U.S. President Unveils New Healthcare Proposal Ahead of Bipartisan Debate

President Obama's New Proposal

Desperate to jumpstart the healthcare reform legislation, U.S. President Barack Obama has announced a new proposal outlining policies that the government hopes will culminate in a bill shortly. The main highlights of the bill are as follows:

• The central theme of affordability, accountability, and deficit watch is carried on the new proposal.
• The total cost of the bill is pegged at US$950 billion. Spending is to be reined in, reducing the deficit by US$100 billion over the next ten years and about US$1 trillion in the second decade.
• 31 million Americans who are currently not covered under health insurance schemes can expect to be included, reducing the number of uninsured from 46.5 million.
• Increasing tax credit for health-insurance premiums and reducing cost-sharing for families with modest incomes to push affordability. The President's proposal allows for a 2–9.5% range credit increase for a family on an income between US$22,000 and US$88,000.
• The Medicare doughnut hole gap is to be closed by replacing the US$500 increase in initial coverage limit with a US$250 rebate to beneficiaries hitting the gap in 2010. Furthermore, by 2010, the standard co-insurance will be 25% throughout the coverage gap.
• Setting up of a new Health Insurance Rate Authority that will monitor at a federal level insurance premium rates. The agency will also help states to determine rate review enforcement and monitor insurance market behaviour.
• Insurance cover age limit for adult dependents is to be increased to 26 years. The president's proposal also prohibits annual and lifetime limits, pre-existing condition exclusions, and discrimination in favour of highly compensated individuals.
• Setting up of a comprehensive sanctions database for Medicare and Medicaid, which will be overseen by the Department of Health and Human Sciences Inspector General. Access to a healthcare integrity and protection data bank is to be increased to encourage information sharing and curb fraud.
• Federal Trade Commission is to be given enforcement authority to address concerns over "pay for delay" agreements, wherein market entry of generic versions of innovative drugs is delayed by agreements between generic and innovative drug firms. Pharma firms will now have to prove that the deal is pro-competitive.
• The plan proposes increasing fees from pharma firms to US$23 billion over 10 years, and for implementation to start in 2011.

The full proposal document can be accessed here.

Outlook and Implications

The new plan is aimed at re-igniting the political debate on healthcare reform. This is the second time that the President has sought to initiate debate following a stalemate over the passage of the reform bill in recent weeks. The proposal is a precursor to a bipartisan debate on Thursday on the subject, but is likely to face strong opposition from the Republicans. The political wrangling will to some extent overshadow the healthcare issues, as the President is looking to push the bill along a path of reconciliation that requires a simple majority rather than tackle the Senate's filibuster rule, which could derail the process altogether. Whether this move will prove successful remains to be seen, as not only the Republicans but the insurance and innovative drug industries will prepare to oppose the proposal.

Focusing on the key elements outlined in the new plan, it appears that it mirrors the Senate proposal much more closely than the House bill. The increase in fees from pharma firms to US$23 billion over a decade will not go down well with the industry, along with the potential increased powers for the Federal Trade Commission (FTC) to scrutinise pay-for-delay deals. However, there is ambiguity over the scope of the enforcement given to the FTC and there will be some relief that there is no outright ban on the practice. The closure of the doughnut hole for Medicare beneficiaries and the increase in insurance coverage is expected to provide some cheer to pharma firms as it indicates a potential increase in uptake of prescription drugs.

The health insurance industry appears to be hardest hit by the new plan, as well as by the setting up of a federal agency to oversee premium rates. While not only monitoring rates, the agency is expected to keep a close eye on the health insurance industry in general and provide support to states in this respect. While there is no mention of a federal insurance plan to rival that of private-sector plans, there will be additional pressure with the launch of the insurance exchange aimed at increasing access to affordable plans for Americans.

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