US Health Care reform plan approved in House

The US health care reform bandwagon moves one step closer with the House of Representatives passing the Affordable Health Care for America Act, that that would overhaul the health insurance system and expand coverage at a cost of $1.1 trillion over 10 years. The Bill will now be debated and voted upon in the Senate.

The Plan, paid for through new fees and taxes (income surtax on individuals earning more than $500,000 and couples earning more than $1 million), along with cuts in Medicare, would extend coverage to 36 million people now without insurance while creating a government health insurance program, significantly expand Medicaid and would offer subsidies to help moderate-income people buy insurance from private companies or from a government insurance plan. The Bill would also require most Americans to obtain health insurance or face penalties, force most employers to provide coverage or pay a tax penalty of up to 8% of their payroll, and also end insurance company practices like not covering pre-existing conditions or dropping people when they become ill. It would also set up a national insurance exchange where people could shop for coverage.

The government insurance plan (aka Public option), would offer the same benefits and comply with same insurance market reforms as those offered by private and non-profit insurance co-operatives, and would negotiate rates with doctors and hospitals to be financially self-sustaining. A comparison of different proposals with the House approved version is available here. See also this interactive graphic of the history of health care reforms in the US.

In a reflection of the power of lobby groups and the influence of individual right activists, the House Democrats had to bow down to pressures from certain conservative Democrats and limit elective abortion coverage from both private and public insurers on the exchange. The proposal will prohibit federal funds for abortion services in the public option and also prohibits individuals who receive affordability credits from purchasing a plan that provides elective abortions.

See also David Leonhardt's take on the House's version of the health care reform bill. David Rose weighs in against the provision on Health co-operatives and favors abolishing Medicare and Medicaid for a voucher program.

Update 1
Twenty three economists have a letter to President Obama outlining four desirables in any health reform bill - deficit neutrality, an excise tax on high-cost insurance plans, an independent Medicare commission, and delivery system reforms.

Update 2
The US Senate finally have agreed on a version that would pass muster there among Senate Democrats. This plan combines three main elements: community rating, so that premiums can’t be based on medical history (which means that coverage becomes available to people with preexisting conditions); an individual mandate, so that healthy people are in the pool, keeping premiums down; and subsidies, to help lower-income families afford the premiums, with the subsidies to be ultimately paid for with taxes on the relatively affluent. Instead of the public plan, it would create at least two national insurance plans modeled after those offered to federal workers and also a new government-run long-term-care insurance program.

The nonpartisan Congressional Budget Office said the legislation would cost $871 billion over 10 years, with the expense more than offset by revenues from new taxes and fees and by reductions in government spending, particularly on Medicare. It also said the bill would reduce future deficits by $132 billion over that period.

Paul Krugman feels that apart from the absence of the public option, broader access o exchanges (now restricted to the uninsured and small businesses), and more subsidies, the Senate Plan looks close to a Massachussetts type single-payer system.

See also Krugman on the costs of the health care reform plan. The CBO and CMS estimates that the direct cost of expanding coverage will be less than 4 percent of total health care spending- the amount by which, on the current trajectory, health spending rises every 7 months.

The Senate finally passed the Bill. See this comparison of the Senate and House Bills.

Update 3 (26/02/2010)
The US Health Reform Bill remains stuck in a stalemate as finding a compromise between the Senate and House versions of the Bill appears daunting. The compromise Obama proposal (closer to the Senate Bill) requires that individuals purchase insurance or pay a fee, that large employers offer insurance or pay a fee, a combination of excise and payroll taxes to finance the reform effort, and measures to improve affordability for low income households.

See this excellent summary of the major issues surrounding the health care reform debate in the US. It identifies reduction of health care costs and expansion of coverage as the biggest problems in the US health care system.