Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

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For Immediate Release Contact: Erin Shields (Baucus)
May 11, 2009 Jill Gerber (Grassley)
(202) 224‐4515

BAUCUS, GRASSLEY RELEASE POLICY OPTIONS FOR EXPANDING HEALTH CARE COVERAGE

Options are the second of three papers in Finance leaders’ health reform effort

Washington, DC – Senate Finance Committee Chairman Max Baucus (D‐Mont.) and Ranking
Member Chuck Grassley (R‐Iowa) today released policy options for expanding health care
coverage to the 46 million Americans who are currently uninsured. The Finance leaders will
“walk through” the options at a Committee meeting on Thursday and solicit thoughts and ideas
from Members on the options for expanding coverage. The options being released today are
the second of three papers that Members will discuss before a Finance Committee mark‐up of
comprehensive health reform legislation in June.

“Expanding health care coverage is not just a moral imperative – it’s an economic necessity,”
said Baucus. “Today 46 million uninsured Americans have few places to turn for health care
besides a hospital emergency room. And the cost of that care is paid by every American with
insurance in the form of a hidden tax of more than $1,000 a year in increased premiums.
These policy options propose a uniquely American approach to provide affordable, quality
coverage to all Americans through a mix of public and private solutions, and drive down
health care costs for every American.

“Millions of Americans have no health insurance and millions more fear losing what they
have,” said Grassley. “Even people with insurance might be under‐insured. Congress has an
obligation to make insurance more available and more affordable and still give people the
option to keep what they have if they like it.”

The policy options released today aim to reform the individual and small group health insurance
markets to end discrimination against sicker individuals. They would instead create a
competitive insurance market where health plans compete on price and quality rather than the
ability to segment risk and discriminate against individuals with pre‐existing health conditions.
The options also include an expansion of public health insurance programs to cover the poorest
Americans and make coverage more affordable by providing tax credits to low income
individuals and small businesses. The policy options make purchasing coverage easier and more
understandable for all consumers.

The policy options for expanding health coverage follow the release of policy options to reduce
costs and improve patient care in the health care delivery system. The final policy options paper
on financing health care reform will be released before the Members meeting on that topic
scheduled for May 20. A summary of the policy options for expanding health care coverage
released today follows. The complete text of the policy options on expanding health care
coverage can be found on the Finance Committee website at. Public comments should be directed to Health_Reform@finance‐dem.senate.gov. The deadline for public comments on the coverage
policy options is May 22, 2009.

POLICY OPTIONS FOR EXPANDING HEALTH CARE COVERAGE

Insurance Market Reforms –Americans who like the insurance they have will be able to keep it
in a reformed health care system. But for millions of other Americans who don’t have or can’t
afford employer‐provided coverage, the insurance market is broken. These individuals and
families can’t purchase coverage because they have a pre‐existing health condition, or they
can’t afford coverage. The policy options would regulate the individual and small group markets
so that coverage is affordable and accessible for all Americans purchasing coverage.
Individual and Micro‐group (2‐10 employees) Market Reforms ‐ Under the policy options,
insurance companies would have to issue coverage to all individuals and would no longer be
allowed to bar individuals with pre‐existing conditions from qualifying for a policy. Limited
variation in premium rates would be permitted for tobacco use, age, and family composition.
Geographic variation in rating would be allowed between rating areas, but would not differ
within a rating area.

Small Group Market Reforms – Under the policy options, the rating rules for the individual and
micro‐group markets would apply to the remainder of small groups as defined by states. This
would include groups of 11 to 50 people, but could also include self‐employed and/or groups up
to 100 people depending on current state law.

Health Insurance Exchange – The policy options would make purchasing health insurance
coverage easier and more understandable by using the internet to present consumers with
available plans. The policy options would create a web portal, or Health Insurance Exchange –
or multiple exchanges – that would direct consumers to every health coverage option available
in their zip code. The web portal would standardize the health insurance enrollment
application, the format companies use to present their insurance plans, and the marketing
rules. The new web portal would be publicized and would have a call center for customer
support. The web portal will enable users to determine if they are eligible for health insurance
subsidies or public programs. The exchange would also allow consumers without access to the
internet to enroll through the mail or in person in a variety of locations.

Eligibility for the Health Insurance Exchange ‐ Under the policy options, individuals and microgroups would be able to purchase insurance through the Exchange immediately following its
creation. The remainder of the small group market (11‐50 employees or as defined by states)
would be able to purchase insurance through the Exchange once rating rules are fully phased in
by that state.

Transitioning to a Reformed Insurance Market – Once the insurance market reforms take effect,
people who want to keep the insurance they have today will be able to do so. Plans will be
allowed to continue to offer the coverage they offer today, but these grandfathered plans will
only be available to those people who are enrolled today. People who qualify for tax credits in
the reformed market will not be able to use them to purchase these grandfathered plans. Tax
credits will be offered only to purchase plans created in the reformed market that meet the
new, benefit standards.

Transitioning for Rating Requirements ‐ Federal rating rules for non‐group and micro‐group
markets (other than for grandfathered plans) will take effect by January 1, 2013, perhaps
sooner. Federal rating rules for the remainder of the small group market (as defined by the
state) would be phased in over a three‐to‐ten year period, as determined by each state, with
approval from the Secretary of HHS.

Making Coverage Affordable – The cost of health insurance has increased five times faster than
wages over the last eight years. And estimates show that just seven years from now, most
Americans will spend nearly half their income on health insurance. American businesses pay
nearly three times more than our major trading partners for health care benefits. Unaffordable
coverage prevents these companies from competing in the global market. The policy options
make coverage more affordable by creating tax credits for low income individuals and small
businesses and strengthening public programs.

Options for Standard Benefits – The policy options would create four benefit categories which
would be permissible in the reformed market: lowest, low, medium, and high. No policies
(except grandfathered policies) would be issued that do not comply with one of the four
categories. And all insurers would have to offer coverage in each of the four categories. All
plans would be required to provide primary care and first‐dollar coverage for preventive
services, emergency services , medical and surgical care, physician services, hospitalization,
outpatient services, day surgery and related anesthesia, diagnostic imaging and screenings,
including x‐rays, maternity and newborn care, prescription drugs, radiation and chemotherapy,
and mental health and substance abuse services. Plans would not be allowed to set lifetime
limits on coverage or annual limits on any benefits.

Individual Health Insurance Tax Credits – Under the proposal, tax credits would be provided for
people with incomes under 400 percent of poverty to help offset the cost of health insurance
premiums. Eligible low‐income individuals – including employees of small and large businesses
– would be able to use the credit to purchase health coverage through the Exchange. The
subsidy would phase‐out, providing a smaller credit as income increases.

Small business health insurance tax credits – The policy options would base the small business
tax credit on a firm’s size and average employee earnings. Firms at or below 10 full‐time
employees with average employee earnings below $20,000 would get a credit equal to 50
percent of the average total premium cost paid by the employer for employer‐sponsored
insurance in that firm’s state. Under that option, a full time employee would be one that
worked 30 or more hours per week. The credit would phase out as a firm’s size and average
wages increased and would be completely phased out for firms with more than 25 workers and
average employee earnings of $40,000.

Public health insurance option – The policy options present three alternatives for a public health
insurance option. One alternative is a Medicare‐like option that would be administered by the
Department of HHS. The Federal government would sets payment rates for that plan. Medicare
providers would participate in the plan. This public health insurance option would not have
solvency requirements. Another alternative is a public health insurance option that would be
administered through multiple, regional, third‐party administrators (TPA). These TPAs would be
required to report to the Secretary of HHS. The TPAs would establish networks of participating
medical providers and would negotiate payments for providers participating in the option. This
public option would be required to adhere to solvency requirements. A third alternative would
be a state‐run public health insurance option. The policy paper also presents the option of not
creating a public health insurance option, but expanding coverage through a reformed and
better regulated private market.

Medicaid – The policy options would standardize Medicaid eligibility for all parents, children,
and pregnant women below 150 percent of the Federal Poverty Level (FPL) or $33,000 a year for
a family of four. The policy options present three alternatives for these qualified individuals to
access this Medicaid coverage. The first is Medicaid in its current structure. Under this
alternative, Medicaid would be expanded to cover all individuals with incomes at or below 115
percent of the FPL. The federal government would provide short‐term full funding for newlyeligible
Medicaid beneficiaries. Then standard FMAP rates would be phased‐in over time. A
second alternative would be for people eligible for Medicaid to access the program through the
Exchange. This alternative would also expand Medicaid to cover all individuals with incomes at
or below 115 percent of the FPL. And it would also provide short‐term full federal funding for
newly‐eligible Medicaid beneficiaries and then phase‐in standard FMAP. The third alternative is
to provide access to coverage through Medicaid and through the Exchange. In this alternative,
parents, children, and pregnant women would access Medicaid through the current structure.
All other individuals at or below 115 percent of the FPL would not become Medicaid eligible, but
instead would get a subsidy to purchase health care coverage. The policy options would also
make improvements to the Medicaid program that would simplify and streamline enrollment
and retention in the program, expand access to home and community‐based services, and
create an automatic countercyclical stabilizer to sustain the program during economic
downturns when more people qualify for the program, but states have less tax revenue to
sustain it.

Additional Options for Public Health Insurance Programs – The paper also addresses creating
options for people ages 55 to 64 years old and for changing the Medicare 24‐month disability
waiting period. The policy options would not make changes to the Children’s Health Insurance
Program (CHIP) until after September 30, 2013. After that date, CHIP would be offered through
the Exchange and would provide additional benefits for low‐income children not eligible for
Medicaid.

Eliminating Health Care Disparities – The policy options propose collecting uniform data on race,
ethnicity, gender, and disability that could help researchers work to end disparities among those
groups. States would also have the option of covering non‐pregnant, legal immigrant adults
during their first five years in the U.S. The options also propose policies to promote maternal
and child health.

Fair share responsibility for individuals – The policy options would create an individual fair share
responsibility to have health care coverage. At the same time, the policy option would establish
exemptions from the requirement. These exemptions would include religious exemption (as
defined in Medicare) and an exemption for undocumented aliens.

Fair share responsibility for employers – The policies set out two options for the employer fair
share responsibility. The first is that employers must offer qualified coverage to full‐time
employees. The coverage must be actuarially equivalent to the lowest coverage option and it
must include first dollar coverage for prevention services. Under this alternative, the employer
would have to contribute 50 percent of the premium costs and that requirement would be
enforced through the tax code. Employers with total annual payroll of less than $250,000 would
be exempt from offering coverage. The second option the policies set out is to not create an
employer fair share responsibility.

Strengthening Coverage of Preventive Services in Medicare – The policy options would make a
wellness visit available to Medicare beneficiaries once every five years and provide a
personalized prevention plan. The options would also provide incentives for Medicare
beneficiaries to utilize preventive services. Examples of these incentives include reducing or
eliminating cost sharing for screenings and offering rebates for completion of health promotion
programs like tobacco cessation. The policy options would also align Medicare coverage for
preventive services with scientific evidence to ensure patients receive appropriate screenings.
Strengthening Coverage of Preventive Services in Medicaid – The policy options would clarify
preventive services covered at the state’s option for adults under Medicaid. These optional
benefits would be defined as all services rated “A” and “B” by the U.S. Preventive Services Task
Force and immunizations recommended by the Advisory Committee on Immunizations. States
that OPT to cover all “A” and “B” rated services and immunizations would receive a one percent
increase in the federal share of the FMAP reimbursement rate. The options would provide
incentives for Medicaid beneficiaries to utilize preventive services. Examples of these incentives
include reducing or eliminating cost‐sharing for screenings and allowing states to apply for
funding to reward Medicaid enrollees for completing health promotion programs like tobacco
cessation.

Options to Prevent Chronic Disease and Encourage Healthy Lifestyles– An additional option to
promote prevention and wellness in the short‐term is make capped grants available to states
until the Exchange is operational. The grants could be used to provide primary preventive
services such as tobacco use screening, influenza immunization, counseling on daily aspirin use,
hypertension screening, or obesity screening. Another option is to provide states with options
to improve the coordination and integration of health and human service systems. For example,
states might create an individualized plan for low income individuals or create multidisciplinary
care teams to better manage and coordinate care, transition individuals from inpatient facilities
to other settings and, refer individuals to social support and community resources. A third
option would be to create tax incentives for qualified comprehensive workplace wellness
programs.

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Sebelius Announces HHS Office of Health Reform Personnel

Secretary of Health and Human Services Kathleen Sebelius today announced the establishment of the Department of Health and Human Services' Office of Health Reform. This Office will spearhead the Department's efforts to pass urgently needed health reform this year and coordinate closely with the White House Office of Health Reform. Both offices were created by an April 8 Executive Order to help deliver on one of President Obama's top priorities.

"The skyrocketing cost of health care is crushing families and businesses and we must enact health reform this year," said Secretary Sebelius. "The HHS Office of Health Reform and the White House Office of Health Reform will work in tandem to advance legislation and take immediate actions to cut costs, assure quality and affordable health care for all Americans, and guarantee Americans can choose their doctor and their health plan."

The following key staff members have been appointed to the HHS Office of Health Reform:

Jeanne Lambrew, PhD, Director of the HHS Office of Health Reform: Jeanne Lambrew will lead the health reform effort in the Office, helping the Secretary to marshal the experience and assets of the Department. Dr.Lambrew was previously an associate professor at the LBJ School of Public Affairs, senior fellow at the Center for American Progress, and worked on health policy in the Clinton Administration.

Michael Hash, Senior Advisor: Michael Hash will serve as a Senior Advisor, running the inter-agency process for developing specific aspects of health reform legislation consistent with the President's priorities. He will be an assignee at the White House Office of Health Reform and assist in the preparation of Administration positions and in communication with the Congress. Prior to his appointment, Hash held senior positions at the Health Care Financing Administration (now CMS) and on the staffs of the House Energy and Commerce Committee as well as a private health policy consulting firm.

Neera Tanden, Senior Advisor: Neera Tanden will work on developing health care policies for HHS and the Administration. She is the former Domestic Policy Director for the Obama-Biden Campaign and Policy Director for the Hillary Clinton campaign, and oversaw health care work on both campaigns. She has worked in think tanks, in the Senate and in the Clinton Administration.

Linda Douglass, Director of Communications: Linda Douglass will serve as the Director of Communications in the Office of Health Reform, working as an assignee at the White House Office of Reform, coordinating communications. Before joining the administration, Douglass was a traveling spokesperson for President Obama's 2008 campaign and was chief spokesperson for the Presidential Inaugural Committee 2009. She spent most of her career as a journalist, most recently as a managing editor for National Journal and prior to that as Chief Capitol Hill Correspondent for ABC News.

Meena Seshamani, MD, PhD, Director of Policy Analysis: Meena Seshamani will coordinate the quantitative and qualitative analyses on health reform conducted throughout HHS. Before joining the administration, Dr.Seshamani was a resident physician in Otolaryngology-Head and Neck Surgery at Johns Hopkins University. She is a health economist who has published widely on issues of health expenditures, health care financing, and their impact on health outcomes.

Caya B. Lewis, MPH, Director of Outreach and Public Health Policy: Caya Lewis will coordinate HHS outreach and interaction with stakeholders on health reform. She will also advise the Office on prevention and public health policy. Before joining the Administration Lewis was the Deputy Staff Director for Health for the Senate HELP committee under the chairmanship of Senator Edward M. Kennedy. She advised Senator Kennedyon a range of issues including public health and prevention, community health centers, health professions training and health disparities.

Jennifer Cannistra, Policy Analyst and Director of Special Projects: Jennifer Cannistra will work as an assignee at the White House and will lead special projects undertaken by the HHS Office of Health Reform that require close coordination with the White House. Previously, Cannistra served as the Pennsylvania State Policy Director for the Obama campaign.Prior to joining Obama for America in September 2007, Cannistra served as a law clerk to the Hon. Faith S. Hochberg, D.N.J. and as an attorney in Washington, DC.

Karen Richardson, Outreach Coordinator: Karen Richardson will be responsible for conducting outreach to stakeholders on behalf of HHS, as an assignee at the White House Office, as it relates to advancing the President's agenda for health reform. She was previously the Policy Director at the Democratic National Committee (DNC). She was Policy Director for Obama for America in Iowa and several states throughout thepresidential primary. Richardson began working for President Obama athis Senate Office in August 2005, beginning as an intern and then serving as Deputy to the Policy Director.

Michael Halle, Special Assistant: Michael Halle will be responsible for coordinating office projects and activities as well as providing research assistance. Halle worked for the Presidential Inaugural Committee and Obama for America, contributing to field operations in Iowa and North Carolina. Prior to joining the Obama campaign he was an intern at the Center for American Progress with the health policy team.

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April 20, 2009

The President
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear Mr. President:

For nearly a year, we have been working together toward the shared goal of significant reforms to our health care system. We must act swiftly, because the cost of inaction is too high for individuals, families, businesses, state and federal governments. Comprehensive health care reform legislation will responsibly contain costs, improve quality, enhance disease prevention, and provide coverage to all Americans. We are committed to working with you, and with our colleagues in Congress, to enact legislation to achieve these long-overdue reforms without delay. We are writing to you today to let you know of the schedule for committee action that we intend to follow to meet this goal.

Since our committees share jurisdiction over health care reform legislation in the Senate, we have jointly laid out an aggressive schedule to accomplish our goal. Both committees plan to mark-up legislation in early June. Our intention is for that legislation to be very similar, and to reflect a shared approach to reform, so that the measures that our two committees report can be quickly merged into a single bill for consideration on the Senate floor.

The unprecedented level of funding devoted to health care reform in your budget this year leaves no doubt about your commitment to the goals of expanding coverage, reducing costs, and improving health and health care. We have a moral duty to ensure that every American can get quality health care. We must act to contain the growth of health care costs to ensure our economic stability; to help American businesses deal with the health care challenge; and to make sure that we are getting our money’s worth. With your continued leadership and commitment, and working together, we remain certain that our goal of enacting comprehensive health care reform can be accomplished with the urgency that the American people rightly demand.

Respectfully yours,

Senator Max Baucus
Senator Edward M. Kennedy