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Health Care Reform
by Susan Jaffe, AARP Bulletin, December 24, 2009
The Senate approved historic legislation early Thursday, Christmas Eve, that promises to provide health insurance coverage to some 31 million people and to change the way many Americans receive and pay for their medical care. The votes of 58 Democrats and two independent senators provided exactly the number needed to pass the bill, which now will have to be merged with the House health care reform bill, go back to both houses for another vote, and, if approved, go to President Obama for his signature. All 40 Republican senators opposed the bill.
No Congress and no president has come this far, though many have tried over nearly a century—Theodore Roosevelt, Franklin Delano Roosevelt, Harry Truman, Richard Nixon, Jimmy Carter, and Bill Clinton.
The nonpartisan Congressional Budget Office reported earlier that the Senate bill would help reduce the federal budget deficit over the next 10 years by $132 billion. It would require every American for the first time to have health insurance or face a fine. Those without employer insurance would be eligible to apply for federal subsidies and to shop for coverage in new state insurance exchanges. And the Senate leadership has publicly pledged that the final health care reform act will include, as the House bill does now, a measure to close the Medicare “doughnut hole,” the gap in Part D prescription drug coverage.
Like the House bill, the Senate proposal prohibits insurance companies from denying coverage because of preexisting medical conditions. It also prohibits companies from hiking insurance prices based on an applicant’s health or gender. Older people could be charged higher premiums than younger people, but no more than three times as much under the Senate bill and twice as much in the House bill. Both bills also forbid caps on how much care policies will cover. The Senate bill would cover 94 percent of legal residents under age 65, compared with the 83 percent who are now covered. The House bill would cover 96 percent. Both bills contain provisions for a voluntary government insurance program designed to help people with long-term care.
To help pay for extending health coverage to millions of uninsured Americans, the Senate bill—which includes a pledge not to cut guaranteed Medicare benefits—banks on $438 billion in savings in Medicare spending. Those savings come through reducing the costs of private Medicare Advantage plans and strictly controlling waste, fraud, and inefficiencies within the government program. The bill includes new powers for an independent Medicare advisory panel, which would be able to implement spending cuts if costs outpace savings in 10 years.
“Americans are dying from diseases we know how to treat and living in pain because it is too expensive to ease,” said Senate Majority Leader Harry Reid, D-Nev., on Tuesday. The bill, he said, will not only save lives, save money and extend Medicare for 10 years, it will “basically save Medicare.”
Aside from the pledge to close the infamous doughnut hole, the Senate measure would also improve Medicare by providing free preventive and wellness care, increasing home care options, and establishing bonus payments to reward medical professionals who provide the best quality care. The emphasis on incentives for quality care and the new wellness and preventive screening would give Medicare a new, active role as a health care advocate, not just a bill payer.
“Health insurance will be extended to tens of millions of people, and that puts us much closer to the standard of health coverage that exists among all the advanced industrial nations,” says Robert Binstock, a political scientist and professor of aging, health, and society at Case Western Reserve University School of Medicine in Cleveland. Binstock directed a White House task force on older Americans for President Lyndon Johnson, shortly after Johnson signed legislation creating Medicare and Medicaid. “This is clearly a major landmark achievement.”
The road to legislative reform hasn’t been easy. Along the way, Senate Democrats pieced together a delicate consensus that required changes in the bill: dropping a government-run public insurance option, which is still in the House bill; scrapping a Medicare buy-in provision for people 55 to 64 years old; and adding language prohibiting the use of government health insurance subsidies for plans that cover most abortion procedures.
The Senate bill, known as the Patient Protection and Affordable Care Act, would strengthen Medicare by requiring insurance companies to competitively bid to offer private Medicare Advantage plans, a move that is estimated to save $118 billion from 2010 to 2019. Currently Medicare beneficiaries are subsidizing enrollees in these plans, which cost an average of 14 percent more than traditional Medicare.
The bill also would:
The Senate and House bills differ on how to pay for health care reform. The Senate bill, estimated to cost $871 billion over 10 years, would finance its changes by raising the Medicare payroll tax for the wealthy, taxing high-cost health care plans offered by employers, taxing indoor tanning services, and reducing Medicare spending. The House legislation, estimated to cost $1 trillion over 10 years, would pay for reforms primarily by taxing the wealthy (individuals with incomes above $500,000 and families with incomes above $1 million) and also trimming nearly $450 billion in Medicare spending.
Under the Senate bill, those who lack employer health insurance could purchase coverage from an insurance company that would be negotiated by the federal Office of Personnel Management, which currently negotiates policies on behalf of federal government employees and members of Congress. The House bill contains the public option, a government-run insurance plan.
The Senate bill does not require employers to offer coverage, as the House does, but businesses with 50 or more employees would pay a penalty of $750 for each employee who receives a government subsidy. The House bill requires larger employers to offer health insurance or face fines.
In addition to the differences over the public option and the employer mandate, the House and Senate disagree on how far to expand Medicaid and on language forbidding the use of public subsidies to purchase health care plans that cover abortion. (The House bill would not allow any plans to cover abortion if they enroll subsidized members, whereas the Senate would allow plans to cover abortion but states would be able to ban such plans.)
The Senate legislation would open Medicaid, the government health care program for low-income people, to millions more by raising the income eligibility limit to an annual income of $14,404 in 2009 for an individual and $29,327 for a family of four. The House bill is more generous, raising the income limit to an annual income of $16,245 in 2009 for an individual and $33,075 for a family of four.
Both bills would create insurance exchanges—a one-stop marketplace for health insurance for those not covered by employer insurance. Those who cannot afford to buy health insurance on their own or do not qualify for the expanded Medicaid coverage would be eligible for government subsidies to help them purchase insurance through the exchanges. Both bills offer subsidies for families with annual income of up to $88,200 in 2009 for a family of four.
If individuals don’t get insurance, the Senate bill would force them to pay a penalty as would the House bill.
Whether the different provisions in the bills can be reconciled remains to be seen. Controversy over the public plan alone could prove fatal for health care reform. Some supporters in the House have said they would not vote for a bill without it. Senate opponents say they would not support health care reform that included a public option. And because both bills passed with few or no votes to spare, some Washington observers warn that there may not be much room for compromise.
Susan Jaffe writes about health policy issues.
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