The Truth about Harry Reid’s Lifetime Cap Loophole

family premiumsHere is how Ezra Klein’s sources explain why Harry Reid snuck a loophole into the Senate bill allowing insurers to put a cap on lifetime coverage.

Hill sources explain that this was inserted because CBO said premiums would “go through the roof” if insurers couldn’t cap benefits. The official quote from Jim Manley, Harry Reid’s spokesperson, says much the same thing. “We are concerned that banning all annual limits, regardless of whether services are voluntary, could lead to higher premiums,” he explained. “We continue to work with experts on how best to accomplish our goals of preventing insurance companies from imposing arbitrary coverage limits while providing the premium relief American families need and deserve.”


Note carefully who told Reid that “premiums would go through the roof” if no lifetime cap were imposed: CBO.

Reid, of course, carried on about a week-long back-and-forth with CBO as he developed the bill to introduce to the Senate (of course, he’s doing precisely the same thing this week–going back and forth with CBO on a bunch of proposals suggested for the compromise bill). As a result of Reid’s last back-and-forth with CBO during which presumably they told him premiums would go through the roof if he didn’t eliminate the lifetime cap, he came out with a bill that cost $849 billion. That was a real feather in his cap because it came in significantly cheaper than the House bill, which cost $894 billion (though the Senate bill covers 5 million fewer people), which meant he didn’t have to justify why the Senate bill shouldn’t just accept the House bill as a base.

Of course, the House bill uses a different strategy for keeping premiums down: including, but not limited to, more subsidies, a lower limit on what people will be expected to spend on health care premiums, and a viable (though not robust enough) public option. Also, the House bill doesn’t do one thing that the Senate bill does, which may raise premiums: tax employer provided health care insurance.

So what Ezra’s sources really mean is that the Senate bill–partly because it has traded off other means to keep premiums down–has had to eliminate a key promise of health care reform: that families experiencing a catastrophic health care event wouldn’t lose coverage at the time they needed it the most. What Ezra’s sources really mean is that, because they chose not to pursue other strategies which would have made it unnecessary to eliminate the cap, they have instead been forced to eliminate the caps to keep the bill competitive with the House bill.

Don’t let Harry Reid fool you. The problem is not that health care “premiums would go through the roof” without caps. The problem is that Harry Reid has deliberately chosen not to use other means to prevent health care premiums from going through the roof, means that wouldn’t make families bear the brunt of the problem.

From this point forward, the debate should never be about what Reid claims is necessary. The debate should be about what Reid has claimed to be necessary because he has made other ill-advised choices that mean he can’t match the House bill outcomes without some awful gimmick like lifetime caps.

18 replies
  1. earlofhuntingdon says:

    Thanks for restating in clear form the Village spin that even Ezra seems caught up in. None of this, of course, relates to improving health insurance, health care or health outcomes. It’s degraded into fight over lobbyist leftovers, and an insurance scheme to protect insuresters. Talk about upside down outcomes.

      • qweryous says:

        I clicked the link to the Ezra Kline article and found this later in the article.

        ..”This, however, obscures the choice that’s being made. The tradeoff here is slightly higher premiums for everyone versus total financial ruin for the people who absolutely need help the most. Politically, choosing “everyone” rather than “people with cancer” makes sense, because the first group has more votes than the second. But on a policy level, it’s nuts. “…

        This article is not bad in terms of it’s analysis of limits.

        • emptywheel says:

          Sort of. But he falsely accepts that binary rather than (shocker of all shocker) using things like the subsidies and, LAW, to make sure that insurance companies don’t screw policy holders.

          What is clear is that they don’t need those lifetime caps to be solvent. They need them to be more profitable. And so long as you accept that cancer patient v. everyone else binary, you’re buying into myths that are really obscuring the need for profit.

        • earlofhuntingdon says:

          And the willingness of this Democratic government, as much as the prior Republican one, to support or subsidize those private profits at public expense.

        • qweryous says:

          For Ezra in the Washington Post on Health Care Reform its not too bad.

          For useful information, consideration of the issues, and analysis of all
          the stakeholders and special interests that have warped the process; well, the Washington Post is not the best source.

          The continual failings of for profit insurance with respect to health care will always include:

          1. the profit motive to deny claims or coverage

          2. the profit motive to disenroll the unprofitable customer

          3. the profit motive to steal the customers whose health has been improved and/or better maintained by some other entities investment.

          4. the lack of profit motive to improve the health of customers when this requires any up front investment with benefits occurring at a later time.

          5. the proportion of expenditure necessary to support the profit calculation ( bookkeeping, billing, all the overhead to the system)
          This is a skim off the top, no health benefit from this cost.

          There has been no significant discussion of these issues during the current “Health Care Reform” process; but the general public has a fairly good grasp, that is why so many actually support single payer.

          No wonder no other industrialized nation has a health care system ( or leaders like Harry and Max, not to mention Joe and…)like ours.

        • emptywheel says:

          I just think a lot more people in flyover country are familiar with the downsides of confronting the ineluctable needs of corporations to maximize profits.

        • qweryous says:

          Had to check that one word out, (ineluctable).
          You are right, in flyover country, and probably up and down both coasts, the BS meters have been pegged at ‘Total’ for a long time on this issue.
          Not much chance that many average voters will be happy with what is about to be ‘produced’ by this process.

  2. emptywheel says:

    Hey, in this case Ezra was just performing the valuable service of reporting the excuse everyone gave him. I’m grateful to have it, because the real issue here is Reid’s BS.

  3. MadDog says:

    I’m sure Harry Reid was told that personal bankruptcy would provide the solution for all the folks who get their insurance coverage capped.

    As in: Don’t worry that you can’t pay your hospitalization bills because you’ve been capped. You don’t have to! Just file for bankruptcy.

    And oh by the way, we need you to move out of your home to a tent in Hoboville because we’re jumpstarting the real estate market by doing some foreclosure flipping.

    Can we call you a taxi or ambulance?

  4. qweryous says:

    The statement says: “…We continue to work with experts on how best to accomplish our goals of preventing insurance companies from imposing arbitrary coverage limits while providing the premium relief American families need and deserve.””

    Merriam-Webster’s Online Dictionary says arbitrary is defined as
    definition 1: “…depending on individual discretion (as of a judge) and not fixed by law…”
    definition 3a: “based on or determined by individual preference or convenience rather than by necessity or the intrinsic nature of something”

    If the lifetime limit is not discretionary for the insurance companies( a uniform limit perhaps? or some approval process with ‘justification’?), then it is not “arbitrary”.

    If “Harry Healthcare” requires lifetime limits because of the “Design by Harry (and his helpers)” features, then it is not by definition arbitrary.

    Harry Reid knows casinos; he has made it one big health care casino, play until you get sick and you and your dependants are bankrupt.

    Thank you Harry.

  5. PJEvans says:

    Price Waterhouse estimates that premiums would go up about half a percent if the cap was 10 million a year (via mcjoan.) Which ain’t exactly ‘going through the roof’, and may be more reliable than wherever the weak Reid gets his information from.

  6. phred says:

    Thanks for this post EW. I was shocked when I read that quote earlier. In a nutshell Harry Reid has just admitted that after all this time and effort they have crafted a spectacularly poor bill that doesn’t achieve the goals of health care reform. You would think he would be ashamed of that and not want to admit such a thing. Instead they say this as if that is a reasonable excuse.

    Ummm, Harry, maybe you ought to fix the damn bill to ensure that insurers do not have free rein to do whatever they damn well please. Betcha didn’t think of that didja? I’m here for ya buddy, next time ask me before ya go makin’ an ass of yourself in public again, ok?

  7. barrelofmonkeys says:

    Marcy: The silver lining of these escapades is that the pols (and journos) are being held to account as never before. Thanks for your hard work.

  8. qweryous says:

    Even if the taxi driver gets it wrong…and there is a war based on what he said, no worries…this story has been out for a little while. From a story in the Daily Mail dated Dec 9,2009:

    “The claim that the rush to war was based – in part – on false information from a gossipy taxi driver is perhaps the most embarrassing revelation yet about the desperate lengths to which the Government went to justify the invasion.” (false information about the non existent weapons that is)

    That and other evidence that the original reason(s) to go to war may not be holding up lead to Tony Blair floating trial balloons like this:

    “If you had known then that there were no WMDs, would you still have gone on?” Blair was asked. He replied: “I would still have thought it right to remove him [Saddam Hussein]”…. And..

    “I mean obviously you would have had to use and deploy different arguments about the nature of the threat.” …(So perhaps start test marketing them now??)Link to the Guardian article:

    Tony Blair and Iraq, deploying new arguments to support(?) the troops he already deployed based on….

  9. fatster says:

    Loophole, doughnut hole, pothole–you can be sure they’ll find a hole to dump us in. Gotta keep a smooth riding surface for the insurance companies, doncha know.

    Thanks ever so much for keeping the heat on, EW. Our struggle is never-ending.

  10. WilliamOckham says:

    In the context of the current health care reform debate (i.e. single payor still makes more sense), there is a much better way to do this. Establish the lifetime limit and have the government fund anything beyond it. This is a situation tailormade for the maximum risk pool. Everybody should prefer this option. Insurance companies get actuarial certainty at the top end (which holds down premiums), providers don’t have to worry about getting screwed by medical bankruptcies (which is what happens), everybody gets freedom from the fear of being wiped out by cancer or other serious illness, and the total amount of money spent on an annual basis is pretty insignificant compared to the rest of the federal health care budget.

    • earlofhuntingdon says:

      Excellent point. Rumors about these caps were that insureds would simply be on their own after any cap were reached, which throws out public health and fairness issues, and any notion of a right to health care itself. The idea of the USG taking on the risk for those who exceeded their cap is one insurers could back. Given how Dee Cee works, the mix and match of these many trade-offs seems likely to lead to the worst possible combinations from the insured’s perspective.

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