The Other ‘Big Three’ in the Health Care Debate

[babylonsister]

The Other ‘Big Three’ in the Health Care Debate
By John Reichard, CQ Staff


It isn’t just the insurance industry that overhaul advocates must worry about. Big employers, labor unions and hospitals that are a political force in every congressional district can wage a powerful campaign of opposition to any health provision they don’t like.

These are the groups to watch in the coming health care debate, because they could stand between advocates of an overhaul and two of the biggest pots of money available to cover the uninsured: Medicare payments for hospital inpatient care and the tax “exclusion” on health care costs for people who get their policies through their employers.

This year’s health care overhaul debate is all about sacrifice, and many groups may have to take their lumps. But the idea of cutting hospital payments makes lawmakers cringe. Democrats are loath to anger big labor and its deep pockets. And big employers don’t take kindly to congressional mandates that alter the way they administer health care benefits.

The conventional wisdom is that lawmakers won’t go after either source of funding because of objections from interest groups. Unions say, for example, that capping the exclusion would take away hard-won benefits negotiated in collective bargaining. But both sources are big-money targets that could be tempting to lawmakers trying to find the estimated $120 billion or more per year needed to fund a universal coverage system.

The biggest would be eliminating or capping the tax exclusion, which keeps employees from having to pay income and payroll taxes on the premiums employers pay for employee health benefits. Capping the exclusion at the average cost of health insurance in 2009 would raise $1.1 trillion over 10 years, according to Leonard E. Burman, director of the Tax Policy Center, a joint program of the Urban Institute and the Brookings Institution. And even an alternative approach taxing only the priciest benefits would net a few hundred billion dollars in new revenue. But squeezing money out of the exclusion would be hard politically. Robert D. Reischauer, president of the Urban Institute says he is skeptical of that approach because of what he calls the “three Gs.” One G is the idea that workers whose employers pay big premiums on their behalf are getting “gold-plated” insurance benefits. The assumption is that the benefits involved are lavish and foster inefficient care. Were that the end of the story, it would make sense to tax those benefits, “but there are two other Gs,” Reischauer says.

The second is geography. Health costs vary sharply by region. Thus, workers in high-cost New York City could complain that their benefits get taxed unfairly because they don’t live in lower-cost parts of the country.

The third G stands for groups. Because premiums vary by the size of the company and average age of employees for which insurance is purchased, workers in smaller firms and firms with many older employees would be subjected to higher taxes than those in large companies with younger workforces. While adjustments can be made for these factors, it would be very difficult, Reischauer says. Big companies agree, and their lobbies, such as the American Benefits Council and the National Business Group on Health, are objecting to potential changes in the exclusion.

more...

http://www.cqpolitics.com/wmspage.cfm?parm1=5&docID=news-000003136737

[JDPriestly]

1. Hospitals have already cut the length of stays to a minimum.

People on Medicare don't go to the hospital unless they really need to. Once there, they need to be fully tested. The tests are expensive but save money in the long run. It's the failure to eliminate possible causes for symptoms that costs more in the end. Face it. Medical care costs money and lots of it. And the less preventive and diagnostic care a person receives, the higher the care costs in the end.

Penny wise and pound foolish -- that's what cutting Medicare hospital costs would be.