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THE PRESIDENT'S HEALTH REFORM INITIATIVE:
A SERIOUS STEP TOWARD HEALTH CARE REFORM
As the President has said, the key to long-term deficit reduction
is controlling health care costs through health care reform. Thus, in
his plan to balance the budget by 2005, the President presents a
serious first step toward reform that:
strengthens the Medicare Hospital Insurance (HI) Trust Fund,
ensuring Medicare solvency until 2005;
provides health security for 6 months for working families after a
reforms Medicare to make quality managed care options more
attractive while preserving choice;
improves Medicare with new benefits that (1) provide Alzheimer's
respite care, and (2) waive the copayment for women who need
provides home- and community-based care grants for disabled and
maintains Medicaid as a safety net for low-income Americans while
reforming it to target funds more efficiently and increase state
reforms the insurance market to ensure that Americans can keep
their coverage if they change jobs, that they won't lose coverage
if they get sick, and to improve the availability and
affordability of coverage for small businesses;
gives small businesses voluntary pooling options, including access
to Federal Employees Health Benefits Program (FEHBP) plans;
expands the self-employed tax deduction to 50 percent; and
reduces the deficit by $271 billion over the next decade.
The President's plan expands coverage, cuts the deficit with less
than half the Medicare savings and a third of the Medicaid savings
that Republicans propose, and imposes no new cost increases on
By contrast, the Republican budget proposals threaten Medicare
beneficiaries, reduce Medicaid coverage for millions of children and
elderly Americans, and endanger many hospitals, including academic
health centers. The Republicans' cuts (assuming a 50/50
beneficiary/provider split) would increase out-of-pocket costs for
couples by $1,700 in 2002 alone (under the House budget resolution).
Moreover, the Republicans do not reinvest one penny into health care;
instead, the Republicans use Medicare and Medicaid cuts to pay for
hundreds of billions of dollars of tax cuts for well-off Americans.
1. Reforming the Insurance Market
Insurance reforms, based on proposals that both Republicans and
Democrats supported in the last Congress, will improve the fairness
and efficiency of the insurance marketplace.
Portability and Renewability of Coverage -- Insurers will be
barred from denying coverage to Americans with pre-existing
medical conditions, and plans will have to renew coverage
regardless of health status.
Small Group Market Reforms -- Insurers will be required to offer
coverage to small employers and their workers, regardless of
health status, and companies will be limited in their ability to
vary or increase premiums on the basis of claims' history.
Consumer Protections -- Insurers will be required to give
consumers information on benefits and limitations of their health
plans, including the identity, location, and availability of
participating providers; a summary of procedures used to control
utilization of services; and how well the plan meets quality
standards. In addition, plans would have to provide prompt notice
of claims denials and establish internal grievance and appeals
2. Helping Working Families Retain Insurance After a Job Loss
Families that lose their health insurance when they lose a job
will be eligible for premium subsidies for up to 6 months. The
premium subsidies will be adequate to help families purchase health
insurance with benefits like the Blue Cross/Blue Shield standard
option plan available to Federal employees.
3. Helping Small Businesses Afford Insurance
Giving Small Employers Access to Group Purchasing Options: Small
employers that lack access to a group purchasing option through
voluntary state pools would get that option through access to the
Federal Employees Health Benefits Program (FEHBP) plans. This
would increase the purchasing power of smaller businesses and make
the small group insurance market more efficient. Small firms
would get coverage from plans that also provide coverage to
Federal employees through FEHBP, but the coverage would be
separately rated in each state, leaving premiums for Federal and
state employees unaffected.
Expanding the Self-Employed Tax Deduction: The President's plan
provides a fairer system for self-employed Americans who have
health insurance. Self-employed people would deduct 50 percent of
the cost of their health insurance premiums, rather than 25
percent as under current law.
4. Reforming and Strengthening Medicare
Strengthening the Trust Fund: The President's plan would reduce
spending in Medicare's Part A by $79 billion over 7 years to
ensure the solvency of the Medicare HI Trust Fund to 2005. The
plan finds such savings by reducing provider cost growth, not
raising beneficiary costs.
Eliminating the CoPayment for Mammograms: Although coverage by
Medicare began in 1991, only 14 percent of eligible beneficiaries
without supplemental insurance tap this potentially lifesaving
benefit. One factor is the required 20 percent copayment. To
remove financial barriers to women seeking preventive mammograms,
the President's plan waives the Medicare copayment.
Expanding Managed Care Choices: The President's plan expands the
managed care options available to beneficiaries to include
preferred provider organizations ("PPOs") and point-of-service
("POS") plans. The plan also implements initiatives to improve
Medicare reimbursement of managed care plans, including a
competitive bidding demonstration proposal. Also included in his
plan are important initiatives to streamline regulation.
Combatting Fraud and Abuse: "Operation Restore Trust" is a
five-state demonstration project that targets fraud and abuse in
home health care, nursing home, and durable medical equipment
industries. The President's budget increases funding for these
critical fraud and abuse activities.
5. Long-Term Care
Expanding Home and Community-Based Care: The President's plan
provides grants to states for home-and community-based services
for disabled elderly Americans. Each state, will receive funds
for home-and community-based care based on the number of severely
disabled people in the state, the size of its low-income
population, and the cost of services in the state.
Providing for a New Alzheimer's Respite Benefit within Medicare:
The President's plan helps Medicare beneficiaries who suffer from
Alzheimer's disease by providing respite services for their
families for one week each year.
6. Reforming Medicaid
The President maintains Medicaid, expanding state flexibility,
cutting costs, and assuring Medicaid's ability to provide coverage to
the vulnerable populations it now serves.
Eliminating Unnecessary Federal Strings on States: To let states
manage their Medicaid programs more efficiently, the President's
plan substantially reduces Federal requirements.
States will be allowed to pursue managed care strategies and
other service delivery innovations without seeking Federal
The "Boren Amendment" and other Federal requirements that set
minimum payments to health care providers will be repealed.
Reducing Medicaid Costs: The President proposes a combination of
policies to reduce the growth of federal Medicaid spending,
including expanding managed care, reducing and better targeting
Federal payments to states for hospitals that serve a high
proportion of low-income people, and limiting the growth in
federal Medicaid payments to states for each beneficiary.
Per-person limits, as opposed to a block grant on total spending,
promote efficiency while protecting coverage.