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The Soldiers’ Angels Valour-IT “friendly” fund-raising competition is on until November 11. Air Force, Army, Navy, and Marine teams are vying to see who can raise the most money for this very worthy project:
Project Valour-IT, in memory of SFC William V. Ziegenfuss, helps provide voice-controlled/adaptive laptop computers and other technology to support Soldiers, Sailors, Airmen and Marines recovering from hand wounds and other severe injuries.
All the stuff they provide is very helpful and very clever but I think hand-held GPS units for those suffering from PTSD and TBI are a stroke of genius.
If you’ve already contributed, many thanks. If you haven’t, please consider doing so. See this post for info on how to do so.
The idea of government-paid - or government-provided - catastrophic health care has popped up here and there recently. It is the heart of David Goldhill’s proposal; Martin Feldstein urged it last month (via Greg Mankiw without comment); and Ross Douthat has advocated it, linking both Feldstein’s proposal and a June 2007 plan from Brad DeLong.
DeLong, Goldhill, and Feldstein have slightly different motivations for their proposals but one thing all three agree on: more consumer exposure to health care costs. Feldstein puts it thus:
A good system should not try to pay all health-care bills. That would lead to excessive demand, wasteful use of expensive technology and, inevitably, rationing in which health-care decisions are taken away from patients and their physicians. Countries that provide health care to all are forced to deny some treatments and diagnostic tests that most Americans have come to expect.
DeLong uses the specific example of cost sensitivity and resultant price reductions in some types of laser eye surgery:
It does seem to matter that consumers are cost conscious and economize when they have financial skin in the game.
Goldhill is concerned with both the cost and the quality issues that arise when consumers don’t pay directly:
I believe if the government took on the goal of better supporting consumers - by bringing greater transparency and competition to the health-care [note: not health insurance] industry, and by directly subsidizing those who can’t afford care - we’d find that consumers could buy much more of their care directly than we might initially think, and that over time we’d see better care and better service, at lower cost, as a result.
So all three proposals are designed to make individuals see clearly what they are paying for their own health care. The authors believe that will result in careful decision making on the part of consumers about what treatments are really worthwhile and which doctors and hospitals provide the best value. It will also result in providers striving to deliver higher quality and lower costs while encouraging transparency in pricing. Those effects on consumers and providers will in turn result in less spending on health care. At the same time all three writers want to make sure everyone has access to care and no one is financially destroyed by medical costs. Their goals are the same; their methods differ. Let’s look at DeLong versus Goldhill first; I’ll throw Feldstein in at the end.
DeLong proposes a 20% government bite of your income. Five percent goes to pay for government-provided catastrophic insurance while 15% goes into your Health Savings Account. You pay for health bills with your HSA. If you don’t spend all your HSA in one year, you can roll the balance into your IRA or you can just get your money back. If you spend all your HSA and you need to spend more, your catastrophic coverage kicks in and the government pays the overage. In this plan “catastrophic health costs” are defined as more than 15% of your income.
Goldhill on the other hand proposes that “catastrophic health costs” be defined as $50,000:
... the real key would be to restrict the coverage to true catastrophes - if this approach is to work, only a minority of us should ever be beneficiaries.
Like DeLong, he proposes a single government pool for catastrophic coverage. Everyone is required to buy this catastrophic coverage. Those who cannot afford the premiums will be subsidized by the government. Like DeLong, Goldhill also wants Health Savings Accounts to which everyone must “contribute a minimum percentage of post-tax income, subject to a floor and a cap in total dollar contributions.” If someone does not earn enough to meet their floor amount the government tosses in the difference. So long as an individual’s medical bills do not exceed $50,000 a year the bills will be paid out of his HSA.
Goldhill also wants premiums for catastrophic care to change with age. Similarly he wants the threshold that must be reached before HSA money can be used for non-health purposes to change with age. Interestingly, he does not specify the direction of the change although I assume in both cases it would increase with age. That is, the older you are the higher premium you pay for catastrophic care since you are more likely to need it. And the older you are the more you must have in your HSA since, again, you are more likely to need medical care. Goldhill does say that the percentage of after-tax income you should be required to contribute to your HSA will increase with age since “wages and wealth typically do.” DeLong’s proposal makes no mention of age.
The big difference between DeLong and Goldhill when it comes to HSAs is that Goldhill wants HSAs to be perpetual: money left in Goldhill’s HSAs at the end of a year simply rolls over to the next year. Once the HSA amount meets some threshold (unspecified but I have some thoughts about that later) the HSA money over that threshold can be withdrawn for whatever purpose the HSA owner wants with no penalty. Any money left in an HSA after death would become part of the deceased’s estate.
This difference exists because under DeLong’s plan there can never be a gap between what is in your HSA and what you must spend before your catastrophic coverage kicks in: you throw 15% of your after-tax income into your HSA every year and if you spend more than that the catastrophic insurance foots the bill. There’s no reason for that HSA money to roll over. In Goldhill’s plan there can be a substantial gap - it’s quite possible to have less in your HSA than the $50,000 that will cause your catastrophic coverage to kick in. Goldhill deals with the possibility of such gaps thus:
What about care that falls through the cracks - major expenses (an appendectomy, sports injury, or birth) that might exceed the current balance of someone’s HSA but are not catastrophic? These should be funded the same way we pay for most expensive purchases that confer long-term benefits: with credit. Americans should be able to borrow against their future contributions to their HSA to cover major health needs; the government could lend directly, or provide guidelines for private lending. Catastrophic coverage should apply with no deductible for young people, but as people age and save, they should pay a steadily increasing deductible from their HSA, unless the HSA has been exhausted. As a result, much end-of-life care would be paid through savings.
The last two sentences confused me at first but I think what Goldhill is saying is that if young people incur medical bills of more than $50,000 they should not have to pay the first $50,000 from their HSAs before their insurance kicks in. If I’m correct in my reading of Goldhill, as soon as your medical bills for a given year exceed $50,000, your catastrophic coverage will pay all your health care costs that year - not just the amount that exceeds $50,000. So while DeLong’s 15% is a deductible, Goldhill’s $50,000 is a trigger.
Let’s say you’re 25 and you have $5,000 in your HSA. You’re in a terrible accident and your medical bills total $65,000. As I read it, Goldhill would have your catastrophic coverage pay the entire $65,000 rather than requiring you to fork over the $5,000 in your HSA and go into debt for an additional $45,000 while your insurance pays only the $15,000 that exceeds $50,000. So long as you’re young, that is. As you age you will be required to pay more and more from your HSA before your catastrophic insurance kicks in. So now let’s say you’re 45 and you have $25,000 in your HSA. You have the same terrible accident and the same $65,000 medical bills. Now you might have to fork over, say, $10,000 from your HSA before your catastrophic coverage kicks in. (Goldhill does not go into specifics as far as amounts.) Now let’s say you’re 85, you have $50,000 in your HSA, and you need a hip replacement. You might have to spend the entire $50,000 before your catastrophic coverage kicks in.
Both Goldhill and DeLong want to make sure everyone gets preventive care and both understand that allowing people to spend their HSAs on stuff other than health care may mean some people will choose not to get preventive care. Goldhill:
Some experts worry that requiring people to pay directly for routine care would cause some to put off regular checkups. So here’s a solution: the government could provide vouchers to all Americans for a free checkup every two years. If everyone participated, the annual cost would be about $30 billion - a small fraction of the government’s current spending on care.
DeLong:
Sin Taxes: on Tobacco, Gorgonzola, Three-Liter Bottles of Liquid High-Fructose Corn Syrup, Tanning Clinics (Melanoma), et cetera: Sin taxes (and, perhaps, someday general revenues) pay for an army of barefoot doctors and nurses and mobile treatment vans roaming the country, knocking on doors, and providing preventive and other long-run lifestyle services for free: Let me examine your prostate. Mind if I check your refrigerator and tell you how to eat healthier? Have you exercised today? I'm a Pilates instructor, and we could do a session now? Are you up on your immunizations? Anybody here have a fever and need antibiotics? Come on out to the van and I'll clean your teeth." The idea is to make the preventive care cheaper-than-free, to insure that nothing with a high long-run benefit/cost ratio gets left undone because people would rather get a bigger check the next April to use to buy an HDTV.
Those are the basics of Goldhill and DeLong. Now let’s add Feldstein to the mix. I have to admit I discuss Feldstein with some trepidation. Feldstein is a Harvard economist so I assume he’s both bright and competent. However his plan makes no sense to me which leads me to suspect I’ve missed something crucial and am about to reveal myself as a total moron. I even printed out his article, fearing I had missed something in pixels that would become clear in ink. Sadly I didn’t fare any better with hard-copy so here goes.
Feldstein proposes vouchers to purchase catastrophic insurance in the private market:
Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family's income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family's health bills in excess of $7,500 a year.
How the family covers the medical bills before the catastrophic coverage kicks in is up to them. Feldstein suggests they could pay out of pocket; add their dollars to the voucher to buy a more traditional insurance policy; or join an HMO. What if the family elects to pay out of pocket and then is hit with medical bills that exceed their cash on hand? They use their government credit card:
The credit card would allow the family to charge any medical expenses below the deductible limit, or 15 percent of adjusted gross income. (With its information on card holders, the government is in a good position to be repaid or garnish wages if necessary.)
The families would not have to use the government credit card; they could pay cash or use their own credit cards or take out a bank loan if they preferred. In case none of those options are feasible, however, the government credit card would not only make it possible for families to pay for care they need it would also reassure providers that bills would be covered even if the family does not have the cash or the credit to do so.
Of the three plans, I think Feldstein’s is the weakest. Most importantly, Feldstein’s proposal contains elements that undercut the whole idea of having health care consumers actually weigh the value of the care they receive. First, he proposes a government credit card rather than a mandatory HSA to pay for non-catastrophic medical expenses. Yes, people will be required to pay back anything they charge on the card but many of us find it all too easy to believe that if we pay for something with a credit card it isn’t really costing us anything. (Remember all that consumer debt we’re drowning in right now?) Being able to whip out a government-issued credit card to pay for medical care will probably make many people less sensitive to the cost rather than more.
Plus who among us really believes the government is going to be able to garnish the wages of people who go on television and sob about how their children needed braces and now they’re up to their eyeballs in debt and will go bankrupt if they have to continue to pay off their health care credit card? Please. Government-provided health care credit card debt will be forgiven faster than you can say “cry me a river”.
Additionally, Feldstein anticipates that employer-paid health plans will continue to exist. In fact he counts on them to fund his proposal. Yet employer-paid health plans are arguably one of the mechanisms that keep people from realizing what their health care is costing them.
On the other hand both DeLong and Goldhill require the consumer to spend his own money to pay for non-catastrophic health care. And it’s really his own money because if he doesn’t spend it on health care he gets it back either the next year (DeLong) or down the road (Goldhill). DeLong’s plan is slightly stronger in this regard because he does not allow (does not need) borrowing from future HSA contributions either with or without some type of government backing. Thus under DeLong’s plan the trade-off between health care expenditures and other expenditures is quite clear to the consumer. Goldhill’s plan requires more delayed gratification: the money you don’t spend today could help pay for a house 10 years from now or help pay for a really nice nursing home 60 years from now.*
A second aspect of Feldstein’s plan I don’t like is that he would leave Medicare and Medicaid as is. I assume this means the vouchers would be only for people who are too young for Medicare and not poor enough for Medicaid. I understand why he has to do this - he has no mechanism for covering that 15% before the catastrophic coverage kicks in so poor people can’t cover it and those counting on Medicare would view his plan as a reduction in benefits . I could live with leaving Medicare in place - except for that whole running out of money thing - but I have to agree with Senator Ron Wyden about Medicaid:
”... Medicaid is a caste system. It is unfair to poor people and it is unfair to taxpayers." The system, he says, makes it hard for physicians to take care of the most vulnerable in society.
DeLong does not mention either Medicaid or Medicare; my assumption is that he would include everyone in the United States in his plan.
Goldhill would explicitly bring Medicaid patients into his plan:
If we abolished Medicaid, we could spend the same money to make a roughly $3,000 HSA contribution and a $2,000 catastrophic-premium payment for 60 million Americans every year. That’s a $12,000 annual HSA plus catastrophic coverage for a low-income family of four. Do we really believe most of them wouldn’t be better off?
And Goldhill’s plan was developed partially to substitute reliance on ones own savings for reliance on Medicare but he acknowledges that:
It would take a full generation to completely migrate from relying on Medicare to saving for late-life care; ...
(Goldhill also thinks it will take a generation to migrate “from Medicaid for the disadvantaged to catastrophic insurance and subsidized savings accounts” but I’m not sure why given his point about abolishing Medicaid.)
Third, I don’t like the fact that Feldstein is going to give his catastrophic insurance vouchers to everyone not covered by Medicare or Medicaid. This means a guy making a million dollars a year who has a soup to nuts insurance plan with a super-low deductible and super-good coverage totally paid for by his employer will get a voucher. First of all, why are we taxing the health insurance plans of people making minimum wage and getting minimum employer health insurance in order to hand money to someone who doesn’t need it? Second of all, what is the rich worker supposed to do with that voucher? Sign it over to his employer to defray costs?
My fourth and final objection to Feldstein’s plan is that he wants us to buy catastrophic insurance from private companies. That sounds odd, even to me, but it strikes me as a recipe for disaster. Here’s why.
After stating that his plan will insure the uninsured; remove the risk of bankruptcy due to medical costs; and remove the “structure of insurance” as a cause of rising medical costs, Feldstein makes an interesting claim:
All of this would happen without involving the government in the delivery or rationing of health care.
Um, no. The reality is that any time you have the government involved in payment the government is also going to be involved in determining what is and is not going to be paid for. Feldstein’s plan makes that determination indirect but it’s still there. Someone is going to have to decide which medical costs can be charged to that credit card and someone is going to have to decide which medical costs count toward that 15% of income you have to spend before your insurance policy kicks in. Under Feldstein’s plan the logical approach would be for your insurance company to determine both - it should be the same group of charges. That’s fine as far as it goes but I predict it will take about 30 seconds before patient groups and medical groups start demanding that the Federal government require insurance companies to cover this, that, or the other.
If we’re going to go down that road anyhow, I’d rather cut out the middleman and just let the government decide. I’ve read in a couple of places that the Baucus bill is to all intents and purposes going to make insurance companies public utilities. It’s heretical to say so but I’m increasingly inclined to believe that would be worse than single-payer: we’ll get the costs and disadvantages of insurance companies combined with the costs and disadvantages of government-run anything. It’s a double whammy. Plus it allows the government to run health insurance while still blaming the insurance companies for all the problems. The government has the power, the companies get the grief. There’s not much accountability in that setup.
The Feldstein approach has the same drawback. Once the government is paying, the government will decide what will - and will not - be covered. We will still get rationing or over-coverage or probably some bizarre combination of both but with two layers of bureaucracy instead of just one and with little understanding that at least half the problems result from the government. If we’re going to have true catastrophic coverage for everyone then just make it a government plan. Forget the fig-leaf of private insurance companies.
This question of what’s covered is more interesting under the DeLong and Goldhill plans. They assume there are no private insurance companies** and no government credit cards; you will have to actually spend some of your own hard, cold cash before the government’s catastrophic insurance kicks in. This gives us a range of alternative ways to address the issue of what is and isn’t covered, ranging from least to most restrictive.
First, at the least restrictive end, we may find there is no need to specify what medical treatments do and do not count toward the catastrophic amount (except for excluding cosmetic surgery based solely on vanity). In order for the government catastrophic insurance to kick in an individual is going to have to spend a significant amount of his own money first. I would hope that the number of people who are willing to burn through 15% of their income (DeLong) or $50,000 (Goldhill) purchasing ineffective treatments is vanishingly small. Those who are convinced that non-traditional forms of treatment are desirable are free to pursue them and if they manage to burn up a significant amount of their own money doing so, the catastrophic insurance will kick in. The consumers will, in other words, have to put their money where their mouths are before getting the rest of us to fund their non-traditional ideas of health care.
Second, if the strictly market approach doesn’t work and a lot of people are in fact churning through their entire HSAs purchasing dung beetle carcasses to cure acne then we could decide that you can spend your HSA on whatever you want and it will all count toward your catastrophic deductible/trigger but only certain treatments would be covered under your catastrophic insurance. If you pay 15% of your income to a charlatan who chants incantations at sundown to cure diabetes, that’s your call. Once you’ve burned through that 15% the catastrophic insurance will kick in if you need an approved treatment but it won’t pay for more chanting.
Third is a harsher alternative: you can spend your HSA on whatever your want but not only will your catastrophic insurance only pay for approved treatments, only those same approved treatments will count toward the catastrophic deductible/trigger. So now if you spend $50,000 of your HSA money on non-approved treatments and then need an approved treatment, you’re out of luck. As far as your catastrophic insurance is concerned, you haven’t spent a dime.
The fourth possibility is like the third but now the government limits how much of your HSA you can spend on unapproved treatments that don’t count toward your trigger. This is probably more doable under the Goldhill plan than the DeLong one; DeLong has no working room from year to year. Under the Goldhill plan, however, the government could allow a certain percent of your HSA to be used for medical services that don’t count toward your catastrophic trigger. That percent could rise depending on how much money was in your HSA and would probably have to fall as you get older. So if someone wants cosmetic dentistry at the age of 35 that wouldn’t count toward his catastrophic trigger but he could fund some of it out of his HSA if he had enough in there.
The most restrictive alternative is that you can only spend your HSA money on approved treatments - which puts us back where the Feldstein approach did but with government making the decisions directly rather than acting as the man behind the curtain vis-a-vis the insurance companies.
I hope we’d start with the least restrictive and see how that works out. After all, part of the reason to have people spend their own real money on health care is to encourage each of us to make tough decisions on what health care is worth our hard-earned cash. There’s no reason to believe that the health care I’m willing to spend money on is always going to be the same as the health care you’re willing to spend money on.
Okay, these are the basics of the three plans. In the next installment I’ll look at whether the plans are paid for; how they do at handling other health care issue like chronic illnesses and end of life costs; and whether I think any of them are worthy rooting for.
*****
* Goldhill appears to walk close to Feldstein’s idea of government credit cards when he says:
Americans should be able to borrow against their future contributions to their HSA to cover major health needs; the government could lend directly, or provide guidelines for private lending.
However, I believe the ideas are substantively different. Under Feldstein’s plan the money spent on health care and charged to your government credit card would have to be repaid from your general funds, funds that could instead be used for food, clothing, or a trip to Disneyland. Under Goldhill’s plan the money spent on health care and fronted by a government loan or a government-backed loan would be repaid from funds already earmarked for health care.
** Note that the Goldhill plan does not necessarily mean the death of private insurance companies. If someone wants to spend his HSA buying health insurance to cover his costs up to that $50,000 trigger there is no reason the government could not make that an acceptable use of the HSA. I don’t think Goldhill anticipates that happening and I don’t think he would like it if it did but it’s possible.
I never will, by any word or act, bow to the shrine of intolerance, or admit a right of inquiry into the religious opinions of others. - Thomas Jefferson
In this article (via BlueLyon) the author sets out to demolish “3 Silly Religious Beliefs Held By Non-Silly People” - “three widely held beliefs of modern progressive and moderate believers: beliefs held by intelligent and educated believers who respect science and don't think religion should contradict it.” In other words, silly beliefs held by the good guys. The beliefs she goes after are:
1) Evolution is guided by God.
2) There is an immaterial soul that animates consciousness
3) The universe is sentient, apparently also expressed as a belief in a “World-Soul”
I know absolutely nothing about the third belief she lists and have nothing to say about it. I found her specific arguments against the first two beliefs interesting but unsophisticated, somehow off-focus. I have no background in theology but it sounds to me as if she’s arguing more against her image of these beliefs than against the actual beliefs as they exist within a coherent religious framework particularly in her comments about an immaterial soul. Still what really struck me about her article was her conclusion and that’s what I want to address.
After first commenting on the author’s woefully inadequate analogy of evolution as a kitchen redesign. Capital “E” evolution strikes me as being remarkably similar to how a computer program evolves: you start with a program designed to do one thing and as you add functionality you are constrained by the need to insure that the existing code continues to work. This means you end up with some very elegant code, some inelegant but serviceable code, some very odd code, some very inefficient code, and some code that appears to be totally unnecessary but that everyone is afraid to rip out for fear it’s doing something important somewhere. Occasionally you mumble - or scream - that the only smart thing to do is scrap the whole system and start from scratch but deep in your heart of hearts you know that the system is now so complex you probably couldn’t recreate it if you tried. And, hey, the system pretty much works. (Note that my analogy explains seahorses which I think is more than anyone else can do. Seahorses are what happens when you’ve been pulling all-nighters for too long and need to write some code that reminds you how much fun programming can be. We mortals come by our playfulness honestly.)
Now about the article’s conclusion:
If you're going to be a moderate or progressive religious believer; if you're going to be a religious believer who respects and supports science instead of treating it as the enemy; if you're going to be a religious believer who wants their beliefs to at least not be directly contradictory with the available scientific evidence... then you need to be willing to consider the possibility that your own beliefs are every bit as contradicted by that evidence as the beliefs of the fundamentalist crazies.
And if the answer is "yup, that belief seems to be contradicted by the evidence"... then you need to be willing to let go of that belief.
So you see it doesn’t matter if you support every item on the moderate - even the progressive - agenda; it doesn’t matter if you staunchly oppose even the slightest hint of religion creeping into education or the public square; it doesn’t matter if you rally, march, and vote for every penny of funding desired by the scientific establishment; it doesn’t matter if you accept every claim of the scientific establishment as Holy Writ. So long as you harbor impure thoughts you are unfit to consider yourself a communicant in the great church of moderate and progressive religious believers. You are a heretic. You are the enemy.
I wonder what religious beliefs this author would permit moderate and progressive religious believers to cling to while still allowing them the privilege of communion with the great congregation of Respect for Science and Separation of Church and State. And has she informed Barack Obama and Hillary Clinton that some of their silly beliefs are going to have to go?
My doctor’s office has informed me they have received a limited amount of swine (H1N1) flu vaccine. They can only provide the swine flu vaccine to certain approved groups. Doctors must report each dose given to the State health department and explain why the person vaccinated was eligible to receive the vaccine. The approved groups are:
- pregnant women
- those caring for infants under 6 months old
- those 4 to 24 years old.
The vaccine is also recommended for children between 6 months and 4 years old but my doctor’s office has not yet received “an approved formulation” for those children.
I assume the eligible groups have been defined as people under 24 and those closely associated with them because viruses similar to H1N1 have turned up in the past and so the theory is that anyone over 24 probably has some immunity to the new variant.
May I just say I personally find that less than reassuring. My entire immune system was wiped out ten years ago - I had to be revaccinated for polio and so on - so I do not have any hope of being at all immune to H1N1. In addition I have a damaged lung which means it would be a really, really bad idea for me to get any serious respiratory illness.
Do I think the initial restrictions are wrong? No, not really. I’m all for protecting the young first. But I will be watching with a great deal of interest to see how much flexibility doctors have if the next release of swine flu vaccine is also inadequate to meet the demand. Will there come a point where supplies are still limited but doctors are allowed to exercise some discretion in deciding who gets the vaccine? I’m never going to fit into an endangered age group - I’m over 24 and under the 65 and over group that usually gets priority - so the only way I’m going to move up the list is if my doctor is allowed to use her knowledge of my health history to make a judgment call.
You see why the idea of having the entire health care system run by the government makes me nervous.
Senator Joe Lieberman was on Face The Nation this morning and the whole interview with him is well worth reading. I particularly liked what he said about the public option:
This recommendation of a public option, a government health insurance company, takes our government down a road that we’ve never gone down before.
In other words, we believe in a market economy. It’s what’s created the great American middle class. But it doesn’t have a conscience. When it behaves badly, we regulate it, companies. We sue them. I’ve been angry at oil companies. I never had the idea that the government should go into the oil business to make oil companies behave better. I think this would be a terrible mistake.
(This is the Reading list for my previous post, entitled “The essential Exchange and the puzzling public option”.)
(This post talks about HR3962. This is the health reform bill introduced by House Speaker Nancy Pelosi on Thursday. It’s also known as the ‘‘Affordable Health Care for America Act’’ or “AHCAA”. You can download a pdf of the 1,990 page bill here. Section and page references in my post are tied to that pdf.)
Reading, lots of it, and heavily annotated:
Here’s the Wikipedia entry on the Baucus bill, aka S. 1796, aka “America’s Healthy Future Act”. (I have a friend who swears he’ll support whatever health care bill doesn’t insist on giving itself some hokey name.) Just in case you want to try to compare the two.
Ezra Klein talks about the Exchange. An excellent explanation of why this - not the public option - is the crucial element of health reform.
Ezra Klein talks more about the Exchange and describes the difference between a strong one and a weak one. (HR3962 looks to me more like a weak Exchange but I haven’t really gotten down in the weeds of the bill’s language.) At the end of his writeup Klein provides a link to “A more scholarly take”. This is a link to a paper prepared by the Urban Institute. I haven’t read the whole thing but it seems to do a good job of explaining how an Exchange works and what elements it must have to achieve “many of the nation’s most oft-state health reform goals.”
SFGate talks about how limited the Exchange is going to be, backing up Klein’s concerns about a weak Exchange. If the concerns expressed here are accurate then it sounds like the Democrats are going to end up passing a bill that doesn’t really do much to help people’s insurance situations quickly. There are high hopes that the Exchange (and the public option) will eventually bring down costs but even if that actually happens it seems unlikely it will do so before the 2010 elections.
The Heritage Foundation summarizes “Rational Alternatives to the Congressional Leadership Bills.” They do a good job of making the case that Republicans have offered alternatives rather than just saying “No” but I’m unimpressed by any of the ideas that offer. It may be that closer examination would give me a better opinion of some of them but too many of them look like they get the Federal government involved in setting up State plans. It seems like the States should be doing that on their own so a truly conservative plan would consist of getting the Feds out of the State’s business.
Time - provides a nice accessible overview of how Health-Insurance Exchanges work. HR3962 allows State-level exchanges - which the article believes is undesirable. It also (as far as I can tell) lets insurance companies sell individual polices outside the Exchange but attempts to mitigate the chance of cherry-picking by forcing insurers outside the Exchange to meet the same requirements as those in the Exchange at least to some extent. The Time article also points out that - sigh - the already existing Federal Employees Health Benefits Program is an Exchange.
The New York Times discusses possibilities and possible problems in Health Insurance Exchanges.
neo-neocon presents a few links to those on the Right who have looked at HR3962. She also links to - and has some unkind words for - Paul Krugman’s remarkably nasty presentation of the conservative position.
Movin’ Meat takes a quick look and presents some links to the bill, to the summary I referenced above, and to the Wonk Room explaining “Top 10 Reasons Why Republicans Should Support The House Health Bill”. Movin’ Meat’s first bullet point cracks me up:
Enough House moderates - citing fiscal conservatism - rejected the cheaper option which would have paid providers at Medicare + 5%, and the bill as released would require the public option to negotiate fee schedules with providers like any other insurance company. IMHO, this is better policy even though it costs more, but hypocritical Blue Dogs get under my skin.
So Movin’ Meat as a physician is being intellectually sincere when he believes negotiation is a better policy but any Blue Dog who believes the same is a hypocrite.
On the other hand I got that warm cozy feeling of tradition honored when I saw that both sides were already misrepresenting HR3962. Wonk Room says:
3. REPUBLICANS ASKED FOR – POLICIES ACROSS STATE LINES: “Interstate competition allowing people to buy insurance across state lines.” [Sen. John Thune (R-SD), 9/8/2009]
HOUSE BILL – POLICIES ACROSS STATE LINES: Allows for the creation of State Health Insurance Compacts – permits states to enter into agreements to allow for the sale of insurance across state lines.
Meanwhile RealClearPolitics (linked by neo-neocon) says:
Remember, you can purchase oranges from Florida and whiskey from Kentucky, yet you're prohibited from buying health insurance from anywhere outside your state . . . so sayeth Nancy Pelosi.
As far as I can tell, here’s the real deal:
1) Any insurance company can sell to anyone in any State via the Exchange so long as the insurance company is licensed by the State it wants to sell to.
2) Insurance companies selling via the Exchange must meet State requirements if the State has paid the Federal government to require them to do so. Otherwise they must only meet Exchange requirements.
3) States can form Interstate Health Insurance Compacts to allow insurance companies from one State in the Compact to sell insurance to residents of other States in the Compact. (Division A, Title III, Subtitle A, Section 309; page 202 on) It is not clear whether insurance companies under such a Compact would have to meet State requirements. This Section says the guidelines for such Compacts shall:
(1) provide for the sale of health insurance coverage to residents of all compacting States subject to the laws and regulations of a primary State designated by the health insurance issuer;
which seems to say that one State in the Compact will be the State whose requirements apply. But the Section also says that the guidelines for such Compacts shall:
(3) preserve the authority of the State of an individual’s residence to address -
(A) market conduct;
(B) unfair trade practices;
(C) network adequacy;
(D) consumer protection standards;
(E) grievance and appeals;
(F) fair claims payment requirements; and
(G) prompt payment of claims;
What we don’t know is exactly how these seven items will be defined. Since what many Republicans want is the ability to buy and sell health insurance across State lines in order to eviscerate State requirements, HR3962 hardly satisfies their definition of “Interstate competition allowing people to buy insurance across state lines.” So Wonk Room is wrong. However so is RealClearPolitics: people will, under certain conditions, be able to buy health insurance across State lines. Just not under the kind of conditions Republicans want.
(This post talks about HR3962. This is the health reform bill introduced by House Speaker Nancy Pelosi on Thursday. It’s also known as the ‘‘Affordable Health Care for America Act’’ or “AHCAA”. You can download a pdf of the 1,990 page bill here. Section and page references in my post are tied to that pdf.)
One of the features that seems to show up in every Democratic health care bill is “the Exchange”. As I understand it, the Exchange is basically a marketplace for insurance policies. Any insurance company that wants to can offer policies via the Exchange. These policies will have to meet certain minimum coverage requirements; most if not all the bills establish levels of coverage. The least comprehensive policies are Basic or Bronze; those with more features are Enhanced or Silver; those with still more are Premium or Gold. There is also a Premium Plus (or Platinum) level. It seemed to me that in the older bills any insurance company that wanted to offer products on the Exchange had to offer all three levels: Bronze, Silver, and Gold but I may remember that wrong - and I’m not going to dig back through the bills to refresh my memory. In HR3962 it looks like an insurance company can offer just a Basic (Bronze) plan. The other plans are optional. (Division A, Title III, Subtitle A, Section 303; page 167)
Insurers offering policies via the Exchange must comply with government rules regarding how premiums are calculated, how pre-existing conditions are handled, and so on. I’m almost positive HR3962 applies these rules to insurance sold both inside and outside the Exchange. (Division A, Title II; page 89 on) I suspect the other Democratic bills do also since making rules within the Exchange more stringent than rules outside the Exchange would result in the Exchange becoming a high-risk insurance plan.* However if an individual State has more stringent rules for health insurance companies than those set out by HR3962, the individual State can enforce those rules with regard to insurers selling plans on the Exchange to individuals in the State provided the State is willing to pay the Federal government for the privilege. (Division A, Title III, Subtitle A, Section 303; page 170-171)**
When I read about earlier Democratic versions it sounded to me like government subsidies would be available only for insurance purchased through the Exchange. I’m not sure if that is the case with HR3962. (Division A, Title III, Subtitle C, Section 342(a)(1)(D); page 247)
It is within the context of the Exchange that the public option exists. The Federal government will offer insurance plans on the Exchange just as any private insurance company does. The original thinking - and that apparently preferred by liberals - was that the public option would peg its reimbursement rates to Medicare, paying at Medicare rates or Medicare plus 5%. There has also been uncertainty over how much the Federal government would subsidize the public option with tax dollars. HR3962 removes the Medicare peg and makes clear that there will be no subsidization of the public option. According to the (understandably) very positive ten-page summary (pdf) provided via the House Committee on Education and Labor:
The bill establishes a public health insurance option available within the Exchange to ensure choice, competition and accountability. Like other private plans, the public option must survive on its premiums. The Secretary of Health and Human Services will administer the public option and negotiate rates for providers that participate in the public option. The public health insurance option is provided startup administrative funding, but it is required to amortize these costs into future premiums to ensure it operates on a level playing field with private insurers.
I find the removal of the Medicare peg both understandable and puzzling. It’s understandable because reimbursement rates pegged to Medicare rates might have resulted in relatively few health care providers being willing to participate in the public option “network”. Especially when the public option is first starting up it probably will not be able to promise a large enough volume of subscribers to make health care providers willing to take extremely low reimbursements.***
I find removal of the Medicare peg puzzling because it makes it less certain that the public option will be less expensive than private insurance - especially that offered by non-profit companies. Since the public option cannot dictate reimbursement rates and will not receive any taxpayer money there is no obvious reason to believe it will be cheaper than private non-profit insurance companies. Since the public option will receive startup funding and it must pay back that funding the public option may well be more expensive than private non-profit insurance companies at least until the startup funding is repaid.****
I assume that the bill authors believe the public option will be cheaper than the private option even under the rules of HR3962 for one of three reasons. First, the full administrative overhead may not be attributed to the public option. The summary I quoted above says:
The Secretary of Health and Human Services will administer the public option and negotiate rates for providers that participate in the public option.
If some or all of the administrative costs - including what I assume is a fairly painful and labor-intensive process of rate negotiation - are attributed not to the public option as a stand-alone “insurance company” but are rather folded into the general HHS budget then the public option could be less expensive; it’s administrative costs will be - or rather, appear to be - very low.
The second reason the public option might be less expensive than private non-profit insurance companies is that the private companies are hideously inefficient and the public option will be better managed. At first glance this seems unlikely: organizations are pretty much the same whether they’re private or government and I haven’t seen any overwhelming evidence that government entities tend to be more efficient than private ones. However there is a lot of verbiage in HR3962 about different reimbursement models and perhaps those who support the HR3962 form of the public option believe the government will achieve cost savings using those models. (Division A, Title III, Subtitle B, Section 324; page 218 on)
The third reason the public option might be less expensive than private non-profit insurance is that the private companies are really price-gouging. Title I, Section 104 is actually entitled, “Sunshine on price gouging by health insurance insurers” so I think I’m pretty safe is asserting that many of those who support the HR3962 form of the public option are so sure price-gouging is rampant that they believe any public option in any form will be less expensive than any private option. This is why the rationale for the public option so often includes ideas like competition and keeping insurance companies honest. Supporters are convinced that even a non-profit like Alabama Blue Cross Blue Shield is charging more than it needs to in order to, well, something: pay its executives huge salaries; stuff its coffer in hopes of being bought out (although who benefits from a buyout when there are no shareholders is a little unclear - unless it’s those same executives getting golden parachutes); or perhaps just because that’s what companies do.
It’s also possible that those who support the HR3962 version of the public option are aware it will be more expensive and want it anyway but then I run up against a real puzzle: why do they think that anyone who wants health insurance will sign up for the public option? The only people who could enroll in the public option will be able to participate in the Exchange. As far as I can tell all policies offered via the Exchange will be eligible for a government subsidy. So why would someone pick a more expensive government “insurance company” plan over a less expensive private insurance company plan? If those who support HR3962 are aware it will be more expensive then they are about to create a $2Billion-plus government health insurance company with no customers. (Division A, Title III, Subtitle B, Section 322(b)(2)(A); page 215) Surely this can’t be the case.
*****
* I’m not entirely sure that HR3962 requires non-Exchange-offered (NEO) health insurance policies to meet the type of coverage requirements Exchange policies must. That is, NEO policies have to meet requirements with regard to pre-existing conditions and rescission and so on but they may be able to offer less comprehensive policies than even the Exchange Basic. I find this unlikely - it would appear to undercut the whole idea of the Exchange - but I haven’t yet run across language that specifically prohibits this. It’s a big bill and life is short.
** This presents an interesting situation. Let’s say New Jersey has more stringent requirements than the Exchange; for example, New Jersey requires insurance companies to pay for poofles. If New Jersey wants to force Exchange-offered plans to meet its requirements, it has to pay up. If it doesn’t pay up then Exchange-offered plans will, of course, be cheaper than non-Exchange offered plans. This will drive everyone who doesn’t want poofles to the Exchange-offered plans thus making the cost of non-Exchange offered plans skyrocket. Those who want a plan that covers poofles will not be able to afford the coverage and eventually there will be no non-Exchange-offered plans in New Jersey.
If New Jersey does pay up then all of us in New Jersey get to keep poofle coverage. This is a situation where the cost of a government requirement for health insurance companies cannot be hidden in a policyholder’s bill but will show up right on everyone’s tax return. The poofle lobby will need to be ready with a really good campaign to convince New Jerseyans that retaining poofle coverage is worth the extra tax burden.
*** This Politico article presents a different explanation for the removal of the Medicare peg:
conservative and moderate Democrats have pushed party leaders to let doctors and hospitals negotiate their reimbursement rates, arguing plans tied to Medicare would give the government an unfair advantage over the private market and imperil rural hospitals with a high percentage of patients with government-funded coverage.
That makes sense but I do wonder how many health care providers would have participated in if the peg hadn’t been removed.
**** After I wrote this last night I heard Senator Lieberman on “Face The Nation” this morning. He said:
The Congressional Budget Office said on Thursday when the House Democrats put out their health care reform plan with a public option in it that the public plan would end up charging higher premiums than the average premiums charged by the commercial health insurance companies.
(The Reading list for this post is going up as a separate post. There’s a lot of it and it’s heavily annotated.)
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