Health Reform: Who gets what?

Clinton’s healthcare reform plan — some form of “managed competition” — now looks like it will be released the first week in May. That’s when the real politics begin.

The debate will focus on two issues: (1) what basic or “uniform” benefits will be covered and (2) how much will it cost to provide this basic coverage to everyone?

How the government defines “uniform benefits” will determine the healthcare product seen by the consumer, how quickly the 37 million uninsured can be covered, the healthcare services that can be paid for with before-tax income, and, ultimately, the cost of the healthcare program.

For example, uniform benefits will surely include the cost of physician visits for routine care and the cost of <<>> hospital stays for appendicitis and other common problems. But where will coverage stop?

For example, will prescription drugs be included as a uniform benefit? Drugs account for only 7% of total health care spending. Yet the issue is getting big attention. Reason: About 70% of the cost of drugs is not covered by insurance. So, it’s paid for out-of-pocket by consumers. This is a lesson for healthcare reformers: People pay attention to the cost of things they pay for themselves.

Will long-term care be included? Today, only one percent of long-term care is covered by private insurance. Many elderly are cared for by their children. About half pay out-of-pocket. Those left have to spend down their retirement nest egg until they reach poverty. Then they are covered by Medicaid. Thus, long-term care is a potent political issue — not only for elderly interests but also for many baby boomers facing the elder care issue in their own extended family.

Will mental health services be included as a uniform benefit? Hillary Clinton said “yes” last week. But what does that mean? Some mental health specialists say that manic-depression, schizophrenia, and obsessive-compulsive behavior have biological origins and should be covered like any other disease. She also signaled that treatment for alcohol and drug abuse should be included. If all these are included, costs will skyrocket and there will be problems with those in Congress and in the general public who want to limit taxes and spending.

And what about preventative services? Some are sure to be included: pre-natal care, childhood immunizations, and mammograms. But what about family planning and fertility services, obesity prevention, smoking prevention?

So, the political devil is in the details of defining uniform benefits. Reason: the definition of uniform benefits decides who gets what, when and how — the classic definition of politics.

The uniform benefits package will first be decided by a small group in the White House. Then it will go to Congress, where the real battle will be waged.

Providers have a lot at stake. Hospitals now get over 90% of their revenues from the insurance system; physicians get about 75%; and drug companies about 30%. So what is covered matters to a lot of powerful interests.

Other big stakeholders include employers (who pay for the healthcare of 2 of 3 Americans under 65) and unions, whose members have generous healthcare benefit packages — often negotiated in place of wage increases. Employers will be able to cover uniform benefits with before-tax dollars. But, additional benefits will not be tax free. Result: there will be strong pressures to downgrade many union and company healthcare benefit programs to include only those services on the uniform benefit list.

That’s why the politics are just beginning. Most Americans will end up paying more for fewer benefits, bad medicine that will go down hard.