Matt Yglesias

CBO Trashes GOP Health Plan — Less Coverage Expansion, Less Deficit Reduction

The Congressional Budget Office has released its initial estimate of the House GOP’s health care alternative, centered on the near-total deregulation of the health insurance industry.

The good news is that the House GOP bill does reduce the deficit. CBO says adopting their plan would reduce the deficit by $68 billion over ten years relative to current law. The number for the Democratic bill, however, is $104 billion. So in exchange for that lesser deficit reduction, the Republicans must cover more people right? Well, of course not. Instead, under the Boehner Plan the number of people without health insurance will stay steady at 17 percent. The Democratic plan will see that sliced to just four percent.

The CBO also says that for most people the GOP plan won’t lower premiums: “In the large group market, which represents nearly 80 percent of total private premiums, the amendment would lower average insurance premiums in 2016 by zero to 3 percent compared with amounts under current law.” And insofar as their plan does reduce premiums, it’s by making your coverage worse:

The second source of change in average insurance premiums is changes in the average extent of coverage purchased. Those changes can reflect both changes in the scope of insurance coverage—the benefits or services that are included—and changes in the share of costs for covered services paid by the insurer—known as the “actuarial value.” With other factors held equal, insurance policies that cover more benefits or services or have smaller copayments or deductibles have higher premiums, while policies that cover fewer benefits or services or have larger copayments or deductibles have lower premiums. Provisions in the amendment that would reduce insurance premiums by affecting the amount of coverage purchased include the State Innovations program, which would encourage states to reduce the number and extent of benefit mandates that they impose, and provisions that would allow individuals or affiliated groups to purchase insurance policies in other states that have less stringent mandates.

To repeat myself from yesterday, this is basically a plan that works well for you if you never get sick. Instead of wasting money on taxes and or premiums to cover your own illness or that of your fellow Americans, you’ll have more money in your pocket to spend on NBA League Pass or what have you. If you’re uninsured or at risk of losing your insurance, this plan does nothing for you. If you’re insured and putting your insurance to use by getting sick, this plan is a disaster, offering you less coverage.

Dick Armey, Big Shot

Delicious barbacoa tacos

Apparently Dick Armey is a jackass:

In one of our conversations about health care, Armey argued that tort reform would significantly cut costs because doctors, with less fear of huge malpractice judgments, would no longer order every possible test. I asked if it might not be patients who sometimes insisted on unneeded tests. As an example, I mentioned that I had recently suffered an athletic injury, a ruptured Achilles’ tendon, and underwent surgery after my orthopedist examined me clinically and said he was sure of his diagnosis. I didn’t ask for any further diagnostic exams, but I suspect that some patients, conditioned to accept the perceived scientific certainty of M.R.I.’s and other scans, would have insisted on more sophisticated measures. “I’d have gotten the M.R.I.,” Armey said. “I’m a big shot, and doctors sure as hell don’t want to be sued by a big shot. He would not even have dared ask. He would have just sent me for the test.”

Later, in North Carolina, we sat down to dinner, and he said: “You ever see that Danny DeVito movie, I think it was Danny DeVito, where he says big shots never order off the menu? They just say what they want.” We were at an On the Border, a Tex-Mex restaurant chain and not the type of place I imagine many big shots patronize, but he pushed the menu aside without reading it and told the waiter what he wanted the kitchen to cook up for him.

On the merits of the issue, no matter how large an impact you want to attribute to fear of lawsuits, changing this would be a one-time thing. What’s scary about health care isn’t that it costs a lot (though it does) but that the rate of growth is so high. Lawsuits don’t deal with that.

Landrieu Out as Palm Beach County Jefferson-Jackson Day Dinner

Mary Landrieu (D-LA)

Palm Beach County in Florida takes baby steps toward party discipline:

Democratic Louisiana Sen. Mary Landrieu is out as keynote speaker for the Palm Beach County Democratic Party’s annual fund-raising dinner next week because party leaders dislike her stance on health care reform, county Democratic Chairman Mark Alan Siegel said today.

Siegel says “We just didn’t want to have a keynote speaker who’s not committed to cloture. It would have just been wrong.” Probably not the most devastating blow to a politician’s career, but good to see someone’s paying attention. Also this:

The Democrats’ annual dinner — formerly known as the Jefferson-Jackson dinner but this year rebranded as the Truman-Kennedy-Johnson dinner — is Nov. 14 at the Palm Beach County Convention Center.

Wouldn’t it make sense to change the name of these annual dinners on a permanent basis? The policies of Andrew Jackson’s administration—opposition to central banking, Indian removal, slavery, etc.—have very little to do with the modern-day Democratic Party. Something like a Roosevelt-Kennedy dinner would invoke historical figures while also invoking a recognizable predecessor of the contemporary policy agenda.

Less Than Zero

Erin Riley tweets from Australia:

Apparently all I need to do to get my Swine Flu shot is rock up at the doctor’s tomorrow. And it’s free. #ilovesocializedmedicine

Something that tends to get obscured in the health care debate is that a number of very different kinds of activities are undertaken under the banner of “health care.” When it comes to cutting-edge medical treatments, you can see the case for a robust private sector role—it’s about innovation.

But an awful lot of medical care is extremely routine. Someone falls and breaks his leg and needs the broken bone set. Someone needs stitches. Someone needs a strep throat test. If the test is positive, he needs antibiotics. Vaccines need to be administered. In situations like these, innovation is really not at issue. And with some of this stuff, like with the H1N1 vaccines, there’s a substantial public health issue in play. You really, really, really want the people who need the vaccine to get the vaccine. It’s much cheaper to give a vulnerable person a vaccine than to treat them after they get sick. And of course getting enough people vaccinated against things like measles is crucial to preventing new epidemics from happening. This sick of basic health care should really be free—perhaps provided by a robust national public health service with a nationwide network of clinics. In fact, ideally it would be cheaper than free so that nobody goes without the appropriate level of vaccinations, blood pressure tests, etc.

Boehnercare: No Soup For You

It looks like Republicans are getting ready to shift from having no plan for reforming health care to having a plan that won’t do anything:

Over the weekend, Boehner said the GOP bill’s aim was to lower healthcare costs, but not to provide healthcare to all.

On Monday, he promised the bill would not raise taxes and remain deficit neutral. He also said it would not cut benefits for seniors on Medicare.

Under the GOP plan, insurance companies will not be banned from denying individuals coverage on the basis of pre-existing conditions however. Instead, those with preexisting conditions would become part of a “high-risk” pool of individuals to be insured, Boehner explained.

If you’re uninsured, this won’t help you.

If you’re insured, but you worry that circumstances beyond your control—a global financial meltdown leading to layoffs at your company, say—this won’t help you.

If you’re insured, but you worry that if you get sick your insurer will gin up some pretext to drop your coverage, this won’t help you.

If you’re insured but your premiums are escalating so fast you worry that you won’t be able to afford to keep paying them, this won’t help you.

Instead, Boehner is proposing the de facto total deregulation of the health insurance industry. Starting with the accurate observation that it’s odd to have insurance regulated fifty different ways in fifty states, the GOP decided not to do the sensible thing and create uniform federal regulation, but instead to let insurers sell plans across state lines. In other words, there’ll be a race to the bottom and all insurance will soon be offered under the rules of whichever state is laxest in its rules—goodbye consumer protections!

The result of all this will be a situation in which the health insurance systems works better for people who don’t need health care services, and much worse for people who actually are sick or who become sick in the future. It’s basically a health un-insurance policy.

Alexander, NYT Slam Obama as Too Partisan, Ignoring Actual GOP Record

I guess this criticism is never going to go away, but after dwelling for a while on other issues Robert Pear and Sheryl Gay Stolberg eventually trot out this time-honored trope—Obama needs to be nicer to Republicans:

Yet White House officials have shown little interest in Republicans, with the exception of Senator Olympia J. Snowe of Maine, whom they have wooed assiduously, and one or two others. Mr. Obama did meet with some Republicans early on, when his aides still believed it was possible to get the support of Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee.

The No. 3 Republican in the Senate, Lamar Alexander of Tennessee, who attended one session with the president, recalled that in the 1960s, when he was a Congressional aide, Democrats and Republicans worked together on civil rights. He said he saw no possibility of a bipartisan health bill.

“White House officials don’t want one or don’t know how to do one,” Mr. Alexander said.

This is very confused, starting with the fact that Alexander started working as a Senate aide in 1967 by which time the main civil rights debate was over. Then any competent observer of American politics should realize that it’s no coincidence that the bipartisanship of the civil rights era vanished in the post-civil rights age. It was the debate over civil rights itself that created the unusual bipartisanship of mid-20th century America.

Last there’s the small matter here of the actual history of the health reform debate. Chuck Grassley is not just some guy, he’s the top Republican on health care issues. And the Grassley courtship process took a long time. And Grassley abandoned it in a blaze of hypocrisy, eventually slamming Democrats for embracing an individual mandate to purchase health insurance that he had long supported.

The larger context is that the president laid out some goals for health reform. He wants a bill that expands coverage in a way that’s deficit neutral in the medium-term, doesn’t disrupt people’s existing health insurance in the short-term, and bends the long-term cost curve. A lot of different ideas were put forward in Congress about how to do this. None of them were put forward by Republicans. One of them, produced by the Senate Finance Committee, was embraced by one Republican, Olympia Snowe. But the others are opposed to all the different proposed ways of achieving these goals and don’t have an alternative approach to offer either. Which is fine. Political parties can have profound disagreements about objectives. But it is what it is. Acting as if inviting Lamar Alexander over for tea would have fundamentally altered the landscape is silly.

The Grayson Factor

I think Alan Grayson has taken some stands on important substantive issues of public policy—mostly related to so-called “bailouts” and the Federal Reserve—that are incorrect on the merits. But personally I welcome at least a bit of his tone and his approach in congress, especially on the issues where I agree with him on the merits. But as I’ve said before, the political/media establishment can’t quite seem to get their heads around the idea of a progressive using stark, moralistic language rather than bloodless technocratic language:

First it was his comment, “If you get sick, America, the Republicans’ health care plan is this: Die quickly.” Then, appearing on MSNBC, he said of former Vice President Dick Cheney: “I have trouble listening to what he says sometimes because of the blood that drips from his teeth while he’s talking.” Finally, a radio interview surfaced in which he had called a female adviser to the Federal Reserve chairman “a K Street whore” — a reference to her former job as a Washington lobbyist. That one forced him to make a formal apology.

Mr. Grayson could be the latest incarnation of what in the American political idiom is known as a wing nut — a loud darling of cable television and talk radio whose remarks are outrageous but often serious enough not to be dismissed entirely. Mr. Grayson is the more notable because he hurls his nuts from the left in a winger world long associated with the right.

As I had occasion to note in the previous post, Harvard economist Jeffrey Miron, who is also a senior fellow at the Cato Institute, really did outline the plan that if you get sick and don’t have money you should die in an opinion piece for CNN. This is all part of his larger explanation of why “Government should not subsidize health insurance — for the uninsured, the poor, the elderly or anyone else — or regulate health insurance markets.” Most conservatives don’t articulate the right-wing position on health care in quite as rigorous a manner as Miron, but the fact of the matter is that the view that spending is bad, taxes is bad, and regulation is bad is at the very core of contemporary American conservative philosophy. And it leads you to where Miron ends up—to exactly what Grayson said.

Of course Miron puts it gently (”if some people do not purchase insurance and then become ill, they would have to rely on private charity”) and Grayson puts it harshly (”die quickly”) but they’re saying the same thing: The right’s view is that the government should make no special provision to protect people from health-related economic catastrophe or from economically-driven health catastrophe.

Socialized Candy

Jim Henley catches the Obamas throwing the free market out the window and just offering handouts to kids who show up at the door to beg. Horrible stuff.

Meanwhile, in Harvard economist and Cato Institute senior fellow Jeffrey Miron’s dystopia, if your parents wind up with no money through bad luck or poor decision-making and then you get sick you’ll just die on the street for lack of money. And as he lays out, once you start with this insane value system you clearly reach the conclusion that the health reform ideas being contemplated by congress don’t make sense.

Will The Public Option Fail?

Public option proponents knew they weren’t going to get the plan of their dreams when the House leadership agreed to drop the Medicare + 5% reimbursement rate formula, but may have been surprised when the CBO came back with an analysis saying that public plan premium rates will be higher than the private plans available in the exchange. How does that work? Well, as Brian Beutler explains the problem with putting a good health care option together is you might wind up with too many sick customers:

“The House bill does a very good job of setting up rules restricting cherry picking,” says Edwin Park, a senior fellow at the Center for Budget and Policy Priorities. But, he adds, “private insurers have years of experience gaming rules,” and will continue to do so.

“Insurers, just in terms of how they do outreach, how they market, are still going to be able to cherry pick,” Park says.

The second is that the public option will just be a gentler creature–it won’t erect as many restrictions on available providers and services as its private competitors will, and that’s likely to attract riskier consumers.

This is the fundamental issue with any mandate/regulate/subsidize approach. A lot is hinging on the “regulate” part. You need to get the rules against cherry-picking and the implementation of the risk-adjustment payments right. Some people see the public option as an alternative to faith in the capacity of the regulators, but absent adequate regulation the distortions in the market could just wind up bringing the public plan down.

The Public Wants Partisan Health Care; But Will They Get It?

Public opinion is in support of harsh measures to secure a public option:

“Which of these would you prefer – (a plan that includes some form of government-sponsored health insurance for people who can’t get affordable private insurance, but is approved without support from Republicans in Congress); or (a plan that is approved with support from Republicans in Congress, but does not include any form of government-sponsored health insurance for people who can’t get affordable private insurance)?”

Fifty one percent said they preferred the public option; 37 percent said they preferred a bill with some support from Republicans in Congress. Six percent said neither and seven percent expressed no opinion.

“Who will tell President Snowe and the rest of the Villagers” jokes Atrios.

I think it’s important, however, to remember that legislative outcomes are ultimately determined by raw vote counts and political power, not by semiotics and control of the media narrative. There are three ways to pass a health care bill:

One: Olympia Snowe votes for cloture.
Two: Ben Nelson votes for cloture.
Three: Fifty Democrats agree to try reconciliation.

Clearly Olympia Snowe doesn’t favor the “ignore Olympia Snowe” approach.

It’s pretty clear that there are fifty Democrats who favor a public option, and if they’re really willing to play procedural hardball there’s not much the parliamentarian or David Broder can do to stop them from enacting a bill with 50 votes. But we’ve seen very little enthusiasm for that approach, probably for reasons that have less to do with public opinion than with the fact that the 60 vote senate serves the interests of individual senators qua senators.

So you’re left with Ben Nelson—and everyone else. What does he want? Will joining with the Republicans to filibuster a health bill imperil his re-election?

The Trust Gap

Some data from Gallup:

Electorally vulnerable Democrats may have something to gain from the perception of triangulating away from their party leadership, but this sort of result tends not to support the idea that breaking with congressional Democrats to join congressional Republicans in a filibuster of Obama’s signature health initiatives would be a political winner.

Health Care Saves Lives, Lack of Coverage Contributes to Death

Among conservatives the view is that health care is so important that we don’t dare have the government give it to anyone because that might, through leaps of logic, lead to hypothetical future rationing. At the same time, even though health care’s important it’s rude to point out that America’s high uninsured rate kills people:

Lack of adequate health care may have contributed to the deaths of some 17,000 US children over the past two decades, according to a study released by the Johns Hopkins Children’s Center.

The research, to be published Friday in the Journal of Public Health, was compiled from more than 23 million hospital records from 37 states between 1988 and 2005.

The study concluded that children without health insurance are far more likely to succumb to their illnesses than those with medical coverage.

Sadly, the life-and-death stakes for uninsured people don’t seem to move the hearts of centrist senators nearly as much as the plaintive cries of insurance company executives. Thus we continue to hear that people not only oppose creating a public option, they oppose such an option so vehemently that they would filibuster are large and multi-faceted health care bill merely in order to kill it.

Would Health Reform “All But Eliminate” Private Health Insurance?

To be clear, I think that all but eliminating private health insurance would be a good idea. That said, I’d be really interested to know what Mike Tanner’s justification is for saying of the House bill “regardless of how much lipstick they put on this pig, it still is a government takeover of the health care system that would all but eliminate private insurance and force millions of Americans into a government-run system.”

For people who receive health insurance through their employers, which is to say the vast majority of the Americans who currently have health insurance, the House bill would change very little. Or, rather, the biggest change would simply be the confidence that if, in the future, you cease to get health insurance from your employer (maybe you’ll lose your job or want to change jobs) that you’ll still be able to get health care. What’s more, of the minority of Americans who would be getting health care through the new “exchange,” the majority will probably sign up for private health insurance and everyone will have the option of doing so. If the government-run public plan is, for whatever reason, vastly more appealing than the private options then it will dominate. But if you believe the government can’t run health care well, there’s no reason to think that will happen. Whatever you think of that, though, the basic fact is that even if the public option does dominate the exchange most people will still have private employer-provided insurance.

In addition to misstating these facts, Tanner says that the idea of a public option negotiating rates with health care providers is “the health care equivalent of negotiating with Tony Soprano.” It strikes me as strange to analogize a government-purchasing arrangement to a sham negotiation with a violent criminal organization. The federal government regularly negotiates with providers of goods and services. Police departments buy cars and guns and uniforms. Government offices buy light bulbs and computers and pieces of paper. Highway authorities buy cement and steel. There are definitely different kinds of issues and problems with public sector contracting activity, but “resemblance to mob extortion” isn’t among them.

The health reform being contemplated in congress involves substantially increases taxes in order to spend substantially more money. I don’t expect Cato Institute personnel to support such a program. But this kind of wild distortion doesn’t help anyone understand what’s happening. The fact of the matter is that congress is proposing just about the most small-c conservative way of pursuing universal coverage you can imagine.

House Health Bill

Read all about it.

One of the key differences between the early draft of the House health bill and the Senate Finance draft was the different long-term implications of the financing mechanism. The House bill is financed by taxes on rich people. Since health spending is increasing faster than the overall economy, this meant that even though the House bill was deficit neutral in the 10-year CBO window, by the end of that period expenditures are rising faster than revenues. The Senate Finance bill, by contrast, raises revenue by phasing out the tax exclusion of employer-provided health insurance. Initially it does this by taxing only a small number of “Cadillac” plans, but over time the tax’s bite grows and grows. That means you have fiscal sustainability over the long run.

Senate Kent Conrad (D-ND) tried to stack the deck in favor of his preferred option by getting the CBO to consider not just a 10-year window, but also a 20-year window. The two bills looked about the same in a 10-year view, but Finance’s bill looked much better at 20. The new House bill responds to that challenge by tweaking things to achieve 20-year deficit neutrality:

A previous version of the House bill carried an estimated cost of $1.04 trillion over 10 years, but House negotiators were able to lower the price tag — in part by expanding Medicaid coverage to a broader slice of the population, the equivalent of all individuals who earn about $16,200 per year. The original House legislation had sought an increase to 133 percent of the federal poverty level, or about $14,400 per year, the same level proposed in the Senate bill.

The adjustment reflects findings by congressional budget analysts that covering the poor through Medicaid — which pays providers far less than Medicare — is much more cost-effective than offering subsidies for private insurance policies, something the bill would provide to middle class individuals who lack access to affordable coverage through their employers.

As usual in the health care debate, I think the House is right about everything except this tax point. Getting more aggressive about Medicaid expansion is a great idea. It hasn’t attracted the same volume of activist interest as the “public option” issue, but Medicaid is, of course, a public program. And it’s an important one. This is good policy.

That said, no matter what you can do in any window, it’s still the case that phasing the tax exclusion of employer-provided health care is better policy for the long run. It would, over time, reduce a significant source of economic distortion, reduce overall health cost growth, and improve long-term fiscal sustainability.

More Decisions Await Harry Reid

Jeff Young reminds us that besides rounding up 60 votes for cloture on a bill that includes an opt-out public option, Harry Reid still has a lot of decisions to make about the other aspects of health reform:

Sen. Charles Schumer (N.Y.), the third-ranking Democrat in the upper chamber, said Wednesday that insurance affordability, a controversial excise tax on high-cost insurance plans, whether most employers will be required to offer health benefits, how to raise needed tax dollars and whether to create a federal long-term-care insurance program are the remaining issues.

One potential upside to Olympia Snowe’s apparent decision to drop her support for health reform is that this may allow us to revisit the issue of the Baucus bill’s ill-conceived effort to replace an employer mandate with a “free rider” fee. In an employer mandate, an employer either needs to pay for his employees’ health insurance or else pay a tax which helps the government afford subsidies for people in need. That’s not a great policy in the abstract, but it’s a reasonable approach to dealing with the legacy of our existing institutions and building on what exists. The free rider fee amounts to a special tax on companies that hire poor people or people with families. It has no real advantages over the straight mandate alternative, but apparently Snowe has a strong preference for it.

Opting In, Opting Out

Matt Compton observes that semi-optional federal programs are not a new idea in American politics:

Medicaid, for instance, is an opt-out program, but no state has ever chosen to take that step.

Federal highways are also an opt-out program, but we all follow the same speed limits.

To be more precisely, Medicaid and federal highways are, like a lot of federal K-12 policy, structured around conditional grants. The federal government makes funds available for certain purposes if states do certain things, and the states can choose not to do them. In the case of Medicaid I believe that Arizona actually held out for a long time before implementing the program. And to the day, the extent of the Medicaid benefits offered from state to state vary a great deal.

The “opt-out” structure of a public option would work differently since there wouldn’t be a net transfer of tax money involved. But for the federal government to enact a policy that works differently in some states than in others wouldn’t be a breach of any time-honored principle of government. What’s more, my strong suspicion is that a public option would either be poorly designed & implemented and flop, or else if it works as intended rapidly become available almost everywhere.

Joe Lieberman’s Bogus Public Option Reasoning

Joe Lieberman proposes:

“We’re trying to do too much at once,” Lieberman said. “To put this government-created insurance company on top of everything else is just asking for trouble for the taxpayers, for the premium payers and for the national debt. I don’t think we need it now.”

Lieberman added that he’d vote against a public option plan “even with an opt-out because it still creates a whole new government entitlement program for which taxpayers will be on the line.”

Jon Chait disposes:

It literally makes no sense whatsoever. A public plan does not provide a new entitlement. It just doesn’t. It’s a different form of providing an entitlement. Nor is it more expensive. In fact, the stronger versions of the public plan would cost less money. Lieberman is just babbling nonsense here.

It’s also worth emphasizing that while only the House-style public option will save a lot of money, even the relatively weak public option from the Reid draft would save money relative to doing what Lieberman wants. He’s talking about filibustering a deficit-reducing bill in order to try to remove a cost-reducing provision, and doing so on grounds of fiscal probity. It’s ludicrous, and the political reporters covering him need to point this out.

Out From What Options Will States Opt?

More details are emerging on the “opt-out” public option. For one thing, my question of who does the opting has been answered—to opt out you need a bill based by both houses of the state legislature and signed by the governor. That means the vast majority of people will likely have the opportunity to join the public option.

On the other hand, the version of the public option that people will get to join would be a pretty limited one. Igor Volsky explains:

The comprise was developed by Sen. Chuck Schumer (D-NY), who converted Sen. Tom Carper’s (D-DE) original state-based opt-in proposal into a national opt-out option, and is far more conservative than the robust public option being considered in the House.

If the option is modeled on the provision in the HELP Committee’s bill, the plan would only save about $25 billion over 10 years, without significantly lowering health insurance premiums. It would likely lack Medicare’s market clout or leverage to significantly lower health care costs, but would still represent a not-for-profit alternative that can begin spearheading critical delivery system reforms.

Since both Senate bills establish state and regional based exchanges in lieu of a single national structure, it’s likely that the compromise in the merged Senate bill will establish 50 different options, all controlled by the Secretary of Health and Human Services. The public plan would have to attract a network of providers, charge premiums “in an amount sufficient to cover expected costs,” and meet all solvency and reserve fund requirements.

It’s been clear for a while that the support just isn’t there in the Senate for a more robust Medicare-linked public option. But this kind of pared-back public option is a lot worse than the meatier version. One reason folks like Ezra Klein and myself were saying over the summer than the public option fight wasn’t the be-all and end-all of health reform was precisely the awareness that any public option that passes the Senate would almost certainly have to be this kind of “level playing field” public option that only improves things marginally.

The best thing about the level playing field public option, however, is that it keeps hope alive. It might be able to spearhead some crucial delivery reforms. States that opted-out initially might opt back in. And with the public option in place, it could be altered over time in a more Medicare-ish direction as it becomes clear that that would be a way of helping to deal with the various deficit issues that will come to a head sometime after this recession ends.

Who Opts?

One point I’m not clear on with regard to the idea of an “opt-out” public option is who does the opting? If the way it works is that you need concurrent affirmative action by both houses of the state legislature and the governor, then it strikes me as very likely that the public option that emerges from an opt-out process will be very strong. If governors can do it unilaterally, then you’ll get something with more of a swiss cheese quality to it.

Similarly, if a state has opted out and decides four years later that it wants in, who gets to decide?

Fredd Hiatt Slams Health Bill for Not Including Provisions it Includes

Fred Hiatt seems to really want to drive the Washington Post’s circulation down to zero so that the company can focus on its core competency in standardized test preparation. He wrote a column complaining that it’s a bad idea to rely on a public option to reduce health care costs, because including a public option can (through magic?) prevent congress from adopting other cost control measures. Not only does this not make sense, but as OMB Director Peter Orszag observes, Hiatt seems unaware of what’s actually happening on the Hill:

Fred Hiatt in today’s Washington Post is the latest of these naysayers, writing in his column that the two biggest steps that can be taken to reduce the rate of health care cost growth — changes in health care’s tax treatment and an independent Medicare commission — are missing. I agree with Hiatt on the potential substantial benefits in terms of cost containment from these two changes. But a note to readers who have not read their Washington Post the past few weeks: the Senate Finance Committee bill includes both of these measures.

Cost-control is important. The House’s approach to cost-control is focused on a robust public option. That’s a good idea. The Senate’s approach focuses on the excise tax concept and the independent Medicare commission. Those are also good ideas. The final bill should include all three. There’s no reason to deride the public option as your means of praising the other ideas.

Mike Pence Loves to Use Government Health Care

As I’ve noted previously, in addition to their government-financed health insurance members of congress can take advantage of direct provision of health care services by government employees throught the Office of the Attending Physician. It turns out that hard-right congressman Mike Pence (R-Indiana) is actually a big fan of this:

“Just about not a week goes by that I don’t see the House physician staff with a gurney running down the hallway to address an issue affecting an American or tourist visiting the Capitol building,” said Rep. Mike Pence, R-Columbus. “I really do have a sense that the House physician’s office is more about providing immediate services during sessions of Congress, frankly the way the emergency room of a hospital would provide for any American. They’re on site. They’re already through security.”

Pence said he has used the office for physicals and stress tests while using his regular health insurance plan for more advanced procedures such as skin cancer surgery.

Pence seems to me to have this right in terms of his personal habits. And it also seems to me that establishing a nationwide network of quality public health clinics at which ordinary citizens could receive these kind of services would be very useful. There’s an element of medicine that involves deploying cutting edge treatments, and there’s a reasonable case to be made for keeping provision of that sort of thing in private hands (note that this is compatible with single-payer health insurance as in Canada) in order to keep innovation going. But a lot of medical care is about competent application of well-understood testing & treatment regimes. This kind of thing is often done quite well by public agencies when given the opportunity, and it’s an extremely cost-effective way of helping people out.

Do Opponents of “Government in the Insurance Business” Want to Eliminate Medicare?

It gets boring pointing this out, but it’s still true that members of congress who claim to have deep-rooted philosophical or practical objections to government-run health insurance have some kind of intellectual responsibility to give some account of their attitude toward America’s existing government-run insurance programs. And journalists who write about their statements ought to bring this point up:

“I think that a fundamental difference we have is whether we think government does a good job at administering health care in America or providing health insurance for the American people,” [John McCain] said. “I don’t think they do.”

Senator Mitch McConnell of Kentucky, the minority leader, said on “This Week” that “100 percent of Republicans have indicated that they don’t think having government in the insurance business is a good idea.”

Right now, Americans who are aged 65 and older receive health insurance that’s administered by the government. I can see a perfectly coherent argument that this is a mistake, and that 66 year-olds should be left to the tender mercies of for-profit insurance providers in just the way that 64 year-olds are. But that would be a pretty radical political proposal in the United States. It’s not one that I believe Senators McCain or McConnell have traditionally advocated. And it’s hard for me to believe that some magical transformation takes place on one’s 65th birthday that suddenly makes government-provided insurance workable.

What If They Gave a Mandate and Nobody Signed Up

Alec MacGillis has a good piece in the Post on the underdiscussed question of what actually happens if you mandate that everyone gets health insurance. After all, we have an “individual mandate” that that teenagers must abstain from beer, but that doesn’t mean you never see drunk teenagers. If you want people to actually comply with a government mandate, and if you want people to take advantage of subsidies designed to help them comply with the mandate, then it’s important to think about other aspects of policy design:

As the behavioral economists see it, compliance will depend not only on the penalties and cost of coverage, but also on the ease of signing up for coverage and whether people can be persuaded that it is a widely accepted social norm. They point to the large number of eligible people who fail to take advantage of Medicaid, food stamps and Pell grants as a sign that perceived inconvenience can keep people from taking steps in their economic interest. By contrast, the Medicare drug benefit program has achieved high enrollment partly because low-income Medicare recipients did not need to apply for subsidies if they already qualified for Medicaid.

Gillis points out that car insurance is generally mandatory, but “The rates of people buying car insurance, for example, vary among states and do not correlate directly with the size of penalties for going without insurance.” In some ways more directly relevant to the health care debate is that in Switzerland, which is in some important respects the model for Obama-care, car insurance rates are far higher than they are in the United States.

House Bill vs Finance Bill

Ezra Klein explains the two main flavors of health reform on option in the congress:

From what I’m hearing, the specifics will look something like this. The Senate Finance Bill gets to 94 percent coverage. The House bill will hit 96 percent. The Senate Finance bill spends a bit over $450 billion on subsidies to help people afford insurance. The House bill will spend more than $700 billion. The Senate Finance bill doesn’t have an employer mandate. The House bill does. The Senate Finance bill funds itself by taxing family health-care benefits over $21,000. The House bill funds itself by taxing incomes over $500,000. The Senate Finance bill expands Medicaid. The House bill expands Medicaid by more. The Senate Finance bill costs $829 billion. The House bill costs $871 billion. And the rumor is that there are some other goodies in there, but I’ve not been able to confirm that yet.

The House bill, in other words, will cover more people at a more affordable cost to individuals. It can do this for a number of reasons, but the big one is that it saves a lot of money by including a strong public option and a real individual mandate. The combination of those two policies allows the government and individuals to pay a bit less while encouraging employers to pay a bit more. Its funding mechanism is a whole lot more popular than taxing health-care plans, but it will also do less to “bend the curve.”

The essence of this, as I see it, is that the House has a structurally better bill but the Senate has a better funding mechanism. The Baucus/Kerry excise tax concept gets you revenue needed to pay for health reform, but also has curve bending power and maintains deficit neutrality into the “out” years. The best way to put these ideas together is to basically take the House bill and largely finance it with (a slightly tweaked version of) the excise tax. You’ll need a bit more money than that to pay for the House’s commitments, so then you need to add on a bit of surtax money.

That’d be a bill that expands coverage enormously, ensures affordability for the middle class, disciplines the insurance industry with a real public option, is legitimately deficit neutral over the long term, and bends the cost curve in the right direction.

Will a Public Option Really Be Financially Independent?

From the get-go it’s been clear that in order to gain adequate legislative support to be enacted into law, any public option would have to be financially self-sustaining. Financed, in other words, out of the premiums it charges rather than being a government program that’s partially funded from general tax revenue. Thus when Mary Landrieu said she couldn’t vote for a taxpayer subsidized public option I pointed out that she seemed confused since nobody is proposing to create such an option.

To this, Kevin Glass asks:

This might be a fine enough criticism, but are Matt and others on the Left willing to really stake their argument on the public option being a government corporation that is (at the very least) budget-neutral? This would be the exception to the rule of government corporations like the Postal Service and Amtrak that habitually hemorrhage money.

I think this is best decomposed into two different questions. One is could a public option actually make money. The other is were a public option to prove financially non-viable, would it actually pass out of existence or would the government just prop it up with taxpayer dollars.

On the first issue I don’t have a strong personal opinion, but the CBO seems to think it would work. And if we assume the risk-adjustment mechanism in the Exchange works how it’s supposed to, there’s no reason a public option shouldn’t be able to make money. If it doesn’t work how it’s supposed to, there’s going to be a problem, but it’ll be a problem that’s shared with a lot of private insurance. The USPS is a very different kind of thing, with a defined obligation to provide universal service at regulated rates irrespective of whether it makes money doing this (it doesn’t), competing with private industry on a different segment of the market, and stuck in an industry (moving pieces of paper around the country) that’s inherently on the decline for technological reasons.*

Amtrak helps shift us to the second question. As currently structured, Amtrak doesn’t make money.** Congress could refuse to bail Amtrak out in which case it would need to drop all its non-profitable routes but members of congress whose communities would lose service (which is to say pretty much everyone outside of the DC-Boston corridor) don’t like that idea so it gets funded. This is a matter of politics. Right now, there are 60 Democratic Senators of which it seems about 50-52 support a public option with the other 8-10 existing in various degrees of willingness to allow cloture on a bill that includes one. And that’s for a public option that the CBO scores as reducing costs, thus enhancing congress’ ability to hand out other goodies. A public option bailout would, by contrast, obviously score as budget negative. Are there going to be 60 votes for a public option bailout in 2023 or whatever? It’s hard to say for sure, but it’s not obvious to me what kind of structural shift would make the senate so much friendlier to the public option in the future.

More »« Less