A Healthy Start … With Loopholes

Now that President Barack Obama has signed health reform into law, insurance industry lobbyists will turn their attention to trying to cripple it. This will be done under the pretense of improving the reform proposal — or, as they say in the lobbying business, loving the law to death.

The passage of health reform was a great event. The Republicans who talk about repeal are misreading the public. At the moment, public opinion polling is mixed, but two days after passage, a USA Today/Gallup Poll reported that 49 percent of those surveyed found the measure was “a good thing.” A total of 40 percent said it was bad.

And support will increase as the reform law begins to kick in later this year. Consider these provisions going into effect in 2010:

Children will be allowed to stay on their parents’ policies until their 26th birthday. The “doughnut hole” in the Medicare drug program will begin to close. Small businesses — those with 25 or fewer workers — will receive a tax credit for purchasing health insurance for employees. Insurance companies will be prohibited from canceling policies of those who become ill. The insurers will no longer be permitted to impose limits on the benefits paid during a person’s lifetime. They will no longer be allowed to deny children coverage for pre-existing conditions. (Adults with these conditions will be able to buy insurance from a government-subsidized high-risk pool until 2014, when the practice of denying coverage in such cases at last will be outlawed.)

By 2014, consumers will be able to buy insurance via online exchanges, shopping for the best deal. Government subsidies will help the lower income buy policies. Medicaid will be expanded to cover 16 million working-class people.

The new law is just a beginning. It has loopholes, as noted in a report being prepared by Consumer Watchdog, a group that has been fighting insurance company abuses for many years.

A huge loophole is the lack of a regulatory mechanism to control insurance company rate increases. The need for such a mechanism was illustrated by the recent rate hikes of as much as 39 percent by Anthem Blue Cross. A bill by U.S. Sen. Dianne Feinstein, D-Calif., would have given the federal government authority to reject insurance company rate increases, but it failed. States can impose their own regulations, as California is trying to do with a bill approved this week by a legislative committee.

The insurance companies’ major effort to weaken the new health reform law involves a program for seniors called Medicare Advantage.

Conceived several years ago to save money, it has turned into a big money maker for the insurance business. Medicare Advantage offers some policies with more benefits and lower co-payments than Medicare. But members may have a limited choice of doctors or hospitals. “What Medicare Advantage patients get is very slick marketing, bells and whistles like ‘free gym membership’ — and tough HMO-style restrictions on doctors and treatment if they happen to fall seriously ill,” said Judy Dugan of Consumer Watchdog.

Most important, the insurance companies that market Medicare Advantage are subsidized by the Medicare program. This is a major reason for rising Medicare costs. The subsidies make Medicare Advantage 14 percent more expensive for the taxpayers than regular Medicare. President Obama has called the subsidy “a waste,” and the new reform law reduces the subsidy by $132 billion over 10 years. These savings would finance other important parts of health reform, such as expanding Medicaid.

The Republicans have jumped on this, accusing Obama of taking money from Medicare to help the poor. Republican senators have been claiming this while fighting a bill making minor changes in the law to reconcile Senate and House versions. Behind the scenes, the insurance companies are battling to preserve their subsidies and to expand Medicare Advantage.

Under the new law, the Medicare Advantage subsidy ends in 2013. That means the insurance lobby has almost three years to try to save it.

In a memorandum to employees obtained by Consumer Watchdog, Stephen Hemsley, CEO of the UnitedHealth Group, an insurance firm, pledged to “protect Medicare Advantage.” The Washington Post reported that the U.S. Chamber of Commerce plans to push for business-friendly changes to the legislation when officials begin writing the regulations to implement it. The paper quoted Chamber President Thomas J. Donohue as saying he and his colleagues “will work through all available avenues — regulatory, legislative, legal and political — to fix its flaws and minimize its potentially harmful impacts.”

The effectiveness of health care reform will be shaped on such terrain.

Even in the best of times, this part of the process is tough for the news media to follow. It’s complicated and secretive, and it can be tedious. In another era, serious policy-loving journalists would closely watch and then report the insurance lobbyists’ moves. But, with a few exceptions, they’re gone — victims of layoffs and closures of Washington and state capital bureaus.

Yet this is the time for real vigilance. “This requires as much vigilance as national security,” California Watchdog’s Dugan told me. “There are IEDs along every road.”

This means the health reform advocacy groups must postpone their celebration and stay vigilant, watching every special interest move, keeping in touch on the Internet and spreading information through blogs and websites as well as working with the remaining traditional journalists.

If this law succeeds despite the attempts to weaken it, prospects will greatly improve for reaching the final goal: universal coverage, Medicare for all.