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Life Health > Health Insurance > Your Practice

Debt Ceiling Deal: Health Insurance is There, Between the Lines

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WASHINGTON BUREAU — The new federal budget deal resolution may not refer directly to private health insurance, but it could have major effects on the health market, an analyst says.

The Senate voted 74-26 today to pass a motion approving the Budget Control Act of 2011, which was packaged in the form of House Resolution 384 — – a measure “providing for consideration of S. 365, to make a technical amendment to the Education Sciences Reform Act of 2002.”

The House voted 269-161 to pass the measure Monday.

The measure provides the legal authority the U.S. government needs to borrow more Moneymoney and continue to make payments on government obligations.

In a television address to the nation immediately after the Senate vote, President Obama said he would sign the measure immediately. The debt ceiling deal passed by Congress is “an important first step for ensuring that as a nation we don’t live beyond our means,” Obama said in a statement.

Beth Mantz-Steindecker of Washington Analysis, Washington – a “buy side” research firm that serves hedge funds and institutional investors — says in a research note that the deficit control procedure created by the budget control measure seems likely to lead to “sequestration.”

Sequestration would create a wave of automatic, across-the-board cuts that would exempt some programs — such as Medicaid, Social Security and veterans programs – but hit Medicare hard, Mantz-Steindecker says.

Under one scenario, Medicare Advantage could face a 2% across-the-board starting Oct. 1, 2013, Mantz-Steindecker says.

The budget control measure requires a 12-member special commission established by Congress to deliver a 10-year, $1.5 trillion deficit reduction package to Congress by Thanksgiving.

The package would be subject to an up-or-down vote without amendment or filibuster.

If Congress fails to make $1.2 trillion in cuts, that would trigger a series of across-the-board cuts big enough to make up the difference between what Congress actually saves and $1.2 trillion.

Some have estimates the across-the-board cuts could amount to $300 billion over 10 years.

The across-the-board cut could affect the federal subsidies created by the Patient Protection and Affordable Care Act of 2010 (PPACA) that are supposed to help consumers and small employers buy health coverage through a new health insurance exchange system starting in 2014.

“We recognize that this isn’t an idea that has been recently discussed, but it could be mentioned,” Mantz-Steindecker says. “Therefore, this could result in fewer purchasers of health insurance via the exchange or, at a minimum, could change the plans that would have been bought. Both would impact those diversified insurers weighing participation in the exchanges.”

Mantz-Steindecker says efforts to cut federal Medicaid spending could increase Medicaid health

maintenance organization (HMO) enrollment. Some states could require enrollees who are eligible for both Medicare and Medicaid – the “dual eligibles” – to enroll in HMOs, she says.

Mantz-Steindecker has based her analysis partly on the recent work of the Gang of Six in the Senate and partly on the deficit commission proposals released in 2010.

Mantz-Steindecker has taken that approach because, she says, the Budget Control Act and the special commission the act would create seem to have put all of the Medicare, Medicaid and and other health care savings proposals discussed in the past few months back in play.

“The makeup of [the] commission’s members is important, as it could increase the odds for savings ideas that had less support in the past, such as a dual eligible rebate in Medicare Part D, medical malpractice reform, or reducing the size of federal subsidies for eligible individuals to buy insurance on the exchange,” Mantz-Steindecker says. “Raising the age of eligibility, indexing incomes for purposes of cost sharing, restricting first dollar coverage in Medigap and increasing Medicare cost sharing are all serious contenders for savings.”

Other federal budget coverage from National Underwriter Life & Health:


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