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You Win Some, You Lose Some, Part I

StimulusNo stimulus package, budget or other large appropriations bill is ever perfect.  Winners and losers are always created in the process of debating which programs deserve funding, and which can go without for a little bit longer.

The stimulus package that President Obama signed into law on February 17, 2009, is no exception. The American Recovery and Reinvestment Act will greatly assist some folks, while leaving other people, programs and projects out in the cold.

So what impact will the stimulus package have on the healthcare field?

Healthcare emerged a winner overall.  An estimated one-fifth of the total bill, or $147 billion, was allocated through tax credits and direct spending to healthcare-related projects.

At the same time, funding for certain benefits was dropped in an effort to attract greater bipartisan support.  And strangely enough, the vast majority of congressional Republicans chose not to sign onto the legislation, even after these accommodations were made.

Healthcare Winners and Losers

The States

For the past several months, lawmakers including Govs. David Paterson (D-NY), John Corzine (D-NJ) and Ed Rendell (D-PA) have urged Congress to approve a second stimulus package to help out the states. Why?

As we’ve shown here and here, the economic recession has dealt a double-whammy to the states.

On the one hand, tax revenues are down as jobs are lost and stocks plummet. The states are struggling to pay for basic services. In Pennsylvania, extras like special education programming and enrichment activities for advanced students have already been cut.

On the other hand, the demand for services is greatly increasing. The newly unemployed are filing for benefits, including assistance in paying for insurance coverage. Many are turning to public programs like SCHIP for their children and Medicaid for the first time.

The result: 44 states and Washington, D.C. are facing a budget gap for fiscal year 2009. Check out this chart to see the expected budget shortfalls.

The good news: The stimulus package includes $87 billion to help the states shore up their Medicaid programs. Governors may now be able to hold off on proposed reimbursement and coverage cuts, and may even be able to assist some of the newly uninsured.

The bad news: The stimulus package allocates roughly $150 billion for state and local fiscal relief in total, with the $87 billion for Medicaid included in that amount.

Already, this report by the Nelson A. Rockefeller Institute of Government predicts that this seemingly huge sum will not be enough to guarantee the economic well-being of the states, and that by 2012, many states will be facing large budget deficits once again.

Experts say that while the stimulus dollars will help the states avoid financial disaster temporarily, tax increases and spending reductions on health care and other programs are still likely.

Governors fought for a $25 billion state fiscal stabilization fund in the final version of the stimulus bill, but it was cut out in hopes of bi-partisan agreement, which didn’t come.

The Unemployed

There may be some hope for newly unemployed folks, many of whom are quickly becoming uninsured. Besides the additional funding for state Medicaid programs, the stimulus package will provide subsidies to help involuntarily unemployed individuals to pay for their COBRA benefits.

The details: Folks who lost their jobs between September 1, 2008, and December 31, 2009, and whose incomes do not exceed $125,000 for individuals, or $250,000 for families, qualify for subsidies to cover 65% of the cost of insurance premiums under COBRA for up to nine months.

Why is this good news?

  • Almost 50% of unemployed folks are also uninsured.
  • This is because many individuals and families are simply not able to afford the premiums charged under COBRA to continue the coverage that they received while employed.
  • COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, requires employers to offer their former employees the company’s insurance coverage for up to 18 months after they leave, at the employee’s expense.
  • The employee must pay the entire premium, plus an additional 2% of the premium to cover administrative costs. This means that an unemployed worker pays 102% of the premium cost while enrolled in COBRA.
  • In 2008, the cost of an annual employer-sponsored individual plan was $4,704 and the cost of a family plan was $12,680.
  • These premiums are too expensive for the average family, and are increasingly unaffordable for the employed and unemployed alike.
  • A Kaiser Family Foundation survey found that two-thirds of employees said it would be very difficult for them to pay the full cost of their employer-sponsored insurance premiums if they were no longer employed.
  • The subsidies offered through the stimulus package will make a big difference for those unemployed workers who are struggling to retain their health coverage.
  • Often times, the insurance provided through COBRA helps to protect the entire family.

The problem with the subsidies: Folks who lost their jobs and coverage before September 1, 2008, will not qualify for this assistance. These early victims of the recession are even more likely to be struggling financially, as they’ve been unemployed for a longer time.

Take Susan McKowen, for example. She’s a 62 year-old breast cancer survivor who was laid-off 13 months ago, and she is nearing the 18-month limit on her COBRA coverage. She currently pays $507 per month in premiums, and would have to pay $900 per month to switch to a state plan with the same benefits. She has avoided the private market entirely because she knows that her “pre-existing condition” would probably make her ineligible for coverage.

In this recent LA Times article, she said, “I just don’t know where to turn. I don’t like pity parties. I know there are a lot of people who are far, far worse than me . . . but I need my health insurance. It’s like my lifeline.”

Later this week we’ll take a look at how healthcare-related research and health information technology (HIT) fared in the stimulus package.

We’ll also discuss what the lack of bipartisan support for the legislation might mean for future healthcare reform efforts.

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