Health care reform: Where we stand

By Anne Kates Smith

Amid heated protests, marathon negotiations and provocative advertising campaigns, U.S. lawmakers vow to change health care as we know it by Christmas. Here's the latest on what the new system might look like.

Nearly all of us would be required to have health insurance, with limited exceptions -- cases of extreme financial hardship, for example. Those who go without would have to pay a penalty: $750 a year under one proposal and 2.5% of adjusted gross income (about $1,000 for the median wage earner) under another.

Complex underwriting standards would virtually disappear: No one could be turned away for a preexisting health condition, and if you got sick, you wouldn't face higher premiums or have to worry about being dropped. Nor would there be caps on annual or lifetime benefits. Even age-based variations would be limited, with the House proposing that the most expensive policy cost no more than twice what the least expensive plan costs. That would lower premiums for older people but boost them big-time for the young and healthy. There's talk in the Senate of raising the ratio to five to one. Kids might stay on your policy longer, with one Senate bill keeping them covered until age 26.

The session, however, did not bridge the political divide that has engulfed health-care reform efforts.

On one side are supporters of a government-run health-care option to compete with private plans they say is needed to control rising costs and cover the 47 million uninsured.

Health care is not a commodity. It's a human right," said Elayne Lastofka, 77, of Appleton, who came to Kagen's session to show her support for a single-payer system. "I'm sick and tired and embarrassed going to fundraisers to help pay for people's medical care within the community."

Opponents remain skeptical. They say the overhaul proposal threatens the quality of health care, limits patient choice and duplicates services already in place.

"It's easy to say the hospitals get paid too much," said Beth Franz, 81, of Appleton. "Hospitals do charge big amounts, but you have to remember what is included."

Over the past month, Kagen, D-Appleton, has faced hostile crowds, but he is undeterred in his push for reform, an issue he has made the centerpiece of his political career.

This year alone he said his staff has logged more than 63,000 calls and letters so far from constituents who for the most part want to share with him their concerns about risings health-care costs.

"I've been fighting against large insurance corporations on behalf of my patients, trying to eliminate them from the practice of medicine for the last 30 years," he said.

But "the last thing I want to replace them with is a federal agency," Kagen said. "In my view and in the view of everybody I've been listening to, insurance corporations should be processing papers, not practicing medicine."

Health plans would have to meet minimum standards. If you have insurance now, your existing plan would likely be grand-fathered in, unless it changes significantly. New plans would probably cover preventive services in full, or nearly so, as well as a percentage of mental-health services, hospital stays, drug prescriptions and so on. But how much of the overall cost of care would be covered is key -- and still up for debate. A bill passed by three House committees says insurance should cover 70% at a minimum; the typical plan now covers 87%. House lawmakers would limit an individual's annual out-of-pocket costs to $5,000, and cap families' outlays at $10,000.

Small businesses and individuals not covered by their employer would shop for insurance on an exchange, where insurers would compete on cost and service. Families with incomes up to four times the federal poverty level ($73,240 for a family of three in 2009) would be granted subsidies on a sliding scale. A huge sticking point is whether a government-run option should be included in the exchange and, if so, how it should pay doctors and other providers. Another option would be to include nonprofit, consumer-owned co-ops.

The $1-trillion question: how to pay for it all. It seems no one wants to treat employer-paid premiums as taxable income for workers. But if House lawmakers prevail, families with incomes above $350,000 ($280,000 for individuals) would face a surcharge ranging from 1% of adjusted gross income to 5.4%.

More likely to pass: an idea floating around the Senate Finance Committee to levy an excise tax on insurers selling high-end plans with premiums above a certain threshold -- say, 35% on premiums exceeding $21,000 to $25,000 for a family policy. Another proposal would cap flexible spending accounts, which let you pay for uncovered health expenses with pretax dollars, at $2,000 a year.

Tactical Error: Health Care vs Finance Regulatory Reform

By Barry Ritholtz

I believe the brain trust behind the Obama White House has made a huge tactical error.

As Rahm Emmanuel likes to say, one should “never waste a crisis” — and the White House has done just that.

There was a narrow window to effect a full regulatory reform of Wall Street, the Banking Industry and other causes of the collapse. Instead, the White House tacked in a different direction, pursuing health care reform.

This was an enormous miscalculation.

I’m not sure who to blame, but the leading suspects (in order) are Larry Summers, Rahm Emmanuel, Tim Geithner, and (perhaps) David Axelrod. Instead of a populist clean up of The Street (ala Eliot Spitzer circa 2,000), Obama advisors allowed a smoldering resentment to take hold and build amongst the electorate. The massive taxpayer wealth transfer to inept, corrupt, incompetent bankers has created huge resentment amongst the populace — regardless of political affiliation.

There was widespread popular support for a full reform of finance. What the White House should have pursued was: 1) Reinstatement of Glass Steagall; 2) Repeal the Commodity Futures Modernization Act; 3) Overturning SEC Bear Stearn exemption allowing 5 biggest firms to leverage up far beyond 12 to one; 4) Regulating the non bank sub-prime lenders; 5) Continuing high risk trades to be compensated regardless of profitibility; 6) Mandating (and enforcing) lending standards, etc.

All of this could have been accomplished in the first 6 months of the Obama administration. The consumer protection stuff could have been tossed in as well, though it was not the cause of the collapse.

What we got instead, was the usual lobbying efforts by the finance industry. They own Congress, lock stock and barrel, and they throttled Financial Reform. It did not help that the Obama economic team is filled with defenders of the Status Quo — primarily Summers, but it appears Geithner also — the dynamic duo that fiddled while the economy burned.

Such dithering can be fatal to an administration.

This was a colossal blunder. Passing reform legislation successfully would have fulfilled the campaign promise of “Change;” it would have created legislative momentum. It could have provided a healthy outlet for the Tea Party anger and the raucous Town Hall meetings. It might have even led to a “throw the Bums out” attitude in the mid-term elections, forcing the most radical de-regulators from office.

Also wasted: The enormous anti-Bush attitude throughout the country that swept team Obama into office. He should have been “Hooverized,” and O should have tapped into that same wave to force the greatest set of Wall Street and Banking regulatory reforms seen since the 1930s.

Instead, we have a White House that appears adrift, and the most importantly, may very well have missed the best chance to clean up Wall Street in five generations.

Never waste a crisis, indeed . .