timely basis,
all small employers.
"(ii) APPLICATION OF NEW RATES.-A carrier
"(II) the carrier does not involuntarily
"(e) TYPES OF FAMILY ENROLLMENT.-Each
that offers health benefit plans to small em-
transfer. and never has involuntarily trans-
health benefit plan offered by a carrier to a
ployers which becomes effective in a month,
ferred. a health benefit plan into or out of
small employer shall permit enrollment of
shall ensure that the premium rates estab-
the block of business, and
(and shall compute premiums separately
lished under clause (i) for that month shall
"(III) that block of business was available
for) individuals based on each of the follow-
apply to all months during the 12-month
for purchase as of the date of the enact-
ing beneficiary classes:
period beginning with that month. In the
ment of this part.
"(1) 1 adult.
case of a plan renewal which is effective for
"(2) TRANSITION.-Notwithstanding para-
"(2) A married couple without children.
a 12-month period beginning with a month.
graph (1)-
"(3) 1 adult and 1 child.
the premium rates established under clause
"(A) during the first effective year (as de-
"(4) A married couple with 1 or more chil-
(i) with respect to that month shall apply to
fined in subsection (f)), the premium rate
dren, or 1 adult with 2 or more children.
all months during 12-month renewal period.
under a health benefit plan issued by a car-
"(f) EFFECTIVE YEARS DEFINED.-In this
"(3) PERIOD OF RENEWAL.-The period of
rier to any small employer may be as much
section, the terms 'first effective year' and
renewal of each health benefit plan offered
as, but may not exceed, 150 percent of the
'second effective year' mean the third and
by a carrier to a small employer shall be for
reference premium rate for such plans in
fourth full years beginning after the date of
a period of not less than 12 months.
the same community for similar benefits in
the enactment of this part.
"SEC. 2752. RATING PRACTICES FOR HEALTH BENE-
the same block of business; or
"(g) EXCEPTION FOR SELF-INSURED CARRI-
FIT PLANS OFFERED TO SMALL EM-
"(B) during the second effective year, the
ERS.-The requirements of this section shall
PLOYERS.
premium rate under such a policy for any
"(&) COHESIVE RATING SYSTEM AND ACTUAR-
apply to reinsurance carriers and health
small employer may be as much as, but may
IAL CERTIFICATION.-
benefit plans offered by such carriers to
not exceed, 122 percent of the reference pre-
small employers.
June
1991
CONGRESSIONAL RECORD SENATE
S7187
"SEC. 2753. BASIC BENEFIT PACKAGE FOR HEALTH
BENEFIT PLANS OFFERED TO SMALL
"(1) GENERAL DISCLOSURE.--Eech carrier
"(1) lim he amount of risk ceded to the
EMPLOYERS.
offering health benefit plans to small em-
reinsuran
ystem: and
"(a) IN GENERAL.-
ployers shall disclose to each small employ-
"(ii) enc rage insurers to manage health
"(1) BENEFITS AND COST-SHARING IN HEALTH
er before issuing such a plan the following:
care costs.
BENEFIT PLANS.-Except as provided in para-
"(A) The availability (pursuant to the re-
"(b) PROTECTION OF HEALTH MAINTENANCE
graph (2) and in section 2743(a), no health
quirement of section 2753(a)(1)(C)) of a
ORGANIZATIONS UNDER REINSURANCE Sys-
benefit plan offered by carriers to small em-
plan including only basic benefits.
TEMS.-No State may establish or enforce &
ployers may be issued to a small employer
"(B) Whether any plan that is a managed
reinsurance system with respect to health
unless-
care plan or provides for a utilization review
insurance policies unless the system pro-
"(A) the plan provides for benefits for all
program, or both, is available, as required
vides for an adjustment in reinsurance pre-
basic health services as defined in part B;
under section 2753(b).
miums (or, in the event of losses to the
"(B) the plan does not impose cost-sharing
"(C) The option of electing the reimburse-
system, assessments) charged to health
with respect to basic health services in
ment rules, as required under section 2754.
maintenance organizations that takes into
excess of the deductibles and coinsurance
"(D) The limits, imposed under section
account-
permitted under part B respect to such serv-
2752, on the premiums permitted to be
"(1) the higher premiums charged by such
ices; and
charged for such plans.
organizations due to the greater coverage
"(C) the carrier makes available to the
"(E) The rights of guaranteed issue and
provided by such organizations as required
small employer a health benefit plan that,
renewability provided under section 2751.
by law,
subject to paragraph (2)(C), only provides
Such disclosure shall be in addition to any
"(2) the limitations under title XIII on
the benefits for basic health services and
disclosure required generally of health ben-
the amount of risk which such an organiza-
the maximum cost-sharing consistent with
efit plans under part B.
tion can reinsure, and
subparagraphs (A) and (B).
"(2) SPECIFIC DISCLOSURE UPON REQUEST.-
"(3) the ability of such organizations to
"(2) EXCEPTIONS.-
Each carrier offering health benefit plans
manage risk internally.
"(A) REQUIRED OFFERING DOES NOT APPLY TO
to small employers shall disclose to small
"(c) EFFECTIVE DATE-This section shall
HMO'S.-Paragraph (1)(C) shall not apply to
employer, upon request, information con-
take effect on the date of the enactment of
a health maintenance organization.
cerning the blocks of business established
this part.".
"(B) ADDITIONAL, OPTIONAL MINIMUM SERV-
with respect to such plans and the applica-
(b) SOCIAL SECURITY Acr.-The Social Se-
ICES.-In meeting the requirement of para-
ble premiums for such plans.
curity Act is amended by inserting after
graph (1)(C), a health benefit plan offered
"(3) STANDARD FORMAT.-The disclosure
title XII the following new title:
by a carrier to a small employer may include
under paragraph (1) shall be made in a uni-
such additional items and services as the
"TITLE XIII-GROUP HEALTH INSURANCE
form format established by the Secretary,
carrier can demonstrate to the satisfaction
STANDARDS
after consultation with the NAIC.
of the applicable regulatory authority that
"(4) EXCEPTIONS.-Faragaph (1) (other
"PART A-GENERAL STANDARDS; DEFINITIONS
inclusion of such items and services will fa-
than subparagraphs (D) and (E)) shall not
"APPLICATION OF REQUIREMENTS TO HEALTH
cilitate appropriate hospital discharges or
apply to a reinsurance carrier with respect
BENEFIT PLANS
avoid unnecessary hospitalization.
to a reinsurance plan.
"(b) MANAGED CARE OPTION.-If & carrier
"SEC. 1301. (a) PLAN UNDER STATE REGULA-
"(b) INFORMATION FILED WITH APPLICABLE
(other than a health maintenance organiza-
TORY PROGRAM OR CERTIFIED BY THE SECRE-
REGULATORY AUTHORITY.-
tion or reinsurance carrier) offers health
TARY.-
benefit plans to an employer that is not a
"(1) IN GENERAL-Each carrier offering
"(1) IN GENERAL.-No health benefit plan
small employer, in a community a health
health benefit plans to small employers
may be issued in a State on or after the ef-
benefit plan that is a managed care plan,
shall disclose to the applicable regulatory
fective date specified in subsection (c) (and
the carrier must make available to small em-
authority, in a manner specified by the Sec-
no new contract may be offered under such
ployers in the community & health benefit
retary, information concerning-
plan with respect to any small employer be-
plan that is such a managed care plan.
"(1) blocks of business established; and
glaming on or after such effective date)
"(c) EXCEPTION FOR REINSURANCE CARRIERS
"(2) applicable premiums for health bene-
unless-
fit plans.
AND PLANS.-The requirements of this sec-
"(A) the Secretary determines that the
tion shall not apply to reinsurance carriers
"(2) ADDITIONAL INFORMATION.-Nothing in
State has established & regulatory program
and reinsurance plans.
this subsection shall be construed as limit-
that provides for the application and en-
"(d) STANDARDIZATION OF BENEFIT PACK-
ing the information which an applicable
forcement of the applicable standards estab-
AGES.-The NAIC shall develop a model to
regulatory authority may require to be re-
lished under section 1302 (to carry out the
standardize benefits to be made available
ported by carriers.
requirements of this title) and that meets
under health benefit plans offered by carri-
"SEC. 2756. NONAPPLICATION IN PUERTO RICO AND
the requirements of section 1302(b) by such
ers to small employers in order to promote
THE TERRITORIES.
effective date, or
consumer understanding and comparison
"This subpart shall not apply outside the
"(B) if the State has not established such
among such plans.
50 States or the District of Columbia.
a program, the plan has been certified by
"SEC. 2754. TIME-LIMITED MEDICARE REIMBURSE-
"Subpart 3-Encouraging Development of
the Secretary (in accordance with such pro-
MENT OPTION FOR HEALTH BENEFIT
Reinsurance Systems
cedures as the Secretary establishes) as
PLANS OFFERED TO SMALL EMPLOY-
meeting the applicable standards estab-
ERS NOT PREVIOUSLY OFFERING IN-
"SEC. 2758. ENCOURAGING DEVELOPMENT OF REIN-
lished under section 1302 by such effective
SURANCE COVERAGE.
SURANCE SYSTEMS.
date.
"(a) OPTION MUST BE OFFERED.-Each car-
"(a) DEVELOPMENT OF MODELS.-
"(2) PLAN DISAPPROVED UNDER LOOK-BEHIND
rier offering a health benefit plan to small
"(1) IN GENERAL-Not later than October 1
AUTHORITY.-If the Secretary determines,
employers meeting the requirements of sec-
of the year following the year in which this
under section 1302(c), that a health benefit
tion 351(a) of the HealthAmerica Act shall
part is enacted, the NAIC shall develop sev-
plan does not meet the applicable require-
offer the small employer the option of
eral models of legislation for the enactment
ments of this title on or after such effective
having payment under the plan made for
of reinsurance systems that may be used by
date, regardless of whether or not the State
basic health benefits at rates no higher
States with respect to health insurance poli-
has taken any action with respect to such
than the payment rates established under
cies (including health benefit plans offered
noncompliance, no new contracts may be of-
part B for such services. The provisions of
to small employers).
fered to small employers under the plan on
section 1848(g)(3) of the Social Security Act
"(2) SPECIFIC MODELS.-Such models shall
or after the date of the determination.
shall not be considered to apply under this
Include at least 1 of each of the following 3
"(b) SANCTIONS.-
subsection.
models:
"(1) COMPLAINTS AND INVESTIGATIONS.-The
"(b) APPLICATION OF MEDICARE BILLING
"(A) A model providing for voluntary par-
LIMITATIONS.-In the case of P. small em-
Secretary shall establish procedures-
ticipation by insurers.
ployer that elects the option offered under
"(A) for individuals and entities to file
"(B) A model providing for insurer partici-
subsection (a) with respect to a health bene-
written, signed complaints with the Secre-
pation on a retrospective basis.
fit plan, the limitations on charges that may
tary respecting potential violations of the
"(C) A model providing for the case man-
be made under medicare shall apply to indi-
requirements of this title;
agement of services for individual claims or
viduals receiving benefits under the plan.
"(B) for the investigation of those com-
groups which are reinsured through the
"(c) EXCEPTION FOR REINSURANCE PLAN.-
plaints which have a substantial probability
system.
Subsection (a) shall not apply to reinsur-
of validity; and
"(3) TERMS OF MODELS.-Each of the
ance plans.
"(C) for the investigation of such other
models-
violations of the requirements of this title
"SEC. 2755. MISCELLANEOUS DISCLOSURE AND
"(A) shall be consistent with the provi-
RECORD-KEEPING
as the Secretary determines to be appropri-
REQUIREMENTS
sions of this part (including those relating
FOR HEALTH BENEFIT PLANS OF-
ate.
FERED TO SMALL EMPLOYERS.
to community-rated premiums), and
"(2) AUTHORITY IN INVESTIGATIONS.-In
"(a) DISCLOSURE.-
"(B) shall include deductibles and coinsur-
conducting investigations and hearings
ance which-
under this subsection-
S7188
CONGRESSIONAL RECORD SENATE
June 5, 1991
"(A) agents of the Secretary and adminis-
in the Court of Appeals for the appropriate
trative law judges shall have reasonable
"(i) for a system for the receipt and dispo-
circuit for review of the order.
access to examine evidence of any person or
sition of consumer complaints or inquiries
"(7) ENFORCEMENT OF ORDERS.-If a carrier
entity being investigated; and
regarding compliance of health benefit
fails to comply with a final order issued
"(B) administrative law judges, may, if
plans with the requirements of this title:
under this section against the carrier, the
and
necessary, compel by subpoena the attend-
Secretary shall file a suit to ek compliance
ance of witnesses and the production of evi-
"(ii) information to small employers and
with the order in any appropriate district
dence at any designated place or hearing.
consumers about carriers that offer health
court of the United States. In any such suit,
In case of contumacy or refusal to obey a
the validity and appropriateness of the final
benefit plans in the area covered by the reg-
subpoena lawfully issued under this subsec-
order shall not be subject to review.
ulatory authority.
tion and upon application of the Secretary,
"(8) USE OF AMOUNTS COLLECTED.-Civil
Such system shall provide for the recording
an appropriate district court of the United
money penalties collected under this subsec-
of consumer complaints in accordance with
States may issue an order requiring compli-
tion shall be credited to the AmeriCare
& uniform methodology developed by the
ance with such subpoena and any failure to
Trust Fund.
NAIC and recognized by the Secretary.
obey such order may be punished by such
"(9) AMOUNT OF CIVIL MONEY PENALTY.-
"(2) SECRETARIAL AUTHORITY.-In the case
court as a contempt thereof.
The amount of any civil money penalty im-
of a State without a regulatory program ap-
"(3) HEARING.-
posed under this subsection shall not exceed
proved under subsection (a), the Secretary
"(A) IN GENERAL-Before imposing an
$25,000 for each carrier with respect to
shall provide for the establishment of the
order described in paragraph (4) against &
which a violation occurs. Such amount may
toll-free telephone information and com-
carrier under this subsection for a violation
take into account the penalties imposed by
plaint system described in paragraph (1).
of the requirements of this title, the Secre-
a State with respect to the same such viola-
"(c) SECRETARIAL REVIEW.-
tary shall provide the carrier with notice
tion.
"(1) PERIODIC REVIEW OF STATE REGULATORY
and, upon request made within a reasonable
"(10) NOTICE TO CARRIER IN THE CASE OF IN-
PROGRAMS.-The Secretary periodically shall
time (of not less than 30 days. as established
SURED PLANS.-As part of any order issued
review State regulatory programs to deter-
by the Secretary) of the date of the notice,
under this subsection in the case of a health
mine if they continue to meet the standards
a hearing respecting the violation.
benefit plan, the order shall require that
referred to in subsection (a) and the re-
"(B) CONDUCT OF HEARING.-Any hearing SO
notice be provided to the carrier of the find-
quirements of subsection (b). If the Secre-
requested shall be conducted before an ad-
ings in the order.
tary finds that a State regulatory program
ministrative law judge under section 201. If
"(11) Loss OF STATUS AS A HEALTH BENEFIT
no longer meets such standards and require-
no hearing is SO requested, the Secretary's
PLAN.-If a carrier is not in compliance with
ments, before making a final determination,
imposition of the order shall constitute a
subsection (a) and is not determined to have
the Secretary shall provide the State an op-
final and unappealable order.
come into compliance with the applicable
portunity to adopt such a plan of correction
"(C) ISSUANCE OF ORDERS.-If the adminis-
standards within 6 months after the date of
as would permit the program to continue to
trative law judge determines, upon the pre-
the initial determination of such a violation,
meet such standards and requirements. If
ponderance of the evidence received, that a
such carrier shall be subject to the provision
the Secretary makes a final determination
carrier named in the complaint has violated
of this subsection.
"(12) EXCISE TAX.-A carrier that is not in
that the State regulatory program, after
the requirements of this title, the adminis-
such an opportunity, fails to meet such
trative law judge shall state the findings of
compliance with subsection (a) shall be sub-
fact and issue and cause to be served on
ject to the tax described in section 4980C of
standards and requirements, the Secretary
such carrier an order described in para-
the Internal Revenue Code of 1986.
shall assume responsibility under section
graph (4).
"(c) EFFECTIVE DATE.-The effective date
1301(a)(1)(B) with respect to plans in the
State.
"(4) ENFORCEMENT AND CIVIL MONEY PENAL-
specified in this subsection is January 1 of
the third full year that begins after the date
"(2) LOOK-BEHIND AUTHORITY.-In the case
TY.-
of the enactment of this part.
of a State with a regulatory program found
"(A) ENFORCEMENT.-Subject to the provi-
by the Secretary to meet the standards and
sions of this paragraph, an order issued
"ESTABLISHMENT OF STANDARDS
under this subsection-
requirements under this title, the Secretary
"(i) shall require the carrier-
"SEC. 1302. (a) ESTABLISHMENT OF STAND-
nonetheless is authorized to determine
ARDS.-
"(I) to cease and desist from such viola-
whether or not health benefit plans offered
tions; and
"(1) NAIC.-The Secretary shall request
by carriers in the State have failed to
the NAIC-
"(II) to pay a civil penalty as required in
comply with the applicable requirements of
paragraph (9); and
"(A) to develop specific standards, in the
this title.
"(ii) may require the carrier to take such
form of a model Act and model regulations,
"(d) GAO AUDITS.-The Comptroller Gen-
other corrective action as is appropriate.
to implement the requirements of this title;
eral shall conduct periodic audits on a
and
"(B) CORRECTIONS WITHIN 30 DAYS.-No
sample of State regulatory programs to de-
order shall be imposed under this subsection
"(B) to report to the Secretary on such de-
termine their compliance with the require-
velopment;
by reason of any violation if the carrier es-
ments of this section. The Comptroller Gen-
by not later than October 1 of the year fol-
tablishes that- to the satisfaction of the Secretary
eral shall report to the Secretary and Con-
lowing the year in which this title is en-
gress on the findings in such audits.
"(i) such violation was due to reasonable
acted. If the NAIC develops such standards
within such period and the Secretary finds
"TRANSITIONAL REQUIREMENTS APPLICABLE TO
cause and not to willful neglect; and
"(ii) such violation is corrected within the
that such standards implement the require-
ALL HEALTH BENEFIT PLANS ISSUED TO SMALL
30-day period beginning on earliest date the
ments of this title, such standards shall be
EMPLOYERS
the standards applied under section 1301.
"SEC. 1303. (a) APPLICATION.-The require-
carrier knew, or exercising reasonable dili-
"(2) SECRETARY.-If the NAIC fails to de-
ments of this section shall apply only to
gence could have known, that such a viola-
tion was occurring.
velop and report on such standards by such
health benefit plans offered to small ein-
"(C) WAIVER BY SECRETARY.-In the case of
date or the Secretary finds that such stand-
ployers during the period that begins on the
a violation which is due to reasonable cause
ards do not implement the requirements of
effective date of this title and ends in the
and not to willful neglect. the Secretary
this title, the Secretary shall develop and
case of a small employer. on the date that
publish, by not later than November 15 of
begins the fifth full year after the date of
may waive part or all of the civil money
penalty imposed by paragraph (9) to the
the year following the year in which this
enactment of this title.
title is enacted, such standards. Such stand-
extent that payment of such penalty would
"(b) No DISCRIMINATION BASED ON HEALTH
be grossly excessive relative to the violation
ards shall then be the standards applied
STATUS FOR CERTAIN SERVICES.-
under section 1301.
involved and to the need for deterrence of
"(1) IN GENERAL.-Except as provided
violations.
"(b) ADDITIONAL ELEMENTS OF REGULATORY
under paragraph (2), health benefit plans
PROGRAMS.-
"(5) ADMINISTRATIVE APPELLATE REVIEW.-
offered to small employers by carriers may
The decision and order of an administrative
"(1) IN GENERAL-A State regulatory pro-
not deny, limit, or condition the coverage
law Judge under this subsection shall
gram shall include the following:
under (or benefits of) the plan with respect
become the final agency decision and order
"(A) The enforcement under the pro-
to basic health services based on the health
gram-
of the Secretary unless, within 30 days. the
status, claims experience, receipt of health
Secretary modifies or vacates the decision
"(i) shall be designed in a manner so as to
care, medical history, or lack of evidence of
and order, in which case the decision and
secure compliance with the standards
insurability. of an individual.
order of the Secretary shall become a final
within 30 days after the date of a finding of
"(2) TREATMENT OF PREEXISTING CONDITION
order under this subsection.
noncompliance with such standards; and
EXCLUSIONS FOR ALL SERVICES.-
"(6) JUDICIAL REVIEW.- carrier adversely
"(ii) shall provide for notice to the Secre-
"(A) IN GENERAL.-Subject to the succeed-
affected by & final order Issued under this
tary in cases where such compliance is not
ing provisions of this paragraph, health
subsection may, within 45 days after the
secured within such 30-day period.
benefit plans provided to small employers
date the final order is issued, file & petition
"(B) A toll-free telephone number which
by carriers may exclude coverage with re-
provides-
spect to services related to treatment of 8
June 5, 1991
CONGRESSIONAL RECORD SENATE
preexisting condition, but the period of such
S7189
"REFINITIONS
exclusion may not exceed 0 months.
1304. (a) HEALTH PLAN AND OTHER
maintenance Trannization, that offers
"(B) NONAPPLICATION TO NEWRORNS AND
L.
ITIONS RELATING TO HEALTH PLANS.-
health benefit Plan directly with respect to a
SUNSET OF PREERISTING CONDITION EXCLU-
A
1 in this title:
an employ contractated group.
SIONS FOR BASIC HEALTH SERVICES.-The ex-
HEALTH BENEFIT PLAN.-The term
clusion of coverage permitted under sub-
this title:
"(e) C. KRAL DEFINITIONS.-As used in
'}
th benefit plan' means any hospital or
paragraph (A) shall not apply to-
medical expense incurred policy or certifi-
"(1) APPLICABLE REGULATORY AUTHORITY.-
"(i) services furnished to newborns, or
cate, hospital or medical service plan con-
The term 'Riplicable regulatory authority'
"(ii) basic health services furnished on or
tract, health maintenance subscriber con-
means, with resumet to a health benefit plan
after July 1 of the sixth full year beginning
tract, other employee welfare plan (as de-
offered In 11. State, the State commissioner
after the date of the enactment of this title.
fined in the Employee Retirement Income
"(C) CREDITING OF PREVIOUS COVERAGE.-
a or other
Security Act of 1964), or any other health
of
"(D, IN GENERAL-A health benefit plan
insurance arrangement, and includes an em-
erclaing or, if the Secretary is ex-
issued to a small:employer by a carrier shall
ployment-related reinsurance plan (as de-
authority under section
provide that If an individual under such
fined in paragraph (3)), but does not in-
plan is in a period of continuous coverage
clude-
"(2) BUSINESS.-The term 'block
the State, the Secretary.
(as defined in clause (ii)(I)) with respect to
"(A) accident-only, credit, dental, or dis-
of business means all, or a distinct grouping
particular services as of the date of initial
ability income insurance,
of, small employers as shown on the records
"(B) coverage issued as a supplement to 11-
of the small carrier, established
coverage under such plan, any period of ex-
clusion of coverage with respect to a preex-
ability insurance,
isting condition for such services or type of
"(C) worker's compensation or similar in-
services shall be reduced by 1 month for
surance, or;
Secretary III.--
area designated by the
each month in the period of continuous COV-
"(D) automobile medical-payment insur-
erage.
ance;
one or more adjacent
"(ii) DEFINITIONS.-As used in this sub-
that is offered by a carrier.
paragraph:
employer' means, with respect to a calendar
(that In not designated within any communi-
the remaining area within each State
areas; or
"(2) SMALL EMPLOYER.-The term 'small
"(I) PERIOD OF CONTINUOUS COVERAGE.-The
year, an employer that normally employs
Ly under subparagraph (A));
term 'period of continuous coverage' means,
with respect to particular services, the
fewer than 100 employees on during the cal-
except that the Hecretary may designate an
endar year.
period beginning on the date an individual
nation would better carry out the
entire Blater as a community if such a desig-
"(3) MANAGED CARE PLAN.-The term 'man-
is enrolled under a health benefit plan
aged care plan' has the same meaning given
of this title. The Secretary from purposes time to
issued to a small employer by a carrier
such term by section 2108(a)(6).
time may change the boundaries of commu-
which provides the same or substantially
"(4) REINSURANCE PLAN.-The term 'rein-
(B) for much purposes. There shall be no ad-
nities designated under subparagraph (A) or
similar benefits with respect to such services
surance plan' means any reinsurance or
and ends on the date the individual is not so
similar mechanism that underwrites a por-
ministrative or Indicial review of the desig-
enrolled for a continuous period of more
tion of the risk for & health benefit plan, If
tion. nation of communities under this subsec-
than 3 months.
the mechanism is offered directly to a small
"(II) PREEMISTING CONDITION.-The term
employer.
"(4) FOLLTIME EMPLOYEE.-The term 'full-
'preexisting condition' means, with respect
"(5) SELF-INSURED HEALTH BENEFIT PLAN.-
time employee' means, with respect to an
to coverage under a health benefit plan
The term 'self-insured health benefit plan'
means a health benefit plan in which the
forms of on $1 monthly basis at least 25 hours
employer, an employee who normally per-
issued to a small employer by a carrier, a
condition which has been diagnosed or
small employer or employment-related
service bor week for that employer.
treated during the 3-month period ending
group assumes the underwriting risk for the
term 'NAIC' means the
on the day before the first date of such cov-
plan (whether or not there is any reinsur-
of Insurance Commis-
erage, except that such term does not in-
ance or similar mechanism to underwrite a
clude a condition which was first diagnosed
portion of that risk).
"(0) INSTRUCTION PREMIUM RATE.-The term
or treated during a period of continuous
"(b) CARRIER; HEALTH MAINTENANCE ORGA-
"reference premium rate' means, for each
coverage.
NIZATION; AND OTHER DEFINITIONS RELATING
block of business for a rating period in a
"(iii) STANDARDS FOR SIMILAR BENEFITS.-
TO CARRIERS.-As used in this title:
community. they lowest premium rate
The standards established under section
"(1) CARRIER.-The term 'carrier' means
charged 188 which could have been charged
1302 shall establish such criteria for deter-
any person that offers a health benefit
by the Himall employer carrier to small em-
mining if benefits are substantially similar
plan, whether through insurance or other-
players for In that block under a rating system
as may be necessary to carry out this sub-
wise, including a licensed Insurance compa-
for that block of business in the community
paragraph.
ny, a prepaid hospital or medical service
health benefit plans with the same
"(c) PERMITTING COVERAGE DURING WAIT-
plan, a health maintenance organization, a
Birrilar The reference premium or
ING PERIOD.-
self-insurer carrier, a reinsurance carrier,
rav: Is determines without regard to any ad-
and a multiple small employer welfare ar-
justment give age of sex described in section
"(1) IN GENERAL.-If a health benefit plan
issued to a small employer by a carrier im-
rangement (R combination of small employ-
1312(c) und without regard to any adjust-
ers associated for the purpose of providing
ment effected under section 1312(d).
poses a waiting period before an eligible in-
dividual may be covered under the plan, the
health benefit plan coverage for their em-
ployees).
60 States win the District of Columbia.
"(") BTATE-TIR term 'State' means the
plan-
"(2) EMPLOYER CARRIER.-The term 'em-
"(A) must make available to the individual
"PART H-KIRALL EMPLOYER HEALTH
ployer carrier'-
coverage (including coverage of dependents)
INSURANCE REFORM
"(A) means any carrier which offers
equivalent to the coverage available to the
health benefit plans, and
"ERROLLMENT PRINTICE AND GUARANTEED RE-
employee upon the completion of any appli-
"(B) includes (unless the context other-
DEVIREMENT ***WIREMENTS FOR HEALTH BEN-
cable waiting period; and
wise requires)-
EPIT PLANS main TO SMALL EMPLOYERS
"(B) may not impose for such coverage
"(i) a self-insurer carrier offering such a
CABLE
WITH APPLI-
charges that exceed the cost under the plan
plan, or
of providing such coverage with respect to
"(ii) a reinsurance carrier offering a
in section shall register with the
carrier (as defined
the employee if such waiting period did not
health benefit plan that is a reinsurance
apply.
plan.
applicable registory authority for each
Nothing in this paragraph shall be con-
"(3) HEALTH MAINTENANCE ORGANIZATION.-
State in which 1, Issues or offers a health
strued as requiring a health benefit plan
The term 'health maintenance organization'
benefit Maria is small
issued to a small employer by a carrier to
has the meaning given the term "eligible or-
INFORMATION
make coverage available to an individual
ganization' in section 1876(b).
paragraph (1)
who no longer has an employment relation-
"(4) REINSURANCE CARRIER.-The term "re-
ship (or who is the spouse or dependent of
insurance carrier' means the entity assum-
cable in registality authority from requiring,
the appli-
such an individual) with respect to the plan.
ing responsibility for underwriting under an
the can 78 that are not self-in-
"(2) ELIGIBLE INDIVIDUAL DEFINED.-In
employment-related reinsurance plan, but
surance informa-
paragraph (1), the term 'eligible individual'
does not include a carrier Insofar as It di-
rectly offers a health benefit plan.
the the apart from, the
means, with respect to 8 health benefit
paragraph (1) as
plan, an individual who, but for a waiting
"(5) SELF-INSURER CARRIER.-The term
'self-insurer carrier' means a carrier that 18
withorizen "If require under State law.
regulatory authority may be
period, would be eligible for immediate 00V-
"(b)
erage under the plan.
not a licensed insurance company, 2 prepaid
hospital or medical service plan, or a health
mg providente of this subsection, a carrier
"II) In Subtotact to the succeed-
7190
CONGRESSIONAL RECORD - SENATE
June 5. 1991
that offers a health benefit plan (including
vide for notice, at least 30 days before the
type of family enrollment for the least ex-
a reinsurance plan) to small employers lo-
date of expiration of the health benefit
cated in a community must offer the same
pensive block of business.
plan. of the terms for renewal of the plan.
an to any. other small employer located in
"(ii) ROLM 0 REGULATORY AUTHORITY.-An
Except with respect to rates and administra-
the community.
applicable
datory authority that is a
tive changes, the terms of renewal (includ-
"(2) TREATMENT OF HEALTH MAINTENANCE
State ma: reduce or eliminate the percent
ing benefits) shall be the same as the terms
ORGANIZATIONS.-
variation otherwise permitted. under clause
of issuance.
"(A) GEOGRAPHIC LIMITATIONS.-A health
(1).
"(B) RENEWAL RATES SAME AS ISSUANCE
maintenance organization may deny cover-
"(iii) EXCEPTION.-Clause (i) shall not
RATES.-The carrier may change the terms
age under a health benefit plan to a small
apply to health benefit plans offered by car-
for such renewal, but the premium rates
employer whose employees are located out.
riers to small employers in a block of busi-
charged with respect to such renewal shall
side the service area of the organization, but
ness-
be the same as that for a new issue.
only if such denial is applied uniformly
"(I) if the block is one for which the carri-
"(C) RATES CANNOT CHANGE MORE OFTEN
without regard to health status or insurabil-
er does not reject, and never has rejected.
THAN MONTHLY.-
ity.
"(i) IN GENERAL.-A carrier may not change
small employers included within the defini-
"(B) SIZE LIMITS.-A health maintenance
the premium rates established with respect
tion of small employers eligible for the
organization may apply to the applicable
to health benefit plans offered for any
block of business or otherwise eligible em-
regulatory authority to cease enrolling new
block of business more often than monthly.
ployees and dependents who enroll on a
small employer groups in its health benefit
"(ii) APPLICATION OF NEW RATES.-A carrier
timely basis,
plan (or in a geographic area served by the
that offers health benefit plans to small em-
"(II) the carrier. does not involuntarily
plan) if it can demonstrate that its financial
ployers which becomes effective in a month,
transfer. and never has involuntarily trans-
or administrative capacity to serve previous-
shall ensure that the premium rates estab-
ferred, a health benefit plan into or out of
ly enrolled groups and individuals (and addi-
lished under clause (i) for that month shall
the block of business, and
tional individuals who will be expected to
apply to all months during the 12-month
"(III) that block of business was available
enroll because of affiliation with such previ-
period beginning with that month. In the
for purchase as of the date of the enact-
ously enrolled groups) will be impaired if it
case of a plan renewal which is effective for
ment of this title.
is required to enroll new groups.
"(3) GROUNDS FOR REFUSAL TO ISSUE OR
a 12-month period beginning with a month,
"(2) TRANSITION.-Notwithstanding para-
the premium rates established under clause
graph (1)-
RENEW.-
"(A) IN GENERAL.-A carrier may refuse to
(i) with respect to that month shall apply to
"(A) during the first effective year (as de-
all months during 12-month renewal period.
fined in subsection (f)), the premium rate
issue or renew or terminate a health benefit
"(3) PERIOD OF RENEWAL-The period of
under a health benefit plan issued by a car-
plan under this part only for-
"(i) nonpayment of premiums,
renewal of each health benefit plan offered
rier to any small employer may be as much
by a carrier to a small employer shall be for
as, but-may not exceed, 150 percent of the
"(ii) fraud or misrepresentation, and
"(iii) failure to meet minimum participa-
a period of not less than 12 months.
reference premium rate for such plans in
"RATING PRACTICES FOR HEALTH BENEFIT PLANS
the same community for similar benefits in
tion rates (consistent with subparagraph
the same block of business; or
(B)).
OFFERED TO SMALL EMPLOYERS
"(B) during the second effective year, the
"(B) MINIMUM PARTICIPATION RATES.-A
"SEC. 1312. (a) COHESIVE RATING SYSTEM
premium rate under such a policy- for any
carrier may require; within the transition
AND ACTURIAL CERTIFICATION.-
small employer may be as much as, but may
period described in section 1303(a), with re-
"(1) IN GENERAL-The premiums (includ-
not exceed, 122 percent of the reference pre-
spect to a health benefit plan, that a mini-
ing reference premium rate, as defined in
mium for such plans in the same com-
mum percentage of full-time, permanent
section 1304(c)(6), age adjustments under
munity for similar benefits in the same
employees eligible to enroll under the plan
subsection (c), and reductions provided
block of business.
be enrolled, so long as such percentage is.en-
under subsection (d)) for all health benefit
"(3) ESTABLISHMENT OF BLOCKS OF RUSI-
forced uniformly for all employment groups
plans offered to small employers by carriers
of comparable size.
NESS.-For the purpose of establishing pre-
shall-
miums for small. employer healt benefit
"(c) MINIMUM PLAN PERIOD.-A carrier
"(A) be established based on a single cohe-
plans with similar coverage, the can ier may
may not offer to, or issue with respect to, a
sive rating system which is applied consist-
establish blocks of. business based only on
small employer a health benefit plan with a
ently for all small employer groups and is
term of less than 12 months.
one or more of the following characteristics:
designed not to treat groups. after the
"(d) GUARANTEED RENEWABILITY.-
"(A) Plans that are marketed by clearly
second effective year (as defined in subsec-
different sales forces.
"(1) IN GENERAL.-
tion (f)), differently based on health status
"(A) GENERAL RULE.-Subject to the suc-
"(B) Plans that have been acquired from
or risk status; and
ceeding provisions of this subsection, a car-
another carrier'as a distinct group.
"(B) be actuarially certified annually.
rier shall ensure that a health benefit plan
"(C) Plans that are managed care plans.
"(2) ACTUARIAL CERTIFIED DEFINED.-For
issued to a small employer be renewed, at
"(D) Plans within another distinct group,
purposes of paragraph (1)(B), & health ben-
the option of the small employer, unless the
if the applicable regulatory authority finds
efit plan is considered to be actuarially cer-
plan is terminated for the reasons specified
that establishment of such a group will en-
in subsection (a)(3)(A) or under subpara-
tified' if there is a written statement, by a
hance the efficiency and fairness of the
graph (B).
member of the American Academy of Actu-
small employer insurance marketplace.
"(B) TERMINATION OF BLOCK OF BUSINESS.-
aries or other individual acceptable to the
"(c) ADJUSTMENTS TO COMMUNITY-
A carrier need not renew a health benefit
applicable regulatory authority that a carri-
RATING.-
er is in compliance with this section, based
plan with respect to such a small employer
"(1) IN GENERAL.Subject to paragraph
if the carrier-
upon the individual's examination, includ-
(2), a health benefit plan offered by a carri-
"(i) is terminating the block of business
ing a review of the appropriate records and
er to a small employer may provide for an
that includes the plan; and
of the actuarial assumptions and methods
adjustment to the reference premium rate
utilized by the carrier in establishing premi-
"(ii) provides notice to the small employer
based on the age and gender of covered indi-
covered under the plan of such termination
um rates for applicable health benefit plans.
viduals. Any such adjustment shall be ap-
"(b) USE OF COMMUNITY-RATING.
at least 90 days before the date of expira-
plied by the carrier consistently to all small
tion of the plan.
"(1) IN GENERAL.-Except as provided in
employers, except that adjustment based on
paragraph (2) and subsection (c):
In the case of such a termination, the carri-
gender may only be made during the transi-
"(A) COMMUNITY RATING WITHIN A BLOCK
tion period.
er may not provide for issuance of any
health benefit plan in any block of business
OF BUSINESS.-The reference premium rate
"(2) LIMITATION ON ADJUSTMENT.-
during the 5-year period beginning on the
charged for health benefit plans offered
"(A) IN GENERAL-The adjustment under
with similar benefits to small employers in a
date of termination of such block of busi-
paragraph (1) may not result, with respect
community within R. block of business for a
ness.
to health benefit plans with similar benefits
type of family enrollment (described in sub-
"(C) CONSTRUCTION RESPECTING ADDITIONAL
offered by carriers to small employers in the
section (e)) shall be the same for all small
STATE DISCLOSURE REQUIREMENTS.-Subpara-
same block of business in a community, in a
employers.
graph (B)(ii) shall not be construed as pre-
premium rate for the most expensive age
"(B) LIMITING VARIATION ON REFERENCE
venting the applicable regulatory authority
group exceeding the applicable percent (as
PREMIUM RATES AMONG BLOCKS OF BUSINESS.-
from specifying the information to be in-
defined in subparagraph (B)) of the premi-
"(1) IN GENERAL.-Except as provided in
cluded in the notice under such subpara-
um rate for the least expensive age group.
clause (iii), the reference premium rate
graph or in requiring such notice to be pro-
"(B) APPLICABLE PERCENT DEFINED.-In sub-
charged for health benefit plans offered
vided at an earlier date.
paragraph (A) but subject to subparagraph
with similar benefits to-small employers in
"(2) NOTICE AND SPECIFICATION OF RATES
(C), the term 'applicable percent' means-
any community for a type of family enroll-
AND ADMINISTRATIVE CHANGES.-
"(1) for the first effective year (as defined
ment for the most expensive block of busl-
"(A) NOTICE.-A carrier offering health
in subsection (f)) 200 percent.
ness shall not exceed 120 percent of such
benefit plans to small employers shall pro-
"(ii) for the second effective year. 150 per-
rate charged for such plan for the same
cent, and
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7191
"(iii) for any subsequent year, 110 percent.
"(C) ROLE OF REGULATORY AUTHORITY.-An
"(d) STANDARDIZATION OF BENEFIT PACK-
"(1) blocks of business established; and
applicable regulatory authority that is a
AGES.--The NAIC shall develop a model to
"(2) applicable premiums for health bene-
State may reduce or eliminate the applica-
standardize benefits to be made available
fit plans.
ble percent otherwise applied.
under health benefit plans offered by carri-
"(2) ADDITIONAL INFORMATION.-Nothing in
"(d) ADJUSTMENT IN RATES PERMITTED IN
ers to small employers in order to promote
this subsection shall be construed as limit-
CASE OF MEDICARE REIMBURSEMENT ELEC-
consumer understanding and comparison
ing the information which an applicable
TION.-A health 1. nefit plan offered by &
among such plans.
regulatory authority may require to be re-
carrier to a small employer may compute
"TIME-LIMITED MEDICARE REIMBURSEMENT
ported by carriers.
premiums based upon a percentage of the
OPTION FOR HEALTH BENEFIT PLANS OFFERED
"NONAPPLICATION IN PUERTO RICO AND THE
reference premlum rate otherwise applica-
TO SMALL EMPLOYERS NOT PREVIOUSLY OF-
TERRITORIES
ble if the small employer to which the plan
FERING INSURANCE COVERAGE
is being offered makes the reimbursement
"SEC. 1314. (a) OPTION MUST BE OFFERED.-
"Sec. 1316. This part shall not apply out-
election described in-section 1314. Any such
side the 50 States or the District of Colum-
Each carrier offering a health benefit plan
bia.
adjustment shall be applied consistently- to
to small employers meeting the require-
all small employers.
ments of section 351(a) of the HealthAmer-
"PART C-ENCOURAGING DEVELOPMENT OF
"(e) TYPES OF FAMILY ENROLLMENT.-Each
ica: Act shall offer the small employer the
REINSURANCE SYSTEMS
health benefit plan offered by a carrier to &
option of having payment under the plan
"ENCOURAGING DEVELOPMENT OF REINSURANCE
small employer shall permit enrollment of
made for basic health services at rates no
SYSTEMS
(and shall, compute premiums separately
higher than the payment rates established
for) individuals based on each of the follow-
"SEC. 1321. (a) DEVELOPMENT OF MODELS.-
under title XVIII for such benefits. The
ing beneficiary classes:
"(1) IN GENERAL.-Not later than October 1
provisions of section 1848(g)(3) shall not be
"(1) 1 adult.
of the year following the year in which this
considered to apply under this subsection.
"(2) A married couple without children.
"(b) APPLICATION OF MEDICARE BILLING
title is enacted, the NAIC shall develop sev-
"(3) 1 adult and 1 child.
eral models of legislation for the enactment
LIMITATIONS.-In the case of a small em-
"(4) A married couple with 1 or more chil-
ployer that elects the option offered under
of reinsurance systems that may be used by
dren, or 1 adult with 2 or more children.
subsection (a) with respect to a health bene-
States with respect to health insurance poli-
"(f) EFFECTIVE YEARS DEFINED.-In this
fit plan, the limitations on charges that may
cies (including health benefit plans offered
section, the terms 'first effective year' and
to small employers).
be made under medicare shall apply to indi-
'second effective year' mean the third and
"(2) SPECIFIC MODELS.Such models shall
viduals receiving benefits under the plan.
fourth full years beginning after the date of
The sanctions imposed under the medicare
include at least 1 of each of the following 3
models:
the enactment of this part.
program (and title XI), including exclusion
"(g) EXCEPTION FOR SELF-INSURED CARRI-
under such program and the imposition of
"(A) A model providing for voluntary par-
ERS.-The requirements of this section shall
ticipation by insurers.
civil money penalties for violations of such
apply to reinsurance carriers and health
limitations, apply to violations of the limita-
"(B) A model providing for insurer partici-
benefit plans offered by such carriers to
pation on a retrospective basis.
tions imposed under this subsection.
small employers.
"(C) A model providing for the case man-
"(c) EXCEPTION FOR REINSURANCE PLAN.-
agement of services for individual claims or
"BASIC BENEFIT PACKAGE FOR HEALTH BENEFIT
Subsection (a) shall not apply to reinsur-
PLANS OFFERED TO SMALL EMPLOYERS
ance plans.
groups which are reinsured through the
system.
"SEC. 1313. (a) IN GENERAL.-
"MISCELLANEOUS DISCLOSURE AND RECORD-
"(3) TERMS OF MODELS.-Each of the
"(1) BENEFITS AND COST-SHARING IN HEALTH
KEEPING REQUIREMENTS FOR HEALTH BENEFIT
models-
BENEFIT PLANS.-Except as provided in para-
PLANS OFFERED TO SMALL EMPLOYERS
"(A) shall be consistent with the provi-
graph (2) and in section 1303(a), no health
"SEC. 1315. (a) DISCLOSURE.-
sions of this title (including those relating
penefit plan offered by carriers to small em-
"(1) GENERAL DISCLOSURE.-Each carrier
to community-rated premiums), and
bloyers mless- may be issued to a small employer
offering health benefit plans to small em-
"(B) shall include deductibles and coinsur-
ployers shall disclose to each small employ-
ance which-
"(A) the plan provides for benefits for all
er before issuing such a plan the following:
"(i) limit the amount of risk ceded to the
basic health services as defined in section
"(A) The availability (pursuant to the re-
reinsurance system; and
1182(1);
quirement of section 1313(a)(1)(C)) of a
"(ii) encourage insurers to manage health
"(B) the plan does not impose cost-sharing
plan including only basic benefits.
care costs.
with respect to basic health services in
"(B) Whether any plan that is a managed
"(b) PROTECTION OF HEALTH MAINTENANCE
excess of the deductibles and coinsurance
care plan or provides for a utilization review
ORGANIZATIONS UNDER REINSURANCE Sys-
permitted under section 2103 with respect
program, or both, is available, as required
TEMS.-No State may establish or enforce a
to such services; and
under section 1313(b).
reinsurance system with respect to health
"(C) the carrier makes available to the
"(C) The option of electing the reimburse-
insurance policies unless the system pro-
small employer a health benefit plan that,
ment rules, as required under section 1314.
vides for an adjustment in reinsurance pre-
subject to paragraph (2)(C), only provides
"(D) The limits, imposed under section
miums (or, in the event of losses to the
the benefits for basic health services and
1312, on the premiums permitted to be
system, assessments) charged to health
the maximum cost-sharing consistent with
charged for such plans.
maintenance organizations that takes into
subparagraphs (A) and (B).
"(E) The rights of guaranteed issue and
account-
"(2) EXCEPTIONS.-
renewability provided under section 1311.
"(1) the higher premiums charged by such
"(A) REQUIRED OFFERING DOES NOT APPLY TO
HMO's.-Paragraph (1)(C) shall not apply to
Such disclosure shall be in addition to any
organizations due to the greater coverage
disclosure required generally of health ben-
provided by such organizations as required
a health maintenance organization.
efit plans under section 2725 of the Public
by law,
"(B) ADDITIONAL, OPTIONAL MINIMUM SERV-
Health Service Act.
"(2) the limitations under title XIII of the
ICES.-In meeting the requirement of para-
graph (1)(C), a health benefit plan offered
"(2) SPECIFIC DISCLOSURE UPON REQUEST.-
Public Health Service Act on the amount of
by a carrier to a small employer may include
Each carrier offering health benefit plans
risk which such an organization can rein-
to small employers shall disclose to small
sure, and
such additional items and services as the
carrier can demonstrate to the satisfaction
employer, upon request, information con-
"(3) the ability of such organizations to
cerning the blocks of business established
manage risk internally.
of the applicable regulatory authority that
with respect to such plans and the applica-
"(c) EFFECTIVE DATE-This section shall
inclusion of such items and services will fa-
cilitate appropriate hospital discharges or
ble premiums for such plans.
take effect on the date of the enactment of
avoid unnecessary hospitalization.
"(3) STANDARD FORMAT.-The disclosure
this title.".
"(b) MANAGED CARE OPTION.-If a carrier
under paragraph (1) shall be made in & uni-
Subtitle B-Tax Equity for Small and Medium-
(other than & health maintenance organiza-
form format established by the Secretary,
Sized Business
tion or reinsurance carrier) offers health
after consultation with the NAIC.
benefit plans to employers that are not
"(4) EXCEPTIONS.-Paragtaph (1) (other
SEC. 321. DEDUCTIBLE HEALTH COVERAGE PROVI-
SIONS.
small employers, in a community a health
than subparagraphs (D) and (E)) shall not
(a) INCREASE IN DEDUCTIBLE HEALTH INSUR-
benefit plan that is a managed care plan,
apply to a reinsurance carrier with respect
to a reinsurance plan.
ANCE COSTS FOR SELF-EMPLOYED INDIVIDUALS
the carrier must make available to small
WITHOUT EMPLOYEES.-
employers in the community a health bene-
"(b) INFORMATION FILED WITH APPLICABLE
It plan that is such a managed care plan
REGULATORY AUTHORITY.-
(1) IN GENERAL.-Paragraph (1) of section
"(1) IN GENERAL-Each carrier offering
162(1) of the Internal Revenue Code of 1986
"(c) EXCEPTION FOR REINSURANCE CARRIERS
AND PLANS.-The requirements of this sec-
health benefit plans to small employers
(relating to special rules for health Insur-
tion shall not apply to reinsurance carriers
shall disclose to the applicable regulatory
ance costs of self-employed individuals) is
and reinsurance plans.
authority, in a manner specified by the Sec-
amended by striking out "25 percent" and
retary. information concerning-
all that follows and inserting in lieu thereof
"100 percent of-
7192
CONGRESSIONAL RECORD - SENATE
June 5, 1991
"(A) the cost of the lowest cost plan meet-
ing the requirements of the subtitle A of
whole or half blood), spouse, ancestors, and
SEC. 322. EXCISE TAX FOR VIOLATION OF HEALTH.
lineal descendants.
title III of the HealthAmerica Act available
BENEFIT PLAN REQUIREMENTS.
in the geographic area in which the Individ-
"(C) SELF-INSURED PLAN.-The term 'self-
(a) IN GENERAL.-
ual resides or conducts business, or
insured plan' means any plan under which
(1) IN GENERAL.-Chapter 43 of the Inter-
"(B) if such individual is enrolled in
medical care benefits are not provided
nal Revenue Code of 1986 (relating to quali-
AmeriCare, the cost of AmeriCare,
under a policy of accident and health insur-
fied pension, etc., plans) Is amended by
ance.
paid during the taxable year for the taxpay-
adding at the end thereof the following new
"(4) LOWEST PER EMPLOYEE CONTRIBU-
section:
er, his spouse, and dependents.".
TION.-
(2) EFFECTIVE DATE.-The amendment
"SEC. 4980C. VIOLATION OF HEALTH BENEFIT PLAN
made by this subsection shall apply to tax-
"(A) IN GENERAL.-For purposes of this
REQUIREMENTS.
able years beginning in the third full calen-
subsection, the term 'lowest per employee
"(a) IMPOSITION OF Tax.-There is hereby
dar year after the date of enactment of this
contribution' means, with respect to any
imposed a tax on an entity's violation of
Act.
taxable year of & self-employed individual,
subsection (a) of section 1301 of: the Social
(b) DEDUCTION ALLOWABLE FOR CERTAIN
the smallest contribution made by the em-
Security Act. The determination of whether
GROUP HEALTH PLAN CONTRIBUTIONS BY
ployer during such taxable year to the plan
there has been such a violation shall be
SELF-EMPLOYED INDIVIDUALS.-
with respect to any employee-
made by the Secretary of Health and
(1) IN GENERAL-Section 162 of the Inter-
"(i) who is not a self-employed individual,
Human Services under such section.
"(ii) with respect to whom a contribution
nal Revenue Code of 1986 (relating to trade
"(b) AMOUNT OF TAX.-The tax imposed by
or business expenses) is amended by redesig-
to the plan was made during such year. and
subsection (a) shall be equal to 25 percent of
nating subsection (m) as subsection (n) and
"(iii) who is in the same category of cover-
the amounts received by the entity (during
by inserting after subsection (1) (relating to
age as the self-employed individual.
the period such a violation persists) for pro-
special rules for health insurance costs of
"(B) CATEGORIES OF COVERAGE.-For pur-
viding any health plan for all blocks of busi-
self-employed individuals) the following new
poses of subparagraph (A), the categories of
ness in all communities.
subsection:
coverage are-
"(c) LIABILITY FOR TAX.-The tax imposed
"(1) self only, and
"(m) DEDUCTION ALLOWABLE FOR CERTAIN
by this section shall be paid by the entity.
"(ii) self and family.
"(d) EXCEPTIONS.-
GROUP HEALTH PLAN CONTRIBUTIONS FOR THE
BENEFIT OF SELF-EMPLOYED INDIVIDUALS.-
"(C) SELF-EMPLOYED INDIVIDUALS WHO ARE
"(1) CORRECTIONS WITHIN 30 DAYS.-No-tax
"(1) IN GENERAL-For purposes of this sec-
PARTICIPANTS FOR LESS THAN ENTIRE TAXABLE
shall be imposed by subsection (a) by reason
YEAR.-In the case of a self-employed Indi-
of any violation If-
tion and sections 212, 104, 105, and 106, in
the case of a qualified group health plan
vidual who is a participant in the plan for
"(A) such violation was due to reasonable
which provides medical care benefits for
less than the entire taxable year, the lowest
cause and not to willful neglect, and
any self-employed individual-
per employee contribution applicable to
"(B) such violation is corrected within the
"(A) such individual shall be treated as an
such individual shall be the same portion of
30-day period beginning on earliest date the
employee,
amount determined under subparagraph (A)
entity knew, or exercising reasonable dili-
"(B) the employer of such individual shall
as the portion of the taxable year during
gence could have known. that such a viola-
be the person treated as the employer under
which such individual was a participant in
tion was occurring.
section 301(c)(4), and
the plan bears to the entire taxable year.
"(2) WAIVER BY SECRETARY.-In the case of
"(C) contributions to such plan for medi-
"(D) SPECIAL RULES.-For purposes of sub-
a violation which is due to reasonable cause
paragraph (A)-
cal benefits for such individual shall be
and not to willful neglect, the Secretary
treated as meeting the requirements of sub-
"(i) only contributions for coverage during
may waive part or all of the tax imposed by
section (a) and section 212 to the extent
the taxable year shall be taken into ac-
subsection (a) to the extent that payment of
count, and
such contributions during the taxable year
such tax would be excessive relative to the
do not exceed the lowest per employee con-
"(ii) the contributions with respect to any
violation involved.
tribution for employees working 25 hours a
employee who is not a participant in the
"(e) DEFINITIONS.-For purposes of this
week or more to the plan made by the em-
plan for the entire taxable year shall be de-
section, the definitions in title XXIII of the
ployer during such year.
termined on an annualized basis.
Social Security Act shall apply under this
"(5) OTHER DEFINITIONS.-For purposes of
section.".
"(2) DEDUCTION CANNOT EXCEED TAXABLE
this subsection-
INCOME FROM ACTIVITY.-The deduction al-
(2) CLERICAL AMENDMENT.-The table of
lowed to any individual by reason of this
"(A) SELF-EMPLOYED
INDIVIDUAL-The
sections for chapter 43 of such Code is
subsection for any taxable year shall not
term 'self-employed individual' has the
amended by adding at the end thereof the
exceed the portion of the taxable income of
meaning given such term by section
following new item:
301(c)(1)(B).
such individual (determined without regard
"(B) MEDICAL CARE BENEFITS.-The term
"Sec. 4980C. Violation of health plan re-
to this subsection) for such year which is al-
'medical care benefits' means, with respect
quirements.".
locable or apportionable to such individual's
interest in the employer.
to any self-employed individual, compensa-
(b) EFFECTIVE DATE.-The amendments
tion for the medical care (as defined in sec-
made by subsection (a) shall become effec-
"(3) QUALIFIED GROUP HEALTH PLAN.-
"(A) IN GENERAL.-For purposes of this
tion 213(d)) of such individual, the spouse of
tive on January 1 of the 4th year beginning
such individual, and dependents of such in-
after the date of the enactment of this Act.
subsection, the term 'qualified group health
dividual.
plan' means, with respect to any self-em-
Subtitle C-Opportunity for Voluntary Provision
ployed individual, any group health plan (as
"(C) DEPENDENT.-The term 'dependent'
of Coverage
defined in section 5000(b)(1)) of an employ-
has the meaning given such term by section
SEC. 331. MEDIUM-SIZED EMPLOYERS.
er if-
152. Any child to whom section 152(e) ap-
(a) EMPLOYERS WITH BETWEEN 25 AND 100
"(i) such plan is not a self-insured plan,
plies shall be treated as a dependent of both
EMPLOYEES.-
and
parents.
"(6) SPECIAL RULES.-
(1) IN GENERAL.-No medium-sized employ-
"(ii) such plan meets the requirements of
er shall be required to provide a health ben-
subparagraphs (B) and (C).
"(A) COORDINATION WITH SECTION 213.-
efit plan under section 2701 of the Public
"(B) ONE-HALF OF PARTICIPANTS MUST BE
Any amount allowed as a deduction by
Health Service Act or make a contribution
EMPLOYEES WHO ARE NOT SELF-EMPLOYED INDI-
reason of this subsection shall not be treat-
in lieu of coverage under title V of this Act
VIDUALS OR EMPLOYEE FAMILY MEMBERS OF
ed as an amount paid for medical care under
section 213.
until the fifth calendar year after the date
SUCH INDIVIDUALS.-
of enactment of this Act.
"(i) IN GENERAL.-A plan meets the require-
"(B) AGGREGATION OF EMPLOYER PLANS.-If
any self-employed individual is a participant
(2) APPLICATION OF REQUIREMENTS.-If,
ments of this subparagraph with respect to
during the fourth calendar year after the
any self-employed individual only if at least
in 2 or more qualified group health plans of
half of the participants in the plan (on each
the employer, all such plans shall be treated
date of enactment of this Act, the Secretary
day of the taxable year of such individual)
as 1 plan for purposes of this subsection.".
finds that the total number of employees,
(2) TECHNICAL AMENDMENT.-Subsection (g)
excluding part-time employees, of all such
are employees who are not-
employers that have no employment-based
"(I) self-employed individuals to whom a
of section 105 of the Internal Revenue Code
deduction is allowable by reason of this sub-
of 1986 (relating to self-employed individual
health insurance coverage provided through
not considered an employee) is amended by
the employers of such employees has been
section with respect to contributions to such
plan. or
striking out "For purposes of this section"
reduced to 25 percent or less of the number
and inserting in lieu thereof "Except as pro-
of such uninsured employees that existed
"(II) family members of any self-employed
individual described in subclause (I).
vided in section 162(m)(1). for purposes of
during the calendar year in which this Act
this section".
was enacted, the requirement to provide
"(ii) FAMILY MEMBER-For purposes of
clause (i), the term 'family member' means,
(3) EFFECTIVE DATE.-The amendments
coverage or make a contribution under title
made by this subsection shall apply to tax-
V shall apply to employers described in
with respect to an individual, such individ-
paragraph (1).
ual's brothers and sisters (whether by the
able years beginning in the third full year
after the date of enactment of this Act.
(3) PERCENTAGES DURING SUBSEQUENT
YEARS.-An employer described in paragraph
June 5, 1991
CONGRESSIONAL RECORD - SENATE
S 7193
(1) shall provide the health benefits cover-
related credits) is amended by inserting at
"(C) EMPLOYEE.
age under this Act, or an amendment made
the term 'employee'--
the end thereof the following new section:
this Act, or make a contribution under
"(i) shall include & self-employed individ-
le V If the percentage of the uninsured
"SEC. 45. SMALL BUSINESS GROUP HEALTH PLAN
ual as defined in section 401(c)(1), but
EXPENDITURES.
Aployees during the fifth calendar year or
"(ii) shall not Include an employee who
"(a) ALLOWANCE OF CREDIT.-
any subsequent calendar year after the date
works less than 25 hours per week:
"(1) IN GENERAL-For purposes of section
of the enactment of this Act is more than
"(c) COORDINATION WITH DEDUCTION.-Any
38, in the case of an eligible small business,
the 25 percent level described in paragraph
deduction allowable under this chapter for
(2).
the amount of the qualified group health
any qualified group health plan expendi-
plan credit for the taxable year shall be an
(b) UNINSURED EMPLOYEES.-
tures shall be in addition to any credit
amount equal to the applicable percentage
(1) YEAR OF-ENACTMENT.-For purposes of
under section 38 attributable to such ex-
of the qualified group health plan expendi-
subsection (a); employees shall be consid-
penditures.".
tures for such taxable year.
ered uninsured during the calendar year in
(b) CONFORMING AMENDMENTS.-
"(2) APPLICABLE PERCENTAGE DEFINED.-
which this Act is enacted if such employees
(1) Section 38(b) of such Code is amend-
"(A) IN GENERAL.-For purposes of para-
ed-
are not covered under any employment-
graph (1), the term 'applicable percentage'
based health Insurance coverage provided
(A) by striking "plus" at the end of para-
means 25 percent reduced (but not below 0
through their employer.
graph (6),
percent) by 5 percent for-
(2) FOURTH YEAR.-For purposes of subsec-
(B) by striking "plus" at the end of para-
"(i) each employee of the eligible small
tion (a), employees shall be considered unin-
business in excess of 40, or
graph (7), and inserting a comma and
sured during the fourth calendar year after
"plus", and
"(ii) each .1 by-which the expanded profit
the date of the enactment of this Act if
(C) by adding at the end thereof the fol-
ratio of such business exceeds 1.
such employees are not covered under any
lowing new paragraph:
"(B) COORDINATION OF MULTIPLE PHASE-
employment-based health insurance cover-
OUTS.-If an eligible small business is sub-
"(8) the small business group health plan
age provided through their employer that
ject to subparagraphs (A)(i) and (A)(ii), the
expenditures credit determined under sec-
meets the requirements of this Act and the
tion 45.".
applicable percentage shall be determined
amendments made by this Act.
by multiplying the resulting applicable per-
(2) The table of sections for subpart D of
SEC. 332. MEASUREMENT SURVEYS.
centage under subparagraph (A)(i) (ex-
part IV of subchapter A of chapter 1 of such
(a) ANNOUNCEMENT.-Not later than 6
pressed as a percentage of the credit re-
Code is amended by inserting after the item
maining) by such applicable percentage
relating to section 44 the following new
months after the date of enactment of this
item:
Act, the Secretary shall publish in the Fed-
under subparagraph (A)(ii).
eral Register an announcement of the
"(C) EXPANDED PROFIT RATIO.-
"Sec. 45. Small business group health plan
survey or surveys to be used by such Secre-
"(i) IN GENERAL.-For purposes of this
expenditures."
tary in the coverage level of employees de-
paragraph, the term 'expanded profit ratio'
(c) EFFECTIVE DATE-The amendments
scribed in section 331, and the criteria that
means the expanded profit of the eligible
made by this section shall apply to taxable
will be used to determine such level.
small business for the taxable year divided
years. beginning in the third full calendar
(b) CRITERIA.-The announcement of crite-
by the qualified group health plan expendi-
year after the date of the enactment of this
ria under subsection (a) shall include & de-
tures of such business for such year.
Act.
termination, based on the availability of the
"(ii) EXPANDED PROFIT.-For purposes of
Subtitle E-Additional Assistance to Small and
most reliable survey data available, as to
clause (i), the term 'expanded profit' means
Medium-Sized Businesses
whether the determination of the coverage
the sum of-
"(I) the taxable income of the eligible
SEC. 351. OPPORTUNITY TO BUY COVERAGE AT
level shall be based on a measurement of in-
small business,
MEDICARE RATES.
fance coverage at a point in time or
ring the course of all or part of a calendar
"(II) the amount of earned income exceed-
(a) ELIGIBILITY.-Businesses with fewer
than 100 employees that have not provided
ar.
ing the applicable contribution base (as dc-
(c) APPLICATION OF AcT.-If the percentage
fined in section 3121(x)(1)) for each 5-per-
coverage to their employees in the calendar
of uninsured employees in the fourth calen-
cent owner of such business, plus
year preceding the date of enactment of this
dar year after the date of the enactment of
"(III) the total amount of interest and
Act shall be eligible to buy private health
dividends distributed to all owners of such
insurance coverage from 2, small or medium-
this Act is equal to or less than the 25 per-
business.
sized business insurer under which providers
cent level described in section 331(a), the
Secretary shall repeat the measurement of
"(b) QUALIFIED GROUP HEALTH PLAN Ex-
of health care services are paid at rules
such coverage level annually and if, in any
PENDITURES; ELIGIBLE SMALL BUSINESS.-For
based on Medicare rates as provided for in
purposes of this section-
part C of title XXVII of the Public Health
calendar year, the Secretary does not find
"(1) QUALIFIED GROUP HEALTH PLAN EXPEND-
Service Act and title XIII of the Social Se-
that the number of employees who do not
have employer provided health insurance
ITURES.-
curity Act, for a period of not to exceed 5
years.
coverage is equal to or less than such 25 per-
"(A) IN GENERAL-The term 'qualified
cent level, the requirements of this Act or
group health plan expenditures' means the
(b) DEFINITION.-As used in this section
section 2701 of the Public Health Service
aggregate amount of expenditures paid or
the term "not provided coverage in the cal-
Act shall apply to all employers described in
incurred by the eligible small business for
endar year preceding the date of enactment
the taxable year for coverage of its employ-
of this Act" means, with respect to a busi-
section 331(a).
ees under a group health plan (as defined in
ness, that less than 25 percent of employees
SEC. 333. SMALL EMPLOYERS.
section 5000(b)(1)) which is a health benefit
working more than 17.5 hours per week for
Sections 331 and 332 shall apply to small
plan (as defined in section 2713(a)(5) of the
the business received coverage from the
employers, except that the requirement to
Public Health Service Act to the extent
business in each of the years.
provide coverage or make a contribution in
such expenditures do not exceed $3,000 for
SEC. 352. SPECIAL PROVISION FOR NEW SMALL
lieu of coverage under title V shall not be
each employee, reduced (but not below zero)
BUSINESSES.
applied until the sixth calendar year after
by 5 percent for each $250 (or fraction
In the case of a small employer that nor-
the date of enactment of this Act, and the
thereof) by which the amount of wages paid
mally employs 24 or fewer employees during
Secretary shall make the determinations re-
to such employee by the eligible small busi-
a year, and that has been an employer for
quired under such sections to be made in
ness in such taxable year exceeds $15,000.
not more than 3 years, such employer shall
the fourth calendar year, in the fifth calen-
"(B) LIMIT INDEXED.-In the case of any
not be required to provide coverage under
dar year after the date of enactment of this
taxable year beginning in a calendar year
this Act or the amendment made by this Act
Act.
after the effective date of this section, the
or make a contribution in lieu of coverage
SEC. 334. FAILURE TO MAKE SURVEYS.
$3,000 amount in subparagraph (A) shall be
under title V for the first two years in
The failure of the Secretary to make the
increased by an amount equal to
which the employer has been an employer.
surveys required under this subtitle shall
"(i) such amount, multiplied by
Such employer shall be permitted to meet
not relieve an employer of the obligation of
"(ii) the increase (if any) in the wage
the requirements of part B of title XXVII
such employer to provide coverage or make
index for such calendar year.
of the Public Health Service Act by making
a contribution in lieu of coverage absent a
"(2) ELIGIBLE SMALL BUSINESS.-
a contribution at a rate that is 1/2 of the rate
finding by the Secretary that the coverage
"(A) IN GENERAL-The term 'eligible small
that would otherwise be required to be paid
target has been met.
business' means any person which, on an av-
under this Act.
Subtitle D-Small Business Tax Credit
erage business day during the preceding tax-
SEC. 353. SMALL AND MEDIUM-SIZED BUSINESS AD-
able year, had no more than 60 employees.
VISORY COMMITTEE.
341. ALLOWANCE OF A CREDIT FOR SMALL
"(B) AGGREGATION RULES.-All members of
AND MEDIUM-SIZED BUSINESS GROUP
(a) ESTABLISHMENT.-The Secretary shall
HEALTH PLAN EXPENDITURES.
the same controlled group of corporations
establish & small and medium-sized business
(a) IN GENERAL-Subpart D of part IV of
(within the meaning of section 52(a)) and
advisory committee (hereafter referred to in
subchapter A of chapter 1 of the Internal
all persons under common control (within
this section as the "committee") that shall
Revenue Code of 1986 (relating to business
the meaning of section 52(b)) shall be treat-
ed as 1 person.
provide advice to such Secretary and to the
appropriate committees of Congress con-
7194
CONGRESSIONAL RECORD SENATE
June 5, 1991
cerning all provisions of this Act that relate
TITLE IV-REDUCING HEALTH CARE COST
"(3) CHAIRPERSON.-The President shall
to small and medium-sized businesses.
INFLATION
appoint a member appointed under para-
(b) MEMBERSHIP.-
Subtitle A-Outcomes Research and Practice
graph (1)(A) to serve as the Chairperson of
(1) IN GENERAL-The Secretary shall joint-
Guideline Development and Dissemination
the Board.
ly appoint individuals to serve on the com-
SEC. 401. INITIAL GUIDELINES AND STANDARDS.
"(4) TERMS.-
mittee, of which-
Subsection (d) of section 912 of the Public
"(A) IN GENERAL.-Except as provided in
(A) seven individuals shall be representa-
Health Service Act (as added by section
subparagraph (B), the members of the
tives of small or medium-sized businesses;
6103(a) of Public Law 101-239) is amended
Board appointed under paragraph (1)(A)
(B) two individuals shall be representa-
to read as follows:
shall serve for terms of 7 years. Such mem-
tives of employees of small or medium-sized
"(d) INITIAL GUIDELINES AND STANDARDS.-
bers may be reappointed.
businesses;
"(1) IN GENERAL.-Not later than January
"(B) INITIAL MEMBERS.-Of the initial
(C) two individuals shall be knowledgeable
1. 1992, the Administrator shall assure the
members of the Board appointed under
concerning the small and medium-sized
development of an initial set of guidelines as
paragraph (1)(A)-
business insurance market; and
described in subscction (a)(1) that shall in-
"(i) three shall be appointed for a term of
(D) two individuals shall be members of
clude not less than three clinical treatments
2 years;
the general public.
or conditions that-
"(ii) three shall be appointed for a term of
(2) SMALL AND MEDIUM-SIZED BUSINESS REP-
"(A) account for a significant portion of
4 years;
national health expenditures;
"(iii) three shall be appointed for a term
RESENTATIVES.-Individuals appointed under
"(B) have & significant variation in the
of.8 years; and
paragraph (1)(A) shall-
frequency or the type of treatment provid-
"(iv) two shall be appointed for a term of
(A) be selected from geographically di-
ed; or
7 years;
verse regions of the country;
"(C) otherwise meet the needs and prior-
as designated by the President at the time
(B) include at least one representative of
ities described in this section.
of appointment.
small or medium-sized businesses that are
"(2) MENTAL HEALTH SERVICES.-The Ad-
"(5) VACANCIES.-Any vacancy in the mem-
located in rural areas and one representa-
ministrator, in consultation with the Na-
bership of the Board shall be filled in the
tive of small or medium-sized businesses lo-
tional Institute of Mental Health and
same manner in which the original appoint-
cated in urban areas;
mental health providers, shall develop out-
ment was made. Any member appointed to
(C) include at least one individual who
comes research and practice parameters for
fill a vacancy occurring before the expira-
represents the concerns of minority busi-
mental health services, including at least
tion of the term of office for which such
nesses; and
the diagnosis and treatment of childhood
member's predecessor was appointed shall
(D) represent a diversity of businesses.
attention deficit disorders and manic de-
be appointed only for the remainder of such
(3) CHAIRPERSON.-The members of the
pression.".
term.
committee shall elect an individual to serve
SEC. 402. AMENDMENTS TO THE SOCIAL SECURITY
"(6) QUORUM.-Six members of the Board
as chairperson.
ACT.
appointed under paragraph (1)(A) shall con-
(4) COMPENSATION AND REIMBURSEMENT OF
Section 1142(i) of the Social Security Act
stitute a quorum for purposes of conducting
EXPENSES.-Members of the committee ap-
(as added by section 6103(b) of Public Law
the business of the Board, but B lesser
pointed under paragraph (1) shall receive
101-239) is amended-
number may meet to hold hearings.
(1) in paragraph (1), to read as follows:
compensation for each day (including travel
"(7) MEETINGS.-The Board shall meet at
"(1) IN GENERAL-There are authorized to
time) engaged in carrying out the duties of
the call of the Chairperson, or upon motion
be appropriated to carry out this section-
the committee. Such compensation may not
by not less than six of the members of the
"(A) $125,000,000 for fiscal year 1991;
be in an amount in excess of the maximum
Board appointed under paragraph (1)(A), to
"(B) $175,000,000 for fiscal year 1992;
rate of basic pay payable for GS-18 of the
conduct the business of the Board.
"(C) $225,000,000 for fiscal year 1993: and
General Schedule.
"(D) $275,000,000 for fiscal year 1994.";
"SEC. 2762. FUNCTIONS AND DUTIES OF THE BOARD.
(5) STAFF.-The Secretary shall provide to
and
"(a) IN GENERAL.-The Board shall-
the committee such staff, information, and
(2) in paragraph (2), by striking out "75
"(1) develop national health care expendi-
other assistance as may be necessary to
percent" and inserting in lieu thereof "50
ture, access and quality goals;
carry out the duties of the committee.
percent".
"(2) convene and oversee negotiations be-
(6) REGULATIONS.-The Secretary shall
Subtitle B-Federal Health Expenditure Board
tween health care providers and purchasers
promulgate regulations that prescribe the
to develop payment rates and perform other
SEC. 411. FEDERAL HEALTH EXPENDITURE BOARD.
terms to be served by the members of the
activities necessary to achieve expenditure
(a) PUBLIC HEALTH SERVICE Acr.-Title
committee, the procedure for filling vacan-
goals developed under paragraph (1);
XXVII of the Public Health Service Act (as
cies on the committee, and the procedure
"(3) establish recommended payment
added under section 101 and amended by
for holding and administering meetings.
levels and other recommended measures
section 201 and 311) is further amended by
(c) DUTIES.-The committee shall-
that may include increased utilization of
adding at the end thereof the following new
(1) perform the advisory functions as de-
managed care, increased utilization of alter-
part:
scribed in subsection (a);
natives to institutionalization, and proce-
"PART D-FEDERAL HEALTH EXPENDITURE
dures for the allocation and limitation of
(2) analyze the impact of the implementa-
BOARD
tion of this Act and the amendments made
capital investment necessary to achieve
"SEC. 2761. ESTABLISHMENT AND MEMBERSHIP.
by this Act on small and medium-sized busi-
health care expenditure, quality and access
nesses and make recommendations to the
"(a) ESTABLISHMENT.-There is established
targets subsequent to the conclusion of re-
as an independent agency in the executive
quired negotiations;
Secretary and the appropriate committees
branch a Federal Health Expenditure Board
"(4) develop goals for States and regions
of Congress concerning appropriate modifi-
(hereafter referred to in this part as the
that are consistent with national goals es-
cations to such Act;
'Board').
tablished under paragraph (1);
(3) review and provide comments concern-
"(b) MEMBERSHIP.-
"(5) prepare and submit, to the President,
ing the regulations promulgated pursuant
"(1) IN GENERAL.-
the appropriate committees of Congress and
to this Act that impact on small and
"(A) APPOINTMENT.-The Board shall be
to the general public, an annual report con-
medium-sized businesses;
composed of 11 members to be appointed by
cerning the success in achieving the goals
(4) monitor the effectiveness of the small
the President, by and with the advice and
established under paragraph (1), together
insurer reform program established under
consent of the Senate.
with such recommendations as the Board
subtitle A, and make recommendations to
"(B) Ex OFFICIO MEMBERS.-The Secretary,
considers appropriate to further the objec-
the Secretary and the appropriate commit-
the Chairman of the Prospective Payment
tives of providing access to affordable, qual-
tees of Congress concerning appropriate
Assessment Commission and the Chairman
ity health care:
modifications in such program;
of the Physician Payment Review Commis-
"(6) establish uniform billing and claim
(5) serve as a channel of communication
sion shall serve as ex officio members of the
forms and mandatory reporting require-
between the Secretary and the small and
Board.
ments to-
medium-sized business communities; and
"(2) REPRESENTATION.-In appointing
"(A) measure the success in meeting the
(6) perform such other functions as the
members to the Board under paragraph
goals established under paragraph (1);
Secretary considers appropriate.
(1)(A), the President shall ensure that-
"(B) permit the Board. to the extent prac-
(d) AUTHORIZATION OF APPROPRIATIONS.-
"(A) the interests of health care providers
ticable, to analyze data acquired under such
There are authorized to be appropriated
and purchasers are fairly represented; and
reporting requirements for individual pro-
"(B) & majority of the members of the
viders to assist purchasers and consumers in
such sums as may be necessary to carry out
this section.
Board are experts in health care issues and
evaluating the quality and cost of care of-
fairly represent the interests of the general
fered by different providers; and
public in having access to quality and af-
"(C) reduce the administrative cost of the
fordable health care.
health care system;
June 5, 1991
CONGRESSIONAL RECORD
S 7195
"(7) recommend rates, budgets and such
other measures as may be appropriate and
and establish a system of measuring the
"SEC. 2765
DECOTIATION REQUIREMENTS.
consistent with expenditure goals developed
progress made in achieving such goals.
"(a)
K
"(2) DATA AND STUDIES:-The Board shall
CIATION BY SECTOR.-In each
by negotiators or the Board under this part
collect such data and conduct such studies
sector selce ed by the Board under section
to assure access to quality affordable health
as may be necessary to carry out paragraph
2764(d) as a sector in which negotiations
care under Federal health Insurance pro-
(1).
shall be conducted, negotiators representing
grams and programs under which the Fed-
"(c) ACCESS GOALS.-
providers of health care and purchasers of
eral Government enters into contracts for
"(1) DEVELOPMENT.-The Board shall, to
health care shall be selected in accordance
the delivery of health care;
"(8) conduct studies, issue reports, and
the extent practicable, develop national
with this section. The Board shall deter-
mine which individuals, organizations, and
gather and disseminate data to the Con-
goals under section 2762(a)(1) for improving
gress, the President and the general public,
access to the health care system for all
institutions are eligible for representation
to contribute to the objective of providing
Americans. Such goals shall include recom-
as providers or purchasers in each sector.
access to high-quality affordable health
mendations for achieving such goals and es-
"(b) HEALTH CARE PROVIDERS.-
tablish a system of measuring progress
"(1) IN GENERAL.-
care;
"(9) cooperate with State-based consorti-
made in achieving such goals.
"(A) PETITION.-An organization (through
um established under section 2781; and
"(2) DATA AND STUDIES.-The Board shall
a representative of such organization) or an
"(10) carry out any other activities deter-
collect such data and conduct such studies
individual that desires to be a negotiator on
(1). as may be necessary to carry out paragraph
behalf of health care providers under this
mined by the Board to be necessary to fur-
ther the goal of making available afford-
section shall submit a petition requesting
able, accessible, high quality health care in
"(d) STATE AND REGIONAL GOALS.-In carry-
such to the Board. Such petition shall in-
the United States.
ing out its functions under this section, the
clude any authorizations of representation
"(b) PERSONNEL, SERVICES, REGULATIONS.-
Board shall develop separate goals for each
that such organization or individual has re-
The Board may, for the purpose of perform-
State and region, based on an adjustment of
celved on behalf of health care providers. in
ing its duties and carrying out its functions
the national goals, to reflect the demo-
such form and meeting such requirements
under this part-
graphic characteristics and other relevant
as the Board may require.
"(1) employ such personnel as it considers
characteristics of such States and regions.
"(B) GENERAL APPROVAL-An organization
necessary to perform administrative, cleri-
"(e) TIMING.-The Board shall, not later
or individual submitting a petition under
cal, technical and other duties;
than June 30 of each year, develop prelimi-
subparagraph (A) that contains authoriza-
"(2) procure the temporary and intermit-
nary goals under this section and, not later
tions of represent from not less than
tent services of experts and consultants to
than December 1 of each year, develop final
25 percent of the health care providers in a
the extent authorized by section 3109(b) of
goals and the recommended payment rates
sector, as determined by the Board. shall be
title 5, United States Code, at rates the
and other measures necessary to achieve
approved by the Board as a negotiator for
Board determines to be reasonable; and
such goals.
providers with respect to that sector.
"(3) prescribe regulations necessary to
"SEC. 2764. HEALTH CARE PROVIDER AND PUR.
"(C) EXCLUSIVE NEGOTIATOR.-An organiza-
carry out the functions and duties of the
CHASER NEGOTIATIONS.
tion or individual submitting a petition
Board under this part.
"(a) REQUIREMENT OF NEGOTIATIONS TO
under subparagraph (A) that contains au-
"SEC. 2763. DEVELOPMENT OF NATIONAL HEALTH
ACHIEVE GOALS.-The Board shall convene
thorizations of representation from not less
CARE EXPENDITURE, ACCESS, AND
appropriate representatives of health care
than 50 percent of the health care providers
QUALITY GOALS.
providers and purchasers recognized or ap-
in a sector. as determined by the Board,
"(a) EXPENDITURE GOALS.-
"(1) IN GENERAL-The Board shall, to the
pointed as negotiators under section 2765 to
shall be approved by the Board as the exclu-
extent practicable, develop national expend-
negotiate concerning terms and conditions
sive negotiator for providers with respect to
that sector.
iture goals under section 2762(a)(1) applica-
related to the provision of health care to
achieve the expenditure goals developed
"(D) APPOINTMENT.-If no organization or
ble to the total amount to be expended in
individual submits a petition under subpara-
the United States for health care. To the
under section 2763(a). The Board shall
extent practicable, such goals shall contain
adopt a negotiating process that shall be
graph (A) that contains authorizations of
followed by such negotiators.
representation from 25 percent or more of
a separate expenditure breakdown for-
"(A) hospital services;
"(b) OBLIGATION TO BARGAIN IN GOOD
the health care providers in a sector, as de-
"(B) physician services;
FAITH.-It shall be the obligation of negotia-
termined by the Board, the Board shall-
"(C) laboratory services;
tors participating in negotiations under sub-
"(i) appoint a negotiator or negotiators to
section (a) to bargain in good faith and con-
represent such providers; or
"(D) pharmaceutical products;
"(ii) establish an election procedure for
"(E) durable medical equipment; and
sistent Board. with the processes established by the
the election of a negotiator or negotiators
"(F) such other health services or sectors,
for such providers.
including subdivisions of the sectors de-
"(c) TIME FOR NEGOTIATIONS.-The negoti-
ations required under subsection (a) shall be
"(2) INSTITUTIONAL SECTORS.-In the case
scribed in this paragraph, other than long-
of a health care sector in which health care
term care services, as the Board determines
commenced not later than July 1, and shall
be completed not later than September 31,
services are delivered primarily through in-
appropriate.
of each year unless such time period is ex-
stitutions or organizations, the Board shall
"(2) CONSIDERATIONS.-In developing ex-
penditure goals under paragraph (1), the
tended by the Board.
establish a procedure to select negotiators
"(d) SECTORS FOR NEGOTIATIONS.-The
to represent such institutions and organiza-
Board shall take into consideration-
Board shall require negotiations under sub-
tions that is based on a weighted designa-
"(A) the aging of the population and such
other factors as may affect the demand for
section (a) for the achievement of the ex-
tion of all such institutions and organiza-
health care in the future;
penditure goals for physician and hospital
tions after consideration of the revenues or
care. The Board may require that negotia-
number of patients served by such institu-
"(B) general inflation factors and the
costs related to inflation in labor and other
tions also be convened under such subsec-
tions or organizations or based on such
tion concerning other health care sectors of
other measure as the Board determines ap-
inputs used to produce health services;
propriate.
"(C) technological advances that may in-
the type referred to in section 2763(a)(1), in-
"(c) PURCHASERS.-
crease or decrease health care costs;
cluding subdivisions of sectors, to the extent
"(1) IN GENERAL.-
"(D) appropriate improvements in health
determined to be appropriate and feasible
care productivity;
by the Board.
"(A) PETITION.-An organization (through
"(E) feasible reductions in unnecessary
"(e) CONTENT OF NEGOTIATIONS.-
a representative of such organization) or an
"(1) IN GENERAL-Negotiators participat-
individual that desires to be a negotiator on
health care;
"(F) the need to assure that all sectors of
ing in negotiations under subsection (a)
behalf of health care purchasers under this
the population have adequate access to
shall attempt to agree on recommendations
section shall submit a petition requesting
health care services;
to be submitted to the Board concerning a
such to the Board. Such petition shall in-
health care payment system and uniform
clude any authorizations of representation
"(G) the impact and availability of such
payment rates, together with other appro-
that such organization or individual has re-
goals on the quality of health care; and
"(H) such other factors as the Board de-
prlate recommendations for achieving the
celved on behalf of health care purchasers.
expenditure goals developed under section
"(B) GENERAL APPROVAL-An organization
termines appropriate.
"(b) QUALITY GOALS.-
2763(a).
or individual submitting a petition under
"(2) ACHIEVEMENT OF GOALS.-In developing
subparagraph (A) that contains authoriza-
"(1) DEVELOPMENT-The Board shall, to
the extent practicable, develop national
recommendations under paragraph (1), the
tions of representation from not less than
negotiators shall attempt to ensure that
25 percent of the health care purchasers in
goals under section 2762(a)(1) for improving
the quality of the health care system of the
such recommended payment system, pay-
a sector, as determined by the Board, shall
United States. Such goals shall include rec-
ment rates, and other recommended meas-
be approved by the Board as a negotiator
ommendations for improving the quality of
ures will, if implemented, will result in the
for purchasers with respect to that sector.
achievement of the expenditure goals devel-
"(C) EXCLUSIVE NEGOTIATOR.-An organiza-
health care provided in the United States
oped under section 2763(s).
tion or individual submitting a petition
under subparagraph (A) that contains au-
196
CONGRESSIONAL RECORD SENATE
June 5, 1931
the izations of representation from not less
than 50 percent of the health care purchas-
organizations or individuals to determine
section 2763, or an alternative goal accepted
ers in & sector, as determined by the Board,
which such organizations and individuals
by the Board under subsection (c), and such
shall be approved by the Board as the exclu-
will be approved or have their approval con-
agreement, in the judgment of the Board,
tinued.
sive negotiator for purchasers with respect
will lead to the achievement of such goals,
to that sector.
"(4) PERIOD OF DESIGNATION.-No organiza-
the Board shall promulgate regulations im-
"(D) APPOINTMENT.-If no organization or
tion or individual shall be a negotiator or an
plementing such rates and other matters
individual submits a petition under subpara-
exclusive negotiator for more than a 5-year
and such rates and other matters shall be
graph (A) that contains authorizations of
period without being recertified as & negoti-
binding on providers and purchasers in the
representation from 25 percent or more of
ator or exclusive negotiator in the same
sector to which such agreement applies.
the health care purchasers in a sector, as
manner as the original designation was
"(c) AGREEMENT ON DIFFERENT GOAL.-If
determined by the Board, the Board shall-
made under this section.
the negotiators reach an agreement, pursu-
"(i) appoint a negotiator or negotiators to
"(5) TIMING.-Any vote or election held
ant to subsection (a), concerning a goal that
represent such purchasers; or
under this subsection to determine the ne-
is different than a goal that has been devel-
"(ii) establish an election procedure for
gotiators for a particular year, shall be com-
oped by the Board under section 2763, the
the election of a negotiator or negotiators
pleted prior to June 30 of that year. Votes
Board shall adopt such agreed upon-goal if
for such purchasers.
or elections completed after such date shall
the Board determines that it- would be in
"(2) DETERMINATIONS.-If the Board desig-
apply to the negotiations for the following
the best interest of the general public to
nates employment-based health benefit
year.
adopt such goal. The Board, on a rejection
plans as all or some of the purchasers enti-
"SEC. 2766. REQUIREMENTS FOR RECOMMENDED
of such alternative agreed upon goal, may
tled to be represented in negotiations for a
PAYMENT SYSTEMS AND RATES.
request that the negotiators attempt. to
sector, the Board shall establish a procedure
"(a) HOSPITALS.-
reach a negotiated agreement concerning
for determining whether the 25 percent or
"(1) NEGOTIATED AGREEMENT.-A payment
the original goal under section 2763, and
50 percent requirements are met for pur-
system for hospitals that is recommended in
such other measures to achieve such origi-
poses of subparagraphs (B) and (C) of para-
an agreement negotiated pursuant to sec-
nal goal, and may promulgate regulations
graph (1), based on a weighted designation
tion 2767 shall be based on the hospital pay-
recommending rates and other matters to
that considers the number of individuals
ment system established under title XVIII
achieve the original goal.
covered by the health benefits plan of the
of the Social Security Act, except that the
"(d) EFFECT OF No AGREEMENT.-
purchaser, the total expenditures under
Board may approve or adopt an alternative
"(1) IN GENERAL.-If the negotiators for a
such plans, or such other measure as the
payment system.
particular sector fail to reach a negotiated
Boards determines appropriate. In the case
"(2) ALTERNATIVE PAYMENT SYSTEM.-An al-
agreement, pursuant to subsection (a), con-
of health benefit plans provided pursuant to
ternative payment system approved or
cerning & goal established under section
a collective bargaining agreement, for pur-
adopted under paragraph (1) shall provide
2763, the Board shall promulgate regula-
poses of the weighted designation, 50 per-
for the adjustment of payment rates to re-
tions recommending advisory rates and
cent of the costs of or individuals covered
flect the differences in costs between differ-
other matters necessary to achieve such
under such plan shall be assigned to the
ent types of hospitals to the extent that
goals. Such advisory rates and other mat-
union and 50 percent to the appropriate em-
such costs represent appropriate differences
ters shall not be binding on health care pro-
ployer or employers. If the Board designates
in the costs of delivering care efficiently and
viders and purchasers.
other categories of purchasers, a similar
effectively in different types of hospitals or
"(2) CONSTRUCTION.-Notwithstanding any
procedure shall be utilized.
are necessary to achieve other public policy
other provision of law, health care purchas-
LIMITATION.- "(d) CONTINUED APPROVAL AS NEGOTIATORS,
objectives, as determined by the Board.
ers Diay combine for the purpose of agree-
Such a payment system shall reflect geo-
ing to pay health care providers for services
"(1) ESTABLISHMENT OF PROCEDURES.-The
graphic differences in labor and to the
at rates recommended pursuant to para-
Board shall establish procedures for the
extent feasible, other input costs, capital
graph (1). Notwithstanding any other provi-
withdrawal of approvals granted to organi-
and other needs to maintain adequate
sion of law, health care providers may com-
zations or individuals under subsections
access to care and quality of care. To the
(b)(1) or (c)(1).
bine for the purpose of agreeing to charge
extent desirable and feasible, the negotia-
for services at rates recommended pursuant
"(2) EXCLUSIVE NEGOTIATORS.-
tors shall recommend, and the Board shall
to paragraph (1).
"(A) PETITION FOR INITIATION OF PROCE-
approve, special treatment for managed care
"(e) TECHNICAL ASSISTANCE.-The Board
DURES.-The Board may initiate procedures
programs.
shall provide technical assistance to negotia-
under paragraph (1) to withdraw the ap-
"(b) PHYSICIANS.-
tors, including estimates of the effect on ex-
proval of an exclusive negotiator under sub-
"(1) NEGOTIATED AGREEMENT.-A payment
section (b)(1)(C) or (c)(1)(C), if not less than
penditure goals of alternative proposals and
system for physicians that is recommended
30 percent of the health care providers or
estimates of utilization changes that can be
in an agreement negotiated pursuant to sec-
purchasers in the appropriate sector file a
expected under different proposals. The
tion 2767 shall be based on the physician
petition with the Board for such withdraw-
Board may recommend a proposal to
al.
payment system established under title
achieve expenditure goals for the consider-
"(B) VOTE ON WITHDRAWAL.-If the Board
XVIII of the Social Security Act, except
ation of the negotiators. The Board may
determines that a petition received under
that the Board may approve or adopt an al-
make available professional mediation and
ternative payment system.
subparagraph (A) is valid, the Board shall
conciliation services to the negotiators.
"(2) ALTERNATIVE PAYMENT SYSTEM.-An al-
arrange for a vote to take place among the
"SEC. 2768. ENFORCEMENT.
ternative payment system approved or
appropriate purchasers or providers to de-
adopted under paragraph (1) shall reflect
"(a) IN GENERAL.-A health care provider
termine whether to withdraw the approval
that is the subject of such petition. If in
geographic differences in practice costs inso-
assessing rates other than those required
far as those differences reflect the cost of
under regulations promulgated by the
excess of 50 percent of such providers or
economical and efficient provision of quality
Board under this part, or failing to comply
purchasers vote to withdraw such approval,
the Board shall certify that such approval is
care, and shall promote an appropriate dis-
in any other manner with such regulations,
withdrawn and initiate procedures to select
tribution of primary and specialty care. To
or a health care purchaser paying rates
the extent desirable and feasible, the nego-
other than those required under such regu-
a new negotiator or negotiators.
tiators shall recommend, and the Board
lations, except-in the case of an alternative
"(3) LIMITATION AND ELECTION.-
shall approve, special treatment for man-
rate or method established under subsec-
"(A) LIMITATION.-With respect to a sector
aged care programs.
tions (a)(2) and (b)(2) of section 2766,
in which no exclusive negotiator has been
shall-
approved under subsection (b)(1)(C) or
"SEC. 2767. OUTCOME OF NEGOTIATIONS, AGREE-
"(1) be ineligible for any assistance under
MENTS.
(c)(1)(C), the Board may not grant approv-
this Act; and
als to organizations and individuals under
"(a) AGREEMENT.-If a majority of the ne-
"(2) be liable to the United States for a
paragraph (1)(B) of each such subsection, as
gotiators (in the case of multiple negotia-
civil penalty for such failure in an amount
applicable, in a manner that would result in
tors) for the providers and a majority of the
not to exceed $50,000 in the case of an indi-
the approval of individuals and organiza-
negotiators (in the case of multiple negotia-
vidual and $500,000 in the case of an organi-
tions representing in excess of 100 percent
tors) for the purchasers, for a particular
zation, as provided for in subsection (b).
of the purchasers or providers.
sector, agree to recommend a proposal
"(b) CIVIL ACTIONS.-
"(B) ELECTION.-In the event that peti-
under this part to the Board, such proposal
"(1) IN GENERAL.-A civil penalty under
tions are received (whether or not approvals
shall be considered to have been agreed to
by the negotiators.
subsection (a)(2) shall be assessed by the
have previously been granted) under subsec-
"(b) BINDING NATURE OF AGREEMENTS.-If a
Board on a health care provider or purchas-
tion (b)(1)(B) or (c)(1)(C), from organiza-
er by an order made on the record after an
tions or individuals cumulatively represent-
negotiated agreement is reached, pursuant
ing in excess of 100 percent of the purchas-
to subsection (a), concerning a health serv-
opportunity for a hearing on any disputed
issues of material fact and the amount of
ers or providers in a sector the Board shall
ices rate structure, or concerning any other
the penalty. In the course of any investiga-
conduct an election among such qualified
matter at would lead to the achievement
of the E als developed by the Board under
tion or hearing under this paragraph, the
Board or its designees may administer oaths
June 5, 1991
CONGRESSIONAL RECORD - SENATE
S 7197
and affirmations, examine witnesses, receive
evidence, and issue subpoenas requiring the
methods are not promulgated under a nego-
tiated agreement.
"(O) the amounts of actual payments
attendance and testimony of witnesses and
made to each physician or professional ren-
he production of evidence that relates to
"(c) STANDARD FOR DETERMINATION.-In
dering service to the patient;
he matter under investigation.
making a determination under subsection
(b), the Board shall consider the effect of
"(P) a uniform identifier of the primary
"(2) AMOUNT.-In determining the amount
payor:
of a civil penalty under paragraph (1), the
the alternative systems, rates or methods,
Board shall take into account the nature,
with respect to the goals established under
"(Q) the ZIP Code of the facility where
circumstances, extent, and gravity of the act
section 2763. on the State as a whole rather
service is rendered to the patient:
"(R) the patient discharge status: and
subject to penalty. the ability to pay, the
than on particular health care sectors in the
State.
"(S) such other material as the Board de-
effect on the ability to continue to do busi-
termines necessary or useful to carry out
ness, any history of prior; similar acts, and
"SEC. 2771. UNIFORM BILLING AND MANDATORY
the duties of the Board or to provide ade-
such other matters as the Board determines
REPORTING.
quate information to purchasers of health
appropriate.
"(a) IN GENERAL.-The Board shall estab-
care to assist such purchasers in appropri-
"(3) LIMITATION ON ACTIONS.-The Board
lish a system of uniform billing and report-
ately paying for services.
may not initiate an action under this subsec-
ing, as required under subsection (c), that
"(3) MEASURE OF SERVICE EFFECTIVENESS.-
tion with respect to any noncompliance de-
will enable the Board to determine the
"(A) DEVELOPMENT OF METHODOLOGY.-To
scribed in subsection (a) that occurred
progress made in meeting the goals estab-
the extent practical and as rapidly as feasi-
before the date of the enactment of this sec-
lished under section 2763, to provide infor-
ble, the Secretary shall develop and imple-
tion.
mation for health care providers and pur-
ment a methodology or methodologies that
"(c) INJUNCTIVE RELIEF.-The Board shall
chasers to assist such providers and pur-
will measure the effectiveness of the health
have the power, upon the initiation of an
chasers in providing and obtaining efficient-
care service provided by health care provid-
action regarding noncompliance with a pro-
ly provided quality health care, and to
ers.
vision of this part, to petition any United
reduce administrative costs of the health
"(B) INCLUSION IN UNIFORM BILLING
care system.
States district court, within any district
FORM.-To the extent practical and as rapid-
wherein such noncompliance is alleged to
"(b) GENERAL REPORTING AND DATA RE-
ly as feasible, the Secretary shall include in
have occurred, for appropriate temporary
QUIREMENTS.-The Board shall-
the uniform claims and billing forms or in
injunctive relief. Upon the filing of any
"(1) develop a computerized system for
other data collection instruments estab-
such petition, the court shall cause notice
the collection, analysis, and dissemination
lished under subsectic (b) data necessary
thereof to be served-upon such person, and
of data required to be collected under this
to provide the Secretar with information
part;
thereupon shall have jurisdiction to grant
concerning each service provided by health
the Board such temporary injunctive relief
"(2) establish one or more uniform claims
care providers that is sufficient to enable
as the court determines to be appropriate.
and billing form as required in subsection
the Secretary to analyze the quality, cost,
"(d) JUDICIAL REVIEW.-Any health care
(c)(2) to be utilized by all data sources and
and service effectiveness of the provider.
providers:
provider or purchaser that is the subject of
"(d) ADDITIONAL DATA.-The Board may
an adverse decision under subsection (b)(1)
"(3) audit information provided by health
collect additional data, Including audited
or subsection (c) may obtain a review of
care providers on a sample basis or in situa-
annual financial reports of all hospitals and
such decision by the United States Court of
tions where there exists reasonable cause
ambulatory service facilities, medicare cost
for such an audit; and
Appeals for the District of Columbia or for
reports, information on capital expendi-
the circuit in which the provider or pur-
"(4) issue public reports concerning health
tures, and any other data that the Board de-
chaser resides, by filing in such court
care costs and the effectiveness of the
termines necessary to carry out its responsi-
within 60 days following the date the pur-
health care provided by health care provid-
bilities under this part.
ers.
haser or provider is notified of the decision
"(5) RECOMMENDATIONS.-The Board shall
"(c) DATA COLLECTION.-
the Board) a petition requesting that the
make recommendations to the committees
decision be modified or set aside.
"(1) IN GENERAL-Data sources shall
of Congress, the President, and the insur-
submit to the Board, on the request of the
ance industry concerning methods to reduce
"SEC. 2769. OTHER GOVERNMENT PROGRAMS.
Board, all data required to be submitted
the cost,and burden of duplication or exces-
"The Board shall promulgate regulations
under this part in accordance with the uni-
sive reporting requirements imposed on
recommending advisory rates and other
form submission formats, coding systems,
health care providers.
matters necessary to achieve the goals es-
and other technical specifications estab-
"(d) REPORTS.-
tablished under section 1172 for all Federal
lished by the Board to assure that such in-
"(1) IN GENERAL-The Board, not less than
programs (other than the program under
coming data is substantially valid, consist-
once each calendar year, shall for every
titles XVIII. XIX and XXI of the Social Se-
ent, compatible and manageable.
health care provider for which sufficient
curity Act) that reimburse providers on a
"(2) UNIFORM CLAIMS AND BILLING FORMS.--
data is available, prepare and make avail-
fee, charge, or cost basis or charge third-
Data shall be collected by the Board
able reports that shall, to the extent practi-
party providers on such basis. Such non-
through the use of one or more Federal Uni-
cable and scientifically valid, contain data in
binding rates shall be consistent with the
form Claims and Billing Forms developed by
a form that will provide the most useful in-
rates promulgated by the Board under sec-
the Board and utilized by providers and pur-
formation to purchasers of health care serv-
tions 1176 and 1178, except that Federal
chasers of health care that shall, at a mini-
ices regarding such providers to enable such
payments resulting from such rates shall be
mum, include-
purchasers to compare providers on the
no greater than such payments would have
"(A) a uniform patient identifier;
basis of cost and quality.
been if determined without regard to this
"(B) the date of birth of the patient;
"(2) AVAILABILITY.-The Secretary shall
section through the fifth full fiscal year
"(C) the gender of the patient;
advertise and make available all reports pre-
after the date of enactment of this section.
"(D) the ZIP Code of the patient;
pared under paragraph (1) to the general
"SEC. 2770. ROLE OF STATES.
"(E) the date of admission of the patient
public, including any dissents submitted by
"(a) ALTERNATIVE SYSTEMS, ETC.-A State
for inpatient hospital services;
health care providers.
consortia established under section 2781
"(F) the date of discharge of the patient
"(3) RECOMMENDATIONS.-The Board shall
may, with the approval of the Board, estab-
referred to in subparagraph (E);
make recommendations to the appropriate
lish an alternative payment system. rates.
"(G) the principal and secondary diag-
committees of Congress, the President, and
and methods for achieving goals developed
noses of the patient;
the insurance industry concerning methods
by the Board under section 2763.
"(H) the principal and secondary proce-
to reduce the cost and burden of duplicative
"(b) APPROVAL-The Board shall approve
dures to be followed in treating the patient;
or excessive reporting requirements imposed
alternative payment systems, rates, and
"(I) a uniform health care facility identifi-
on health care providers.
er;
methods under subsection (a) if Board de-
"(e) DEFINITION.-As used in this section,
termines that such alternative systems,
"(J) uniform identifiers of physicians and
the term 'data sources' means classes of en-
rates, or methods would result in a level of
treating the patient;
titles and individuals that the Board desig-
health care expenditures in the State that
"(K) for services provided in an inpatient
nates as data sources.
achieves the national goals developed under
setting. the total charges of the health care
"SEC. 2772. ANNUAL REPORTS.
section 2763, adjusted to the State level. If
facility treating the patient, segregated into
the Board determines that such national
major categories determined appropriate by
"Not later than June 30 of each year, the
goals would not be achieved through the
the Board:
Board shall prepare and submit to the Presi-
"(L) the amounts of actual payments
dent, the appropriate committees of Con-
pposed alternative systems. rates or meth-
S. the rates or other matters that apply to
made to the treating health care facility;
gress and the general public, a report con-
de State under regulations promulgated by
"(M) the amounts of the charges of each
cerning the success in attaining expendi-
the Board shall remain binding in the State.
physician or professional rendering service
ture, access, and. quality goals developed
to the patient:
under section 2763, and containing recom-
Such Board approval is only necessary
setting: "(N) the services provided in an inpatient
mendations for additional measures, if any.
where binding payment systems, rates and
that the Board determines are necessary to
achieve such goals.
7198
CONGRESSIONAL RECORD - SENATE
June 5, 1991
"SEC. 2773. DEFINITIONS.
"As used in this part:
grams and programs under which the Fed-
"(c) ACCESS GOALS.-
"(1)
eral Government enters into contracts for
PROVIDER.-The term 'provider'
"(1) DEVELOPMENT.-The Board shall, to
the delivery of health care;
means a physician, hospital, health mainte-
the extent practicable, develop national
"(8) conduct studies, issue reports, and
nance organization, pharmacy, laboratory,
goals under section 1171(a)(1) for improving
gather and disseminate data to the Con-
or other provider of health care services or
access to the health care system for all
supplies, that has entered into an agree-
gress, the President, and the general public,
Americans. Such goals shall include recom-
ment with a managed care entity to provide
to contribute to the objective of providing
mendations for achieving such goals and es-
access to high-quality affordable health
such services or supplies to a patient en-
tablish a system of measuring progress
care;
rolled in 8. managed care plan.
made in achieving such goals.
"(9) cooperate with State-based consorti-
"(2) PURCHASER.-The term 'purchaser'
"(2) DATA AND STUDIES.-The Board shall
um described under part D of this title; and
means an entity that pays for the services
collect such data and conduct such studies
"(10) carry out any other activities deter-
of providers, including in the case of a
mined by the Board to be necessary to fur-
as may be necessary to carry out paragraph
health benefit plan provided pursuant to a
(1).
ther the goal of making available afford-
collective bargaining agreement, the labor
able, accessible, high quality health care in
"(d) STATE AN REGIONAL GOALS.-In carry-
union that has negotiated for such plan on
the United States.
ing out its fun:- ons under this section, the
behalf of employees shall be considered to
"(b) PERSONNEL, SERVICES, REGULATIONS.-
Board shall develop separate goals for each
be a purchaser.
The Board may, for the purpose of perform-
State and region, based on an adjustment of
"SEC. 2774. EFFECTIVE DATES.
ing its duties and carrying out its functions
the national goals, to reflect the demo-
"The Board shall develop the goals under
under this part-
graphic characteristics and other relevant
section 2763 for each calendar year begin-
"(1) employ such personnel as it considers
characteristics of such States and regions.
ning not later than the second full calendar
"(e) TIMING.-The Board shall, no later
necessary to perform administrative, cleri-
year after the date of enactment of this
cal, technical and other duties;
than June 30 of each year, develop prelimi-
part. The Board shall establish the negoti-
"(2) procure the temporary and intermit-
nary goals under this section and, not later
ating procedures required under section
tent services of experts and consultants to
than December 1 of each year, develop final
2714(a) for each calendar year beginning
the extent authorized by section 3109(b) of
goals and the recommended payment rates
not later than the third calendar year after
title 5, United States Code, at rates the
and other measures necessary to achieve
the date of enactment of this part.".
such goals.
Board determines to be reasonable; and
(b) SOCIAL SECURITY Acr.-Title XI of the
"(3) prescribe regulations necessary to
"HEALTH CARE PROVIDER AND PURCHASER
Social Security Act (42 U.S.C. 1301 et seq.)
carry out the functions and duties of the
NEGOTIATIONS
is amended by adding at the end thereof the
Board under this part.
following new part:
"Sec. 1173. (a) REQUIREMENT OF NEGOTIA-
"DEVELOPMENT OF NATIONAL HEALTH CARE
TIONS TO ACHIEVE GOALS.-The Board shall
"PART C-FEDERAL HEALTH EXPENDITURE
EXPENDITURE, ACCESS, AND QUALITY GOALS
convene appropriate representatives of
BOARD
"Sec. 1172. (a) EXPENDITURE GOALS.-
health care providers and purchasers recog-
"FUNCTIONS AND DUTIES OF THE FEDERAL
"(1) IN GENERAL-The Board shall, to the
nized or appointed as negotiators under sec-
HEALTH EXPENDITURE BOARD
extent practicable, develop national expend-
tion 1174 to negotiate concerning terms and
"Sec. 1171. (a) IN GENERAL.-The Federal
iture goals under section 1171(a)(1) applica-
conditions related to the provision of health
Health Expenditure Board (hereafter in
ble to the total amount to be expended in
care to achieve the expensiture goals devel-
this part referred to as the 'Board') shall-
the United States for health care. To the
oped under section 1172(a. The Board shall
"(1) develop national health care expendi-
extent practicable, such goals shall contain
adopt a negotiating process that shall be
ture, access and quality goals;
a separate expenditure breakdown for-
followed by such negotiators.
"(2) convene and oversee negotiations be-
"(A) hospital services;
"(b) OBLIGATION TO BARGAIN IN Good
tween health care providers and purchasers
"(B) physician services;
FAITH.-It shall be the obligation of negotia-
to develop payment rates and perform other
"(C) laboratory services;
tors participating in negotiations under sub-
activities necessary to achieve expenditure
"(D) pharmaceutical products;
section (a) to bargain in good faith and con-
goals developed under paragraph (1);
"(E) durable medical equipment; and
sistent with the processes established by the
"(3) establish recommended payment
"(F) such other health services or sectors,
Board.
levels and other recommended measures
including subdivisions of the sectors de-
"(c) TIME FOR NEGOTIATIONS.-The negoti-
that may include increased utilization of
managed care, increased utilization of alter-
scribed in this paragraph, other than long-
ations required under subsection (a) shall be
term care services, as the Board determines
commenced not later than July 1, and shall
natives to institutionalization, and proce-
appropriate.
be completed not later than September 31,
dures for the allocation and limitation of
"(2) CONSIDERATIONS.-In developing ex-
of each year unless such time period is ex-
capital investment necessary to achieve
penditure goals under paragraph (1), the
tended by the Board.
health care expenditure, quality, and access
Board shall take into consideration-
"(d) SECTORS FOR NEGOTIATIONS.-The
targets subsequent to the conclusion of re-
quired negotiations;
"(A) the aging of the population and such
Board shall require negotiations under sub-
other factors as may affect the demand for
section (a) for the achievement of the ex-
"(4) develop goals for States and regions
that are consistent with national goals es-
health care in the future;
penditure goals for physician and hospital
"(B) general inflation factors and the
care. The Board may require that negotia-
tablished under paragraph (1);
"(5) prepare and submit, to the President,
costs related to inflation in labor and other
tions also be convened under such subsec-
the appropriate committees of Congress and
inputs used to produce health services;
tion concerning other health care sectors of
to the general public, an annual report con-
"(C) technological advances that may in-
the type referred to in section 1172(a)(1), in-
crease or decrease health care costs;
cluding subdivisions of sectors, to the extent
cerning the success in achieving the goals
"(D) appropriate improvements in health
determined to be appropriate and feasible
established under paragraph (1), together
care productivity;
by the Board.
with such recommendations as the Board
"(E) feasible reductions in unnecessary
"(e) CONTENT OF NEGOTIATIONS.-
considers appropriate to further the objec-
health care;
"(1) IN GENERAL.-Negotiators participat-
tives of providing access to affordable, qual-
"(F) the need to assure that all sectors of
ing in negotiations under subsection (a)
ity health care;
"(6) establish uniform billing and claims
the population have adequate access to
shall attempt to agr e on recommendations
health care services;
to be submitted to the Board concerning a
forms and mandatory reporting require-
ments to-
"(G) the impact of such goals on the qual-
health care payment system and uniform
"(A) measure the success in meeting the
ity and availability of health care; and
payment rates, together with other appro-
"(E) such other factors as the Board de-
priate recommendations for achieving the
goals established under paragraph (1);
termines appropriate.
expenditure goals developed under section
"(B) permit the Board, to the extent prac-
"(b) QUALITY GOALS.-
1172(a).
ticable. to analyze data acquired under such
"(1) DEVELOPMENT.-The Board shall, to
"(2) ACHIEVEMENT OF GOALS.-In developing
reporting requirements for individual pro-
the extent practicable, develop national
recommendations under paragraph (1), the
viders to assist purchasers and consumers in
evaluating the quality and cost of care of-
goals under section 1171(a)(1) for improving
negotiators shall attempt to ensure that
the quality of the health care system of the
such recommended payment system, pay-
fered by different providers; and
"(C) reduce the administrative cost of the
United States. Such goals shall include rec-
ment rates, and other recommended meas-
ommendations for improving the quality of
ures will, if implemented, will result in the
health care system;
health care provided in the United States
achievement of the expenditure goals devel-
"(7) recommend rates, budgets, and such
other measures as may be appropriate and
and establish a system of measuring the
oped under section 1172(a).
progress made in achieving such goals.
consistent with expenditure goals developed
"NEGOTIATION REQUIREMENTS
"(2) DATA AND STUDIES.-The Board shall
by negotiators or the Board under this part
"SEC. 1174. (a) NEGOTIATION BY SECTOR.-
collect such data and conduct such studies
to assure access to quality affordable health
In each sector selected by the Board under
as may be necessary to carry out paragraph
care under Federal health insurance pro-
(1).
section 1173(d) as a sector in which negotia-
tions shall be conducted. negotiators repre-
June 5, 1991
CONGRESSIONAL RECORD - SENATE
S 7199
senting providers of health care and pur-
chasers of health care shall be selected in
sive negotiator for purchasers with respect
to that sector.
"(4) PERIOD OF DESIGNATION.-No organiza-
accordance with this section. The Board
tion or individual shall be a negotiator or an
hall determine which individuals. organiza-
"(D) APPOINTMENT.-If no organization or
individual submits a petition under subpara-
exclusive negotia' or for more than a 5-year
ions, and institutions are eligible for repre-
graph (A) that contains authorizations of
period without b. ing recertified as a negoti-
sentation as providers or purchasers in each
ator or exclusive negotiator in the same
sector.
representation from 25 percent or more of
the health care purchasers in a sector, as
manner as the original designation was
"(b) HEALTH CARE PROVIDERS.-
made under this section.
determined by the Board, the Board shall-
"(1) IN GENERAL.-
"(i) appoint a negotiator or negotiators to
"(5) TIMING.-Any vote or election held
"(A) PETITION.-An organization (through
under this subsection to determine the ne-
represent such purchasers; or
a representative of such organization) or an
"(ii) establish an election procedure for
gotiators for a particular year, shall be com-
individual that desires to be a negotiator on
the election of a negotiator or negotiators
pleted prior to June 30 of that year. Votes
behalf of health care providers under this
for such purchasers.
or elections completed after such date shall
section shall submit a petition requesting
"(2) DETERMINATIONS.-If the Board desig-
apply to the negotiations for the following
such to the Board. Such petition shall in-
year.
nates employment-based health benefit
clude any authorizations of representation
plans as all or some of the purchasers enti-
"REQUIREMENTS FOR RECOMMENDED PAYMENT
that such organization or individual has re-
tled to be represented in negotiations for a
SYSTEMS AND RATES
ceived on behalf of health care providers, in
sector, the Board shall establish a procedure
"SEC. 1175. (a) HOSPITALS.-
such form and meeting such requirements
for determining whether the 25 percent or
"(1) NEGOTIATED AGREEMENT.-A payment
as the Board may require.
50 percent requirements are met for pur-
system for hospitals that is recommended.
"(B) GENERAL APPROVAL.-An organization
poses of subparagraphs (B) and (C) of para-
an agreement negotiated pursuant to sec-
or individual submitting a petition under
graph (1), based on a weighted designation
tion 1176 shall be based on the hospital pay-
subparagraph (A) that contains authoriza-
that considers the number of individuals
ment system established under title XVIII
tions of representation from not less than
covered by the health benefits plan of the
of this Act, except that the Board may ap-
25 percent of the health care providers in a
purchaser, the total expenditures under
such plans, or such other measure as the
prove or adopt an alternative payment
sector, as determined by the Board, shall be
system.
approved by the Board as a negotiator for
Boards determines appropriate. In the case
"(2) ALTERNATIVE PAYMENT SYSTEM.-An al-
providers with respect to that sector.
of health benefit plans provided pursuant to
ternative payment system approved or
"(C) EXCLUSIVE NEGOTIATOR.-An organiza-
a collective bargaining agreement, for pur-
adopted under paragraph (1) shall provide
tion or individual submitting a petition
poses of the weighted designation, 50 per-
for the adjustment of payment rates to re-
une r subparagraph (A) that contains au-
cent of the costs of or individuals covered
flect the differences in costs between differ-
the izations of representation from not less
under such plan shall be assigned to the
union and 50 percent to the appropriate em-
ent types of hospitals to the extent that
than 50 percent of the health care providers
in a sector, as determined by the Board,
ployer or employers. If the Board designates
such costs represent appropriate differences
other categories of purchasers, a similar
in the costs of delivering care efficiently and
shall be approved by the Board as the exclu-
sive negotiator for providers with respect to
procedure shall be utilized.
effectively in different types of hospitals or
that sector.
"(d) CONTINUED APPROVAL AS NEGOTIATORS,
are necessary to achieve other public policy
"(D) APPOINTMENT.-If no organization or
LIMITATION.-
objectives, as determined by the Board.
individual submits a petition under subpara-
"(1) ESTABLISHMENT OF PROCEDURES.-The
Such a payment system shall reflect geo-
graph (A) that contains authorizations of
Board shall establish procedures for the
graphic differences in labor and to the
withdrawal of approvals granted to organi-
extent feasible, other input costs, capital
representation from 25 percent or more of
zations or individuals under subsections
and other needs to maintain adequate
ae health care providers in a sector, as de-
(b)(1) or (c)(1).
access to care and quality of care. To the
rmined by the Board, the Board shall-
"(2) EXCLUSIVE NEGOTIATORS.-
extent desirable and feasible, the negotia-
"(i) appoint a negotiator or negotiators to
represent such providers; or
"(A) PETITION FOR INITIATION OF PROCE-
tors shall recommend, and the Board shall
DURES.-The Board may initiate procedures
approve; special treatment for managed care
"(ii) establish. an election procedure for
the election of a negotiator or negotiators
under paragraph (1) to withdraw the ap-
programs.
proval of an exclusive negotiator under sub-
"(b) PHYSICIANS.-
for such providers.
"(2) INSTITUTIONAL SECTORS.-In the case
section (b)(1)(C) or (c)(1)(C), if not less than
"(1) NEGOTIATED AGREEMENT.-A payment
of a health care sector in which health care
30 percent of the health care providers or
system for physicians that is recommended
services are delivered primarily through in-
purchasers in the appropriate sector file a
in an agreement negotiated pursuant to sec-
petition with the Board for such withdraw-
tion 1176 shall be based on the physician
stitutions or organizations, the Board shall
al.
payment system established under title
establish a procedure to select negotiators
"(B) VOTE ON WITHDRAWAL-If the Board
XVIII of this Act, except that the Board
to represent such institutions and organiza-
tions that is based on a weighted designa-
determines that a petition received under
may approve or adopt an alternative pay-
tion of all such institutions and organiza-
subparagraph (A) is valid, the Board shall
ment system.
arrange for a vote to ke place among the
"(2) ALTERNATIVE PAYMENT SYSTEM.-An al-
tions after consideration of the revenues or
number of patients served by such Institu-
appropriate purchaser or providers to de-
ternative payment system approved or
termine whether to \ adraw the approval
adopted under paragraph (1) shall reflect
tions or organizations or based on such
other propriate. measure as the Board determines ap-
that is the subject of such petition. If in
geographic differences in practice costs inso-
excess of 50 percent of such providers or
far as those differences reflect the cost of
"(c) PURCHASERS.-
purchasers vote to withdraw such approval,
economical and efficient provision of quality
"(1) IN GENERAL.-
the Board shall certify that such approval is
care, and shall promote an appropriate dis-
withdrawn and initiate procedures to select
tribution of primary and specialty care. To
"(A) PETITION.-An organization (through
a new negotiator or negotiators.
the extent desirable and feasible, the nego-
a representative of such organization) or an
individual that desires to be a negotiator on
"(3) LIMITATION AND ELECTION.-
tiators shall recommend, and the the Board
behalf of health care purchasers under this
"(A) LIMITATION.-With respect to a sector
shall approve, special treatment for man-
in which no exclusive negotiator has been
aged care programs.
section shall submit a petition requesting
such to the Board. Such petition shall in-
approved under subsection (b)(1)(C) or
"OUTCOME OF NEGOTIATIONS, AGREEMENTS
clude any authorizations of representation
(c)(1)(C), the Board may not grant approv-
that such organization or Individual has re-
als to organizations and individuals under
"SEC. 1176. (a) AGREEMENT.-If a majority
ceived on behalf of health care purchasers.
paragraph (1)(B) of each such subsection, as
of the negotiators (in the case of multiple
applicable, in a manner that would result in
negotiators) for the providers and a majori-
"(B) GENERAL APPROVAL.-An organization
or individual submitting a petition under
the approval of individuals and organiza-
ty of the negotiators (in the case of multiple
subparagraph (A) that contains authoriza-
tions representing in excess of 100 percent
negotiators) for the purchasers, for a par-
tions of representation from not less than
of the purchasers or providers.
ticular sector, agree to recommend a propos-
25 percent of the health care purchasers in
"(B) ELECTION.-In the event that peti-
al under this part to the Board. such pro-
posal shall be considered to have been
a sector, as determined by the Board, shall
tions are received (whether or not approvals
be approved by the Board as a negotiator
have previously been granted) under subsec-
agreed to by the negotiators.
for purchasers with respect to that sector.
tion (b)(1)(B) or (c)(1)(C), from organiza-
"(b) BINDING NATURE OF AGREEMENTS.-If a
"(C) EXCLUSIVE NEGOTIATOR.-An organiza-
tions or individuals cumulatively represent-
negotiated agreement is reached, pursuant
n or individual submitting a petition
ing in excess of 100 percent of the purchas-
to subsection (a), concerning a health serv-
der subparagraph (A) that contains au-
ers or providers in a sector the Board shall
ices rate structure, or concerning any other
conduct an election among such qualified
matter that would lead to the achievement
adorizations of representation from not less
than 50 percent of the health care purchas-
organizations or individuals to determine
of the goals developed by the Board under
ers In a sector, as determined by the Board,
which such organizations and individuals
section 1172. or an alternative goal accepted
will tinued. be approved or have their approval con-
by the Board under subsection (c), and such
shall be approved by the Board as the exclu-
agreement, in the judgment of the Board,
will lead to the achievement of such goals,
7200
CONGRESSIONAL RECORD SENATE
June 5, 1991
the Board shall promulgate regulations im-
Board shall take into account the nature,
mined
without
rd
to
this
section
plementing such rates and other matters
circumstances, extent, and gravity of the act
through the fifth full fiscal year after the
and such rates and other matters shall be
subject to penalty, the ability to pay, the
date of enactment of this section.
binding on providers and purchasers in the
effect on the ability to continue to do busi-
"UNIFORM BILLING AND'MANDATORY REPORTING
sector to which such agreement applies.
ness, any history of prior, similar acts, and
"(c) AGREEMENT ON DIFFERENT GOAL.-If
such other matters as the Board determines
"SEC. 1180. (a) IN GENERAL.-The Board
the negotiators reach an agreement, pursu-
appropriate.
shall establish a system of uniform billing
ant to subsection (a), concerning a goal that
"(3) LIMITATION ON ACTIONS.-The Board
and reporting, as required under subsection
is different than a goal that has been devel-
may not initiate an action under this subsec-
(c), that will enable the Board to determine
oped by the Board under section 1172, the
tion with respect to any noncompliance de-
the progress made in meeting the goals es.
Board shall adopt such agreed upon goal if
scribed in subsection (a) that occurred
tablished under section 1172, to provide in-
the Board determines that it would be in
before the date of the enactment of this sec-
formation for health care providers and
the best interest of the general public to
tion.
purchasers to assist such providers and pur-
adopt such goal. The Board, on a rejection
"(c) INJUNCTIVE RELIEF.-The Board shall
chasers in providing and obtaining efficient-
of such alternative agreed upon goal, may
have the power, upon the initiation of an
ly provided quality health care, and to
request that the negotiators attempt to
action regarding noncompliance with a pro-
reduce administrative costs of the health
reach a negotiated agreement concerning
vision of this part, to petition any United
care system.
the original goal under section 1172, and
States district court, within any district
"(b) GENERAL REPORTING AND DATA RE-
such other measures to achieve such origi-
wherein such noncompliance is alleged to
QUIREMENTS.-The Board shall-
nal goal, and may promulgate regulations
have occurred, for appropriate temporary
"(1) develop a computerized system for
recommending rates and other matters to
injunctive relief. Upon the filing of any
the collection, analysis, and dissemination
achieve the original goal.
such petition, the court shall cause notice
of data required to be collected under this
"(d) EFFECT OF No AGREEMENT.-
thereof to be served upon such person, and
part;
"(1) IN GENERAL.-If the negotiators for a
thereupon shall have jurisdiction to grant
"(2) establish one or more uniform claims
particular sector fail to reach a negotiated
the Board such temporary injunctive relief
and billing form as required in subsection
agreement, pursuant to subsection (a), con-
as the court determines to be appropriate.
(c)(2) to be utilized by all data sources and
cerning 8 goal established under section
"(d) JUDICIAL REVIEW.-Any health care
providers;
1172, the Board shall promulgate regula-
provider or purchaser that is the subject of
"(3) audit information provided by health
tions recommending advisory rates and
an adverse decision under subsection (b)(1)
care providers on a sample basis or in situa-
other matters necessary to achieve such
or subsection (c) may obtain a review of
tions where there exists reasonable cause
goals. Such advisory rates and other matters
such decision by the United States Court of
for such an audit; and
shall not be binding on health care provid-
Appeals for the District of Columbia or for
"(4) issue public reports concerning health
ers and purchasers.
the circuit in which the provider or pur-
care costs and the effectiveness of the
"(2) CONSTRUCTION.-Notwithstanding any
chaser resides, by filing in such court
health care provided by health care provid-
other provision of law, health care purchas-
(within GO days following the date the pur-
ers.
ers may combine for the purpose of agree-
chaser or provider is notified of the decision
"(c) DATA COLLECTION.-
ing to pay health care providers for services
of the Board) a petition requesting that the
"(1) IN GENERAL-Data sources shall
at rates recommended pursuant to para-
decision be modified or set aside.
submit to the Board, on the request of the
graph (1).
"ROLE OF STATES
Board, all data required to be submitted
"(e) TECHNICAL ASSISTANCE.-The Board
"SEC. 1178. (a) ALTERNATIVE SYSTEMS,
under this part in accordance with the uni-
shall provide technical assistance to negotia-
ETc.-A State consortia described in part D
form submission formats, coding systems,
tors, including estimates of the effect on ex-
of this title may, with the approval of the
and other technical specifications estab-
penditure goals of alternative proposals and
Board, establish an alternative payment
lished by the Board to assure that such in-
estimates of utilization changes that can be
system. rates, and methods for achieving
coming data is substantially valid, consist-
expected under different proposals. The
goals developed by the Board under section
ent, compatible and manageable.
Board may recommend a proposal to
1172.
"(2) UNIFORM CLAIMS AND BILLING FORMS.-
achieve expenditure goals for the consider-
"(b) APPROVAL-The Board shall approve
Data shall be collected by the Board
ation of the negotiators. The Board may
alternative payment systems, rates, and
through the use of one or more Federal Uni-
make available professional mediation and
methods under subsection (a) if Board de-
form Claims and Billing Forms developed by
conciliation services to the negotiators.
termines that such alternative systems,
the Board and utilized by providers and pur-
"ENFORCEMENT
rates, or methods would result in a level of
chasers of health care that shall, at & mini-
"Sec. 1177. (a) IN GENERAL.-A health care
health care expenditures in the State that
mum, include-
provider assessing rates other than those re-
achieves the national goals developed under
"(A) 8 uniform patient identifier;
quired under regulations promulgated by
section 1172, adjusted to the State level. If
"(B) the date of birth of the patient;
the Board determines that such national
the Board under this part, or failing to
"(C) the gender of the patient;
comply in any other manner with such reg-
goals would not be achieved through the
"(D) the ZIP Code of the patient;
ulations, or a health care purchaser paying
proposed alternative systems, rates or meth-
"(E) the date of admission of the patient
rates other than those required under such
ods, the rates or other matters that apply to
for inpatient hospital services;
regulations, except in the case of an alterna-
the State under regulations promulgated by
"(F) the date of discharge of the patient
tive rate or method established under sub-
the Board shall remain binding in the State.
referred to in subparagraph (E);
sections (a)(2) and (b)(2) of section 1175,
Such Board approval is only necessary
"(G) the principal and secondary diag-
shall-
where binding payment systems. rates and
noses of the patient;
"(1) be ineligible for any assistance under
methods are not promulgated under a nego-
"(H) the principal and secondary proce-
this Act; and
tiated agreement.
dures to be followed in treating the patient;
"(2) be liable to the United States for a
"(c) STANDARD FOR DETERMINATION.-In
"(I) a uniform health care facility identifi-
civil penalty for such failure in an amount
making a determination under subsection
er;
not to exceed $50,000 in the case of an indi-
(b), the Board shall consider the effect of
"(J) uniform identifiers of physicians
vidual and $500,000 in the case of an organi-
the alternative systems, rates or methods,
treating the patient;
zation, as provided for in subsection (b).
with respect to the goals established under
"(K) for services provided in an inpatient
"(b) CIVIL ACTIONS.-
section 1172, on the State as a whole rather
setting, the total charges of the health care
"(1) IN GENERAL-A civil penalty under
than on particular health care sectors in the
facility treating the patient, segregated into
subsection (a)(2) shall be assessed by the
State.
major categories determined appropriate by
Board on a health care provider or purchas-
"OTHER GOVERNMENT PROGRAMS
the Board;
er by an order made on the record after an
"SEC. 1179. The Board shall promulgate
"(L) the amounts of actual payments
opportunity for 8 Board hearing on any dis-
regulations recommending advisory rates
made to the treating health care facility:
puted issues of material fact and the
and other matters necessary to achieve the
"(M) the amounts of the charges of each
amount of the penalty. In the course of any
goals established under section 1172 for all
physician or professional rendering service
investigation or hearing under this para-
Federal programs (other than the program
to the patient;
graph, the Board or its designees may ad-
under title XVIII of this Act) that reim-
"(N) the services provided in an inpatient
minister oaths and affirmations, examine
burse providers on & fee, charge, or cost
setting;
witnesses, receive evidence, and issue sub-
basis or charge third-party providers on
"(O) the amounts of actual payments
poenas requiring the attendance and testi-
such basic. Such nonbinding rates shall be
made to each physician or professional ren-
mony of witnesses and the production of
consistent with the rates promulgated by
dering service to the patient;
evidence that relates to the matter under in-
the Board under sections 1176 and 1178,
"(P) a uniform identifier of the primary
vestigation.
except that Federal payments resulting
payor;
"(2) AMOUNT.-In determining the amount
from such rates shall be no greater than
"(Q) the ZIP Code of the facility where
of & civil penalty under paragraph (1), the
such payments would have been if deter-
service is rendered to the patient;
June 5, 1991
CONGRESSIONAL
- SENATE
7201
"(R) the patient discharge status; and
Security Act of 19
(29 U.S.C. 1002(1))
rability in such rates. Such recommenda-
"(S) such other material as the Board de-
that-
tions shall not result in Federal payments
termines necessary or useful to carry out
"(A) provides medical care to participants
greater than such payments would have
the duties of the Board or to provide ade-
or beneficiaries directly or through insur-
been If determined without regard to this
quate information to purchasers of health
ance, reimbursement, or otherwise; and
section through the fifth full fiscal year
care to assist such purchasers in appropri-
"(B) meets the requirements of section
after the date of enactment of this section.
ately paying for services.
2721 of the Public Health Service Act.
"(b) PHYSICIAN SERVICES.Notwithstand-
"(3) MEASURE OF SERVICE EFFECTIVENESS.-
Such term shall include a small business
ing any other provision of this title, in the
"(A), DEVELOPMENT OF METHODOLOGY.-To
the extent practical and as rapidly as feasi-
health benefits plan, as defined in section
second full fiscal year after the date of en-
2713(11) of such Act.
actment of this section and annually there-
ble, the Secretary shall develop and imple-
"(2) MANAGED CARE PLAN.-The term 'man-
after, the Board shall, with due regard to
ment a methodology or methodologies that
aged care plan' has the meaning given such
the recommendations of the Physician Pay-
will measure the effectiveness of the health
term by section 2108(a)(6).
ment Review Commission, recommend-
care service provided by health care provid-
"(3) PROVIDER.-The term 'provider'
"(1) appropriate modifications of the re-
ers.
means a physician, hospital, health mainte-
source based relative value schedule provid-
"(B) INCLUSION IN UNIFORM BILLING
nance organization, pharmacy, laboratory,
ed for in section 1848;
FORM.-To the extent practical and as rapid-
or other appropriately licensed provider of
"(2) volume performance standards pro-
ly as feasible, the Secretary shall include In
health care services or supplies, that has en-
vided for in section 1848(f);
the uniform claims and billing forms or in
tered into an agreement with a managed
"(3) updates in the conversion factor, con-
other data collection instruments estab-
care entity to provide such services or sup-
sistent with the volume performance stand-
lished under subsection (b) data necessary
plies to a patient enrolled in a managed care
ards, provided in section 1848(d);
to provide the Secretary with information
plan.
"(4) revisions of the geographical adjust-
concerning each service provided by health
"(4) PURCHASER.-The term 'purchaser'
ment factors provided in section 1848(e);
care providers that is sufficient to enable
means an entity that pays for services of
and
the Secretary to analyze the quality, cost,
providers, including in the case of a health
"(5) such other matters relating to reim-
and service effectiveness of the provider.
benefit plan provided pursuant to a collec-
bursement under this title as the Board
"(4) ADDITIONAL DATA.-The Board may
tive bargaining agreement, the labor union
shall elect.
collect additional data, including audited
that has negotiated for such plan on behalf
In making such recommendations to the
annual financial reports of all hospitals and
of employees shall be considered to be a
Congress, the Board shall also make recom-
ambulatory service facilities, medicare cost
purchaser.
mendations for modifications of the physi-
reports, information on capital expendi-
tures, and any other data that the Board de-
"EFFECTIVE DATES
clan payment system under this title. In
termines necessary to carry out its responsi-
"SEC. 1183. The Board shall develop the
making the recommendations described in
bilities under this part.
goals under section 1172 for each calendar
paragraphs (1), (2), (3), and (4), the Board
"(5) RECOMMENDATIONS.-The Board shall
year beginning not later than the second
shall seck to maintain parity in increases in
make recommendations to the committees
full calendar year after the date of the en-
payment rates with other purchasers of
of Congress, the President, and the insur-
actment of this part. The Board shall estab-
health care services, and shall, over time,
ance industry concerning methods to reduce
lish the negotiating procedures required
seek to achieve comparability in such rates.
the cost and burden of duplication or exces-
under section 1173(a) for each calendar year
Such recommendations shall not result in
sive reporting requirements imposed on
beginning not later than the third calendar
Federal payments greater than such pay-
year after the date of the enactment of this
ments would have been if determined with-
health care providers.
"(d) REPORTS.-
part.".
out regard to this section through the fifth
"(1) IN GENERAL-The Board, not less than
(c) CONFORMING AMEN DMENTS.-
full fiscal year after the date of enactment
Ince each calendar year, shall for every
(1) COMPENSATION, LEVEL III-Section 5314
of this section.".
health care provider for which sufficient
of title 5, United States Code, is amended by
Subtitle C-State Purchasing Consortia
data is available. prepare and make avail-
adding at the end thereof the following:
SEC. 421. STATE PURCHASING CONSORTIA
able reports that shall, to the extent practi-
"Members, Federal Health Expenditure
(a) PUBLIC HEALTH SERVICE Acr.-Title
cable and scientifically valid, contain data in
Board."
XXVII of the Public Health Service Act (as
a form that will provide the most useful in-
(2) COMPENSATION, LEVEL IV.-Section 5315
added by section 101 and amended by sec-
formation to purchasers of health care serv-
of title 5, United States Code, is amended by
tions 201, 311 and 411) is further amended
ices regarding such providers to enable such
adding at the end thereof the following:
by adding at the end thereof the following
purchasers to compare providers on the
"Members, Federal Health Expenditure
new part:
basis of cost and quality.
Board.".
"(2) AVAILABILITY.-The Secretary shall
(d) MEDICARE-Title XVIII of the Social
"PART E-STATE PURCHASING CONSORTIA
advertise and make available all reports pre-
Security Act (42 U.S.C. 1395 et seq.) is
"SEC. 2781. STATE PURCHASING CONSORTIA.
pared under paragraph (1) to the general
amended by adding at the end the following
"(a) REQUIREMENT.-
public, including any dissents submitted by
new section:
"(1) ESTABLISHMENT BY STATE-Not later
health care providers.
"FEDERAL HEALTH EXPENDITURE BOARD
than 1 year after the date of enactment of
"(3) RECOMMENDATIONS.-The Board shall
this part, or the first day of the first calen-
"SEC. 1893. (a) HOSPITAL SERVICES.-Not-
make recommendations to the appropriate
dar year beginning after the close of the
withstanding any other provision of this
committees of Congress, the President, and
title, in the second full fiscal year after the
first regular session of the State legislature
the insurance industry concerning methods
that begins after the date of enactment of
date of enactment of this section and annu-
to reduce the cost and burden of duplicative
this part, whichever is later, the State shall
ally thereafter, the Federal Health Expendi-
or excessive reporting requirements imposed
establish a State Consortium (hereafter re-
ture Board (hereafter in this section re-
on health care providers.
ferred to as the 'Board') shall, with due
ferred to in this section as the 'consortium')
"(e) DEFINITION.-As used in this section,
regard to the recommendations of the Pro-
which may be a public or nonprofit private
the term 'data sources' means classes of en-
entity, or be a member of a Regional Con-
spective Payment Assessment Commission,
tities and individuals that the Board desig-
sortium in accordance with subsection (f),
recommend-
nates as data sources.
that shall carry out the activities described
"(1) the update factor for the DRG pro-
in subsection (d).
"ANNUAL REPORTS
spective payment rates provided in section
"SEC. 1181. Not later than June 30 of each
1886(d);
"(2) ESTABLISHMENT BY SECRETARY.-If a
State fails to establish a State consortium
year, the Board shall prepare and submit to
"(2) the DRG recalibration;
the President, the appropriate committees
"(3) the update factor for excluded hospi-
as required under paragraph (1), the Secre-
tals; and
tary shall develop and implement a State
of Congress and the general public, a report
consortium for such State.
concerning the success in attaining expendi-
"(4) such other matters relating to reim-
ture, access, and quality goals developed
bursement under this title as the Board
"(b) BOARD OF DIRECTORS AND MEMBER-
SHIP.-
under section 1172. and containing recom-
shall elect.
"(1) BOARD OF DIRECTORS.-
mendations for additional measures, if any,
In making such recommendations to the
"(A) IN GENERAL-A consortium shall be
that the Board determines are necessary to
Congress, the Board shall also make recom-
managed by a board of directors who shall
achieve such goals.
mendations for modifications of the pro-
be appointed and serve in accordance with
"DEFINITIONS
spective payment system under this title. In
guidelines and regulations developed by the
recommending the update factor for DRG
State.
SEC. 1182. As used in this part:
prospective payment rates and for excluded
(1) HEALTH BENEFIT PLAN.-The term
"(B) MANDATORY FUNCTIONS.-The guide-
hospitals. the Board shall seek to maintain
health benefit plan' means an employee
lines and regulations developed under sub-
parity in increases in payment rates with
welfare benefit plan (as defined in section
paragraph (A) shall ensure that, for pur-
other purchasers of health care services,
3(1) of the Employee Retirement Income
poses of carrying out the mandatory func-
and, shall over time, seek to achieve compa-
tions under subsection (d)(1), the board of
S 7202
CONGRESSIONAL RECORD SENATE
June 5, 1991
directors will be composed of Insurers, pro-
viders and consumers.
with the program established under part D,
to assure the provision of cost-effective,
and employ uniform billing and claim form
"(C) OPTIONAL FUNCTIONS.-The guidelines
quality services.
and procedures for providers of health serv-
and regulations developed under subpara-
"(5) SMALL SHARE HEALTH INSURANCE COM-
ices covered by enrollees, and for individuals
graph (A) hall ensure that, for purposes of
PANIES.-As used in this subsection, the term
submitting claims directly to the consorti-
carrying out the optional functions under
'small share health insurance companies'
um;
subsection (d)(2), the board of directors will
shall include entities determined appropri-
"(D) further attempt to reduce adminis-
be composed of individuals who represent
ate by the Secretary. In making such deter-
trative costs and burdens on enrollees and
the balanced interests of all interested par-
mination, the Secretary shall seek to mini-
providers of health services, through-
ties.
mize the number of sources reimbursing
"(i) the maintenance of a staff to explain
"(2) MEMBERSHIP IN CONSORTIUM.-All pro-
claims procedures (that shall be consistent
providers directly in the State but shall
viders and purchasers of health insurance
with claims procedures adopted under title
permit insurers with a market share that is
and health care in the State, including busi-
XVIII of the Social Security Act) to provid-
large enough to sufficiently achieve the
ness, labor, and consumer organizations,
ers and enrollees and to provide such other
economies of scale sought through the con-
shall be eligible to become members of the
services as may assist providers in receiving
sortium, to remain independent of the con-
consortium in such State.
reimbursement promptly and at the lowest
sortium, to the extent that permitting such
"(c) APPLICATION AND PLAN, GRANTS AND
possible cost;
separate payment sources would not dilute
TECHNICAL ASSISTANCE.-
"(ii) establish, to the maximum extent
the purpose of the consortium.
"(1) APPLICATION AND PLAN.-
practicable, a paperless processing system to
"(e) DATA AND INFORMATION.-A State con-
"(A) REQUIREMENT.-Prior to the estab-
permit providers to submit claims electroni-
sortium shall collect or provide for the col-
lishment of the State consortium, the State
cally to the consortium;
lection of data and information concerning
shall prepare and submit to the Secretary
"(iii) establish, to the maximum extent
the operations of the consortium and shall
for approval, an application in such form
practicable, the use of 'sinart cards' or other
provide such data and information to the
and containing such information as the Sec-
electronic methods for immediate verifica-
Secretary on an annual basis.
retary may require, including the plan de-
tion by providers of an individuals's health
"(f) REGIONAL CONSORTIUM.-States may
scribed in subparagraph (B).
insurance coverage;
enter into an agreement for the establish-
"(B) PLAN.-As part of the application sub-
"(iv) encouraging providers to submit
ment of a regional consortium that shall
mitted under subparagraph (A), the State
claims directly to the consortium on behalf
have jurisdiction over all States that are
shall prepare a plan that shall outline the
of enrollees; and
parties to such agreement and that shall be
form of the State consortium and that shall
"(v) the conduct of appropriate utilization
subject to the provisions of this section as If
include a description-
reviews;
such consortium were established by a
"(i) of the guidelines applicable to the ap-
"(E) carry out any other activities deter-
single State.
pointment and service of the board of direc-
mined appropriate by the Secretary; and
"(g) ENFORCEMENT.-A State that fails to
tors of the consortium;
"(F) cooperate with the Federal Health
comply with the requirements of this sec-
"(ii) of the manner in which the State will
Expenditure Board established under part
tion shall be ineligible to receive assistance
solicit membership for the consortium;
D.
made available under this Act.
"(iii) of the manner in which the consorti-
"(2) OPTIONAL FUNCTIONS.-The State con-
um will perform the mandatory functions
"(h) STUDY.-Not later than 3 years after
sortium may-
under subsection (d)(1);
the date of enactment of this part, the Sec-
"(A) permit insurers with a large share of
"(iv) of the optional functions that the
retary shall prepare and submit to the ap-
the market in & State to participate in the
consortium will perform under subsection
propriate committees of Congress, a report
consortium;
(d)(2); and
that shall contain the results of a study con-
"(B) convene negotiations with health
"(v) of any other information that the
ducted by the Secretary concerning the
care providers and purchasers and others, as
Secretary determines appropriate.
State consortia system established under
appropriate, concerning the availability of
"(2) GRANTS.-
this section, and whether such consortia are
health care services, coverage and reim-
"(A) IN GENERAL-The Secretary shall
effective in containing health care costs, in
bursement levels for such services, and
award a grant to each State to assist the
expanding the availability of access to such
State in paying the costs associated with the
claim sub- ission and payment procedures
(activities undertaken as a result of such ne-
care, and in protecting and enhancing the
establishment and initial operation of the
quality of such care.
State consortium.
gotiations shall be exempt from Federal
"(i) AUTHORIZATION OF APPROPRIATIONS.-
anti-trust laws if such activities are author-
"(B) AMOUNTS.-Not less than $150,000
ized by the State);
There are authorized to be appropriated
shall be provided to each State under a
"(C) develop procedure: for-
such sums as may be necessary to carry out
grant awarded under this subparagraph (A),
this section.".
"(1) the allocation of capital among health
except that additional amounts may be pro-
care providers to encourage an adequate
(b) SOCIAL SECURITY Acr.-Title XI of the
vided to a State if the Secretary determines,
and efficient level and distribution of health
Social Security Act (as amended by section
based on an application that is submitted by
care resources;
411) is further amended by adding at the
the State for such amounts, that such
"(ii) encouraging a rational distribution of
end thereof the following new part:
amounts are needed to help defray the costs
health care providers; and
"PART D-STATE PURCHASING CONSORTIA
associated with optional functions provided
by the consortium under the State plan sub-
"(iii) encouraging the development of
managed care;
"STATE PURCHASING CONSORTIA
mitted under paragraph (1)(B).
"(D) the collection and dissemination of
"SEC. 1191. (a) MEMBERSHIP IN CONSORTI-
"(C) PLANNING FUNCTIONS.-Except as pro-
vided in subparagraph (B), amounts provid-
data through a Statewide data organization
UM.-
that is accessible to all interested parties in
"(1) IN GENERAL.-A State may, with the
ed under grants awarded under this para-
the State in order to facilitate appropriate
approval of the Secretary, require that the
graph shall be utilized for planning func-
decisions by consumers and to encourage ef-
providers operating under the programs
tions only.
ficient behavior by providers;
conducted under titles XVIII, XIX, and
"(3) TECHNICAL ASSISTANCE.-The Secre-
"(E) coordinate with entities responsible
XXI of this Act in the State, participate in
tary shall provide technical assistance to
for assuring the quality of health care pro-
the State consortium for purposes of claims
States in setting up the State consortia.
vided within the State; and
processing and for such other purposes as
"(d) FUNCTIONS OF CONSORTIUM.-
"(F) carry out any other activities that are
the Secretary may approve, in the least re-
"(1) MANDATORY FUNCTIONS.-The State
consortium shall-
contained within the State plan and ap-
strictive manner practicable.
proved by the Secretary and that are de-
"(2) WAIVERS.-With respect to a State re-
"(A) enroll all small share health insur-
signed to improve the quality of health care,
quirement under paragraph (1) that provid-
ance companies in the State as members of
the consortium for insurers, purchasers and
access to such care, and to control the costs
ers under titles XVIII, XIX, and XXI of
of such care.
providers;
this Act participate in the consortium, the
"(3) APPLICABILITY OF CONSUMER PROTEC-
"(B) establish a claim payment fund and
Secretary may waive such requirement on
TION LAWS.-Notwithstanding any other pro-
the request of such & provider, if the Secre-
procedures for the payment, by the consor-
vision of law, the provisions of the Con-
tium on behalf of its enrollees, of valid
tary determines, on & budget neutral basis,
sumer Product Safety Act and other Feder-
claims submitted by providers or enrollees
that such waiver is necessary to protect the
al consumer protection laws shall apply to
to the consortium, such fund to be capital-
access of the beneficiaries of such provider
ized through public and private contribu-
the functions carried out under paragraph
to care provided by such provider, and that
(1).
tions and assessments made by the consorti-
such waiver will promote the cost effective
"(4) MANAGED CARE.-This subsection shall
delivery of services.
um on such enrollees to reflect amounts
not be construed as limiting the ability of a
paid from such fund on behalf of each such
"(b) FUNCTIONS OF CONSORTIUM.-
enrollee;
managed care plan to select providers eligi-
"(1) MANDATORY FUNCTIONS.-The State
ble to perform services under the plan, or to
"(C) develop, in consultation and with the
consortium shall-
establish reasonable procedures to be fol-
assistance of the Secretary and consistent
"(A) enroll all small share health insur-
lowed by providers participating in the plan,
ance companies in the State as members of
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7203
the consortium for insurers, purchasers and
"(3) APPLICABILITY OF CONSUMER PROTEC-
providers;
"(2) OPERATION.-'1. Administrator may
TION LAWS.-Notwithstanding any other pro-
"(B) establish a claim payment fund and
reserve not to exceed 10 percent of the
vision of law, the provisions of the Con-
ocedures for the payment, by the consor-
amount appropriated under subsection (g)
sumer Product Safety Act and other Feder-
im on behalf of it's enrollees, of valid
in each fiscal year for the operation of the
al consumer protection laws shall apply to
claims submitted by providers or enrollees
clearinghouse, the dissemination of infor-
the functions carried out under paragraph
to the consortium, such fund to be capital-
(1).
mation, and the provision of technical as-
ized through public and private contribu-
"(4) MANAGED CARE.-This subsection shall
sistance under paragraph (1).
tions and assessments made by the consorti-
not be construed as limiting the ability of a
"(e) CONSULTATION.-In developing the
um on such enrollees to reflect amounts
managed care plan to select providers eligi-
procedures for awarding grants under this
paid from-such fund on behalf of each such
ble to perform services under the plan, or to
section, the Secretary shall consult with the
enrollee;
establish reasonable procedures to be fol-
Federal Health Expenditure Board estab-
"(C) develop, in consultation and with the
lowed by providers participating in the plan.
lished under part D of title XXVII.
assistance of the Secretary and consistent
to assure the provision of cost-effective,
"(f) MATCHING REQUIREMENT.-In the case
with the program established under part C.
quality services.
of a grant awarded for the conduct of a
and employ uniform billing claim forms and
"(5) SMALL SHARE HEALTH INSURANCE COM-
demonstration program that will provide a
procedures for providers of health services
PANIES.-As used in this subsection, the term
direct benefit to the grantee, the Adminis-
covered by enrollees, and for individuals
'small share health insurance companies'
trator shall not award such grant unless the
submitting claims directly to the consorti-
shall include entities determined appropri-
grantee agrees to provide additional
um;
ate by the Secretary. In making such deter-
amounts for such program equal to not less
"(D) further attempt to reduce adminis-
mination, the Secretary shall seek to mini-
than 25 percent of the amount of the grant.
trative costs and burdens on enrollees and
mize the number of sources reimbursing
Such additional amounts may be in cash or
providers of health services, through-
providers directly in the State but shall
in kind.
"(i) the maintenance of a staff to explain
permit insurers with a market share that is
"(g) AUTHORIZATION OF APPROPRIATIONS.-
claims procedures (that shall be consistent
large enough to sufficiently achieve the
There are authorized to be appropriated to
with claims procedures adopted under title
economies of scale sought through the con-
carry out this section, such sums as may be
XVIII of this Act) to providers and enrollees
sortium, to remain independent of the con-
necessary in each of the fiscal years 1992
and to provide such other services as may
sortium, to the extent that permitting such
through 1994.".
assist providers in receiving reimbursement
separate payment sources would not dilute
promptly and at the lowest possible cost;
the purpose of the consortium.
Subtitle E-Malpractice Reform
"(ii) establish, to the maximum extent
"(c) DATA AND INFORMATION.-A State con-
SEC. 441. MALPRACTICE REFORM.
practicable, 8. paperless processing system to
sortium shall collect or provide for the col-
Part A of title IX of the Public Health
permit providers to submit claims electroni-
lection of data and information concerning
cally to the consortium;
the operations of the consortium and shall
Service Act (42 U.S.C. 299 et seq.) as amend-
provide such data and information to the
ed by section 431 is further amended by
"(iii) establish, to the maximum extent
practicable, the use of 'smart cards' or other
Secretary on an annual basis.
adding at the end thereof the following new
section:
electronic methods for immediate verifica-
"(d) REGIONAL CONSORTIUM.-States may
tion by providers of an individual's health
enter into an agreement for the establish-
"SEC. 906. MALPRACTICE REFORM.
insurance coverage:
ment of a regional consortium that shall
"(a) IN GENERAL.-The Administrator may
"(iv) encouraging providers to submit
have jurisdiction over all States that are
award grants to States for the development
claims directly to the consortium on behalf
parties to such agreement and that shall be
and implementation of programs for medi-
enrollees; and
subject to the provisions of this section as if
cal malpractice reforms. Programs receiving
(v) the conduct of appropriate utilization
such consortium were established by a
such grants shall include efforts to develop
liews;
single State.
alternative methods to resolve liability dis-
"(E) carry out any other activities deter-
"(e) ENFORCEMENT.-A State that fails to
putes that fairly protect the interests of all
mined appropriate by the Secretary; and
comply with the requirements of this sec-
parties involved and may include an appro-
"(F) cooperate with the Federal Health
tion shall be ineligible to receive payments
priate role for the use of medical practice
Expenditure Board.
under section 2109 of this Act.".
guidelines. No grant shall be awarded that is
"(2) OPTIONAL FUNCTIONS.-The State con-
Subtitle D-Cost Control Grant Program
inconsistent with the goal of-
sortium may-
SEC. 431. COST CONTROL GRANT PROGRAM.
"(1) reducing excessive health care costs;
"(A) permit insurers with a large share of
Part A of title IX of the Public Health
"(2) reducing unnecessary or ineffective
the market in a State to participate in the
Service Act (42 U.S.C. 299 et seq.) is amend-
medical care;
consortium;
ed by adding at the end thereof the follow-
"(3) improving access to quality health
"(B) convene negotiations with health
ing new section:
care;
care providers and purchasers and others, as
"SEC. 905. COST CONTROL GRANT PROGRAM.
"(4) ensuring fair and adequate compensa-
appropriate, concerning the availability of
health care services, coverage and reim-
"(a) IN GENERAL.-The Administrator may
tion for and review of injuries arising from
award grants and enter into contracts with
medical negligence;
bursement levels for such services, and
claim submission and payment procedures
States, public entities, insurers, health plan
"(5) ensuring reasonable insurance rating
administrators, businesses, labor unions,
and premium setting practices; and
(activities undertaken as a result of such ne-
gotiations shall be exempt from Federal
non-profit organizations, and researchers
"(6) improving patient protections, disci-
anti-trust laws if such activities are author-
for the development, demonstration, and
plinary standards for health care profes-
ized by the State);
evaluation of innovative methods for reduc-
sionals, and the effectiveness of State medi-
ing health care costs.
cal boards.
"(C) develop procedures for-
"(b) APPLICATION.-To be eligible for a
"(b) TYPES OF GRANTS.-A grant awarded
"(i) the allocation of capital among health
grant or contract under subsection (a), an
under subsection (a) shall be either-
care providers to encourage an adequate
and efficient level and distribution of health
entity of the type described in such subsec-
"(1) a planning grant, to assist the grantee
tion shall prepare and submit, to the Ad-
care resources;
in the development of a program under this
"(ii) encouraging a rational distribution of
ministrator, an application at such time, in
section that shall be for a period of not to
health care providers: and
such form, and containing such information
exceed two years; or
"(iii) encouraging the development of
as the Administrator shall require.
"(2) an operational grant. to assist the
managed care;
"(c) PREFERENCES.-In awarding grants or
grantee in operation and evaluation of the
"(D) the collection and dissemination of
entering into contracts under subsection (a),
new program referred to in paragraph (1),
data through a Statewide data organization
the Administrator shall give a preference to
that shall be for a period of not to exceed
that is accessible to all interested parties in
entities submitting applications under sub-
five years.
the State in order to facilitate appropriate
section (b) that propose to implement
"(c) REQUIREMENT.-An operational grant
decisions by consumers and to encourage ef-
projects, with assistance provided under this
under subsection (b)(2) shall include a re-
ficient behavior by providers;
section. with the potential to develop pro-
quirement that an evaluation. approved by
"(E) coordinate with entities responsible
grams that could have a significant impact
the Administrator as being adequate, is con-
for assuring the quality of health care pro-
on overall national health care costs.
ducted to determine the effectiveness of the
"(d) CLEARINGHOUSE.-
mided within the State: and
program for which the grant is utilized. A
F) carry out any other activities that are
"(1) ESTABLISHMENT.-The Administrator
final report on the results of the evaluation
ained within the State plan and ap-
shall establish a clearinghouse, and under-
shall be prepared and submitted to the Ad-
Aved by the Secretary and that are de-
take such other activities as may be neces-
ministrator.
signed to improve the quality of health care,
sary, to disseminate information concerning
"(d) AUTHORIZATION OF APPROPRIATIONS.-
access to such care, and to control the costs
successful health care cost control methods
of such care.
and to provide technical assistance in the
There are authorized to be appropriated
implementation of such methods.
such sums as may be necessary to carry out
this section.".
7204
CONGRESSIONAL RECORD
June 5, 1991
SEC. 442. STUDY OF MEDICAL MALPRACTICE.
(a) CONTRACT.-The Secretary shall enter
provement board, appoint the executive
di-
subsection shall be construed to prohibit a
into a contract with the Institute of Medi-
rector of the quality improvement
rd,
plan from paying for services performed or
cine, or with a similar independent entity,
and shall assume such other duties
the
for the collection and analysis of data and
Secretary may prescribe or the board
ordered by such provider at its normal reim-
di-
bursement rates.
issues, by a group of representatives of in-
rectors shall determine to be necessary to
the proper functioning of the quality im-
"(e) RECERTIFICATION AND SUSPENSION OF
terested parties and experts, related to-
provement board.
CERTIFICATION.-A provider certified as out-
(1) ineffective or unnecessary medical
"(c) DUTIES OF THE QUALITY IMPROVEMENT
standing under subsection (c)(3) shall be re-
testing and practices;
BOARD.-
certified periodically by the quality im-
(2) the occurrence of malpractice and mal-
practice awards (including the number of
"(1) GUIDELINES.-
provement board unless the board acts to
"(A) REQUIREMENT.-The quality improve-
suspend such certification. Such suspen-
negligence); claims filed and the number of findings of
ment board shall adopt guidelines for appro-
sions, at the request of the provider shall be
reconsidered.
(3) the adequacy of existing health care
priate medical practice and for recommend-
ed measures to be taken by providers to im-
"(f) EXCEPTION FOR MANAGED CARE
provider licensing and disciplining proce-
dures in preventing malpractice;
prove the quality of care.
PLANS.-Nothing in this section shall be con-
(4) the reasonableness of malpractice in-
"(B) CONTENTS.-Guidelines adopted
strued to limit the ability of a managed care
surance premiums and rate-setting prac-
under subparagraph (A) shall include those
plan to choose providers eligible to perform
of the type developed under the authority
services under the plan or to establish rea-
tices; and
of section 912 and such guidelines as the
sonable procedures to be followed by provid-
(5) any other issues relevant to the ade-
quacy of current medical practices, of com-
Secretary may specify, and may include ad-
ers participating in the plan in order to
ditional guidelines developed by profession-
assure cost-effective, quality services.
pensation for injuries resulting from medi-
cal malpractice, and the impact of legal 11-
al societies or other appropriately qualified
"(g) PLANNING GRANTS.-To facilitate the
bodies or individuals.
establishment of a quality improvement
ability on medical practices.
(b) RECOMMENDATIONS.-Not later than 1
"(2) RECOMMENDED MEASURES.-In coopera-
board in each State, the Secretary may
tion with appropriate professional bodies,
award planning grants, in amounts that
year after the date of enactment of this Act,
the Institute or entity referred to in subsec-
associations, and the Joint Commission on
shall not exceed $200,000 for each State, to
tion (a) shall make available to the Secre-
Accreditation of Hospitals, the quality im-
private, non-profit or public entities, for the
tary, the appropriate committees of Con-
provement board shall recommend meas-
planning, development and implementation
ures for continuous quality improvement to
of the board and the programs undertaken
gress, the appropriate State officials, and to
by the board.
the general public, a report containing the
be adopted by health care professionals and
institutions. Such measures shall include
"(h) AUTHORIZATION OF APPROPRIATIONS.-
recommendations of the Institute or entity
measures specified by the Secretary, appro-
There are authorized to be appropriated,
forms. for any desirable medical malpractice re-
priate continuing medical education and, for
such sums as may be necessary to carry out
this section.".
(c) AUTHORIZATION OF APPROPRIATIONS.-
health care institutions, internal quality im-
There are authorized to be appropriated
provement procedures.
(b) SOCIAL SECURITY Acr.-Title XI of the
such sums as may be necessary to carry out
"(3) CERTIFICATION OF PROVIDERS.-The
Social Security Act (42 U.S.C. 1301 et seq.)
this section.
quality improvement board shall periodical-
as amended by sections 411 and 421, is fur-
Subtitle F-Reducing the Administrative Cost of
ly review the performance of health care
ther amended by adding at the end thereof
Assuring Appropriate Utilization of Health
service providers and, based on-
the following new part:
Care Services and Improving the Quality of
"(A) the conformity of the practice of the
"PART E-ESTABLISHMENT OF A QUALITY
Health Care Services
provider with the guidelines developed by
IMPROVEMENT BOARD
SEC. 451. ESTABLISHMENT OF A QUALITY IM-
the board;
"(B) such measures of health care out-
"ESTABLISHMENT OF A QUALITY IMPROVEMENT
PROVEMENT BOARD.
BOARD
(a) PUBLIC HEALTH SERVICE AcT.-Title
comes as may be scientifically valid and
XXVII of the Public Health Service Act (as
adopted by the board;
"SEC. 1195. (a) DUTIES OF THE QUALITY IM-
"(C) adoption by the provider of the meas-
PROVEMENT BOARD.-
added by section 101 and amended by sec-
tions 201, 311, 411, and 421) is further
ures for continuous quality improvement
"(1) GUIDELINES.-
amended by adding at the end thereof the
recommended by the board; and
"(A) REQUIREMENT.-The quality improve-
following new part:
"(D) such other factors as the board or
ment board for a State established under
"PART F-ESTABLISHMENT OF A QUALITY
the Secretary may prescribe; and
section 451(a) of the HealthAmerica Act
IMPROVEMENT BOARD
may certify a health care provider as an
(hereafter referred to as the 'quality im-
"SEC. 2785. ESTABLISHMENT OF A QUALITY IM-
outstanding provider for the purpose of this
provement board') shall adopt guidelines for
section.
appropriate medical practice and for recom-
PROVEMENT BOARD.
"(a) CONTRACT.-The Secretary shall enter
"(4) LIMITATION ON CERTIFICATION.-A cer-
mended measures to be taken by providers
to improve the quality of care.
into a contract with an entity in each State
tification under paragraph (3) shall be ex-
"(B) CONTENTS.-Guidelines adopted
(such entity shall hereafter be referred to in
amined periodically by the quality improve-
this section as the 'quality improvement
ment board to determine if continued certi-
under subparagraph (A) shall include such
board') to review the quality of health care
fication is appropriate. The quality improve-
guidelines as the Secretary may specify, and
provided by health care professionals and
ment board may suspend the certification of
may include additional guidelines developed
a provider at any time. At the request of a
by professional societies or other appropri-
institutions in each such State and to estab-
lish mechanisms to encourage continuous
health plan, insurance company or State
ately qualified bodies or individuals.
agency, the board must reconsider the certi-
"(2) RECOMMENDED MEASURES.-In coopera-
quality improvement.
"(b) BOARD OF DIRECTORS.-
fication of a provider.
tion with appropriate professional bodies,
"(5) DATA COLLECTION.-The quality im-
associations, and the Joint Commission on
"(1) REQUIREMENT.-The quality improve-
provement board shall collect and review
Accreditation of Hospitals, the quality im-
ment board shall, in accordance with Feder-
al guidelines and regulations and in accord-
such data and conduct such inspections and
provement board shall recommend meas-
evaluations as are necessary to enable the
ures for continuous quality improvement to
ance with the requirements of the contract
board to carry out its duties. At the request
be adopted by health care professionals and
entered into under subsection (a), be man-
of the board, insurers shall provide the
institutions. Such measures shall include
aged by a board of directors.
board with any data collected in the normal
measures specified by the Secretary, appro-
"(2) MEMBERSHIP.-The board of directors
required under paragraph (1) shall consist
course of business as the board determines
priate continuing medical education and, for
of 15 members, of whom-
necessary to perform its duties. The data
health care institutions, internal quality im-
provement procedures.
"(A) seven members shall be representa-
collected by the Federal Health Expendi-
tives of health care providers, including in-
ture Board under part D and the data col-
"(3) CERTIFICATION OF PROVIDERS.-The
lected by the State consortia under part E
quality improvement board shall periodical-
dividuals of recognized excellence in the de-
shall be made available to the board.
ly review the performance of health care
velopment, application, and evaluation of
service providers and, based on-
health care services, procedures, and tech-
"(d) RESTRICTION ON LIMITATION OF PAY-
nologies;
MENT FOR SERVICES PERFORMED BY OUTSTAND-
"(A) the conformity of the practice of the
"(B) four members shall be representa-
ING PROVIDERS.-A health benefit plan may
provider with the guidelines developed by
the board;
tives of insurers and purchasers of health
not deny payment for any service performed
care services; and
or ordered by a provider certified as out-
"(B) such measures of health care out-
"(C) four members shall be health care
standing under subsection (c)(3) during the
comes as may be scientifically valid and
adopted by the board;
service researchers and consumers.
period of such certification for any reason
"(3) DUTIES.-The board of directors shall
other than noncoverage of the provided
"(C) adoption by the provider of the meas-
adopt policies for the quality improvement
service under the plan. The plan may not
ures for continuous quality improvement
deny coverage on the basis that the service
recommended by the board; and
board, approve the budget of the quality im-
is not medically necessary. Nothing in this
"(D) such other factors as the board or
the Secretary may prescribe; and
June-5, 1991
CONGRESSIONAL RECORD SENATE
7205
may certify a health care provider as an
outstanding provider for the purpose of this
Subtitle H-National Standards for the
"(B) CHANGES.-A State is deemed not to
section.
Promotion of Managed Care
have such an election in effect as of the
"(4) LIMITATION ON CERTIFICATION.- cer-
SEC. 471. NATIONAL STANDARDS FOR THE PROMO-
date the Secretary determines that the
tification under paragraph (3) shall be ex-
TION OF MANAGED CARE.
State is enforcing any law regulation in
amined periodically by the quality improve-
Title XXVII of the Public Health Service
violation of subsection (a).
ment board to determine If continued certi-
Act (as added by section 101 and amended
"(c) LIMITATION ON RESTRICTIONS ON MAN-
flcation-is appropriate. The quality improve-
by sections 201, 311, 411, 421 and 451) is fur-
AGED CARE PLANS.-In order to comply with
ther amended by adding at the end thereof
ment board may suspend the certification of
the requirements of this subsection, a State
the following new part:
a provider at any time. At the request of a
may not by law or regulation prohibit or un-
health plan; insurance company or State
"PART G-NATIONAL STANDARDS FOR THE
reasonably limit any of the following:
PROMOTION OF MANAGED CARE
agency, the board must reconsider the certi-
"(1) A State may not prohibit or limit a
fication of a provider.
"SEC. 2791. NATIONAL STANDARDS.
managed care. plan from including incen-
"(5) DATA COLLECTION.-The quality im-
"(a) PROHIBITIONS.-No requirement of
tives for enrollees to use the services of par-
any State insurance, health care or any
ticipating providers.
provement board shall collect and review
such data and conduct such inspections and
other law or regulation shall-
"(2) A State may not prohibit or limit a
evaluations as are necessary to enable the
"(1) prohibit a managed care plan from
managed care plan from limiting coverage
board to carry out its duties. At the request
freely selecting the health care providers, or
of services to those provided by a participat-
the type of health care providers in a locale,
ing provider.
of the board, insurers shall provide the
as the participating providers; or
"(3)(A) Subject to subparagraph (B), a
board with any data collected in the normal
"(2) limit the ability of a managed care
State may not prohibit or limit the negotia-
course of business as the board determines
entity to negotiate, enter into contracts or
tion of rates and forms of payments for pro-
necessary to perform its duties. The data
establish alternative rates or forms of pay-
viders under a managed care plan.
collected by the Federal Health Expendi-
ment for participating providers, or to re-
"(B) Subparagraph (A) shall not apply
ture Board under part C and the data col-
quire or provide incentives that promote the
where the amount of payments with respect
lected by the State consortium under part D
use of participating provide
to & block of services or providers is estab-
board. of title XI shall be made available to the
"(b) UTILIZATION REVIEW SERVICES.-Not-
lished under a Statewide system applicable
withstanding any State law, an insurer or
to all non-Federal payors with respect to
"(b) RESTRICTION ON LIMITATION OF PAY-
other person or entity may offer utilization
such services or providers.
MENT FOR SERVICES PERFORMED BY OUTSTAND-
review services in any State if such insurer,
"(4) A State may not prohibit or limit a
ING PROVIDERS.-A health benefit plan may
person or entity has established-
managed care plan from limiting the
not deny payment for any service performed
"(1) a procedure that adequately evaluates
number of participating providers.
or ordered by a provider certified as out-
the necessity and appropriateness of the
"(5) A State may not prohibit or limit a
standing under subsection (a)(3) during the
proposed or delivered health care services;
managed care plan from requiring that serv-
period of such certification for any reason
"(2) a procedure that permits patients and
ices be provided (or authorized) by a pri-
other than noncoverage of the provided
providers to appeal any adverse decisions by
mary care physician selected by the enrollee
service under the plan. The plan may not
the person or entity performing the utiliza-
from a list of available participating provid-
tion review services, as provided for in sec-
ers.
deny coverage on the basis that the service
tion 2725;
is not medically necessary. Nothing in this
"(d) ADDITIONAL DEFINITIONS:-In this
subsection shall be construed to prohibit a
"(3) a procedure that ensures that the
part, the definitions contained in sections.
plan from paying for services performed or
person or entity providing the utilization
2713 shall also apply.
rdered by such provider at its normal reim-
review services is reasonably accessible (five
Bursement rates.
days each week during normal business
"SEC. 2793. FAVORABLE TREATMENT OF UTILIZA-
TION REVIEW PROGRAMS.
"(c) RECERTIFICATION AND SUSPENSION OF
hours and, where necessary, at other appro-
priate times) to patients and providers; and
"(a) PREEMPTION OF STATE LAWS RESTRICT-
CERTIFICATION.-A provider certified as out-
"(4) a procedure that ensures that all ap-
ING UTILIZATION REVIEW PROGRAMS THAT
standing under subsection (a)(3) shall be re-
plicable Federal and State laws that are de-
MEET FEDERAL STANDARDS.-In the case of a
certified periodically by the quality im-
signed to protect the confidentiality of indi-
health benefit plan that includes a utiliza-
provement board. unless the board acts to
vidual medical records are followed.
tion review program, no State law or regula-
suspend such certification. Such suspen-
tion shall prohibit or regulate activities
"SEC. 2792. FAVORABLE TREATMENT OF MANAGED
sions, at the request of a provider, shall be
CARE PLANS.
under such program, except insofar as such
reconsidered.
"(a) MANAGED CARE PLAN DEFINED.-
law or regulation is consistent with the
"(d) EXCEPTION FOR MANAGED CARE
"(1) DEFINED.-As used in this part, the
standards established under subsection (b).
PLANS.-Nothing in this section shall be con-
term 'managed care plan' has the same
"(b) ESTABLISHMENT OF STANDARDS FOR UTI-
strued to limit the ability of a managed care
LIZATION REVIEW PROGRAMS.-
meaning given such term in section 2713(7).
plan to choose providers eligible to perform
"(2) DETERMINATION OF MANAGED CARE
"(1) IN GENERAL-The Secretary shall pro-
services under the plan or to establish rea-
vide, by regulation, for the establishment of
PLANS.-In the case of a health benefit plan
sonable procedures to be followed by provid-
that is offered by an entity, that is not a
Federal standards for utilization review pro-
ers participating in the plan in order to
self-insured entity, that is subject to regula-
grams of health benefit plans. Such stand-
tion by an applicable regulatory authority
ards shall be designed to assure, within a
assure cost-effective, quality services.
"(e) PLANNING GRANTS.-To facilitate the
(as defined in section 2744(c)), consistent
plan, the cost-effective and medically appro-
priate use of services.
establishment of a quality improvement
with procedures established by the Secre-
board in each State, the Secretary may
tary in consultation with such authorities,
"(2) CONTENTS OF STANDARDS.-Such stand-
such authorities shall be responsible for cer-
ards shall be established with respect to at
award planning grants. in amounts that
tifying for purposes of this part and the
least each of the following aspects of utiliza-
shall not exceed $200,000 for each State, to
Social Security Act whether the health ben-
tion review programs:
private, non-profit or public entities, for the
planning, development and implementation
efit plan is a managed care plan. In the case
"(A) The qualification of those who may
of the board and the programs undertaken
of self-insured entities, the Secretary shall
perform utilization review activities.
by the board.
be responsible for providing such certifica-
"(B) The standards to be applied in per-
"(f) AUTHORIZATION OF APPROPRIATIONS.-
tion.
forming utilization review.
"(b) CONDITION OF STATE FUNDING.-
"(C) The timeliness in which utilization
There are authorized to be appropriated,
"(1) IN GENERAL.-No amounts shall be
review determinations are to be made.
such sums as may be necessary to carry out
this section.".
made available under this Act to a State in
"(D) An appeals process which provides a
any fiscal year (beginning with the first
fair opportunity for individuals adversely
Subtitle G-Use of Practice Guidelines in Federal
fiscal year beginning after the date of the
affected by a utilization review determina-
Health Insurance and Service Programs
enactment of this section) unless the State
tion to have such a determination reviewed.
is in compliance with subsection (a).
"(E). Protection for the confidentiality of
SEC. 461. USE OF PRACTICE GUIDELINES IN FEDER-
AL HEALTH INSURANCE AND SERVICE
"(2) DEEMED ELECTION; IMPLIED PREEMP-
individually-identifiable information used in
the process:
PROGRAMS.
TION.-
Guidelines developed under the authority
"(A) IN GENERAL.-A State is deemed to
"(3) USE OF GUIDELINES.-Such standards
section 912 of the Public Health Service
have elected subsection (a) to be in effect in
shall, to the maximum extent feasible, be
ct (42 U.S.C. 299b-1) shall, to the extent
the State as of the beginning of a fiscal
consistent with practice guidelines devel-
year, unless the chief executive officer of a
oped by the Agency for Health Care Policy
Mactical and effective, be utilized in Federal
and Research.
health insurance programs as utilization
State indicates in writing that the State will
review screens and as practice guidelines in
not comply with this section. Such an elec-
"(4) DEADLINE-Standards shall first be
Federal programs providing health care
tion shall have the effect of preempting the
established under this subsection by not
establishment or enforcement of any State
later than 2 years after the date of the en-
services either directly or through grantees.
law that is in violation of subsection (a).
actment of this part. The Secretary may
revise the standards from time to time as re-
7206
CONGRESSIONAL RECORD SENATE
June 5, 1991
quired to assure, within health benefit
plans, the cost-effective and medically ap-
wages in the case of an employer described
"STATE REQUIREMENTS FOR PARTICIPATION IN
propriate use of services.
in section 352 of the HealthAmerica Act)
AMERICARE
"(c) UTILIZATION REVIEW PROGRAM DE-
paid during such period to employees with
respect to whom the employer is required
"SEC. 2101. (a) IN GENERAL.-A State
FINED.-In this section, the term 'utilization
review program' means a system of review-
(without regard to the election under this
must-
ing the medical necessity and appropriate-
section) to provide health insurance cover-
"(1) provide either for the establishment
age under part B of title XXVII of the
or designation of a single State agency
ness of patient services (which may include
Public Health Service Act.
(other than the agency established or desig-
inpatient and outpatient services) using
"(2) APPLICABLE PERCENTAGE.-For purposes
nated under section 1902 of this Act) to ad-
specified guidelines. Such a system may in-
of paragraph (1)-
minister or supervise the administration of
clude preadmission certification, the appli-
cation of practice guidelines, continued stay
"(A) IN GENERAL.-The applicable percent-
AmeriCare;
age for any calendar year shall be the per-
"(2) provide basic health benefits de-
review, discharge planning, preauthoriza-
tion of ambulatory procedures, and retro-
centage established under this paragraph
scribed in section 2102, subject to cost-shar-
for such calendar year by the Secretary of
ing provisions under section 2103-
spective review.".
Health and Human Services at the lowest
"(A) to any child or pregnant woman who
Subtitle I-Expansion of Technology Assessment
level consistent with maintaining a fair bal-
is not otherwise covered under a nongovern-
SEC. 481. EXPANSION OF TECHNOLOGY ASSESS-
ance between public and private health in-
mental health insurance policy, plan, or
MENT.
surance coverage for employees employed
program beginning on the first day of the
Section 904 of the Public Health Service
by employers not currently offering health
second full calendar year after the date of
Act (42 U.S.C. 299a-2) is amended by adding
insurance coverage.
the enactment of this title;
at the end thereof the following new subsec-
"(B) FAIR BALANCE.-For purposes of sub-
"(B) to any employee or family member
tions:
paragraph (A), the term 'fair balance'
with respect to whom an employer makes a
"(e) EXPANSION OF EFFORTS.-In carrying
means, with respect to a year, a balance cal-
contribution under title V of the Health
out section 901(b) through subsection (a),
culated based on the estimated cost of a
America Act beginning on the first day of
the Administrator shall focus on expanding
fully implemented health insurance plan in
the second full calendar year after the date
and applying appropriate assessments of ex-
that year, and would, if such plan were fully
of the enactment of this title; and
isting health care technologies. Such expan-
implemented and in effect, result in a ratio
"(C) to any individual not covered under a
sion shall be achieved in part, through an
between coverage of such employees under
health benefit plan under title II of such
evaluation of health services provided to in-
the public health insurance plan under title
Act, beginning on the first day of the fifth
dividuals through publicly and privately
XXI of the Social Security Act and under a
full calendar year after the effective date
funded sources.
health benefit plan under part B of title II
described in subparagraph (A);
"(f) PUBLIC-PRIVATE PARTNERSHIPS.-
of the Public Health Service Act that is not
"(3) provide at least monthly supplemen-
"(1) ESTABLISHMENT OF PROGRAM.-The Ad-
disproportionate.
tal payments for premiums, deductibles, and
ministrator shall establish a program under
"(C) NOT DISPROPORTIONATE.-For pur-
other cost-sharing charged to individuals
which the Administrator shall enter into
poses of subparagraph (B), the term 'not
and families as provided under section 2104;
contracts or cooperative agreements with el-
disproportionate' means a ratio of not great-
"(4) provide a clear, simple explanation of
igible entities for the establishment of
er than 65 percent to 35 percent in compar-
the basic health benefits and supplemental
public-private partnerships to undertake
ing coverage under such public health insur-
payments available under AmeriCare
technology assessment and related activities
ance plan to such health benefit plans for a
through public announcements, mailings,
in the private sector.
year.
and any other suitable means;
"(2) ELIGIBLE ENTITIES.-Entities eligible
"(3) WAGES.-For purposes of this subsec-
"(5) provide enrollment in AmeriCare as
to receive a contract or agreement under
tion, the term 'wages' has the meaning
described in subsection (b);
paragraph (1), shall include academic medi-
given such term by section 3121(a), without
"(6) to the extent required by the Seere-
cal centers, research institutions, or a con-
regard to any limitation by reference to the
tary, provide basic health benefits or sup-
sortia of appropriate entities established for
contribution and benefit base under section
plemental payments under AmeriCare to in-
the purposes of conducting technology as-
230 of the Social Security Act.
dividuals who are-
sessment.
"(c) PAYROLL PERIOD.-For purposes of
"(A) residents of the State but are absent
"(3) APPLICATION.-To be eligible to re-
this section, the term 'payroll period' has
therefrom,
ceive a contract or agreement under para-
the meaning given such term by section
"(B) temporarily located in the State but
graph (1), an entity shall prepare and
3401(b).
are not permanent residents of any State; or
submit to the Administrator an application,
"(d) ADMINISTRATION.-For purposes of
"(C) formerly resident: of the State but
at such time, in such form, and containing
this title, the contribution required by sub-
are currently United States citizens perma-
require.". such information as the Administrator may
section (a) shall be treated in the same
nently residing in a country which has reci-
manner as the tax imposed by section
TITLE V-CONTRIBUTION BY EMPLOYERS
3111(a).".
procity agreements with the United States;
"(7) provide to any individual covered
NOT ERAGE PROVIDING PRIVATE HEALTH COV-
(b) CONFORMING AMENDMENTS.-The table
under a health benefit plan under title II of
of chapters for subtitle C of the Internal
the HealthAmerica Act, or any employer of
SEC. 501. CONTRIBUTION BY EMPLOYERS NOT PRO-
Revenue Code of 1986 is amended by adding
VIDING PRIVATE HEALTH BENEFIT
at the end thereof the following new item:
such individual, the opportunity to pur-
chase (or have purchased for such individ-
PLANS.
"Chapter 26. Contribution in lieu of employ-
ual by the individual's employer) AmeriCare
(a) IN GENERAL-Subtitle C of the Inter-
er coverage.".
benefits described in section 2102(a)(7) at a
nal Revenue Code of 1986 is amended by
(c) EFFECTIVE DATE-The amendments
separate actuarial premium rate determined
chapter: adding at the end thereof the following new
made by this section shall apply to payroll
by the State and subject to such other cost-
periods beginning on or after the effective
sharing provisions as the plan under such
"CHAPTER 26-CONTRIBUTION BY EMPLOY-
date of this Act.
title II provides for other benefits under
ERS NOT PROVIDING PRIVATE HEALTH
TITLE VI-ASSURING PROVISION OF
such plan;
BENEFIT PLANS
HEALTH BENEFITS TO ALL AMERICANS
"(8) provide for granting an opportunity
"Sec. 3601. Contribution by employers not
SEC. 601. ESTABLISHMENT OF AMERICARE.
for a fair hearing before the State agency to
providing private health bene-
(a) IN GENERAL.-The Social Security Act
any individual whose claim for coverage
fit plans.
(42 U.S.C. 301 et seq.) is amended by adding
under AmeriCare is denied or is not acted
"SEC. 3601. CONTRIBUTION BY EMPLOYERS NOT
at the end thereof the following new title:
upon with reasonable promptness, under
PROVIDING PRIVATE HEALTH BENE-
rules described in section 2107(b);
FIT PLANS.
"TITLE XXI-AMERICARE
"(9) meet the requirements of-
"(a) CONTRIBUTION.-If an employer to
"TABLE OF CONTENTS OF TITLE
"(A) paragraphs (4), (6), (7), (11), (19),
whom part B of title XXVII or section
"Sec. 2101. State requirements for partici-
(27), (45), (46), (48), and (49) of section
2701(a) of the Public Health Service Act ap-
1902(a),
pation in AmeriCare.
plies elects to have this chapter apply. there
"Sec. 2102. Basic health benefits.
"(B) subsections (b) and (g) of section
is hereby imposed on such employer for
1902, and
"Sec. 2103. Cost-sharing provisions.
each payroll period a contribution require-
"Sec. 2104. Supplemental payments.
"(C) section 1907,
ment in the amount determined under sub-
"Sec. 2105. Health care providers.
in the same manner as they apply to title
section (b).
"(b) AMOUNT OF CONTRIBUTION.-
"Sec. 2106. Quality and cost-effective care
XIX of this Act;
measures.
"(10) meet the requirements of section
"(1) IN GENERAL-The amount of the con-
"Sec. 2107. Administration.
2105 and 210S(c);
tribution required by subsection (a) for any
"Sec. 2108. Definitions and special rules.
"(11) provide that AmeriCare shall be in
payroll period shall be equal to the applica-
ble percentage of wages (50 percent of
"Sec. 2109. Payments to States.
effect in all political subdivisions of the
"Sec. 2110. AmeriCare trust fund.
State, and if administered by such subdivi-
sions, be mandatory upon such subdivisions;
June 5, 1991
CONGRESSIONAL RECORD SENATE
7207
"(12) provide for financial participation by
HealthAmerica Act and who were covered:
the State equal to the non-Federal share- of
fied clinical social worker, a uly licensed or
under AmeriCare in such State.
the expenditures under AmeriCare with re-
certified equivalent mental health profes-
spect to which pr ments under section 2109
Each employer shall provide employees. de-
sional, or a clinic or center providing duly lf-
are authorized by
scribed in subclause (I) with AmeriCare ap-
is title;
censed or certified mental health services;
plications.
meet any ier requirements of this.
and
"(iii) COLLECTION OF PREMIUMS.-
and
"(7) items and services described in section
"(I) IN GENERAL-Each State may require
) in order to insure compliance with
1905(a)(4)(B) (relating to early and periodic
that employers collect AmeriCare premiums
Litle and to receive the Federal share
screening, diagnosis, and treatment for chil-
on behalf of the employees of such employ-
under section 2109, submit to the Secretary
dren under the age of 21).
cr.
a plan that meets the requirements of this
"(II) FAILURE TO PAY PREMIUMS.-If a State
(b) EXCEPTIONS.-Subsection (a) shall not
subsection and is subject to rules similar to
plan includes the requirement described in
be construed as requiring a plan for Ameri-
the rules of section 1904.
subclause (I), the State shall notify the em-
Care to include payment for-
"(b) ELIGIBILITY FOR BASIC HEALTH BENE-
ployee and the Secretary of the failure of
(1) items and services that are not medi-
FITS.-
the employer to make timely premium pay-
cally necessary as determined under rules
"(1) IN GENERAL:-Subject to the provisions
ments on behalf of the employee and the
similar to rules under title XVIII of this
of paragraphs (2) and (6) of subsection (a),
employee's family members. as required
Act;
each individual not otherwise covered under
under such plan. Such notification shall be
(2) routine physical examinations or pre-
a health benefit plan under title II of the
provided not less that 30 days prior to any
ventive care (other than care and services
HealthAmerica Act is entitled to basic
termination of coverage by the State as the
described in paragraphs (4); (5), and (7) of
health benefits under AmeriCare.
result of such nonpayment of premiums.
subsection (a); or
"(2) PERIOD OF CÓVERAGE:-
"(5) ENROLLMENT PERIODS.-
(3) experimental services and procedures
"(A) GENERAL RULE.-Upon notification of
"(A) IN GENERAL.-Except as provided in
as determined under rules similar to rules
the approval of an application submitted by
any individual (or a guardian or representa-
this paragraph, any individual may enroll in
under title XVIII of this Act.
AmeriCare-
(c) AMOUNT, SCOPE, AND DURATION OF CER-
tive of such individual), AmeriCare coverage
of the applicant. begins on the date of such
"(i) during an annual open enrollment
TAIN BENEFITS.-Except as provided in sub-
application.
period (of not less than 1 month) estab-
section (b), AmeriCare shall place no limits
"(B) FAILURE TO MAKE TIMELY NOTIFICA-
lished by the Secretary; and
on the amount, scope, or duration of bene-
"(ii) during such other periods (including
fits described in. paragraphs. (1) through (3)
TION.-If the State fails to notify the appli-
upon loss of coverage under a health benefit
of subsection (a).
cant of the applicant's ineligibility within 1
plan under title II of the HealthAmerica
(d) AMOUNT, SCOPE, AND DURATION OF PRE-
month of the date of the application, Ameri
Act) as the Secretary shall require in regu-
VENTIVE SERVICES.-AmeriCare may limit
Care coverage shall apply during the period
lations.
the preventive services. described in subsec-
beginning on the date the individual submit-
ted the application and ending on the date
"(B) FOR UNDER-POVERTY FAMILIES.-In the
tion (a)(5). pursuant to, regulations of the
the State notifies such individual of such in-
case of an individual who is determined to
Secretary specifying, the content and perio-
eligibility.
be a member of an under-poverty family,
dicity of such care. The Secretary shall de-
"(C) EMPLOYER'S CONTINUATION COVER-
the individual may enroll in AmeriCare at
velop such regulations after consultation
AGE.-Coverage under AmeriCare shall not
any time.
with appropriate medical:experts.
apply for services provided during a period
"(C) PHASE-IN PERIODS.-In the case of any
(e) MENTAL HEALTH CARE.-
of hospitalization that begins prior to the
individual who first becomes eligible for
(1) INPATIENT CARE-Inpatient hospital
date specified in subparagraph (A) or (B)
benefits under AmeriCare in a calendar year
care described in subsection (a)(6)(A) shall
with respect to an individual whose enroll-
described in subsection (a)(2); the period of
include reimbursement for professional care
ment in an employer-based health plan ter-
enrollment shall continue for the entire cal-
provided to the individual while the individ-
minated during such period of hospitaliza-
endar year.
ual is receiving such inpatient care, by a
"(6) AMERICARE CARD.-The State shall
physician or duly licensed OF certified clini-
GUARANTEED MINIMUM ELIGIBILITY
issue an AmeriCare card which may be used
cal psychologist operating within the scope
-An individual who is determined in
for purposes of identification and processing
of practice of the physician or psychologist,
a month to be eligible for benefits under
of claims under AmeriCare: AmeriCare
as determined appropriate under State law.
AmeriCare shall remain eligible for cover-
cards shall identify (as appropriate) if the
Nothing in this subsection shall be con-
age for a period of not less than 1 year,
individual is eligible for special eligibility
strued to modify hospital practices with
unless otherwise covered under a health
benefits.
regard to scope of practice, admitting privi-
benefit plan under title II of the Health
"BASIC HEALTH BENEFITS
leges, or billing:arrangements.
America Act.
"Sec. 2102. (a) GENERAL BENEFITS.-Bene-
(2). STANDARDS FOR CERTAIN PROVIDERS OF
"(3) APPLICATION FORMS.-Each State plan
fits under this section with respect to all in-
OUTPATIENT CARE-The Secretary shall es-
shall use a standard Federal application
dividuals shall include-
tablish standards that providers referred to
which shall be as simple in form as possible
"(1) inpatient and outpatient hospital
in subsection (a)(6)(B)(ii) must meet to be
and understandable to the average individ-
care, except that treatment for a mental dis-
eligible for payment under AmeriCare.
ual and require attachment of such docu-
order is subject to the special limitations de-
"(f) ENHANCED BENEFITS.-Basic health
mentation as deemed necessary by the Sec-
scribed in paragraph (6)(A);
benefits under this section with respect to
retary in order to insure eligibility.
"(2) inpatient and outpatient physician
special eligibility individuals shall include
"(4) ENROLLMENT PROCESS.-
services, except that psychotherapy or
medical assistance, not otherwise described
"(A) IN GENERAL-Each State shall provide
counseling for a mental disorder is subject
in subsection (a), in the State's plan under
for the receipt of AmeriCare applications-
to the special limitations described in para-
title XIX of this Act, other than medical as-
"(i) by mail; and
graph (6)(B);
sistance described in paragraphs (4)(A), (7),
"(ii) at locations broadly available to the
"(3) diagnostic tests;
(14), and (18) of section 1905(a).
general public, including locations that
serve large numbers of indigent individuals
"(4) prenatal care and well-baby care pro-
"(g) ADDITIONAL BENEFITS.-As part of
vided to children who are 1 year of age or
AmeriCare, a State may provide for the cov-
(as defined and determined by the Secre-
younger;
erage of health benefits in addition to the
tary).
"(B) EMPLOYER ASSISTANCE.--
"(5) preventive services, limited to-
basic health benefits described in the pre-
"(A) well child care;
ceding subsections of this section, on the
"(i) IN GENERAL.-Any employer who con-
"(B) pap smears; and
condition that the State shall not receive
tributes under title V of the HealthAmerica
Act in lieu of providing a health benefit
"(C) mammograms; and
any Federal payment for such additional
"(6)(A) inpatient hospital care for a
coverage.
plan under title II of such Act shall notify
the State of the identities of all employees
mental disorder for not less than 45 days
"COST-SHARING PROVISIONS
of that State and shall provide such employ-
per year, except that days of partial hospi-
"SEC. 2103. (a) IN GENERAL-Except as
talization or residential care may be substi-
ees with AmeriCare applications.
provided in subsection (b), each State that
"(ii) CHANGE IN STATUS NOTIFICATION.-Any
tuted for days of inpatient care according to
provides AmeriCare shall provide for cost-
employer shall notify the State of-
a ratio established by the Secretary; and
sharing as follows:
"(I) the identities of any employees of
"(B) outpatient psychotherapy and coun-
"(1) UNDER-POVERTY FAMILIES.-With re-
that State who become eligible for Ameri-
seling for a mental disorder for not less
spect. to an individual who is a member of
Care as the result of changes in employ-
than 20 visits per year provided by a. provid-
er who is acting within the scope of State
an under-poverty family, AmeriCare may
ment status; and
law and who-
not impose any premiums, deductibles or
"(II) the identities of any individuals (in-
other cost-sharing on such individual.
"(i) is a physician; or
members of the families. of such in-
"(2) NEAR-POVERTY FAMILIES.-
Is) who become covered under a
"(ii) meets the standards of subsection
(e)(2) and is a duly licensed or certified clin-
"(A) IN GENERAL.-Subject to subpara-
benefit plan under title II of the
ical psychologist or a duly licensed or certi-
graph (C), with respect to an individual who
is a member of a. near-poverty family that
7208
CONGRESSIONAL RECORD - SENATE
June 5, 1991
receives benefits under AmeriCare, the
shall require an individual whose employer
amount of the monthly AmeriCare premi-
"(2) LIMITATION ON DEDUCTIBLES.-A State
makes a contribution under title V of the
um for such individual shall be the applica-
plan for AmeriCare shall not provide, for
ble percentage of the monthly actuarial rate
HealthAmerica Act in lieu of providing a
benefits provided in any plan year, for a de-
of such State.
health benefit plan under title II of such
ductible amount that exceeds-
"(B) APPLICABLE PERCENTAGE.-For the pur-
Act to pay an AmeriCare premium equal to
"(A) with respect to benefits payable for
the lesser-of-
poses of this paragraph, the term 'applica-
items and services furnished to any individ-
ble percentage' means 2 percentage points
"(A) coverage under AmeriCare for such
ual with no family member enrolled under
for each 10 percentage point bracket (or any
individual for a period of one month; or
AmeriCare, for a plan year beginning in-
portion thereof) such family's income
"(B) 20 percent of the monthly actuarial
"(i) the first calendar year that begins
rate of such State.
equals or exceeds the income official pover-
more than 1 year after the effective date of
ty line (as defined by the Office of Manage-
"(2) With respect to any part-time em-
this title, $250; or
ment and Budget, and revised annually in
ployee who is a member of a family that re-
"(ii) for a subsequent calendar year, the
accordance with section 673(2) of the Omni-
ceives benefits under AmeriCare and whose
limitation of deductions specified in clause
bus Budget Reconciliation Act of 1981) ap-
income equals or exceeds an income level
(i) for the previous calendar year increased
plicable to a family of the size involved.
that is 200 percent of the income official
by the percentage increase in the consumer
"(C) LIMITATION.-The aggregate amount
poverty line (as described in subsection
price index for all urban consumers (United
of any AmeriCare premiums imposed on the
(a)(2)(B)) and whose employer makes a con-
States city average, as published by the
family of the individual under this para-
tribution under title V of the HealthAmer-
Bureau of Labor Statistics) for the 12-
graph for any calendar year shall not
ica Act, the amount of any AmeriCare pre-
month period ending on September 30 of
exceed an amount equal to 3 percent of the
mium imposed on such employee shall be 50
the preceding calendar year; and
family income.
percent of the amount determined under
"(B) with respect to benefits payable for
"(D) ADDITIONAL COST SHARING LIMITA-
paragraph (1).
"(c) DEFINITIONS AND SPECIAL RULES.-
items and services furnished to any individ-
TION.-
ual with a family member enrolled under
"(i) IN GENERAL.-With respect to any indi-
"(1) MONTHLY ACTUARIAL RATE DEFINED.-
"(A) IN GENERAL.-For purposes of this sec-
AmeriCare, for a plan year beginning in-
vidual who is a member of a near-poverty
family that receives benefits under Ameri-
tion, the term 'monthly actuarial rate'
"(i) the first calendar year that begins
more than 1 year after the effective date of
Care, such individual shall, in addition to
means, with respect to AmeriCare in a plan
the AmeriCare premium described in this
year, the average monthly per enrollee
this title, $250 per family member and $500
per family; or
paragraph, pay the applicable percentage of
amount that the State estimates, based on
any AmeriCare deductible or other cost-
actuarial calculations conducted in conform-
"(ii) for a subsequent calendar year, the
sharing.
ity with requirements established by the
limitation of deductions specified in clause
"(ii) APPLICABLE PERCENTAGE.-For pur-
Secretary, for enrollees under AmeriCare
(i) for the previous calendar year increased
poses of this subparagraph, the term 'appli-
during the year, would be necessary to pay
by the percentage increase in the consumer
cable percentage' means 10 percentage
for the total benefits required under the
price index for all urban consumers (United
points for each 10 percentage point bracket
State plan for AmeriCare (including admin-
States city average, as published by the
(or any portion thereof) such family's
istrative costs for the provision of such ben-
Bureau of Labor Statistics) for the 12-
income equals or exceeds 110 percent of
efits and an appropriate amount for a con-
month period ending on September 30 of
such income official poverty line.
tingency margin) during the year.
the preceding calendar year.
"(3) OTHER FAMILIES.-
"(B) SPECIAL RULE.-With respect to any
If the limitation of deductions computed
"(A) IN GENERAL.Subject to subpara-
State plan for AmeriCare, for any period
under subparagraph (A)(ii) or (B)(ii) is not a
graph (C), with respect to an individual who
ending before the date described in section
multiple of $10, it shall be rounded to the
is a member of a family that receives bene-
2101(a)(2)(C), the monthly actuarial rate
next highest multiple of $10.
fits under AmeriCare and whose income
shall be calculated as if all eligible children
"(3) LIMITATION ON COPAYMENTS AND COIN-
equals or exceeds an income level that is 200
in such State participate in such plan.
SURANCE.-
percent of the income official poverty line
"(2) APPLICATION ON BASIS OF FAMILY
"(A) IN GENERAL.-Subject to subpara-
(as described in paragraph (2)(B)), the
STATUS.-For purposes of this section, a
graphs (B) through (D), a State plan for
amount of the monthly AmeriCare premi-
State plan for AmeriCare may provide for
AmeriCare shall not-
um for such individual shall be the monthly
the AmeriCare premium to be applied, and
"(i) require the payment of any copay-
actuarial rate of such State.
the monthly actuarial rate to be computed-
ment or coinsurance for an item or service
"(B) LIMITATION.-The aggregate amount
"(A) separately for individuals who have
for which coverage is provided under section
of any AmeriCare premiums imposed on the
family members covered under AmeriCare
2102(g) in an amount that exceeds 20 per-
family of the individual under this paΓa-
and for individuals who do not have family
cent of the cost of the item or service; or
graph for any calendar year shall not
members covered under the AmeriCare; and
"(ii) require the payment of any copay-
exceed an amount equal to-
"(B) with respect to individuals with such
ment or coinsurance for items and services
"(i) in the case of a family whose income
covered family members, separately-
required under section 2102 (other than sub-
equals or exceeds 200 percent of such
"(i) for individuals who have a covered
section (g)) to be furnished in a plan year
income official poverty line but is less than
250 percent of such income official poverty
spouse and one or more covered children;
for an individual after the individual has in-
"(ii) for individuals who have a covered
curred out-of-pocket expenses under the
line, 3.5 percent of the family income,
"(ii) in the case of a family whose income
spouse but no covered children; and
plan that are equal to the out-of-pocket
"(iii) for individuals who do not have a
limit (as defined in subparagraph (E)(ii)).
equals or exceeds 250 percent of such
covered spouse but have one or more cov-
"(B) EXCEPTION FOR PREFERRED PROVID-
income official poverty line but is less than
ered children.
ERS.-If a State plan for AmeriCare estab-
325 percent of such income official poverty
"(3) ADJUSTMENT FOR COVERED SPOUSE WITH
line, 4 percent of the family income, and
lishes reasonable classifications of partici-
OTHER COVERAGE.-For purposes of this sec-
pating and nonparticipating providers of
"(ii) in the case of a family whose income
equals or exceeds 325 percent of such
tion, if a State plan for AmeriCare charges
items and services, the plan may require
income official poverty line but is less than
an individual for a share of the AmeriCare
payments in excess of the amount permitted
premium, the plan shall establish a separate
under subparagraph (A) in the case of items
400 percent of such income official poverty
line, 5 percent of the family income.
AmeriCare premium category (or catego-
and services furnished by nonparticipating
ries) for family coverage in the case of a
providers.
"(C) With respect to any individual who is
covered spouse who is receiving primary
"(C) EXCEPTION FOR IMPROPER UTILIZA-
a member of a family described in this para-
graph that receives benefits under Ameri-
health insurance coverage from another
TION.-A State plan for AmeriCare may pro-
Care, such individual shall, in addition to
health benefit plan. The AmeriCare premi-
vide for copayment or coinsurance in excess
um for such categories shall be established
the AmeriCare premium described in this
of the amount permitted under subpara-
based on actual or projected plan experi-
paragraph, pay 100 percent of any Ameri-
graph (A) for any item or service that an in-
ence or according to a formula established
Care deductible or other cost-sharing.
dividual obtains without complying with
by the Secretary, and shall take into ac-
"(4) PHASE-IN COVERAGE FOR CHILDREN.-
any reasonable procedures established by
count the reduction in health insurance
With respect to any family described in this
the plan to ensure the efficient and appro-
subsection, the children of which are the
costs resulting from such coverage.
priate utilization of covered services.
"(d) AMERICARE DEDUCTIBLE OR OTHER
only individuals eligible for coverage under
"(D) MENTAL HEALTH CARE.-In the case of
COST-SHARING.-
AmeriCare, the percentages described in
care provided under section 2102(a)(6)(B), a
"(1) IN GENERAL.-For purposes of this
paragraphs (2)(C) and (3)(B) shall be re-
State plan for AmeriCare shall not require
title, the term 'AmeriCare deductible or
duced by two-thirds.
payment of any copayment or coinsurance
other cost-sharing' means any deductible,
"(b) MONTHLY AMERICARE PREMIUM FOR
for an item or service for which coverage is
EMPLOYED INDIVIDUALS.-
copayment, or coinsurance established by
required by this title in an amount that ex-
the State plan for AmeriCare as determined
"(1) IN GENERAL.-Except as provided in
ceeds 50 percent of the cost of the item or
under paragraphs (2) and (3) of this subsec-
paragraph (2), a State plan for AmeriCare
service.
tion.
"(E) LIMIT ON OUT-OF-POCKET EXPENSES.-
June 5, 1991
CONGRESSIONAL RECORD - SENATE
"(i) OUT-OF-POCKET EXPENSES DEFINED.-For
7209
purposes of this paragraph, the term 'out-
cent reduced (but not below 2 percent) by 2
of-pocket expenses' means, with respect to
percentage points for each 10 percentage
to a person described in clause (ii) of such
section.
an individual in a plan year, amounts pay-
point bracket (or portion thereof) such fam-
ily's income equals OF exceeds 110 percent of
"(6) NOTICE OF REQUIREMENT.-The State
able under AmeriCare as deductibles and CO-
insurance with respect to items and services
the income official poverty line (as defined
shall provide for written notice, in March of
movided under AmeriCare and furnished in
by the Office of Management and Budget,
each year, of the requirement of paragraph
and revised annually in accordance with sec-
(2) to each family which received assistance
plan year on behalf of the individual
tion 673(2) of the Omnibus Budget Recon-
under this section in any month during the
B family covered under AmeriCare.
"(ii) OUT-OF-POCKET LIMIT DEFINED.-For
ciliation Act of 1981) applicable to a family
preceding year and to which such require-
purposes of this paragraph, the term 'out-
of the size involved.
ment applies.
of-pocket limit' means for a plan year begin-
"(d). APPLICATION FOR ASSISTANCE.-The
"(7): TRANSMITTAL OF INFORMATION.-The
ning in-
State plan for AmeriCare shall use a stand-
Secretary of the Treasury shall transmit an-
"(I) the first calendar year that begins
ard Federal application which shall be as
nually to the State such information relat-
more than 1 year after the effective date of
simple in form as possible and understand-
ing to the total income of individuals for the
this title, $3,000; or
able to the average individual and require
taxable year ending in the previous year as
"(II) for a subsequent calendar year, the
attachment of such documentation as
may be necessary to verify the reconcilia-
out-of-pocket limit specified in subclause (I)
deemed necessary by the Secretary in order
tion of assistance ünder this subsection.
for the previous calendar year increased by
to insure eligibility. Such application shall
"(f). PAYMENT OF OTHER COST-SHARING
the percentage increase in the consumer
be available to any employee as provided in
CLAIMS.-The State plan shall provide that
price index for all urban consumers (United
section 2107(b), may be filed at any time,
each individual subject to coverage under
States city average, as published by the
and shall initiate coverage under the rules
this section or the health care provider ren-
Bureau of Labor Statistics) for the 12-
similar to the rules of subparagraphs (A)
dering the service shall file claims for the
month period ending on September 30 of
and (B) of section 2101(b)(2).
supplemental payment of deductibles and
the preceding calendar year.
"(e) PAYMENT OF-PREMIUMS.-
other cost-sharing imposed on such individ-
If the out-of-pocket limit computed under
"(1) IN GENERAL-The State plan shall
ual under the employer's health benefit
subclause (II) is not a multiple of $10, it
provide that upon the initiation of coverage
plan or AmeriCare, and the State shall
shall be rounded to the next highest multi-
under this section, an individual shall re-
make such payments at the option of the in-
ple of $10.
ceive advanced payment of supplemental
dividual; to such individual or the health
premium payments for the calendar year
care provider.
"SUPPLEMENTAL PAYMENTS
from AmeriCare, or in the case of an indi-
"SEC. 2104. (a) IN GENERAL-Except as
vidual enrolled in AmeriCare, a reduction in
"HEALTH CARE PROVIDERS
provided in this section, an individual who is
the annual AmeriCare premium.
"SEC. 2105. (a) USE OF MEDICARE PAYMENT
enrolled in a health benefit plan under title
"(2): REQUIREMENT FOR FILING OF INCOME
RULES.-
II of the HealthAmerica Act is not entitled
STATEMENT:-In-the case of a family which is
"(1) IN GENERAL.-Except as provided in
to benefits under AmeriCare.
receiving supplemental premium payments
subsections (b) and (c)-
"(b) ASSISTANCE FOR UNDER-POVERTY FAMI-
(or a reduction in AmeriCare premiums)
"(A) payment of benefits under the State
LIES.-In the case of an individual described
under this section for any month in a year,
plan for AmeriCare shall be made in the
in subsection (a) or an individual whose em-
a member of the family shall file with the
same amounts and on the same basis as pay-
ployer makes a contribution under title V of
State, by not later than April 15 of the fol-
ment may be made with respect to such ben-
the HealthAmerica Act in lieu- of providing
lowing year, a statement that verifies the
efits under title XVIII of this Act, and
a health benefit plan under title II of such
family's total family income for the taxable
"(B) the provisions of sections 1814, 1815,
Act, who is a member of an under-poverty
year ending during the previous year. Such
1833, 1834(c) (other than paragraphs (1)(A)
family, AmeriCare shall provide for pay-
a statement shall provide information neces-
(2)), 1835, 1842, 1848; 1886, 1887 shall apply
ment of-
sary to determine the family income during
to payment of benefits (and provision of
"(1) any premiums charged the individual
the year and the number of family members
services and charges thereon) under this
the applicable category of coverage
in the family as of the last day of the year.
er the employer's health benefit plan or
"(3) RECONCILIATION OF PREMIUM ASSIST-
title in the same manner as such provisions
apply to benefits. services, and charges
eriCare in which the individual is en-
ANCE BASED ON ACTUAL INCOME-Based on and
under title XVIII of this Act.
rolled, except that AmeriCare is not re-
using the income reported in the statement
quired to pay for such amount of a premium
filed under paragraph (2) with respect to a
"(2). IDENTIFICATION OF COMPARABLE PAY-
as exceeds the lowest premium which would
family or individual, the State shall com-
MENT METHODS FOR NEW SERVICES.-In the
pute the amount of assistance that should
case of services for which there is not a pay-
be charged the individual for the applicable
have been provided under this section with
ment basis established under title XVIII of
category of coverage under any health bene-
respect to premiums for the family in the
this Act, the Secretary shall establish pay-
fit plan offered the individual under title II
of the HealthAmerica Act or AmeriCare, as
year involved. If the amount of such assist-
ment rules that are similar to the payment
the case may be; and
ance computed is-
rules for similar services under such title.
"(A) greater than the amount of premium
"(3) ADJUSTMENT OF MEDICARE PAYMENT
"(2) deductibles and other cost-sharing im-
RATES.-
posed on the individual under the employ-
assistance provided, the State shall provide
for payment (directly or through a credit
"(A) IN. GENERAL.-For purposes of pay-
er's health benefit plan OF AmeriCare, but
against future premiums owed) to the
ment for inpatient hospital services, physi-
only with respect to the basic benefits re-
quired under such a plan under such title II
family or individual involved of an amount
cians' services, and other services under this
or AmeriCare, as the case may be.
equal to the amount of the deficit, or
title: for which payment rates are estab-
"(B) less than the amount of assistance
lished under title XVIII of this Act, the Sec-
"(c) ASSISTANCE FOR NEAR-POVERTY FAMI-
provided, the State shall require the family
retary shall adjust the payment rates other-
LIES.-
or individual to pay (directly or through an
wise established under such title XVIII to
"(1) IN GENERAL-In the case of an individ-
ual described in subsection (a) or an individ-
increase in future premiums owed) to the
take into account differences between the
ual whose employer makes a contribution
State (to the credit of the program under
population served under that title and the
this title) an amount equal to the amount of
population served by the State plan or en-
under title V of the HealthAmerica Act in
lieu of providing a health benefit plan
the excess payment.
rolled under health benefit plans under title
"(4) DISQUALIFICATION FOR FAILURE TO
II of the HealthAmerica Act and such other
under title II of such Act, who is a member
FILE.-In the case. of any family that is re-
appropriate factors (such as the special cir-
of a near-poverty family. AmeriCare shall
provide for payment of the applicable pre-
quired to file an information statement
cumstances of hospitals the inpatients of
mium percentage of any premiums charged
under paragraph (2) in a year and that fails
which are predominantly children) as the
to file such a statement by the deadline
Secretary deems appropriate.
the individual for the applicable category of
specified in such paragraph. no member of
"(B) CONSULTATION.-In making adjust-
coverage under the employer's health bene-
the family shall be eligible for assistance
ments under subparagraph (A), the Secre-
fit plan or AmeriCare in which the individ-
ual is enrolled, except that AmeriCare is not
under this section after May 1 of such year.
tary shall consult with the Prospective Pay-
required to pay for such amount of a premi-
The State shall waive the application of this
ment Assessment Commission with respect
paragraph if the family establishes, to the
to inpatient hospital services and with the
'im as exceeds the lowest premium which
would be charged the individual for the ap-
satisfaction of the State, good cause for the
Physician Payment Review Commission
basis. failure to file the statement on a timely
with respect to physicians' services.
plicable category of coverage under any
"(b) ALTERNATIVE METHODS.-In issuing
health benefit plan offered the individual
under title II of the HealthAmerica Act or
"(5) PENALTIES FOR FALSE INFORMATION.-
regulations to establish national reimburse-
AmeriCare, as the case may be.
Any individual that provides false informa-
ment levels under this section, a State may
APPLICABLE PREMIUM PERCENTAGE.-For
tion in 3 statement under paragraph (2) is
provide for alternative payment systems
subject to a criminal penalty to the same
that apply rates and methodologies that are
bses of paragraph (1)(A), the term 'ap-
extent as a criminal penalty may be im-
not employed in the Federal guidelines de-
ble premium percentage' means 20 per-
posed under section 1123B(a) with respect
scribed in subsection (a) if such State meets
in the aggregate for all health care provid-
7210
CONGRESSIONAL RECORD SENATE
June 5, 1991
ers in such State the requirements for na-
are conducted in the manner "rescribed in
tional reimbursement levels described in
"(E) Financial incentives to encourage the
such section.
use of cost-effective services.
this section.
"(2) ADDITIONAL CRITERIA.-- he Adminis-
"(c) PHASE-IN OF MEDICARE RATES.-In lieu
"(F) Measures to encourage an awareness
trator of the Agency for Health Care Policy
of the rates established under the rules de-
of the costs associated with medical care, in-
and Research shall, on an annual basis, and
cluding nominal copayments (as determined
scribed in subsection (a) or (b), the payment
as otherwise determined by the Secretary,
of benefits under the State plan for Ameri-
by the Secretary) and the advantages of
advise the Secretary concerning the incor-
preventive care and other cost-effective
Care shall be made in the same amounts
poration of patient outcome measures and
types of care.
and on the same basis as payment may be
practice parameters with respect to care and
The Secretary shall require each State that
made with respect to comparable medical
services furnished under this title in con-
assistance under title XIX of this Act, and
submits an approved application to develop
junction with the quality control and peer
plans for conducting a demonstration
the provisions of such title shall apply to
review activities described in paragraph (1)
payment of benefits (and provision of serv-
of this subsection.
project under this paragraph, in accordance
ices and charges thereon) under this title in
"(b) ALTERNATIVE DELIVERY AND ADMINIS-
with requirements that the Secretary shall
the same manner as such provisions apply
TRATIVE SYSTEMS.-A State may enter into a
establish by regulation.
to payment of comparable medical assist-
contract with a private entity or insurer or a
"(2) ENHANCED COVERAGE DEMONSTRATION
ance under title XIX of this Act, except as
State consortium (described under part D of
PROJECTS.-The Secretary may by waiver
follows:
title XI of this Act) to design and imple-
provide that a State plan for AmeriCare
"(1) With respect to prenatal and child de-
ment innovative systems of health care de-
may include as benefits under such plan
livery benefits and infant care benefits-
livery and administrative systems that meet
payment for all or part of the cost of serv-
"(A) 50 percent of the rate differential be-
the standards of this title.
ices described in section 1915(c) (other than
ginning on the first day of the third full cal-
"(c) MANAGED CARE.-
paragraph (3) thereof).
endar year after the date of the enactment
"(1) IN GENERAL-Each State plan shall, as
"ADMINISTRATION
of this title
part of AmeriCare, provide for managed
"SEC. 2107. (a) ADMINISTRATION.-
"(B) 100 percent of the rate differential
care plans in accordance with the require-
ments of this subsection.
"(1) IN GENERAL.-Subject to paragraph
beginning on the first day of the fourth full
calendar year after the date of the enact-
"(2) REQUIREMENTS.-In providing for
(3), each State shall provide for administra-
ment of this title.
managed care plans under this subsection, a
tion of this title in the same manner as it
"(2) With respect to benefits described in
State shall ensure that-
provides for administration of the plan es-
"(A) managed care plans are, to the extent
tablished under section 1902(a) of this Act.
section 2102(a)(7) and children outpatient
practicable, selected through a competitive
In the administration of this title, the State
and pediatric hospitalization benefits-
selection process;
agency designated under section 2101(a)(1)
"(A) 50 percent of the rate differential be-
"(B) an eligible individual under this title
may delegate or contract with other public
ginning on the first day of the fifth full cal-
endar year after the date of the enactment
has an option to enroll in any of the man-
or private entities for the administration of
aged care plans selected by the State of-
the plan for AmeriCare.
of this title
"(B) 100 percent of the rate differential
fered by any qualified health care provider
"(2) NOTIFICATION OF AMERICARE; APPLICA-
(as defined and determined by the Secre-
TION PROCESSING.-Any State that submits
beginning on the first day of the sixth full
calendar year after the date of the enact-
tary);
an application approved by the Secretary
ment of this title.
"(C) an eligible individual who is receiving
may contract with private entities or a State
"(3) With respect to all other benefits de-
benefits under a managed care plan, may,
agency other than the agency designated
scribed in section 2102-
not less often than annually, and without
under section 2101(a)(1) to provide notifica-
cause, exercise the option to discontinue re-
tion of AmeriCare to the residents of the
"(A) 50 percent of the rate differential be-
ginning on the first day of the seventh full
ceiving benefits under the managed care
State and process and review applications as
calendar year after the date of the enact-
plan and receive coverage under an alterna-
required under section 2101(a)(6), and sec-
ment of this title
tive plan under AmeriCare;
tions 2101(b) and 2104(d), respectively.
"(B) 100 percent of the rate differential
"(D) any arrangements for incentive pay-
"(3) ELECTION.-A State, with such notice
beginning on the first day of the eighth full
ments for physicians under a managed care
to the Secretary as the Secretary may re-
calendar year after the date of the enact-
plan must comply with requirements for the
quire, may elect to have this title (insofar as
ment of this title.
provision of quality care that the Secretary
it provides benefits with respect to individ-
shall prescribe by regulation, taking into ac-
uals under section 2101(a)(2)) administered
For purposes of this subsection, the term
count, at a minimum, quality care guidelines
with respect to that State by the Secretary
'rate differential' means with respect to
under title XVIII of this Act; and
(or by such agent as the Secretary may des-
each benefit the difference between the re-
"(E) a managed care plan shall provide for
ignate). The Secretary may not accept such
imbursement rate as determined under sub-
a system of rate assessment and adjustment
an election unless the State provides assur-
section (a) or (b) and the reimbursement
that minimizes risk selection and segmenta-
ances satisfactory to the Secretary that the
rate for comparable medical assistance de-
tion (as defined and determined by the Sec-
State will make payments to the Secretary
termined under subsection (c).
retary).
toward the cost of implementing this title in
"(d) No JUDICIAL OR ADMINISTRATION
"(3) REGULATIONS.-The Secretary shall,
the same amounts and at the same time as
REVIEW.-There shall be no administrative
not more than 180 days after the date of the
the State would make payments under this
or judicial review of the payment rates or
enactment of this title, develop and estab-
title but for the fact of such an election.
rules under this section (including adjust-
lish by regulation, standards to ensure the
"(4) MULTI-STATE PROGRAMS.-Subject to
ments made under this section).
quality of care under managed care plans
the approval of the Secretary, any State
"(e) UNIFORM CLAIMS AND BILLING FORM.-
under AmeriCare.
may submit a joint plan for AmeriCare
Each State plan shall require the use of any
"(e) Cost CONTAINMENT DEMONSTRATION
along with 1 or more other States to imple-
Federal Uniform Claims and Billing Form
PROJECTS.-
ment a regional administration of 1 plan for
developed by the Federal Health Expendi-
"(1) IN GENERAL-The Secretary shall es-
AmeriCare.
ture Board under section 1180(b). Addition-
tablish various demonstration projects to
"(5) DATA COLLECTION.-Each State shall
al information may be required by the State
enable the States that submit an approved
submit to the Secretary (in such form and
plan if approved by the Secretary.
application, to implement cost management
manner as the Secretary determines) for
"(f) UNIFORM IDENTIFICATION SYSTEM.-
initiatives that promote the effective fur-
collection and analysis-
Each State plan shall require each health
nishing of care under this title. Such cost
"(A) aggregate and per enrollee expendi-
care provider to use the identification
management initiatives shall include:
tures for each benefit covered under Ameri-
number (if any) such provider uses in fur-
"(A) Programs for contracting with com-
nishing services for which payment is made
Care, including categorization by age, race,
munity-based providers (as defined by the
sex, and income level; and
under title XVIII of this Act or such other
Secretary).
identification number specified by the Sec-
"(B) uniform claims collection (by com-
"(B) Financial incentives to encourage the
puter) that provide data to assist in the as-
retary.
delivery of high quality, cost effective man-
sessment of the amount, type, quality, and
"(g) MULTI-STATE PROVIDERS.-Each State
aged care under subsection (d) of this sec-
plan shall allow health care providers par-
location of health care furnished through
tion, including enhanced payment rates to
AmeriCare.
ticipating in AmeriCare to participate under
States with a high percentage of individuals
"(b) RIGHT TO REVIEW DENIED CLAIMS.-
any other State plan for AmeriCare.
enrolled in managed care plans, to the
"(1) NOTICE-Each State plan for Ameri-
"QUALITY AND COST-EFFECTIVE CARE MEASURES
degree such enrollment results in reduced
Care shall require that the State agency
Federal expenditures.
"SEC. 2106. (a) APPLICATION OF PEER
shall provide an individual with written
REVIEW ORGANIZATIONS.-
"(C) Case management. including case-
notice concerning the denial of a claim sub-
finding and the coordination of social and
"(1) IN GENERAL-The Secretary shall
mitted by such individual. Such notice shall
support services.
ensure that the quality control and peer
include the reasons for such denial.
review activities described in section 1165
"(D) Financial incentives to encourage
"(2) PROCESS FOR REVIEW.-Each State
outreach programs.
plan for AmeriCare shall utilize a fair proc-
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7211
ess for the timely rt
ew
of
claims
denied
under such plan.
"(B) is under 23 years of age and a full-
health care services provided or proposed to
time student; or
CLAIM FOR CA
be provided to a patient.
NEEDED FOR LIFE-
"(C) is, regardless of age, unmarried, de-
NING ILLNESS.- 3 cases in which the
"(7) MENTAL DISORDER.-The term 'mental
pendent, and incapable of self-support as a
to provide alth care promptly
disorder' has the same meaning given such
Would be life-threatening or result in a risk
result of a mental or physical disability that
term in the International Classification of
of permanent disability, the AmeriCare ben-
existed prior to the individual reaching 22
Diseases, 9th Revis Clinical Modifica-
eficiary shall be entitled to a decision as to
years of age.
tion.
whether care will be provided under Ameri-
"(2) EMPLOYEE.-The term 'employee' has
"(8) NEAR-POVERTY FAMILY.-The term
Care not later than 1 day after supplying
the meaning given such term under section
'near-poverty family' means a family whose
the State with all requested information. In
2713(a)(2) of the Public Health Service Act.
income equals or exceeds 100 percent of the
the event of a denial of coverage for such
"(3) EMPLOYER.-The term 'employer' has
income official poverty line (as described in
care, the beneficiary shall be entitled to an
the meaning given such term under section
paragraph (1)), but is less than 200 percent
expedited review of an appeal of such denial
2713(a)(3) of the Public Health Service Act.
of such income official poverty line.
within 5 days.
"(4) FAMILY.-The term 'family' means an
"(9) PART-TIME EMPLOYEE.-The term 'part-
"(4) APPEALS.-Individuals shall be enti-
individual, and any spouse or child of an in-
time employee' has the meaning given such
tled to appeal the denial of a claim submit-
dividual. In determining if any individual is
term under section 2713(a)(2)(G) of the
ted by such individual to the State agency.
a child of another individual, rules similar
Public Health Service Act.
The Secretary shall promulgate regulations
to the rules of section 152(b)(2) of the Inter-
"(10) SPECIAL ELIGIBILITY INDIVIDUALS.-
establishing procedures to be utilized for ap-
nal Revenue Code of 1986 shall apply.
The term 'special eligibility individual'
pealing denials of claims under AmeriCare
"(5) HEALTH CARE PROVIDER.-The term
means an individual who on the date of ap-
that are similar to the procedures estab-
'health care provider' means any entity or
plication for benefits under AmeriCare is-
lished under title XVIII of this Act for ap-
person eligible to receive payments under
"(A) a member of an under-poverty
pealing denials of claims under such title
titles XVIII and XIX of this Act.
family; or
XVIII, including the right to a trial de novo.
"(6) MANAGED CARE PLAN.-
"(B) would have qualified for assistance
"(c) ADMINISTRATIVE REGULATIONS.-
"(A) MANAGED CARE PLAN.-The term 'man-
under title IV of this Act or for medical as-
"(1) INCOME DETERMINATION.-The Secre-
aged care plan' means a health benefit plan
sistance in the State of the individual's resi-
tary and the States shall develop and pro-
(as defined in section 1182(1)-
dence under title XIX of this Act (as in
mulgate by regulation a system for the cer-
"(i) in which the insurer-
effect on the date of the enactment of this
tifying of income and the reporting of
"(I) utilizes explicit standards for the se-
title);
changes of income by individuals within an
lection and recertification of participating
"(C) or both.
appropriate period of time for the purposes
providers;
"(11) STATE-The term 'State' means the
of determining the amount of any premi-
"(II) has organizational arrangements, es-
50 States and the District of Columbia.
ums and copayments under section 2103 and
tablished in accordance with regulations of
the eligibility for supplemental payments of
the Secretary, for an ongoing quality assur-
"(12) UNDER-POVERTY FAMILY.-The term
'under-poverty family' means a family
deductibles and other cost-sharing under
ance program for its health services, which
program (aa) stresses health outcomes, and
whose income is less than 100 percent of the
section 2104, including the use of the social
security identification number in tracking
(bb) provides review by physicians and
income official poverty line (as defined by
such changes and verifying the information
other health professionals of the process
the Office of Management and Budget, and
at least biannually. Such system shall in-
followed in the provision of health services;
revised annually in accordance with section
and
673(2) of the Omnibus Budget Reconcilia-
clude rules similar to the rules described in
pay
"(III) contains significant incentives to
tion- Act of 1981) applicable to a family of
phs (2) through (7) of section
the size involved.
2
including a method for making ad-
use the participating providers and proce-
ju
its for any overpayments or under-
dures provided for by the plan; and
"(b) DETERMINATIONS OF INCOME.-For the
"(ii) which, if it limits coverage of services
purposes of this title-
Payments of such premiums, copayments,
and supplemental payments.
to those provided by participating providers
"(1) In general.-The term 'income'
means-
"(2) NOTICE OF SUPPLEMENTAL PAYMENTS.-
or permits deductibles and coinsurance with
"(A) IN GENERAL-The Secretary, in con-
respect to basic health services provided by
"(A) adjusted gross income (as defined in
sultation with the Secretary of the Treas-
persons who are not participating providers
section 62(a) of the Internal Revenue Code
ury, shall, by regulation, require that each
which are in excess of those permitted
of 1986), determined without the applica-
employer-
under health benefit plans-
tion of paragraphs (6) and (7) of such sec-
"(i) provide written notification forms to
"(I) has a sufficient number and distribu-
tion and without the application of section
tion of participating providers to assure
162(1) of such Code, plus
each employee outlining the availability of
supplemental payments under AmeriCare in
that all covered items and services are (aa)
"(B) the amount of social security benefits
the State in which such employee resides as
available and accessible to each enrollee,
(described in section 86(d) of such Code)
described in section 2104;
within the area served by the plan, with rea-
which is not includable in gross income
"(ii) coordinate the distribution of stand-
sonable promptness and in a manner which
under section 86 of such Code.
ard Federal application forms described in
assures continuity, and (bb) when medically
"(2) FAMILY INCOME.-The term 'family
section 2104(d) in conjunction with the pro-
necessary, available and accessible twenty-
income' means, with respect to an individ-
vision of written notification under para-
four hours a day and seven days a week; and
ual, the sum of the income for the individ-
graph (1);
"(II) provides benefits for covered items
ual and all the other family members.
"(iii) carry out the requirements of clauses
and services not furnished by participating
"(3) FAMILY SIZE.-The family size to be
(i) and (ii) without regard to the level of
providers if the items and services are medi-
applied under this title, with respect to
income of any employee.
cally necessary and immediately required
family income, is the number of individuals
"(B) CONTENTS OF NOTICE.-In promulgat-
because of an unforeseen illness, injury, or
included in the family for purposes of cover-
ing the regulations described in subpara-
condition.
age of basic health benefits under Ameri-
graph (A), the Secretary shall require the
"(B) MANAGED CARE ENTITY.-The term
Care or under a health benefit plan (as the
following information to be supplied in the
'managed care entity' means an insurer,
case may be).
written notification:
health maintenance organization, preferred
"(4) TIMING OF DETERMINATION.-Income
"(i) Information relating to the availabil-
provider organization, dental plan organiza-
shall be determined in accordance with one
ity of supplemental payments on the basis
tion, or other entity licensed to do business
of the following methods, at the option of
of family income and size (prepared to co-
in a State, that markets managed care plans
the applicant, for coverage under this title:
ordinate with tax filing units or census in-
to groups or individuals or an employer,
"(A) Multiplying by a factor of 4 the
formation).
labor union, or other State licensed entity
family income of the applicant for the 3-
"(ii) Information concerning the amount
that provides managed care plans for its em-
month period immediately preceding the
of monthly supplemental payments.
ployees or members.
month in which the application for coverage
"(c) FAILURE To PRESCRIBE REGULATIONS.-
"(C) PARTICIPATING PROVIDER.-The term
under this title is made.
The failure of the Secretary to prescribe
participating provider' means a physician,
"(B) Determining the family income of
any regulations under this title shall not re-
hospital, health maintenance organization,
the applicant for the month in which the
lieve a State of any responsibility for com-
pharmacy, laboratory, or other appropriate-
application for such coverage is made.
plying with this title.
ly licensed provider of health care services
"PAYMENT TO STATES
DEFINITIONS AND SPECIAL RULES
or supplies, that has entered into an agree-
"SEC. 2109. (a) IN GENERAL-The Secre-
2108. (a) DEFINITIONS.-As used in
ment with a managed care entity to provide
tary shall pay to each State which has a
this title:
such services or supplies to a patient en-
plan approved under this title, for each
"(1) CHILD.-The term 'child' means an in-
rolled in a managed care plan.
quarter, beginning with the quarter com-
dividual who-
"(D) UTILIZATION REVIEW.-The term 'uti-
mencing January 1, 1992-
"(A) is under 19 years of age;
lization review' means a program for review-
"(1) an amount equal to the Federal insur-
ing the necessity and appropriateness of
ance assistance percentage of the total
7212
CONGRESSIONAL RECORD
June 5, 1991
amount expended during such quarter for
'AmeriCare', there are authorized and ap-
(A) Levels of employment.
benefits and supplemental payments under
propriated for each fiscal year from the
(B) The population of individuals covered
the State plan; plus
Fund a sum sufficient to carry out the pur-
under AmeriCare under such title XXI.
"(2) an amount equal to the administra-
pose of this title. The sums made available
tive percentage of so much of the sums ex-
(C) Poverty levels.
under this paragraph shall be used for
(D) Economic conditions.
pended during such quarter as found neces-
making payments under section 2109 to
(E) The distribution of urban and rural
sary by the Secretary for the proper and ef-
States that have submitted, and had ap-
ficient administration of the State plan.
populations.
proved by the Secretary, a State plan for
"(b) FEDERAL INSURANCE ASSISTANCE PER-
(F) Health indicators, such as infant mor-
AmeriCare.
CENTAGE.-
tality.
"(2) ALLOCATIONS.-Amounts described in
"(1) IN GENERAL.-For purposes of subsec-
(2) EMERGENCY FUND.-The Secretary shall
subsection (b)(1) shall be allotted to each
tion (a)(1), the Federal insurance assistance
develop recommendations for the creation
State under paragraph (1) on the basis of
percentage for any State shall be 100 per-
of an emergency fund to fund certain bene-
amounts received in the Fund with respect
cent less the State percentage.
fits under title XXI of the Social Security
to employees residing in such State.
"(2) STATE PERCENTAGE.-Thc State per-
Act (as added by this Act) in the event a
"(3) ADDITIONAL FUNDS FOR ADMINISTRA-
centage for any State shall be equal to-
TIVE EXPENSES.Amounts in the Fund shall
State experiences changes in economic con-
"(A) the State percentage determined
be available, as provided in appropriation
ditions or other conditions that the Secre-
under section 1905(b), minus
Acts, for the expenses of the Health Care
tary determines to necessitate emergency
"(B) the applicable percentage of such
Financing Administration or any other Fed-
funding.
State percentage.
eral agency designated by the Secretary in
(3) REPORT.-Upon completion of the rec-
"(c) ADMINISTRATIVE PERCENTAGE.-For
administering the provisions of this title.
ommendations described in paragraphs (1)
purposes of subsection (a)(2), the adminis-
"(e) INCORPORATION OF TRUST FUND PROVI-
and (2), the Secretary shall submit a report
trative percentage for any State shall be-
SIONS.-The provisions of subsections (b)
to the appropriate committees of the Con-
"(1) 50 percent, plus
through (i) of section 1841, as in effect on
gress that includes such recommendations.
"(2) the applicable percentage of 50 per-
the day before the date of the enactment of
(e) REDUCTION IN PAYMENT FOR HOSPITALS
cent.
this title, shall apply to the Fund in the
RECEIVING A DISPROPORTIONATE SHARE AD-
"(d) APPLICABLE PERCENTAGE.-For pur-
JUSTMENT.-
same manner as such provisions apply to
poses of this section, the term 'applicable
the Federal Supplemental Medical Insur-
(1) IN GENERAL-Notvithstanding any
percentage' means in the case of each quar-
ance Trust Fund, except that any reference
other provision of law, the Secretary of
ter in the following full calendar years be-
to the Secretary of Health and Human Serv-
Health and Human Services (hereafter in
ginning after the date of the enactment of
ices or the Administrator of the Health
this subsection referred to as the "Secre-
this title, the following percentage:
Care Financing Administration shall be
tary") shall for discharges occurring on or
deemed a reference to the Secretary of
after the first day of the second full calen-
Health and Human Services.".
dar year after the date of the enactment of
Applicable
"Calendar year:
Percentage:
(b) ADMINISTRATIVE AND JUDICIAL REVIEW
this Act provide for a reduction in the pay-
2nd
20
OF CERTAIN ADMINISTRATIVE DETERMINA-
ment of the disproportionate share adjust-
3rd
20
TIONS.-Section 1116 of the Social Security
ment percentage specified in section
4th
15
Act (42 U.S.C. 1316) is amended-
1886(d)(5)(F) of the Social Security Act by
5th
10
(1) by striking "or XIX" each place it ap-
1/4 (1/2, with respect to discharges occurring
6th
5.
pears and inserting "XIX, or XXI", and
on or after the first day of the seventh such
"AMERICARE TRUST FUND
(2) by striking "or 1904" in subsection
full calendar year) of what the payments to
"SEC. 2110. (a) CREATION OF TRUST FUND.-
(a)(3) and inserting "1904. or 2101(a)(14)".
hospitals under such provision would have
There is established in the Treasury of the
(c) UTILIZATION AND QUALITY CONTROL
been but for the enactment of this subsec-
United States a trust fund to be known as
PEER REVIEW ORGANIZATIONS.-Title XI of
tion.
the 'AmeriCare Trust Fund' (hereafter in
the Social Security Act (42 U.S.C. 1301 et
(2) APPLICATION FOR EXCEPTION.-
this section referred to as the 'Fund'). con-
seq.) is amended by adding at the end the
(A) IN GENERAL.-The Secretary shall, not-
sisting of such gifts and bequests as may be
following new section:
withstanding paragraph (1), provide for
made and such amounts as may be credited
payment of the full disproportionate share
"REVIEW OF AMERICARE UNDER TITLE XXI.
to the Fund under this section.
adjustment percentage specified in section
"SEC. 1165. (a) REVIEW OF AMERICARE
"(b) TRANSFERS TO FUND.-
1886(d)(5)(F) of the Social Security Act in
UNDER TITLE XXI.-The Secretary shall pro-
"(1) IN GENERAL.-There are hereby appro-
any case in which a hospital applies to the
vide, by regulation. for reviews of the pro-
priated to the Fund amounts equivalent to
Secretary for an exception from the reduc-
grams under title XXI of this Act by utiliza-
the net revenues received in the Treasury
tion specified in paragraph (1) and it is de-
from-
tion and quality control peer review organi-
termined by the Secretary that such hospi-
zations to be carried out in a similar manner
"(A) contributions required by section
tal shall receive payments resulting from
as provided under this part for review of
3601 of the Internal Revenue Code of 1986,
the enactment of title VI of this Act that
programs under title XVIII of this Act.".
"(B) contributions made under section
are less than 200 percent of the amount of
"(b) CLINICAL PRACTICE GUIDELINES.-In
2723(c)(2) of the Public Health Service Act.
reduction of payments specified in para-
providing for the review of programs under
"(C) AmeriCare premiums (as defined in
graph (1) to such hospital.
title XXI of this Act as described in subsec-
section 2104(6)) collected by employers on
(B) DETERMINATION CRITERIA.-In making
tion (a), the Secretary shall, in consultation
behalf of employees, and
a determination under subparagraph (A)
with recognized experts in the field of utili-
"(D) penalties collected under section 2732
the Secretary shall consider-
of the Public Health Service Act.
zation and quality control review, ensure
(i) the number of patients served by a hos-
that, to the extent practicable, the reviews
"(2) TRANSFERS BASED ON ESTIMATES.-The
pital that are underinsured or uninsured
conducted under this section take into con-
amounts appropriated by subparagraphs
and the costs to the hospital of providing
sideration clinical practice guidelines, (in-
(A), (E), and (C) shall be transferred from
services to such patients in the first full cal-
cluding guidelines for clinical practice and
time to time (not less frequently than
endar year after the date of the enactment
other standards developed by the Advisory
of this Act; and
monthly) from the general fund in the
Council for Health Care Policy, Research,
Treasury to the Fund, such amounts to be
(ii) such other relevant factors as the Sec-
and Evaluation pursuant to section 921 of
determined on the basis of estimates by the
retary determines appropriate.
the Public Health Service Act (42 U.S.C.
Secretary of the Treasury of the amounts,
(C) CONSIDERATION OF APPLICATION.-In
299b-1)).".
specified in such subparagraphs, paid to or
the case of a hospital that submits an appli-
(d) CALCULATION OF FEDERAL INSURANCE As-
deposited into the Treasury: and proper ad-
cation to the Secretary under this subsec-
SISTANCE PERCENTAGE APPLICABLE TO TITLE
justments shall be made in amounts subse-
tion at least 6 months before the first day of
XXI.-
quently transferred to the extent prior esti-
the second full calendar year after the date
(1) IN GENERAL-The Secretary of Health
mates were in excess of or were less than
of the enactment of this Act, the Secretary
and Human Services (hereafter in this sub-
the amounts specified in such subpara-
shall make a determination with regard to
section referred to as the "Secretary"), in
graphs.
such application prior to such first day.
consultation with the chief executives of
"(c) APPROPRIATION OF ADDITIONAL Sums.-
With respect to all other applications sub-
the States, shall develop recommendations
There are hereby authorized to be appropri-
mitted to the Secretary under this subsec-
for the calculation of a specific Federal in-
ated to the Fund such additional sums as
tion the Secretary shall make a determina-
surance assistance percentage applicable to
may be required to make expenditures re-
tion with respect to such application no
coverage furnished under title XXI of the
ferred to in subsection (d).
later than 6 months after the date of re-
Social Security Act (as added by this Act).
"(d) EXPENDITURES FROM FUND.-
ceipt of such application.
In a recommended formula for the determi-
"(1) IN GENERAL.-For the purpose of es-
(D) APPEAL OF DETERMINATION.-A hospital
nation of such Federal insurance assistance
tablishing a public program to provide
submitting an application to the Secretary
percentage, the Secretary shall consider fac-
health insurance coverage to be known as
under this subsection may appeal a determi-
tors related to the following:
nation by the Secretary to the Provider Re-
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7213
imbursement Review Board established
under section 1878 of the Social Security
"(c) REVIEW OF APPLICATIONS: PRIORITY.-
propriate notice and an opportunity for a
Act and the provisions of such section shall
"(1) REVIEW.-The Secretary shall develop
hearing, terminate the payment of amounts
apply to any such appeal.
a process and timetable for reviewing appli-
under such grant to such entity. The Secre-
cations submitted under subsection (b)(2) to
COORDINATION WITH TITLE XIX.-Title
tary may terminate grants to entities that
of the Social Security Act (42 U.S.C.
assure that, to the extent practicable, all
fail to demonstrate good faith efforts to
amounts appropriated under this section are
it seq.) is amended by adding at the
meet the requirements of this section.
end the following new section:
awarded not later than 180 days after the
beginning of each fiscal year.
"(2) ADDITIONAL POWERS OF THE SECRE-
"COORDINATION WITH TITLE XXI
"(2) PRIORITY.-In awarding grants under
TARY.-In addition to terminating payments
"SEC. 1930. (a) The provision of medical
this section, the Secretary shall give priori-
under paragraph (1), the Secretary may-
assistance under this title shall not apply to
ty to-
"(A) sell any property acquired by the
any individual éligible for coverage under
"(A) applicants that will use amounts re-
entity with amounts received under the
AmeriCare under title XXI of this Act.
ceived under such grant to provide services
grant, or transfer such property to another
"(b) The Secretary shall, by regulation,
in areas with the greatest need for such
entity receiving such a grant; and
provide for appropriate coordination of this
services and in which the demand for such
"(B) recoup (to the extent practicable) as-
title with title XXI of this Act.".
services can be expected to increase after
sistance previously provided to the entity
(g) INCREASE IN TITLE XIX CAP FOR TERRI-
the implementation of the HealthAmerica
under this section.
TORIES.-Subsection (c). of section 1108 of
Act;
"(3) INELIGIBILITY FOR FUTURE GRANTS.-If
the Social Security Act (42 U.S.C. 1308) is
"(B) applicants with a demonstrated abili-
an entity that is not in compliance with the
amended by adding at the end thereof the
ty to expand their operations in the most ef-
requirements of this section may be granted
following new flush sentence:
ficient manner;
a 2-year extension to meet such require-
"Notwithstanding the preceding sentence,
"(C) applicants that are migrant or com-
ments. If at the end of such 2-year period
for each fiscal year beginning after the date
munity health centers receiving assistance
the entity has failed to comply with such re-
of the enactment of the HealthAmerica Act
under section 329 or 330, that propose to use
quirements, that entity shall be ineligible
each amount under subclause (C) of each
amounts received under such grants to
for further grants under this section.
clause of such sentence shall be increased
expand their operations, including expan-
"(g) ADMINISTRATION.-Not more than 10
by the AmeriCare percentage increase for
sion to new sites, to serve high impact areas
percent of the amounts made available
the preceding fiscal year. For purposes of
(as defined in section 329(a)(5)) or medically
under this section may be used for adminis-
the preceding sentence, the AmeriCare per-
underserved populations (as defined in sec-
trative purposes. The costs of administra-
centage increase equals the percentage in-
tion 330(b)(3)), that are not currently being
tion include-
crease (if any) in the total Federal program
served;
"(1) the cost of providing, either directly
costs of title XXI of this Act over such costs
"(D) applicants that do not receive assist-
or by grant or contract to nonprofit private
of title XIX of this Act (as determined in
ance under section 329 or section 330, but
entities that represent the recipients of
the fiscal year preceding the effective date
that meet all requirements to receive funds
grants under this section, for the identifica-
of the HealthAmerica Act) for all States.".
under either of such sections, including, for
tion of areas and populations eligible for as-
(h) EFFECTIVE DATE.-The amendments
the purpose of planning the establishment
sistance under this section; and
made by this title shall take effect on the
of new centers in areas of high need, enti-
"(2) the provision of technical assistance
first day of the second full calendar year be-
ties eligible for planning grants under sec-
to entities for the planning, development
ginning after the date of the enactment of
tions 329(c) and 330(c).
and operation of the service delivery sys-
this Act, without regard to whether regula-
"(3) SECONDARY PRIORITY.-The Secretary
tems supported under this section.
tions to implement such amendments are
shall give secondary priority in awarding
"(h) AUTHORIZATION OF APPROPRIATIONS.-
promulgated by such day.
grants under this section to applicants
"(1) IN GENERAL-There are authorized to
VII-DEVELOPMENT OF HEALTH
that-
be appropriated and there are appropriated
SERVICE CAPACITY
"(A) propose to meet the requirements of
to carry out this section-
(s.
GRANTS FOR EXPANSION OF AVAILABIL-
section 329 or 330 within 2 years after the
"(A) $58,000,000 for fiscal year 1992;
ITY OF PRIMARY CARE SERVICES.
date on which the application is submitted;
"(B) $166,000,000 for fiscal year 1993;
and
Part D of title III of the Public Health
"(C) $266,000,000 for fiscal year 1994;
Service Act (42 U.S.C. 254b et seq.) is
"(B) are serving or propose to serve such
"(D) $350,000,000 for fiscal year 1995; and
amended by adding at the end thereof the
populations or areas that are not currently
"(E) $426,000,000 for fiscal year 1996.
following new subpart:
being served or have a proposal for such
"(2) REPORT.-Not later than September
service pending.
"Subpart V-Emergency Health Care Grant
30, 1995, the Secretary shall prepare and
"(d) USE OF AMOUNTS.-An entity receiving
Programs
submit to the appropriate committees of
a grant under this section shall use amounts
Congress a report concerning the need for
"SEC. 340D. GRANTS FOR EXPANSION OF AVAIL.
received under such grant to expand the
further migrant and community health
ABILITY OF PRIMARY CARE SERV-
ICES.
availability of comprehensive primary
center primary care service capacity devel-
health services (as defined in section
"(a) IN GENERAL.-The Secretary shall
opment and recommendations concerning
330(b)(1)) in medically underserved or high
award grants to eligible entities to expand
the appropriate level of support needed for
impact areas.
the availability of comprehensive primary
activities to address such capacity develop-
"(e) REIMBURSEMENT FROM OTHER
health services (as defined in section
ment.
SOURCES.-
330(b)(1)) in medically underserved areas.
"(3) ADDITIONAL AMOUNTS.-Amounts pro-
"(1) IN GENERAL.-An entity receiving a
"(b) ELIGIBILITY.-To be eligible to receive
vided under this section shall be in addition
grant under this section shall use any and
a grant under this section an entity shall-
to any amounts appropriated under sections
"(1) be-
all reimbursements received from other
329 and 330.".
"(A) a migrant or community health
sources for services provided by such entity
to-
TITLE VIII-EFFECTIVE DATE
center that receives assistance under section
329 or 330;
"(A) compensate for the unreimbursed
SEC. 801. EFFECTIVE DATE.
"(B) be an entity that meets the require-
costs of providing services to patients;
(a) GENERAL RULE.-Except as otherwise
ments of section 329(a) of 330(a) for being a
"(B) expand the amounts and types of
provided in this section, titles I and II of
services furnished;
migrant or community health center,
this Act shall take effect on January 1 of
though not a recipient of a grant under
"(C) serve additional patients or areas; or
the second full year that begins after the
either of such sections;
"(D) promote the recruitment, training, or
date of the enactment of this Act.
retention of personnel.
"(C) be an entity that does not meet the
(b) EXISTING PLANS.-In the case of an em-
requirements of section 329(a) or 330(a) for
"(2) RETURN OF UNUSED AMOUNTS.-Any
ployer that, on the date of the enactment of
being a migrant or community health
amounts of the reimbursements referred to
in paragraph (1) that are not used for the
this Act, has in effect a health insurance
center, but that provides assurances satis-
plan covering the employees of such em-
factory to the Secretary, including subse-
purposes described in such paragraph shall
quent demonstrable evidence, that such
be returned to the Secretary, either directly
ployer, the amendments made by titles I
or through adjustments in future grants,
and II shall not apply to such employer
entity will meet the requirements of either
such section not later than 2 years after re-
and shall be used by the Secretary to make
until the date described in subsection (a) or
ceiving a grant under this section; or
additional or expanded grants under this
the first day of the second full year after
"(D) be an entity that is eligible for a
section without regard to appropriations
the date of the enactment of this Act,
whichever is later.
under subsection (h).
grant under sections 329(c) or
\and
"(f) FAILURE TO COMPLY.-
(c) STATE AND LOCAL GOVERNMENTS.-In the
"(1) TERMINATION OF PAYMENTS.-In the
case of an employer whose revenue is raised
prepare and submit to the Secretary
case of an entity that receives a grant under
by a taxing authority. a health insurance
plication at such time, in such manner,
this section and fails to comply with the re-
plan covering the employees of such em-
and containing such information as the Sec-
retary may require.
quirements of this section, the Secretary
ployer shall not be required to meet the re-
shall, after providing such entity with ap-
quirements of part B of title XXVII of the
Public Health Service Act until the first day
7214
CONGRESSIONAL RECORD
June 5, 1991
of the third full year after the date of the
public program to collect the employees'
enactment of this Act. During the period be-
charged premiums higher than 20 percent
portion of the premium. In the absence of
ginning on the effective date prescribed
of the cost of a basic plan as the result of
this requirement, employers will be allowed
under subsections (a) and (b) and ending on
this provision may decline employer cover-
to voluntarily collect premiums on behalf of
the first day of such third full plan year,
age and receive coverage throug' the public
employees.
employee participation in such plan shall be
plan.
Individual responsibility.-Employees will
voluntary unless otherwise required by the
Two family members employed. Each em-
be required to accept coverage for them-
plan.
ployer is responsible for primary coverage
selves and their families if offered by their
SEC. 802. POLICY RESPECTING ADDITIONAL BENE-
of his or her employee. If a family member.
employers and pay a share of the premium
FITS.
is covered under another plan, a work
as well as co-payments and deductibles, if
(a) IN GENERAL-After the date of the en-
required under the employer plan. A similar
may decline coverage for that family
actment of this Act, no employer shall be
obligation will be assumed by workers whose
member. Parents may choose which employ-
required under part B of title XXVII of the
er plan will cover their children. A worker
employers make a contribution to the public
Public Health Service Act to provide any
program. When the plan is fully phased-in,
receiving primary coverage from an employ-
health benefit in addition to the benefits re-
certification of health insurance coverage
er may also elect to participate in the plan
quired to be provided under section 2721(a)
will be required for each individual claimed
of another working family member and re-
of such Act (as in effect on the date of the
as a personal exemption. Certification of
ceive secondary, wrap-around coverage from
enactment of this Act) unless-
coverage will also be required when apply-
that plan. In the case of a two-worker
(1) such additional health benefit is for a
ing for government benefits such as govern-
family, the primary worker's premium pay-
service that the AmeriCare plans (under
ment loans or food stamps as a condition of
ment, if any, to the primary employer shall
title XXI of the Social Security Act) are re-
receiving benefits.
be adjusted to reflect savings to that em-
quired to cover; and
ployer as the result of not bearing responsi-
(2) before the enactment of such require-
BASIC BENEFIT PACKAGE
bility for primary coverage of the secondary
ment, the benefits and costs of requiring the
Covered services. Plans must cover: hospi-
worker. A similar adjustment shall be made
provision of such additional health benefit
tal services; physician services; diagnostic
for workers receiving retirement health ben-
have been analyzed and considered by Con-
tests; limited mental health benefits; 45
efits from a previous employer.
gress.
days of inpatient care; 20 outpatient visits;
Employed child. Coverage may be waived
(b) REPORTS.-
pre-natal and well-baby care; preventive
for a working dependent child covered
(1) IN GENERAL.-In carrying out subsec-
health benefits: mammograms, pap smears,
under a parent's plan.
tion (a)(2) with respect to the consideration
and well child care.
Cost-sharing. Maximum employee cost-
ADDITIONAL FEATURES
of a proposed additional health benefit,
Congress shall request a report from the In-
sharing under basic plans is: 20 percent of
Waiting period. The waiting period for
stitute of Medicine of the National Academy
the premium; deductibles of $250 per indi-
coverage may not exceed 30 days. If the em-
of Sciences or a public or nonprofit entity
vidual and $500 per family: co-payments of
ployer elects to impose & waiting period, the
with expertise relating to health benefits.
20 percent (except for outpatient mental
employee may elect to receive coverage
Any such report shall-
health services, for which 50 percent co-pay-
from the employer during this period by
(A) analyze and summarize such proposed
ments may be charged); out-of-pocket cata-
paying 102 percent of the combined employ-
additional health benefit; and
strophic cap on liability for covered services
er and employee share of the premium.
(B) contain an estimate of the economic
of $3,000; wage-related cost-sharing may be
Pre-existing condition limitations on cov-
and health impacts of such proposed addi-
used for deductible and catastrophic cap;
erage. When fully phased-in, no limits on
tional health benefit.
employee premium share and co-payments
coverage may be imposed based on the exist-
(2) CONSULTATION.-Any such report shall
and deductibles will be subsidized by the
ence of pre-existing conditions.
be prepared in consultation with interested
public plan for low-income workers (as de-
Consumer protection. A set of legal pro-
members of the public and with individuals
scribed in the public plan section below).
tections will be established for insured indi-
and entities having expertise with respect to
Actuarial equivalency. To assure employer
viduals, including the right to full informa-
such proposed additional health benefit.
flexibility to adapt the plan to the needs of
tion on plan provisions and the right to
the particular work force, employers may
appeal coverage decisions.
SUMMARY OF HEALTHAMERICA: AFFORDABLE
offer plans that do not meet minimum
standards as long as the employer contribu-
PUBLIC PLAN
HEALTH CARE FOR ALL AMERICANS
tion to the plan offered is actuarially equiv-
Medicaid will be replaced by 2. new Fed-
OVERVIEW
alent, pursuant to guidelines issued by the
eral-State program of public coverage called
The legislation will assure every American
Secretary, to what would be provided under
AmeriCare. The program would be adminis-
basic health insurance coverage, either
the basic plan. Under an actuarially equiva-
tered by the states subject to national
through a plan provided by an employer or
lent plan, basic services must still be covered
standards for eligibility, reimbursement,
through a Federal-State public insurance
without limits on scope and duration, except
and coverage. All Americans not covered by
program. called AmeriCare, that will replace
as specified in the basic plan, but the level
employment-based coverage will receive cov-
Medicaid.' Universal health insurance cov-
of cost-sharing could be adjusted. For exam-
erage under AmeriCare.
erage will be coupled with a comprehensive
ple, an employer who offered a service that
Benefits under AmeriCare will be the
program to control health care costs and
was not required to be covered could require
same as for employment-based coverage,
with provision to reflect the special needs
his or her employees to pay a larger share
except that Early and Periodic Screening,
and problems of small business.
of the premium or charge a higher deducti-
Diagnosis, and Treatment (EPSDT) will be
EMPLOYMENT-BASED COVERAGE
ble. An employer with a lower deductible
available under the public program. Individ-
Business responsibility.-Businses will
could have a higher catastrophic cap.
uals below the poverty line will have access
be offered a choice of providing coverage
EMPLOYEES TO BE COVERED
to optional Medicaid services that the State
meeting minimum standards for employees
Full-time workers. If an employer provides
chooses to provide. Individuals below the
and their families or making a contribution
private coverage rather than making a con-
poverty line covered by an employment-
to the public plan. The contribution will be
tribution to the public plan, all workers and
based plan will also be entitled to receive
set at 8 percent of payroll. This contribu-
their families working 17½ hours a week or
such services through the public plan.
tion will encourage employers to provide
more must be covered. An employer may
Specific provisions include:
health insurance while providing a substan-
choose to make a contribution to the public
Premiums.-Individuals below 100
tial subsidy to employers, especially small
plan for workers employed less than 17½
percentof poverty will pay no premium. In-
employers. with a high percentage of low-
hours per week even if direct coverage
dividuals between 100 and 200 percent of
wage or part-time workers. The contribution
rather than the payment is chosen for other
poverty will pay premiums on a sliding scale
will be set at a level that will maximize pri-
workers. For purposes of computing the
basis. Individuals above 200 percent of pov-
vate coverage for the working population
wage base for contributions to the public
erty will pay premiums equal to the average
without imposing an excessive burden on
plan, the employer may exclude workers for
actuarial value of the coverage, capped by a
employers.
whom coverage is not mandatory, including
percent of Income reflecting ability to pay.
If an employer chooses to make a contri-
employed children covered under a parent's
Workers receiving coverage through the
bution, he or she will be required to facili-
plan and workers with two employers receiv-
public plan will pay 20 percent of the actu-
tate the process of enrollment in the public
ing coverage under another employer's plan.
arial value of coverage, unless their incomes
program by providing his or her employees
Less than full-time workers. The required
are below 200 percent of poverty.
with enrollment forms and information
employer premium contribution for workers
Subsidy of low-income workers receiving
about how to apply for coverage. States will
employed 17½ hours per week or more and
private coverage through an employer.-
be given the option to require those employ-
less than 25 hours a week may be reduced
The public plan will subsidize the premium
ers who elect to make a contribution to the
based on the ratio of hours worked to 25.
share of workers with family income below
The required contribution for employees
200 percent of poverty. Premiums will be
working less than 17½ hours per week is at
1 Except for long-term care services.
least 50 percent. Employees who are
2 Except for long-term care services.
June 5, 1991
CONGRESSIONAL RECORD
7215
completely covered for below-poverty work-
ers for basic plan benefits.
the appropriate use of technology will be
will be established to set national expendi-
Consortia.-States will be encouraged to
expanded. Cooperation between the public
ture goals, in total and by sectors of the
establish purchasing consortia to reduce the
and private sector and coordination or pri-
health care industry. Advisory goals. will
overall rate of health care cost inflation (see
vate sector efforts will be encouraged. Fed-
also be established for states and regions.
eral matching grants will be available
bel ^meriCare and Medicare can partici-
through the Agency for Health Care Policy
The Board will convene providers and pur-
nese consortia.
I
and Research for private sector technology
chasers to conduct negotiations on rates and
ed care.-States will be encouraged
assessment initiatives.
other methods of achieving the expenditure
to
and enroll beneficiaries in cost-ef-
Encouragement of managed cares-Man-
goals. Negotiators may recommend adjust-
fective managed care systems. Safeguards
aged care works by encouraging use of the
ments of the goals to the Board. The Board
are included to assure that no enrollee will
be forced to choose a managed care alterna-
most efficient providers and minimizing un-
will publish recommended rates and other
necessary or ineffective care. Managed care
measures to achieve the goals for the use of
tive.
will be encouraged by the following meas-
purchasers and providers. Recommended
Provider reimbursement.--Providers will
ures:
rates and other measures will be binding If
be reimbursed at levels at least equivalent
State legislative barriers to managed care
the negotiations are successful unless State
to the level that would be provided by the
will be preempted.
Consortia (see below) establish different
use of Medicare reimbursement rules. Reim-
Small businesses (which employ 30 per-
payment methods, rates, or other measures
bursement will be raised in phases.
cent of all American workers) will be given
that could be successful in achieving the
Scope and duration.-No limits may be
guaranteed access to managed care through
goals.
placed on scope and duration of coverage
small business insurance reform (see below).
Encourage State Consortia/Innovative
for required services.
Through small business insurance reform
cost control programs.-States will be re-
Phase-in.-The public plan will be phased-
(see below), insurers will be given additional
quired to establish insurance/purchasing
in. All children and pregnant women will be
incentives to develop cost-effective systems
consortia, which would, at a minimum, re-
assured coverage in the first phase.
of managed care.
quire insurance companies with small
Financing-The public program would be
The public program will make managed
financed by state and Federal contributions.
market shares to participate for the purpose
care options available to those not covered
of reducing administrative costs. These con-
States would receive an enhanced Federal
by employment-based plans.
sortia would also be encouraged to take
match, phased out over time, for coverage
The data base necessary for effective man-
other cost-containment actions. To encour-
of newly eligible persons and other new pro-
aged care will be enhanced by the standard-
age states to use consortia, states will be
gram costs in the public program. This en-
ized data and evaluation of providers de-
hanced match would be a specified percent
given the flexibility to have both Medicare
scribed below and by evaluation research
increase over a state's current matching rate
and AmeriCare participate. States will also
and development of practice guidelines.
for the Medicaid program.
be given grants to establish and evaluate
ELIMINATING UNNECESSARY ADMINISTRATIVE
these consortia.
EXPANDING ACCESS THROUGH AN IMPROVED
COSTS
Mandatory functions. The consortia will
DELIVERY SYSTEM
Four programs will be established to
make all direct payments to providers on
Insurance coverage alone will not guaran-
reduce the excessive administrative costs of
behalf of insurance companies with small
tee access to care for many individuals in
our pluralistic payment system.
market shares (most of the estimated 1200
rural and inner-city areas where there is an
Standardized claims forms.-The Federal
insurance companies marketing health in-
inadequate supply of health care providers.
Health Expenditure Board (see below) will
surance) and will work with providers to es-
Over the next five years, approximately $1.2
be required to develop and implement
tablish paperless processing and "smart
billion in additional funding will be invested
standardized claims and data forms. This
card" systems for reimbursement that will
in the creation of community health centers
will reduce administrative costs for provid-
reduce administrative costs and burdens and
to provide primary care services in such un-
ers, who must now deal with a multiplicity
derserved areas. This additional funding will
of forms provided by different payers.
take advantage of economies of scale.
Larger insurers and the public programs
pro
he capacity to serve an estimated
Insurance Consortia. (See Encourage
5.4
State Consortia, below).-By requiring small
will be allowed, and, at state option, re-
n people each year.
RING
THE BURDEN OF HEALTH CARE COSTS
insurance companies to combine for the
quired to join these insurance consortia.
purpose of paying providers, the legislation
Optional functions. Optional functions of
Universal health insurance coverage itself
significantly reduces the cost of health care
will dramatically reduce the number of pay-
the consortia may include: price negotia-
to businesses and individuals currently pur-
ment entitles with which providers must
tion; volume negotiation; capital allocation;
chasing insurance. Uncompensated care
deal. This will make possible significant
rational distribution of providers; data col-
economies of scale in claims processing, fa-
lection; consumer protection; promotion of
raises private health insurance premiums an
cilitate electronic claims processing, and
managed care/competition.
estimated 10-15 percent.
In addition to the reduction in cost-shift-
reduce administrative costs of providers.
If state consortia establish effective meth-
Quality improvement agencies.-New
ods of achieving overall state goals estab-
ing, the program includes a comprehensive
agencies will be established in each state to
lished by the Federal Expenditure Board,
program to lower health care cost inflation
work with providers on a program of contin-
state rates or other methods may be used in
and total health care costs. The strategy is
organized around steps to reduce unneces-
uous quality improvement and implementa-
lieu of Board published rates.
tion of cost-effective methods of delivering
Develop and disseminate cost and quality
sary and ineffective care; to reduce the ex-
cessive administrative costs of the current
care, including practice guidelines. Providers
data on individual providers.-The Federal
pluralistic payment system, and to limit un-
periodically certified by the agency as prac-
Health Expenditure Board will collect, ana-
restrained price and volume increases by
ticing efficient, quality care will be exempt
lyze, and disseminate data that will assist
from utilization review by insurers during
purchasers of care and consumers in evalu-
providers. Specific measures include:
the period of the certification, not to exceed
ating the efficiency and quality of individ-
REDUCING UNNECESSARY OR INEFFECTIVE CARE
one year. This step will focus utilization
ual providers. This will assist in the develop-
Outcomes research/practice guidelines
review where it is most likely to be cost-ef-
ment of managed care networks, in identify-
dissemination.-The Pepper Commission es-
fective and enhance risk-management activi-
ing quality providers for patients, and in en-
timated that unnecessary or ineffective
ties.
couraging providers to improve their per-
health care added as much as $18 billion an-
Small business insurance reform (see
formance.
nually to health care costs. The legislation
below).-By reducing the costs of the con-
ADDITIONAL COST CONTROL ACTIONS
will raise the authorization level for the
tinuous enrollment and disenrollment en-
Agency for Health Care Policy and Re-
demic to the current system of insuring
Fre-empt state mandates.-The current
search by $50 million, to enable it to con-
small businesses, by promoting more effec-
ERISA pre-emption of state regulation of
duct additional outcomes research and de-
tive price competition, and eliminating or
the content of employer health plans for
velop practice guidelines for more proce-
reducing the high costs associated with
self-insured plans will be extended to all em-
dures. The current emphasis on Medicare
medical underwriting, this reform will
ployment-based health plans. Federal stand-
services will be supplemented by an equal
reduce the average administrative costs as-
ards will replace state standards.
emphasis on the services that are delivered
sociated with selling insurance to businesses
Malpractice.-A grant program will be es-
in the private market. Government pro-
of 25 employees or fewer from 25 percent of
tablished to provide states incentives to ex-
grams will be required to use practice guide-
premium to 15 percent. For companies with
periment with alternatives to the tort
lines in utilization review activities. Addi-
ten or fewer workers, where administrative
system for reimbursing and protecting the
tional measures will be taken to assure dis-
and sales costs are often as high as 40 per-
victims of malpractice and with the use of
semination of guidelines, once developed, to
cent, savings will be even greater.
practice guidelines in malpractice cases. The
proysi
and payers (see below).
ASSURE PROVIDER PRICE AND VOLUME RSTRAINT.
Institute of Medicine or similar independent
logy Assessment.-The current
organization will conduct an evaluation of
pu
litiative through the Agency for
Federal Health Expenditure Board.-An
the current status of knowledge about the
independent agency with the stature and in-
Care Policy and Research to analyze
malpractice problem in all its facets and
dependence of the Federal Reserve Board
make recommendations to the Congress.
S 7216
CONGRESSIONAL RECORD - SENATE
June 5, 1991
Health care cost control research and
demonstration program.-A new program of
allowed to buy insurance paying providers
A family without health insurance
under Medicare rules.
health care cost control research grants and
must live every day with the knowl-
This program will allow these small busi-
demonstrations will be established in the
nesses to provide coverage at lower costs
edge that an accident or an illness
new Agency for Health Care Policy and Re-
and will encourage them to begin to provide
could wipe out the savings of a life-
search. Grants will be made to develop ef-
coverage voluntarily during the transition
time. But the danger is more profound
fective methods of health care cost reduc-
period. The Secretary shall study this pro-
than the loss of economic security
tion. A similar program in the '70s led to the
gram and report to the Congress on its ef-
alone.
development of the DRG program.
fectiveness.
Every year, 1 million Americans seek
SPECIAL PROGRAMS FOR SMALL BUSINESS
Improved tax treatment for the self-em-
The legislation recognizes the special
ployed.-Currently, the owner-operator of
health care, but are turned away be-
problems faced by small business in provid-
an unincorporated small business is only al-
cause they cannot pay. Another 14
lowed to deduct 25 percent of the cost of his
million do not even look for care they
ing health insurance to their workers and
or her own health insurance premiums from
need, because they know they cannot
addresses these problems in a number of
income for tax purposes, and even this de-
afford it.
ways.
duction is due to expire in December, 1991.
Contribution to public coverage.-By of-
Two-thirds of the uninsured with se-
By contrast, the cost of health insurance for
fering businesses the opportunity to make a
the owner-operator of an incorporated busi-
rious health symptoms such as sponta-
contribution based on a percentage of pay-
ness is fully deductible. This provision
neous bleeding or loss of consciousness
roll instead of providing coverage directly,
would allow the self-employed owner-opera-
do not see a doctor. A recent study in
the legislation reduces the cost substantially
tor to deduct 100 percent of the cost of his
Washington, DC, found that almost
to businesses, often small businesses, that
or her own health insurance premiums up
half of the uninsured people admitted
employ predominantly low-wage or part-
to the value of the premium they paid on
to the hospital could have avoided
time workers. This alternative is far less
behalf of their employees. Owner-operators
hospitalization if timely care from a
costly to such businesses than providing
with no employees would be allowed to
coverage but will assist them in attracting a
deduct 100 percent of the cost of the lowest
family doctor had been available.
qualified work force.
cost small employer plan meeting the basic
The problem is especially devastat-
Phase-in of Small Business Responsibil-
benefit requirements available in their area.
ing to America's children. Eight mil-
ity.-Small businesses with fewer than 100
Tax credits for small business.-In addi-
lion American children have no health
workers will be allowed a phase-in period
tion to the improved deductibility of health
insurance. One in every three poor
before they are required to provide or con-
insurance expenses for the self-employed,
children has no coverage. Forty per-
tribute to coverage for their workers. For
small businesses that are not profitable
cent of the Nation's children do not
businesses with 25 to 99 workers, the phase-
enough to be able to afford to provide
in will be four years. For businesses with
health insurance coverage to their workers
even get basic childhood vaccinations.
fewer than 25 workers, the phase-in will be
without difficulty will receive a tax credit to
The United States ranks first in
five years. These transition periods will
cover up to 25 percent of the cost. This
wealth, first in military power-and a
allow small business insurance reform time
crédit will be provided to small businesses
dismal 22d in preventing infant mor-
to take effect and give small businesses time
with fewer than 60 employees for each full-
tality.
to plan for the additional costs they will be
time employee with a salary of less than
Every American child should be
expected to incur. Businesses with 25-99
$20,000, except for high-profit firms in
which the employer earns more than
guaranteed a healthy start in life, but
workers will have 4 years to voluntarily pro-
$53,400 per year. This credit would be in ad-
too many are not getting it. Soaring
vide coverage to workers. If at the end of 4
dition to the deduction currently available
costs threaten to price health care out
years 75 percent of the currently uncovered
employees of these businesses have been
for the cost of such insurance.
of the reach of working Americans.
covered, then employers in this group will
Mr. KENNEDY. Mr. President, I
Today, we are spending in excess of
not be required to provide coverage or pay a
have been working on the issue of af-
$700 billion a year on health. Costs are
contribution to the public program. The
fordable health care for many years.
going up twice as fast as wages. Corpo-
same rule will apply for businesses with
Never have we been closer to guaran-
rate expenses for health care are actu-
fewer than 25 employees, except that they
teeing affordable health care for all
ally greater than corporate profits.
will have 5 years to voluntarily provide cov-
erage.
our people than we are today.
The amount American families pay for
Small business insurance reform.-Federal
And never has the need for action
health care that insurance did not
standards for health insurance sold in the
been greater, because we face a two-
cover has almost tripled in the last 10
small group market will: remove barriers to
pronged crisis in health care that
years, from $63 to $162 billion.
access to group health insurance by elimi-
threatens the health and well-being of
Exploding costs would be a problem
nating pre-existing condition exclusions and
every American.
under any circumstances. But these
denials of coverage on the basis of health
Too many Americans are uninsured
immense expenditures have not
status; promote equity in insurance premi-
and underinsured-and the number is
brought us the health care system the
ums, by moving rate-setting toward a com-
growing every year. No American
munity-rated system; and improve the af-
American people need or that the
fordability of coverage for small employers,
family can be secure that the health
American people deserve.
by preempting state benefit laws and ensur-
insurance they have today will protect
They have not kept newborn Ameri-
ing access to managed care. States will be
them tomorrow. And health care costs
can infants from dying at rates higher
required to provide information and techni-
are too high and growing at astronom-
than almost every other industrial
cal assistance to small employers and con-
ical rates.
country. They have not raised life ex-
sumers seeking to choose a plan.
In this rich land of 250 million
pectancy as high as 12 other nations.
Special treatment of new small business-
Americans, 34 million of our fellow
They have not bought insurance for
es.-Recognizing the fragility of small busi-
citizens have no health insurance
nesses in their early years, the legislation
millions of working families or ade-
whatsoever.
allows new, small businesses a reduced obli-
quate protection for millions more.
gation with regard to providing or contrib-
At various times over the next 2
Caught between the twin problems
uting toward health insurance coverage.
years, 30 million more will have no
of increasing numbers of the unin-
Small businesses with fewer than 25 work-
health care coverage for substantial
sured and escalating costs, some of our
ers will have no obligation to provide or con-
periods. And another 60 million have
most important health care institu-
tribute to coverage during their first two
insurance that even the Reagan ad-
tions are imperiled. Hospitals commit-
years. In the third year. the contribution
ministration said was inadequate.
ted to serving the uninsured are in-
they will be required to make to the public
During the great depression, Presi-
plan will be one-half the normal level. In
creasingly swamped in a tide of red
dent Franklin Delano Roosevelt called
the fourth year, such businesses will be re-
ink. Half of all public hospitals are op-
quired to fulfill the same obligations as
us to action with his statement that
erating at a loss. One-third of all rural
other businesses.
"One-third of a nation is ill-housed, ill-
hospitals are operating at a loss. Six
Special treatment of small businesses that
clad, and ill-fed." Today, more than a
hundred are likely to close in the next
have not previously provided coverage.-
third of our Nation lacks the basic
few years.
During the first five years after enactment,
health insurance coverage that every
In New York City, it is not uncom-
small businesses that have not provided cov-
other industrialized country except
mon to wait 3 days in an emergency
erage to their employees during the year
South Africa deems a fundamental
prior to enactment of the legislation will be
room before a hospital bed becomes
human right.
available. Forty-one States report
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7217
similar problems. In Los Angeles, more
than half the private hospitals have
to pay up to 25 percent of the costs of
buy, not the most wasteful and expen-
dropped out of the trauma care
small businesses that might have trou-
sive one.
system, because they cannot afford
ble affording coverage. And it phases
Under this program, a new Federal
the uninsured patients who arrive in
in the provisions of the plan so that
Health Expenditure Board, with the
small businesses will have time to
emergency room. Nationally, a
stature and independence of the Fed-
adapt.
of all hospitals have dropped out
eral Reserve Board, will be created.
01 the trauma care system. The mes-
Our plan includes the most compre-
The Board will collect, analyze, and
sage is cminous-"Don't get into an
hensive program to deal with the ex-
publish data on doctors and hospitals
auto accident-whether you are rich
cessive cost of health care ever intro-
duced.
in every community in the country, SO
or poor, insured or uninsured, your life
that patients and insurers can com-
is at greater risk."
First, it includes strong steps to
pare costs and quality. The Board will
Even in hospitals with a wealthy,
squeeze unnecessry care out of the
establish tough goals for total spend-
well-insured clientele, costs continue
system. Studies by the RAND Corp. of
ing, and bring providers and purchas-
to scar. This imbalance is yet another
selected medical procedures found
ers together to negotiate ways to
mark of our failure to establish a ra-
that 15 to 30 percent, depending on
achieve the goals. And States will be
tional, humane, and effective national
the procedure, were clearly unneces-
encouraged to take additional steps to
health care system. Health care is the
sary or even harmful. A 5-year study
control costs.
fastest growing failing business in
of Medicare has found that 10 to 20
Finally, the program will end cost-
America.
percent of care to be unnecessary. The
shifting by assuring that every Ameri-
The plan we are proposing today
Pepper Commission estimated that as
can is covered, and that every business
builds our current system but corrects
much as $18 billion worth of medical
does its fair share. Today, health in-
its worst faults. It is a practical,
care annually was unnecessary. Our
surance costs for those who have in-
achievable proposal that will get the
program will required stepped-up de-
job done.
surance are as much as 15 percent
velopment of practice guidelines so
higher than if everyone were covered.
It will guarantee basic health insur-
that unnecessary medical care can be
When people cannot pay their medical
ance for every American family, and it
clearly identified and eliminated. Man-
bills, the costs are picked up in the
will put in place a comprehensive pro-
aged care, with cost-effective provid-
form of higher charges for everyone
gram to control health care costs.
ers, will be encouraged. And outcomes
else.
Under the plan, every business will
research will be increased so that for
be required to provide health insur-
My family has been fortunate in
many medical procedures whose value
always being able to afford the best
ance coverage for its workers and their
is unclear, effectiveness will be estab-
families, or contribute to their cover-
medical care. The time is long overdue
lished and in effective procedures
age under a new Federal-State pro-
to guarantee every citizen that same
eliminated.
gram called AmeriCare. Two-thirds of
access to the care they need. I believe
Second, the plan will cut billions of
the uninsured are workers and their
the introduction to this bill marks the
dollars in unnecessary administrative
families. These Americans work hard-
beginning of a process that can
costs. The current system is strangling
most of them 40 hours a week, fifty
achieve that goal, and make decent
in redtape that burdens physicians,
weeks a year, but all their hard work
health care a reality for every Ameri-
hospitals, and patients alike. Over
buy them the health insur-
can family.
a
1,200 separate companies are selling
ley need, because their employ-
Mr. RIEGLE. Mr. President, today I
health insurance today, and the multi-
e
use to provide it.
am introducing S. 1277, Health Amer-
plicity of different forms and payment
The vast majority of businesses al-
ica: Affordable Health Care for All
ready assume this obligation. It has
procedures, as well as the repetitive
Americans, with Senators MITCHELL,
and inconsistent review of medical
been more than half a century since
KENNEDY, and ROCKEFELLER. I want to
practice that results, diverts time and
we required all employers to pay a
commend the majority leader for his
minimum wage, to contribute to Social
money that could be better spent on
leadership in this area.
Security, and to participate in work-
medical care. When insurance compa-
Health America is the product of
er's compensation and unemployment
nies sell a policy to a small business or
almost 2 years of work of the Finance
insurance. In 1991, the time is long
an individual, as much as 40 to 50
Subcommittee on Health for Families
overdue for all employers to provide or
cents of every premium dollar goes to
and the Uninsured to provide health
contribute to health care.
cover sales and administrative costs
care coverage for all Americans. In the
The unemployed deserve the basic
and profit. This money that stays with
101st Congress, the Finance Commit-
right to health care, too. AmeriCare
the insurance companies doesn't buy
tee's Subcommittee on Health for
will make coverage available to them
even a single band-aid.
Families and the Uninsured was cre-
with premiums based on ability to pay.
Our program will reform the insur-
ated at my request to enable us to find
Coverage under the plan will be
ance market, so that overhead is re-
a solution. At the first hearing of our
phased in over a 5-year period, begin-
duced and a greater share of premi-
Subcommittee, the lead off witness
ning with coverage for every child.
ums is used to cover medical care
was Senator KENNEDY, chairman of
Businesses with 100 employees or
costs, not insurance company redtape.
the Labor and Human Resources Com-
more will be required to provide or
Billing and claims forms will be stand-
mittee and we agreed to work togeth-
contribute to coverage immediately.
ardized, and small insurance compa-
er-and have done so-along with the
The obligation will be phased in for
nies will be required to join consortia
majority leader, Senator ROCKEFELLER
smaller businesses. By the fifth year,
for the purpose of paying doctors and
and others like Senator PRYOR and
every American will be guaranteed
hospitals. Economies of scale and
Senator METZENBAUM. Over the
coverage on the job or through Ameri-
standardization will make cost-effec-
months all points of view have been
Care.
tive paperless processing easier to im-
The plan includes a number of provi-
plement and will cut the resources de-
weighed and balanced in the package
we're presenting today.
sions to make it easier for smaller
voted to administration. A new quality
businesses to afford the cost of their
improvement program will exempt
We began as a bipartisan process.
large numbers of doctors and hospitals
And it is my hope that this legislation
increased obligations. These provisions
will prompt the administration to act
include insurance reform, so that
from the necessity of wasting time and
now on the crisis of high health care
small businesses will finally be able to
money justifying tests and procedures
buy coverage at a fair price, regardless
to insurance companies.
costs and lack of availability of health
care coverage.
of
ether their employees are
Third, the plan will end the blank-
he
check payment policies that have al-
I first introduced a bill to provide
or not. It includes new tax
crt
to provide fair tax treatment
lowed doctors and hospitals to charge
health care to the uninsured in De-
for the costs of the self-employed and
whatever they want for care. We need
cember 1982 in the 97th Congress and
the best health care system money can
introduced bills on this issue every
Congress until the 101st when I asked
7218
CONGRESSIONAL RECORD SENATE
June 5, 1991
for the creation and became chairman
of the Finance Subcommittee. I began
millions more without health insur-
to their liking. I consider that a meas-
ance.
by focusing on unemployed people
ure of its practicality and why it
without health insurance and have
A General Accounting Office [GAO]
should be-and will be-enacted.
since broadened to more comprehen-
study I requested shows just one dra-
Mr. President, Health America ad-
sive legislation.
matic example of why we need com-
dressed two major shortcomings of our
prehensive reform of our current
America's health care crisis is part of
health care system-rising health care
a larger problem of a shrinking Ameri-
health care system. The primary rea-
costs and lack of health care coverage
sons for the closing of 60 hospital
can middle class where our people
have less and less economic power to
trauma care units in major urban
for millions. Our plan would, in stages
over 5 years, provide health care for
areas were the costs of treating unin-
meet their basic needs. Skyrocketing
sured people without the means to pay
all people who currently do not have
health insurance costs for those who
and unreasonably low medicaid pay-
health care coverage, building on the
have coverage-and the growing group
ment rates to hospitals. Hospital
current private and public system.
of Americans with no health insurance
trauma centers can't stay open in an
Children and pregnant women are cov-
coverage-are signs that our health
environment where they are losing
ered in the first phase. Of integral im-
care system must be reformed.
money on the people they must serve.
portance, we have also developed a sig-
While health care reform has many
For three hospitals in Detroit, the
nificant cost containment program.
complexities we must not get lost in
total losses exceed $10 million a year
Our cost containment program makes
the detail and lose sight of the fact
for emergency and trauma care alone.
this bill different from proposals in
that this is an urgent issue facing our
people.
Parts of our health care system are
the past which deal only with access.
collapsing around us while the need
About two-thirds of the currently in-
In Michigan alone, there are a mil-
for comprehensive health care reform
sured get their coverage from their
lion people today without a penny of
has been stalled by an executive
employer. Another 15 percent get
health insurance, and 300,000 of them
branch largely indifferent to the prob-
their coverage through public pro-
are children. Nationally, an estimated
lem.
grams, primarily the Medicaid Pro-
34 million Americans have no health
insurance coverage. Those that do
When essential services, like hospital
gram. That leaves about 16 percent of
trauma centers, are forced to shut
our population with no coverage at all.
have health insurance are finding
down due to inadequate funds we all
Our plan fills in the current gaps in
their rates rising sharply and their
suffer. Trauma centers are not the
coverage by restructuring the current
coverage being reduced by rising de-
ductibles, copayments, and diminished
only problem, hospital emergency
system. Employers would be encour-
benefits. We can and must do better-
rooms are closing, hospitals are closing
aged through tax incentives and disin-
and that requires the comprehensive
down entirely, and doctors are finding
centives to provide coverage; so most
health insurance plant we are introduc-
it harder and harder to treat a grow-
people would get coverage through
ing today.
ing number of our people. In Michigan
their employer as they do today.
alone, hospitals lost $350 million last
Mr. President, more than ever
We have a series of special provi-
before, we need a national strategy for
year providing care for those who
sions to ease the burden on small busi-
addressing the current health care
could not or would not pay. Ultimate-
nesses including tax credits, small
crisis in this country. Our health care
ly, the financial distress of hospitals
group insurance market reform and
system-the most advanced and so-
and doctors that provide large
special phase-in periods for coverage.
phisticated in the world-is failing us
amounts of uncompensated care
Since we phasein our cost reduction
in two important ways. Tens of mil-
threatens the quality and availability
program sooner than the coverage of
lions of Americans are without health
of this care and, in fact, is threatening
the uninsured, we hope to make
insurance or the financial resources to
to shut down hospitals all across
health care plans more affordable for
America as well as reduce the number
purchase health care services when
small businesses. Many businesses
they or families need care. Yet at the
of doctors providing care, particularly
would like to provide health care COV-
in areas where they are needed the
same time, our health care system is
erage but the costs are too high. We
most.
the most expensive in the world. A
hope that making health care benefits
more efficient, better designed health
The plan we are unveiling today
more affordable and providing direct
care delivery system could provide
begins the reform process. We've spent
tax credits will entice businesses to
the past 2 years analyzing all the rele-
care to all Americans without utilizing
voluntarily provide coverage. I would
additional national resources.
vant data and weighing the viewpoints
also say at this point that we owe Sen-
Every day we read or hear about
of the various parties at interest. In
ator PRYOR a debt of gratitude for all
these issues-and the problems are
fact, in March last year a document of
his hard work in this area.
only getting worse. We now know that
proposed options was distributed for
Anyone who does not receive health
public comment to hundreds of
even more Americans, over 60 million,
insurance through an employer will
lacked health insurance protection for
groups, and at least 100 groups in
have access to our new public health
a period of time each year. A recent
Michigan alone. The principles we
insurance program called AmeriCare.
study I requested from the GAO un-
have used in designing our program
Unlike medicaid, which it replaces,
derscores the fact that the uninsured
mark a breakthrough that will, in
AmeriCare is not a welfare program.
span all ages, income levels, employ-
stages over the next 5 years, bring
All people are eligible for its coverage
ment status, ethnic groups, and geo-
basic health insurance coverage to
including workers and their families
every person in America.
graphic regions. The uninsured are
from businesses that do not provide
also more likely to die after entering a
It does SO by implementing impor-
private health insurance.
hospital and less likely to have certain
tant cost-saving reforms at the same
Also, AmeriCare will provide a uni-
time we broaden health insurance cov-
procedures performed when compared
form health benefit package and
to insured persons. In fact, in Michi-
erage-starting universal coverage
first with 10 million American chil-
higher reimbursement rates for pro-
gan, this subcommittee has heard tes-
viders-both significant changes from
timony from people that have since
dren who now lack health insurance
the current Medicaid Program. States
died as a result of delaying medical
and would begin to receive it once the
would administer AmeriCare within
care specifically because they had no
program takes effect. By matching
these tighter Federal standards creat-
health care insurance.
cost-saving reforms with broadened
ing a uniform health care program
Health care is increasingly becoming
coverage-we can achieve needed effi-
across America. Medicaid now varies
unaffordable for all Americans. In
ciencies and cost saving throughout
tremendously by State. In addition,
our entire health care system.
some cases, premiums continue to rise
States usually cover only single
in double digit figures. These pres-
This bill strikes a fair and carefully
structured balance among competing
women with children and on average
sures on the current system will 1 day
cover only some 40 percent of all
lead to a complete collapse, leaving
objectives-and none of the various
people living in poverty. We increase
parties of interest will find it precisely
funding to the States for AmeriCare
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7219
during the time the program is being
rent problems relating to medical li-
phased-in.
based system. A majority of consum-
ability, we would set up grants to
Here is just one example of who
ers, have also overwhelmingly ex-
States for short reform or alternatives
would be helped by this type of pro-
pressed a need for substantial health
to this, such as alternative dispute res-
system reform.
g
olution.
Mr. President, we need to act now on
arkable young woman age 28 from
IMPACT ON BUSINESS
MI, Cheryl Eichler, had
both universal access to health care
Crohn's disease for 13 years. She left a hos-
Experience shows that companies
and rising health care costs. We have
pital bed in June 1989 to testify before a fi-
that provide health insurance to their
done enough study of the issues. It's
nance subcommittee hearing in Michigan.
employees are finding that their rates
now time to move forward on a health
Cheryl earned $12,000/yr (2 times the pov-
are going through the ceiling because
care program for all Americans. I hope
erty level) at a 7-11 store but her employer
they are indirectly paying for the med-
that my colleagues in the Senate will
did not offer health care. When she quit her
ical care of uninsured people. The
job due to her illness, she did not qualify for
join me in cosponsoring this important
costs of uncompensated health care
medicaid because as a single woman with no
piece of legislation to ensure afford-
children she did not fit one of the current
costs which are shifted to private
able high quality health care for
categories under medicaid. We tried to help
payers have sharply increased the cost
Americans.
her. Within 6 months she died-and I am
of private health insurance.
This severely damages the ability of
Mr. ROCKEFELLER. Mr. President,
convinced her tragic and premature death
I am extremely pleased and honored
occurred because she did not receive the
U.S. companies to compete interna-
tionally. Chrysler's health care cost
to rise today with the majority leader,
proper care she needed at the right time.
AmeriCare could have helped Cheryl
per vehicle-$700-exceeds our inter-
Senator MITCHELL, my colleague on
national competitors' costs by nearly
the Finance Committee and chairman
Eichler; she would have had immedi-
ate access to essential health care serv-
$500 per vehicle.
of the Subcommittee on the Unin-
Our bill would help American busi-
sured, Senator RIEGLE, and the chair-
ices. She would not have had to fit
nesses in several different ways. The
man of the Labor and Human Re-
into an arbitrary category in order to
get health care. If she had received
bill would reduce the current uncom-
sources Committee, Senator KENNEDY,
immediate medical care throughout
pensated care cost shift, often 15 per-
to introduce a bill that would reshape
cent of their total health care costs.
our Nation's health care system.
her illness, I'm convinced she'd be
Businesses will also be better able to
It has just been a little more than a
alive today. Our country is diminished
help manage health care costs by par-
year ago that the Pepper Commis-
by her death. We can and must save
lives like Cheryl's-this program will
ticipating in the Federal Health Ex-
sion-which I chaired and on which
let us do that.
penditure Board and State consortia.
Senator KENNEDY served-released its
Our Plan would help those currently
Businesses working together will have
recommendations on how to achieve
insured by the private sector by sig-
increased bargaining power with pro-
universal access to health care for all
nificantly controlling health care
viders encouraging more efficient de-
our citizens. At that time I said that
livery of health care services. We will
our job had just begun and hard work
costs. We do this by reducing unneces-
also reduce overall administrative
lay ahead. Introduction of today's bill
sary care, decreasing administrative
costs by standardizing billing and by
is evidence of some of that hard work
costs, and constraining price increases.
Savings to the health care system for
implementing practice guidelines to
and brings us even closer to the day
p
determine appropriateness of services,
when we can say that every American
our cost containment program
is
ated at close to $80 billion over
thus reducing unnecessary care.
man, woman, and child has decent, af-
a 5-year period.
We also significantly reduce the cur-
fordable health care coverage.
Our program is a significant step to-
rent cost shift to business from pres-
We all know that the current path
wards a more rationale health care
ently inadequate public programs by
of rationing health care based on a
system. Among many provisions, we
mandating higher reimbursement
person's ability to pay is not accepta-
rates.
establish a new independent Federal
ble, nor are the costs of our health
Health Expenditure Board that will
Mr. President, the political dynamics
care system sustainable. It is simply
establish voluntary annual expendi-
around this issue have changed dra-
immoral to pour billions of dollars into
ture goals by health care sector and by
matically. All sectors of society now
the world's most sophisticated, high-
State or regional. The commissioners
recognize the need for change and are
technology health care system-but
working to find solutions.
appointed by the President and ap-
deny prenatal care to the 433,000 preg-
proved by the Senate, on the board
Big business, facing increasingly
nant women who lack health insur-
would be insulated from the political
competitive world markets, must find
ance and to lag behind Singapore and
process. They would convene negotia-
ways to control health care costs.
21 other industrialized countries in
tions between purchasers and provid-
Small businesses fear government-
infant mortality.
ers to establish rates and other cost
mandated health benefits for employ-
Mr. President, I will not spend my
controlling mechanisms in order to es-
ees and are looking at alternatives to
time this afternoon outlining the
mandates.
tablish fair prices. At the State level, a
problem, that's the easy part. The
similar process would occur. Both the
State governments are finding that
hard part is putting forth a solution
Federal and State activities in this
health care costs are an increasingly
and, unfortunately, there is not a
large percentage of their budgets. The
area would set forth a process where
magic solution or a quick fix to make
Governors have formed a task force to
all relevant players-purchasers and
the inequities in our system disappear
develop their own recommendations
providers-are involved and are in-
overnight, or to slow down health
on this issue.
tended to help constrain health care
costs. Even a single payer, Canada-
prices.
Doctors and hospitals, concerned
style solution, which sounds simple
This bill would also go a long way to-
about the lack of adequate payment
and has a certain appeal, would re-
for services, want answers to the un-
wards reducing unnecessary by ex-
quire a massive shift and reallocation
compensated care problem. Insurers
panding the current outcomes re-
of resources. It took the Canadians 25
are looking for new ways to keep costs
search effort to determine appropri-
years to create their current health
down so their customers do not move
ateness of care and by expanding tech-
care system, and their per capita
to other forms of care or to self-insur-
nology assessment. We also expect to
health costs are rising as rapidly as
ance.
reduce overall administrative costs by
ours.
Health care is now the major issue
promoting cost-effective managed care
Last year, the Pepper Commission
in the vast majority of collective bar-
systems; providing purchasers better
recommended a comprehensive strate-
ir
gaining negotiations. Organized labor
ation cost and quality and es-
gy with a fair sharing of public and
ta
recently united in supporting the need
ng uniform claims and billing
private responsibility. We came to this
forms io be utilized by all providers.
to achieve universal access and signifi-
decision because we felt our mission
Finally, in order to address the cur-
cant cost containment, through build-
was to recommend practical, common
ing on the Nation's existing employer-
sense, and enactable answers for
S 7220
CONGRESSIONAL RECORD - SENATE
June 5, 1991
health care reform. Because 85 per-
cent of private insurance is provided
barriers. So, finally after a period of
and some models are more effective
time, after putting all these reforms
by employers and because 75 percent
into effect and making special assist-
than others. Furthermore, according
of the ininsured are members of work-
ance available, we measure the success
to CBO's Director, Bob Reischauer, re-
ing families, we recommended building
of these efforts. If the vast majority of
search to date shows only one-time
on our job-based system while at the
working uninsured do not have cover-
savings from managed care. Managed
same time providing special assistance
to small employers-which accounts
age, small firms will be required to
care has had little or no impact on
either provide basic health benefits di-
growth of spending over time.
for 65 percent of the working unin-
sured.
rectly or contribute toward public cov-
The chairman of the Finance Com-
erage for their employees. If most
mittee and a proven leader on health
The Affordable Health Care for all
workers are uninsured, the Federal
care issues, Senator BENTSEN, has held
Americans Act takes that same job-
Government must find ways to guar-
a series of hearings this past spring on
based approach, including the struc-
antee coverage for the remaining citi-
health care reform. At one hearing.
tural reforms recommended by the
zens.
the president of Southern California
Pepper Commission that are vital if
Mr. President, in addition to the spe-
Edison, Michael Peevey, testified in
participation is required in our health
cial measures targeted toward small
favor of a federally created "all-payor
care system.
businesses, this bill contains a variety
rate negotiation to ensure that every
Foremost among these structural re-
of mechanisms to slow down national
health care payor, no matter how
forms is small group health insurance
health care expenditures.
small, can benefit from the low rates
reform. While we leave insurance reg-
ulation and enforcement in the hands
Simply by providing universal
negotiated by the largest purchasers."
access, we will end the cost shifting of
Moreover, he called for a national
of the States, similar to legislation we
passed last year for Medicare supple-
uncompensated care that employers-
health expenditure target and limits
as well as doctors and hospitals-
on capital expenditures.
mental policies, we require that Feder-
al minimum standards be met.
detest. Through malpractice reforms
This comes from the president of a
To make private health insurance
and outcomes research, we will lessen
company that has compiled a remark-
America's addiction to défensive medi-
able record in cost control. Edison saw
more available, insurance companies
cine and to unnecessary tests and sur-
no increase in its health care costs be-
would no longer be allowed to engage
in cherry-picking the good risks and
geries. Through mandatory cost shar-
tween 1988 and 1989 and their project-
selecting out the unhealthy, or those
ing by individuals, we will instill a
ed long-term trend rate is down to the
deemed likely to incur high medical
sense of consumer responsibility and
10 to 12 percent range. Even so, at
bills because of where they work or
sensitivity to health care costs.
their current rate of increase, their
where they live. Insurance companies
Through managed care, health care
health care costs will double every 6
would be forced to go back to manag-
will be delivered in settings that em-
years.
ing risk and to start managing care.
phasize quality and appropriateness.
Mr. Peevey was not alone in calling
We prohibit medical underwriting and
These were all the cost containing
for dramatic action. Another example:
huge premium hikes, or outright can-
tools called for in the Pepper plan,
The chairman and CEO of Bethlehem
cellation of policies, due to changes in
and I am absolutely certain that they
Steel, Walter Williams. Mr. Williams
an individual's health status.
will help. But, for various reasons,
testified that in spite of increased em-
We preempt over 700 State benefit
they fall short of the test. The solu-
ployee cost sharing and extensive
mandates and replace them with a
tion to the access problem requires
managed care programs, their costs
basic health benefit package. And, in a
bigger, and yes, more dramatic ways to
rose 26 percent in 1990. His recommen-
contain cost.
step designed to make private health
dation: Federal cost containment legis-
insurance even more affordable for
Take individual cost sharing. Making
lation to make sure public and private
small businesses, we allow previously-
consumers more price sensitive has
payors pay the same for health care
uninsured small businesses to elect the
only a limited effect on whether or not
and regional reimbursement schedules
use of Medicare reimbursement rules.
an individual initially seeks care. Once
This will give small businesses the
initiated, research shows that courses
to insure that all payors-pay the
market clout they have so far lacked
of treatment generally are the same-
same-for the same care. He, too,
since those decisions have traditional-
called for a national health spending
in order to negotiate better deals with
ly been left up to the doctor.
target to keep annual increases in
providers. We require insurers to offer
health care costs at acceptable levels.
managed care plans to small business-
As for outcomes research and prac-
tice guidelines, I could not be a bigger
Their calls and others for tougher
es if they offer these plans to large
believer in the importance of this
cost containment have not fallen on
employers in the area, while at the
work-and not just for cost reasons.
deaf ears. If others are to gain access
same time we preempt State antiman-
aged care laws.
But practice guidelines, once devel-
to our health care system, we must si-
In addition to the reforms of the
oped, will need to be disseminated and,
multaneously get a handle on its costs.
marketplace, we provide a permanent
more importantly, adopted by practic-
Through the creation of an inde-
25 percent tax credit toward the cost
ing doctors. And, just as we will find
pendent Federal Health Expenditure
Board, voluntary goals for national,
of health insurance for employers
instances of inappropriate and unnec-
with less than 60 workers and whose
essary care through outcomes re-
and State-specific, health care spend-
search, we will, no doubt, find in-
ing would be set and a process for na-
salaries are less than $20,000. We in-
stances of underuse of care. So we
tional negotiations between providers
crease the deductibility of health in-
might need to spend more in certain
and purchasers of health care on reim-
surance from the current level of 25 to
bursement levels would be established.
cases.
100 percent for the self-employed.
Insurance reform is potentially a
State flexibility and innovation would
And, because of our recognition of the
fragility of new businesses, we exempt
powerful tool. That's why I will fight
be preserved through the establish-
proposals that allege reform, but are
ment of State-level consortiums that
new, small businesses from providing
health insurance during a 2-year start-
actually far too weak. We can save
could perform a variety. of cost-saving
almost $14 billion over 5 years by
activities, including further State-level
up period. The third year of operation,
eliminating medical underwriting and
negotiations on reimbursement levels
new small businesses would only be re-
limiting preexisting condition exclu-
and volume, reduction of administra-
quired to contribute one-half what
sions through small group insurance
tive costs by streamlining the process-
would otherwise normally be required
reform.
ing of claims, or capital allocation.
under the public program.
This legislation includes several
These recommendations stop short
Employers have told us, overwhelm-
ways to promote managed care and
of setting mandatory caps on health
ingly, they would like to provide
make it more available. Here again, I
spending or national payment rates to
health benefits to their workers but
am a believer. But managed care
allow for any necessary adjustments
that cost and availability often are
means many things to many people,
during the transition to universal
access. And once fully implemented.
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7221
we will have the necessary data and in-
ing solution? What about one that
viduals who are not residents or domi-
mation on how well we have done
admits the cost of inaction is simply
cilaries of that State.
the job of holding down health care
unacceptable and that failure to act
its, so we can adequately judge
S. 280
threatens our future economic securi-
where we might need to do more work,
ty?
At the request of Mr. SASSER, the
or in other areas less.
names of the Senator from Nebraska
Mr. President, all together the cost
[Mr. KERREY], the Senator from Wis-
containment measures outlined in this
ADDITIONAL COSPONSORS
consin [Mr. KOHL], and the Senator
bill have been estimated, by an inde-
from Georgia [Mr. NUNN] were added
S.4
pendent consulting firm, to have the
At the request of Mr. BENTSEN, the
as cosponsors of S. 280, a bill to pro-
potential to reduce health spending in
name of the Senator from Maryland
vide for the inclusion of foreign depos-
this country by almost $80 billion over
its in the deposit insurance assessment
5 years. Over time these savings will
[Mr. SARBANES] was added as a cospon-
sor of S. 4, a bill to amend titles IV, V
base, to permit inclusion of non-depos-
grow.
My colleagues in the Senate and I
and XIX of the Social Security Act to
it liabilities in the deposit insurance
establish innovative child welfare and
assessment base, to require the FDIC
have laid out in great detail a way to
family support services in order to
to implement a risk-based deposit in-
achieve universal access, while at the
strengthen families and avoid place-
surance premium structure, to estab-
same time make a significant dent in
ment in foster care, to promote the de-
lish guidelines for early regulatory
the costs of our health care system.
velopment of comprehensive substance
intervention in the financial decline of
Just a week and a half ago I intro-
duced a bill, S. 1177, that laid out in
abuse programs for pregnant women
banks, and to permit regulatory re-
and caretaker relatives with children,
strictions on brokered deposits.
great detail the recommendations of
the Pepper Commission for universal
to provide improved delivery of health
S. 323
access. While different in some re-
care services to low-income children,
At the request of Mr. CHAFEE, the
spects, the general approach is the
and for other purposes.
name of the Senator from Connecticut
same.
S. 25
[Mr. LIEBERMAN] was added as a co-
I have said all along that concessions
At the request of Mr. CRANSTON, the
sponsor of S. 323, a bill to require the
and accommodations will have to come
name of the Senator from California
Secretary of Health and Human Serv-
from all corners-from business, from
[Mr. SEYMOUR] was added as a cospon-
ices to ensure that pregnant women
the insurance industry, from health-
sor of S. 25, a bill to protect the repro-
receiving assistance under title X of
care providers, and from the public-if
ductive rights of women, and for other
the Public Health Service Act are pro-
we are to have any hope of real
purposes.
vided with information and counseling
change. In other words, no one can
regarding their pregnancies, and for
S. 190
demand their first choice and expect
other purposes.
At the request of Mr. GRAHAM, the
to see results. So, for example, al-
names of the Senator from Utah [Mr.
S. 416
though the Pepper bill, S. 1177, in-
HATCH], the Senator from Massachu-
At the request of Mr. DANFORTH, the
Judes my preference for a federally
setts [Mr. KERRY], the Senator from
name of the Senator from Utah [Mr.
n public program to replace Medic-
North Dakota [Mr. BURDICK], and the
HATCH] was added as a cosponsor of S.
1, I was willing to compromise with
Senator from Arkansas [Mr. BUMP-
416, a bill to amend the Internal Reve-
my colleagues in order to move the
ERS], were added as cosponsors of S.
nue Code of 1986 to make permanent
debate, and it is my fervent hope to
190, a bill to amend 3104 of title 38,
the tax credit for increasing research
move health reform legislation along.
United States Code, to permit veterans
activities.
I know my Senate colleagues would
who have a service-connected disabil-
join me in saying to our colleagues and
S. 489
ity and who are retired members of
to others that we are open to further
At the request of Mr. HATCH, the
debate and discussion to refine or to
the Armed Forces to receive compen-
names of the Senator from Mississippi
add or subtract. It is time to take a
sation, without reduction, concurrent-
[Mr. COCHRAN] and the Senator from
ly with retired pay reduced on the
seat at the table.
New Hampshire [Mr. RUDMAN] were
The majority leader, Senator MITCH-
basis of the degree of the disability
added as cosponsors of S. 489, a bill to
rating of such veteran.
ELL, has shown tremendous leadership
provide grants to States to encourage
in introducing this legislation today. I
S. 200
States to improve their systems for
would welcome a similar display of
At the request of Mr. FRYOR, the
compensating individuals injured in
leadership from the White House. I
name of the Senator from Idaho [Mr.
the course of the provision of health
hope introduction of this bill spurs the
CRAIG] was added as a cosponsor of S.
care services, to establish uniform cri-
administration to come up with its
200, a bill to amend the Internal Reve-
teria for awarding damages in health
own plan for health care reform and
nue Code of 1986 to exclude small
care malpractice actions, and for other
not just ignite another round of stone
transactions from broker reporting re-
purposes.
throwing.
quirements, and to make certain clari-
S. 574
In cities, suburbs, and rural towns
fications relating to such require-
At the request of Mr. CRANSTON, the
across America-health care is the
ments.
names of the Senator from Maryland
pocketbook issue. Over 70 percent of
S. 239
[Ms. MIKULSKI] and the Senator from
the uninsured are not poor. They are
At the request of Mr. SARBANES, the
Ohio [Mr. METZENBAUM] were added as
families in which fathers and mothers
names of the Senator from Missouri
cosponsors of S. 574, a bill to amend
have lost their jobs because of the re-
[Mr. DANFORTH], the Senator from
the Civil Rights Act of 1964 to prohib-
cession. They are working people
Alabama [Mr. SHELBY], and the Sena-
it discrimination on the basis of affec-
whose employers cannot afford today's
tor from Arizona [Mr. McCAIN] were
tional or sexual orientation, and for
insurance rates. They even include
added as cosponsors of SF 239, a bill to
other purposes.
people with ample incomes, but who
authorize the Alpha Phi Alpha Frater-
S. 597
cannot buy insurance because of a
nity to establish a memorial to Martin
health condition or past illness.
Luther King, Jr., in the District of Co-
At the request of Mr. DODD, the
The Director of the Office of Man-
lumbia.
name of the Senator from North
Dakota [Mr. CONRAD] was added as a
;ement and Budget, Dick Darman,
S. 267
SO recently testified before the Fi-
cosponsor of S. 597, a bill to amend
At the request of Mr. REID, the
ance Committee that he has yet to
the Public Health Service Act to estab-
name of the Senator from Montana
come up with an intellectually satisfy-
lish and expand grant programs for
[Mr. BURNS] was added as a cosponsor
ing solution to the problem of the 9
evaluation and treatment of parents
of S. 267, a bill to prohibit a State
million uninsured children in this
who are abusers and children of sub-
from imposing an income tax on the
country. What about a morally satisfy-
stance abusers, and for other pur-
pension or retirement income of indi-
poses.
June 5, 1991
CONGRESSIONAL RECORD SENATE
7061
force more quickly, more effectively,
I thank our colleagues and their
COST ESTIMATE
and into a wider range of jobs, with
staffs who have worked so hard for so
MAY 31, 1991.
the help of these technology networks.
many months and years to bring us to
1. Bill number: S. 210.
Finally, a word about what this bill
this new threshold.
2. Bill title: Comprehensive Uranium Act
is not. It is not a telco bill. It is not a
Mr. President, I suggest the absence
of 1991.
cable bill. Rather, it is a bill to bring
of a quorum.
3. Bill status: As amended by the Senate
he information age to all Americans
The PRESIDING OFFICER. The
Committee on Energy and Natural Re-
ho wish to participate.
clerk will call the roll.
sources, May 22, 1991.
I applaud the foresight and leader-
The assistant legislative clerk pro-
4. Bill purpose: S. 210 would reorganize
the government's uranium enrichment en-
ship of Senator BURNS on this legisla-
ceeded to call the roll.
terprise and assist the domestic uranium in-
tion and urge the Senate to match
Mr. HOLLINGS. Mr. President, I ask
dustry.
Senator BURNS' effort in working
unanimous consent that the order for
Title I would establish a wholly owned
toward its passage.
the quorum call be rescinded.
government corporation to replace the ex-
The PRESIDING OFFICER (Mr.
The PRESIDING OFFICER (Mr.
isting Department of Energy (DOE) pro-
FORD). The Senator from Wisconsin is
ROBB). Without objection, it is so or-
gram for providing uranium enrichment
recognized.
dered.
services to commercial nuclear powerplants
and to government defense and research
programs. Key features of the proposed cor-
DEMOCRATIC HEALTH REFORM
REVISED
CONGRESSIONAL
poration are summarized below. This bill
BUDGET OFFICE COST ESTI-
would:
PACKAGE
MATE OF S. 210, THE COMPRE-
Set the corporation's initial debt at $364
Mr. KOHL. Mr. President, this
million, payable with interest to the Treas-
HENSIVE URANIUM ACT OF
morning I would like to briefly com-
ury over a period of 20 years. Payment of
1991
the $364 million debt would constitute all of
mend my colleagues, who have worked
Mr. JOHNSTON. Mr. President, on
the recovery of past costs associated with
SO hard in crafting the comprehensive
health care reform bill to be intro-
May 23, 1991, I submitted on behalf of
the uranium enrichment program. By con-
duced today.
the Committee on Energy and Natural
trast, the General Accounting Office (GAO)
estimates that unrecovered federal costs for
We need not repeat the numbers of
Resources Senate Report 102-63, to ac-
uranium enrichment now total about $11
underserved. We know them. We need
company S. 210, the Comprehensive
billion.
not repeat statistics on the benefits of
Uranium Act of 1991. Included in the
Provide the uranium enrichment corpora-
prevention-we are paying dearly for
report was a May 10, 1991, letter from
tion with up to $2.5 billion in borrowing au-
those past failures. We need not
the Congressional Budget Office that
thority, but would not allow the corporation
estimated the cost of the bill.
to borrow from the Treasury's Federal Fi-
repeat health cost inflation figures.
Nor the tragic stories about citizens
In its May 10 letter, CBO concluded
nancing Bank. The corporation would fund
young and old who have been denied
that certain provisions of the bill as
its spending through a combination of its
access to quality care. Each of us has
originally approved by the Committee
revenues and borrowing from the public.
Under current law, the Congress provides an
heard those numbers and those stories
would have resulted in direct spending
annual appropriation to fund the DOE pro-
in hundreds of ways.
during fiscal years 1992 through 1996.
gram.
The problem is real. Our health care
As explained in Senate Report 102-
Provide that the proposed corporation be
63, the Committee on Energy and Nát-
managed by an Administrator and a corpo-
system is in crisis. And we have a re-
rate board, both appointed by the President.
sponsibility to lead the Nation out of
ural Resources amended S. 210 on
that crisis.
May 22, 1991, to remove the direct
The Secretary of Energy would have gener-
Our colleagues from West Virginia,
spending identified by CBO from the
al supervision over the Administrator for
bill.
health, safety, environment, and national
Massachusetts, Maine, and Michigan-
security concerns.
among others-have met the challenge
Accordingly, CBO revised its cost es-
Transfer current DOE production facili-
in offering this blueprint for national
timate. In a May 31, 1991, letter, CBO
ties-for uranium enrichment to the corpora-
health care reform. It is a commenda-
stated that S. 210 as amended and re-
tion. The corporation would then issue cap-
ported "would not affect direct spend-
ital stock to the Treasury to represent the
ble and meritorious plan. It offers
ing over the next 5 years, and would
book value of assets transferred.
hope and answers to questions of uni-
not be subject to pay-as-you-go proce-
Require the corporation to set prices to
versal access, quality, and cost.
I believe we are faced with a real op-
dures under section 252 of the Bal-
(1) recover its initial debt; (2) pay for its
costs of service; (3) recover costs of decon-
portunity here and I hope we do not
anced Budget and Emergency Deficit
tamination and decommissioning; and (4)
let it pass. We have had similar
Control Act of 1985."
provide a "normal business" profit-to be
chances in the past-in the late 1960's
I ask unanimous consent that CBO's
paid in dividends to the Treasury.
and early 1970's when President Nixon
revised cost estimate for S. 210 be
Exempt the corporation from sequestra-
printed in the RECORD in its entirety.
tion under the Balanced Budget Act
offered the Nation a plan for employ-
There being no objection, the esti-
(Gramm-Rudman-Hollings). With the ex-
ment based health care; in the late
mate was ordered to be printed in the
ception of initial set-up costs, the corpora-
1970's when President Carter, through
RECORD, as follows:
tion's spending would not be subject to
Secretary Califano, offered a compre-
annual appropriations.
hensive employment based plan that
U.S. CONGRESS,
Title I also would establish a fund for the
also included Medicaid reforms. For
CONGRESSIONAL BUDGET OFFICE,
decontamination and decommissioning
various reasons, we let those opportu-
Washington, DC, May 31, 1991.
(D&D) of the government's uranium enrich-
Hon. J. BENNETT JOHNSTON,
nities pass us by. It has cost us dearly.
ment facilities.
Chairman, Committee on Energy and Natu-
Title II contains provisions that would
I believe it will be easy for each of us
ral Resources, U.S. Senate, Washington,
assist and attempt to revitalize the domestic
to sit back and critique this package.
DC.
uranium industry by:
Surely each of us-and each of our
DEAR MR. CHAIRMAN: The Congressional
Establishing a program that could lead to
constituencies-can find fault with one
Budget Office has prepared the attached
increased purchases of domestic uranium by
aspect or another. I hope we resist
cost estimate for S. 210, the Comprehensive
nuclear utilities;
that easy path for it will take us no-
Uranium Act of 1991, as amended by the
Establishing a national strategic uranium
where once again. Those who have not
Senate Committee on Energy and Natural
reserve (consisting of uranium stocks cur-
Resources on May 22, 1991. This bill, as
been close to the drafting of this legis-
rently held by the the U.S. government);
amended, would not affect direct spending
lation have an obligation to study it
Directing the Secretary of Energy to en-
over the next five years, and would not be
courage the use and export of domestic ura-
carefully. We need to go back to our
subject to pay-as-you-go procedures under
nium;
States and talk to our people about it.
section 252 of the Balanced Budget and
Requiring the federal government to pur-
But, we have a responsibility to study
Emergency Deficit Control Act of 1985.
chase only domestic uranium for defense
and consider it from a positive per-
If you wish further details on this esti-
needs; and
spective. And that is what I intend to
mate, we will be pleased to provide them.
Establishing a program for partial reim-
do.
Sincerely,
bursement, by the federal government, of
ROBERT D. REISCHAUER.
remedial action at active uranium and thori-
S7108
CONGRESSIONAL RECORD - SENATE
June 5, 1991
ates (including affiliates described in para-
ture pursuant to section 481(h)(5) of the
ACCESS TO HEALTH CARE FOR
graphs (6) and (7) of subsection (c)) neces-
Foreign Assistance Act of 1961; or
sary to verify transactions conducted with
ALL AMERICANS
(2) which is listed by the Secretary of
such Bell Telephone Company that are rele-
State under section 40(d) of the Arms
Mr. KENNEDY. Mr. President, on a
vant to the specific activities permitted
under this section and that are necessary to
Export Control Act or section 6(j) of the
matter which was addressed earlier
the State's regulation of telephone rates.
Export Administration Act of 1979 as a
today by the jority leader and a
Each State commission shall implement ap-
country the government of which has re-
group of Senators in advancing the
propriate procedures to ensure the protec-
peatedly provided support for acts of inter-
cause of access to health care and ef-
tion of any proprietary Information submit-
national terrorism,
fective cost containment, I noticed
ted to it under this section.
should not be represented. either by diplo-
during the afternoon that there were
"(1) As used in this section:
matic, military, or political officials, or by
negative comments from some of our
"(1) The term 'affiliate' means any organi-
national images or symbols, at the victory
colleagues about what I consider to be
zation or entity that, directly or indirectly,
parade scheduled to be held in Washington,
owns or controls, is owned or controlled by,
District of Columbia on June 8, 1991, to cel-
an excellent proposal that has now
or is under common ownership with a Bell
ebrate the liberation of Kuwait and the vic-
been introduced.
Telephone Company. Such term includes
tory of the United Nations coalition forces
The majority leader indicated that it
any organization or entity (A) in which a
over Iraq.
represented the joint effort of a
Bell Telephone Company and any of its af-
Mr. HOLLINGS. I move to reconsid-
number of Senators, building on the
filiates have an equity interest of greater
er the vote.
work that has been done by Members
than 10 percent, or a management interest
of greater than 10 percent, or (B) in which a
Mr. DANFORTH. I move to lay that
on both sides of the aisle, and he indi-
Bell Telephone Company and any of its af-
motion on the table.
cated during the course of his press
filiates have any other significant financial
The motion to lay on the table was
conference that he was eager to work
interest.
agreed to.
with all of those in this body and out-
"(2) The term 'Bell Telephone Company'
means those companies listed in appendix A
Mr. HOLLINGS. Mr. President, I
side this body who are concerned, as
of the Modification of Final Judgment, and
take this opportunity to thank our dis-
he is, with the increasing costs in our
includes any successor or assign of any such
tinguished staff. I can tell you they
health care systems.
have worked around the clock and
We are facing a health care crisis.
company. but does not include any affiliate
of any such company.
done yeomen's work, John Windhou-
Health care is the fastest growing fail-
"(3) The term 'customer premises equip-
ing business in America. In 1970, the
ment' means equipment employed on the
sen, Toni Cook, Linda Morgan, Jim
premises of a person (other than a carrier)
Drewry, Loretta Dunn, and Kevin
United States was spending $65 billion
to originate, route, or terminate telecom-
Curtin, the whole Commerce Commit-
on health care. Now we are spending
$650 billion a year. The best estimate
munications.
tee staff over there, plus my own staff.
"(4) The term 'manufacturing' has the
is it will be $1 trillion 500 billion by
I want to thank our distinguished
same meaning as such term has in the Modi-
the year 2000.
counterpart and former chairman, the
fication of Final Judgment as interpreted in
The time has come, Mr. President,
United States V. Western Electric, Civil
distinguished Senator from Missouri
for action. This public policy issue has
Action No. 32-0192 (United States District
[Mr. DANFORTH], Walter McCormick,
been studied to death. Real people are
Court, District of Columbia) (filed Decem-
of his staff, and others. We have had a
hurting. The 10 million children in our
ber 3, 1987).
bipartisan effort, as is obvious from
society who have no coverage are hurt-
"(5) The term Modification of Final Judg-
the vote.
ment' means the decree entered August 24,
ing. Millions of workers without cover-
1982, in United States v. Western Electric,
Mr. DANFORTH. Mr. President, I
age are hurting. They work hard every
Civil Action No. 82-0192 (United States Dis-
simply want to express my apprecia-
day, 40 hours a week, 52 weeks of the
trict Court. District of Columbia).
tion for the work of our chairman,
year, and have no health insurance
"(6) The term 'telecommunications" means
Senator HOLLINGS. This has been a re-
coverage. They're playing Russian rou-
the transmission, between or among points
markable accomplishment. Many
lette with their health. They are hurt-
specified by the user, of information of the
people have said for a number of years
ing. Sixty million more Americans
user's choosing, without change in the form
that we have to do something about
have health insurance that even the
or content of the information as sent and
received, by means of an electromagnetic
the present state of affairs in our tele-
Reagan administration said was inad-
transmission medium, including all instru-
phone industry where a Federal judge
equate. Approximately 100 million of
mentalities, facilities, apparatus, and serv-
basically makes the decisions. We have
our fellow citizens in this country of
ices (including the collection, storage, for-
now moved in the direction of Con-
250 million have inadequate coverage
warding, switching, and delivery of such in-
formation) essential to such transmission.
gress taking over the decisionmaking,
or no coverage at all.
"(7) The term 'telecommunications equip-
which is exactly what should be the
Employers are paying too much
ment' means equipment, other than custom-
case.
today because they are also paying the
er premises equipment, used by a carrier to
This is a major accomplishment. I
bills for those who have no coverage.
provide telecommunications services.
think that we are going to have some
They're paying in the form of higher
"(8) The term telecommunications serv-
difficulties with the administration,
premiums, because other firms refuse
ice' means the offering for hire of telecom-
and, hopefully, there can be some
to provide coverage. Workers in plants
munications facilities, or of telecommunica-
tions by means of such facilities.".
room for give with respect to the do-
and factories all over this country are
SEC. 4. ADDITIONAL AMENDMENT TO THE COMMU-
mestic-content provision.
effectively paying the bill for charity
NICATIONS ACT OF 1934.
I supported my chairman in this
care for other workers who are not
covered.
Section 220(d) of the Communications Act
connection. I intend to continue to
of 1934 (47 U.S.C. 220(d)) is amended by de-
work with him as the bill progresses,
We face increasing problems in deal-
leting "$6,000" and inserting in lieu thereof
and my hope is that we can end up
ing with AIDS and substance abuse,
"$10,000".
with something that the President
not just in urban areas, but in rural
SEC. 5. APPLICATION OF ANTITRUST LAWS.
areas, as well. Our whole health care
would be willing to sign.
Nothing in this Act shall be deemed to
system is in a state of crisis. We do not
alter the application of Federal and State
have time to keep studying the issue
antitrust laws as interpreted by the respec-
tive courts
MORNING BUSINESS
and keep refusing to deal with it.
Senior citizens were hurting in the
TITLE-I-GENERAL PROVISIONS
Mr. HOLLINGS. Mr. President. on
Depression, and with Franklin Roose-
SEC. 101. SENSE OF THE SENATE REGARDING THE
behalf of the leadership, I ask unani-
velt's leadership, we adopted Social Se-
NATIONAL VICTORY PARADE FOR THE
mous consent there be a period for
curity. We did not wait for the various
PERSIAN GULF WAR.
morning business with Senators per-
States to try to deal with that prob-
It is the sense of the Senate that any
mitted to speak therein.
lem. In the 1960's, when we adopted
country-
The PRESIDING OFFICER. With-
Medicare. we were not saying: Let us
(1) for which United States assistance is
being withheld from obligation and expendi-
out objection, it is so ordered.
wait to see what the States do. We had
national leadership to deal with the
June 5; 1991
CONGRESSIONAL RECORD - SENATE
S 7109
problem. We need the same sort of
For months, the debate has focused
leadership now.
Lamb, Dumas, Barone, and Rickman.
on one word-"quotas." I oppose
Mr. President, again want to say
notes the grave situation in Liberia
quotas, and SO does everyone else who
W important today has been for this
and calls for increased cooperation be-
favors this bill. Quotas are illegal
itution. The majority leader took
tween the Federal and State govern-
today, and they will remain illegal
responsibility and advanced the
ments to alleviate the Liberian nation-
after a civil rights bill is enacted.
debate on health care. I commend his
al crisis. I believe the resolution makes
For many years, the cause of equal
assurance that he will make every
an extremely important contribution
justice for all has enjoyed broad bipar-
effort to see that we are able to debate
to United States policy on Liberia. I
tisan support in Congress and in this
this issue and achieve the action we
country. The landmark Civil Rights
commend the Rhode Island legislators
need.
Act of 1964 would never have been en-
for their efforts, and I support them
I hope this time when we debate it,
fully.
acted without the leadership of Ever-
and when some Senators find reason
ett Dirksen and Hubert Humphrey.
Mr. President, I ask unanimous con-
to oppose it, they will have the decen-
The landmark Americans with Dis-
sent that the full text of the resolu-
cy not to use the Capitol health facili-
abilities Act would not have been en-
tion be printed in the RECORD at this
ties or go out to Walter Reed Army
acted in 1990 without the leadership
point.
Hospital or Bethesda Naval Hospital. I
of Lowell Weicker, DAVID DUREN-
There being no objection, the assem-
hope they will not be so hypocritical
BERGER, and ToM HARKIN.
bly resolution was ordered to be print-
as to say "no" to the American people,
Over the past year, I have enjoyed
ed in the RECORD, as follows:
and then continue to use these Feder-
working closely with Senator JEFFORDS
HOUSE RESOLUTION-STATE OF RHODE ISLAND
al facilities we make available for our-
of Vermont to achieve a fair civil
Whereas it is acknowledged that a civil
selves.
rights bill.
war of horrific proportions is now being
It is the height of hypocrisy. If they
I particularly commend Senator
waged in the West African nation of Liberia:
are not going to vote for decent health
DANFORTH for his efforts this year. Re-
and
care for the American people, they
cently, Senator DANFORTH advanced
Whereas that conflict has caused wide-
should not take advantage of it them-
the debate and discussion with his
spread misery, death and destruction, where
selves. I think the American people
series of recommendations.
approximately half the 2.5 million Liberian
His proposals are constructive, and
population has been displaced inside the
will be watching, and watching very
country, and another 760,000 have sought
closely, what we are doing, and what
many of their features deserve serious
refuge in the neighboring countries of Ivory
we are failing to do.
consideration. Other provisions, how-
Coast, Sierra Leone, Guinea, Ghana, Mali
Those who have worked SO hard to
ever, fall short of providing the full
and Nigeria; and
advance the debate and discussion
protection against job discrimination
Whereas over 7,000 Liberian nationals
should be commended, and I welcome,
that all working Americans deserve.
have found temporary refuge in Rhode
the constructive attitude suggested by
I look forward to working with him
Island-where more Liberians reside than in
a number of our colleagues about the
and with many other Senators in the
any other state-in part because there exists
desire to work together. If this move-
days ahead to agree on a civil rights
an excellent support network of extended
families and friends; and
ment had not taken place now on this
bill that everyone in this body can
Whereas Liberia was settled in 1822 by
issue, another Congress could have
support and that the President can
freed American slaves and many of its
e past without the opportunity for
sign. There is still time to reach a civil
major cities are named after past United
fledged debate and action.
rights compromise that will bring us
States presidents (the capital city is Monro-
know the majority leader is inter-
together, not drive us apart.
via); and
ested in working with our colleagues
Whereas it is the policy of the State of
on this side of the aisle and the other
Rhode Island to acknowledge our historical
side of the aisle. Many of us have been
TERRY ANDERSON
ties to Liberia and to welcome those Liberi-
very much involved in the discussion
Mr. MOYNIHAN. Mr. President, I
an nationals who are seeking refuge here
of health policy over a long period of
rise to inform my colleagues that
until a lasting peace is restored; now, there-
today marks the 2,272d day that Terry
fore, be it
time. The time is fast moving by, and
Anderson has been held captive in
Resolved, That this House of Representa-
the time for action is now. I am very
tives of the State of Rhode Island and Prov-
hopeful that in this Congress we will
Lebanon.
idence Plantations hereby declares it to be
be able to take the kind of action nec-
the policy of the State of Rhode Island to
essary to deal with this issue. It is of
RHODE ISLAND GENERAL AS-
cooperate fully with our federal government
enormous importance to the American
SEMBLY PASSES LEGISLATION
in relocating displaced Liberians to this
people.
ON LIBERIA
state, and to assist in every way possible
with the reunification of families; and be it
Mr. PELL. Mr. President, the civil
further
CIVIL RIGHTS
war in Liberia has been devastating.
Resolved, That we call upon the United
All of us have been deeply moved by
States Congress to review its immigration
Mr. KENNEDY. Mr. President, the
the reports of violence, death, and de-
laws with a view toward expressing maxi-
House of Representatives today passed
struction resulting from the conflict.
mum sympathy and humanitarian support
the civil rights bill with the same
for Liberians who have been temporarily
broad, bipartisan majority as last year.
As a cosponsor of the Liberian Relief,
displaced by the civil war; and be it further
Rehabilitation, and Reconstruction
I commend the House for its action,
Resolved, That this House of Representa-
but I deplore the bitterness and the
Act of 1991, introduced by Senator
tives and people of Rhode Island welcome
charges and counter-charges that have
KENNEDY earlier this year, I believe
additional Liberians who are seeking entry
that the United States has a responsi-
to the United States as tourists, students
tarnished the debate and obscured the
bility to help Liberia rebuild as it
and/or refugees an call upon the Congress
real issues on this essential measure.
moves toward reconciliation.
to clarify its immigration laws to allow for
There is still time to find common
One outgrowth of the strife in Libe-
the increased entry of those Liberians
ground on the two critical issues that
ria is especially troubling: The status of
deemed most vulnerable-namely, Liberian
have divided us for the past year. Both
sides agree that women and religious
Liberians residing in the United
women under 40 with minor children, sen-
iors over 55, and those seeking official polit-
minorities do not have adequate reme-
States. Countless Liberians, many of
ical asylum; and be it further
dies for intentional job discrimination.
whom reside in my home State of
Resolved, That we call upon Rhode Island
Both sides agree that the Supreme
Rhode Island, have been displaced be-
educational institutions to cooperate by en-
urt's decision in the Wards Cove
cause of the fighting. This aspect of
rolling a limited number of Liberian stu-
should be overruled. The distance
the Liberian crisis has been effectively
dents on "good faith" for the academic year
characterized in a resolution passed by
1991-92 in situations where transcripts are
ween us is actually much less than
overheated rhetoric of this debate
the Rhode Island General Assembly
not available but where there is demonstrat-
would suggest.
last month. The resolution, introduced
ed interests and capability in continuing
their formal studies in the United States:
by State representatives Newsome,
and be it further
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7085
emphasize to all Senators that his is
one of the more meaningful state-
cratic Party solution is the always-
make-somebody-else-pay-for-it
RBRVS, have led to increased costs
ments in this entire debate, and his
or
always-make-someone-else-do-it
because of volume phenomena. All
comments are right on the mark.
ap-
It is not surprising since the distin-
proach. Spend somebody else's money.
this has led to more proposed regula-
tion.
guished Senator, as has been noted,
This will cost at least $30 billion. And
chaired the Governors Conference on
whose money? It has to be the Ameri-
Rate regulation ignores the only
can workers. You can say we will just
proven way to control costs, and that
the Telecommunications Task Force.
have American business pay for it. UI-
is the market. Rate regulation tends to
He has kept up and led the way in the
U.S. Senate.
timately that is taken out of the hide
freeze inequities as they currently
We appreciate very much his sup-
of the workers of America.
exist, and there are plenty of them.
port, and we value very much his sug-
Our employer-based health insur-
Current inequities include no access to
gestions. I too am concerned about
ance system is a historical accident
health care for over 30 million of our
what we see on television and ensuring
that is in part responsible for our cur-
citizens, while many of them overcon-
that the communications industry is
rent health care mess. As health care
sume, driving up costs. Who is to say
costs have increased, many employers
how much we should spend on health
competitive.
have found they cannot offer health
care? That should depend on individ-
We thank the Senator for his com-
care benefits and stay in business.
ual freedom of choice as long as
ments and his support.
Most employers offer health insur-
market incentives are not distorted.
The PRESIDING OFFICER. The
Senator from Utah, Mr. HATCH.
ance, if they can afford it.
Expenditure targets would ration care
Mr. HATCH. Mr. President, I ask
Mandates on employers limit both
from on-high while leaving horrible
unanimous consent that my remarks
employers' and employees' flexibility,
distortion in our centrally planned
be considered as in morning business.
damper their creativity, and, in the
health care system if that is what we
The PRESIDING OFFICER. With-
case of health insurance, may threat-
opt to go for under this particular
out objection, it so ordered.
en their very survival. It is particularly
plan.
disconcerting that the pay-or-play
Why cannot my colleagues who are
mandate will fall hardest on employ-
sponsoring this bill learn a lesson from
HEALTH CARE
ers who offer entry-level jobs-the
Eastern Europe and the Soviet Union?
Mr. HATCH. Mr. President, I have
very jobs that we need in this country
Regulation does not work. Unencum-
been interested that the majority
to enhance family and societal stabili-
bering the market does work. And the
leader is talking in terms of a Demo-
ty in high-risk situations. Often those
approach of those who are filing this
crat health care plan for America. And
entry-level jobs are part-time or a
bill is once again more encumbrances.
from what I understand about the
second job or spousal employment.
I wonder if my democratic colleagues
plan, I would like to just say a few
These kinds of employees often choose
have ever wondered why no innova-
words about it because I think it is
not to be covered by health insurance.
tions in health care have emerged
very important that this debate begin.
The Democrat approach, or pay-or-
from socialist countries.
I believe that health care is one of
play, will provide them something that
I have problems with mandated ben-
the two or three top issues in the
they may not need or may not want, in
efit packages. The Mitchell plan would
minds of everybody in our country
fact probably will not want, and per-
either define a set benefit plan or have
today. There is no question we are in
haps at the expense of having no job
at all.
a Federal board do it. Thus my col-
trouble. Health care costs are rising at
leagues who are sponsors of this bill
an annual 12.5 percent of the gross na-
It is clear that many of these em-
seem to accept that over 700 State
tional product rate. That is too fast
ployers are on a thin margin. An 8-per-
mandated benefits have contributed to
and too much. Compared to any other
cent increase in their taxes-essential-
country in the world, we spend more
ly applied to their gross receipts, since
our current problems. But they again
their expenses are heavily payroll and
insist on mandating highly specific
per capita than any country in the
world. Something has to be done. I do
they have no profit-could drive them
benefit packages, which will be very
not think this administration or any-
out of business. As small employers
costly for employers and employees.
fail, SO does most of our job creation
They will have to pay for this while
body else can stand back and say we
capacity. Everybody knows that the
giving little or no flexibility to employ-
want to do it in a leisurely pace.
Health care costs are going to 18 per-
largest part of small business' expense
ees. What is the difference between
State and Federal mandates?
cent unless we find some way of con-
happens to be with payroll. If you
taining the escalation of those costs.
have a tax of 8 percent of payroll, you
Mandated benefits increase cost, de-
Having said all that and having also
are disproportionately hitting small
crease insurer flexibility to custom
indicated that I am pleased that the
business where it hurts.
tailor insurance packages, and remove
majority leader and my fellow col-
In reality, this pay-or-play approach
individual freedom of choice. As a
is a mandate on the backs of American
nation of individuals, we thrive on our
leagues on the other side are willing to
workers. What they get is a loss of
diversity. One-size-fits-all solutions are
do something in this area, I am
jobs, loss of flexibility, and loss of
inappropriate for us; most important,
pleased that they will file a bill that
they will not improve our collective
will begin the debate and will begin
wages. Before we mandate new ex-
health, but they will increase our
discussion and will cause people to sit
penses on the backs of American work-
costs.
down and consider these very delicate
ers, we better get health care costs
and important, complex matters.
under control.
Let us let the market define benefit
Having said all that, I would like to
I would like to spend a minute or
packages which individuals, exercising
say a few things about the bill itself
two on the national expenditure tar-
free choice, can choose among. Let us
that I have been led to believe is to be
gets. The Mitchell plan sets "volun-
given them the choice. Let us not have
filed by my friends on the other side.
tary spending targets" for health care
government bureaucrats or ourselves
One thing that I have great difficul-
spending. If spending exceeds a speci-
define those packages. The market
fied amount, certain rate regulations
will work to provide appropriate bene-
ty with is employer mandates. As I un-
are likely to go into place. This is rate
fits at a minimum cost if we let it. I do
derstand it, the Democrats' bill would
have an employer mandate because if
regulation pure and simple. It is also a
not know one American who cannot
an employer did not provide health in-
gutless Federal Government approach
tell me what he or she needs when it
comes to health care.
surance that employer would have to
to rationing from the worst possible
pay an 8 percent payroll tax into a
position-centrally, "on high."
Now, this pay-or-play system bothers
public program.
Hospital costs in rate-regulated
me a great deal. As usual, those who
The thing that bothers me about
States have increased faster than the
support this type of approach cannot
national average and much faster than
pay for the program, except on the
that is there is too much of that atti-
sician in nonregulated States. Medicare phy-
backs of employers and American
tude in this body. The typical Demo-
expenditure
workers. They will not constrain the
targets,
the
overconsumption which results from
7086
CONGRESSIONAL RECORD - SENATE
June 5, 1991
overinsurance. They will not make in-
and geographic distribution of practice
No. 6, encourage development of
dividuals responsible for their own
location. Care is often delayed until a
consolidated claims management and
ealth care choices. They prefer to
time when outcome has worsened and
claims payment mechanisms on &
ild inefficient bureaucratic regula-
costs are higher. Underfunded public
State or regional basis. Current admin-
ry mechanisms which always, in
programs increase their cost-shifting
istrative costs of our pluralistic system
every case, increase costs.
to other payers, further driving up
may approximate 30 percent of all
They contend that a single payor
costs.
health insurance costs. This could be
claims system will save money. They
We cannot increase access until we
substantially reduced by consolidation,
tried that as a public program in Mas-
control costs.
saving perhaps as much as $60 billion
sachusetts. Administrative costs were
The most important mechanism for
per year. Consolidation does not mean
30 percent. They created the mess in
controlling costs is to make individuals
rate regulation or an all payers
Massachusetts. Why cannot they learn
more responsible for their own health
system.
from it?
care, including their health care
No. 7, small group health insurance
Let me just say this. I have said
spending. All sectors of the health in-
market reform is essential. Make
some fairly crusty things about the
dustry-employers, insurers, providers,
health insurance a guaranteed issue
Mitchell plan, or the plan of our
professionals-must take responsibility
for all employees and employers, re-
friends on the other side of the aisle.
for restraining costs. And, the govern-
gardless of size, and moderate the cur-
But I also want to say that they have
ment must make sure that there are
rently outrageous costs for small em-
done the country a service in filing
proper incentives for cost constraint
ployers.
something because there are some
by all of these sectors, and do its part
No. 8, develop new provider and pro-
good things in their plan. Based upon
in funding safety-net programs.
fessional cost containment and quality
what I know about the Democrat plan
My proposal would:
assurance mechanisms within States
I would say this: The Democrats have
No. 1, require publication of quality
through grants to States.
adopted several of the ideas that Sena-
measures and costs of health care by
No. 9, increased emphasis on preven-
tor KENNEDY and I have been working
on for years. We have been talking
specific unit of service, for all provid-
tion. Individual responsibility plus em-
about them for years. We put them in
ers and professionals in each State. A
ployer incentives to offer work place
prudent consumer cannot make in-
health education and maintenance ac-
various bills, and so forth. They now
formed shopping decisions if they do
tivities, I think, is essential.
seem to admit that the liability crisis
exists in settings other than the com-
not have information about quality
The above cost containment-re-
munity health centers. We can work
and cost. I reject a utility or rate regu-
straint-rollback mechanisms should be
together on medical liability reform,
lation model, because they do not
allowed to work for 10 years. If univer-
and I commend my colleagues and par-
work.
sal access has not been achieved after
ticularly Senators MITCHELL and KEN-
No. 2, provide grants to and expand
all the reforms the industry has re-
NEDY, and others on the other side,
programs in medical outcome research
quested have been in effect for 10
who have acknowledged this and who
in order to catalyze development of
years, a penalty will be assessed on all
agree that this is something that just
medical practice guidelines. Practice
sectors of the industry to provide
has to happen. It has to happen.
patterns vary substantially often even
funding for a public program for the
We agree that new initiatives in
within a small geographic area. Prac-
uninsured.
tatewide quality assurance activities
tice patterns are often professional
The Federal Government must also
are essential. I think that is a good
whims, not proven effective mecha-
do its part. Everyone must share the
point in their program.
nisms. With research data driven prac-
pain. The Federal programs must stop
We can work together to establish
tice standards, remibursement would
passing their costs onto the States
and publish standardized cost and
be limited to only appropriate care
with Medicaid, onto providers through
quality data for each provider on a
and not to individual whim.
inadequate reimbursement levels, and
State-by-State basis.
No. 3, cap the existing deductibility
onto the private sector through cost
We agree that State-mandated bene-
of employer provided health insurance
shifting. We will federalize Medicaid
fit laws and restrictions on managed
costs at probably around $3,000, which
and refocus it on poor women and chil-
care must be preempted.
would generate $21 billion in savings
dren by decanting reponsibility for the
We can come to an agreement on the
to the taxpayers and $3,600 would gen-
elderly to Medicare and for the dis-
reform of the small group health in-
erate $16 billion. Overconsumption of
abled to a new Federal program. The
surance market.
unneeded care is encouraged by the
new Medicaid Program will increase to
We can work together, as we have in
perception that health care is pre-
at least 115 percent of poverty, and
the past, to develop practice standards
pared and free. Capping the deduction
improve reimbursement rates to Medi-
based on excellent medical outcomes
would make individuals more aware of
care levels.
research.
and responsible for their own health
The costs of federalized Medicaid
We will continue to work toward ex-
care costs.
can be met through the $20 billion
pansion of Medicaid, including in-
No. 4, we would pass a very similar
savings from the tax cap on employer
creased eligibility and improved reim-
medical liability reform bill, but it
deductibility and through the savings
bursement schedules.
would have more teeth than what the
from medical liability reform.
We can jointly develop increased em-
approach is going to be in the Mitchell
The States must also do their part.
phasis on preventive health approach-
proposal.
Each State will be required to design
es. I think all of those are important.
No. 5, preemption of State-mandated
and fund a catastrophic insurance pro-
The fundamental disorder in our
benefits laws and of State restrictions
gram, individualized for the unique-
current health care system is high
on managed care. States would define
ness of each State. Having responsibil-
costs, which are getting higher every
a basic health insurance premium
ity for catastrophic coverage fall to
minute. Inflation in health care has
amount within which insurers could
the States will keep resource alloca-
been 2 to 3 times the basic inflation
compete by defining various benefit
tion decisions, that is, rationing, prop-
rate almost four times, as a matter of
packages.
erly decentralized. It will also require
fact, last year. And. in some sectors of
Let the insurers do it and let the
regional cost-demographic distortions
the industry, health insurance premi-
people buy what they need. Do not
be dealt with at the local level and not
ums, for instance, costs have increased
have mandated State mandates that
cost shifted to a national level. Utah
20 percent over the last year.
literally no State legislator can fight
should not have to help Massachusetts
Increased costs have many deriva-
against.
pay for its excesses, nor should Massa-
tives. Access to the system is limited.
The State-defined amount would
chusetts have to help Utah pay for its
Wise preventive approaches are
limit State tax deductibility; regard-
excesses, although I do not think
squeezed out. Health manpower is dis-
less of a State's defined amount, Fed-
there are many excesses in the State
torted in terms of specialties chosen
eral deductibility would be limited.
of Utah.
June 5, 1991
CONGRESSIONAL RECORD
7087
Mr. President, these are just broad
allowing me to interrupt him at this
outlines but, nevertheless, outlines
without the support of some Republi-
time.
that we have been working on for
cans and a majority of Democrats in
years and outlines that I think would
Congress and without the Bush ad-
help to bring us to an affordable na-
THE DEMOCRATIC PROPOSAL
minstration's support. Neither are pre-
tional health system that would really
ON HEALTH-CARE REFORM
pared to endorse such 8. plan. There is
work.
Mr. CHAFEE. Mr. President, today a
no broad support for this approach,
I have the same problems with the
group of Democratic Senators is intro-
Inside or outside the beltway. Small
mandates and the other things that I
ducing a bill to expand access to
business, and even some larger busi-
have discussed regarding the Mitchell
health insurance to all Americans. I
nesses will not support this proposal.
plan, but again I want to commend the
applaud their efforts in this area, and
Yet, we have momentum for change,
majority leader for having the guts to
believe some of their proposals repre-
and I believe that we should take ad-
file a plan and to get this particular
sent a strong step forward. However, I
vantage of it.
issue started and to bring it into the
also have concerns about the direction
It is critical that we move forward
public debate and to see what we can
they have taken, and would like to ad-
on health care reform in the next 18
do, hopefully, ultimately to have a bi-
dress some of the details of the pro-
months. There are Americans who are
partisan approach to this subject.
posal.
at risk because they do not have access
I also want to pay particular tribute
Before I do that, I would like to ex-
to health care services. I hope that the
to my friend, JOHN CHAFEE, on our
press some general thoughts. I strong-
Democrats will not allow the tempta-
side, who has worked long and hard to
ly believe that we must significantly
tion of using this as a campaign issue
try and come up with various ap-
improve our health care system in the
to take priority over passing some-
proaches that will work from a biparti-
United States. Our costs are spiraling
thing that will at least move us closer
san national health approach. I hope
out of control, our health status-es-
to a goal we all share-ensuring that
that before it is all said and done we
pecially among children-is not im-
all Americans have access to health
will be able to do that.
proving, and too many Americans are
care services.
Mr. President, I yield the floor.
without access to affordable and ap-
The Democrats have addressed the
(Mr. WELLSTONE assumed the
propriate health care. As a veteran in
growth of health care costs through
chair.)
this area, however, I know that it is
encouraging managed care plans, pre-
Mr. HOLLINGS. Mr. President, it is
much easier to make that statement
empting health benefits currently
my understanding that my distin-
than it is to gather a large enough
mandated by the States, encouraging
guished colleague from Rhode Island
consensus to solve the problem.
the use of single claim forms to lower
would like to address the Senate re-
Throughout the 1970's and 1980's,
administrative costs, and reforming
specting health care and we will yield,
calls for comprehensive health care
the insurance market's treatment of
as if in morning business, for 10 min-
reform came in cycles. We all had pro-
small business. We have discussed all
utes.
posals which we felt would solve the
of these ideas on a bipartisan basis for
My problem, Mr. President, is I do
problem. Leaders dug their heels in
the past 18 months, and I am glad to
not want word to go out that we are
and insisted that they had the best ap-
see them party to this package.
going into other matters. We went
proach. We got nowhere.
They also have at least acknowl-
into China lectures yesterday, the civil
We are now in another such cycle. If
edged that solving our health care
rights lectures, the health care lec-
history is a teacher. surely we can
access problem can not be accom-
learn from our mistakes.
tures. Now we have said we should not
plished solely through health insur-
have a flag by the Bell Operating Cos.
We have another chance now, and I
ance expansion. They have adopted an
of Syria or, at least, the Bell Operat-
hope we will not let it slip through our
idea I have promoted-to significantly
ing Cos. should not operate in Syria.
fingers for political reasons. Many Re-
expand community health centers
The truth of the matter is that we
publicans in the Senate agree, and in
which provide needed care in medical-
have completed all amendments. I
July of last year formed a Republican
ly underserved areas.
heard there was a head count going on
Health Care Task Force to study this
What about the other provisions in-
issue. I have the privilege to be chair-
preparatory to an amendment. I heard
cluded in the proposal?
that at 12 noon and it has taken 3
man of this task force. There are 32
Clearly the "pay or play" component
hours to get that head count and we
members. Many of us have been work-
of this proposal is a rerun of the
still do not have our amendment. The
ing to pull together proposals that we
Pepper commission recommendations.
best way to get a head count is to
believe have a chance of becoming law.
I have strong concerns about the abili-
In this process, many of us have had
present the amendment. if they will
ty of employers to comply with the re-
to compromise our desire to attack the
present the amendment. Otherwise,
quirement that they offer health in-
whole system in one fell swoop. We
we are going to be moving toward
surance to all full-time employees or
third reading. We are not going to sit
are developing a package which we be-
pay a very large surtax. Until we make
here all afternoon listening to lectures
lieve will move us significantly for-
significant reforms in the insurance
ward, even though it may not solve all
on matters unrelated to this bill.
market for small business and insti-
of our problems.
The Senate has terribly important
tute real cost containment measures-
business. I know the Senator from
Many areas of our Nation are experi-
and they are proven effective-there is
Rhode Island has some important
encing severe recessions. We are facing
no guarantee that health insurance
a tremendous Federal deficit. Mandat-
comments to make, but the Senator
costs will be lowered enough to be af-
from Pennsylvania has been waiting to
ed employer coverage of health insur-
fordable to all small businesses.
debate on the bill.
ance will be vigorously opposed by
I question whether in our current
Mr. CHAFEE. Mr. President, first of
small business. Neither Federal and
economic situation it is wise to impose
II want to thank the distinguished
State governments nor businesses are
significant costs-either through in-
prepared to significantly increase
anager of the bill for giving me this
surance premiums or a payroll tax of 8
health care spending.
ne.
percent-on our business community.
Before I start, I thank the distin-
Yet, a number of Members of Con-
Can we really afford to take the risk
Puished Senator from Utah, who made
gress and interest groups insist that
that those small businesses which are
some very cogent comments on the
the time has come to enact a national
operating on the margin now will be
Democratic proposals, for some sug-
health plan which would guarantee
forced out of business? After all, busi-
that everyone has health care insur-
estions that he has. and that, also, I
nesses with less than 100 employees
lave. We have been working together
ance coverage. The bill my Democratic
employ 46 percent of American work-
this.
colleagues have introduced may prom-
ers.
Also, I thank the distinguished
ise health insurance to all Americans,
It also concerns me that one of the
but it does not have much of a chance
unior Senator from Pennsylvania for
most critical health care costs-medi-
of passage. No such proposal will pass
cal liability-is not adequately ad-
S 7088
CONGRESSIONAL RECORD - SENATE
June 5, 1991
dressed in this proposal. The proposal
would provide grants to States to ex-
Federal expenditure on health care,
level. Only through experimentation
behind Medicare and Medicaid.
periment with alternatives to our tort
such as this can we best determine
system. While grants could be a small
Under current law, all employer
how to address most effectively, defi-
contributions to an employee health
useful component to medical liability
ciencies in our health care system.
insurance plan are excluded from the
reform, simply throwing grant dollars
I will be the first to admit that these
employee's taxable income. An individ-
to a State will do little to encourage
ual who does not receive employer-
proposals will not solve all our prob-
development of alternative dispute
based insurance not only will pay more
lems. I would like to go further. It is
resolution systems and urge plaintiffs
for insurance because he is purchasing
easy to upport providing health in-
and defendants to use them. The cost
it outside of a group, but also will pay
surance overage for all Americans. It
of medical liability-including premi-
for it with after-tax dollars. Thus, we
is easy to say that we should create a
ums and defensive medicine-accounts
are subsidizing health care for a signif-
new public program for all uninsured
for about $12 to $14 billion per year.
icant number of upper- and middle-
individuals. It is easy to point to
The proposal also includes an entire-
income individuals. Workers in busi-
Canada, West Germany, and Sweden
ly new public program. However, there
nesses that do not provide insurance,
and say, "If they can do it, so can we."
is a requirement that all individuals be
usually low-wage workers in the serv-
Simply put, we have neither the sup-
covered, and the States will be re-
ice industry or seasonal workers, do
port nor the resources to enact such
quired to pay a significant share of the
not receive this subsidy.
proposals. The harsh reality is that
cost. Unless they significantly increase
We are examining the placement of
there is no consensus on what radical
Federal matching funds to States, a
a cap on the deductibility of very gen-
reform should include, and how it
costly proposition, this could be a real
erous employer provided plan, given
should be paid for. The Democrats
problem for the many States which
that so many in our society have no
can't agree, and neither can the Re-
are already facing severe budget prob-
health care whatsoever.
publicans. The business community
lems.
We are looking at expanding the de-
cannot agree, nor can consumer
Now, it is easy to criticize a proposal.
ductibility of health costs to those
groups, nor can health care providers.
My response to critics is generally, Do
who purchase insurance outside of an
We can make significant strides
you have any better ideas? In this case
employer group, as well as to those
toward what may one day be a radical
the answer is "yes," I think some of us
who are self-employed. Another
change in our health care system-not
do.
method of expanding access to both
by revolution, but by evolution.
As I mentioned earlier, in the Re-
insurance and services is through the
It is my hope that once the bill is in-
publican Health Care Task Force our
use of credits for low-income families
troduced, the Democrats will go back
goal has been to pull together a pro-
and small businesses which is a pro-
posal that may not offer all things to
posal we are examining.
to the drawing board with us and try
to develop an approach to this critical
all people, but that is reasonable and
We are also considering changes
has a chance of getting beyond the
which will help control the spiraling
problem that really can be enacted.
cost of health care, such as preempt-
Clearly, nothing will pass that does
rhetorical stage-in other words,
ing State laws which create obstacles
not have the support of business, con-
policy over politics.
to managed care arrangements. An-
servative Democrats, Republicans, and
We are looking at ways to encourage
other issue we will address through
the President.
employers to provide health insurance
coverage to their employees. This
significant reform is medical liability.
Mr. SPECTER. Mr. President, I
Health care providers are paying out-
have been waiting on the floor to ad-
could be done by making insurance
more affordable to small businesses.
rageous premiums, and are practicing
dress the pending legislation, Senate
defensive medicine to ensure they
bill 173, but before doing so, I will take
We are discussing providing incentives
have the ability to defend against a
just a moment to congratulate my dis-
for small businesses to form purchas-
ing groups so they can gain market
negligence suit.
tinguished colleague from Rhode
strength to negotiate more effectively
We are also looking at increasing the
Island, Senator CHAFEE, for his out-
availability of health care services for
standing work as chairman of the Re-
with insurance companies.
low-income individuals who do not
publican Task Force on Health Care. I
We are looking at reforms in insur-
have access to employer-based cover-
similarly compliment the Democratic
ance market practices which make it
difficult for small employers to pro-
age. I and a number of my Republican
Members who have offered health
vide coverage to their employees. Such
colleagues have introduced legislation
care legislation. It is an extraordinari-
practices include underwriting and
which will increase access to critical
ly complex problem. As I traveled my
rate setting policies, which exclude
health care services for individuals
State extensively, it is an issue I hear
high-risk individuals or groups.
living in medically underserved areas.
raised as much if not more than any
All too often, we as policymakers
other.
We are discussing development of a
model benefits package, which could
forget that just giving someone a Med-
With some $660 billion or 12 percent
be used to allow employers to offer
icaid card, or private insurance for
of the gross national product being al-
lower-cost benefit packages. In order
that matter, does not necessarily guar-
located to health care, we still find
to do this, we would have to preempt
antee access to health care.
millions of Americans not covered. It
State mandated benefits which can
In both rural and inner-city areas
is an issue which has to be addressed.
significantly increase the cost of
there are shortages of qualified medi-
We have to find a policy that we can
health care insurance. These man-
cal personnel. In addition, there are
pay for.
dates range from in-vitro fertilization
shortages of health professionals who
As Senator CHAFEE noted, I have
to treatment for hair loss.
will accept Medicaid patients. Commu-
been working with him on the task
If we are going to control costs
nity health centers are one solution to
force, and it is an issue which must
within our system, we must examine
our health care delivery problems.
command considerable attention by
current Federal expenditures on
They provide cost-efficient high qual-
the Congress of the United States and
health care. When we think of health
ity primary and preventive care serv-
by the administration.
care entitlement programs, we think
ices to the uninsured, as well as per-
of Medicare and Medicaid. There is,
sons with Medicare, Medicaid, or pri-
however. another significant Federal
vate coverage. We are looking at a sig-
TELECOMMUNICATIONS EQUIP-
health care entitlement program. I am
nificant increase in the funding avail-
MENT RESEARCH AND MANU-
able to these centers.
FACTURING
referring to the treatment of health
COMPETITION
care benefits under the Tax Code.
We are also considering proposals to
ACT
This loss of revenue to the Federal
give States increased ability to enact
Treasury amounts to almost $40 bil-
statewide health care reforms. This
The Senate continued with the con-
sideration of the bill.
lion annually. and is the third largest
could help us to determine what strat-
egies we should pursue on a Federal
Mr. SPECTER. Mr. President, as I
have noted, I have been on the floor
June 5, 1991
CONGRESSIONAL RECORD - SENATE
7081
Mr. DURENBERGER. Mr. Presi-
ality and made the Pepper Commis-
that money going to come? It proposes
dent, I ask unanimous consent that
sion work.
a payroll tax on businesses that do not
the order for the quorum call be re-
Democrats and Republicans in the
choose to provide insurance. How big
scinded.
Congress have been working on
will that be-10 percent, 15, 20? This
The PRESIDING OFFICER. With-
changes in the way America pays for
legislation gives no answers. The fail-
out objection, it is so ordered.
health care since I arrived here in 1979
ure of the sponsors to agree upon a fi-
Mr. DURENBERGER. I ask unani-
to meet the specter of something
nancing mechanism even among them-
mous consent that I might proceed for
called hospital cost containment.
selves does belie the so-called compre-
up to 10 minutes as though in morning
There can be no question that Amer-
hensive nature of the bill.
business.
ica must change the way we produce,
Second, by relying on employer man-
The PRESIDING OFFICER. Hear-
the way we well, and the way we buy
dates to solve the uninsured problem,
ing no objection, that will be the
medical services.
the bill prescribes a treatment that
order.
Just as health is a basic issue to
has already failed clinical trials in the
Mr. DURENBERGER. I thank the
every person. it is a fundamental issue
State of Massachusetts. There is a
Chair.
for every business, every institution,
major problem of the working unin-
and every level of Government in
sured-people who have jobs but
America. Like a person with very high
cannot get insurance in the workplace.
NATIONAL HEALTH CARE
blood pressure, each institution of our
But the problem is not that their em-
REFORM
society today is threatened with an ex-
ployers-mostly small businesses-will
plosive increase in medical costs. This
Mr. DURENBERGER. Mr. Presi-
not provide insurance; it is simply that
year American health expenditures
dent, let me first thank the managers
their employers cannot.
will be $750 billion. By the turn of the
of this bill for the opportunity to take
Finding and keeping affordable in-
century-only 8½ years from now-
this time to congratulate my col-
surance in the current cost spiral has
that amount will have tripled, to over
leagues in this body. especially those
$2 trillion. Can employers afford three
been nearly impossible, and to add a
from Maine, Massachusetts, and West
times their current health care costs?
mandate to buy insurance in this situ-
Virginia-Democratic Senators MITCH-
Can Government? Can individuals and
ation is simply to mandate bankrupt-
ELL, KENNEDY, and ROCKEFELLER-on
families? Of course not.
cies.
the occasion of the introduction of
We have 31 million Americans who
The bill requires employers to either
their landmark legislation on health
have no health insurance at all, with
provide a health plan for their em-
crae reform.
millions more soon to join the ranks
ployees or pay into a State insurance
Regardless of the shortcomings of
because of cost increases. We have
fund; in other words. "play or pay."
this particular proposal-and I believe
major sectors of our society-in rural
The eventual result will be employers
there are several-this event today is a
and urban areas-grossly underserved.
abandoning their responsibility to
very major milestone on the road to
Change is urgently needed.
insure workers and dumping them into
urgently needed health care reform in
I commend my colleagues for laying
a huge State system. In other words,
America. It literally is a first.
this proposal on the table.
we will get a Canadian system by the
Today, we have on the table a seri-
As I look over the proposal, I see a
installment plan.
ous proposal for the national reform
number of very necessary reforms
But the greatest unfairness in this
of health care which is as close to
which have been discussed in the Fi-
mandate is it treats all employers and
comprehensive as anything we have
nance Committee and in the Pepper
all businesses as though they were the
seen. For want of a better alternative,
Commission. The bill is a great im-
same; it ignores differences which are
this bill sets the agenda for the Con-
provement on the Pepper Commission
crucial to how these employers make
gress. It begins the long and difficult
final report because it begins to ad-
their health care decisions, even the
process of health care reform.
dress a major gap in the document-
decision to play or pay.
Because we all tend to focus on the
cost containment.
There are differences between em-
day-to-day challenges around here, we
I wish to thank the sponsors for in-
ployers located in urban and those in
often cannot take in the longer view of
cluding a number of proposals which I
rural areas, different kinds of busi-
legislation. For our colleague, Senator
have just put forward over the last
nesses-manufacturers, service indus-
KENNEDY, this is not a 1-day event. It
several years, and I am especially
try-the kind of business that can pass
is yet another step in a 30-year effort
pleased to see a small business insur-
on these costs on goods and services
to bring access to health care to all
ance reform component which I have
and those that cannot. There are dif-
Americans. This is not an issue to him:
been working on since March of last
ferences between the coastal areas of
it is a passion, and I commend him for
year and on which I have introduced
this country and its heartland. To say
that.
S. 700, the American Health Security
these disparities do not exist guaran-
I also want to commend the other
Act.
tees bad policy outcomes.
key players in this proposal who are,
But, Mr. President, before I sound
The third flaw in this bill is that it
relative to our colleagues from Massa-
any more like a cosponsor of this pro-
leaves totally unreformed $100 billion
chusetts, new kids on the block. It has
posal, which I am not, there are sever-
a year in Federal health spending on
been my privilege to have served with
al flaws which will cause this bill to
the tax side of the ledger. There is a
both GEORGE MITCHELL and JAY
fall short of its own ambitious goals.
very large hole in the Nation's health
ROCKEFELLER on the Medicare Sub-
This afternoon I will mention just
bucket that simply must be plugged if
committee of the Senate Finance
four.
we are going to get the kind of effi-
Committee as long as they have been
First. introducing a bill without any
ciency we need in this system. Every
in the Senate. GEORGE and JAY epito-
financing to it is like wrapping up an
year, we hand out $100 billion in tax
mize Senators of the modern era.
empty box and putting it under the
benefits-or the taxpayers do-for
They are both good listeners and seri-
Christmas tree. It is designed to disap-
health expenditures, and the Ameri-
ous thinkers, and they have an ability
point. One of the lessons we were sup-
can people get no better system for it.
to push through the complexities of
posed to have learned from the 1980's
We subsidize the average lawyer in
the issues that we face to reach far-
is that government should not promise
this city about $2,000 a year for his
reaching solutions.
for what it cannot pay, or is unwilling
health insurance, a tax subsidy paid
I commend them for that effort and
to pay.
for by farmers in Minnesota who do
the efforts they have made over the
Unfortunately, this bill falls into
not get that kind of subsidy and have
last several years to understand and
that trap. The bill is quite explicit
to pay twice as much for their premi-
master the health field and for much
about what we will do for the Ameri-
ums without the benefit of a deduc-
good policy which they now lay before
can people and silent on how they will
tion.
us. JAY ROCKEFELLER, I must say, also
pay for it. It proposes $6 to $8 billion
Fourth, I am sure the sponsors
made physician payment reform a re-
in Medicaid changes. From where is
would also agree that even passage of
7082
CONGRESSIONAL RECORD - SENATE
June 5, 1991
their bill today would not nearly
There has been a considerable
finish the job of health reform. We
manufacturing competition on a .ay-
still have to deal with Medicare re-
amount of opposition, persuasive argu-
ing field that will remain level. in-
stru turing and optional services for
ments on the other side, and I suspect
cludes measures that will enhance
long-term care. We have to deal with
we are rather close now to passing this
America's position in global trade.
piece of legislation.
the medical arms race in this country
For these reasons I plan to vote in
I have had a great deal of interest in
which is raising costs by 11, 12 percent
favor of this bill. But for other reasons
telecommunications for some time. I
a year. We have to deal with restoring
I will vote for the bill with some
was chairman of the National Gover-
individual resonsibility and changing
nors Association's Task Force on Tele-
regret. What I regret is simply this:
the wasteful way in which health care
communications Policy and, as a con-
America's elected leadership, in par-
is currently delivered in this country.
sequence of that, we took some regula-
ticular the administration, is doing so
This is the real key to cost contain-
tory action while I was Governor. And
little to set and achieve a bold and
ment in America today, changing the
the object of the deregulation action
broad-reaching telecommunications
way people access health care and
was to try to encourage the local
vision for our Nation's future.
changing the way medicine is prac-
ticed.
phone companies to invest more in
All of us in political life, any who
communications technology.
have been in business, understand
I would suggest that if every health
The jury is still out as to whether or
automatically the power of modern
professional in America practiced as
not that will occur.
telecommunications.
part of a Mayo Clinic we would double
I am pleased with some of the action
There can be no doubt that the
quality assurance in America, and I
know we would cut the costs by at
that has occurred, and not so pleased
nature of our telecommunications
with some others.
system in the next century will shape
least a third.
The majority leader, Senator MITCH-
Mr. President, I believe this is an ap-
America's destiny as powerfully as our
propriate legislative response to an in-
rail, water, and highway systems have
ELL, in his statement said this is a
appropriate judicial situation. Since
done over the past two centuries. If we
"comprehensive bill to reform the Na-
Federal District Judge Harold
took the right steps today, we could
tion's health system to provide access
Greene's modified final judgment on
begin to revolutionize every aspect of
to affordable heath care for all Ameri-
the breakup of AT&T went into effect
our lives: The way we educate our chil-
cans."
in 1984, the RBOC's have been barred
dren, the way we obtain our health
But without the details of the fi-
from manufacturing telecommunica-
care, and the way we do our jobs. I
nancing, without a sustainable solu-
tions equipment. The RBOC's created
have seen some of those possibilities
tion to the uninsured problem, with-
in that divestiture, and as a part of
demonstrated already in some of the
out a tax component or reform in
that divestiture agreement and the
Nebraska schools.
other major areas, this bill will have
consent decree, as a consequence were
Mr. President, it is very exciting.
trouble living up to that reputation.
not allowed to get into the business of
One portrait of what we can achieve
Mr. President, the process of health
manufacturing
telecommunications
was recently painted by George Gilder
reform will be a long and difficult one.
equipment.
in the Harvard Business Review. Mr.
Changing how 13 percent of the GNP
This edict on the part of Judge
President, the article is too long for in-
in this country operates when it is op-
Greene-in fact, a consent decree
clusion in the RECORD, but I recom-
erating in a drug company over here
signed between the U.S. Government
mend it to my colleagues.
and in a small town clinic over there,
and AT&T-was targeted toward le-
Mr. Gilder presents to us a rather
is a huge challenge. But we have to
gitimate ends. That end is to protect
exciting proposal. It is one that has a
start some place. And some place is
the consumer from unduly high phone
considerable amount of risk attached
the bill our colleagues, Senators KEN-
bills and shielding other telecommuni-
to it, as well. But the proposal, Mr.
NEDY, MITCHELL, and ROCKEFELLER,
cations firms from unfair competition.
have put before us.
President, says that what is missing in
I emphasize this is a legitimate regu-
I commend them for their leader-
the United States is the infrastruc-
latory objective. These are still compa-
ship and for the correct choices they
ture; not the high-end infrastructure,
nies with highly monopolistic charac-
have made, and I look forward to
but the infrastructure that connects
teristics particularly deserving of regu-
working with them in the areas-and
the American home and family to that
lation.
there are many-where we will have
high-speed network that we generally
The result has been one of unelected
disagreements.
use with long-distance phone systems.
judicial officials now doing more than
This will be a long journey-10
That pared copper line that con-
perhaps any elected official to shape
years' worth of work perhaps. But we
nects every American home and most
America's telecommunications policy.
cannot get there unless we get started.
of America's businesses with our
And the result has been a restriction
Credit belongs to those Senators
phone system is the greatest barrier, I
of the RBOC's that is broader than
today. Because of their efforts, we are
believe, not only to our being able to
needed to protect wallets of American
finally underway.
develop a fully integrated information
consumers and the competitive inter-
Mr. President, I suggest the absence
ests of American manufacturers.
system in our country, but in seeing
of a quorum.
that marketplace, information market-
I believe the sponsor of the bill, as I
I yield the floor.
place, explode and grow even more
have indicated earlier, the distin-
rapidly than it has in the 1980's.
guished Senator from South Carolina
What Mr. Gilder proposes is that we
TELECOMMUNICATIONS EQUIP-
[Mr. HOLLINGS], has done a tremen-
are simply not regulating for the right
MENT RESEARCH AND MANU-
dous job, an admirable job in crafting
objective; we have not taken into ac-
FACTURING
COMPETITION
this legislation in a way that balances
count changing technology and what
ACT
the various interests, the various con-
that technology has done for us. It has
flicting interests.
The Senate continued with the con-
given us the opportunity to refashion
sideration of the bill.
It erects quite concrete barriers to
our laws, not without some risk.
Mr. KERREY. Mr. President, I rise to
prevent the RBOC's from using their
I assume Butler Aviation, both at
state my support for S. 173, and in
regional monopolies over the phone
National and Dulles, is doing a lot of
particular I want to call my colleagues'
service to cross-subsidize their manu-
facturing operations, and to that end I
business this week. I assume there is a
attention to what I think is an ex-
believe the amendments offered by
lot of heavy iron coming in trying to
traordinary accomplishment on the
the distinguished Senator from Ohio
influence our vote. I have seen a con-
part of the distinguished senior Sena-
improve the extent to which we will be
siderable amount of evidence of that
tor from South Carolina, who has
fought this battle long and hard. I am
able to monitor and prevent that
out in the rotunda. There will be a lot
cross-subsidization.
more heavy iron in town if we were, in
it. very grateful he has been willing to do
Further, the legislation takes steps
my judgment, to consider that what
to ensure the RBOC's will reenter the
Mr. Gilder is saying is, in fact, correct.
That is this, Mr. President: What we
THE WALL STREET JOURNAL TUESDAY, JUNE 11, 1991
Wrong Prescription for the Uninsured
By JOHN C. GOODMAN
provide each Chrysler worker with health
as the hospital marketplace becomes more
uninsured workers are employed. Like Mr.
0 solve the problem of 34 million
insurance, and make a handsome profit.
competitive, cost-shifting to other patients
Dukakis, the Senate Democrats propose to
ricans without health insurance, Sen-
(If they have any sense, Chrysler workers
becomes less feasible and government at
talk now and act later-definitely after the
ate Democrats have unvelled a new health-
will resist this mightily.
all levels has less money to spend. So far,
next election.
care plan. Ever faithful to the big govern-
If employers decide to provide health
only Oregon publicly admits that rationing
A third problem is health-care costs-
ment, big bureaucracy point of view,
insurance to their employees, they will be
in its Medicaid program is routine. Medi-
which are bound to rise as more people ac-
George Mitchell (D., Maine ), Edward Ken-
required under the bill to include mental-
cal providers know the same thing is hap-
quire health insurance. Initially Senate
nedy (D., Mass. 1. John Rockefeller (D.,
health benefits the fastest-rising compo-
pening in every state.
Democrats propose "voluntary" spending
W.Va. 1 and Donald Riegle (D., Mich. ) pro-
nent of health-care costs and preventive
If readers get a sense of deja UM, it's
limits with targets for the total amount
pose to take a manageable problem and
procedures, including mammograms, pap
probably because they have heard this be-
spent on physicians fees and hospital serv-
turn it into a major disaster.
smears and well-child care (items for
fore. The Senate Democrats have endorsed
ices throughout the country. But since the
Under the bill's "pay or play" plan, em-
which costs double when the administra-
the very plan that Michael Dukakis cre-
nation's 5,000 hospitals and 500,000 doctors
ployers would have a choice: pay a federal
tive costs of third-party insurers get fac-
ated for Massachusetts. Voters may recall
could not possibly agree collectively on
tax, tentatively set at about 7% of payroll,
tored in). The required out-of-pocket de-
Mr. Dukakis's 1988 boast that everyone in
anything. the targets are bound to be
or provide health insurance to their
ductible is only $250. Employers could
Massachusetts had health insurance. Well,
missed, and "voluntary" will soon become
workers containing core benefits defined in
charge a higher deductible only if they
not quite. The Massachusetts Legislature
"mandatory."
Washington. If employers decide to pay the
provided additional benefits to those in the
wants to delay the private sector's entry,
This is precisely the approach taken in
tax, government will assume responsibility
core package-not to cut costs.
into the program until 1994, and the cur-
countries with national health insurance,
for providing health insurance and em-
Count on the benefits expanding and the
rent governor wants to kill the whole pro-
where governments set arbitrary budgets
ployees will pay premiums that vary based
costs rising once the special interests get
gram.
for hospitals and area health authorities
on income level.
their hands on the bill. In response to pro-
One problem is that government is in-
and force the providers to ration health
For example, a $2,500 family health in-
vider pressures, state governments have
herently incapable of administering an in-
care. The result is a lower quality of care
surance premium for a worker earning
and more-not less-inefficiency.
$20,000 costs 13% of payroll, not 7%. In this
case, the obvious choice for the employer
While 700,000 people wait for surgery
is to pay the tax and turn the problem over
Lee lacocca will like this plan. For years he's wanted
in Britain, at any one time one of four
to government. Indeed, considering that
to dump Chrysler's health-care costs on government, and
hospital beds is empty. While 50,000 people
about 95% of all uninsured workers earn
wait for surgery in New Zealand, one out
less than $30,000, in the vast majority of
the Senate Democrats are offering him a chance.
of five beds is empty. As the waiting lines
their cases employers will have strong in-
grow in Canada, the politics of bureau-
centives to pay the tax rather than to begin
cracy determines who gets the next brain
providing coverage themselves. (The cost
enacted more than 800 cost-increasing
surance program that prices risk accu-
scan. In all three countries, about one in
of the core-benefit package will vary de-
mandated benefits, requiring insurers to
rately. Witness the deposit insurance deba-
every four hospital beds is filled with the
pending on the benefits included, and the
cover services ranging from acupuncture
cle at the federal level and the auto liabil-
chronically in elderly, using the hospital as
age, occupation and geographical location
to in-vitro fertilization. All this means that
ity insurance crises in California, New Jer-
an expensive nursing home.
of employees. The $2,500 example is a very
individuals have to pay for coverage they
sey and Massachusetts. In Massachusetts,
Listen to Bentsen
conservative number: the current average
do not want. Though the Senate Demo-
auto insurance has become so politicized
net per employee in the U.S. is $3,217.)
crats' bill would override these state man-
Bureaucratic health-care rationing is
that any possibility of rational premium
dates-in an attempt to control costs-the
anything bat fair. Although health care is
Temptation
prices has vanished and 65% of all pre-
lobbyists can be expected to move to
theoretically free in England, 12% of the
miums now go to the state risk pool.
.his is not necessarily good news for
Washington and continue their push for
population now has private health insur-
The Senate Democrats have already
the uninsured. Assuming uninsured em-
ance. In New Zealand's "free" health care
coverage of more and more services.
signaled they have no Interest in insurance
ployees are already paid a fair wage, a 7%
If employers exercise the option to pay
system, one-third of the population has pri-
prices based on real risks. The 7% payroll
payroll tax means that their employers
vate insurance and one-fourth of all sur-
the tax rather than provide health insur-
tax has no relationship to the actual cost of
will have to cut wages by 7% or lay off
ance, what happens to the workers:
gery is performed privately. In Canada.
health for any particular employee. And
workers. Since those earning the minimum
Rather than purchasing a private health
where private health care has been virtu-
they are proposing a quasi-cartel in the
wage can't by law take a wage cut, they
Insurance policy on their own, they will be
ally outlawed, the U.S. border is the safety
small-group health insurance market to
stand the greatest risk of becoming unem-
required to join Medicaid. In fact, if you
valve. For example, about 100 Canadians
guarantee that private Insurance pre-
ployed.
have any desire to toss away your private
get heart surgery every year at the Cleve-
miums won't reflect real risks either. This
Employers who already provide health
land Clinic.
health Insurance and join Medicaid. you'll
will speed the exodus of people into Medic-
insurance to their employees also will com-
love the Senate Democrats new health-
aid (oops, AmeriCare), the risk pool of last
Before taxing small business to pay for
pare the 7% tax with the cost of a health-
care plan.
resort.
an expanded Medicaid program with
insurance policy containing federally man-
Granted, under the Democrats' plan
A second problem both for Massachu-
health-care rationing required by limits on
dated benefits. A great many of them will
Medicaid would be reorganized. It would
setts and the Senate Democrats is small
spending, the Senate Democrats should lis
be tempted to pay the tax and drop exist-
also have a new name-"AmeriCare." But
business, which employs most of the nonin-
ten to their colleague Lloyd Bentsen (D.,
ing coverage. N T is this mere speculation.
Medicaid under any name is still Medic-
sured workers. Does it really make sense
Texas), author of refundable tax credits
A Kennedy aide says the bill's sponsors ex-
aid.
to heap new taxes on small business-the
for the purchase of health Insurance. In
pect this to happen.
In most places, Medicaid pays doctors
job-creating sector of the economy-in the
stead of pushing more people into a gov-
Lee Iacocca will like this plan. For
and hospitals 50 cents on the dollar-some-
middle of a recession? One suspects that
ernment rationing program, the Bentsen
years he's wanted to dump Chrysler's
times even less. As a result, doctors in-
even the senators would answer "no."
approach would empower low-income fam-
health-care costs on government, and the
creasingly won't see Medicaid patients and
In fact, one suspects they're not really
ilies and make them reál participants in
Senate Democrats are offering him a
access to hospital care is increasingly lim-
serious about the proposal at all. The plan
the health-insurance marketplace.
chance. Instead of paying what I estimate
ited to charity hospitals.
proposes a two-year grace period for new
to be close to $4,000 per employee for pri-
Because Medicaid underpays, health-
small businesses and a five-year grace pe-
Mr. Goodman is president of the
vate insurance, Mr(. Iacocca could pay a
care rationing is inevitable. And more se-
riod for firms with fewer than 25 em-
tional Center for Policy Analysis, a
tax of less than $3,000, have government
vere rationing is right around the corner
ployees-the firms where almost half of all
based research institute.
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12TH STORY of Level 1 printed in FULL format.
Copyright (c) The Bureau of National Affairs, Inc., 1991
BNA PENSIONS & BENEFITS DAILY
July 25, 1991
LENGTH: 846 words
Health Care Cost
PAYROLL TAX WILL NOT COVER COST
OF SENATE DEMOCRATS' PLAN, ECONOMIST SAYS
WASHINGTON (BNA) -- The payroll tax envisioned under the Senate Democrats'
universal health care bill probably would not be sufficient to cover the
costs of the public plan, an economist said July 24.
Moreover, the shortfall could force the plan's creators to seek
additional tax to pay for the program, Stuart Butler, director of domestic
and economic policy studies at The Heritage Foundation, predicted.
Butler was one of several economists who appeared before the Senate Labor
and Human Resources Committee to discuss the economic impact of S 1227, the
health reform proposal unveiled by Senate Democrats June 5 (18 BPR 959).
Under the "play-or-pay" scheme, employers would be required to provide a
certain level of benefits to all workers or pay an unspecified payroll tax.
The tax would be designated by the Secretary of Health and Human Services.
Senate Majority Leader George Mitchell (D-Maine), one of the chief
sponsors of the bill, has said he does not expect the payroll tax to cover
the cost of the entire reform package. He said the Congressional Budget
Office estimated supplemental costs to be $6 billion in the first year.
"Dumped" Employees
Butler expressed concern that far more working individuals than
anticipated would be shifted or "dumped" into the so-called AmeriCare public
program by employers that did not wish to provide private insurance.
"I think there will be far more people shifted into the public program
while still employed than previous estimates have indicated," Butler said.
This would place the federal government at risk of adverse selection into
AmeriCare, Butler said.
As a result, the cost of the public program ultimately will be in the
hands of employers, he concluded.
In his prepared remarks, Sen. Orrin Hatch (R-Utah), ranking Republican on
the committee, said he had reviewed estimates that as many as 60 million
persons could be "cast off" from employer-provided insurance programs to
public programs under the bill. Butler said any estimates of likely shifting
are difficult to determine because they are influenced by many other factors.
Another economist took issue with Butler's use of the word "dumping" when
referring to a shift of persons to public plans. "I disagree that it is
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BNA PENSIONS & BENEFITS DAILY (c) BNA, Inc., July 25, 1991
'dumping' any more than covering the elderly or disabled is 'dumping' (into
the Medicare program),' said Karen Davis, professor and chairman of the
Department of Health Policy and Management at The Johns Hopkins School of
Hygiene and Public Health. Providing a public program guarantees coverage for
these individuals and under a "play-or-pay" scheme it gives two attractive
options to employers, she argued.
Davis spoke in favor of enacting S 1227, saying the proposal would provide
health insurance coverage for 33 million more people, while incurring "at
most" a loss of 50,000 jobs. The losses would be more than offset by the
expansionary impact on the health insurance industry, which would expand to
provide needed health care to those who currently are uninsured, she added.
Savings Cited
Davis was joined in her views by Kenneth E. Thorpe, associate professor
with the University of North Carolina-Chapel Hill's School of Public Health,
Department of Health Policy and Administration. At current trends, the nation
will spend nearly $2 trillion, or 19.6 percent of gross national product, on
health care by the year 2000, he said. "Even with a relatively modest
reduction in cost growth, similar to the rate of increase observed in many
rate-setting states, our nation would spend 14.9 percent of GNP on health,"
he said. The potential savings to U.S. employers would be $150 billion, he
said.
A significant part of the legislation is a proposed national expenditure
review board whose task would be to moderate the rate of growth in health
care spending, Thorpe said. "By setting expenditure goals, the board
represents a critical first step in allowing our country to moderate the rate
of increase in cost, and encourage the diffusion of technologies which
examine both benefits and costs."
Butler, however, took aim at the expenditure review board, saying the
United States cannot have a fixed medical budget while maintaining the
freedom of choice among providers and services that is prized by its
citizens. "The British system has a fixed budget and it holds costs down
compared with this country" by using specific measures-like waiting
lists-that may not be acceptable to U.S. citizens, he said.
"I don't know that we have any evidence that rate regulation would work in
this country," Butler said. "If you stop consumers from demanding resources,
then you can do it. But if you try to maintain the current system of choice
with a fixed budget, it's an impossible combination," he added.
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9
10TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 PR Newswire Association, Inc.
PR Newswire
July 31, 1991, Wednesday
SECTION: Financial News
DISTRIBUTION: TO NATIONAL, BUSINESS AND MEDICAL/HEALTH EDITORS
LENGTH: 844 words
HEADLINE: HIAA PRESIDENT SCHRAMM SAYS 'HEALTHAMERICA' WOULD MEAN SPIRALING
HEALTH CARE COSTS
DATELINE: WASHINGTON, July 31
KEYWORD: bc-Health-Insuran-cost
BODY:
The HealthAmerica plan offered by the Senate Democratic leadership
contains provisions that would result in "spiraling health care costs" and
proposes a public program "guaranteed to lose money," according to Carl J.
Schramm, president of the Health Insurance Association of America (HIAA).
Schramm, testifying today before the Senate Labor and Human Resources
Committee in opposition to the HealthAmerica plan, was particularly critical of
provisions that would impose community rating in the small group market --
traditionally, companies that employ 25 or fewer people -- and that would expand
the existing Medicaid program to people who could be served by private health
insurance.
"A movement toward community rating will have negative side effects," noted
Schramm. "A community rated system would increase costs for populations least
able and willing to pay (especially young workers) and compromises local
accountability for health care costs, since the actions of an employer (to
reduce costs) would have little if any effect."
"The ultimate result of community rating," added Schramm, "could well be
spiraling health care costs for insured populations and a growing number of
employees without adequate protection."
As for the proposed = Americare" program that would expand and replace the
existing federal/state Medicaid program, Schramm noted that historically,
Medicaid has been "chronically underfunded," and remarked that the proposed
funding mechanism for Americare would do nothing to improve financial
adequacy.
The "pay or play" provision of Americare would compel employers either to
pay into the public Americare program or "play" by buying private health
insurance, continued Schramm. Employers who anticipate that their employees'
health care costs would exceed the Americare premium -- those with older or
less healthy workers would have an incentive to take part in the public
program, while employers with younger, healthier workers will not participate,
he added. "In other words, Americare is guaranteed to lose money on the
employer-based population that opts into it," he remarked.
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Confronted with large and mounting losses, the Americare program, noted
Schramm, would require "a major new infusion of public funds," financing from
groups of people originally intended to be outside of the program, and/or lower
reimbursement rates to providers, which = would result in an unsustainable
and unfair cost-shift from Americare to non- Americare enrollees."
Instead of Americare, Schramm advocated a more modest expansion of public
coverage to poor and near poor people. He also recommended adoption of certain
aspects of the HealthAmerica proposal that would reform the small group market
by guaranteeing availability of health care coverage, continuity of coverage
and extending a 100 percent tax deduction to the self-employed and special tax
credits to low wage earners.
Additionally, Schramm commended the cost containment provisions
in HealthAmerica = that prohibit states from hindering the capacity
of managed care plans to select providers to make up networks, to limit
the number of participating providers, to pay providers in innovative ways and
at alternative rates, and to incorporate incentives for consumers to use
participating providers."
However, HIAA does not support the establishment of a new government entity
to be known as the Health Expenditure Board that would set and enforce spending
targets and provider rates.
"Is it appropriate to treat medical care in a way that is 50 radically
different from virtually all other areas of the economy?" asked Schramm. "If
the answer is yes, isn't this properly a legislative function, rather than one
that should be turned over to an independent agency that is beyond the direct
control of the legislature and thus the people? How can any agency determine
rationally what is the 'right' amount to spend for medical care?"
Perhaps most troubling, Schramm added, is a provision that would give the
Health Expenditure Board authority to make non-binding recommendations of
provider rates through a negotiation process, either at the national or state
level.
"Providers, in particular, have an incentive to refuse to accept rates that
substantially constrain their incomes," observed Schramm. "In the event of such
an impasse, the board's non-binding authority would mean that everything is left
largely as it is now."
"Some of the 'answers' that we propound today may be found wanting and in
need of revision," Schramm noted in closing. "For these reasons, HIAA believes
that access and cost proposals should retain significant flexibility, and that
the states should be the principal locus of regulatory and oversight activity."
HIAA is a trade association of the nation's leading commercial insurance
carriers that provide health insurance for approximately 95 million Americans.
CONTACT: Richard Coorsh of the Health Insurance Association of America,
202-223-7787
ORGANIZATION: Health Insurance Association of America
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18TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 Chicago Tribune Company;
Chicago Tribune
July 2, 1991, Tuesday, NORTH SPORTS FINAL EDITION
SECTION: PERSPECTIVE; Pg. 14; ZONE: C; Voice of the people (letter)
LENGTH: 259 words
HEADLINE: AmeriCare's flaws
BYLINE: Tom Whisler, President, American Seniors, Inc
DATELINE: INDIANAPOLIS
BODY:
The newly unveiled Democratic health plan, = AmeriCare, = looks highly
flawed to seniors familiar with Medicare, Medicaid and the late unlamented
Catastrophic Care Act. The zeal to take care of everyone has again carried our
representatives into the woods.
Advocates argue that: 1. It will be more efficient because it eliminates all
the overhead costs resulting from numerous private insurance firms. Those who
like this argument should recall the two pre-unification Germanys. In socialist
East Germany, the "efficient" government provided one automobile for everyone -
the Trabant, a wretched, polluting, tiny automobile, available usually only
after years of waiting. In capitalistic West Germany, the government allowed
total "inefficient" competition of private auto firms. There, almost everyone
had a car, and one of his choice.
2. It will control costs. This magic will be achieved, first, by price
controls on doctors and hospitals - a prescription that is already beginning to
diminish the quality of health care under Medicare. The choice of physicians
and of available treat-ments is increasingly limited by the actions of the
regulators.
Our representatives are mesmerized by the belief that health costs can be
controlled by tweaking up the present system of employer-provided health care
plans, and are not seriously thinking about alternative ways of providing true
health insurance for most of our citizens in affordable fashion. The socialist
approach is likely to be self-defeating. Why are they trying to sell us a
Trabant?
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21ST STORY of Level 1 printed in FULL format.
Copyright (c) 1991 The Bureau of National Affairs, Inc.
Pension Reporter
June 17, 1991
Vol. 18, No. 24; Pg. 1000
LENGTH: 1029 words
SECTION: NEWS: Health Care.
TITLE: SEN. HATCH SAYS 'PLAY-OR-PAY' PROVISION WILL INCREASE EMPLOYERS' COSTS,
LOSE JOBS.
TEXT:
Sen. Orrin Hatch (R-Utah) June 11 strongly criticized the "play-or-pay"
provision in the Senate Democrats' health care proposal (S 1227).
The requirement that employers either provide health insurance for employees
or pay a payroll tax would be costly for businesses and could result in the loss
of some jobs, Hatch asserted. "The pay-or-play mechanism makes this legislation
a job-loss bill, not an enhanced access to care bill," he said.
The senator's comments came during Senate Labor and Human Resources Committee
hearings held June 11-12 on the Democratic proposal which was introduced June
5 by Senate Majority Leader George Mitchell (D-Maine), along with Sens. John D.
Rockefeller IV (D-WVa), Don Riegle (D-Mich), and Edward Kennedy (D-Mass), who
chairs the Labor and Human Resources committee (18 BPR 959).
Despite his criticism of "play-or-pay," Hatch did applaud the Democrats, in
particular Kennedy, for their reform proposal. However, Hatch said it is
essential that the Senate develop a bipartisan approach to health care reform.
"The plan is not in a bipartisan mode but we can get it there," Hatch said.
In separate testimony June 11, former government officials Joseph Califano
and Elliot Richardson both supported the general approach of the Democrats'
plan. In particular, Richardson, who was secretary of the Department of Health,
Education, and Welfare during the Nixon administration, said the reform plan
includes two major innovations -- the "play-or-pay" provision and a
comprehensive cost-control program.
'Triple Crown Winner'
Similarly, Califano, who served as secretary of Health, Education, and
Welfare during the Carter administration, said the reform plan is a "Triple
Crown winner." Not only does the proposal ensure continuous and affordable
access to health care, but businesses will find that health care costs are
"restrained and fairly distributed," Califano said. Furthermore, he said
physicians, hospitals, and other providers will face lighter administrative
burdens and will not be burdened with uncompensated care.
In a prepared statement, Kennedy said the play-or-pay provision was central
to the Democrats' comprehensive plan. In addition, he said the cost problem
will be addressed through provisions dealing with all parts of the problem,
i.e., cost-shifting, unnecessary care, excessive administrative costs, and the
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(c) BNA, Inc., Pension Reporter, June 17, 1991
blank-check reimbursement to providers.
But Hatch charged that the financing mechanism of the Democrats' bill --
which includes the payroll tax and a supplementary source of revenue to be
decided on by the tax writers -- is "all too typical."
"Break the bank; make others pay the costs," Hatch said.
Hatch further said the mandates in the play-or-pay scheme could result in the
loss of 3.5 million jobs. In particular, he said that employers with heavy
payroll expenses would be especially hard hit.
Hatch also raised the possibility that the play-or-pay mandate may encourage
current employers to drop private insurance coverage and pay into the government
program.
Preventive Care
Preventive care for pregnant women and children must be a key aspect of
health reform legislation, representatives of children's health organizations
told the committee June 12.
Universal provision of high-quality medical care beginning in the first
trimester of pregnancy, and continuing for the infant after birth, could reduce
the risk of infant mortality and morbidity by one-quarter, according to Reed
Tuckson, senior vice president for programs at the March of Dimes Birth Defects
Foundation. In prepared remarks, Tuckson noted that the United States ranked
19th among nations in infant survival.
Birth defects, low birthweight, and prematurity are the leading causes of
infant death, Tuckson stated. Over 100,000 of the 400,000 disabling conditions
that result from conditions of birth could be prevented through enhanced access
to comprehensive maternal and infant health services, he said.
While S 1227 is to be phased in over a five-year period, children come first,
Kennedy said in his opening remarks. "[T]he very first phase of the program will
guarantee affordable health insurance to every child," he said.
The American Academy of Pediatrics is generally supportive of S 1227, but
believes that certain preventive services included in a proposed federal-state
health program also should be included in the basic benefits package that is
another component of the bill, according to testimony given by Antoinette Parisi
Eaton, president of the American Academy of Pediatrics.
Preventive Services
The proposed federal-state program, known as Americare, would include early
and periodic screening, diagnosis, and treatment for beneficiaries --
encompassing such services as assessments of health, developmental and
nutritional status, appropriate immunizations, and vision, hearing, and dental
screens, Eaton noted. However, these services are not part of the employee
benefits package included in S 1227. These services are important to effective
preventive care for children and youth at all income levels, she said.
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Kennedy noted that "consistent with current business practices, most
preventive services are not covered [in the basic benefit package], but coverage
is required for prenatal care and well-baby and well-child care."
The committee also heard testimony from parents of children with disabilities
or conditions whose special health care needs are not covered by insurance.
Pam Punteney of Omaha, Neb., said her son has slipped through the cracks of both
the military and commercial insurance systems.
Punteney's family was covered by the Civilian Health and Medical Program of
the Uniformed Services (CHAMPUS) while her husband, Richard Punteney, served in
the Persian Gulf. During this period Punteney's son was struck by a car. Richard
Punteney has since returned to the United States and the family's CHAMPUS
coverage expires June 27. Meanwhile, no commercial insurer will cover health
care services related to Punteney's son's accident. "We have learned the hard
way that a person can't move freely from policy to policy in the current
insurance climate," she said.
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22ND STORY of Level 1 printed in FULL format.
Copyright (c) 1991 The New York Times Company
The New York Times
June 15, 1991, Saturday, Late Edition - Final
SECTION: Section 1; Page 22; Column 1; Editorial Desk
LENGTH: 555 words
HEADLINE: Half a Medical Plan Is Better
BODY:
President Bush spoke on domestic policy this week without even mentioning the
crisis in health care. But at least the Senate took notice, with hearings on a
Democratic plan to provide medical insurance for all Americans. Well, make
that half a plan; it would achieve universal coverage, but only waves at
spiraling costs.
Senator Mitchell, the majority leader, and the other sponsors thus duck a
stark truth: Effective reform will require sacrifice by doctors and patients.
But even half a plan beats no plan, which is what the Bush Administration
offers.
The bill adopts a play-or-pay system whereby employers provide basic medical
insurance or else pay a tax to enroll workers in a public program called
AmeriCare. For a fee based on income, AmeriCare would cover anyone otherwise
uninsured, including those now on Medicaid.
Pay-or-play puts the insurance burden on employers. It would force them to
compensate by ratcheting down wages -- a disguised tax - or laying off workers.
Yet pay-or-play is defensible because it would cover 30 million uninsured
Americans by building upon existing institutions.
Less defensible is the attempt to control costs with a dizzying array of
toothless provisions. A board made up of payers and providers would negotiate
spending targets and fees. But nothing would require agreement or impose
sanctions. So much for tough cost control.
The bill's major flaw is to preserve, even protect, the principal reason for
rising medical costs -- the prevailing fee-for-service system. Doctors are
rewarded for providing lots of services, even if unnecessary, to patients who
don't mind because they pay only a fraction of the bill. And because patients
choose their doctors, insurers are unable to negotiate treatment and fees. The
upshot: a system spinning out of control.
The best answer is managed care. A sponsor, perhaps a large employer or
public agency, directs enrollees to a designated group of doctors and hospitals.
The sponsor negotiates treatment practices and monitors quality. Because
sponsors wield tremendous market power, they are able to negotiate premiums
below fee-for-service plans.
Managed care restricts choice. But it's the only plan that has proved it can
provide quality care in the U.S. at reasonable cost. Mr. Mitchell's bill would
encourage managed care, but ineffectively. The AmeriCare program, for example,
was not designed as managed care.
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(c) 1991 The New York Times, June 15, 1991
Another key to cost control is to make patients cost-conscious. A cap on
tax-deductible insurance premiums, for example, would give consumers an
incentive to choose cost-effective managed care over fee-for-service plans.
This, too, is missing from the bill.
Nevertheless, the bill contains many thoughtful reforms. Treatment guidelines
would be developed to insure quality care and eliminate the need for wasteful
tests as a defense against frivolous malpractice suits. Insurance companies
would be prevented from extracting high premiums from the chronically ill. And
small businesses would be encouraged to join forces to negotiate insurance
contracts.
These are important ideas. But without taking on the payment system, or
capping tax subsidies, they won't get to the core of the problem. Before Mr.
Mitchell's bill can become the last word on health care reform, it will have
to find some guts.
TYPE: Editorial
SUBJECT: MEDICINE AND HEALTH; EDITORIALS; HEALTH INSURANCE; RATES
NAME: BUSH, GEORGE (PRES)
GEOGRAPHIC: UNITED STATES
LEXIS'NEXIS'LEXIS NEXIS
CONGRESSIONAL
QUARTERLY Weekly Report
Replenished FDIC
May Be Sole Survivor
Of Bank Bill Fights
Political Emergency
Democrats, GOP Rush To Prescribe Cures
Foreign Aid Shaken
To Soothe Public Ire Over Health Care
As Democrats Adopt
'America First' Theme
Falling Star:
NASA's Support
Election
26,
Fading in Congress
Deal To Extend
Chafee
Unemployment Pay
Mitchell
Bush
Exposes Fault Lines
In Benefits System
Rockefeller
Russo
By the Numbers:
R.T. Savidge
The Political Career
Of L. Douglas Wilder
Oo
C
November 16, 1991
Volume 49, No. 46
Pages 3349-3424 -
SOCIAL POLICY
COVER STORY
Growing Health-Care Debate
Widens Partisan Divisions
Voters may have spoken on need to overhaul system,
but politicians differ over how far to go
A
day before Pennsylva-
Nov. 12 announced a plan that
nia's special Senate
would impose a "play or pay"
election, goes the story
system. The plan would re-
on Capitol Hill, a health-care
quire employers to provide
overhaul proposal on which
workers and their dependents
Senate Republicans had been
with health insurance or else
working for more than a year
had two cosponsors: author
Election
pay into a fund from which
26,
insurance would be provided.
John H. Chafee, R.I., and Mi-
Play-or-pay is also the central
nority Leader Bob Dole, Kan.
concept in the Senate Demo-
But the day after Democrat
cratic leadership's bill (S 1227)
Harris Wofford pulled an upset
introduced in June by Majority
with a platform calling for
Leader George J. Mitchell of
national health insurance, the
Chafee
Maine. Although the coali-
number of cosponsors bal-
Mitchell
tion's plan is a second-genera-
looned to 20.
Bush
tion version of a proposal put
Chafee denies the story
together by many of the same
but concedes that Wofford's
Rockefeller
people in 1989, in the new
win "certainly didn't do us
health-reform environment
any harm" in garnering co-
the announcement led network
sponsors. And just the fact
Russo
newscasts and The Washing-
that people are telling it illus-
ton Post. (Weekly Report, pp.
trates how the outcome of the
1507, 419)
Pennsylvania election has al-
ROBERT T. SAVIDGE
The House Democratic
tered the dynamic of health-
Caucus on Nov. 14 unani-
care reform in Congress.
But the health-care issue's rise from
mously approved a resolution calling
Efforts to revamp the nation's
a "might" to a "must" on the congres-
for "comprehensive national health
$660-billion-and-growing health sys-
sional agenda brings political risks as
insurance legislation" that would
tem have been perking along all year,
well as opportunities, particularly as
guarantee insurance coverage to all
but action has been confined mostly to
members struggle with such controver-
Americans and contain health-care
a dozen or so Hill health experts try-
sial details as who will foot the bill.
costs. The move marked the first step
ing to convince confused and reluctant
Wofford's election, said Sen. Dave
toward resolving a feud between
colleagues that an overhaul could be
Durenberger, R-Minn., "confirmed the
House Democrats who support the
good policy and good politics. Still, no
diagnosis we've suspected for years.
play-or-pay approach and those who
one was sure how such a complicated
The health system is sick. But what it
prefer a "single payer" plan such as
and potentially divisive issue might
did not do was prescribe the cure."
Canada's, in which the government
play with voters.
Since the Pennsylvania election
pays all the nation's health bills.
But now, the voters, at least in one
jump-started the health debate:
Mitchell announced Nov. 13 that
large state, seem to have sent a mes-
Chafee and a dozen colleagues on
the Senate Democratic Policy Com-
sage: Do something about the health
Nov. 7 unveiled the long-awaited Sen-
mittee would sponsor field hearings
system, or else.
ate GOP plan. The bill (S 1936) de-
between Dec. 9 and 13 to highlight the
"The American people signaled, I
pends largely on incentives to encour-
health-care issue. The "road show,"
think particularly in the Pennsylvania
age employers to offer workers
as it has been dubbed, is to travel to
election, that they want some atten-
insurance. It emphasizes preventive
Detroit, Cleveland, Denver, Atlanta
tion to this problem," said House
health care and would overhaul the
and Tampa, Fla.
Speaker Thomas S. Foley, D-Wash.,
handling of malpractice claims.
President Bush, who has yet to fol-
on Nov. 13. "It's the one that's causing
The National Leadership Coalition
low up on promises in his 1990 and
more anxiety for their economic future
on Health Care Reform, whose mem-
1991 State of the Union addresses to
than any other."
bership includes business and labor
study the issue, is strongly hinting
groups as well as former Presidents Ger-
that he will soon make public a plan of
By Julie Rouner
ald R. Ford and Jimmy Carter, on
his own. "I'd like to have a compre-
CQ
NOVEMBER 16, 1991 - 3377
SOCIAL POLICY
The Tide of History Turns Again
O
n the surface, the political
Doctors and lawyers argued for
pressures today are similar to
national health insurance. The
those that stirred Washington a
1915 recommendation of the Amer-
generation ago. Americans talk of
ican Association for Labor Legisla-
mortgaging homes and farms, fight-
tion, a group of lawyers, academics
ing off bankruptcy or being unable
and other professionals, prompted
to send children to college, all be-
the first serious debate. Their pro-
cause of crushing medical bills.
posal gained momentum in 1917,
Lawmakers, in turn, talk of
when the American Medical Asso-
plans to radically expand the gov-
ciation's (AMA) House of Dele-
ernment's role in guaranteeing
gates voted for a government health
health care for Americans.
insurance program.
But the political realities are
Labor leaders, among them
different.
Samuel Gompers, criticized the
In 1965, President Lyndon B.
concept, arguing that national in-
Johnson was fresh off a landslide
surance would result in government
victory, with an expanding econ-
control over the working class. But
omy and a brute determination to
it was not labor that scuttled the
pass his Great Society legislation.
Even so, he focused his health-
NATIONAL ARCHIVES
idea; it was the anger of an impor-
care attention on programs for
Truman rode the health issue to victory in 1948.
tant lobby - burial insurers, who
complained that a proposed burial
two groups of Americans - Medi-
benefit would undercut a thriving
care for the elderly and Medicaid for the poor. And still, he
private industry. "It was a simple tactical error, and tactics
had to compromise with a reluctant Congress and battle a
have always mattered," says Paul Starr, a sociology profes-
hostile physicians' lobby. "It took all his horses," recalls
sor at Princeton University.
Joseph A. Califano Jr., one of Johnson's top aides.
The idea remained dormant until the 1930s. As the
Now, Harris Wofford's stunning upset in the Nov. 5
nation reeled under the Great Depression, the coalition
Pennsylvania Senate election - and his middle-class
backing national health insurance reform had reversed
appeal for national health insurance - has ignited a new
itself. Then, as in the Medicare fight, the AMA stood in
political fire for broad reform. But this time, pivotal
opposition, labor in support.
differences make congressional action more confusing.
In 1934, President Franklin D. Roosevelt's Committee
Unlike Johnson, President Bush is headed into an
on Economic Security considered compulsory health in-
election with his public approval rating falling. He faces
surance. But word that the panel was studying the matter
a Congress controlled by the opposition party and he has
"was responsible for so many telegrams to members of
yet to spell out a plan.
Congress that the entire Social Security program seemed
Moreover, Congress approaches the debate chastened
endangered," Edwin Witte, the committee's executive di-
by its last experience with a major health policy bill - the
rector, told a historian. Roosevelt dropped the idea.
1988 law to provide insurance for Americans who suffer
The national health service debate was revived less
catastrophic medical costs. Faced with voter outrage over
than a decade later, as the country called up men to serve
the surtax to pay for it, Congess repealed it a year later.
in World War II. Nearly one-third of those between the
That embarrassing turnabout illustrated the diffi-
ages 18 and 37 were found physically or mentally unfit.
culty of translating political rhetoric into public policy,
In response, the first comprehensive national health in-
particularly when someone has to pick up the tab.
surance bill was introduced June 4, 1943, by Sens. Robert
Over 75 years, complexity has been the one constant
F. Wagner, D-N.Y., and James E. Murray, D-Mont., and
in health-care debate. The terms have shifted in re-
Rep. John D. Dingell Sr., D-Mich.
sponse to consumer needs, and the coalitions for change
"Dad's bill was crafted with the help of the [Roose-
have realigned, depending on who bears the cost.
velt] administration," says Dingell's son, chairman of the
"There's always been a permissive consensus on the con-
House Energy and Commerce Committee, who has re-
cepts," notes Theodore Marmor, a political science pro-
introduced the bill in every Congress since he succeeded
fessor at Yale University. "But the more details people
his father in 1955. "It's still the best national health
have, the less they support any program."
insurance approach around."
In words that Pennsylvania's Wofford would echo
Roots of the Debate
nearly five decades later, Roosevelt included in his 1944
Washington adopted its first government health in-
State of the Union address an "economic bill of rights"
surance program in 1798, for merchant marine sailors
incorporating the "right to adequate medical care and
who contributed a few cents a month to pay for hospital
the opportunity to achieve and enjoy good health."
care provided by a marine hospital. But it was not until
But it was his successor, Harry S Truman, who made
the early 20th century that the idea of mandating health
health care a political priority. "We should resolve now
insurance for the general public became an issue.
that the health of this nation is a national concern; that
3378 - NOVEMBER 16, 1991
CQ
SOCIAL POLICY
On National Health Insurance Ideas
financial barriers in the way of attaining health shall be
removed; that the health of all its citizens deserves the
help of all the nation," said Truman on Nov. 19, 1945.
Quotables
Truman rode the issue in his narrow 1948 victory, and
the Wagner-Murray-Dingell bill got its first hearing in
"The best health facilities and the finest doctors in the
1949. But as the Cold War became a fact of American
world are not much help to the people who cannot afford
life, the AMA's dire warnings that the proposal
to use them."
amounted to "socialized medicine" reverberated across
-President Harry S Truman, Oct. 15, 1948
the country. After a few liberal senators campaigned on
the issue and lost in 1950, Democrats dropped the idea.
"I will propose a program to insure that no American
family will be prevented from obtaining basic medical care
Scaling Back to Medicare
by inability to pay."
-President Richard M. Nixon, Jan. 22, 1971. The next
The political atmosphere had changed. With the
month, he sent Congress a proposal requiring businesses
AMA's power proved and the new Eisenhower adminis-
to provide basic health insurance coverage to employees.
tration resisting national health insurance, Democrats
scaled back their ambitious health-care plans. The idea
"Whenever senators and representatives catch a little
of hospital insurance for the aged began to take hold, and
cold, the Capitol physician will see them immediately,
the first bill toward that end was introduced in 1952.
treat them promptly and fill a prescription on the spot.
If health insurance is good enough for the president, vice
"At that time, there were no retiree health plans, and
president and the Congress of the United States, then it is
the pressure for us to act came from the middle-aged,
good enough for every family in America."
middle-class who were beginning to pay the bills for their
-Sen. Edward M. Kennedy, D-Mass., Aug. 12, 1980
parents," says Califano.
Dwight D. Eisenhower responded by launching the
"I am committed to bring the staggering costs of
idea of catastrophic coverage for the low-income elderly,
health care under control."
while Democrats continued to push broader insurance
-President Bush, Jan. 31, 1990
for the aged. Republicans and Democrats divided as
"Health care isn't a matter of privilege but a funda-
John F. Kennedy made health insurance for the elderly
mental human right."
an important piece of his 1960 presidential campaign.
-Sen. Harris Wofford, D-Pa., June 1, 1991
In office, Kennedy tried to rally support with stories
of people mortgaging their homes to pay for their par-
ents' health care, and in 1962, he tried to personalize the
issue for Congress. "I talked to a member of Congress
1980, the substantive debate was lost in the political tug
from my own state a week ago," Kennedy said, "who told
between the two men. The election that year of Ronald
me he was going to send his daughter away to school but
Reagan, a longtime opponent of big government, tempo-
because his father had been sick for two years he could
rarily ended talk of major changes.
not do it. And congressmen are paid $22,500 a year -
The pinch on the middle class later forced Reagan to
and that's more than most people get."
reconsider his position, however. In 1986, he called for a
However, Kennedy struggled against formidable resis-
study on "how the private sector and government can
tance within his own party: conservative Southerners led by
work together to address the problems of affordable in-
Ways and Means Chairman Wilbur D. Mills of Arkansas.
surance for those whose life savings would otherwise be
Congress took no action during Kennedy's administration.
threatened when catastrophic illness strikes."
In 1964, Johnson took the issue to the nation in his
Over 18 months, Congress crafted legislation that went
presidential campaign and came back with a mandate for
beyond Reagan's mandate to create the largest expansion
action.
of Medicare coverage since its inception. Reagan was pre-
Johnson agreed to rework a funding formula for cov-
sented the bill just weeks before the 1988 presidential
erage for the poor that had been directing the over-
nominating conventions, and he not only signed it, but
whelming majority of funds to large states. That done,
hailed it as a bill that would "remove a terrible threat from
Congress enacted the 1965 Medicare-Medicaid bill, a
the lives of elderly and disabled Americans." It wasn't long,
jewel in Johnson's Great Society agenda.
however, before support for the program unraveled, as
senior citizens became outraged over the program's cost.
A Call for Broader Coverage
The bill was repealed in 1989.
Inflation in the 1970s revived calls for broader na-
Now the political climate appears to have shifted yet
tional health coverage. Presidents Richard M. Nixon and
again. Part of the business community - squeezed by the
Jimmy Carter supported some form of broad health in-
high cost of health insurance premiums - is on board. And
surance reform, but the idea had no real champion and
Harris Wofford's victory proved that middle-class voters are
faced continued animus from the AMA and business.
ready to demand action. "The question today is not whether
The issue briefly took center stage as Sen. Edward M.
we are going to have national insurance," says Professor
Kennedy, D-Mass., challenged Carter over it. But as
Marmor. "The question is whether it's going to be any good."
Kennedy prepared to enter the presidential primaries in
-Beth Donovan
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NOVEMBER 16, 1991 - 3379
SOCIAL POLICY
hensive health-care plan
44
Do or Die
that I can vigorously take to
For House Democr
the American people," Bush
action has been held up
told reporters in Rome on
the dispute about whether
Nov. 8, saying it could come
to proceed with a play
before next year's election.
pay plan similar to Mitch
ell's or to line up behind
Partisan Divisions
government-paid plan such
Since the beginning of
as one (HR 1300) Marty
the year, members of Con-
Russo, D-Ill., introduced.
gress have introduced more
"Sometimes I think the
than three dozen health-
play-or-pay people hate the
care reform proposals.
single-payer people over
Wofford's win has also has-
R. MICHAEL JENKINS
more than they hate the cur
tened the boiling down of
rent system," said one exas-
those plans into Democratic
Democrats, led by Sen.
perated House leadership
and Republican camps.
Mitchell - with
aide.
"The race is now be-
But the urgency of the
tween the parties to flesh
governors, above - are
issue - and the impending
out some of the specifics,"
talking about mandating
adjournment - appears to
said Rep. Ron Wyden, D-
be forcing a compromise un-
Ore.
coverage. Republicans,
der which Democrats would
Democrats are emphasiz-
led by Sen. Chafee, want
endorse play-or-pay as a
ing universal coverage - the
to fine-tune the current
first step toward a single.
guarantee that every Ameri-
payer system.
can receive health insur-
system.
"It's an orderly way to
ance, whether the mecha-
move," said Henry A. Wax-
nism be play-or-pay or
man, D-Calif., whose own
single payer.
opportunity to experiment with health
proposal (HR 2535) embodies the
"To assure that every American
reform by making it easier to "waive"
play-or-pay approach, but only be-
can exercise his or her right to afford-
federal rules and by allowing them to
cause he says it is more politically
able health care, we must require that
establish a program to provide health
possible. "The advantage of play-or-
health insurance is provided," said
coverage to low-income, uninsured in-
pay is it requires fewer federal dollars
Mitchell on the Senate floor Nov. 13.
dividuals not otherwise eligible for
up front and disrupts the health-care
Republicans, by contrast, stress
Medicaid, the joint federal-state
system less."
that the current system is good and
health program for the poor.
House Democratic leaders said af-
only requires marginal fixing up.
Like the Senate Democrats' plan,
ter the caucus meeting Nov. 14 that
"Our system has much to com-
the GOP version does not include pro-
they expected to have a consensus bill
mend it," House Minority Leader
posals to cover the estimated $150 bil-
ready early in 1992.
Robert H. Michel, R-Ill., testified be-
lion cost over five years.
Lawmakers from both parties ac-
fore the Ways and Means Committee
Financing "is so controversial, no
knowledge that there are dangers in
in October. "We ought to seek solu-
one party can step forward on it," said
developing the details, both because
tions that build on what we have."
Chafee. "It's got to be a consensus."
the issue is complicated and because
That is the basis of the GOP sena-
That decision eliminated a pro-
reform, by definition, will outrage at
tors' plan, which Chafee said "builds
posal Republicans floated earlier this
least some entrenched interest groups.
on the good in our system, reforms the
summer that would have capped the
"We can't just wave some magic wand
bad and encourages innovation in
amount employers can deduct for
and make everything hunky-dory,"
both the private and public sectors."
health insurance premiums for their
said Chafee.
The proposal's centerpiece would
workers. Such deductions currently
Still, said Sen. John D. Rockefeller
provide tax incentives to encourage in-
are unlimited.
IV, D-W.Va., "I'd much rather be in
dividuals and businesses who now can-
"To say that's controversial would
the minefield than out of the war."
not deduct health insurance expenses
understate it," Chafee said.
Added Rockefeller, who pressed hard
to buy insurance.
House Republicans, however, are
on the issue last summer while explor-
The measure also seeks to make it
still grappling with the touchy financ-
ing a bid for the presidency, "health
easier and less expensive for small
ing question as they put the finishing
care is an open door" for the Demo-
businesses to obtain insurance by en-
touches on their plan.
crats. "If we botch it up by walking
couraging them to form insurance-
But some House Republicans are
through it, that's our problem."
buying groups and by requiring insur-
worried that they may be left behind
But others fear a presidential elec-
ance companies to make small-
if they don't act soon.
tion year might not be the right time.
business policies available and
"We've spent a lot of time dotting
If members are not careful, warned
limiting rate increases.
the i's and crossing the t's, and I'm not
Rep. Brian Donnelly, D-Mass., "we
The bill also emphasizes preven-
sure how necessary that is politically,"
could charge ahead in this politically
tive health care, by both providing
said Fred Grandy, R-Iowa, a member
charged atmosphere and get into a
tax credits and upping authorizations
of a House health task force. Wofford
bidding war that would make the 1981
for existing programs.
just won an election by saying 'I'm for
tax bill look like reasonable policy."
Finally, the plan gives states more
health care, details to follow."
He was referring to congressional ac-
3380 - NOVEMBER 16, 1991
CQ
SOCIAL POLICY
Talking Points
M
embers have introduced dozens of legislative pro-
posals for overhauling the nation's health-care sys-
tem, ranging from cosmetic changes to restructuring.
Most of the plans share at least some general concepts:
Cost Containment
The Holy Grail of health-system reform is slowing
the rise of medical costs, which have been climbing at
double-digit rates for most of the last decade. No one
knows for sure how to accomplish the broad goal, and
sponsors of various bills apply the cost-containment
label to any provision they think might save money.
For example, the Senate Democratic leadership's bill
(S 1227), introduced by Majority Leader George J.
Mitchell, D-Maine, would create a board similar to the
Federal Reserve. It would set national health-care
spending goals and organize negotiations between those
R. MICHAEL JENKINS
who pay for health care, such as insurance companies,
A clinic volunteer draws a blood sample from a patient.
and those who provide it, such as doctors and hospitals.
Rep. Marty Russo, D-Ill., and other sponsors of bills
the physicians who are sued most often for malpractice
calling for a single government-run health system say
frequently are not guilty, while many negligent doctors
money would be saved by eliminating duplicative paper-
never get sued, studies suggest.
work.
The Bush administration's proposal and the Senate
And the Senate Republicans' proposal (S 1936), in-
Republicans' bill would cap non-economic damages,
troduced by John H. Chafee, R.I., lists under cost-con-
such as those for "pain and suffering," arising from
tainment its proposals to reshape the medical malprac-
medical negligence. Both those plans, the Senate Demo-
tice system, increase access to preventive care services,
crats' plan, and several other free-standing bills also
and broaden "managed health care."
would encourage states to test ways to settle disputes
out of court.
Mandates/Tax Credits
After containing costs, the goal of virtually all of the
Prevention
overhaul plans is to expand access to health care for the
Policy-makers agree that more and better preventive
estimated 34 million Americans who lack health insurance.
care, such as immunizations for children and prenatal
Most of the Democratic bills include some sort of
examinations, can help hold down future health-care
required coverage, on the theory that that is the only
costs. Health and Human Services Secretary Louis W.
way to guarantee that everyone is included. Under the
Sullivan emphasizes that getting Americans to eat a
"play or pay" schemes included in several of the plans,
healthy diet, exercise more, and reduce smoking and
most notably those of Senate Democrats, employers
drinking can avert costly illnesses.
would have to provide workers and their dependents
Most of the proposals that mandate coverage include
with coverage or pay into a fund from which insurance
language to ensure that preventive services are part of
coverage would be provided. The most sweeping man-
any insurance package. The Senate Republican plan,
date, in Russo's bill (HR 1300), would require the gov-
which has no mandate, would increase the authoriza-
ernment to insure everyone for health care, as Canada
tions for two existing programs - Community Health
does.
Centers and the National Health Service Corps - that
GOP plans, by contrast, eschew mandates as coun-
currently provide primary and preventive care in medi-
terproductive, arguing that they would drive some em-
cally underserved areas.
ployers out of business. Instead, Republicans prefer in-
centives to expand health insurance. Most of these
Managed Care
plans, the Senate's among them, lean heavily toward
Finally, most of the overhaul plans give a nod to
providing tax credits and deductions for individuals and
making "managed care" more available, long a goal of
businesses to help offset insurance costs.
the Reagan and Bush administrations. These plans in-
clude health maintenance organizations, which charge a
Malpractice Reform
flat fee for all services, and preferred provider organiza-
Just about all the major plans, Democratic and Re-
tion, which offer patients lower fees if they see certain
publican, seek to overhaul the medical liability system,
doctors who have agreed to charge less. Managed-care
and the Bush administration offered its own proposal in
plans seek to contain costs by providing patients with a
May. Studies have shown that "defensive medicine,"
single point of entry to the health-care system and re-
such as unnecessary tests and lab work ordered by
stricting access to specialists and hospitals.
doctors who fear lawsuits, is driving up costs. Also,
-Julie Rouner
CQ
NOVEMBER 16, 1991 - 3381
SOCIAL POLICY
tion on President Ronald Reagan's
HEALTH/EDUCATION
tax-cut proposal, when Democrats and
Republicans competed over who could
be most generous to taxpayers - end-
Two Similar Bills Aim at Loans
ing with a bill that Democrats blame
for today's huge federal deficits.
For Medical Education
Without what are bound to be un-
popular cost-containment proposals,
said Donnelly, "you have a disaster of
L
egislation to reauthorize education
monumental proportions."
loans and medical training services
But the atmosphere could make
for health professionals moved for-
inaction just as dangerous, say others.
ward in both the House and Senate
"I think it will boomerang if people
the week of Nov. 11.
play around with it as an issue for too
The House on Nov. 12 passed a bill
long," said Sen. Paul Wellstone, D-
(HR 3508) by voice vote to revise and
Minn., who pushed universal health
extend existing programs for appro-
care in his own 1990 upset of Republi-
priations of up to $2 billion through
can Sen. Rudy Boschwitz.
fiscal 1994. In addition, the bill would
Wellstone fears Wofford's success
authorize government guarantees in
at calling for health-care reform with-
fiscal 1992 on up to $365 million in
out giving details could become "the
loans to students under the Health
functional equivalent of kissing ba-
Education Assistance Loan (HEAL)
bies. Everyone will be for it until we
program.
get to the specifics."
The next day, the Senate Labor and
BOXSCORE
Human Resources Committee voted 17-
Short-Term Solutions
0 to approve a similar measure (S 1933)
Bills: HR 3508, S 1933 - Medical
Privately, just about everyone con-
that would authorize nearly $3 billion
recruitment and training
cedes that the most likely outcome be-
for the programs through fiscal 1996.
programs.
fore the election will be an incre-
That bill would authorize $400 million
Latest action: House floor
mental bill similar to legislation
in student loan guarantees.
introduced in October by Lloyd Bent-
Both measures include new steps
passage, voice vote, Nov. 12;
Senate Labor Committee
sen, D-Texas, and Dan Rostenkowski,
to cut down on the high default rate
D-Ill. They are the chairmen of the
on these loans. One provision would
approval, 17-0, Nov. 13.
Senate Finance and the House Ways
change the way the government
Next likely action: Senate floor.
and Means committees, respectively.
assesses fees on new loans.
Background: The measures
Like the Senate Republican plan,
Under current law, the same loan
would reauthorize two titles of
the bills (S 1872, HR 3626) try to make
origination fee is charged to all who
the Public Health Service Act that
health insurance more available and af-
request loans under the HEAL pro-
provide financial assistance for
fordable for small businesses. They also
gram. The fees go into a pool that is
medical education and training.
increase the tax deductions for self-
supposed to cover defaults.
employed individuals and small busi-
The House bill would allow the
Reference: House committee
nesses. The bills also would expand pre-
government to charge a loan origina-
approval, Weekly Report, p.
ventive services available under
tion fee based on the number of de-
2960.
Medicare, the federal health insurance
faults for students in each field (podi-
program for the elderly and disabled,
atry vs. chiropractic, for example).
and create a commission to advise Con-
The more defaults in a particular
to needy students. The administration
gress and the president on strategies for
field, the higher the origination fee.
has since backed away from that idea,
reducing health-care costs.
The Senate bill would do the same.
and it agreed to support the guaran-
An overhaul, Bentsen told report-
It would also prohibit any loans to
tees after sponsors revised their bills
ers in October, will take time "and in
institutions with default rates of 25 per-
to crack down on defaults.
the meantime, a lot of people are going
cent or more. The Senate bill would cut
Both bills would add social workers
to suffer." He said his bill addresses
the origination fee in half for borrowers
and therapists to a program that edu-
"things we can do now, not things that
who got a creditworthy co-signer.
cates health-care personnel on AIDS.
will block more major reform later."
In addition, the Senate bill would
The House bill would authorize $17
That is a strategy with which many
authorize $1 million in demonstration
million for this program in fiscal 1992;
Republicans agree. Congress should
grants to experiment with direct gov-
the Senate would authorize $21 million.
"do whatever we can do without wait-
ernment loans. The program would in-
Labor Committee Chairman Ed-
ing for utopia and perfection" said
volve 20 schools with low default rates,
ward M. Kennedy, D-Mass., sponsor
Rep. Bill Gradison, R-Ohio, at an Oc-
and the schools would be responsible
of S 1933, hopes to get it to the Senate
tober Ways and Means hearing.
for all loan-servicing costs.
floor before Congress adjourns.
Concurred Grandy, "All of us are
This is in response to a proposal
Kennedy said he was pleased with
committed to incremental reform be-
floated earlier in the year by the Bush
the unanimous support for the bill,
fore the election."
administration to scrap the loan-guar-
which moved through the committee
Those who want more can just point
antee system and provide loans directly
without hearings or debate. "I was all
to Pennsylvania. Said Rockefeller: "A
ready to hold a series of hearings," he
punitive public is our best ally."
By Elizabeth A. Palmer
said.
3382 - NOVEMBER 16, 1991
CQ
Services of Mead Data Central, Inc.
PAGE 11
6TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 The New York Times Company
The New York Times
April 30, 1991, Tuesday, Late Edition - Final
SECTION: Section A; Page 19; Column 1; Editorial Desk
LENGTH: 732 words
HEADLINE: OBSERVER;
Dead Brains Society
BYLINE: By RUSSELL BAKER
BODY:
It's obvious the United States is ready for what used to be called socialized
medicine. The Democrats ought to be leading the agitation for it and the fact
that they aren't is further evidence suggesting their party is brain dead.
If it weren't, Democrats would surely be beating the feathers and dust out
of George Bush for doing nothing while the country's rickety private
health-insurance system totters toward collapse.
Statistics illuminate the political wealth waiting to be mined from the
health-care issue: 33 million Americans with no health-insurance coverage at
all, millions more afraid to move into better jobs for fear of losing their
coverage and ever more insurers confining coverage to the healthiest, which is
to say, people who least need it.
More: There's the skyrocketing price of insurance for people who can't get
group coverage. For people who can, there are constantly rising costs or
constantly shrinking benefits, sometimes both simultaneously.
The anecdotal evidence that this is a dynamite political issue is also
compelling. High on the list of Great American Nightmares is catastrophic
illness, so called not only because it is hard on body and soul but also because
it wreaks catastrophe on a family's financial health.
Even big corporations are starting to cry "Mercy!" Not long ago A.T.& T.
took a strike when it tried to lighten the ever-swelling burden of its
employees' health plan. Wherever a new labor contract is being negotiated this
spring, there you will find management trying to reduce its commitment to
employees' health-care programs.
Large corporations are big mules in Washington. When they hurt, Congress and
Presidents weep for their suffering, and relief is soon on the way. On health,
however, even big business can't expect much from President Bush. Health care
is just not a Republican issue.
Democrats' refusal to make it their issue shows how desperately they now
need a risk-taking prophet to bring the party back from the dead as Barry
Goldwater brought the Republican Party back from the other side in the early
1960's.
LEXIS'NEXIS'LEXIS NEXIS
Services of Mead Data Central, Inc.
PAGE 12
(c) 1991 The New York Times, April 30, 1991
Goldwater did the trick by standing for something. "Conservatism," he called
it. It may have looked more like old-fashioned, radical Western populism, but
whatever it was, it re-introduced ideology into a politics stultified by people
who stood mainly for doing only what was necessary to get elected.
This was called "pragmatism," and Goldwater's suggestion that people in
politics should stand for something was at first treated as lunacy. Goldwater's
1964 Presidential campaign slogan -- "In your heart you know he's right" -- was
often edited by Democratic vandals to read, "In your heart you know he's nuts."
The Democrats now need just such a nut. Goldwater took a brutal beating from
Lyndon Johnson in 1964, and in the process started his "conservatives" toward
domination of American politics.
The 1992 election ought to be the natural opportunity for Democrats to renew
their acquaintance with ideas about governing a country with staggering
problems. If reports of President Bush's invincibility are not exaggerated, what
an opportunity for some live Democrat to start calling the brethren up from the
grave.
A party with nothing to lose can afford the luxury of being a party of
ideas. After all these years Democrats could finally stand for something vital.
For a national health-care program, for instance, even though it sounds daring
and outrageous, having been long stigmatized by the medical lobby as "socialized
medicine.'
A nation being bankrupted at the hospital might not be so easily scared by
the bugaboo word "socialized." Anyhow there are ideas whose time will come, and
it's surely better politics, if you're doomed to lose, to stand for those ideas
than to try out-Bushing Bush, as Democrats commonly do nowadays, by denouncing
taxes and debt.
What a pathetic case the Democrats are when they try to be more Republican
than the Republicans, when they cringe before the gun lobby, boast of their
hatred for taxes and turn their backs on America's squalor because confronting
it might hurt them politically.
Democrats aren't needed for such things. The number of Republicans available
for the work is more than adequate. Hey, you Demos, get out of that grave --
there's a whole country out here waiting for somebody to stand for something!
TYPE: Op-Ed
SUBJECT: MEDICINE AND HEALTH; HEALTH INSURANCE; ELECTION ISSUES
NAME: BAKER, RUSSELL
GEOGRAPHIC: UNITED STATES
LEXIS'NEXIS'LEXIS NEXIS
Scary
HEALTH
CARE
GOOD
Politics
HEALT
HEALTH
CAR
CARE
THE
FOR AL
FORA
EW
Health
NEW
YOR
Bush and Congress will
duck the issue for '92
n a rare and near-unanimous consensus,
Congress and the Bush administration
have agreed on two things about the
NEW
YOA
nation's health-care system: it's a disas-
ROBERT FOX-IMPACT VISUALS
trous failure, and nothing much will be
With any solution, an OX to be gored: Union members demonstrate for a health-care bill
done about it at least through next year.
To be sure, Democratic elders in the Sen-
ate. have unveiled a sweeping bill that
Worst off are the uninsured. But there's
to puncture the myth that health is a prob-
would extend health insurance to all Amer-
no national will to help the have-nots, SO
lem of the poor and indigent."
icans, including the more than 34 million
Democrats who have long championed na-
The tactic is working. "It's becoming a
who now have no coverage at all. And ad-
tional health insurance to bring them into
middle-class issue because that's who's get-
ministration spokesmen, pleading for ac-
the tent are now trying instead to mobilize
ting scared," says Ellen Goldstein, a pri-
middle-class support. That means enlisting
vate-pension lobbyist. But it works only up
tion, have warned that health-care costs
will soak up 37 percent of the gross national
the 200 million Americans who have insur-
to a point: poll after poll shows that while
product by the year 2030 if nothing is done
ance but find it a bureaucratic nightmare
voters consider health care a birthright,
to slow them down. But the Democratic bill
or fear it may let them down in a real
they are not willing to pay for it. "People
emergency. Once a week, West Virginia
want to hear about health care," Murphy
can't pass without George Bush's support,
and Bush is waiting for it to be shot down
Democrat Bob Wise gives a one-minute
explains, "but they don't like any of the
before he comes in with his own measure
speech on the House floor, telling a medical
messages-that it'll cost more or that doc-
tors make too much money. There's no real
calling on state and local governments to
horror story: about a 2-year-old with cere-
find ways to cut medical costs. And while
bral palsy, for instance, who can't get ther-
applause line." Worse, any solution gores at
both parties hope to use health as an issue in
apy because his father's insurance plan
least one big OX: doctors, hospitals, insur-
next year's campaign, neither wants to pay
doesn't cover pre-existing conditions, or a
ance companies, labor and big business all
teenager with hemophilia whose father's
have their own angles on the issue. Law-
the political price of dealing with it before
the election. "It's the scariest politics of
insurance premiums have risen to $900 a
makers still flinch at the memory of the re-
all," says Republican consultant Mike
month. "I'm putting faces in front of the
bellion of the affluent elders two years ago
Murphy, "because there's no easy answer."
statistics," Wise explains. "And I'm trying
when retirees were asked to pay part of the
cost of catastrophic health care.
For all those hazards, law-
makers headed by Sen. Ted
The Costs of Care
Kennedy have worked for two
decades to pass a national-
Climbing medical charges are pricing many
health bill. They have recruits
Americans out of the health-care market.
these days in a band of younger
legislators who sense the power
The U.S. spent $671 billion on health care in
of the issue. But it's a measure
1990, twice the amount spent eight years ago,
of the times that the Democrat-
Canada's national health-care system spent
ic bill proposed this month is
$1,683 per capita in 1989 percent of GNP);
remarkably similar to one that
the U.S. spent $2,354 (12 percent of GNP).
Kennedy scorned as inade-
More than 34 million Americans have no
quate when Richard Nixon of-
fered it in 1971. The measure
health insurance.
would force all U.S. businesses
Of the uninsured, 85 percent are employed.
to "play or pay," either enroll-
About 27 percent of Hispanics are uninsured,
ing their employees in health-
20 percent of blacks and 12 percent of whites
insurance plans or paying into
By one estimate, the U.S. will have 140,000
an "AmeriCare" fund that
more physicians by the year 2000 than in 1986,
would buy insurance for all
DAVID YORK-MEDICHROME
adding $40 billion to the nation's health bill.
Americans not enrolled in busi-
Bigger bills: In an intensive care unit
ness plans. The scheme started
as a bipartisan measure and
18 NEWSWEEK JUNE 24, 1991
still has a surprising amount of qualified
Sununu argues that it's even less impor-
are tackling the health-care problem," says
support from interest groups, including the
tant to affluent Republicans, SO why should
a disgruntled senior administration aide.
National Association of Manufacturers. It
Bush risk anything before he has to? "It's
"The reality is, we are avoiding it."
would cost $6 billion in its first year, with
just too hot," says one of his aides. And
How the issue will play in political reali-
funding largely unspecified, but its spon-
Bush himself tends to side with Sununu,
ty is anybody's guess. For West Virginia
sors maintain it would save $78 billion in
taking a minimalist approach in the belief
Sen. John D. (Jay) Rockefeller, sponsorship
national health costs over five years.
that there's little the government can do in
For his part, George Bush made a cam-
of the Democratic bill is a high-stakes gam-
any case. As with other domestic matters
ble that could make or break his presiden-
paign promise in 1988 to provide "access to
(page 20), the president wants to throw the
tial hopes. Other Democrats, like Texas
health care for all Americans," and he has
hot potato back to state and local officials.
Sen. Lloyd Bentsen, worry about the bill's
assigned Louis Sullivan, secretary of
'Avoiding it': So, while stalling on Sulli-
health and human services, to head a task
cost to small businesses. Republicans are
van's report, the White House strategy is to
force on how to doit. Sullivan, who says he's
quick to underscore that: Senate Minority
drop minor bills into the vacuum. Bush has
"a doctor first and a politician second," is
Leader Bob Dole said the bill's sponsors are
already proposed a medical-malpractice re-
"looking for a new pocket to pick, and small
eager to move. But when he went to the
form, asking states to limit jury awards to
business will fill that role.' In the end, it will
White House recently to report progress,
$250,000 for pain and suffering and provide
depend on how much fear of ruin Bob Wise
he was told not to rush. The task force isn't
mediation for malpractice disputes. And he
expected to report for at least six months.
and his colleagues can drum up. If the issue
announced last week that he will ask Con-
Sullivan is at odds with chief of staff John
remains number four on Sununu's charts,
gress for $40 million next year for vaccines
Sununu, whose polls show that health care
the president has probably won his bet.
and clinics to immunize poor, inner-city
is only the number-four priority for voters.
children. "The idea is to make it look like we
LARRY MARTZWITH ELEANOR CLIFTAND
ANN McDANIELin Washington
Rocky for President?
WV ith health care one of the
The more serious matter is if
WE nation's top pocketbook
there were nothing to reduce
issues, Democrats want a can
to a sound bite, he says. In the
didate with a good bedside
Senate, he is highly regarded
manner West Virginia Sen
for the zeal he brings to issues.
John H. (Jay) Rockefeller
Next week; he will report on
may be just what the spin doc-
the findings of a National
tor ordered. Rockefeller has
Commission on Children. "I
name recognition, a towering
don't know if he's got the mag-
physical presence, and the re
ic, or any magic," says Demo-
spect that comes from being
cratic consultant Michael Mc-
one of the Senate's leading
Curry But someone with a
health-care: advocates. "We
good basketful of ideascangoa)
have to act now to make sure
long way in this race
you t have to be a Rocke
Rockefeller may find it hard
feller to afford decent health
to talk convincingly about the
care in this country, he says
squeeze on middle-class vot-
Rockefeller is among the lat-
ers His wealth has been esti-
est undeclared candidates to
mated at $100 million; his
be talked up as the Democrat
Washington home has 11
ic standard-bearer in '92
bathrooms and a treehouse
RICK STAR
Because of his expertise,
that could pass for a starter
Trying to make health policy a winning issue: Jay Rockefeller
he is better positioned than
home But the Democrats
other presidential hopefuls
have had good luck with the
into West Virginia politics,
to use health care as a meta,
of its steel mills and coal
moneyed class (FDR, JFK)
spending $12 million to be
phor for Bush's failure to ad
mines symbolizes the past,
And Rockefeller has paid his
re-elected governor and $12
dress domestic problems. But
not the future. But Rockefel-
dues He was a VISTA volun
million on :his 1984 Senate
Rockefeller has trouble trans-
ler has overcome the suspi-
teer in) the 1960s, working
race. But it took decades
lating his good intentions into
cion of Yankee outsiders in
with the poor in West/Virgin
before he convinced people,
crisp campaign speeches. He
one, of the nation's poorest
ia. "I was a New Yorker; I had
he was motivated by more
is a candidate in search of a
states. He says his forays
Washington license plates; I
than ambition. "I'm the first
sound bite.
around the country have been
was 6. feet 6½ inches. I
Rockefeller in a thousand
Rockefeller finds it hard to
"exhilarating," and that he
went around saying, I want
generations to put poor peo-
settle for the picture gloss.
will decide whether to run
to do good'.
ple. to work and not make
He is a cosponsor of the Demo
this summer. He's not wor-
Steel mills: The experience
money at it," he once joked:
cratic national health bill
ried about raising money.
radicalized Rockefeller, a Re-
His twosterms as governor
and as chairman of the Pep
'People get a kick out of writ-
publican and a nephew of Nel-
aren a compelling case for
per Commission, last year
ing a check to a Rockefeller,"
son Rockefeller, and prompt-
what he would do for the coun-
recommended a $66 billion
he says. But will anyone get a
ed him to become a Democrat
try. West Virginia's grinding
overhaul of the health system
kick out of voting for him?
He virtually bought his way
poverty continues; what's left
ELEANOR CLIFT
NEWSWEEK JUNE 24, 1991 19
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27TH STORY of Level 1 printed in FULL format.
The Associated Press
The materials in the AP file were compiled by The Associated Press. These
materials may not be republished without the express written consent of The
Associated Press.
June 11, 1991, Tuesday, PM cycle
SECTION: Washington Dateline
LENGTH: 785 words
HEADLINE: WALTER MEARS: Health Insurance Is a Hot Issue, But Not at the White
House
BYLINE: By WALTER R. MEARS, AP Special Correspondent
DATELINE: WASHINGTON
KEYWORD: What Health Care
BODY:
One of these election years, national health insurance is going to become an
issue that can swing votes - but the White House seems to be wagering that it
won't be 1992.
The administration is handling health care with a study and silence, except
for President Bush's proposal to control spiraling medical malpractice costs by
seeking to limit damage awards.
Bush will discuss his domestic agenda in a White House address Wednesday
night, but an administration health care proposal is not expected to be part
of it.
Democrats are pushing legislation to overhaul the whole system; while
formulas vary, the objective is universal health insurance coverage. There are
some Republican proposals along similar lines.
The measures come with titles that sound more like political slogans than
laws: Health USA, Americare, Medicore, Health Care for All Americans. That
may be appropriate on a subject that has been under political debate for
decades.
It's been the topic of more talk than action, and may be again.
But let health care costs and needs continue unanswered, says Democratic
Sen. John D. Rockefeller IV of West Virginia, and it will lead to economic
collapse.
At current escalating rates, Rockefeller said, the $$765 billion that will be
spent on health care this year will become $$2 trillion in the year 2000.
Rockefeller is exploring a bid for the Democratic presidential nomination,
and health care is one of his issues. That amounts to a test case on the kind
of complex problem that is hard to handle in the shorthand of a political
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The Associated Press, June 11, 1991
campaign.
There's no question about the need to do something. The questions are what
and when and how to pay for it with the government deep in the red and
constrained by the spending limits of the 1990 budget deal, ceilings that last
past the 1992 election.
The administration is considering health care proposals, but the topic is
not high on the priority list.
That yields the subject to the Democrats, for whom it is not new business.
They're been at it since Harry S. Truman's time. The Medicare program of health
insurance for the elderly was a Truman administration proposal, but Lyndon B.
Johnson was president before the bill became law, 20 years later. Truman also
favored broader national health insurance, which didn't stand a chance in his
time.
There have been Republican initiatives too. Richard M. Nixon proposed a
national health insurance plan in 1971, with employers and workers to share the
cost of basic coverage and the government to insure the poor. Democratic
critics pointed to gaps and limits in the Nixon plan; Sen. Edward M. Kennedy of
Massachusetts called it a formula for "poorhouse medicine."
But a debate once centered on health care for the needy now involves a
problem that is reaching the middle class, as health costs and insurance rates
soar, and employers cut back benefits or coverage.
And Kennedy is now co-sponsoring a plan that shares some features with that
old Nixon proposal.
An estimated 34 million to 37 million Americans have no health insurance;
more than 60 million are under-insured against the costs of major illness. The
health care expenses of large U.S. businesses increased by nearly 22 percent
in 1990. Health care costs equal more than 12 percent of the gross national
product.
Proposals for change range from government health insurance to cover every
American to voluntary systems with incentives to business to provide health
coverage for their employees.
Senate Democratic leaders have proposed what Sen. George J. Mitchell,
D-Maine., called a compromise, to guarantee coverage by requiring that employers
provide insurance or pay an extra payroll tax to finance government health
insurance.
That plan also would include medical cost controls, and government health
insurance for the needy, at an estimated cost of $$6 billion, with no immediate
proposal for raising the money.
That's one problem; another lies in Republican, conservative and small
business opposition to the mandatory provision to insure or be taxed.
Still, after all the years of talk about health costs and insurance,
something is going to happen, perhaps not immediately, but soon.
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The Associated Press, June 11, 1991
The American Medical Association, a bastion of opposition to government
involvement in health care in Truman's era and long after, now favors reform
to guarantee that all Americans can get care. "An aura of inevitability is upon
us," said an editorial in the AMA Journal.
"For millions of Americans ... health care is the pocketbook issue," said
Rockefeller.
EDITOR'S NOTE - Walter R. Mears, vice president and columnist for The Associated
Press, has reported on Washington and national politics for more than 25 years.
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5TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 The Christian Science Publishing Society;
The Christian Science Monitor
August 5, 1991, Monday
SECTION: THE U.S.; Pg. 1
LENGTH: 819 words
HEADLINE: Rising Cost Of Health Care Could Hurt Bush
BYLINE: John Dillin, Staff writer of The Christian Science Monitor
DATELINE: WASHINGTON
KEYWORD: Stats
HIGHLIGHT:
Impact on family budgets concerns voters, pollsters say. QUESTION OF ACCESS
BODY:
EVERY time a Chrysler rolls off an assembly line in the United States, the
cost includes at least $700 in health-care expenses for the company's
employees.
Health-care costs at Chrysler Corporation, like thousands of other American
businesses, are becoming an overwhelming burden that is driving up product
prices, cutting profits, and threatening the prosperity of American firms and
families.
Democrats say health care will be the most critical and controversial
domestic issue of the 1990s. They say it could bring about a political showdown
with George Bush that could put a Democrat back into the White House.
"Americans see major problems in the health-care system and want strong
public solutions," says Celinda Lake, a Democratic pollster.
Republicans admit there is cause for concern. "The political future of the
country is up for grabs here," says Doug Bailey, a Republican consultant. The
domestic agenda, "led by health care, = is what the battle will be about, he
predicts.
Thirty-five million people in the US have no health insurance, but Ms. Lake
says the problem goes far beyond "compassion" for those uninsured Americans.
Even people with good jobs and insurance sense that they are increasingly at
risk, she says. Costs are escalating so fast that millions feel in danger.
Pollster Humphrey Taylor, president of Louis Harris and Associates Inc.,
agrees. "Fear of losing one's health insurance is now a major concern," he says.
"This is a pocketbook issue, not a compassion issue, for most voters," Lake
says. As one voter recently told her in a focus group:
"Affordability is the biggest problem. If you speak of access, you should be
able to afford it. Something could be there, available. But if you can't
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(c) 1991 The Christian Science Publishing Society, August 5, 1991
afford it, what good is it?"
The crisis that Lake and Mr. Taylor see in health care has sprung from
several causes.
1. The middle class "squeeze." Ever since the 1970s, middle- class incomes
have leveled off. Wives often must enter the workplace just to keep their
families on the same economic level that a single breadwinner could attain in
the 1950s and 1960s.
2. Job insecurity. Many sources of steady jobs banks, auto companies, and
steel mills, to name a few - - have hit hard times. That has forced millions of
people to take lower-paying jobs, often without fringe benefits like health
insurance.
3. Soaring costs. Americans spent $604.1 billion on health care in 1989, or
about $2,400 per person. That is double the per capita spending in many European
countries where health-care access is guaranteed. Health-care inflation in
the US has outpaced inflation in every other segment of the economy since 1981.
Lake explains the political fallout this way: "The 1992 election comes at a
period when voters are worried about the economy, their standard of living,
their children's economic future, and the general direction of the country.
Today, rising prices are voters' top economic concern
and
the
cost
of
health
is central to those concerns."
The political question is: Can Democrats agree on a plan to solve the
problem? Or will the Republicans co-opt them?
There are many competing ideas, ranging from the nationalization of health
care to tinkering with the present system.
A number of leading senators, including majority leader George Mitchell of
Maine, John D. Rockefeller IV of West Virginia, Edward Kennedy of Massachusetts,
and Donald Riegle of Michigan, introduced the principal Democratic proposal
June 5.
Senator Mitchell noted at the time: "We must find a way to bring
health-care costs under control or we risk adding millions more to the rolls
of the uninsured and ultimately face a total collapse of the health-care
system."
The heart of their proposal is "play or pay." Employers would be forced
either to provide health insurance or to pay a tax that would go into a fund
known as AmeriCare. Those not covered by employers would have access to
AmeriCare coverage.
The bill would also create the Federal Health Expenditure Board, which would
set spending goals to hold down costs.
The American Medical Association supports a plan that would require employers
to provide health insurance and would create risk pools to insure people now
considered uninsurable. Medicaid would be expanded to provide uniform nationwide
coverage for those who could not afford it.
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Others, such as Rep. Marty Russo (D) of Illinois, support a Canadian-style
system in which the federal government would pay all health-care costs. This
"single-payer" system would save so much in administrative costs that it could
cover all of today's uninsured Americans with no increase in spending, its
supporters claim.
Yet Robert Moffit of the Heritage Foundation sees danger in all this for
Democrats: "Everybody says they want high- health care, but nobody wants to
pay for it. The Democrats run the risk of overpromising It has lots of
political danger."
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68TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 Globe Newspaper Company;
The Boston Globe
June 2, 1991, Sunday, City Edition
SECTION: NEW HAMPSHIRE WEEKLY; Pg. 1
LENGTH: 1199 words
HEADLINE: N.H. stakes rising for Democrats in '92;
NEW HAMPSHIRE WEEKLY
BYLINE: By John Milne, Globe Staff
DATELINE: ATKINSON
KEYWORD: NEW HAMPSHIRE POLITIC DEMOCRATIC PARTY
BODY:
Cindy Leuschner is a single mother of two from Salem who lost her job as an
electronic-parts assembler last year. She has no insurance to pay for her
11-year-old son's allergy shots or for her 9-year-old daughter's eye surgery.
Despite President Bush's popularity in the polls, Leuschner's economic condition
may persuade her to vote for a Democrat.
"I have a lot of different feelings about Bush," Leuschner said. "I think
Bush is for the people with money."
Barbara Parker is a resident of Epsom whose husband, John, a carpenter, is
out of work. They lost their health insurance last week. "We're middle class,"
she said. "We don't get a tax break. We don't get squat."
Leuschner and Parker are the kind of voters the Democratic presidential
candidates are looking for.
Politicians and insiders agree that this year the presidential sweepstakes is
shaping up differently. The New Hampshire primary, now scheduled for Feb. 18,
has always picked winners. No one has been elected president without winning in
New Hampshire. But because of changes in the political calendar and the apparent
decline in influence of the Iowa caucuses - few candidates are traveling through
Iowa this month - some insiders contend that the nation's first primary will be
even more influential this campaign.
The only announced candidate for president, former US Sen. Paul Tsongas of
Massachusetts, has made several political trips to New Hampshire and expects to
open a campaign office this month.
In the past two weeks, other Democratic hopefuls such as Sen. John D.
Rockefeller 4th of West Virginia, Sen. Tom Harkin of Iowa and Senate Majority
Leader George J. Mitchell of Maine have tested the waters. And other potential
candidates have been calling prominent Democrats in the state. More entries in
the primary are anticipated.
"I wouldn't be surprised to see as many as 12 candidates in the race," said
Boston pollster Brad Bannon at a recent reception in Sunapee.
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(c) 1991, The Boston Globe, June 2, 1991
Bush plans to announce for reelection this fall, aides say, and so far he has
no Republican opposition.
Among the Democrats, the candidates "are all trying to come up with a
message," said the state House Democratic leader, Mary Chambers of Etna. In
1988, most Democrats agreed on the issues and stressed personal and character
issues. In 1992, candidates are offering Democrats a kind of multiple-choice
test on which direction the party should take. "What you're going to see in 1991
and 1992 is a crossroads for the party," Tsongas said recently in Manchester.
This is why Leuschner stood on a steamy blacktop surrounding Palmer Gas Co.
talking to Rockefeller, who said he is "aggressively pursuing the possibility of
running for the presidency in 1992."
Health care, on which expenditures have doubled in a decade to $ 660
billion, is one area analysts say Bush is vulnerable. And health care is one
area Democrats are trying to present an alternative.
Rockefeller said his 11-year-old had allergies, but because he is the
great-grandson of one of America's most famous capitalists, he is able to afford
medical treatment. Around them, newspaper photographers and TV camera crews
jockeyed to get the 6-foot-6-inch Rockefeller and the 5-5 Leuschner in the same
frame.
"If you want to get ahead of this problem, you've got to have health
insurance reform," Rockefeller told her emphatically. "Only the federal
government can do it."
When Parker made her plea at a reception in Concord, Harkin agreed with her.
"I want to be a person who fights for working people," he said.
Harkin said he is leaning toward a national health care program such as the
one Canada has, particularly one that spends money on prevention as well as
treatment.
Rockefeller and Mitchell have been involved in drafting a "play or pay"
proposal to be introduced this month that would replace Medicaid, the federal
and state health insurance program, with Americare. Employers would either
have to provide health insurance benefits at a specific level or pay a tax,
estimated at about 8 percent of payroll, to provide coverage for the uninsured.
Other Democrats are proposing solutions to the nation's problems. Tsongas
said he believes Democrats should have greater concern about economic growth,
adding that the party has for 25 years "been worrying about how you redistribute
wealth instead of how you create it." He said Democrats give off an
antibusiness tinge, and Americans do not trust them to run the economy.
Mitchell is arguing that Democrats should pick traditional issues such as
child-labor laws, civil rights, environmental legislation. "Every major step to
expand opportunity, to create hope, to break down barriers of discrimination,
every one was created by Democrats, usually over Republican opposition. That's
our heritage," he said, "and we ought to be proud of it."
Harkin, who became the first Iowa Democratic senator to win reelection in a
campaign in which both sides used negative advertising, said candidates should
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(c) 1991, The Boston Globe, June 2, 1991
be fighters. "I don't think we've had a good populist candidate running for
president in a long time," he said. Although Harkin has one of the Senate's most
liberal voting records, he has rejected the notion that he wants to expand
government.
Sen. Albert Gore of Tennessee, a 1988 candidate, is writing a book about the
environment and is keeping in touch with New Hampshire supporters, said George
Bruno of Manchester, a Democratic National Committee member. Gov. Douglas
Wilder of Virginia made a trip to New Hampshire last summer.
Rev. Jesse Jackson has spoken in the state twice within the past year.
Supporters expect that Gov. Bill Clinton of Arkansas will run, but Sen. J.
Robert Kerrey of Nebraska has been cool to offers of support. Tossups include
Sen. Lloyd Bentsen of Texas and House Democratic Leader Richard A. Gephardt.
Gov. Mario M. Cuomo of New York has a a number of supporters, although he has
said he does not intend to run.
Despite all this ferment, a survey commissioned last week by Times-Mirror Co.
found that just 1 in 4 Americans, 24 percent, could name a Democrat who has
been mentioned as a 1992 candidate. The biggest showings were still in single
digits: Cuomo at 9 percent and Tsongas at 7 percent.
Politicians and activists have contended that this lack of broad candidate
recognition will bring intensive campaigning to New Hampshire, because the
primary may acquire greater importance. "New Hampshire, even if California
comes in, will have even more importance than it has in the past."
Most campaigners and observers said that the late start of the race should
not change the outcome much. "You spend an awful lot of time talking to
activists who can't really help until the fall or winter," said Katherine
Rogers, an organizing veteran. "And many of them want paid campaign jobs."
Said Judith Reardon, a longtime Democratic organizer: "In 1988 I ended up
supporting former Sen. Gary Hart, and after he dropped out, I found it
embarrassing to see the long conversations that Gephardt and Michael Dukakis had
with very small groups of Hart people as they tried to convince me to support
them. I found the whole process demeaning to the candidates."
LEXIS'NEXIS'LEXIS'NEXIS
HEALTH
Middle-Class Medicaid
Medicaid was designed
H
arriet Fridkin tries not to let her
to take some of the sting out. A change
to help the nation's
personal opinions cloud her pro-
still reverberating through the system
fessional advice. But Fridkin, an
came in 1988, when Congress passed a
poor. But with help
information and referral special-
ist at the Alzheimer's Association of
law to help avoid impoverishing the
spouses of patients who receive medicaid-
from government and
Greater Washington, which is located in
financed nursing-home care.
an affluent suburb of the nation's capital,
smart lawyers,
And, as Fridkin has learned, middle-
sounded slightly galled as she recounted
class and affluent elderly have also been
relatively well-to-do
the telephone call from a brother and sis-
finding ways not sanctioned by govern-
ter, both young professionals. They want-
ment to hang on to family wealth and yet
Americans are finding
ed to know how they could get medicaid,
the federal-state welfare program that's
still take advantage of the publicly
new ways to have the
financed medicaid program.
intended for poor people, to pick up the
Fridkin said that her parents have
program pick up their
tab for their widowed mother's nursing-
home costs while preserving her assets for
eschewed such legal maneuvers and paid
nursing-home bills.
their inheritance. "Dad didn't mean all
for her father's care themselves, though it
that money to go for long-term care,"
has meant some financial hardship for
her mother. "He feels that's not what the
Fridkin recalled them saying.
system's meant for," Fridkin said. "He
BY JULIE KOSTERLITZ
"It's not my job to prejudge them,"
thinks it helps bankrupt the system."
Fridkin said. "It's my job to refer them"
to books and professionals that can help.
Though no one knows how many peo-
ple are manipulating the system, a bur-
But Fridkin is also sympathetic to the
geoning number of lawyers and financial
plight of many of the growing number of
advisers are counseling affluent Ameri-
callers who want to know how they can
cans on how to shuffle, shed or shelter an
qualify for government help without
bankrupting themselves. "Most of them
elderly family member's assets to qualify
for medicaid nursing-home benefits.
think the system's unfair, and I go along
Though most such maneuvers-
with them on that," she said. "Many of
euphemistically known as "medicaid
them saved for a rainy day, and they get a
rainstorm that never ends. When you
estate planning"-are entirely legal, they
clearly run counter to the intent of the
place someone in a nursing home, that's
law.
the rainstorm that never ends."
In addition, several states want to tin-
Fridkin isn't alone with her split sym-
ker with their medicaid rules to allow the
pathies. While Congress continues its
long-running debate on how best to
affluent elderly to use the program while
reform the system, and the private insur-
preserving some wealth. In broad strokes,
ance industry tries to tap deep into the
the program would be opened to persons
who buy private long-term care insurance
elderly market, medicaid is increasingly
to cover some of the costs. Advocates of
being used to provide an expensive bene-
fit-nursing-home care-for middle-class
this approach say that it's not only more
and affluent elderly.
humane, and preferable to having the
affluent cheat the system, but that it
The medicaid program, which is in-
could also help slow the disastrous rise in
tended to provide such care for the elder-
medicaid costs.
ly poor, has also long provided a safety
Congress has been ambivalent about
net for elderly Americans of all income
the growing acceptance of medicaid as a
levels-after they exhaust their earnings
and assets on nursing-home care.
middle-class program: concerned, but
But because giving up the savings and
seemingly at a loss as to how to proceed.
While many lawmakers have decried let-
wealth of a lifetime in their hour of need
is so repugnant to middle-class and afflu-
ting the wealthy dodge the rules to keep
their wealth and get medicaid, no one has
ent people, and so politically unpopular,
the federal government and the states,
seriously contemplated a major crack-
down.
over time, have made some concessions
The private insurance industry, which
2728
NATIONAL JOURNAL 11/9/91
sees the affluent elderly as a potentially
In recent years, private insurers have
has come to pay for about 45 per cent of
large market for private long-term care
begun to market policies aimed at cover-
the nation's $53 billion nursing-home bill.
insurance, has begun pressing Congress
ing such care, but the policies are expen-
to investigate the problem, and a few car-
In recent years, the pressures on the
sive: The typical annual premiums at age
riers want lawmakers to go after the
medicaid program have gotten worse:
65 for some of the more comprehensive
year after year of higher-than-inflation
'estates of deceased affluent people who
policies currently range from $1,000-
ended up on medicaid. Such crackdowns,
increases in health care costs, program
$3,000. Despite continuing improve-
however, are not a politically popular
expansions dictated by Congress and,
ments, these policies still draw fire from
option.
lately, the recession-caused double
consumer advocates over whether they
Some key members of Congress are
whammy of burgeoning welfare rolls and
deliver all that they promise.
slowing tax revenues.
uneasy about plans, including the pro-
The elderly poor can have their nurs-
posed state experiments, that would pro-
And the costs of long-term care are
ing-home costs paid for by medicaid, and
mote private long-term care insurance,
expected to stay on a steep upward curve,
so can the middle class-once they've
saying that it's too expensive for most
in part because the old are living longer,
essentially bankrupted themselves by
elderly, doesn't have much of a track rec-
and in part because the vast numbers in
ord and doesn't always deliver what it
promises.
These lawmakers also have philosophi-
cal reservations about the state experi-
ments. "I'm troubled by the idea of the
medicaid program, designed to assist the
poorest of the poor elderly, being used to
subsidize private insurers by backing up a
private insurance policy," Rep. Henry A.
Waxman, D-Calif., chairman of the Ener-
gy and Commerce Subcommittee on
Health and the Environment, said in an
interview. "I don't think it should be a
program to protect the assets of middle-
class people; it should be a safety net pro-
gram for the poor." Waxman prefers a
broader overhaul of the system.
There may also be a political worry:
Measures aimed at appeasing the afflu-
ent could rob the health care reform
movement of some of its most powerful
Richard A. Bloom
advocates.
Rep. Henry A. Waxman, D-Calif., chairman of the Health and Environment Subcommittee
Although Congress refused to grant
permission for the state experiments last
"I don't think [medicaid] should be a program to protect the assets of middle-dass people."
year, Connecticut recently found a loop-
paying for care. Roughly 20 per cent of
hole in the law that allows it to proceed
the baby boom generation are only a few
nursing-home residents who started their
anyway, and other states may follow suit.
decades from old age. The Health Care
stays paying for their care end up on
But many state officials, including
Financing Administration (HCFA),
medicaid.
which runs the medicare and medicaid
some who say they share Waxman's
Watching their life savings ebb away as
programs, has estimated that medicaid's
reform-minded ideas, contend that they
their health fails isn't a particularly palat-
can't afford to wait. "If there were a bet-
nursing-home costs will grow two-and-a
able option for most elderly Americans.
half-fold by 2000.
ter alternative, I'd be more than glad to
Nor is going on welfare or getting the
embrace it," said James Tallon, majority
These pressures and the scarcity of
second-class care that medicaid recipi-
leader of the New York state Assembly
funds create a de facto tug-of-war be-
ents often receive. Nevertheless, the
and a leading supporter of the state's
tween two populations: poor women and
medicaid program has become the payer
proposed long-term care experiment.
children, and poor and middle-class
of last resort for many middle-class elder-
"This discussion would not come up if we
elderly.
ly. Slightly more than half of all elderly
were anywhere near a broad-based natio-
It's a dilemma that government offi-
medicaid recipients are poor enough to
nal program of long-term care. We've
cials don't like to acknowledge. Most
be on a cash welfare program. The rest
been talking about it for a long time, but
think that welfare programs ought to
are on medicaid because their medical
I don't sense we're close to sweeping
serve only the poor. On the other hand,
expenses exceed their income and assets.
reform."
politicians don't like to confront the
If this isn't ideal for the elderly, it's also
problem of middle-class constituents, or
a problem for public officials. The medi-
even their own families, bankrupting
MIDDLE-CLASS SAFETY NET
caid program, which is designed primarily
themselves solely to have the government
to meet the short-term health care needs
About 43 per cent of Americans turn-
share the cost of nursing-home care.
of poor women and children, has had to
ing 65 this year will eventually spend time
So far, however, those who are unhap-
spend an increasing share of its limited
in nursing homes. And when they do,
py with the system haven't managed to
funds for long-term care of the elderly.
they're in for a shock. The average cost of
surmount the political and fiscal difficul-
Elderly Americans in nursing homes or
nursing-home care is about $30,000 a
ties of creating a public program that
other long-term care facilities constitute
year, and medicare, the federal health
would offer universal coverage for nurs-
just 5 per cent of medicaid beneficiaries
care program for the elderly, doesn't
ing-home or home health care. A reform
cover it.
but account for 22 per cent of spending
plan designed in 1990 by the U.S. Biparti-
under the program. Nationally, medicaid
san Commission on Comprehensive
NATIONAL JOURNAL 11/9/91 2729
Health Care (the Pepper Commission)
ly spouses, but also toward a greater role
with wide bipartisan support from its
wake of the catastrophic illness insurance
for medicaid as protector of the middle
blue-ribbon members, envisions a limited
legislation. During the highly publicized
class. "If you look at what Congress has
role for private insurers and, in its first
campaign against the bill, which was
done, it has certainly liberalized [medi-
year, would cost $43 billion. It's a tough
waged primarily by affluent elderly who
caid] and made it available to more peo-
sell, especially when added to the expect-
felt that it imposed a tax on them not
ple," said M. Garey Eakes, an attorney in
ed billions in costs to overhaul the broad-
commensurate with the added benefits,
Arlington, Va., who specializes in legal
er health care system.
many Americans became aware for the
affairs of the elderly.
In the meantime, the federal govern-
first time that neither medicare nor the
ment and the states have tried to make
catastrophic illness benefit covered nurs-
some accommodations. Many state gov-
THE ARTFUL DODGERS
ing-home care. Before passage of the bill,
ernments have established comparatively
polls conducted by the American Assoc-
The medicare catastrophic act and the
lenient eligibility standards for the elderly
iation of Retired Persons (AARP) found
spousal impoverishment provision may
to qualify for medicaid's nursing-home
that nearly two-thirds of elderly Ameri-
also have expanded medicaid's role for
benefits. In 31 states, there is no limit on
the middle class in unintended ways.
cans thought such care was covered by
how much income elderly people can
medicare; after passage, that number
For some time now, the unpleasant
have and still qualify for medicaid, pro-
dropped to roughly 33 per cent.
prospect of spending their way into
vided that their medical and nursing-
In addition, large numbers of elderly
poverty to qualify for help with nursing-
home expenses exceed it. With rising
home costs has spurred some among the
Americans began seeking legal help to
understand the new spousal impoverish-
affluent elderly to find other, more cre-
ment benefit. The new wave of clients
ative ways to qualify for medicaid. And
Many relatively
helped to fuel the growth of a hitherto
the stakes have been getting higher as the
small and peripheral legal specialty: elder
nation's elderly have become a wealthier
affluent Americans
law. The National Academy of Elder
demographic group. Census figures cited
Law, founded just three years ago, now
in a new study by the Health Insurance
boasts 1,300 members. "Spousal impover-
are angling to
Association of America (HIAA), for
ishment helped create the elderly law
example, show that the median net worth
bar," said Nancy Coleman, director of
of Americans age 65 and older increased
shuffle, shed or
from $68,600 in 1984 to $73,471 in 1988.
the American Bar Association (ABA)
Commission on Legal Problems of the
(Over the same period, the median net
Elderly.
shelter their assets
worth of American households dropped
3 per cent, to $35,752.)
Once merely a variant of estate plan-
ning, this specialty has increasingly come
Some have simply lied about their
to qualify for
to focus on helping the affluent plan for
assets and hoped they wouldn't get
disability in old age, including such mat-
caught. Others have tried more sophisti-
medicaid nursing-
cated gambits, often on the advice of
ters as establishing a "living will" to gov-
lawyers, that stayed within the letter-if
ern choices in medical care or providing
for power of attorney in the event of
home benefits.
not the spirit-of the law.
mental incompetency.
There are, as it turns out, numerous
A sizable portion of the business, how-
techniques for sheltering assets or trans-
ferring them to family members as a pre-
ever, consists of "medicaid estate plan-
lude to getting medicaid to pay the tab
ning." Once in the door, clients seeking
advice on the spousal impoverishment
for nursing-home care. Among them:
nursing-home costs, people with progres-
rule could find out about a whole host of
opening joint bank accounts; holding
sively higher incomes have become eligi-
other asset and income-shifting tech-
property in joint tenancy; investing in
ble for the program. (There are still ceil-
niques.
irrevocable, nontransferable annuities;
ings on the assets one can have and
Although Congress has passed a vari-
and paying family members for services,
qualify, but the law makes some excep-
ety of laws over the past decade that are
such as shopping and transportation.
tions to these rules.)
Although states can attempt to recoup
intended to guard against such abuses,
And, in 1988, Congress made an im-
most of them are fairly ineffective.
money from the estates of deceased med-
portant concession. The "spousal impov-
According to Eakes, the president of the
icaid recipients, few do so aggressively. A
erishment" benefit-one of the few pro-
1988 report by the inspector general of
academy, a provision of the catastrophic
visions to survive when the ill-fated
coverage law that appears to make asset
the Health and Human Services (HHS)
medicare catastrophic coverage act was
Department found that just over half the
transfers more difficult actually makes
repealed in 1989-substantially raised
states tried to recover money from
them easier. Before the change, he says,
the amount of income that spouses could
someone in Virginia who transferred
estates and that only two states placed
retain before handing the balance over to
liens on homes as an asset-recovery tech-
$12,000 in assets with the intent to qualify
medicaid to help defray the cost of a
nique; moreover, most states recovered
for the medicaid program would be
patient's nursing-home care. Federal law
only a fraction of what they might have
penalized by being made ineligible for 40
allows states to let "at-home" spouses
been able to. If every state recovered
months. Now, under the new law, such an
retain as much as $66,480 of the couple's
assets as effectively as Oregon, the most
offender would be ineligible for only 8
months.
combined assets and as much as $1,662 in
effective state, the report said, nation-
monthly income.
wide collections in 1988 could have been
The medicaid estate planning business
Although the new benefit got lost in
$589 million instead of the $74 million
is booming. For starters, there's been a
the political hubbub over the catastrophic
that was recovered that year.
spate of how-to books, including the
benefits bill, a few observers at the time
brazenly titled Avoiding the Medicaid
Although hard data are lacking, many
cited it as an important symbolic move:
Trap: How to Beat the Catastrophic Costs
experts say that public interest in medi-
toward more-humane treatment of elder-
caid eligibility stratagems increased in the
of Nursing Home Care (Henry Holt,
1989): "By following the tips on these
2730 NATIONAL JOURNAL 11/9/91
pages, an older person
can save most
portion of the need, and beyond that help
needier individuals. Moreover, he point-
or all of their savings, despite our law-
those who need public support?"
ed out, long-term care insurance is a
makers' best efforts," writes author
Under the experimental plan, elderly
risky, unproven line of business in which
Armond D. Budish.
participants would contribute to the cost
policies are often purchased 20 years in
'Budish and other lawyers in the busi-
of their care in a more rational way: by
advance of need. What happens if insur-
ness say that they're providing an impor-
pooling risks. With medicaid as a back-
ers are unable to make good on the poli-
tant service, principally for middle-class
stop, insurance companies could limit the
cies?
people who are in a tough spot. The very
risks they assume and, as a result, offer
HCFA officials privately expressed
wealthy looking to shield large assets for
more affordable policies to consumers.
their reservations to Capitol Hill lawmak-
posterity are, they contend, a minority.
This approach would avoid the indigni-
ers about launching an experiment that
Even so, Eakes said, "Whether it's right
ties of impoverishment, foundation and
could take 20 years to produce meaning-
or wrong with respect to financing long-
state officials maintain, while presenting
ful results. Typically, medicaid law is
term care, it's a pretty well-entrenched
an alternative to cheating the system.
waived only to permit short-term experi-
notion in this country that one of the best
Such a plan, its boosters further main-
ments.
things you can do for your family is pass
tain, would save the states money; the
But the real problem, many critics con-
wealth to them at end of life."
more middle-class people who buy insur-
tend, is the implied change in medicaid's
Although the ABA's Coleman was
ance, the fewer who will "spend down"
mission. Should a program designed for
among the founders of the National
their savings and end up on medicaid at
the poor help the rich pass wealth to their
Academy of Elder Law, she confesses to
public expense.
heirs? And should it serve as a stop-loss
being disturbed by many of its members'
Connecticut, the first state
emphasis on medicaid estate planning. "I
to begin developing the idea,
wish we had an adequate way of paying
envisions a system in which
for it, but I don't think we should be rob-
those who buy private insur-
bing the poverty program to do it," she
ance can keep a level of
said.
assets equal to the amount
"I harangue them constantly," Cole-
the policy pays out on their
man said of her colleagues. "I explain to
behalf and still be eligible for
them the problems this creates for the
medicaid if and when the
public trust.
They argue that it's their
private benefits run out.
ethical obligation as attorneys to explain
Someone with modest assets
to clients all the options that might be
who bought a one-year poli-
before them."
cy, for example, might be
able to protect roughly
$30,000 in assets should he
THE STATES JOIN IN
or she then require medi-
For different reasons and in different
caid's help.
ways, a few states are also trying to find
To proceed, the states last
ways to allow more of the affluent elderly
year sought a congressional
to benefit from the medicaid program.
waiver of certain medicaid
Over the past five years, with planning
provisions. But during hear-
grants from the Robert Woods Johnson
ings by his subcommittee,
Foundation, seven states have been try-
Waxman and several wit-
ing to devise experiments that would
nesses questioned whether
allow these elderly to hang on to more of
the proposed experiments
their assets, and be entitled to medicaid
would benefit all parties as
benefits, provided that they bought long-
advertised.
term care insurance first.
Private insurance has
The foundation's premise is that a
major pitfalls, warned Phyllis
costly new public plan is unlikely to be
Torda, the director of health
enacted any time soon. Moreover, the
policy for the Washington-
Richard A. Bloom
fledgling private insurance industry has
based Families USA Foun-
too many problems to offer a major solu-
dation, a group that's con-
Nancy Coleman of the American Bar Association
tion to the nursing-home needs of the
cerned with the low-income
She's disturbed by "medicaid estate planning" practices.
middle class. Chief among the problems:
elderly. She expressed con-
Such insurance policies are a risky propo-
cern that only wealthy individuals could
program that helps limit the risks faced
sition for carriers and, in any event, are
afford the insurance. Moreover, she
by private insurers, and thus helps them
too expensive for many potential cus-
argued, insurance companies can exclude
market their products to the affluent?
tomers. But a well-crafted partnership
people they consider to be bad risks and
"This whole question of the role of
between the public and private sectors
often find grounds for refusing to pay
government in paying for the long-term
might help solve these problems.
claims.
care of people who are not poor is a very
"The whole premise is that the public
Lawrence H. Thompson, the assistant
value-laden issue," said Gail R. Wilensky,
side cannot handle the whole burden and
comptroller general for human resources
the administrator of HCFA. "It has not
neither can the private side," said David
at the General Accounting Office, also
come up and been resolved in the way we
Guttchen, a planning analyst with the
warned that the experiments could actu-
are going to have to do."
Connecticut Partnership for Long-Term
ally hurt low-income people. Some of
Although the Senate approved the leg-
Care, the government office that's man-
them could allow in wealthy people who
islation and the House approved a more
aging the experiment in the state. "Can
otherwise would not have participated in
restrictive version, the measure ultimate-
we create a private market that meets a
the program, he said, at the expense of
ly was dropped in conference last year.
NATIONAL JOURNAL 11/9/91 2731
But Connecticut recently found a way to
gressional complacency. HIAA recently
as a condition of eligibility on everything
proceed legally without congressional
issued a report on the dodging of medi-
you own."
approval by exploiting a provision of the
caid's "spend down" provisions, which it
Such crackdowns are a tough sell polit-
law that was originally intended to let
called "middle-class welfare," and it has
ically. The dismal track record of states in
states extend medicaid coverage to more
begun shopping the report around to key
estate recoveries, as documented by
of the poor and near-poor elderly. "That
Senators. (The Senate's Special Commit-
HHS's inspector general, suggests that
part of the law they are drawing on
tee on Aging is currently considering
state officials, who live closer to the gov-
was not [intended] for the purpose
whether to schedule hearings on the
erned, have instinctively grasped the
they're using it for," Wilensky said. She
issue.) And LTC Inc., a Kirkland
political downside of such a policy. Those
added, however, that HHS, HCFA's fed-
(Wash.)-based broker of long-term care
who haven't might want to consult the
eral parent, was obliged to approve the
insurance, has hired Stephen A. Moses,
September 1991 issue of Campaigns &
plan.
who wrote the HHS inspector general's
Elections magazine. In an article on how
Despite HCFA's reservations about
report as a government employee, to
to defeat incumbents, the magazine
the states' experiments, Wilensky said,
research the issue and stump the country
advises challengers: "Never underesti-
mate the ability of elected officials to say
and do incredible and dumb things. Can
you imagine a law allowing state govern-
ment to foreclose on the homes of de-
ceased medicaid recipients to recoup
medicaid payments? Two states have
such laws. Someone voted for them."
Moses and some state officials say that
they would like Congress to provide them
with some political cover by making such
recoveries mandatory. To federal law-
makers, it sounds about as inviting as the
proposition, "Let's you and him fight."
Moreover, many lawmakers are uneasy
about the matter of exactly what role pri-
vate long-term insurance should play in
the system. Waxman and Energy and
Commerce Committee chairman John D.
Dingell, for example, have expressed con-
John Eisele
cern over Connecticut's use of a legal
loophole to forge ahead with its experi-
ment, as well as reports that other states
Stephen A. Moses, director of research for LTC Inc., which sells long-term care insurance
are planning to do the same. Although
Washington "should make it easy for those who need it to get care without playing games."
Connecticut has relatively strict limits on
the income and wealth it allows privately
she applauds their attempts to encourage
to make the case for a get-tough stance
insured individuals to retain once they
collaboration between the public and pri-
on estate recoveries.
are on medicaid and also has a variety of
vate sectors on financing long-term care.
Officials of the trade association say
consumer protections in place, some poli-
Lawmakers on Capitol Hill haven't
that they are acting out of concern about
cy makers are worried that other states
tried to short-circuit Connecticut's exper-
the impact on the program's primary mis-
could proceed without such limits and
iment, but Waxman said that he might
sion of helping poor women and children.
protections.
act if other states follow suit. Delineating
(The group's health care reform proposal
More important, some worry that med-
the roles of the public and private sectors
urges that medicaid coverage be extend-
icaid's progressive drift toward accommo-
in long-term care needs to be done care-
ed to a broader segment of the needy.)
dating the affluent elderly will get in the
fully and explicitly at the federal level, he
"This has been shoved under the rug for
way of reform efforts. Joshua M. Weiner,
contended. "If you're going to have a
years and years," said Richard E. Curtis,
a senior researcher at the Brookings
social insurance system of some sort, you
its director of policy development and
Institution, faults the idea behind Con-
have to think through what role, if any,
research. "But when the desperately poor
necticut's experiment: protecting assets.
[companies in] the private sector should
and vulnerable are being hurt as bad as
"That's absolutely the weakest card that
have," he said. "If they have a role, it
they are [by medicaid cutbacks during the
reform advocates have to play," he said.
should be clearly spelled out and con-
recession], it's very important that we go
"If this is only about asset protection, I
sumers adequately protected."
back and look at this."
don't think you'll get broad support."
But insurance industry officials also
Others, including John C. Rother, the
concede that they hope such crackdowns
WASHINGTON'S INERTIA
director of legislation and public policy at
will force more Americans to consider
the AARP, which opposed the bill per-
As the philosophical underpinning of
buying private long-term care insurance.
mitting the experiments last year, worry
the medicaid program erodes around
Moses is outspoken on the point. The
that attempts to mold the medicaid pro-
them, most of Washington's policy mak-
federal government, he says, "should
gram to help the nonpoor will make it
ers haven't yet focused on the problem.
make it easy for those who need it to get
tougher to get reforms for everyone.
While some lawmakers and executive
care without playing games, but there
"When you say the top 10 per cent-of the
branch officials are worried, they seem to
should be no transfer of assets. The quid
elderly can do this, you create a political
be at a loss for knowing how to respond.
pro quo is if you don't plan ahead [and
problem getting support," he said,
The insurance industry has recently
buy insurance to protect your assets], you
"because this group will have bought
mounted a campaign to shake the con-
can't just give it away. There'd be a lien
themselves out of the problem."
2732 NATIONAL JOURNAL 11/9/91
Services Mead Data Central, Inc.
PAGE 25
28TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 Globe Newspaper Company;
The Boston Globe
June 11, 1991, Tuesday, City Edition
SECTION: OP-ED; Pg. 23
LENGTH: 630 words
HEADLINE: A plan that could aid Medicaid and the states' cash burden
BYLINE: By Robert L. Turner, Globe Staff
KEYWORD: MEDICAID COST MASSACHUSETTS
BODY:
Democrats are hungry for new ideas? How's this:
Federalize Medicaid.
Rep. Joseph P. Kennedy is preparing legislation that would take the whole,
huge, budget-busting program of health care for the poor and give it to
Washington.
Sure, it would cost a not-so-small fortune to take over the states' share of
the massive program. In a time of massive and persistent federal deficits, many
in the capital will dismiss the idea out of hand.
But cost is Kennedy's central argument. Now, he says, "with 50 different
state programs, there is absolutely no cost containment."
Medicaid, according to Kennedy, should be modeled after - and combined with -
the Medicare program that delivers health care to the elderly that is both
better and cheaper, despite the fact that the pay scale for specific services is
higher than Medicaid.
The secret, Kennedy says, is having a single payer to control "outrageously
high annual cost increases."
Ways might be found to pay for a federal takeover. Kennedy says it can be
done by raising federal taxes on gasoline, wine and beer. Others might suggest a
trade-off, with the states agreeing to pay a large share of some other programs,
such as transportation, which match state contributions at a higher rate. When
state dollars are matched nine-to-one by Washington, there is an obvious
incentive for extravagance.
The flip side of the cost argument is that federalizing Medicaid would give a
heaven-sent windfall to the states, 35 of which are struggling with deficits -
almost all driven partly or largely by Medicaid.
Nearly all these states have been raising revenues, through taxes or fees,
and cutting services at the same time. These trends obviously can't continue
simultaneously forever.
LEXIS'NEXIS'LEXIS'NEXIS
Services of Mead Data Central, Inc.
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(c) 1991, The Boston Globe, June 11, 1991
The national recession, which has contributed to state deficits, will
presumably go away eventually, but the budget-busters threaten to keep the
states in hock forever, and Medicaid is chief among them.
Nationally, according to Kennedy, the cost of Medicaid went up 18 percent
last year and is expected to rise 25 percent this year.
So his proposal is not simply a one-time bailout for the states, but a
realignment of the federal-state relationship that may be necessary, sooner or
later, if the states are to avoid perpetual penury.
Though Kennedy doesn't stress it, the politics could become interesting here,
too. Several of the states with the worst deficit problems have Republican
governors - - Massachusetts and California for starters.
"There would be tremendous benefits for Massachusetts," Kennedy said - about
$ 800 million a year.
For any governor, Kennedy said, "I would think this would be difficult to
turn down."
While the questions of who wins and who loses, and who pays the bill, are
important, Kennedy's proposal raises the more fundamental issue of where
responsibility for health care in America properly belongs.
Leaving the Medicaid part of it with the states "just hasn't worked," he
said.
There are gross disparities between some states over the quality and variety
of services provided. In some areas people have difficulty getting access to the
care they need because doctors and hospitals discourage Medicaid recipients. And
the price tag is huge, and ballooning.
Kennedy estimates $ 8 billion could be saved that is now being wasted. The
cost to Washington, he says, would still be $ 30 billion annually, or $ 22
billion if combined with Americare, the universal health proposal that would
bring in some private insurance paid for by businesses. Other estimates will
vary.
Kennedy hasn't even begun to seek cosponsors for his bill, which is being
worked on in the legislative counsel's office.
But it is a proposal that deserves to stimulate some serious debate, and
maybe even some real progress.
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39TH STORY of Level 1 printed in FULL format.
Copyright (c) The Bureau of National Affairs, Inc., 1991
BNA PENSIONS & BENEFITS DAILY
June 6, 1991
LENGTH: 2415 words
Health Care
SENATE DEMOCRATS UNVEIL COMPREHENSIVE
PLAN TO REFORM U.S. HEALTH CARE SYSTEM
WASHINGTON (BNA) - Senate Majority Leader George Mitchell (D-Maine),
along with Sens. Edward Kennedy (D-Mass), Donald Riegle (D-Mich), and Jay
Rockefeller (D-WVa), June 5 introduced a comprehensive health care reform
package featuring a "play-or-pay" provision that would require employers to
provide health insurance for employees or pay a payroll tax.
The health care package (bill number not yet available), which is intended
to guarantee affordable health care for all Americans, builds on the current
employer-based health insurance system and would provide public insurance for
uninsured individuals, both employed and unemployed.
The goals of the plan, according to Democratic staff members, is to
provide universal access to health care and to contain health care costs.
In unveiling the proposal Mitchell said Democrats are not critical of the
administration for not coming forward with its own plan. Rather, he said,
Democrats encourage the president to participate in this effort are hopeful
the Bush administration will view this as a "serious, thoughtful effort."
To encourage businesses, particularly smaller ones, to provide health care
for employees, the bill calls for a 25 percent tax credit for the cost of
insurance provided to lower-income employers by small businesses. All
businesses, including those eligible for the tax credit, would be able to
deduct the cost of health insurance, and the 100 percent deduction would be
extended to self-employed individuals. The insurance requirements for small
businesses would be phased-in over a five-year period.
Provider Cost Controls
To control the volume and price of services furnished by hospitals,
physicians, and other providers, the bill would establish national
expenditure targets to be set by a new federal agency called the Federal
Expenditure Board. The board would set national expenditure goals, in total
and by sectors of the health care industry, as well as separate goals for
specific states and regions.
In setting the goals, the board would bring together employers and other
purchasers of care with providers to negotiate provider rates and other cost
control methods. If the negotiations were successful, the rates would be
binding; providers charging in excess of the rate would be subject to civil
monetary penalties. Otherwise, the rates would be published as
recommendations that providers and purchasers would use as guidelines.
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The bill would allow a insurance/purchasing consortia in individual states
to establish different payment rates or alternative cost control methods, as
long as they achieved the goals established by the national board.
At a minimum, states would be required to establish insurance/purchasing
consortia that would combine insurance companies with small market shares for
the purpose of paying providers-a requirement intended to reduce the number
of payment entities that a provider must deal with. The consortia would make
all direct payments to providers on behalf of insurance companies.
The sponsors also intend for the consortia to increase electronic billing
for reimbursement to further reduce the administrative burden. In addition, a
standardized claim form would be developed and implemented by the federal
board.
"Play-Or-Pay"
At a technical briefing, Democratic staff members explained that the
"play-or-pay" feature would not go into effect unless fewer than 75 percent
of workers were covered by health insurance after a five-year period.
In the event "play-or-pay" does take effect, Mitchell explained, the
amount of the payroll tax would be determined by the secretary of health and
human services. At the technical briefing, Democratic staff members said
that, in determining the tax rate, the HHS secretary would attempt to
maintain a balance between the cost of private and public insurance coverage
so that employers would not "bail out" of private plans.
One staff member told BNA the employer payment really is a contribution
which allowed employees to purchase the government insurance, rather than a
payroll tax. At the technical briefing, the staff members said that treating
the employer payment as a contribution would avoid a possible constitutional
problem raised by legislation which permits the Executive Branch to determine
tax rates.
The premium cost for the government insurance, according to staff members,
would be community rated, and would be subsidized by the federal government.
Employees who participate in the government insurance plan, = Americare,
would be required to pay up to 20 percent of the premium cost, on a sliding
scale depending on income. Similarly, employers who provide private
insurance for employees could require covered employees to pay up to 20
percent of premium costs.
AS for the possibility that some employees with generous health care
benefits could end up with reduced benefits, one staff member said he was
"confident it won't happen." He explained that since the employers'
contribution for the government insurance plan is based on wage rates, only
low wage firms will find it advantageous to use the public insurance system.
Additional Funding
Mitchell acknowledged that the payroll tax or employer contribution would
not pay for the whole cost of the reform package and that additional funding
would be needed in order to meet the requirement in last year's budget law
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that all new entitlement spending be offset by spending cuts or tax increases.
According to Mitchell, the Congressional Budget Office estimates that the
supplemental cost of the program for the first year will be $6 billion. And,
while estimates for later years are not yet available, Democratic staff
members said the similar recommendations in the Pepper Commission report were
estimated to cost $14 billion a year when fully implemented.
While staff members said they still are discussions underway about
possible revenue sources, Mitchell said that the final decision on a revenue
source will be left to the tax-writing committees.
Although staff members said the plan does not include any limit on the
exclusion for employer-provided health care benefits, it is possible that the
tax writers will look toward limiting this exclusion or possibly denying
employers a deduction for health care costs, particularly since these items
together represent one of the largest federal tax expenditures.
In press releases, Senate Finance Committee members John Chaffee (R-RI)
and David Durenberger (R-Minn) both applauded their colleagues, efforts in
introducing their proposal but said that any reform package also should
include some restriction on the current tax expenditures for employee
benefits.
A White House spokeswoman cited the similarity of the Democrats' proposal
with the Pepper Commission report and questioned whether the Democrats' plan
would be widely supported. "In the Pepper Commission, a similar proposal
could not get the support of all Democratic members," she said, adding, "We
look forward to seeing whether this plan obtains broad support."
Another Bush administration official described the Democratic proposal as
"a warmed over version of the Dukakis plan."
Timetable For Action
The majority leader said that he was hopeful Congress could enact reform
legislation during this session and rejected the notion that Democrats were
introducing the legislation in an effort to frame health care as an issue for
the 1992 presidential campaign.
Furthermore, Mitchell said he is confident the plan will move ahead,
particularly because of the "growing and widespread" concern about the
problem. Public attitudes are providing encouragement for action, he said.
Riegle said although the reform package started out as a bipartisan
effort, Democrats found it necessary to move ahead. "There is an urgency to
get the job done," he said.
Mitchell also said the health care reform package is the first part of a
two-part strategy to address the U.S. health care problem. Mitchell said he
plans to introduce a second measure to address the problem of long-term
health care. "I am committed to enactment of a long-term care program," he
said.
House Democrats, including House Majority Leader Richard Gephardt (D-Mo),
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are working on their own plan, which, according to Gephardt, may be ready by
the end of the month. Mitchell said Senate task force members have been
consulting regularly with their counterparts in the House, notably committee
and subcommittee chairmen working on the House proposal. The House Democratic
proposal is likely to move "in the same direction" as the Senate Democratic
plan, Mitchell said.
Industry Input
The majority leader said the Senate task force, over the past two years,
has worked with a number of industry groups, including health care providers,
insurance companies, and medical professional and hospital groups. Mitchell
said the task force has developed "a remarkable consensus within the industry
for reform.
The response of the health care industry to the Senate proposals
generally has been positive, with a number of groups issuing press releases
in support of the Democrats' effort. However, while many provider
organizations support comprehensive health care reform, several associations
expressed concern over the role the government would play in determining how
much they would be paid under the Senate leadership's proposal.
Jack Owen, interim president of the American Hospital Association, said,
"This legislation represents an important step forward in the process of
health care reform, and the AHA is committed to working closely with the
Democratic leadership to further refine the proposal."
Owen also said, however, the association supports the "pay-or-play"
concept and the establishment of a broad public plan, but has "serious
concerns about the broad regulatory authority" that would be given to both
state and federal governments through state consortia and the Federal
Expenditure Board.
American Medical Association President James Todd said in a press release
that "the Democratic proposal is an interesting, first step toward exploring
an issue of paramount importance to all Americans." Todd said, however, that
the AMA did not endorse any particular legislation proposal and would work
towards developing a package that would win the approval of both Congress and
the president.
The American Protestant Health Association said that a system of all-payer
rates also must address costs incurred by providers. If a federal or state
commission limits price increases to hospitals, it is "only fair" that the
same commission also limit wage and supply costs in the same amount, APHA
said.
The Federation of American Health Systems, which represents investor-owned
hospitals, expressed some concern about placing government "at the center of
50 many important spending decisions concerning health care. = It warned that
"a health care system in which government, either directly or indirectly,
controls prices and sets budgets will lead, inevitably, to serious shortfalls
in quality and access."
The Blue Cross and Blue Shield Association said, "The proposal will serve
as a catalyst for all of us.
.We will all borrow many ideas from the
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proposal and find substitutes for parts of it."
Meanwhile, the Association of Private Pension and Welfare Plans welcomed
the proposed replacement of Medicaid with a new = AmeriCare" program because
"Medicaid is just not doing its job." Howard Weitzman, APPWP executive
director, said the group still has a "long lost of questions about many
aspects of the leadership proposal, especially the minimum benefit package
and the cost containment items" and added that "it is not clear that the
rate-regulation path they have outlined is appropriate."
Other groups that came out in support of the proposal, at least in
concept, included the American Association of Retired Persons, the Washington
Business Group on Health, and Families USA.
The Democratic Governors Association also issued a release with
endorsements for the plan from several governors, including New Jersey Gov.
Jim Florio (D) and Maryland Gov. William Donald Schaefer (D).
The AFL-CIO came out behind the plan and expressed the hope that the
proposal would "energize" the administration and others to enact health care
reform legislation in the 102nd Congress.
As for business groups, the National Association of Manufacturers came out
in support of the Democrats' effort but did express some reservations. "This
bill opens the dialogue and helps us begin to address the problems of our
ailing health care system. Though we can't support all the provisions of
this bill, we comment its authors for taking a bold step and initiating this
critical debate," NAM President Jerry Jasinowski said in a press release.
Small Business Concerns
According to National Small Business United, the proposal not only "stops
short of actually limiting the growth of health care spending," but also
"contains many elements which will be harmful to small business." NSBU
Executive Vice President John Galles said actual limits and fee caps are
needed to hold costs down.
Galles also said subsidizing businesses with tax credits takes the wrong
approach. "It would be much more effective to focus tax subsidies on
individuals, rather than on business entities," he said.
NSBU also argued the plan could become under-financed very quickly,
resulting in increased payroll taxes for employers and adding greatly to the
federal deficit. The plan would have the effect of steering small businesses
away from private insurance into a public plan, Galles said, and create the
need for either higher payroll taxes or higher income taxes to fund the
program.
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62ND STORY of Level 1 printed in FULL format.
Copyright (c) 1991 States News Service
June 5, 1991, Wednesday
LENGTH: 536 words
HEADLINE: Elements of Federal Health Plan Mirror Maine Pilot Health Programs
BYLINE: By Laurie Ledgard, States News Service
DATELINE: WASHINGTON
KEYWORD: health
BODY:
Some elements of the $6 billion, business-based health care plan introduced
by Sen. George Mitchell on Wednesday are found in pilot health programs funded
in part by the state of Maine.
"Access to affordable, quality health care should be a right for all
Americans, not merely a luxury for those who have the economic means to purchase
health insurance," Mitchell told reporters at a press conference in the Capitol.
The key to the Senate Democrats' plan is a requirement that employers
either provide health insurance or pay into a new public program that will
replace Medicaid.
Nationwide, 34 million Americans have no health insurance, Mitchell said.
According to a 1986 University of Southern Maine study, 93,000 Mainers lack
health coverage. More recent figures were not available.
Recognizing the health coverage problems in the state, particularly in rural
areas, the Maine Department of Human Services (DHS) developed pilot programs
combining state subsidies with employer or employee payments. One program,
called MaineCare, ensures that small businesses and the self-employed have basic
health coverage.
Mitchell's office has watched these programs carefully, a Mitchell staffer
said, and last year found federal demonstration funds for the Maine Health
Program. That program, run by the state DHS, extends Medicaid coverage and
picks up employees' shares of insurance payments.
"There are a lot of ideas
that we've discussed with people in the
state," the staff member said. "We think the states are doing a lot of
innovative things."
Progressive forms of health care in Washington state and Hawaii also were
studied as the basis for the federal plan, as was the German system. Operated by
the former West German government, it is the closest business-based model to the
Senate plan.
Beth Kilbreth, director of the medical insurance program at the Human
Services Development Institute of the University of Southern Maine, said a
recent study of small businesses found that half of them offer no coverage for
their employees.
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Due to Maine's seasonal tourism industry, Kilbreth said, part-time and
seasonal employees have a dramatically low rate of health coverage.
Kilbreth said it is difficult to determine if the results of the two-year
study were affected by the regional economy.
"Rural areas are harder hit than urban areas," Kilbreth said. "There are a
lot of desperate stories."
Mitchell joined fellow Democrats Sens. Edward Kennedy of Massachusetts,
John D. Rockefeller IV of West Virginia, and Donald W. Reigle, Jr. of
Michigan to introduce the plan.
Highlights of the proposal include federal-state public health coverage
called # AmeriCare, = that would replace Medicaid, tax credits and insurance
reform to assist small businesses -- which make up much of the business
community in Maine -- and reductions in unnecessary care and administrative
costs.
It also calls for the creation of a new Federal Health Expenditure Board
(similar in nature to the Federal Reserve Board) that will maintain and analyze
information about health care providers in all communities in order to compare
costs and quality.
Similar legislation is pending in the House, Mitchell said.
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31ST STORY of Level 1 printed in FULL format.
Copyright (c) 1991 Crain Communications, Inc.;
Business Insurance
June 10, 1991
SECTION: Pg. 1
LENGTH: 1008 words
HEADLINE: Democrats proposal includes cost control
BYLINE: By JERRY GEISEL
DATELINE: WASHINGTON
BODY:
Legislation introduced by Senate Democrats last week to widen access to the
health care system also would create a new federal board that would attempt to
hold down health care costs.
The measure also would give certain small employers tax breaks to encourage
them to offer their employees health insurance.
And, in a provision that surprised many benefit experts, the secretary of
health and human services would be given authority to set the size of the
penalty -- in the form of a new payroll tax -- on employers that fail to offer a
health care plan that meets the standards outlined in the legislation.
Benefit experts had thought the size of the payroll tax penalty would be
specified in the bill, S. 1227.
But much of the bill, "HealthAmerica: Affordable Health Care for All
Americans Act," is similar to earlier versions that had been widely distributed
(BI, June 3). Those provisions include:
* Requiring employers, as part of a "play or pay" approach, to offer
employees a health care plan or pay a new tax to help fund coverage for the
uninsured.
* Creating a new federal program, known as AmeriCare, which would largely
replace Medicaid to provide comprehensive coverage for individuals without
employment-based health insurance.
Unlike Medicaid, though, AmeriCare would not restrict eligibility to the
poor. Others also could obtain the coverage, though they would have to pay a
much greater share of the cost.
* Eliminating state laws that mandate that certain types of services be
covered by health care plans sold by commercial insurers.
The legislation was introduced last week at a jammed press conference by its
sponsors: Senate Majority Leader George Mitchell, D-Maine, and Sens. Edward M.
Kennedy, D-Mass.; Donald Riegle Jr., D-Mich.; and John D. Rockefeller IV,
D-W.Va.
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(c) 1991 Business Insurance, June 10, 1991
Sen. Kennedy, the congressional champion of universal health care,
proclaimed the introduction of the bill as a "historic day for the Senate and
for the nation."
Indeed, as benefit experts earlier noted, the legislation marks the first
time that Senate Democratic leaders have united on a single approach to
improving health care access. Previously, Sen. Kennedy had worked pretty much
alone -- without significant backing from party leaders -- in advocating that
employers be required to offer health care plans.
Sen. Mitchell pledged that he will work to win passage of the legislation
during the current congressional session; hearings by the Senate Labor and Human
Resources Committee, chaired by Sen. Kennedy, are set to begin this week. A
similar bill is expected to be introduced in the House within a few weeks.
Despite the strong push by Senate Democrats, benefits experts say
congressional passage of the legislation is not likely anytime soon.
"The chances of passage are zero" because of a lack of concensus on improving
access to health care, said Dallas Salisbury, president of the Employee
Benefit Research Institute in Washington, D.C.
But the introduction of the bill will expand the debate on health care
access, said Dr. Roger Taylor, national health care leader with The Wyatt Co.
in Washington, D.C.
Unlike earlier bills introduced by Sen. Kennedy, which were criticized as
paying only lip service to cost containment, the Senate Democrats' proposal
does create a mechanism to try to control national health care spending.
A Federal Health Expenditure Board would be created to establish voluntary
targets for annual health care spending in specified areas, like hospital care
and physician services.
The board also would bring together health care providers, like hospital
associations, and purchasers, like employers and insurers, to conduct
negotiations on rates for services.
However, the board only would mandate rate levels if a majority of both
providers and purchasers reach an agreement. If agreement is not reached, the
board would only issue non-binding recommended rates.
Many benefit experts said last week they want to study this complex provision
before commenting.
However, the proposal at least pays attention to the importance of cost
containment, noted Frank McArdle, a consultant with Hewitt Associates in
Washington, D.C.
"For the first time senior members of Congress are taking a step to control
costs. That is a step forward," agreed Mark Ugoretz, executive director of the
ERISA Industry Committee, a Washington, D.C.-based employer lobbying group.
The measure also would give new tax breaks to certain small employers that
offer health plans meeting standards laid down in the measure.
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For example, employers with fewer than 60 workers would receive a tax credit
equal to 25% of the cost of coverage for each full-time employee earning less
than $ 20,000. The tax credit would not be available to certain highly
profitable firms.
Meanwhile, as earlier reported, the measure would require employers to either
offer a health care plan or pay a payroll tax, to be set annually by the
secretary of health and human services.
Generally, the employer would have to pay 80% of the premium, while
deductibles could not exceed $ 250 for individual coverage and $ 500 for family
coverage. Employee coinsurance could not exceed 20%, with a maximum annual
out-of-pocket limit of $ 3,000.
Employers, though, could offer a health plan with different cost-sharing
requirements so long as its "actuarial value" was equal to that of the basic
health plan.
Small employers -- those with fewer than 25 employees - would have five
years to comply. If, at the end of five years, fewer than 75% of workers at
small firms do not have health insurance, the employers would either have to
offer a health plan or be subject to the payroll tax.
This same requirement would apply to employers with between 25 and 99
employees, except they would have only four years to voluntarily provide
coverage.
Newly established employers with fewer than 25 employees would be exempt from
offering coverage or paying a tax during their first two years of operations.
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14TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 Gannett Company Inc.
USA TODAY
July 25, 1991, Thursday, FINAL EDITION
SECTION: NEWS; Pg. 9A
LENGTH: 901 words
HEADLINE: Reforming health care
BYLINE: Kevin Anderson
KEYWORD: JOHN D. ROCKEFELLER IV:JAY ROCKEFELLER:AGE: HEALTH CARE REFORM:MEDICAL
CARE: COST
BODY:
Sen. John D. Rockefeller IV says 'people don't like change,' but 'the
health care system needs change' to give access to all Americans.
Q: You are a sponsor of the Democratic health-care reform bill that was the
subject of a congressional hearing Wednesday. What are the key points of this
plan?
A: You want that in three sentences? It keeps our present job-based system,
which is uniquely important for Americans. And through incentives to small
business and a publicly funded plan insures that every American has access to
health insurance. It's all done within our present system, but we do it by
radically reforming the present system.
Q: Why does health care reform seem so terribly difficult in this country?
A: I asked a very brilliant, experienced lobbyist for the health-care
industry once publicly: ''How many people do you feel understand health-care
public policy in the Congress to a substantial degree?'' And he very quickly
answered 12. That's out of 535.
Q: What does that tell you?
A: If he's right, that says health care is very difficult. It is not
approached lightly. It is a world of acronyms, of conflicts, of incredibly
palpable interests. It's a hard subject.
Q: Two-thirds of the 37 million Americans with no insurance are in families
headed by a full-time worker, most at very small companies. What will be the
impact of this bill on small businesses?
A: Very positive because we pay 40% of their health insurance premiums for
five years.
Q: Is it just for the very smallest of small employers?
A: It's 25 and down, and in the bill it's 25% of health insurance premiums
forever.
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Q: Another concern is whether this will create a huge bureaucracy. Will it?
A: Everything is a catastrophe until it happens. People don't like change.
The health care system needs change.
Q: But do we want AmeriCare to be a huge, vast federal bureaucracy that
swallows Medicaid without curing some of Medicaid's failings?
A: Well, we would get rid of Medicaid.
Q: And replace it with a public program that has even more people in it?
A: Not necessarily. For example, Medicare, which most people think is a
gigantic bureaucracy, its overhead, its administrative costs are 3%. No business
in this country operates an on overhead cost of 3%. So it could happen, but it
doesn't necessarily have to happen. What we're doing today, according to some,
is wasting $ 100 billion dollars on health care in unnecessary bureaucratic
costs. We can't do worse than that.
Q: Does the Democratic plan have a lot of wiggle room for experimentation and
accommodation once it is up and running?
A: Hopefully that's what this encourages. What we're trying to do is to get
away from a system which clearly doesn't work, where health-care costs are
becoming unsustainable very rapidly. And we're trying to get to a point where
health- care costs begin to be controlled.
Q: What is controlled? We're looking at annual national health expenditure
growth of 13% to 15% a year.
A: I'm not sure I can answer that. A lot less than our present rate of
growth. A number of things are controllable; the consumer's behavior is less
controllable. The whole problem of Americans just latching on to every single
new piece of technology as their birth right is a very expensive sort of sense
of ownership. So Americans have to participate in the cost of their own health
care and share in tougher decision-making about their own reaching out for
health care.
Q: What are the chances for passage of this bill?
A: My official answer is we'll get it because in health care legislation,
your only attitude can be full speed ahead. Assault on all fronts. If, on the
other hand, we came out of this session of the Congress with full health
insurance for pregnant women and children and insurance reform, that would not
be sufficient to what I want, but it would be a gigantic step forward.
How the Democrats' plan would change the system
THE BILL:
The Senate Democrats' HealthAmerica bill proposes to guarantee insurance
coverage to all Americans and trim the nation's health care bill by $ 78
billion over five years.
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(c) 1991 USA TODAY, July 25, 1991
THE PROVISIONS:
- Mandate basic benefits, including hospital and physician services, pre-
natal and preventive care and limited mental health benefits.
- Require all employers, after a five-year phase-in, to either provide at
least basic coverage for all employees working more than 17 1/2 hours a week
through private insurance, or pay a percentage of their payroll to a new public
insurance program, AmeriCare.
- Allow everyone without insurance to buy basic coverage through AmeriCare
for a premium based on income.
- Insure all without income for free. ( AmeriCare would replace Medicaid
that covers the poor and unemployed.)
- Subsidize insurance premiums for the smallest, lowest-wage employers.
- Make working people responsible for up to 20% of their premiums and most
medical bills, based on income.
- Bar health insurers from denying coverage or charging prohibitive rates
based on health status.
- Set up state or regional authorities to negotiate fees with doctors and
hospitals, establish standards and guidelines for effective and efficient
medical care, and weigh costs and benefits of new technology.
- Require a standard electronic claims filing system nationwide to cut
administrative costs.
GRAPHIC: GRAPHIC; b/w, Keith Carter, USA TODAY, Source: Employee Benefits
Research Institute, Small Business Administration (Pie charts); PHOTO; b/w, USA
TODAY
CUTLINE: Rockefeller
TYPE: Inquiry
SUBJECT: PROFILE; HEALTH; LEGISLATION; INTERVIEW
NOTES: Sen. John D. Rockefeller IV, D-W.Va., 54, is the principal architect of
the Democrats' health-care plan,
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