The Week in Health Reform – Hitting a Speed Bump – Say Ahhh! A Children’s Health Policy Blog

Health reform didn’t go very well this week and everyone already knows it. Since it is well-covered territory, I’ll leave the depressing details to others, and stick to what this week’s developments mean for children.

Leaving aside for now the just-released and yet-to-be-read 852-page House bill on health reform, the most notable development this week was the bad news delivered by the Congressional Budget Office to the Senate Finance Committee that its proposed reform plan would cost $1.6 trillion over ten years, about $600 billion more than the Finance Committee had wanted.  In response, Chairman Baucus has gone back to the drawing board. According to leaked documents (found here and here), which now are as widespread as bad cookie dough, the Senate Finance Committee is considering retreating from some of its policy options that would have been good news for kids.

The possible changes include:

  • Scaling back proposed expansions of Medicaid from 150 percent of the federal poverty level to 133 percent of the poverty level.  This news is particularly alarming because many children already are covered in Medicaid at income levels above 133 percent of the federal poverty level, which means that some children could actually lose Medicaid if this proposal goes into effect and isn’t accompanied by a requirement that states continue with any existing coverage at higher income levels.  The earlier SFC proposal included a “maintenance-of-effort” requirement, and it is possible that this “detail” simply wasn’t included in the leaked documents.
  • No strengthening of CHIP.  In an earlier options paper, the SFC proposed continuing CHIP under current rules through the end of fiscal year 2013 (when the program is slated to expire) and then requiring all states to expand coverage for uninsured children to 275% of the FPL.  In addition, the paper proposed that beginning after fiscal year 2013, CHIP programs be required to provide children with “EPSDT,” a strong, kid-specific benefit package.  In the new, leaked documents, the future of CHIP is left unaddressed, raising the prospect that the Senate Finance Committee may no longer be pursuing these changes. 
  • A slower and more limited phase-in of Medicaid coverage for parents.  The SFC now is considering whether to expand Medicaid for parents (and other adults) only to 100 percent of the FPL rather than 150 percent of the FPL as previously suggested, and would phase the new coverage in over a three-year period.  If such a policy were adopted, some children in families with income between 100 percent and 133 percent of the FPL would be covered in Medicaid even as their parents must apply for and secure coverage through an Exchange plan.
  • Less generous coverage and subsidies for families buying insurance through an Exchange.  In the new proposal, subsidies would be provided only up to 300 percent of the FPL, rather than 400 percent of the FPL, as the SFC previously suggested.  Moreover, the SFC now is considering a benefit package that would cover a smaller share of the health care expenses that people incur.  (Technically, the actuarial value of the packages offered through the Exchange would drop from a range of 76%- 93% to a range of 65% – 90%.)

At the same time, the SFC is considering a new idea that could be particularly bad news for low-income people, including children in low-income families.  

  • A tax proposal that makes it harder for low-income people to find and keep jobs. The SFC now has on the table the idea of imposing a special tax on employers with employees who sign up for Medicaid or the new subsidy program.  This apparently is supposed to substitute for a more traditional “play or pay” proposal under which employers that fail to offer coverage must pay into a fund that helps the federal government finance subsidies.  The problem with the new option is that it creates an incentive for employers to avoid hiring a low-income person who relies on Medicaid (or, perhaps, has a child who does; the documents are unclear) or the new subsidy program.  This is an idea that may die quickly – it is hard to see why policymakers would make it more difficult for low and moderate-income people and families to find and keep jobs.

While the leaked documents are troubling, it is not time to hit the panic button quite yet.  The SFC’s product is far from complete (it’s not even officially public yet) and any final bill will have to find approval from both the House and President Obama.  We may be heading up Heartbreak Hill, but the marathon of health reform is far from over.

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