In its debate over health care legislation, the Senate and the Obama administration must contend with conflicting forces and incentives. There appears to be a political consensus among supporters that "guaranteed issue" and "community rating" are essential features of any bill. ("Guaranteed issue" means people cannot be denied coverage no matter how risky they are. "Community rating" means people with low health risks have to subsidize them.)
As we have noted several times now, keeping these features requires that everyone have health insurance. This means people with low health risks must be compelled to buy (and pay too much for) health insurance.
The latest evidence comes via Washington Post Staff Writer David S. Hilzenrath, whose theme is that the benefits promised by legislation will be years away, and may not ever materialize.
Until 2014, insurance companies could continue to deny coverage or charge higher premiums based on people's medical history. Another highly touted reform -- banning annual and lifetime limits on coverage -- would take effect in 2010, but it would permit significant exceptions.
In short, both "guaranteed issue" and "community rating" have to be delayed to "reduce the cost of the bill during the 10-year budget window measured by the Congressional Budget Office."
Deferred until 2014 would be a federal mandate that everyone buy insurance, subsidies to help people with lower incomes pay for it, and the creation of marketplaces called exchanges, in which individuals and small businesses could comparison-shop for health plans.
Hilzenrath says the Obama administration understands the linkage between guaranteed issue and community rating on the one hand, and the individual mandate on the other:
White House health reform czar Nancy-Ann DeParle said the president was moving as quickly as possible. She said that the insurance industry cannot be forced to accept people irrespective of preexisting conditions until everyone is required to have insurance, and that the administration does not want such a requirement until the exchanges are up and running.
Another feature the Administration wants is the elimination of annual and lifetime benefit caps. Without these caps, however, the cost of every insurance plan must go up. Senate leaders appear unable or unwilling to decide this contentious issue, and they intend to delegate the responsibility for deciding to the Executive branch:
Where annual benefits are concerned, the Senate bill bans only "unreasonable" limits. What that means is not spelled out; a Senate aide said the Treasury Department would set the standard.
Of course, the Treasury Department has no expertise on health care, so it cannot determine what is "reasonable" based on medical factors -- just cost.
