Here's how GOP wants to 'prune' health care law

Kaiser Health NewsJanuary 24, 2011 

WASHINGTON — The Republican effort to repeal the health care law is sure to founder in the Democratic-controlled Senate, but that doesn't mean the GOP is ending its attempts. Republicans in the House of Representatives already are beginning work in committees to lop off and possibly replace some of the law's provisions.

Party leaders have released few specifics, but some of the changes that Republicans and a few Democrats are urging could affect Americans' health care spending and coverage under the law. Ways and Means Committee Chairman Dave Camp, R-Mich., was blunt about the strategy last week: "If the tree is rotten, you cut it down." If that doesn't work, "we'll prune it branch by branch."

Here's a look at branches of the health law tree that Republicans are eyeing:

REPORTING BUSINESS PAYMENTS ON 1099 FORMS

What's in the law: This provision requires businesses that make payments of $600 in a year for goods or services to single providers to file 1099 forms to the Internal Revenue Service identifying the companies or people who received the payments.

Purpose: The reporting requirement is expected to raise $19 billion over 10 years to help pay for the cost of expanded insurance coverage under the law. It's intended to help increase taxpayers' income-reporting compliance. Fiscal experts say individuals and businesses are more likely to report income correctly if they think the government already knows about it.

What's being discussed: This provision raised concerns from business groups, which argue that the $600 trigger is too low and will create an administrative nightmare, especially for small businesses. That prompted bipartisan support to change or repeal the provision; the White House agreed that it should be amended. Republican and Democratic lawmakers have offered proposals, but none passed last year. The new GOP majority in the House is determined to take up the issue again and have made a bill repealing the reporting requirement a priority, saying it will be considered in the early weeks of the session. Three Democratic senators have written Speaker John Boehner, R-Ohio, to urge quick passage of the bill.

INDIVIDUAL MANDATE

What's in the law: U.S. citizens and legal residents are required to have health insurance by 2014 or pay a penalty. A small number of people are exempted from the mandate, including those for whom the coverage would cost more than 8 percent of their incomes, American Indians and those who have religious objections.

Purpose: The mandate is designed to discourage consumers from waiting to apply for coverage until they're sick and need costly treatments. Backers say that's important because insurers will be required to provide coverage to people who have pre-existing medical conditions.

The Congressional Budget Office has estimated that if the provision were struck from the law, fewer healthy people would purchase insurance and the result would be a 15 to 20 percent increase in premiums in the individual market. It also predicted that the number of uninsured Americans would be 23 million in 2019 under the current law, but that would rise to 39 million if the courts repealed or overturned the mandate.

What's being discussed: Republicans have been especially vehement in their opposition to this part of the law. They argue that it's unconstitutional to force individuals to purchase a product, and about two dozen states are challenging the provision in court. The issue is expected to work its way to the Supreme Court. Even some Democrats who supported the law, such as Sens. Claire McCaskill of Missouri and Ben Nelson of Nebraska, have acknowledged that they'd like to explore other options to guarantee that the insurance pool is robust. Among the options different groups are promoting are limiting insurance-plan enrollment to specific times or imposing penalties on those who don't enroll when they first become eligible, and dropping the mandate but offering consumers an incentive — such as a tax credit — if they buy insurance.

INDEPENDENT PAYMENT ADVISORY BOARD

What's in the law: This 15-member board, whose members are to be nominated by the president and confirmed by the Senate, is tasked with curbing the growth rate in Medicare spending. Beginning in January 2014, the board will recommend ways to reduce the growth of Medicare spending that will be implemented automatically in the 2015 fiscal year unless Congress comes up with its own solution for slowing spending. Congress also may vote, by a supermajority, to reject the recommendations and send the bill to the president, who can sign or veto the measure. Congress and the advisory board face statutory deadlines for action.

Purpose: Efforts by Congress to rein in Medicare spending have been met by repeated resistance from special interests, making it difficult for lawmakers to slow health care spending. The advisory board is supposed to make the hard decisions on spending that Congress has been unable to implement.

What's being discussed: Republicans see the board as another expansion of government in health care, while many House Democrats oppose having an independent board exercise control over Medicare. Many powerful interests — including doctors, drug companies, hospitals and patients-rights groups — have begun lobbying Congress to get rid of the advisory board provision. They say they're worried that the cuts will be draconian, disrupting the health care system.

HEALTH CARE FLEXIBLE SPENDING ACCOUNTS

What's in the law: Starting this year, people who put money into pretax flexible spending accounts no longer can use those funds to buy over-the-counter medications or health care products unless they have prescriptions. Starting in 2013, contributions to those accounts will be capped at $2,500 a year.

Purpose: The change is intended to increase government revenues to help pay for the broader health care overhaul, in which the government will subsidize poorer people's health insurance. Many economists also argue that FSAs encourage needless purchases because any unspent money is forfeited at the end of the year.

What's being discussed: Companies that administer these accounts are pressing Congress to rescind the restriction on over-the-counter medications and products. They also hope that if Congress won't raise the $2,500 annual limit, lawmakers at least will allow people to roll unspent money into next year's accounts or have it returned to them as taxable income.

CLASS ACT

What's in the law: The Community Living Assistance Services and Supports Act is a voluntary insurance program — financed through a payroll deduction — that's designed to help people stay in their homes if they become disabled by giving them money for nonmedical care expenses.

Purpose: The payments of at least $50 a day can be used for a variety of expenses, including paying for a home health aide or family member who provides care, household modifications, respite care, special transportation or technology needs or to help pay for assisted living expenses. There's no lifetime limit on benefits.

What's being discussed: Conservatives argue that the program will outpace its funding quickly and become an entitlement that the country can't afford. Some of these experts, including the Heritage Foundation, have urged Congress to repeal the provision before CLASS begins operating. Last year, Rep. Charles Boustany, R-La., introduced a bill that would require Congress to reconsider whether the program was self-sustaining, but lawmakers didn't act on the legislation.

TAXES ON INSURERS

What's in the law: Starting in 2014, a fee will be imposed on health insurers. The fee for the industry will be $8 billion in 2014 and will grow to $14.3 billion in 2018. After that, increases will be based on the rate of growth of premiums. Individual insurance companies' shares will be assessed based on their market shares. Nonprofit insurers will have different provisions.

Purpose: The provision is designed to raise money to help pay for the health care overhaul.

What's being discussed: Sen. Ron Wyden, D-Ore., said in an interview that he was considering an amendment that would restructure the tax formula in this provision so that insurers with lower premiums wouldn't be penalized as much as others. "I've been looking at — I'm not ready to do — is that there are considerable taxes on insurers over the next few years," he said. But if insurers "hold their premiums down, they should pay less tax. If they don't hold premiums down, they should pay more tax."

(Kaiser Health News is an editorially independent news service and is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that's not affiliated with Kaiser Permanente.)

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