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Bush healthcare proposal leaves questions unanswered.

President Bush has announced his long-awaited, $100 billion proposal to revise the nation's ailing health care industry. Although much of what has been said about the President's plan focuses on tax credits and vouchers to help individuals and families pay for insurance, the plan also calls for expansion of access access to health care, health insurance market reforms and methods of containing costs.

How these reforms will be paid for, however, is only partially explained.

Expanding Access

To expand access to affordable health care, the plan would provide vouchers for low-income individuals and tax credits to middle income individuals to purchase insurance. Eligibility for the credit or the deduction is related to income and is capped at a modified adjusted gross income of $50,000 for single persons, $65,000 for persons filing as heads of households, and $80,000 for married persons filing jointly. Income levels would be adjusted for inflation.

Both vouchers and deductions would be available for health insurance costs of up to $3,750 for families of three or more, $2,500 per couple and $1,250 for individuals. For those receiving employer-provided insurance coverage, the credit or deduction would be adjusted to reflect any employer contributions. Those receiving tax credits could transfer their credits only to an insurer to purchase insurance and could not be cashed in. Persons covered by other federal programs such as Medicaid or Medicare would not be eligible for the credit and it would replace the supplemental earned income tax credit for low income taxpayers who contribute toward the purchase of health insurance coverage for their children.

The credit would be phased-in over a five year period at which time: all eligible individuals, married couples, or families with incomes below the tax threshold (100 percent of poverty) would receive the maximum credit; all eligible individuals, married couples, or families above the tax threshold would receive a partial credit, decreasing to 10 percent of the maximum credit; and all eligible individuals, married couples, or families with incomes above 150 percent of the tax threshold, would receive the greater of the minimum credit or the deduction of up to $3,750.

Insurance Market Reform

Under the President's plan, employers (including municipalities) would not be required to finance or administer health care benefits for any employee.

The four-part market reform proposal would require, as a condition of doing business in a state, all health insurers to accept every employer group in the state that applies for coverage. Insurers that sell coverage to individuals receiving the health insurance tax credit would be prohibited from excluding any credit recipient.

Insurers would be required to renew coverage and be prohibited from dropping coverage nor could they exclude persons with pre- existing conditions. State laws mandating specific benefits or coverage would be eliminated. Premiums charged for similar policies sold to firms in a single block of business could not vary by more than 50 percent.

To ensure access to coverage for individuals and families receiving the tax credit, each state would be required to provide a "basic" benefit package (or packages) with an estimated actuarial value equal to the value of the health tax credit. Any insurer could offer the basic plan. If no insurer comes forward to offer the basic plan, the state insurance commissioner could require two or more health plans with substantial market share to offer the basic benefit plan.

In an effort to spread risk more broadly, the plan contemplates that each state would implement two broad health risk pools: one for small group coverage and another for coverage provided to individuals and families receiving transferable health insurance tax credits. Implementation of health risk pools for small group coverage would occur over a five-year period on a phased-in basis, starting in the third year after enactment of the reform proposal.

Health Insurance Networks (HINs), a new way to assist small employers purchase insurance, could contract with insurers to provide coverage to members or could self-insure subject to enhanced state solvency regulations (if state solvency standards are insufficient, DOL solvency standards would operate as a backup oversight system). All federally approved HINs would be required to offer at least one "coordinated care" (managed care) option and to issue a standard claims form. HINs would also allow for multistate pooling of small firms.

One of several cost containing methods contained in the Bush plan seeks to encourage the use of managed care in both the public and private sectors. In addition, the plan would encourage states to use managed care in Medicaid programs.

To avoid malpractice litigation, physicians have needed to defend themselves by practicing "defensive medicine" -(e.g. ordering more tests and performing more procedures than necessary.) In response, the Bush plan would provide incentives to states to: eliminate joint and several liability for non-economic damages, cap non-economic damages, and promote pretrial alternatives.

One of the leading complaints of the insurance industry is the administrative paper trails. The plan would seek to reduce the amount of paper work thereby reducing the cost of insurance.

The cost of the credit and voucher plan would be offset by savings achieved through measures to contain health care costs. They include more efficient health care delivery system arising from a greater role for market forces, reduced administrative and malpractice costs, more healthy personal behavior and the effects of preventive services to lessen the need for health services and a more cost-effective public program. President Bush has emphasized that his new plan would not require any additional taxes.
COPYRIGHT 1992 National League of Cities
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:George Bush
Author:Quist, Janet
Publication:Nation's Cities Weekly
Date:Feb 17, 1992
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