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Health Industry Concerned About Reform Measures
Leaders Warn That Democrats' Bills Would Leave Too Many Uncovered

By Ceci Connolly
Washington Post Staff Writer
Friday, October 9, 2009

The industry heavyweights President Obama neutralized through the summer are agitating that the health-care bills in Congress violate agreements they made with the White House, leave 25 million Americans uninsured and have the potential to increase medical costs.

One day after Democrats celebrated the news that a bill drafted in the Senate Finance Committee would not increase the deficit, the prospects for speedy enactment of landmark reform grew murkier. Industry leaders, who have held their tongues for months, spoke in increasingly dire tones Thursday about the impact of the Democratic proposals, raising the specter of an eleventh-hour lobbying campaign to defeat Obama's centerpiece domestic policy goal.

Many lobbyists and independent analysts underlined what they called major flaws in the Finance Committee's bill, saying it probably would draw the sickest, most expensive patients into the health coverage system without balancing the insurance risk with more young, healthy people. The result, they predicted, would be ever-rising premiums for the people, businesses and governments that pay for medical care.

"The consequences of this would be an upward spiral; rate shock to everyone who stays in," said Karen Ignagni, president of the industry group America's Health Insurance Plans. "This legislation will fail the test of affordability for individuals."

White House officials, mindful of a possible industry uprising, stressed that the legislation is a "work in progress." Administration senior health adviser Nancy-Ann DeParle and economic adviser Lawrence H. Summers met with Ignagni for an hour Wednesday.

"There are a number of protections in the bill that would mitigate against any concerns" the industry has, DeParle said, citing a proposed $25 billion reinsurance fund to buffer against heavy losses.

The American Medical Association is concerned because the 10-year $829 billion cost of the Senate bill does not include $200 billion in promised higher Medicare payments.

Hospital executives, meanwhile, complained that the legislation would leave 25 million people without coverage in 2019. The uninsured place a high burden on hospitals, which are required by law to treat everyone who arrives at an emergency department, regardless of citizenship or ability to pay. Those costs result in debt for hospitals and higher fees for people with insurance.

"One of the main purposes of health reform is to get as many Americans covered as possible," said Chip Kahn, president of the Federation of American Hospitals.

The trade group and two other hospital associations struck a deal with the White House and Finance Committee Chairman Max Baucus (D-Mont.) to accept $155 billion less in Medicare payments over the next decade if 94 percent of all residents -- legal and illegal -- are insured. The Congressional Budget Office reported Wednesday that the finance panel's bill would extend coverage to 91 percent of residents.

"The Senate has a ways to go to meet our deal," said Kahn, who was behind the "Harry and Louise" ads that criticized President Bill Clinton's attempt at health-care overhaul. "When you're taking $350 billion away from services for Medicare beneficiaries and use that to fund other care, covering 29 million people isn't good enough."

Said White House deputy communications director Dan Pfeiffer: "The president has always believed that the best way to . . . pass comprehensive health reform is by having all of the stakeholders at the table. We will continue working with the hospitals, doctors and others to provide access to affordable coverage for as many Americans as possible."

Originally, the Baucus bill offered a tradeoff to insurers: Drop policies that deny coverage based on a person's poor health, and in return the government would require that everyone carry insurance, including younger, healthier Americans. But the committee postponed and reduced the penalties on people who refuse to buy coverage.

"Without the addition of the millions of young and healthy Americans who now choose to forgo coverage . . . the requirement that insurers insure all comers . . . would actually backfire -- resulting in higher premiums and more instability for the middle class," wrote researchers at the Third Way, a centrist Democratic group.

The left-leaning Urban Institute released an analysis projecting that pre-retirement-age people would face average insurance bills above $10,000 because the legislation would allow insurers to charge older customers rates five times as high as those for younger clients.

The measure also includes $6.5 billion in insurance fees each year, a cost that insurers say will be passed on to consumers. "Everyone who buys insurance is going to pay higher premiums," said Alissa Fox, a vice president at the Blue Cross and Blue Shield Association.

But Carl McDonald, an analyst at Oppenheimer Equity Research, said the insurers may be worried about the impact of reform on profit margins. Under the proposed system, customers would buy insurance on a regulated, transparent marketplace called an exchange.

"If all of the products are standardized, then when you actually get the price quotes, those price quotes are going to actually be comparable," he said. "In that kind of scenario, I don't see how premiums don't come down and put pressure on margins."

Baucus will continue altering the legislation to make coverage as affordable and broad as possible, spokeswoman Erin Shields said.

"No one policy is a magic bullet for any problem in our health-care system today, and that's why Chairman Baucus developed a comprehensive reform package," she said.

The insurance industry leaders spoke out on the same day House Speaker Nancy Pelosi (D-Calif.) said that "the votes are there" in her chamber to authorize a government-sponsored insurance program, and as Senate leaders announced that a key committee will vote Tuesday on its health-care measure.

In the House, where liberal Democrats continue to press for a government-run insurance option, Pelosi said she would ask the CBO to analyze three versions of a public option. Once she gets the analyses back, Democratic leaders and the House Rules Committee will assemble a bill that they can introduce on the floor. The week of Oct. 19 appears to be the soonest the House could vote on it.

Staff writers David S. Hilzenrath and Ben Pershing contributed to this report.

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