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Healthcare Stimulus Provisions
After less than a month in office, President Barack Obama has achieved his first major victory -- the passing of a $787 billion economic stimulus package that he claims will be a "major milestone on our road to recovery." The new legislation's impact is far-reaching, providing aid to those recently unemployed due to significant job losses across many industries, as well as funds targeted to aid schools and fund transportation projects. Obama signed the bill on Feb. 17. The legislation also includes provisions that impact healthcare, including a new federal bureaucracy to investigate the efficacy of prescription drugs, an increase in healthcare technology and enhanced COBRA benefits. Comparative Effectiveness Research
The stimulus legislation will also establish a Federal Coordinating Council for Comparative Effectiveness Research -- a 15-member board composed entirely of federal employees appointed by the president. Spending authority of the proposed $1.1 billion-funded council would be held by the Health and Human Services Secretary to investigate the effectiveness of different drugs and medical devices.
Helen Darling, president of the National Business Group on Health, based in Washington, says this represents a positive benefit to employers. "This is very important to employers because it would help them determine what is effective medical care and what isn't," she says. "It would help us determine if we're paying for things that are not effective or that are ineffective." "Without independent, reliable information comparing clinical effectiveness of alternative treatment options, patients may not get the right care they need at the right time," says Darling, whose organization represents about 300 large companies and shares best practices related to healthcare. The determinations of the board will directly impact which medical treatments the federal government will or will not pay for. House Appropriations Chairman Rep. David Obey (D., Wis.) indicated that drugs and treatments "that are found to be less effective and in some cases, more expensive, will no longer be prescribed." That bothers some observers, who believe the council may at some point prevent patients from receiving the medical procedures they need because of cost. Critics of the council say this type of research should be conducted within the private sector to ensure the personal freedom of patients to choose the healthcare options that -- in the opinion of their medical providers -- best meets their needs. "The health-related provisions take a sharp turn toward greater government control over our health sector, without any hearings or serious debate in Congress and without telling the American people what the changes would mean for their personal healthcare," write William Winkenwerder, Jr. and Grace-Marie Turner in an article on National Review Online. Winkenwerder is a former assistant secretary of defense for health affairs in the U.S. Department of Defense. Turner is president of the Galen Institute, an Alexandria, Va.-based think tank specializing in health reform. "This is the biggest land grab in the health sector ever attempted by the federal government, and it would be a major step toward thrusting full responsibility for healthcare financing onto the American taxpayer -- today and for decades to come," they write. Darling says that, in addition to the funding for comparative research, "there are also funds in there for prevention and wellness, which I think will indirectly benefit employers." John Heins, senior vice president and chief human resources officer for Spherion Corp., a staffing and solutions company based in Fort Lauderdale, Fla., also says the research is a welcome addition. "We have experienced the positive aspects of providing preventative care which results directly in reduced cost related to critical disease state cases," he says. Technology and Health Care
One of the bill's highly supported initiatives is the expansion of computerized information technology in the healthcare industry. The portion of the bill directed to healthcare information technology is a carry-over from the prior administration, notes Heins. "That's been a big topic that's been around and part of several administrations." This is an important issue, he says, and it's one that will likely to lead to reduced healthcare costs in the long term due to reduced errors. Winkenwerder and Turner point out that the bill allocates more than $20 billion to the HR IT provisions, but that "no one has been able to come up with a workable plan to spend even a fraction of that amount wisely." Winkenwerder asserts that "it is simply impossible to spend sums that huge wisely -- not to mention quickly enough to stimulate the economy." COBRA
The biggest benefit in the recovery package is COBRA assistance subsidies to unemployed workers, says Darling. Anyone who lost their job involuntarily between Sept. 1, 2008 and Dec. 31, 2009 will be eligible for a premium subsidy of 65 percent for up to nine months. "The moment of eligibility starts as soon as the president signs the law, whether you initially turned it down or not," says Darling. Currently, COBRA allows workers to maintain employer-based coverage for up to 18 months by paying the full cost of that coverage -- both the employee and employer portion. The bill would provide a subsidy to help reduce that cost significantly. This is obviously a boon to laid-off employees but represents more than just administrative burdens to employers, says Heins. The cost of maintaining workers on healthcare plans long after they have left the organization has the potential to create a larger risk pool and possible adverse selection of individuals who remain on COBRA, he says. Basically, he says, "this is untested and un-modeled from an overall healthcare premium perspective." Consider an organization such as General Motors, which reduced 10,000 people from its payroll, Heins says. Suppose a majority of these employees elect to stay on COBRA, meaning that GM will still carry several thousand people in its risk pool when calculating healthcare premiums. "And, if they only stay on COBRA because they're at risk, then you could have an adverse selection of the people that stay within your risk group," Heins says. On the other hand, he acknowledges, there could be some positive impact from an overall economic standpoint. "Taking away the need to find healthcare coverage will allow people a greater opportunity to seek non-traditional job opportunities or work arrangements like consulting or contract employment," he says. "If I don't have to worry about finding health insurance because I can be covered under COBRA then I'm more likely to take a part-time, contract or temporary assignment." This represents a potential benefit to employers that may benefit from increased access to temporary labor. Employers, says Heins, might even "be willing to pay a higher salary to someone knowing they don't have to pay healthcare costs. Winkenwerder and Turner note that a PricewaterhouseCoopers analysis indicates that the 10-year cost of this provision would be up to $65 billion just for those workers currently eligible for COBRA. "The estimated costs would be even higher if many more workers retire early, as they likely will if they know they can continue their employment-based coverage indefinitely," they write. Time Will Tell
All of these arguments still neglect the bigger picture, says Robert A. Book, senior research fellow in health economics in the Center for Data Analysis at The Heritage Foundation, a think tank in Washington. "Any money the federal government spends on healthcare reform, IT, Medicaid, roads and bridges, or anything else has to come from somewhere. And that somewhere is either increased taxes, more borrowing, or inflation of the currency -- any combination of which would cancel out any stimulus effect of the new spending," he says. Still, Heins, who says he tends to take a positive view, is optimistic about the stimulus bill and its impacts for employers. "Anything that will get the economy moving to the point where we're able to start hiring people and growing talent and industries and jobs will be healthy not only for businesses," he says, "but for the employment market."
February 17, 2009 Copyright 2009© LRP Publications |
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