As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."
Thursday, October 08, 2009
Taxing High-End Insurance Plans
Democrats are getting a lot of pressure from unions to eliminate the one provision that would corrode, or at least stop privileging, the inefficient employer-based health care system we have for the majority of this country:
As Democratic leaders prepare to bring healthcare legislation before the full House and Senate for votes this month, they soon must decide who will be taxed to pay for expanding coverage -- the wealthy or the insurance companies.
Legislation emerging from the House would slap a surtax on upper-income people. But many Democrats, especially in the Senate, fear the political fallout over voting to raise anyone's income taxes.
The most prominent Senate bill would impose a tax on insurance companies that provide expensive policies, sometimes dubbed "Cadillac" plans. But labor unions -- a powerful force within the Democratic Party -- bitterly oppose the idea, saying the tax would be passed on to workers in the form of higher premiums or shrunken benefits.
This would have been mitigated greatly by passing the Employee Free Choice Act first, because now it looks like Democrats are just dumping on labor unions. They need to pass EFCA very soon.
But let's be clear what the tax on insurers would do. It would only affect 10% of all insurance plans, and a lower percentage of those are union plans. And it's the only way to take in revenue for health care that extends beyond the cost of health inflation. I don't think the excise tax is entirely well-designed - it isn't adjusted by region based on cost-of-living, and without indexing it will quickly affect the average plan - but the House bill financing is not at all well-designed. It's just a budget-buster, with the effects past the budget window to hide them. That's a recipe for getting the bill dismantled in the future.
In other words, surpluses in the early years make up for deficits in the later years. But since time doesn’t actually stop when the CBO ten-year scoring window expires, what you’re left with is legislation that worsens the long-run fiscal outlook. That’s not really so awful since it basically just means that you’ll need to change the law sometime in the next ten years, and the law will definitely be changed in the next ten years anyway. But I’d say it’s definitely worse than the more robust form of deficit neutrality given by a bill that includes a revenue source which grows over time in line with costs.
To be clear, I think they should impose the surtax TOO, and use that money to expand the subsidies in the exchange. But the real goal here should be getting employers out of the business of providing health care, or at least into the regulated exchange. Taxing high-end plans does this, and does it in a mostly progressive way.
The CBO score for the newest version of the Senate Finance Committee bill is in, and the word incrementalism comes to mind.
According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period (see Table 1). The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period [...]
By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent.
We have an $829 billion dollar paid-for bill that lowers the deficit over time, but leaves 25 million residents uninsured, 2/3 of them American citizens. The bill doesn't cover as many people because Senate amendments reduced the penalties for non-compliance with the mandate and increased the hardship exemption. Without a public option, I actually agree with that, but it narrows the risk pool, and insurance companies don't want that because they'll be forced to cover a higher ratio of sick people, in their opinion. They could all handle this by increasing the subsidies, but Obama basically put a cap on the bill at $900 billion, and the more conservative Finance Committee went even lower than that. There's also a "trigger" of sorts that will reduce subsidies to people by a fairly large amount:
In the aggregate, the Senate finance bill reduces the deficit. But there are a couple individual years when it increases it. The CBO thus estimates that "the failsafe provisions would require a reduction in exchange subsidies averaging about 15 percent during the years 2015 through 2018." That's a very bad thing, particularly in the first years of the plan. It means that, with no warning, subsidies will be cut by 15 percent, and insurance that families were able to afford the year before will become totally unaffordable. That needs to be changed.
That's not the only problem with the exchanges. An amendment in the Finance Committee basically eliminated all policy benefits to them:
In the bills that passed three House committees and the Senate Health, Education, Labor, and Pensions (HELP) Committee, the exchange would be a "prudent purchaser." In other words, it would have a staff that bargained with insurers to bring down premiums--and that made sure all plans lived up to strict guidelines for coverage and customer service. In effect, any insurer that wants to offer coverage through the exchanges has to get the equivalent of a "Good Housekeeping Seal of Approval" from the administrators. This is precisely how it works in Massachusetts.
By contrast, the Senate Finance bill envisions much weaker exchanges. Instead of choosing which plans to make available, the exchange administrators would, by law, have to accept any plan that meets a relatively minimal set of standards.
Jon Kingsdale, who runs the Massachusetts exchange, calls that a recipe for "policy disaster," as consumers faced a dizzying array of more expensive, less regulated choices. "It would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery. ... The exchanges would be nothing more than an automated Yellow Pages."
Cappy McGarr, who ran an exchange that failed in Texas, says that the exchanges will fail if they don't attract a considerable market share. Making them user-unfriendly like this is a sure way to have people just run in the other direction. And firewalling them from employees of bigger businesses is another. Insurers outside the exchanges will only need to use good marketing to entice consumers into their web, especially if the exchanges are not designed well.
If Congress now creates new exchanges, as seems increasingly likely, it must prevent this phenomenon by setting two national rules: Insurers have to accept everyone and have to charge everyone the same rates regardless of health status.
Such rules would force insurers to spread risk. But enforcement would also be difficult. Every aspect of health insurance — from the rules for underwriting and setting premiums to the marketing of policies — would need to be monitored stringently to prevent companies from steering all bad risks to the exchanges.
It would be smarter for Congress to revisit the idea of creating a public plan that could provide an attractive choice for consumers and real competition for private insurers, to give them the incentive to offer good coverage at affordable prices.
Igor Volsky has more. To me, it's no wonder that Republicans are starting to concede on this health care bill. Aside from the fact that they can't stop it, they know that Baucus-care isn't all that likely to work, which will help them in the long run.
...is this a good starting place? Maybe. I'm worried about its survivability. We've seen a lot of exchanges die off over the years, and while there will be some default position toward making this viable in the short-term, if for example Obama loses in 2012 I could easily see a repeal, given that the exchanges wouldn't even be in place by then.
So how's that Finance Committee doing on health care?
Well, they did manage to beat back a requirement that people show a photo ID to use the exchanges or access subsidies, though the enforcement requirements in the bill still deny undocumented immigrants the ability to but insurance on the exchanges, which is pitiful, and restrict LEGAL immigrants from doing the same for five years. So it's a win without a victory.
In better news, Max Baucus continues to be pushed to the left on affordability.
In a push to lock down votes, Senator Max Baucus, the Montana Democrat and chairman of the Senate Finance Committee, is pulling together a last-minute package of changes to his health care legislation aimed at addressing the chief concern among his fellow Democrats: that health insurance be made as affordable as possible for moderate-income Americans.
“There’s an effort to solve people’s problems,” said Senator John D. Rockefeller IV, Democrat of West Virginia, who has been a critic of the bill. “How far that’ll go, we’ll see.”
Among the proposals under consideration is an amendment by Senator Maria Cantwell, Democrat of Washington, that would create a “basic health plan” for Americans earning less than 200 percent of the federal poverty level, or $44,100 for a family of four. The proposal would let states develop or expand various existing insurance programs that now typically cover people who qualify for Medicaid. Small states could develop plans jointly.
The Baucus bill would already expand Medicaid to Americans earning up to 133 percent of poverty, and Ms. Cantwell’s proposal would effectively expand it further. But because her plan is expected to be cheaper than providing subsidies to those low-income people to buy their own insurance, it could save money that could be used to make other provisions of the bill more generous.
The Cantwell Amendment sounds pretty good at first blush. While not a public option, it's a proven idea (Washington state has this) that would reduce costs up to 200% FPL that can be used to increase subsidies above that level. UPDATE: Ezra Klein has a good interview with Cantwell about her proposal. She claims it would hit 75% of the total uninsured.
But I really like what Jay Rockefeller's cooking up - a legitimate floor for what insurance companies must spend on treatment and care.
This is delectable politics. Fresh off a meeting with Ob-Rahma, Jay Rock has come back to the Senate and demanded 90% loss ratio for any coverage the subsidies pay for. "Loss ratio" is insurance-speak for what they actually have to spend providing actual health care. That means the insurance companies can't steal 20% of our tax dollars to pay for executive salaries. They get 10%.
They're peeing their pants right now.
But I suspect Jay Rock has offered this as an outcome of his meeting with Ob-Rahma. I'm sure at that meeting they said, "Jello Jay, We'd like you to pitch other ways to save money. We'd like to come up with a way to keep costs down."
And voila!!! 90%!!! Insurance companies have to actually provide health care without gobs of executive subsidies. We're actually going to demand a certain amount of health care in exchange for the half trillion MaxTax!!!
There's no way to vote against this and still claim that you are on the side of the people instead of the insurance companies. With the cost savings in the bill, not to mention the ease of using the exchange to advertise services, insurers should easily be able to spend 90% of all premiums and still make a health profit. The only problem with this is enforcement, and how you get compliance from insurers who lie about loss ratios currently.
The Finance Committee will consider all these amendments and have a final vote on the bill next week, with Harry Reid bringing a merged bill to the floor the following week. We now know the schedule - time to make sure the best bill gets out.
The Senate Finance Committee began marking up the Baucus health care bill this morning, and Part II of that hearing begins in just an hour or so. While the markup session is more a theater show than an actual horse trading session, lots of what has been going on behind the scenes will be revealed publicly over the next few days, in front of the White House and all the industry big hitters.
That's proven by the fact that, based on the leaks so far, the movement is toward making the bill better from a liberal perspective than a conservative one. The affordability credits are expanding, new financing schemes are being debated, and Ron Wyden's Free Choice Act is picking up support amidst a decent CBO score:
Relative to the Chairman’s mark, the amendment as modeled would reduce the net impact on federal deficits by about $1 billion over 10 years. There would not be substantial effects on the total number of people with insurance coverage or the sources of that coverage, relative to the Chairman’s mark.
The CBO doesn't think lots of people would use Wyden's alternative, which would allow anyone to go into the exchange even if their employer offered health care. But this gives people an option, and sets the stage for an eventual move away from the employer system without a firewall propping it up. If it can show itself to be able to survive, it can prosper. If not, if the premiums go up and the employer-offered insurance gets worse, people have a safety valve. Max Baucus said this morning to Wyden, "I especially appreciate your comments about choice and competition if you don't want to be stuck with what your employer gives you. We're going to get into some ideas for how to do that."
I would like to see more counter-attacks along the lines of removing the anti-trust exemption for health insurers, to keep them in line with the policy. Dallasdoc has some great ideas. But the cantankerous nature of Republicans has actually moved the ball toward the only ones on the playing field, and Baucus-care is slowly, but surely, improving. Hopefully that will continue down the line.
To be precise, I don't think Billo is endorsing the public option in this clip. In fact, he up and says that the public option "is done... it's not going to happen" right at the beginning. What O'Reilly is actually endorsing here is the exchanges, and the coverage subsidies that would allow people to buy insurance on the exchange. He's endorsing the architecture of the Obama health care plan. On the right that is seen as a government takeover, so if you judge it by their take, he endorsed a public option. But he didn't.
I'll take the endorsement of the exchanges, however. And I'm not surprised. It's fundamentally a Republican, free-market idea.
Boy, Max Baucus (R-MT) sure knows how to make friends and influence people, doesn't he? He bends over backwards to please Republicans and they spurn his bill. In the process he alienates Democrats, who now... hate the concessions made in his bill and don't understand their purpose, given that it brought no Republicans along. He had to stand alone to announce his bill because nobody wants to be associated with him. Not even Kent Conrad, his best bud because he included his industry-sponsored weak co-op plan, wouldn't take the dais with him. He's become such the public face for Democratic incompetence that his very name leads to boos at Democratic events:
Workers are chanting "bullshit!" at the mere mention of Baucus' name at labor events. Health care advocacy groups use his name as a punchline, if not an obscenity. He's literally gone from the most important man in the room on health care to a potentially irrelevant one.
A dealmaker needs credibility and respect on both sides, and Baucus has lost it. The Democrats on his committee don't trust his instincts or his core commitments or his legislative skill. Nor do the Democrats outside his committee. They feel he gave away too much in return for not just too little, but nothing at all. That means the Republicans on his committee have further reason to distrust his ability to make a deal, because restive Democrats are going to want to change his bill. Meanwhile, House Democrats are enraged that he left them to suffer through August, and have little interest in passing a bipartisan compromise that doesn't come with any Republican votes [...]
Even within his committee, it's not obvious he can secure the votes of the liberals, and if he does, he almost certainly sacrifices Snowe. That means the White House and the Senate leadership are going to play the primary role in both offering concessions and guaranteeing their preservation in the process. The bill remains in Max Baucus's committee, but at this point, it's largely out of his hands.
That's a good thing, on balance, for supporters of real health reform. The media still acts as if Baucus' bill is the final bill, but that's not quite the case. His bill would require substantial changes before he could even get a majority of the vote in the Senate. And there are plenty of areas for improvement:
• Subsidies. The Baucus bill is simply not affordable. Forget everything else about health care - if the coverage isn't affordable for Americans to buy into it, the reforms won't work. It won't be universal, shrinking the risk pool, and insurers will want to deny coverage or care to maximize profits in that lower risk pool. The Center for Budget and Policy Priorities tells you pretty much what you need to know. This amounts to a $140 billion dollar tax on the middle class.
One reason the Baucus bill is “cheaper” than the House bill is that it has lower subsidies. For illustration, let’s assume that the whole $140 billion difference is due to lower subsidies. Relative to the House bill, then, the Baucus bill costs the government $140 billion less; but it costs middle-income people exactly $140 billion more, since they have to buy health insurance. The difference is that in the House bill, the money comes from taxes on the very rich; in the Baucus bill, it comes out of the pockets of the middle-class people who are getting smaller subsidies. Put another way, the Baucus bill is the House bill, plus a $140 billion tax on people making around $40-80,000 per year. That’ s not only stupid policy; it’s stupid politics.
• Bad Employer Incentives. The lack of an employer mandate, replaced with a terrible "free rider" policy, is completely unacceptable. Whether you believe that it incentivizes employers to not hire low-income workers, or that it incentivizes large employers to keep wages down so they can push their employees off onto Medicaid, employers have clear, giant loopholes that they can exploit to make life for their workers objectively worse.
• No public option. The co-ops are crap. Almost worse than useless. Everyone knows it. The CBO admits it and they've been practically writing the bill with Baucus.
"Liberal Democrats fumed that Baucus had dropped the idea of a government-run insurance plan to compete with private insurance companies in favor of a national network of member-run cooperatives -- an alternative the CBO said seems "unlikely to establish a significant market presence in many areas of the country."
There is no mechanism for competition with the private insurance industry, which the President has viewed as a fundamental principle.
Now, the Baucus bill does do a couple OK things. It raises a decent amount of revenue through excise taxes on industry, a back-door way to cap the employer deduction. It reduces the deficit. And it provides for a gradual shift away from employer coverage and toward the exchanges, although that shift could happen quicker, similar to what Ron Wyden is proposing.
The fact that the President spoke with Jay Rockefeller, the leading critic of the Baucus bill and its co-ops, as well as Wyden and Bob Bennett, who hold the bill that would move away from the employer-based system, tells me that he's actually looking to improve the Baucus draft down the road in the process. As Matt Yglesias said today, this is tailor-made for the conference committee process:
Viewed optimistically, this is what conference committee is for. Each version of the legislation is audacious along one axis—committing major funds to affordability in the House, trying to take a serious whack at cost growth in Baucus—and a conference committee could meld them into a bill that does both. You could imagine a productive meeting that produces the kind of result I’m talking about that lets Mike Ross walk out and say he added tough cost controls to the bill, while Jay Rockefeller gets to walk out and say he beefed up affordability, and then Max Baucus and Henry Waxman get to congratulate each other on being masters of legislative compromise. Alternatively, of course, the whole thing could fall apart. But ultimately my point would be that both version of the legislation have strong points that could be combined into some very good legislation indeed.
Absolutely, though admittedly we don't live in a perfect world. For example, you could add back in the President's shift on charitable deductions from 35% to the 28% it was in the Reagan Administration, which would impact pretty much nobody and save $350 billion over 10 years, plow that into subsidies, and call it a day. The bill would remain fully paid for and everybody would be happy.
Ezra has some further thoughts on this. I would just add that the President knows he owns this bill, so regardless of whether or not it would make the insurance industry mad, he needs to get this right so it works for people.
The White House agrees with Joe Wilson, thinks it's a good idea to stop undocumented immigrants from buying things with their own money. Hopefully they'll extend this and stop them from buying over-the-counter prescription drugs and food without showing papers, either. They're at least talking about using SAVE, a much better verification system than the blunt instrument of proof of citizenship, but it's beyond stupid to force undocumented immigrants away from getting any health insurance (basically what this would do) and into emergency rooms as their primary doctor, with higher costs for everyone, because some backbencher yelled during a speech.
A White House spokesman, Reid Cherlin, said that the president’s proposals would bar illegal immigrants from purchasing private insurance through the new government marketplace, known as an exchange, and that verification of immigration status would be required for anyone seeking to purchase coverage [...]
The White House said that illegal immigrants would still be able to purchase health insurance through the private market, as they can now, but acknowledged that the private market was certain to shrink after the creation of the new marketplace.
Many illegal immigrants must now seek medical treatment in emergency rooms, which by law cannot turn them away. In recent years, the federal government has spent $250 million a year to reimburse hospitals for bills that go unpaid as a result. The White House said those reimbursements would continue.
Jellyfish run our government. By the way, watch abortion be next. They'll move to restrict all funding for a women's right to choose, even in private plans, inside the exchanges. You can see it coming.
John Aravosis uncovers an amazing nugget in TIME Magazine. Apparently, there are Democrats who saw Rep. Joe Wilson yell "You Lie!" at the President of the United States and thought, "that guy has a point." And they happen to be the ones writing the health care bill in the Senate Finance Committee.
The controversy over Republican Rep. Joe Wilson's shouting out "You Lie!" at the President over his claim that illegal immigrants wouldn't benefit from health-care reform apparently sparked some reconsideration of the relevant language. "We really thought we'd resolved this question of people who are here illegally, but as we reflected on the President's speech last night we wanted to go back and drill down again," said Senator Kent Conrad, one of the Democrats in the talks after a meeting Thursday morning. Baucus later that afternoon said the group would put in a proof of citizenship requirement to participate in the new health exchange — a move likely to inflame the left.
So many things wrong with this, starting with caving to an extremist. But it's worse than that on the policy end. The exchanges are just health insurance purchasing centers, like a Wal-Mart for insurance. You don't have to receive a subsidy to buy insurance on the exchanges; in fact, if your family makes over $88,000 a year, you can't be eligible for a subsidy, though you can still purchase there. What Conrad is saying is that he would make it illegal for a non-citizen to BUY something.
Not only that, but proof of citizenship laws, which we don't have in most states for voting, are onerous and disproportionately tilted away from the poor and the elderly, as well as potentially restrictive to legal immigrants with green cards, in this case. As the New York Times says today:
Should we take a harder line? Force people to prove citizenship in emergency rooms? That’s illegal, for good reason. Make verification requirements so onerous that not a single illegal immigrant slips through? Very expensive, and not smart. It would be highly likely to snag deserving citizens — like old people who don’t have their original birth certificates. And besides, we’ve tried that: A House oversight committee reviewed six state Medicaid programs in 2007 and found that verification rules had cost the federal government an additional $8.3 million. They caught exactly eight illegal immigrants.
In the case of an epidemic, like swine flu, should illegal immigrants go untreated so they can infect legal residents and American citizens?
Hard-line Republicans insist that they will fight for citizenship verification. They could, in theory, get the country to spend whatever it takes to do that and proudly report back to their voters. But there is a line beyond which antipathy to the undocumented can be damaging to those voters’ health, not to mention the federal budget. Mr. Wilson and his admirers seem to have crossed it.
Not to mention the fact that buckling to these demands will not get one Republican vote on any health care bill.
This is the Senate Finance bill, not the overall bill. But Democrats are so wishy-washy when it comes to, well, anything, that we actually could see this rotten, xenophobic, piss-poor policy in a bill supposedly designed to expand access to health care.
I know a lot of money has been flowing to Joe Wilson's opponent in 2010, but a far better use of those dollars would be to funnel them toward primary opponents for Kent Conrad and Max Baucus.
UPDATE: Conrad is now clarifying that there would be no federal subsidies, and requiring proof of citizenship would just be used to determine qualification for government assistance. Of course, you end up with the same problem, then; those without proper proof of ID would have trouble getting subsidies that could be available to them. The larger point is that there was no need to react to a teabagger yelling and screaming. This was already implicit in the bill, and allowed for the HHS Secretary to determine a best practice. This blunt instrument is not the way to do it, and makes Democrats look weak (but that's redundant).
UPDATE II: As this GAO report notes, checkpoint systems like Baucus and Conrad want were implemented under the Bush Administration to ensure undocumenteds didn't get on Medicaid, and for every $100 they spent, 14 CENTS in Medicaid savings were achieved. It's wasteful and spiteful!
I've read a lot of the more skepticalcommentary about the President's speech last night, but the person who seems to have crystallized my thoughts about it is Ron Wyden, who sits on the Senate Finance Committee. He agrees, as everyone should, that the President gave the cause of reform a big boost last night by making an exceptional case for why we need to do this. But he hones in on the two areas, in terms of the specific policy, where the bills on offer clearly need to improve:
Wyden believes the proposal wouldn't allow nearly as many people as it should to choose to enter so-called health insurance exchanges, if they're unhappy with the insurance their employers provide.
"Only people who are unemployed and uninsured and work at very small businesses would be allowed choice and competition in the exchanges," Wyden noted "Anybody who works at a mid-size business who doesn't like what they have, a government bureaucrat steps in and says you don't have choices.
Separately, Wyden is concerned that the proposal--which Obama said would cost $900 billion--might not be able to provide generous enough subsidies for middle class uninsured people who will, under the terms of the plan, be required to buy health insurance.
"If you have a family making $65,000 a year and they're paying $8300, $8400 for their premiums and copayments and deductibles...that's going to be another area that you're going to have to hone in on," Wyden added.
Wyden was also critical of the funding mechanism of taxing insurance companies, which he thinks wouldn't hit them at all, but hit consumers. I agree that it will not hit insurers, because it's not designed to do that. It's designed to essentially limit the employer deduction by encouraging insurers not to hand out policies that cost more than $21,000 a year for the individual. Wyden ought to know this, since his Wyden-Bennett proposal attacks the employer deduction directly by phasing it out. If the work-around insurance tax is the best we can do to get at that employer deduction, I'll take it.
On the other two points, Wyden is on the money. Affordability is a major problem in the bill, with or without a public option. $900 billion is not likely to cover it, especially considering that some of that money will have to fund these high-risk pools that have now been included. It's not just that people don't want to tithe 10-20% of their income to private companies - they don't want to tithe that to anyone. So the coverage subsidies have to be strengthened, and revenue raised to pay for it. This is problematic because of all the deals and sacred cows protecting various pots of money. But a bill that passes but doesn't work will be a political nightmare.
The other point is that Obama is telling a white lie when he says "Everyone should have the same choice as members of Congress have." If you get insurance through an employer, you simply don't have that choice, and this protects a busted, inefficient insurance delivery system. Wyden's Free Choice Act would break the firewall on the exchanges and allow employees the option of using them. His framing of a "government bureaucrat" keeping you from accessing the exchange plays to right-wing arguments, but it's undeniably effective.
Plenty of people are focused on the public option (although opening the exchanges would be the only thing that could make the public option viable), so these will be my main concerns over the next several weeks - making the subsidies affordable, opening the exchanges, and making sure the regulatory apparatus for insurance companies is actually workable. The provision encouraging employers to only hire people with rich families has got to go as well. Basically, the less of the Baucus document and the more of HR 3200, along with the additional tweaks mentioned above, the better.
Max Baucus' plan had the name of Liz Fowler, a former WellPoint VP who now works for the Finance Committee, in the metadata. When you have WellPoint personnel instrumental in writing the laws, you get little provisions like this:
Interstate Sale of Insurance. Starting in 2015, states may form “health care choice compacts” to allow for the purchase of non-group health insurance across state lines. Such compacts may exist between two or more states. Once compacts have been formed, insurers would be allowed to sell policies in any state participating in the compact. Insurers selling policies through a compact would only be subject to the laws and regulations of the state where the policy is written or issued.
This is something that conservatives have been begging to do for years. Even the most outgunned conservative on a talking head debate can vomit up "let people take their insurance across state lines to increase competition!" It sounds reasonable. But there's a very good reason why it would quickly turn into a nightmare, and you can see it in the examples of Delaware and South Dakota.
Both of those states have essentially no regulations on credit card companies. When legislation passed allowing banks to issue credit cards across state lines, some states started wildly deregulating their credit card markets in a race to the bottom. South Dakota and Delaware won. And now practically all credit cards are issued from those two states.
This would be precisely what would happen to the health insurance market under these "health care choice compacts," which could go national, based on this language. Right now, insurance companies can sell their coverage "across state lines," they just have to be accountable to the laws of the state where they sell it. Under this plan, insurers would be allowed to ignore the regulations in the state where individuals purchase insurance, and only subject to the laws where they issue it. Insurance regulations vary widely in the states, and would do so more under this compact. Anti-government legislatures could gut insurance regulation to entice insurers into setting up their corporate HQs there. States with regulations in place might prefer to lighten their regulatory case load, in this era of budget struggles, and let some other state deal with it. The insurance exchanges would presumably put a stop to this practice, but crucially, they only have a state-level framework and not a national one.
Consumer Watchdog jumped on this today, claiming that this race to the bottom could be expanded.
Washington, D.C. -- The consumer group that pioneered the most successful insurance premium regulation law in the nation, which has saved California drivers $62 billion on auto insurance rates since 1988, released a report today outlining the deep flaws in the proposed Senate Finance Committee health reforms. The report calls on Congress to adopt "prior approval" health insurance rate regulation and block insurance industry efforts to gut state consumer protection laws.
A "framework plan" released today by the so-called "Group of Six" Senators negotiating a health reform bill headed by Senator Max Baucus (D-MT) would open the door to gutting state laws. The plan would result in a "race to the bottom" in health care regulation by allowing insurance companies that participate in "health care compacts" to choose the weakest state law to govern all their policies, regardless of which state the policies are sold in. Currently, insurance companies must abide by the state laws of any state where they sell insurance. The Baucus plan resembles an industry proposal carried by Mike Enzi (R-WY) in 2006 discussed below [...]
** Loss of state benefit mandates would allow exclusion of preventive treatments and exams, prevent early diagnosis of disease and evade Patient Bill of Rights laws passed in nearly every state. Denying access to such basic preventive care makes treatment more costly to the policyholder and ultimately to taxpayers, who pick up the bill when individuals cannot pay outrageous out-of-pocket costs.
** State laws providing consumers the right to appeal a coverage denial to an independent panel of physicians, a right to a second opinion, and assistance from state regulators when coverage is denied would all be lost under the Enzi approach.
** Individual patients who currently have the ability to hold insurers financially accountable for injuries caused by the denial or delay of necessary care would lose those rights if they joined the Enzi co-op.
This is what you get when industry VPs write your laws.
House progressives have really tried to throw their weight around on the deal put together between Henry Waxman and the Blue Dogs. They probably should get the full list of co-signers before releasing it, but still, this represents a rare step for the Progressive Caucus in taking a stand against compromise after compromise with the conservative wing of the party. I hear they got 53 members to add their names to this:
We write to voice our opposition to the negotiated health care reform agreement under consideration in the Energy and Commerce Committee.
We regard the agreement reached by Chairman Waxman and several Blue Dog members of the Committee as fundamentally unacceptable. This agreement is not a step forward toward a good health care bill, but a large step backwards. Any bill that does not provide, at a minimum, for a public option with reimbursement rates based on Medicare rates - not negotiated rates - is unacceptable. It would ensure higher costs for the public plan, and would do nothing to achieve the goal of "keeping insurance companies honest," and their rates down.
To offset the increased costs incurred by adopting the provisions advocated by the Blue Dog members of the Committee, the agreement would reduce subsidies to low- and middle-income families, requiring them to pay a larger portion of their income for insurance premiums, and would impose an unfunded mandate on the states to pay for what were to have been Federal costs.
In short, this agreement will result in the public, both as insurance purchasers and as taxpayers, paying ever higher rates to insurance companies.
We simply cannot vote for such a proposal.
At issue seems to be the reimbursement rates for the public option, which seems odd to me, because the Medicare +5% rates in the House Tri-Committee bill only exist for the first three years, and the negotiated rates from the Health and Human Services Secretary will presumably be improved over that of private industry. I agree about the lower coverage subsidies, but again, we're talking about 1% on those between 300 and 400% of the federal poverty level, which is not determinative. Finally, looping back to the public option, I agree that bargaining rates are important, but even if they are restored, the fact that relatively few people can access it because it's firewalled for people who get health insurance from their employers seems to be a MUCH bigger problem.
If you're interested in covering people, the primary questions are the subsidies, the employer mandate and the individual mandate. If you're interested in reforming the system, the primary question is the strength of the Health Insurance Exchanges. And if you're interested in the public plan? It's the Health Insurance Exchanges. Again.
In all the bills we've seen, the public option is on the exchange. It is only available to those who are able to buy into the exchange. But most Americans can't buy into the exchange. They're not allowed. To make this very clear, imagine that the House and the Senate both pass Henry Waxman's proposal tomorrow. Liberals would celebrate. That's got a good, strong public plan. And I can't use it. Not even if I want to pay for it out-of-pocket. I work at a large employer and thus I am not allowed to buy into the exchange.
A strong public plan on a weak exchange will fail because it won't attain sufficient market share. It's as simple as that. Conversely, even a weak public plan on a strong exchange could thrive, because it would have access to a lot of customers. Focusing on the public plan and ignoring the rules of the exchange is like focusing on engine power but ignoring whether people can buy the car.
And the one remedy for this problem, the Free Choice Act, which would give employees the choice to take employer coverage or use that money on the insurance exchange, is being pushed by Ron Wyden but virtually nobody else, certainly not House progressives or the larger progressive activist community.
(Now, I will say that Matt Yglesias' contention that the exchanges aren't the most important part of reform, but the insurance regulations are, when things like rescission and pre-existing conditions don't apply to the employer market either, is a little weird. An exchange that has all of those consumer protections on the insurance industry AND is available to anyone who wants to buy in would be a game-changer, particularly with a public plan providing competition inside the exchange.)
So, if progressives are vowing not to vote for deals that don't even contain the kinds of reforms they'd want, what's going on here? I think Ezra Klein has it right.
House liberals are afraid of the dynamic in which good bills face Blue Dog opposition in the final mile and are aggressively watered down. Senate liberals are afraid of the same. And throwing this final compromise with the Blue Dogs into doubt is a show of strength. After all, House liberals feel they've already compromised plenty: Coming down from single-payer is a compromise. Cordoning the public plan off on the Health Insurance Exchange is a compromise. The whole bill is one big compromise, and every subsequent iteration is a compromise stacked atop a compromise placed upon a compromise. At some point, the compromises have to stop. Or, better yet, they have to go in the other direction.
Yep. This is not about the specifics of the bill as much as it is about changing the general dynamic. It shows me that progressive lawmakers are learning from the mood of the grassroots, who have been demanding this for a while. Furthermore, they can add that, if health care goes down, the people on the front lines will be the ones who wouldn't deliver what the people wanted and are in the kind of districts most likely to flip to Republicans. I'm sure that progressives are mindful that a half a loaf bill will open them up to challenges from the left, too.
Simply put, this is the kind of world that Chris Matthews privileges when he goes on television and says that we have to get "subsidized abortions" out of the health care bill (there's about 100 ways in which that isn't true, which I've described consistently over the last few weeks, but put that aside for a moment):
Nicaragua's total ban on abortion is a violation of human rights and is killing a growing number of women and children, Amnesty International said Monday in launching a campaign to have the measure repealed.
In a report released in Mexico City, the international human rights organization said Nicaragua's law, which went into effect in late 2006, puts the Central American country among the 3% of the world's nations that do not allow abortion under any circumstance.
Citing statistics from the Nicaraguan Health Ministry, the report says 33 women and girls died from pregnancy complications in the first 19 weeks of this year, compared with 20 in the same period last year. It also says the real numbers are probably much higher.
Nicaragua has one of Latin America's highest rates of sexual violence, with the abuse often perpetrated by fathers, uncles or other relatives.
At least 50% of reported rapes are of girls under the age of 18, and most of those who get pregnant are under 15, the report says.
Women and girls who have been impregnated by rapists or whose lives or health is at risk are not allowed to abort.
Matthews would say that he simply doesn't want to sully the health care debate with all that icky abortion talk. Well, it is icky when women and girls die because they cannot access medical care. But that's not a reason to give in to anti-choice demands. Conservatives don't just want to prevent "government-funded abortions" (again, not true, just using their language), they want any plan inside the insurance exchange, including private plans, not to cover abortion services. That's the entire individual market, under this vision of health care reform. And Medicaid is already banned from covering reproductive rights. And Medicare is irrelevant. So we chip, chip, chip away at reproductive choice, preventing insurance from covering it, making it more expensive, less attractive for doctors to perform to people who may not be able to afford it, and essentially more difficult. The extreme version of where Matthews is being led can be found in Nicaragua, where women are dying for no reason.
Here comes the part of the health care debate where people start to talk themselves into half a loaf instead of fighting for a full one.
There are many themes in the sad and frustrating history of health-care reform. But one of the central ones is that there were many points when Democrats could have accepted a compromise and did not. Richard Nixon, for instance, proposed a plan that could have passed Congress but that liberals thought comically inadequate. It was more comprehensive than anything we will get this year. George H.W. Bush also offered a pretty good proposal but got no support among Democrats.
Opportunities at health-care reform do not happen frequently. The average between major attempts is 19.5 years. That's 19.5 years in which the uninsured stay uninsured and their ranks grow. Where a situation that is already bad gets a lot worse. This year, Barack Obama is popular, and there are 60 Democrats in the Senate and huge majorities in the House. There is no reason to believe that Democrats will be in a stronger position anytime soon. It is not like when a weakened Nixon, or a fading Bush, offered a compromise.
If reformers cannot pass a strong health-care reform bill now, there is no reason to believe they will be able to do it later. The question is whether the knowledge that the system will not let you solve this problem should prevent you from doing what you can to improve it. Put more sharply, the question should be whether this bill is better or worse than another 19.5 years of the deteriorating status quo.
Ezra Klein is not an activist. He's a health care policy wonk. And he knows that we have a very broken political system and a media that gives wide berth to out and out lies from conservatives. So he reasons that health insurance reform that gives access to coverage to 40 million Americans who don't have it will be a major improvement for many Americans, and even if that's seen as a loss in the political world, it's worth achieving. Heck, if we get community rating, forcing insurers to cover everyone with the same coverage at the same basic rate, even a jury-rigged system can be universal.
This hardly solves every problem. In particular, it doesn't do much to rein in costs. But if you combine (a) Medicare, (b) our current employer-based insurance regime, and (c) community rating along with subsidies for low-income families, you've essentially institutionalized universal healthcare insurance. Not everyone will take advantage of it — there will always be a few people who go without coverage even if it's affordable — and you still a need a few other things like out-of-pocket caps. Still, it's basically a statement that everyone in the country can and should be covered. And once that becomes a cultural norm, it will never go away.
If we end up with health insurance reform, where you have to be covered, cannot be dropped, and must pay the same rate regardless of prior conditions, and you have an exchange to buy insurance instead of being forced into a regional monopoly, people in the individual market will see the difference. Of course, problems will remain. Employers, without a mandate, will still drop coverage. The costs will continue to soar, especially without a public option that can gain a big enough following to force competition in that individual marketplace, particularly on price. The smaller tweaks of health IT and prevention and comparative effectiveness are important but may end up compromised. And without getting the real savings from stakeholders necessary to drive down costs, people will still see their premiums rise. Not to mention the fact that we're going to need millions more doctors.
The reason that liberals want to enshrine a public option, not the weak co-op alternative, is that the history of the few victories in health care and social safety net reform in this country have started with an incomplete toehold that gets expanded over time. Medicare wasn't perfect at the start. Or SCHIP. Or even Social Security. They needed to be tweaked and improved and made useful for all. I don't think it's possible for co-ops to scale up in this way. We've seen the history of them taking decades to have any measurable effect.
"We think the public option is very important," said House Majority Leader Steny Hoyer, D-Md., but "we have to see what the Senate does on co-ops, and see how it's formulated, to see whether or not it would have a similar effect."
"It's really premature for me to lay out what should be in this bill," said Senate Majority Leader Harry Reid, D-Nev., when he was asked about the public option [...]
Liberals shudder at the idea of removing a public option.
"There are rumors that the leadership is getting squishy" on the public option, said Rep. Eliot Engel, D-N.Y., a member of the House Energy and Commerce Committee, which also is trying to write a version of health care legislation.
"Some of us have pushed back hard and said we will not support a bill if it doesn't have a public option," he warned. "There comes a point where some of us will say getting a bill out at any cost is not a panacea if it's a bad bill."
When Harry Reid comes out and says what can get 60 votes beats what I want, you understand that he's laying the groundwork. This is why health insurance stocks shot up yesterday. They're on the verge of getting a forced market, lowering their administrative costs (no rescission department) and adding tens of millions to the rolls.
14 House members are so far on the record saying they'll vote against any health care reform bill that doesn't include a legitimate public option, not something that Harry Reid and the gang will try to pass off as one. And yes, at some point, the President needs to weigh in and pick a side. He sounded wobbly on this yesterday.
And the other thing that we do want to do -- now, this is controversial, and I understand some people are worried about this -- we do think that it makes sense to have a public option alongside the private option. So you could still choose a private insurer, but we'd also have a public plan that you could choose from that would be non-for-profit, wouldn't have, hopefully, some of the same high administrative costs, and would be potentially more responsive to your needs at a lower cost. I think that helps keep the insurance companies honest because now they have somebody to compete with.
And I have to say, the reason this has been controversial is a lot of people have heard this phrase "socialized medicine" and they say, we don't want government-run health care; we don't want a Canadian-style plan. Nobody is talking about that. We're saying, let's give you a choice. You can choose the private marketplace, or this other approach.
And I got a letter the other day from a woman; she said, I don't want government-run health care, I don't want socialized medicine, and don't touch my Medicare. (Laughter.) And I wanted to say, well, I mean, that's what Medicare is, is it's a government-run health care plan that people are very happy with. But I think that we've been so accustomed to hearing those phrases that sometimes we can't sort out the myth from the reality.
Nothing abut co-ops yesterday, but the move, one assumes, would be to sell co-ops as the public plan. Obama's strategy has been to get to conference and make the necessary adjustments at that time.
In my (bungled) attempt to look at drug company advertising, I noted that the House Ways and Means Committee looked at, then discarded, the option of cutting out their deduction for advertising as a business expense to help pay for reform. One commenter rightly observed that this is a function of having to scrape for cash anywhere it can be found to pay for a policy that must remain deficit-neutral within a 10-year budget window, despite numerous up-front costs, and a completely artificial ceiling placed on how much can be spent in those ten years.
For a while now, the conversation about health care has been all about costs--in particular, the cost to the federal government. Somewhere along the line, somebody decided that health reform shouldn't involve the government sending out more than $1 trillion over ten years, even if we can provide that much money through some combination of higher taxes and savings in the medical care system.
There is no magic reason why $1 trillion should be the theshold. My colleague Jonathan Chait recently suggested that it's all because of way our bodies look. If we all had twelve fingers and toes rather than ten, he said, the magic number would be $1.2 trillion. I guess that would mean it's god's fault.
My own theory is that conservatives and centrists complaining about the price of reform don't think guaranteeing affordable coverage is really so important. I include among them a certain Democrat from North Dakota who runs the Budget Committee and keeps talking about what we can't afford to do. To be clear, Senator Kent Conrad is not god, although I wonder sometimes if he thinks he should be.
The problem is that capping the cost of the bill at $1 trillion over ten years (and by the way, in that time America will spend something around $24 trillion annually on health care) has led to fiscal scolds cutting the kinds of things out of the plan that would increase access, like lowering the subsidies that would make insurance affordable to everyone, or shrinking the benefits package so individuals would have worse coverage and higher out-of-pocket costs.
"We are very concerned that [lawmakers] have that fixed and arbitrary total dollar amount and this is it," said Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network. "Either it's not going to be enough to pay for adequate insurance or we just dumb down the level of benefits. We are concerned we could wind up with a package that is neither adequate nor affordable coverage."
Lead fiscal scold Kent Conrad gets quoted in this article too, telling us that we all "have got to be realistic about what is possible" and "We can’t do everything we’d like to do and pay for it and bend the cost curve the right way."
First off, this is actually untrue. A viable public option which didn't firewall out those with employer coverage and has a provider network and rates similar to Medicare could bend that cost curve. As could giving Americans more choices in their coverage by breaking regional monopolies through an insurance exchange. The same with expanding access and eliminating the hidden fee of paying for costly ER visits for the uninsured. And empowering an independent board to make changes to Medicare rates and structures while partially insulated from the political process. And a host of other ideas where more reform, of the kind that people like Kent Conrad don't want, can lower costs.
But this amounts to playing on the other side of the field. Americans trust Democrats on health care issues, for the most part, because they have traditionally emphasized more access to care and treatment. That's not to say that the cost issue is meaningless - it's actually in many cases complementary to the cause of access - but it's a matter of emphasis. And the moral case for health care reform has been almost entirely extinguished.
This year, however, it's not just been the opponents of the policy who have relied on the "mellifluous language of the standard economic theory of markets." It's been the advocates of reform. Ask yourself what the administration's one-line goal is on health-care reform. Is it "equal treatment for everybody?" Is it "if every American is guaranteed a lawyer, why not a doctor?" Is it even "guaranteed health care for everyone?"
No. It's "bend the curve." And the problem with "bending the curve" is that it's a broadly testable proposition. This is, in part, why the Congressional Budget Office's skeptical assessments pose such a threat to health-care reform. If the White House's primary objective was health care for every American, or guaranteed care that you could keep even if you lost your job, or choice of insurance plans for every American, you could spend a bit more on health care and say you were achieving your goal. But if you say that the point of health-care reform is to save money, and then the outfit charged with estimating such things says it won't, that strikes at the heart of the project.
Now, we're getting some better news from the CBO in the last 24 hours, as they have announced that the House bill will increase the number of people receiving employer coverage, and that a public insurance option can exist in tandem with private insurance. But the way the health care fight has played out, it has privileged these messages from the CBO. And to the media, they only matter when they matter anyway.
Somewhere along the line, Democrats in Congress and an Obama Administration obsessed with not following in the footsteps of the Clinton health care failure have forgotten to make the simple case that they support quality, affordable health care for every man, woman and child in the country. They've made a case about costs, but not a case about imperatives. There are plenty of economic arguments to make, but the moral arguments - about insurance companies denying coverage to those with a pre-existing condition, or dropping customers for the flimsiest of reasons when they ask to use their health insurance - but those have been pushed into the background. Health care is one of the more profound moral issues in public policy, and right at the moment that we're nearing a major shift in policies, we're talking cost curves and independent advisory boards. It's all important, of course, but consigning tens of millions of Americans to the horrors of no medical coverage adds a certain oomph.
If this moral case were made, a true argument about the human consequences of delay, maybe that $1 trillion dollar number inches upward. And maybe some deficits are floated within the 10-year budget window. But we turned this debate into one primarily about costs. This played right into the hands of the fiscal scolds.
Am I the only one who didn't really see a line in the sand from the President in yesterday's health care YouTube address?
That’s why any plan I sign must include an insurance exchange: a one-stop shopping marketplace where you can compare the benefits, cost and track records of a variety of plans – including a public option to increase competition and keep insurance companies honest – and choose what’s best for your family. And that’s why we’ll put an end to the worst practices of the insurance industry: no more yearly caps or lifetime caps; no more denying people care because of pre-existing conditions; and no more dropping people from a plan when they get too sick. No longer will you be without health insurance, even if you lose your job or change jobs.
The emphasis of the must is on the insurance exchange, which is actually a very important policy to break regional monopolies in the insurance market. The public option is wedged in there, but mostly Obama demands an insurance exchange so that individuals and small businesses have the ability to choose from a wide variety of plans.
But what this shows to me is that the public option is yesterday's debate. I think we'll get it, if we get a bill. But it's not holding up the process any more. It's too popular to kill the bill over. There are other elements that can sink the bill, most of them to do with cost. The DNC push against recalcitrant House and Senate Democrats just references some horror stories from citizens and states "it's time" for health care reform. No policy is forwarded, certainly not the public option.
The groups pushing back against reform aren't simply opposed to the public option, they're opposed to reform in general. And they see the cost controls and how to pay for the bill as the best way to attack it. Unfortunately, not a lot of people on the progressive side are defending wealth surtaxes or increasing the authority of MedPAC, for example.
The House Ways and Means Committee as well as the Education and Labor Committee have passed health care reform bills this week, which have largely the same form as the Tri-Committee bill released earlier. Both of the committee votes lost Democrats, but their numerical advantages allowed them to still pass the legislation. In the Energy and Commerce Committee, Blue Dogs hold higher numbers, and so some compromises may be needed to pass the bill. That markup will end sometime next week.
The focus now, thanks to the CBO head Doug Elmendorf's testimony in the Senate Budget Committee, is on cost control. Elmendorf claims that the current legislation would not bend the cost curve on health care to a sufficient degree to protect the federal budget. The White House has distributed language on strengthening MedPAC, the board that recommends how Medicare pays for certain services. If Medicare gets used as a way to make medical delivery more efficient, that could ripple through the rest of the system, and the White House proposal would allow those recommendations to go into law immediately, though Congress would have the power to vote down any recommendation. It's similar to Tom Daschle's old proposal of a Federal Reserve for health care. Elmendorf himself wants to revisit the employer deduction for health benefits, but as long as advocacy groups paid by unions continue to protect union interests, there will be no momentum for it in Democratic circles. I'm fairly upset with union opposition on this score.
But there is one legitimate reform that could lower costs for both individuals and the government, increase competition in the marketplace, and provide the best coverage at the best cost for everyone. That would be Ron Wyden's Free Choice Act, and it's what I think progressives ought to really push at this point.
There are two major problems with the proposals being considered in Congress. The first is that they do not do enough to cut costs, because they do not do enough to change the fundamental nature of the employer-based health-care system [...] The second is that the bill does not offer obvious benefits to an insured worker. You can argue that it changes the system around them: There are subsidies if they lose their job and regulations to protect them from the excesses of private insurers. But though the health-care system might be different, it will not, for most people, feel different. And that has made it hard to explain to people why this is something they should pay for. You can tell the insured worker what he gets if his circumstances change. You cannot tell him what he gets if his circumstances do not change.
Enter Wyden. The Free Choice Act is not a health-care-reform bill. It is best understood as a reform of the health-care-reform bill. In particular, it reforms the nature of the Health Insurance Exchange. Under the bills being considered right now, the exchange will be limited to the uninsured, the self-employed and small businesses. Maybe it will be expanded over time. Maybe not. In addition, it is barricaded by what's called a "firewall." The firewall essentially bars individuals from entering the exchange so long as their employers offer them a basic level of health-care coverage.
The Free Choice Act starts by setting the rules for the exchange: Within five years the exchange is open to all employers. More importantly, it's open to all people. The firewall is extinguished. But as the late, great, Billy Mays would say, that's not all!
The key component of the Free Choice Act is called "cash-out." Under the Free Choice Act, if I decide that I don't like any of the health-care coverage options being offered by my employer and would prefer to choose from the many options being offered on the Health Insurance Exchange, my employer has to give me a voucher that covers 65 to 70 percent of the cost of the lowest level of exchange plan. (That is the average portion that an employer pays of his employee's health insurance premiums.) I can take that voucher and, along with whatever money I want to throw in, choose a plan on the exchange.
We keep hearing the mantra of "if you like what you have, you can keep it." Wyden's reform preserves that. But it also opens up the health insurance exchange to everyone, and forces both insurers and the public option into real competition. The public option would not be walled off simply to those who don't have insurance from their employer or certain small businesses. It would have the opportunity to get market share to compete with private insurers. And for the first time, insurers across regions would compete with one another, as the companies inside the exchange would be able to entice workers who get insurance through their employers. All of this could actually change the dynamic in the insurance market and force competition on price and quality, rather than the current competition among insurers, which is "who can pay for the least amount of health care." It gives individuals the freedom to choose without stripping them of their bargaining power - in fact, it empowers them more. And it strengthens the public option, by opening the market to potentially tens of millions more consumers.
The employer-based system is nice for some, but it really delivers health care inefficiently, and Wyden's Free Choice Act would allow over time for an alternative to emerge that maintains the economies of scale to allow that alternative to compete. And this would save money, as it encourages cost effectiveness since everyone is competing on price.
What we tried to do in this proposal is show the sweet spot between blowing the employer-based system to pieces and, on the other hand, simply saying that we will not try to improve it. The president's promise that we will be sensitive to not changing what people have is not incompatible with being able to choose some better.
When you tell people they can have access to a full menu of choices like members of Congress have, that's out of the park in terms of positive reaction. But if you're a congressperson and you're with Blue Cross one year and then all of a sudden you decide you want to go with Aetna, your transition is seamless. Someone in the private sector wouldn't even get that choice. We're trying to give it to them.
The biggest problem with health care reform right now is that we're grafting onto a system that doesn't work. Wyden actually finds a way to do that while also transforming the system. It's not enough to just argue for a public option that is as highly regulated and firewalled as what exists in the current House and Senate options. If you want actual health care reform, I think you need to echo Wyden's call for free choice.
...Dennis Kucinich also passed an amendment in the Education and Labor Committee permitting states to move forward with single-payer programs if they so choose. Which I think is fine, but given the economic predicament in which states find themselves right now, I can't see any one of them being able to do it for a while.
...From the Department of Bad Timing, just as I praise Wyden, he signs on to President Nelson and Collins' letter to delay health care reform. I have no idea why Wyden is in that coalition, but maybe this Free Choice Act has something to do with it.
For liberals, the public option has become a line in the sand. Given that the public option is carefully circumscribed and not open to everyone who may want to choose it, I find that more curious than ever.
President Obama and leading Democrats have stressed that people who like their employer-sponsored insurance would be able to keep it, under a health care overhaul. But they haven't emphasized the flip side: That people who don't like their coverage might have to keep it.
Under the main health bills being debated in Congress, many people with job-based insurance could find it difficult to impossible to switch to health plans on a new insurance exchange, even if the plans there were cheaper or offered better coverage. The restrictions extend to any government-run plan, which would be offered on the exchange [...]
Democratic lawmakers and administration officials say the restrictions are critical to maintaining a strong employer-based insurance system, which covers 158 million Americans.
But critics argue that the rules run counter to suggestions from health care reform advocates that an overhaul could provide people with a broader choice of insurance options. The rules, they say, could be especially unfair to some lower-income workers who are enrolled in costly job-based insurance. Also, they argue, the restrictions would hurt the proposed public plan by limiting enrollment.
Why are the Democrats putting up these firewalls? For years now, they have professed to have learned the lessons of 1994 by stating that "if you like what you have, you can keep it." That's been called the "beauty" of the current plan by people like Howard Dean. But what it means on a practical level is that the employer-based system, with all its inefficiency, must be sustained, in this case through forcing workers to accept their employer-based coverage. There are other reasons, too, which Ezra Klein lays out.
The political reason is that people like what they have, or are at least scared of what they don't know, and are thus skeptical of any health-care reform plan that would change their current arrangements. One of the goals of health-care reform, in fact, is to maximize employer-based coverage, which will be accomplished through the employer mandate. If employers could simply move over to the exchange -- which would probably be quite a bit cheaper for them -- then a lot of people will find their current insurance changing, and reformers don't want that.
The economic reason is that the exchange is where the subsidies live. If you make $30,000 but you work full-time for The Washington Post, The Washington Post pays for the bulk of your health-care coverage. If you were moved over to the exchange, you'd be eligible for pretty significant subsidies. That would make health-care reform costlier to the government, which would in turn make it tougher to pass. Another way of putting this is that the fewer people on the exchange and using subsidies, the cheaper health-care reform will be.
And the policy reason is that if the exchange is open to all employers in the first year, it's likely that the employers having trouble affording health-care insurance -- that is to say, the employers with sicker and older workforces -- will quickly buy in, while the young, cheaper employers won't. That could leave the exchange with a bad risk pool and thus high costs.
It's important to note that Ron Wyden is trying to change this. He's trying to allow individuals who get coverage through employers the choice to buy coverage through the insurance exchange. It's technical, but something that progressives ought to get behind.
But this issue with the insurance exchange firewalls is symptomatic of a lot of the moving parts of the health care debate. Reformers want to cut the internal costs from the current system, and are making deals with providers to do so. But in so doing they're giving up even bigger potential cost savings.
If only that were true. Far from being "game-changers," those agreements are the same old Washington game of bribes, backroom deals, profiteering and protectionism -- and a harbinger of what health care will look like if the president’s reforms succeed.
In June, the pharmaceutical lobby PhRMA agreed to give 50 percent discounts to seniors in Medicare's "doughnut hole," where enrollees now pay 100 percent of their drug costs. President Obama hailed the agreement as a "significant breakthrough," while PhRMA spun it as their $80 billion contribution toward health care reform.
Yet the PhRMA agreement would not save taxpayers $80 billion. It would cost them $80 billion, and then some.
Under the agreement, the full price of each drug would continue to count toward seniors' catastrophic deductible. As a result, even more seniors would exceed that deductible, after which taxpayers would pay 95 percent of their drug costs. Obama also agreed to oppose stricter price controls for government purchases. PhRMA members agreed to cut their prices for seniors only because Obama agreed that taxpayers would buy more drugs at higher prices.
I know, it's from Cato, but the guy's not totally wrong. For instance, in the Senate HELP Committee markup, biologic drugs were given 12 years of patent protection before competition from generics kicks in. This was a defeat for the Obama Administration, but even the victories have strings attached.
Even the revenue mechanism in the House, a surtax for the wealthy, is the result of a political concession, albeit one that Republicans walked into and ought to own (Republicans demonized sensible taxes for so many years that wealth taxes are really all that's left). The truth is that we have this fundamental paradox in the health care debate.
And that's pretty much where we are now. Democrats are making a lot of bad policy compromises because doing so is good politics. They're trying to fund the bill in the way pollsters would advise rather than policy wonks would choose. They're leaving the employer-based system alone. They're letting everyone keep what they have, even though what everyone has is expensive and inefficient, and is in fact the reason we need health-care reform.
Is it worth being disappointed about that? Sure. But legislation cannot be understood in a vacuum. The place to change the tax argument isn't in final days of health-care reform. It's in the intervening years when Republicans are attacking the very idea of taxation. Any given piece of legislation is only as good as the political culture that's produced it. Right now, our political culture isn't that good. The question is whether legislators are getting the best plausible outcomes out of a badly compromised process.
As Ezra says, we have a terrible political culture, and you're starting to see the results. If 30 million Americans get health insurance and you don't add a penny to the debt, you make that deal. And cementing something like a public insurance option into policy, given that it can only expand, which is an easier lift politically, is a good bargain as well. But the counter-intuitive compromises are a bit hard to take.
I should mention that the Tri-Committee health care reform bill from the House has been released, and rather than bend to the dictates of marginalized Blue Dogs who value their relationships with the health care industry over their constituents, they created a pretty darn good bill. It's not perfect, of course, but it represents a far better bill on the left flank than, say, the Waxman-Markey bill did.
LOWER COSTS • No more co-pays or deductibles for preventive care • No more rate increases for pre-existing conditions, gender, or occupation • An annual cap on your out-of-pocket expenses • Group rates of a national pool if you buy your own plan • Guaranteed, affordable oral, hearing, and vision care for your kids
GREATER CHOICE • Keep your doctor, and your current plan, if you like them • More choice, with a high quality public health insurance option competing with private insurers
HIGHER QUALITY • You and your doctors make health care decisions — not insurance companies • More family doctors and nurses will enter the workforce, helping guarantee access • Mental health care must be covered
STABILITY & PEACE OF MIND • No more coverage denials for pre-existing conditions • No more lifetime limits on how much insurance companies will pay • No reason to ever make a job or life decision again based on health care coverage
The "national pool" refers to the insurance exchange, which is a hard concept to put into bullet points, but this is a pretty good list of how the average Americans would benefit from this plan.
As to the specifics, here's Ezra Klein, Scarecrow, Mcjoan and Jon Cohn. You'll notice a consensus. 97% of the population would get covered in 10 years. The subsidies are 400% of poverty and Medicaid gets expanded to 133% of poverty - both more generous subsidies than the Senate bills. Insurers are regulated against denying coverage for pre-existing condition or rescission, and the benefits floor is pretty decent. There are caps on out-of-pocket expenses, and efforts at controlling costs. It includes an individual mandate and an employer mandate that gets exempted for certain-sized small businesses. About the worst thing you can say about the bill is that some of the good stuff doesn't happen fast enough (to keep the size of the cost down):
I do have one, not minor concern: It will be a while before people see the best stuff. Most of the major elements--the insurance exchange, the subsidies, the insurance regulations, the public plan--won't come online until 2013 or later. This is, I believe, also true of counterpart bills in the Senate.
There's a sound policy rationale for going slow; it takes a lot of work to set up exchanges, regulations, and the like. But four years is a long time. And I suspect money has a lot to do with the pace. Slower implementation makes it possible to keep the price tag to around $1 trillion.
On the bright side, some provisions--filling in the Medicare drug donut hole, bolsteirng the primary care workforce, among others--would start in the next two years.
The cost of the bill, scored by the CBO at around $1 trillion dollars over 10 years, gets paid with $500 billion in internal cost savings and around $500 billion in new revenues, mostly with a surtax on the wealthy. I prefer other methods, but let's get real about this:
The details haven't been released yet, but most (if not all) of the families that fall under Rangel's tax plan will also be in this 1% range.
These are families that paid a lower rate in 2006 (the last date of available data) than they did 15 years ago. That's not an argument for upping the taxes, of course. But it puts it in perspective. (Confession: If you go back to the Reagan years, the top effective rate is lower. But the current rate is still below the historical average.)
News reports have anticipated Rangel proposing a 1-3% surtax. Even a 3% increase across the board will leave an effective rate lower than it was in 1995.
The President approves of the general approach of the House bill, and the Education and Labor Committee will start markup this week. The bill text is here and a summary is here.
For the second day in a row, Chris Matthews ranted about the prospect of a potential public health insurance option covering abortion services, and his lineup of talking heads agreed that this was "the last thing Obama needed" and that Obama was a hypocrite because he met the Pope last week.
MATTHEWS: What do you make of the 19 House Democrats who said there can't be any abortion funding in this bill? There can't be any national health insurance payments for abortion. What do you make of that choice? And by the way, Bob Casey of Pennsylvania today voted, yesterday voted with the Republicans to ban any money from this bill that's supposed to be for national health to go for abortions?
NAVARETTE: It's the last thing Obama needs. The issue's complicated and divisive and controversial enough without bringing abortion into it. The American people are giving mixed signals. They say they don't want to pay for the program but they do want to cut costs, and they want to pay for some kind of reform, but don't get in the way of my doctor and the tests he might order. So they're all over the map. Clearly, politicians are trying to be responsive to that. It's a tough enough issue without trying to bring abortion into it. Obama's in a tough spot, I don't think he gets this through.
MATTHEWS: Well, I think he did, I think he will, but he's gonna deal with this thing. What do you think, Roger, because this could be the straw that breaks the camel's back. Because when I see it coming, it came from nowhere. I started reading about it this weekend in the Weekly Standard, and I watched Hatch last night on this show stating that he pushed to ban it. The law says, it has said since the 70s, under a Democratic Congress, no federal money pays for abortions. It has been the law of the land, and now they're trying to change it.
SIMON: Whatever the merits are, as Ruben said, as you are saying just now, this is just a fight that President Obama does not need. There are other problems with the health care bill. First of all, what is it going to look like, are you going to have a true public option, how are you going to pay for this trillion dollar program. You don't need to add in a hot-button issue like abortion. To most Americans, abortion is a settled issue.
MATTHEWS: You mean the right to an abortion. But not payment for it.
SIMON: That's right. Safe, legal and rare, and don't bother us about it.
MATTHEWS: By the way, the night he tells the Pope, he goes over to see the Pope and says they're going to reduce the number of abortions, and then that same week he pushes to subsidize abortion? You can't do that!
SIMON: I think last week is a week the White House would like to have back.
I wonder if Tweety came up with that phrase, "subsidize abortions," himself, or whether he read it in his beloved Weekly Standard. I expect we'll hear it a lot in the weeks to come.
And I also want to looks at Roger Simon's "Whatever the merits are," which is a classic pundit phrase, where they don't want to deal with the reality of a situation, so they burrow into the politics. Let me tell you what the "merits" are of including a legal medical service like abortion into a public insurance plan. Actually, let Dana Goldstein tell you.
So when opponents of abortion rights say they'd like to "maintain current policy," what they likely mean is that Hyde should also apply to any potential public health insurance plan, thus maintaining the federal government's ban on abortion funding. This would make a public plan much less attractive to women of reproductive age. A full 90 percent of current private health plans cover abortion services, and 89 percent cover contraception. According to a poll by the Mellman Group on behalf of the National Women's Law Center, 71 percent of Americans support coverage for reproductive health, including contraception, under a public plan. Sixty-six percent support coverage for abortion in a public plan. Americans hope that a public plan will provide services comparable to what they can purchase on the private market. They don't see health reform as grounds for a culture war.
Let's go further than this. 17 states cover abortion under Medicaid by using their portion of state funding to pay for it (another reason why letting the federal government fully fund Medicaid might be a problem). The Matthews/conservative version of a public plan would be worse than Medicaid in those 17 states. In addition, the entire premise of Matthews' critique, ripped from the pages of The Weekly Standard, is just wrong. As the just-released House Tri-Committee bill describes, the public insurance option is completely self-sustaining and pays for everything out of its own premiums. There's public money involved in the sense that the Health and Human Services Secretary would have to hire administrators, but basically this is a self-funded insurance program.
SELF-SUFFICIENCY Public option must be financially self-sustaining, as private plans are.
Public option will need to build start-up costs and contingency funds into its rates and adjust premiums annually in order to assure its financial viability, as private plans do.
As Goldstein notes, the Hyde Amendment, that law from the 70s that Tweety cites, "is not under threat from any of the proposed House or Senate health reform bills." Meaning that Medicaid and other public health programs will continue to deny legal abortion services as part of their coverage. It's sad that Democrats are already conceding that, but Republicans want more. Not only do they want reproductive choice banned from a self-sustaining public option, they want it banned from any private insurance company that offers coverage inside these "insurance exchanges" designed to provide small businesses and individuals more choice and greater purchasing power to receive health insurance. As said before, 90% of all private insurers include abortion services in their coverage. Anti-choice Republicans don't just want to follow existing law, they want to create new policy that says anyone the federal government does business with cannot offer abortion services as part of their coverage to consumers. The Hyde Amendment already discriminates against poor women who cannot afford health insurance; the anti-choicers would extend that.
Under Tweety Bird's construction, Obama walked into a minefield by trying to "subsidize abortion." That's absurd. And the merits of the policy, contra Roger Simon, are important and shouldn't be set aside because old men consider them icky:
If the public plan does not cover reproductive health services, it will be a weak public plan. And a weak public plan, by failing to attract a constituency, is bad for the overall goals of progressive health reform; it will mean that our employer-based system is not fundamentally transformed. Could this be the true goal of most Congressional Republicans? Hmm....
And since we have a religion-industrial complex telling Democrats constantly to give ground on this issue, and a leadership willing to oblige them, they now have to choose between making their reform bill demonstrably worse and making Chris Matthews uncomfortable. Sadly, I fear they'll opt for the latter. I'm very sorry that the continuing discrimination against women's rights to their own medical choices is a tough policy under which to find middle ground, but that's no reason to disable health care reform by hamstringing it.
By the way, you know who I didn't see in that Hardball discussion? A woman. Funny how that is...
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