http://www.hillaryclinton.com/feature/healthcareplan/americanhealthchoicesplan.pdfThe pdf above is probably easier to read
Fiscal Responsibility that Honors our Priorities
Fixing what is broken in our current health care system will, over time, slow the growth in overall U.S.
health spending, reducing pressures on our families, our businesses and the long-term fiscal outlook.
Yet, to ensure that health coverage is immediately affordable for all Americans through provisions such
as the new health tax credit, an up-front federal investment will be necessary. To ensure that this is
done in a fiscally responsible manner, the new investment will be funded in two ways:
1) Savings from Modernization and Reforms that Target Overpayments: The majority of
savings from the American Health Choices Plan comes from excess expenditures already
within the health care system that can be reinvested in the necessary up-front investment
for a reformed health care system. Such savings — from modernization, better
coordination of care and prevention — could be far more significant than what is listed
below. Indeed, information technology alone could produce savings as high as $77 billion
annually according to RAND studies.xix The Business Roundtable estimated $2,200 in
national health savings for the typical family.xx This is why payers like General Motors
agree that the use of information technology must be accelerated in health care. Yet to
ensure that she is reversing the fiscal irresponsibility of the current administration, Hillary
Clinton is taking a conservative approach to counting such federal savings, focusing on the
specific initiative mentioned below. They pay for the initial necessary investments for
health care infrastructure (such as information technology) and help ensure that health
care is affordable for all Americans. Specific initiatives that produce savings include:
• Phase-Out Excessive Medicare Overpayments to HMOs and Other Managed Care
Plans ($10 billion in net savings): Independent study after study has concluded that
the current policy is overpaying participating managed care plans. Overpayment
reduces Medicare Trust Fund solvency and raises premiums for Medicare beneficiaries.
This reform would achieve substantial savings and would include policies to improve
access to programs that provide cost-sharing protections to low-income beneficiaries
(e.g., revise overly restrictive asset-test rules).
• Dedicate Portion of Savings Achieved from Reduced Need for Uncompensated
Care Payments ($7 billion in net savings): In the context of health care reform, there
will be a reduced need for so-called “disproportionate share hospital” (DSH) payments
now used for uncompensated care burdens imposed on providers. A reduction in DSH
payments outside the context of universal coverage initiatives makes no sense and
should occur only in a careful transition as coverage expands. However, as all
Americans are covered, a percentage of savings from reduced DSH liabilities should be
reinvested in public hospitals, community health centers, and surge capacity to ensure
health system capacity during natural disasters, epidemics, or when national security is
threatened.
• Apply Purchasing Leverage to Reduce Prescription Drug Costs (At least $4 billion
in savings): Americans pay the highest prices in the world for drugs, and no other
nation spends what we do for health insurance. In the last decade, prescription drugs
accounted for 15 percent of the total increase in health spending, despite the fact that
they account for only about 10 percent of all health costs.xxi This plan will tackle drug
costs by allowing Medicare to negotiate lower drug prices; creating a pathway for
biogeneric drug competition; removing barriers to generic competition; and providing
more oversight over pharmaceutical companies’ financial relationships with providers.
• Modernize Health Care Delivery System to Promote Value and Quality (At least
$35 billion): As outlined previously, the plan includes multiple policies designed to
apply technology and clinical best practices to improve quality, reduce errors, and
eliminate extraordinarily expensive waste. These initiatives include: information
technology, prevention, chronic care coordination, and comparative effectiveness
research. The plan will improve quality as it improves the value of care. Among other
policies, it will align Medicare payments with performance to both promote quality
and reduce the geographic variation in care; provide patients with information on
provider performance through databases and decision tools; and ensure “truth in
advertising” to crack down on misleading and costly prescription drug advertising and
direct-to-consumer advertising.
2) Redirecting Tax Breaks
• Redirect Savings from High-Income Tax Cuts for Tax Breaks to Ensure Affordable,
Health Care Coverage: The American Health Choices Plan will redirect the revenue
gained from not continuing President Bush’s income tax rate cuts and exemption
increases (known as PEP and Pease) for households making over $250,000 to help
finance health reform. While this small percentage of well-off Americans would see
their tax rates returned to pre-Bush levels, the plan would offer tens of millions of
Americans a new tax credit to make premiums affordable. Those tax breaks more than
offset the increase in revenues derived from not renewing these provisions of the Bush
tax cuts and capping the tax exclusion for health care for the highest income
Americans (explained below), making the plan a net tax cut for American taxpayers.
• Making the Employer Tax Exclusion Fairer: The fact that health premiums paid by
employers are excluded from workers’ taxes (i.e., they are not counted as income) has
benefited hundreds of millions of Americans and led to employer pooling of high- and
low-risk workers. The American Health Choices Plan rejects calls to limit the tax
exclusion for middle-class Americans who have negotiated generous coverage or for
those whose premiums are high due to health status, age, or high local health care
costs. However, at a time of limited resources, it is neither prudent nor fair to allow the
portion of a high-end plan that is in excess of the typical Health Choices Menu plan to
be tax subsidized for the highest income Americans. A high-income American would
still get a tax break for the employer contribution to the cost of a typical plan, like the
Congressional plan, and they could still choose to get additional high-end coverage.
But given that the highest income American already receives a tax benefit for
purchasing a quality plan that is about twice as large as what a typical American
taxpayer receives, the choice by such high-income Americans to obtain additional
high-end benefits should be at their own — and not the taxpayers’ — expense.
Reinvest Savings from Efficiency Reforms: The plan makes a series of changes to improve value and
performance of America’s health care system, as well as to eliminate waste. The federal savings from
these policies will be reinvested to strengthen and modernize the system to make health insurance
coverage more affordable for all Americans.
Phase-out Excessive Medicare Overpayments to HMOs and Other
Managed Care Plans (Based on CBO estimate of HR 3162 Act, 8/1/07): $10 billion
Dedicate Savings from Unnecessary Medicare and Medicaid Spending
(Includes savings from Medicare/Medicaid DSH payments in the context
of coverage for all and net of new investments in the safety net)
(Based on CBO Budget Options, 2/07; MedPAC): $7 billion
Constrain Prescription Drug Costs (e.g., competition savings from biogenerics
and removal of barriers to market access for generic drugs, empowering Medicare
to negotiate, reimportation, higher Medicaid brand rebates, use of e-prescribing
technology)(Based on CBO estimate of HR 3162, 8/1/07; Express Scripts, 2/07;
CBO Budget Options, 2/07; Gorman Health Group, 7/07): $4 billion
Modernize Health System (e.g., health information technology, comparative
effectiveness, chronic disease management) (Conservative estimate based on
RAND, 9/05; Business Roundtable, 6/07; other studies; assumes implemented in
public programs and Health Choices Menu): $35 billion
Total Federal Savings from Reducing Overpayments and New Efficiencies: $56 billion
Redirect Tax Breaks: New tax credits will make health insurance affordable for working families.
These tax credits will be financed by redirecting tax breaks and closing loopholes:
Discontinue Bush Tax Cuts for Top Two Income Tax Brackets
and Bush Increases in Tax Exemptions (PEP/Pease) for
Households over $250,000 (Calculations based on Tax Policy
Center, 2/19/04, 11/2/04; CBO Budget Options, 2/07): $52 billion
Cap Federal Income Tax Exclusion of Employer Contributions
for Health Benefits for Households over $250,000
(Based on Tax Policy Center, 2/6/07): $2 billion
Total Tax Savings from Limits on High-Income Tax Breaks: $54 billion
Total Savings / Reinvestment: $110 billion
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