Health Care Rx: How to mend our broken system?

Nowhere else in the world is so much money spent with such poor results. On that point there is rare unanimity among Washington decisionmakers: The U.S. health system needs a major overhaul. But the consensus breaks down on the question of how best to create a coordinated, high-performing, evidence-based system that provides the right care to the right people.

On Tuesday, Democrats accelerated their drive to overhaul the $2.3 trillion system, outlining proposals to extend coverage to uninsured millions as a broad consensus appeared to be developing among Democratic leaders. At their core, a 316-page partial draft bill released by Democrats on the Senate Health, Education, Labor and Pensions Committee and a three-page outline circulated by senior House Democrats were largely identical. But they left out most details on plans for raising more than $1 trillion needed to cover costs. Here's a look at the proposals:

WHAT WOULD BE REQUIRED

For individuals: Individuals would be able to purchase insurance from new exchanges operated by the states or federal government. Individuals would be required to buy insurance if they could afford it, with waivers available in hardship cases. In both the House and Senate, Democrats want to provide subsidies to families with incomes of up to about $88,000 a year to help them pay for insurance.

The Senate measure provides for an unspecified penalty for anyone refusing to obey the so-called mandate, and House Democrats are considering a similar approach. The Senate bill also stipulates that children as old as 26 could remain on their parents' insurance policies.

For employers: The House approach would require employers to buy insurance for their workers or pay a penalty. Senate Democrats left that issue for a final decision later this week or next week, but it is expected to be included.

For private insurers: They would be required to cover people with preexisting conditions, co-payments for preventive care would be limited, and doctors and hospitals that provided high-quality care would be rewarded.

TAX ON EMPLOYER-PROVIDED PLANS

The plan is likely to include a new tax on some employer-provided health benefits that exceed the value of the basic plan offered to federal employees, currently about $13,000 a year for a family of four, the chairman of the Senate Finance Committee said Tuesday. Sen. Max Baucus, D-Mont., said that taxing employer-provided benefits is "perhaps the best way to raise money for an overhaul of the health-care system."

How would it work? He said his proposal is likely to limit benefits at "a level higher than the actual benefit that members of Congress receive today." An employer-provided plan worth less than that level would remain tax-free, he said, while any benefit exceeding the cap would be taxed as ordinary income. Such a tax, if adopted, would be phased in over "several years," Baucus said. And it would be likely to "grandfather" in health benefits set as part of a collective-bargaining agreement, he said, allowing union plans to remain tax-free until new contracts can be negotiated.

How much money would it bring in? Baucus declined to say how much money the proposal would generate. The nonpartisan Joint Committee on Taxation estimates that taxing employer benefits above the value of the Federal Employees Health Benefit Plan, adjusted for inflation, would generate nearly $420 billion over the next 10 years -- a sizable chunk of the $1 trillion or more likely to be needed to expand coverage for the uninsured.

What it means: A higher limit and exemptions for unions would make the tax more politically palatable but would diminish the amount of money it would raise. Baucus said the sums under discussion remain "significant" but added that he is looking at a variety of other money-raising options, including Obama's plan to limit the value of itemized deductions for families earning more than $250,000 a year.

WHAT ABOUT A GOVERNMENT PLAN?

What the House wants: On a hotly contested issue, the House plan would give individuals the option of buying insurance in a government-run health insurance plan similar to Medicare.

What the Senate wants: Democrats on the Senate committee embraced a similar provision last week, but omitted it from the draft released Tuesday in what Sen. Chris Dodd, D-Conn., said was a gesture to Republicans who oppose it.

What GOP leaders say: Senate Republican leaders denounced the idea of a pure government-run insurance plan. "We saw a Washington takeover with banks," said Sen. Lamar Alexander of Tennessee, the chairman of the Senate Republican Conference. "We saw Washington try to take over student loans. We see a Washington takeover with car companies. And now we see an attempt to have a Washington takeover with a government-run health care plan." Top Republicans also want to know if a government-created plan will limit patients' treatments and if mandating employers to cover health care will force companies to cut jobs.

A compromise plan: Sen. Kent Conrad, D-N.D., suggested that the public plan might take the form of an insurance cooperative, owned and operated for the benefit of its members -- individuals and businesses with fewer than 10 employees. This proposal, floated as a compromise, seemed to intrigue Republicans who were familiar with cooperatives that market items as varied as electric power, telephone service, milk and wheat. "The strength of this proposal is that it accomplishes much of what those who want a public option are calling for -- that is, something to compete with private for-profit insurance companies," Conrad said. "On the other hand, it meets the objections of many Republicans and some Democrats as well. The co-op is not government-controlled."

WHAT'S THE TIMING?

Democrats seek passage of legislation in the House and Senate by early August. A final compromise would wait for September or later in the fall, according to a schedule the party's leadership.

NEWS SERVICES