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Q&A: US healthcare reform Q&A: US healthcare reform
(about 6 hours later)
Healthcare reform in the US is entering a critical phaseHealthcare reform in the US is entering a critical phase
US President Barack Obama made reform of the American healthcare system his top priority when he entered the White House.US President Barack Obama made reform of the American healthcare system his top priority when he entered the White House.
He has pledged to get a reform bill passed this year.He has pledged to get a reform bill passed this year.
But lawmakers in Congress are finding it difficult to agree on a bill to implement reform.But lawmakers in Congress are finding it difficult to agree on a bill to implement reform.
How is the US healthcare system currently structured?How is the US healthcare system currently structured?
Unlike other developed countries, the US does not have a universal system of healthcare coverage.Unlike other developed countries, the US does not have a universal system of healthcare coverage.
It is up to individuals to obtain health insurance. Most Americans obtain coverage through their employers, but others sign up for private insurance schemes.It is up to individuals to obtain health insurance. Most Americans obtain coverage through their employers, but others sign up for private insurance schemes.
Under the terms of most coverage plans, members pay regular premiums, but they are sometimes also required to pay part of the cost of their treatment (known in the US as a deductible) before the insurer covers the expense. The amount they pay varies according to their plan.Under the terms of most coverage plans, members pay regular premiums, but they are sometimes also required to pay part of the cost of their treatment (known in the US as a deductible) before the insurer covers the expense. The amount they pay varies according to their plan.
Does the US government provide health coverage for anyone?Does the US government provide health coverage for anyone?
Yes. Americans aged 65 or over can sign up for the government-run Medicare scheme, and low-income parents, children, pregnant women and people with certain disabilities are eligible for the government-administered Medicaid programme.Yes. Americans aged 65 or over can sign up for the government-run Medicare scheme, and low-income parents, children, pregnant women and people with certain disabilities are eligible for the government-administered Medicaid programme.
The US government also runs the State Children's Health Insurance Program (SCHIP), which provides coverage to children whose parents are on modest incomes, but not poor enough to qualify for Medicaid.The US government also runs the State Children's Health Insurance Program (SCHIP), which provides coverage to children whose parents are on modest incomes, but not poor enough to qualify for Medicaid.
Military veterans are also provided healthcare by a government-run scheme.Military veterans are also provided healthcare by a government-run scheme.
So what are the problems with the US system?So what are the problems with the US system?
Healthcare costs for individuals are rising dramatically.Healthcare costs for individuals are rising dramatically.
Premiums for employer-provided schemes have risen four times faster than wages, and are now double their cost nine years ago.Premiums for employer-provided schemes have risen four times faster than wages, and are now double their cost nine years ago.
The percentage of employees with an annual deductible greater than $1,000 increased from 1% to 18% between 2000 and 2008.The percentage of employees with an annual deductible greater than $1,000 increased from 1% to 18% between 2000 and 2008.
As a nation, the US spent some $2.2tn (£1.34tn) on healthcare in 2007. That amounts to 16.2% of GDP, nearly twice the average of other OECD countries.As a nation, the US spent some $2.2tn (£1.34tn) on healthcare in 2007. That amounts to 16.2% of GDP, nearly twice the average of other OECD countries.
What are the effects of rising health costs?What are the effects of rising health costs?
The rising individual costs mean that more and more Americans are unable to afford health insurance. Some 47 million (out of a population of over 300 million) are estimated to be without insurance.The rising individual costs mean that more and more Americans are unable to afford health insurance. Some 47 million (out of a population of over 300 million) are estimated to be without insurance.
On top of that, 25 million Americans are also deemed "under-insured" - their coverage is inadequate for their needs.On top of that, 25 million Americans are also deemed "under-insured" - their coverage is inadequate for their needs.
When someone without insurance (or with inadequate cover) falls ill, they are obliged to pay their medical costs out of their own pocket.When someone without insurance (or with inadequate cover) falls ill, they are obliged to pay their medical costs out of their own pocket.
Mr Obama says he wants to pass healthcare reform by the end of 2009Mr Obama says he wants to pass healthcare reform by the end of 2009
Many are faced with a choice between allowing their illness to go untreated and financial ruin. Half of all personal bankruptcies in the US are at least partially the result of medical expenses.Many are faced with a choice between allowing their illness to go untreated and financial ruin. Half of all personal bankruptcies in the US are at least partially the result of medical expenses.
Rising costs also mean the government is spending more and more on Medicare and Medicaid.Rising costs also mean the government is spending more and more on Medicare and Medicaid.
US government spending on the two schemes is expected to rise from 4% of GDP in 2007 to 19% of GDP in 2082, making rising healthcare costs the biggest contributing factor to the spiralling US budget deficit.US government spending on the two schemes is expected to rise from 4% of GDP in 2007 to 19% of GDP in 2082, making rising healthcare costs the biggest contributing factor to the spiralling US budget deficit.
What is President Obama proposing?What is President Obama proposing?
During the 2008 presidential election campaign, Mr Obama ran on a platform of comprehensive healthcare reform. During the 2008 election campaign, Mr Obama proposed to create a national health insurance programme for Americans who were not covered by their employers or by federal programmes, paid for by contributions from employers who did not run their own scheme, and the elimination of Bush-era tax cuts.
He planned to create a national health insurance programme for Americans who were not covered by their employers or by federal programmes.
Employers who did not offer their workers a health scheme would have been required to pay a percentage of their payroll to the government to help pay for the new scheme, and federal subsidies would have been offered to those eligible for it.
He planned to pay for his proposals by eliminating Bush-era tax cuts for those earning over $250,000.
Since entering office, Mr Obama has abandoned these specific proposals.Since entering office, Mr Obama has abandoned these specific proposals.
Mindful that any reforms need to pass through Congress before they can become law, Mr Obama has left the business of fleshing out the specifics of healthcare reform to Congress, while setting out three "principles" that any eventual reform will need to fulfil to gain his support. Mindful that any reforms need to pass through Congress before they can become law, Mr Obama has left the business of fleshing out the specifics of healthcare reform to lawmakers, while setting out three "principles" that any eventual reform will need to fulfil to gain his support.
What are Mr Obama's "three principles" for healthcare reform?
For any reform proposal to meet with Mr Obama's approval, it must reduce costs, guarantee that every American has the freedom to choose their own health plan (including a public plan), and ensure that all Americans have quality and affordable healthcare.For any reform proposal to meet with Mr Obama's approval, it must reduce costs, guarantee that every American has the freedom to choose their own health plan (including a public plan), and ensure that all Americans have quality and affordable healthcare.
What proposals have lawmakers come up with?What proposals have lawmakers come up with?
Two committees in the Senate and three committees in the House of Representatives are working on healthcare reform bills. A number of congressional committees are working on healthcare reform bills.
In the Senate, the Health, Employment, Labour and Pensions (Help) Committee became the first congressional panel to vote through a healthcare reform package. The Senate, the Health, Employment, Labour and Pensions (Help) Committee became the first congressional panel to vote through a healthcare reform package.
Under its proposal, Americans would be required by law to obtain health insurance (this is called an individual mandate). The Committee's bill also requires most employers to provide their employees with healthcare coverage (this is called an employer mandate). Medicaid would be expanded to cover more people.Under its proposal, Americans would be required by law to obtain health insurance (this is called an individual mandate). The Committee's bill also requires most employers to provide their employees with healthcare coverage (this is called an employer mandate). Medicaid would be expanded to cover more people.
For people who are not eligible for the expanded Medicaid, but whose employers do not provide coverage, the government would provide subsidies.
Crucially, the committee's bill would also establish a public health insurance plan, open only to those who do not have access to an employer-provided plan.
The Senate Help committee was the first to pass a healthcare reform billThe Senate Help committee was the first to pass a healthcare reform bill
The other Senate committee working on a bill is the Finance Committee. Its members are having difficulty reaching agreement on a bill. Crucially, the committee's bill would also establish a public health insurance plan, open only to those are not eligible for Medicaid, but who do not have access to an employer-provided plan. Three committees in the House of Representatives have produced a joint bill which proposes a similar system.
The indications are that the Finance Committee's bill will propose individual and employer mandates, but will not include a public option. Instead, it would set up non-profit medical co-operatives to compete with private insurers. The as-yet unpublished Senate Finance Committee's bill is also expected to propose individual and employer mandates, but will not include a public option. Instead, it would set up non-profit medical co-operatives to compete with private insurers.
The three House committees with jurisdiction over healthcare have been working together to produce a joint proposal.
Like the Senate Help Committee's bill, the House committees' proposal would require Americans to purchase health insurance, and would set up a public option for those without access to an employer-sponsored scheme.
So no-one is proposing to replace the current system with a UK-style National Health Service?
No. Proponents of reform fear that any proposal to strip Americans of their existing employer-provided coverage and replace it with a government scheme would be unpopular.
So a public scheme - if it survives the congressional debate - would only be available to Americans without employer-sponsored insurance.
How will these proposals to expand healthcare coverage be paid for?How will these proposals to expand healthcare coverage be paid for?
Subsidising the healthcare of millions of extra Americans will cost as much as $1tn.
Part of the increase will be paid for by reducing waste, introducing electronic records systems, and cutting the payments that hospitals currently receive for treating uninsured patients in emergency rooms (the idea being that the payments would no longer be needed if all patients had insurance).Part of the increase will be paid for by reducing waste, introducing electronic records systems, and cutting the payments that hospitals currently receive for treating uninsured patients in emergency rooms (the idea being that the payments would no longer be needed if all patients had insurance).
But these measures would not produce all the necessary revenue.
The House committees' bill proposes establishing a surtax of up to 5.4% on Americans earning over $350,000 a year to help pay for the expansion, but the proposal has met with opposition and would be unlikely to pass the Senate.
Raising revenue does not come under the Senate Help Committee's jurisdiction, so its bill does not make any suggestions about how its proposals would be paid for.
HOW WILL AMERICA PAY FOR HEALTHCARE? The House committees proposed a 1-5% surtax on Americans earning over $350,000The Senate Finance Committee talked about taxing employer-provided health benefitsPresident Obama failed to persuade Congress to cut tax deductions for wealthy Americans' charitable donationsHOW WILL AMERICA PAY FOR HEALTHCARE? The House committees proposed a 1-5% surtax on Americans earning over $350,000The Senate Finance Committee talked about taxing employer-provided health benefitsPresident Obama failed to persuade Congress to cut tax deductions for wealthy Americans' charitable donations
The Senate Finance Committee does have the power to propose revenue-raising measures, but has yet to agree on a mechanism. But these measures would not produce all the necessary revenue.
It had been considering levying a tax on employer-provided health benefits. Health benefits are currently not classified as wages, and are therefore tax-exempt. The House committees' bill proposes establishing a surtax of up to 5.4% on families earning over $350,000 a year to help pay for the expansion, but the proposal has met with opposition and would be unlikely to pass the Senate.
This proposal has proved unpopular with trade unions and many Democrats however, and is unlikely to be adopted. The Senate Finance Committee considered levying a tax on employer-provided health benefits. Health benefits are currently not classified as wages, and are therefore tax-exempt.
But this proposal has proved unpopular with trade unions and many Democrats, however, and is unlikely to be adopted.
In his March budget, Mr Obama proposed cutting the tax deductions that rich Americans can claim for their charitable donations, but this proposal attracted bipartisan criticism and was removed when the budget passed through Congress.In his March budget, Mr Obama proposed cutting the tax deductions that rich Americans can claim for their charitable donations, but this proposal attracted bipartisan criticism and was removed when the budget passed through Congress.
Eventually, if a healthcare bill is to pass, lawmakers will have to agree on a mechanism to raise the necessary revenue to pay for expansion
What about cutting long-term costs?
Cutting healthcare costs could make expansion less expensive, thus reducing the need for unpopular revenue-raising mechanisms.
Some people argue that the proposed public insurance plan will cut costs by injecting more competition into the private insurance market.
It could also benefit from economies of scale when paying for drugs and other treatments.
President Obama has proposed giving the Medicare Payment Advisory Commission (Medpac) the power to make decisions about healthcare spending.
This move - it is argued - would cut costs by taking Congress out of the decision-making loop; Medpac would be immune from the political pressures faced by elected lawmakers to increase healthcare spending.
Another proposal is to establish a body to study the comparative effectiveness of different treatments.
At the moment, some argue, because drug research is often paid for by pharmaceutical companies, there are few independent measures of a treatment's costs and benefits, so insurers could be paying for expensive treatment that may be no more effective than cheaper options.
Opponents fear comparative effectiveness research could lead to government bodies denying some treatments to patients.
Will healthcare reform pass this year?Will healthcare reform pass this year?
President Obama has pledged to get a healthcare reform bill passed this year.President Obama has pledged to get a healthcare reform bill passed this year.
To that end, he has called on the House and Senate to vote on legislation before lawmakers leave Washington for their August recess, and for both chambers to have agreed on a final bill ready for him to sign into law in October.To that end, he has called on the House and Senate to vote on legislation before lawmakers leave Washington for their August recess, and for both chambers to have agreed on a final bill ready for him to sign into law in October.
However, the disagreements in Congress on revenue-raising mechanisms are threatening to jeopardise this timetable.However, the disagreements in Congress on revenue-raising mechanisms are threatening to jeopardise this timetable.
With so much of his political capital now resting on passage of a bill, Mr Obama and his team will be lobbying hard to get a bill passed this year, and may be prepared to make some compromises along the way.With so much of his political capital now resting on passage of a bill, Mr Obama and his team will be lobbying hard to get a bill passed this year, and may be prepared to make some compromises along the way.
Whether or not the final bill pleases healthcare reform advocates, therefore, remains to be seen.Whether or not the final bill pleases healthcare reform advocates, therefore, remains to be seen.