Kathleen Sebelius

How rich health care mandates could bust the budget

May 4, 2011: 5:00 AM ET

Medical groups are furiously lobbying HHS Secretary Kathleen Sebelius to get their treatments covered under the reform bill. Her choices could be what makes or breaks the plan.

By Shawn Tully, editor-at-large

FORTUNE -- The Patient Protection and Affordable Care Act aims for a delicate balance that even its champions acknowledge as highly challenging: Making medical services affordable for tens of millions of uninsured Americans, and yet restraining the expenditures needed to vastly expand coverage so that it shrinks, rather than swells, the looming deficits.

Kathleen Sebelius

Kathleen Sebelius, HHS Secretary

To grasp why the reform bill (PPACA) risks missing both goals -- and why the measure's margin for error is so perilously narrow -- it's crucial to follow the debate over its central provision, what it calls the "Essential Health Benefits" package. That debate is now playing out in a series of wonkish conferences sponsored by the Department of Health and Human Services that the press, pundits and even politicians are mainly overlooking.

But those seemingly routine hearings merit close attention, because they demonstrate that health care reform is still an unpredictable work in progress. Its true costs, and the number of people it insures, depend on decisions still to be made -- and none is more important than deciding what goes into the Essential Health Benefits packages.

The PPAC requires that small companies and plans for individuals, the main focus of the Act, provide a uniform set of benefits, called Essential Health Benefits, to all customers after January 1st, 2014. But the bill gives only an extremely broad outline of what's in that package. It establishes ten major areas of coverage, including prescription drugs, preventive care, and maternity and newborn services.

The medical industry is currently lobbying en force to get expensive treatments not required in the original bill covered under the packages that HHS is empowered to establish. At an HHS-sponsored hearing in January, no fewer than eighteen medical specialty groups contended that the "essential benefits" should encompass dental care, chiropractic services, unlimited kidney dialysis, treatments for autistic children, and unrestricted visits to psychologists for substance abuse sufferers.

If HHS gets the requirement wrong by stuffing those plans with such expensive mandates, it will bust future federal budgets and give small business owners a powerful incentive to cancel coverage. It will also push young people to go uninsured when they're healthy, then buy policies when they're sick -- the reverse of the Obama administration's goal of getting as many workers as possible paying into a giant insurance pool. More

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