With Congress debating an historic overhaul of the nation’s system of paying for medical care, here’s a glossary to help you understand what the policymakers are saying.
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Age rating refers to the ratio between what older and younger purchasers pay for insurance. The Senate bill requires that the premiums charged to customers in the individual and small group markets vary by age by a ratio of no more than 3 to 1, which means that older people could only be required to pay three times as much as younger people. The House bill allows only a maximum 2 to 1 ratio. In the current market, particularly in the individual market, the majority of states have no restrictions on the age rating, so older people can be charged five or six times as much as younger ones. The reason — older people are more likely to have serious ailments that require costly treatment.
'Bend the health care cost curve'
From 2002 to 2007, medical spending in the United States increased by an average of 7.3 percent a year, a far faster pace than the growth in the nation’s income. President Barack Obama and congressional leaders want to “bend the cost curve” — or slow the growth in health care spending — by forcing doctors and hospitals to become more efficient.
'Cadillac' health insurance plan
'Cadillac' plans offer relatively generous benefits and may require less cost-sharing by enrollees than other programs. Such plans have often been negotiated by labor unions which accept better benefits in lieu of higher wages.
The Senate bill would impose a 40 percent tax on such plans that exceeded a threshold of $8,500 for individual coverage and $23,000 for family coverage. The bill partly shields early retirees and those in certain high-risk professions from this tax.
The Congressional Budget Office, the non-partisan budget estimator for Congress, “scores” a proposed bill by calculating the amount it will either increase or decrease federal spending and tax revenues.
The Children's Health Insurance Program provides health insurance to children in low-income families whose parents are not poor enough to qualify for Medicaid. The program is jointly financed by states and the federal government. It is administered by the states.
Under a federal law — the Consolidated Omnibus Reconciliation Act of 1985 — a company’s insurance plan must offer continuation coverage to workers after they lose their jobs. But the laid-off worker must pay the full cost of the premiums.
Comparative effectiveness research examines the relative cost and efficacy of medical procedures in one hospital or region of the country contrasted with another hospital or region, in the hopes of forcing down costs in the more expensive areas.
President Obama has endorsed this approach, saying the Mayo Clinic in Minnesota and other institutions “offer the highest-quality care at costs well below the national norm. We need to learn from their successes and replicate those best practices across our country.”
Under a proposal made by Senate Budget Committee Chairman Kent Conrad, D-N.D., people without health insurance would be able to purchase it from regional co-operatives, almost like farmer co-ops.
These co-ops would not be run by the federal government, but would compete on cost and quality with the for-profit insurance industry.
Conrad called his co-op idea "an alternative to for-profit insurance companies, so that there's a different delivery model for competition."
Obama has pledged that the insurance overhaul will not add to the projected federal deficits when measured over ten years. New spending will need to be offset by cuts in other parts of the health care system. According to the CBO, the cumulative deficits from 2010 to 2019 will be $9.3 trillion, or about 5 percent of gross domestic product.
Under a fee-for-service system, a doctor bills the insurance company or the government for each service he or she provides. This contrasts with a capitation system under which physicians receive a fixed sum for each patient assigned to them and the payment does not increase if more services are provided.
According the CBO, “providing separate payments for each service encourages physicians to provide a higher volume of services than they would under capitation arrangements.”
Health care rationing
Rationing uses a mechanism such as a waiting list or a strict national medical budget to allocate limited resources.
In Britain, where overall medical care spending is controlled by the government, the rationing agency, the National Institute of Health and Clinical Excellence, refuses to recommend some medications for patients with certain advanced cancers, because it judges them to be not cost effective. Patients who decide to pay on their own for a new drug or treatment which is not approved by the agency are ineligible for further care by the National Health Service.
Health information technology, or health IT, refers to storing patients’ records on computerized databases which would allow more efficient sharing of patients’ medical histories among doctors, nurses, and others. As of 2008, according to the New England Journal of Medicine, only 5 percent of doctors in the United States had adopted comprehensive health IT systems.
Health insurance exchange
A health insurance exchange system would allow uninsured individuals and small employers to purchase insurance by shopping at a federally-regulated, web-based marketplace similar to a travel web site such as Orbitz.
Purchasers would be given a menu of competing plans, mostly private-sector ones, but also one federally-sponsored plan which would compete on cost and quality with the private-sector plans.
Proposed by some reform advocates, an individual mandate would require that uninsured individuals purchase coverage. It would apply to individuals who were neither poor enough to qualify for Medicaid nor old enough to enter Medicare. Those who failed to comply would be forced to pay a penalty to the federal government.
Independent Medicare Advisory Board
The Senate bill would establish an Independent Medicare Advisory Board, which would be required to recommend changes to the Medicare program to limit its spending growth. Its recommendations would go into effect automatically unless Congress votes to block them. Such changes would be required if the Medicare trustees projected that the program’s spending per beneficiary would grow more rapidly than the medical inflation rate or the growth in per capita medical spending. The board couldn't change eligibility or benefits, so its recommendations would likely focus on Medicare Advantage plans and on payments to medical providers.
Medicaid is the primary insurance program for low-income Americans. The states and the federal government share the cost of Medicaid. On average, the federal government pays for 57 percent of Medicaid costs, though this varies from state to state with high-income states bearing more of the burden than low-income states.
Total enrollment is more than 60 million. About 30 million low-income children and 15 million adults are covered, as well as 6 million elderly and 9.6 million blind or disabled people.
The Medicare program — which is distinct from Medicaid — pays for medical treatment for Americans age 65 and older and for people with permanent disabilities.
Medicaid helps about 1 in 5 Medicare beneficiaries to pay their premiums for coverage and to pay some additional costs. These low-income people are called the “dual eligibles.”
According to the Kaiser Commission on Medicaid and the Uninsured, the dual eligibles account for more than 45 percent of Medicaid spending for medical services.
Medicare is the taxpayer-supported plan that pays for the medical care of 44 million individuals, including most Americans who are age 65 or older.
Medicare Part A pays for hospital and nursing home care.
Medicare Part B covers the costs of physicians’ services and other outpatient care.
Medicare Part C, the Medicare Advantage program, is an alternative to the traditional fee-for-service Medicare. It allows people to enroll in a private plan. The federal government then reimburses the private company for providing Medicare-covered benefits.
Medicare Part D pays for prescription drugs.
Workers’ payroll taxes pay for most of the cost of Medicare, but the people enrolled in the program also pay monthly premiums.
Opt-in public plan
A government-run plan for people not enrolled in employer-sponsored insurance, Medicare, or Medicaid. Under the opt-in model, states would not take part in such a plan, unless they affirmatively chose to do so. But Congress has yet to decide how states would exercise that choice, whether through referendum or by a state legislature vote.
Opt-out public plan
A form of a government-run health plan which Senate Majority Leader Harry Reid included in his version of the overhaul bill. If a state decided it didn’t want a public option, it could pass a law to opt out of the federal program.
Direct spending by consumers for health care goods and services, including co-payments, deductibles, and any amounts not covered by insurance, are called out-of-pocket payments.
A pay-or-play requirement would require companies to offer health insurance to their employees or make a payment to the federal government to help pay for coverage of the uninsured.
Public option (also known as 'public plan')
A public option is a form of government-sponsored insurance that would be offered to the uninsured as one of the choices in the health exchange. President Barack Obama supports a public option and has denied that it is “a Trojan horse for a single-payer system.”
Only people not enrolled in employer-sponsored insurance, Medicare, or Medicaid would be eligible to join the public plan.
Normally, 60 votes are needed to overcome a filibuster, or an unlimited debate in the Senate. Reconciliation is a streamlined procedure that the Senate may use to enact changes by a simple majority vote, removing the possibility of a filibuster. Senate rules allow the reconciliation process to be used only on a budget bill.
Some Democrats favor using the reconciliation process to pass an overhaul of health insurance. But most health insurance policy changes would be extraneous to a budget bill. Those policy changes would be stricken from the bill unless 60 senators voted to override the chamber's rules.
Taxation of products such as cigarettes, alcohol, and fatty food — items, when used by Americans, can raise the cost of health care for everyone. Reform advocates hope that high taxes would persuade Americans to cut their consumption of these products and thus improve their health.
A system under which medical care for all Americans would be paid for by the federal government is a single-payer plan. Sen. Bernie Sanders, I-Vt., has introduced a bill that would set up a single-payer, or universal, system. His bill would replace Medicaid, Medicare, the Children's Health Insurance Program, and the federal employees benefits plan with a universal package. Sanders would curb, or even perhaps eliminate, private-sector health insurance by prohibiting the sale of insurance that duplicates benefits provided under the single-payer plan.
Sustainable growth rate
Each year, Medicare sets fees for physicians’ services using a “sustainable growth rate” formula. This target is updated annually to reflect inflation, the increase in the number of Medicare enrollees, and other factors. If actual Medicare spending for physicians’ services has increased faster than the target, the SGR is supposed to automatically reduce future payments for those services.
The CBO estimates that under current SGR policy, physicians will receive about a 21 percent cut in payment rates in 2010. But, in recent years, responding to complaints by doctors, Congress has voted to suspend these cuts, which is one reason Medicare’s costs keep increasing.
Tax break for employer-provided insurance
The money an employer pays to buy insurance for a worker is excluded from the worker’s taxable income. According to the congressional Joint Committee on Taxation, the Treasury misses out on $226 billion a year in revenues because employer spending on health insurance isn’t counted as taxable income. Some congressional leaders see taxing employer-provided insurance as a principal means of raising the money needed to cover Americans who are now uninsured.
The TRICARE program provides care for the military’s uniformed personnel and retirees, and for their dependents and survivors — in all, more than 9 million people. In 2008, the Department of Defense spent $42 billion on TRICARE, about 6 percent of total defense spending. The Congressional Budget Office forecast that TRICARE will consume 13 percent of total defense spending by 2026.
'Trigger' for public option
A mechanism that would launch a federally-run public plan to compete with private-sector insurers only if private-sector insurers failed to make their own plans less costly for consumers. The centrist House Democrats' Blue Dog coalition and Sen. Olympia Snowe, R-Maine, support a trigger as an alternative to an immediate public plan.
Medical care given to a patient who has no health insurance and can’t afford to pay the out-of-pocket costs is called uncompensated care. Hospitals pass the cost of of uncompensated care along to their paying customers.
According to Senate Finance Committee Chairman Max Baucus, this cost shifting accounts for eight percent of the average health insurance premium, or about $1,100 per family per year. American hospitals currently spend over $30 billion a year on uncompensated care with about two-thirds of that amount due to the care of uninsured people, according to MIT economist Jonathan Gruber.
Sources: Center for Medicaid and Medicare Services; Congressional Budget Office; Kaiser Family Foundation; Senate Finance Committee; The Observer (London); The Urban Institute’s Policy Jargon Decoder.
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