Why Reform Matters If Your Insurance Is Fine

A guide to the upcoming health reform debate.

June 24, 2009— -- As the health care reform debate goes on, a number of new questions and jargon are arising. ABC News answers some of your most pressing questions about health care reform.

Why is President Obama talking <a target="_blank" href=" http://abcnews.go.com/GMA/Politics/story?id=7882279&page=1">reform</a>?

The average family of four with health insurance had medical costs of $16,771 in 2009, according to the Milliman Medical Index, a report produced by the Milliman consulting firm.

Watch "ABC News Primetime: Questions for the President -- Prescription for America," Wednesday, June 24, at 10 p.m. ET

While 59 percent of that tab is picked up by the employer, that left $4,004 in premiums and $2,820 in out-of-pocket costs that comes out of a family's budget.

The authors of the MMI note that this is the third straight year that employees' out-of-pocket costs have increased in percent by double digits. Since the index began in 2005, the total health costs of an average family of four have increased by more than $1,000 per year, each year.

Additionally, a cause of concern for many is the fact that 46 million Americans do not have health insurance.

Some critics have noted that the number of uninsured may be misleading. Keith Hennessey, who served as a senior White House economic adviser to President George W. Bush, broke down the number of uninsured Americans.

Hennessey noted that many counted among the 46 million could get insurance through available government programs, while others would likely not be considered worthy of taxpayer support and may simply choose not to get health insurance.

It should also be noted that many who report bankruptcy from medical conditions had health insurance when they were first diagnosed.

Health Care Questions

I have health insurance through work and I am happy with it. Why should I care about reform?

Regardless of where you get your insurance, health reform will affect how much you pay in taxes and how much you pay in premiums.

For starters, one proposed method to raise revenue to pay for health reform is a tax on employer-provided health benefits. Because employers and employees do not have to pay taxes on employee health benefits, it has encouraged their growth.

So, a tax increase might raise your tax bill if you currently have health insurance through work.

It's unclear how likely this reform is. In the recent presidential campaign, John McCain supported taxing health benefits, while Obama opposed it. Additionally, the recent ABC News poll on health reform found that 70 percent of Americans oppose a tax on health benefits, even those above $17,000.

The premiums you pay for insurance will likely change through reform, although it's not entirely clear whether they will increase or decrease.

The hope is that reform will force insurers to lower their rates to compete with a government plan. Premiums might also go down as everyone is required to get insurance and people who are insured no longer sees their premiums paying for hidden costs.

What are the "hidden costs" being paid for by health insurance premiums?

A number of hidden costs can drive up the premiums a family pays for insurance. Those hidden costs arise from health care that isn't paid for by the person using it.

For example, emergency rooms are required to treat anyone who comes through their door, regardless of ability to pay. When a person who is uninsured is treated and cannot pay for the services, the costs are passed on to other patients at the hospital.

As mentioned above, some doctors have complained that Medicare and especially Medicaid do not cover the costs of treating all of those patients, in which case the costs are passed on to private insurers who then charge higher premiums.

Of course, the challenge in universal health insurance is getting people who don't buy insurance now coverage they can pay for under a new plan.

Why are some doctors and the American Medical Association opposed to a public plan?

The AMA has stated that it is not opposed to a public plan per se but is opposed to a public plan that doctors are forced to participate in.

Two current public plans many doctors deal with are Medicaid, which covers people who are impoverished or disabled, and Medicare, which covers people over the age of 65.

Doctors' main complaints with the two programs have to do with the difficulty in getting reimbursed and rates of reimbursement, which they say sometimes do not even cover the cost of treatments. Those costs are then passed to patients who use private insurance.

For this reason, some doctors do not take patients who use Medicare or Medicaid. The concern over a public plan is that doctors' will be forced to treat patients whose costs will not be covered.

The other concern is that such a plan would be able to set rates throughout the country because of its size, and those rates would be similar to those of Medicaid and Medicare, thus creating a financial problem for doctors -- one they feel would be exacerbated if private insurers were driven out of business. (A step the recent ABC News poll said erases favorable public sentiment for a public plan.)

According to a March 2009 study by the Medicare Payment Advisory Commission, orMedPAC, an independent body that advises Congress on Medicare issues, despite concerns about finding doctors enrolled in Medicare, fewer than 2 percent of enrollees were searching for a new primary care physician and could not find one.

However, the problem of physicians not accepting Medicare is clearly understated.

According to the Center for Medicare and Medicaid Services, 94.8 percent of family practice physicians enrolled in Medicare accepted Medicare reimbursement.

However, that number means that 5.2 percent of physicians who enroll in Medicare can still require some payment beyond what Medicare provides.

Additionally, the figure does not include physicians who do not accept Medicare at all. According to the American Academy of Family Physicians, there were 100,431 family physicians practicing in 2006. Since the CMS numbers only include the 86,164 physicians already enrolled in Medicare, that means more than 14 percent of family physicians did not accept Medicare at all in 2006.

How is this whole reform project going to be paid for?

It's still unclear how the health care reforms will be paid for.

One possibility, as mentioned before, is taxing health care benefits received through work. This appears to be an unpopular proposal, with 70 percent opposed to a tax on benefits exceeding $17,000.

Another proposal has been increased taxes on households with income above $250,000, an idea that has 60 percent of people supporting it.

In the end, a lot of the savings is projected to come from reforms in medical practice, whether it be changing how physicians are compensated -- paying for quality care instead of simply performing a lot of procedures -- or introducing cost-saving technologies like electronic medical records.