Healthcare Reform, by the Commonwealth Fund

Insurance for everybody, and lower premiums, too. Sounds great, but can it work?

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Imagine this: a healthcare system that provides coverage for nearly everyone and lowers insurance costs for individuals and small businesses by 30 percent. Sound too good to be true? It may well be. But let's take a look at it anyway. The new plan, developed by the Commonwealth Fund and published today in the journal Health Affairs, is similar in many particulars to the proposals put forward by the Democratic presidential candidates. But unlike the candidates' plans, this one offers specifics about costs to individuals and businesses. The numbers can certainly be disputed—that 30 percent cost savings seems awfully optimistic—but given our regular diet of lofty but not always satisfying campaign rhetoric, this provides food for thought.

Like the Democrats' plans, the Commonwealth Fund proposal would create a new national "connector" through which small businesses and individuals could buy insurance, either a souped-up "Medicare Extra" plan through the federal government or private insurance. Everyone would be required to have coverage, but insurers couldn't turn anyone away or charge people an arm and a leg because they're sick. The program would expand Medicaid and SCHIP coverage for low-income adults and children to all those earning less than 150 percent of the poverty level (about $15,000) and provide tax credits for everyone to make premiums more affordable. Employers would be required to either provide health insurance or contribute to a pool to help pay for coverage.

The biggest difference from the Democratic candidates' proposals involves Medicare. The Commonwealth Fund's plan would open up Medicare to adults ages 60 to 64, with an estimated monthly premium for this group of $532 a month for Parts A, B, and D. The plan would eliminate the current two-year waiting period for the disabled to become eligible and would allow current Medicare beneficiaries to sign up for the Medicare Extra plan if they wished, eliminating the need for supplemental coverage. These changes would make many early retirees happy, not to mention employers, who have been backing away from retiree health coverage for years.

By building on the existing Medicare program, with its low overhead and reduced payment rates for providers, the new program would be able to offer cheaper premiums than most people pay for regular commercial plans. The Commonwealth Fund estimates premiums for single coverage under its Medicare Extra plan would be $259 per month for individuals and $702 for families, about 30 percent less than the current cost of an employer-sponsored plan.

According to the report, the plan would add to healthcare costs by a net $15 billion in 2008, less than 1 percent of the $2.4 trillion in total estimated spending. This is substantially less than the $110 billion that Clinton has said her plan would cost annually or the $50 billion to $65 billion the Obama camp has estimated for his plan. Since the campaigns haven't released details about how they arrived at their cost estimates, it's impossible to compare them with the Commonwealth Fund plan or to gauge whose figures are more accurate.

While it's true that increased competition would mean that individuals in employer plans would probably pay less, too, some groups would pay more. Employers that don't now provide health insurance would be required to kick in 7 percent of payroll, up to $1.25 an hour, to help finance coverage. That's as much as $2, 600 per worker, and although it may be less than an employer would pay for coverage, it's a lot more than the $295 per employee that employers pay in Massachusetts under that state's newish universal coverage law, a figure that caused plenty of grumbling when it was instituted. Insurers that currently make a bundle selling pricey individual and small group insurance policies might also be unhappy, since they wouldn't be able to charge more for covering sick people. And with 60 million people expected to sign up through the new Medicare connector, many providers would feel the pain of lower reimbursements.

Study coauthor and Commonwealth Fund President Karen Davis says some pain would be well worth it. "If everybody will give a little, it means that you can get universal coverage, and we can also get health system savings of $1.6 trillion over 10 years." Anytime the candidates want to offer up more specifics about their own plans, I'm listening.