The New Health Dialogue

A Blog from New America's Health Policy Program

COST: Getting to Affordability

Published:  January 5, 2010
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As the House and Senate begin the crucial process of reconciling the differences between their two bills, one of the biggest outstanding issues remains the question of affordability.

This is by no means a new issue. We’ve written on it before and for a complete rundown of the bicameral differences in the bills check out this 11-pager prepared by the House Tri-Committee staff. For a brief refresher, here are some of the key differences between the House and Senate on affordability:

  • Medicaid Eligibility: Both bills expand Medicaid eligibility. The House bill raises the income threshold for which adults under the age of 65 are eligible for Medicaid to 150 percent of the federal poverty level (FPL). The Senate bill raises the threshold to 133 percent of FPL.

  • Premium Subsidies: Both bills provide subsidies on a sliding scale for individuals and families with incomes under 400 percent of FPL to purchase insurance in the exchange. The slope or generosity of that sliding scale is one of the biggest points of contention. The chart below helps illustrate some of the differences:

Basically the House bill provides more generous subsidies at the lower ends of income scale. The Senate bill provides slightly lower subsidies at the lower end of the income scale, but caps the maximum amount of income a person would have to contribute to the cost of their premium at 9.8 percent for individuals with incomes between 300 and 400 percent of FPL.

  • Other Subsidies: Both bills provide various cost sharing subsidies on a sliding scale to help cover things like deductibles and co-pays and limits on total out of pocket spending. (See chart in previous bullet.) Again the House bill’s subsidies are generally more generous.

  • Start Date: The affordability provisions of the House bill would take effect a year earlier than the Senate bill, on January 1, 2013.

The differences are real, and so are their potential impacts. Kaiser Health News in collaboration with the Philadelphia Inquirer has an excellent article today profiling the kind of individuals and families who could fall through the cracks if the affordability provisions of health reform are inadequate. They’re concerns are shared by liberal bloggers like Firedoglake’s Marcy Wheeler and have fueled a discussion on the Left about what “affordability” really means and whether the bills (and in particular the Senate) achieve it. The back and forth (summed up in this exchange between Wheeler, and FiveThirtyEight’s Nate Silver here, here, here, and here) illustrates how difficult this question is. But arguing about what should reasonably constitute "affordable" health spending relative to say housing, child care or transportation, obscures some important facts about affordability and health reform in general.

First, both the House and Senate bills are undeniably better than the status quo. If you have any doubt, check out the analysis of The New Republic’s Jonathan Cohn with MIT’s Jonathan Gruber. Basically they argue that the difference between health costs with and without reform can translate into bankruptcy or foreclosure from medical costs. See the chart:

 

Or put another way from Jonathan's blog The Treatment (X-axis = Income as a percent of FPL):

Second, the debate around affordability will not be settled in this round of negotiations between the House and Senate. Nor should it be. Instead affordabilty will become an issue that lawmakers must address year in and year out. And that’s the point because up until now, affordability was an issue lawmakers could only address with abstract promises. After reform, they’ll have to come up with concrete solutions, ways to make subsidies more generous and health care less costly. Getting the subsidy levels right from the start is important. But even more important is getting a process started that addressses costs and affordability over the long-term.

To be sure the Senate bill (which will likely set the parameters of a final compromise) can and should be improved during negotiations. No one wants to make health care less affordable, and the real issue with increasing the generosity of subsidies is finding a way to pay for it. There’s enough daylight between the financing provisions of the House and Senate bills that the Democratic leadership should be able to find a compromise that does just that.

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