THE TREATMENT JULY 27, 2009
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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.
But I digress. Whatever the reason, $1 trillion seems to be the maximum the Congress is willing to spend. And that complicates policy development considerably.
If you want to make health insurance available to everybody, then for the first few years you have to spend some new money. The money pays for expanding Medicaid and giving financial assistance to people who can't afford coverage on their own.
But if you can't spend more than $1 trillion over ten yeras, then you're limited in what you can do. (Remember the scale here: As a society, we spend more than $2 trillion on health care every single year.) At best, you end up with a program that doesn't really get started until around 2014 and, even then, only reaches about 97 percent of legal residents. That's basically what the House bill does. We'd be accomplishing a lot, yes, but we could accomplish a lot more.
But is anybody talking about spending more money? Of course not. Everybody wants to spend less. And that will mean it's harder for people to get health insurance, at least at affordable levels.
In the House, as Politico first reported, Blue Dog Democrats interested in downsizing reform have suggested to House leadership they pare back financial assistance. Instead of offering subsidies to people making up to four times the poverty line, the Blue Dogs have suggeted, government should cut off subsidies at three times the poverty line. The Senate Finance Committee, which has had trouble rounding up financing to pay for a $1 trillion package, is already looking at the same option.
What would this mean? A few weeks ago, when it became clear the Senate Finance Committee might cut off subsidies at three times the poverty line, the Center on Budget and Policy Priorities released a report on the likely impact. Among its findings:
This means that an individual with income above $32,490, and a family
of three with income above $54,930, would not receive any subsidy to
help pay for coverage. Substantial numbers of people
with incomes modestly above 300 percent of the poverty line could face
difficulty paying the full price for coverage. The average job-based
insurance policy today would cost a family of three at 300 percent of
the poverty line about 23 percent of its income. This could leave the
family short of funds for other expenses such as housing and child care.
The report went on to predict that lower subsidies could be particularly tough on older workers. As you may recall, while the main reform bills moving through Congress would bar insurers from varying premiums based on illness, they would allow insurers to vary rates by age. And early documents from the Senate Finance Committee suggested they might allow variations by as much as a factor of five. If that went through--and if subsidies were pared back to three times of poverty--plenty of older workers would be priced out of the market.
Also keep in mind that a lower subsidy threshold means less assistance for those who still receive help, since the subsidies are on a sliding scale that phases out gradually. In a downsized bill, somebody earning twice the poverty line--for a family, aorund $33,000 a year--would receive less assistance than they would under the current House measure.
Nor are subsidies the only issue. Keeping the bill to a trillion dollars has meant reducing what insurance actually covers. In a new story for Kaiser Health News, Jordan Rau and Eric Pianin explain the implications:
...a person with a serious illness such as
cancer or diabetes could quickly run up charges for thousands of
dollars in deductibles, co-payments and co-insurance.Bill
drafters are trying to protect people from such catastrophic costs by
setting a maximum amount they would have to pay each year out of
pocket—$5,000 a person and $10,000 a family in the House bill and a bit
more in the Senate Health, Education, Labor and Pensions Committee
version. But [Georgetown Professor and health care expert Karen] Pollitz said that even those levels may be too high for
low-income people. “It may be fine for families that don't
need too much care, but God forbid somebody gets into a motorcycle
accident," Pollitz says. "They're going to hit the $5,000 limit
quickly. People with limited incomes, and particularly families, can
easily drown in bills, even if there are co-pays."...Congress appears to be
moving toward more cost sharing by patients. In a bill recently
approved by the Senate health committee, insurers would be required to
cover at least 76 percent of health care expenses incurred by the
average plan member, and the Senate Finance Committee is considering
setting the requirement at 65 percent. The House Democratic bill would
set the ratio, technically known as "actuarial value," at 70 percent.That
would be less than the standard health care plan available to federal
employees and on par with what Medicare and high-deductible Health
Savings Accounts pay, according to a recent report by the Congressional
Research Service. Moreover, a typical private employer
preferred-provider plan pays between 80 percent and 84 percent, and the
typical health maintenance organization pays 93 percent, according to
CRS.
To date, this issue hasn't gotten nearly the attention it's deserved. And partly that's because of a weird political assymetry. While conservatives and centrists have focused relentlessly on the overall cost of the programs, liberals have focused heavily--almost exclusivley--on the public insurance option.
A public insurance plan would, if well-designed, obviously help provide people with a more affordable coverage option. That's one of the (many) reasons it's such a good idea. But it's not clear how many people would be eligible for it--let alone whether Congress would give it the institutional power necessary to drive down premiums. In short, it's not a substitute for generous subsidies and benefits.
Thankfully, the issue is now getting attention. Last week, a coalition of liberal interest groups sent a letter to Congress urging it to keep to the 400 percent subsidy level. And they have an apparent ally in Senator Olympia Snowe, the Maine Republican widely seen as the Republican most likely to vote for health care reform when the debate is over. In Monday's New York Times, she tells Robert Pear that "We have to make sure that the health plans are affordable to average Americans, and to low-wage workers who are not eligible for Medicaid, because they would confront a penalty if they do not have health insurance."
Now if only she could get Kent Conrad to see things that way.
--Jonathan Cohn
7 comments
I hate to say it, but if it is between 300% and a bill that passes and anything more expensive that does not, I will take the bill that passes. I also think you underestimate with proper budgeting how far 54 K can last. Couple that with deductions and the eitc, things can be dealt with. I am more afraid of the perfect being the enemy of the good, or to be more accurate, the good being the enemy of the OK. I am on summer vacation and bought temporary highmark blue shield, which is pretty useless for everything but disaster.
And if I don't have good insurance, I am not going to ride a motorcycle, besides many accidents are caused by cars, so they would be responsible for medical. I used to ride and I have seen car drivers look at me and still pull out in front of me, I got so used to it I kept an eye out for that.
- blackton
July 27, 2009 at 8:05pm
From a political point of view,
1) The 253 million Americans who have coverage now are not going to accept a reduction in the quality of their coverage.
2) The progressive wing of the Democratic Party is not going to pass reform that provides coverage that is substantially worse than the coverage the 253 million are currently getting.
3) If you want to subsidize this for people making between 20 and 70k a year, it's going to cost a bundle.
4) No one (the CBO included) believes we are going to pay for this out of cost savings (at least not in any reasonable near term projection).
5) Small business owners and honest economists will object to a surtax on high incomes to pay for it. Having boosted the future deficit with the stimulus bill there is probably no income tax rate high enough to pay for all the government spending if the tax increase is limited to only those over $250k/$350k/$1million (pick which ever number you think is politically most palatable)
6) So if you want to heavily subsidize those making between $20k and $70K, you are going to have to tax those making between $70k and $250k. Don't think this will get through Congress either.
So bottom line, you have proposal in front of Congress which is politically, economically, and mathematically untenable.
Some modest expansion in eligibility for those near the poverty line is maybe doable, but it is unreasonable to expect that rest of population is going to massively subsidize those in the $20k to $70 income range who according to the accepted political definition of poverty (i.e. the poverty line) are not poor.
The cost of health care is going to be a problem for this group and the only way to address it is to control health care costs. There are only two ways to do this, either by a) government fiat.... not looking good since the senate is talking about taking the government payor option off the table; or b) high co-pays and or high deductibles which rely on market forces to hold down or reduce costs.
- dtohmatsu
July 27, 2009 at 10:13pm
Talking about one trillion dollars is the way not to talk about single payer financing, tha way not to take private insurance out of the picture. We need to remember we have a health care financing system that costs almost twice that of the other industrialized countries which also have better results. Our system is too expensive and too complex. The subsidy/mandate/public option approach only makes it more complex and expensive. It looks like the public option is being stripped of the aspects which would make it a truly viable alternative and hopefully lead to single payer. As long as we leave this crazy mix of about half public and half private financing of our health care we're looking at an anchor on our economy, medically driven bankruptcies and foreclosures, many uninsured, many more underinsured, improper incentives for preventive/primary care, and over and under utilization of health care.
- bsemple
July 28, 2009 at 2:08am
"So bottom line, you have proposal in front of Congress which is politically, economically, and mathematically untenable." (well said by dtohmatsu)
Yesterday, I attended a field hearing in Southern Indiana organized by a Subcommittee of Energy and Commerce. Victims of rescission gave their grim testimony. Then two executives from WellPoint and UnitedHealth Care attempted to defend their companies' cruel and inhumane underwriting protocols. Reps Bart Stupak, Baron Hill (members of Energy & Commerce) and John Yarmuth (Ways and Means) heard the testimony.
Congressman Stupak reminded those present of the profits earned by the insurers. Just last week, UnitedHealth Care “reported a second quarter profit of $859 million, more than double the $337 million earned during the same quarter a year ago. . . . The company’s revenue rose to $21.7 billion for the second quarter of 2009, up 7 percent from $20.3 billion from a year ago” (J. Niemela, Minneapolis/St Paul Business Journal, July 21, 2009)
We have an insurance industry running unchecked over our healthcare system, and the lives of our people.
From a Families USA 2008 report:
"Not every state ensures that premiums are reasonable by reviewing premium rate increases
before insurers impose them. And few states require that at least 75 cents of every dollar
collected in premiums be spent on medical services rather than administration and profit.
--In 20 states and the District of Columbia, insurers can set and raise premiums
without adequate oversight.
--In 45 states and the District of Columbia, insurers can spend less than 75 cents of
every premium dollar on medical services.
--In the majority of states, insurance companies can move to limit or revoke an individual’s
policy long after it was purchased by claiming that the policyholder did not adequately
reflect his/her medical history on the application. "
Yet Congress and the Administration want to implement an individual and employer mandate that will hand us all over to the Insurance industry as a "captive market" (Marcia Angell on Bill Moyers show)
Does anyone really think the insurers will come into line, enroll every applicant, dispense with age, gender, health status and experience rating?
Only single payer will be both economically and mathematically tenable. Save 400 billion annually. As for the politics--a new alliance of liberals, progressives, fiscal conservatives, and Obama voters, must convince Congress and the White House that we don't want the high cost private insurers anymore.
We want single payer!
- hmseil01
July 28, 2009 at 1:45pm
Response to bsemple: I disagree that it is clear that American healthcare is responsible for worse life outcomes than other industrialized countries. A common error in analysis of healthcare is that somehow the cause of Americans living shorter lives and having higher infant mortality rates is the fault of the healthcare system, when other more direct factors such as having the highest obesity rates in the world, higher crime rates than other industrialized countries (if you are murdered at age 18 you bring the life expectancy of Americans down, and doctors can't solve that probem), or that pregnant teen mothers with premature infants will increase infant mortality regardless of healthcare quality.
For a fairer look at healthcare outcomes I'd point to cancer survival rates, which are more closely correlated with the quality of medical interventions, in which case the U.S. has the best outcomes in the world.
American healthcare has much to improve, however its weaknesses do not relate to the quality of outcomes. If Americans want longer lives then they should try to lose weight and get lifestyles as healthy as the Japanese; no pill or healthcare plan can make up for our awful life habits, higher general crime rates, higher motor vehicle fatalities, and higher teen pregnancy rates. Consider that Japanese-Americans tend to have similar life expectancies to the Japanese, even though they have different healthcare systems, and the notion that cultural habits can affect quality of life becomes more evident.
One easy way to save money without hurting quality is to limit self-referal for high-end imaging services. Currently many physicians buy their own imaging machines and then, predictably, find it necessary to increase the number of patients they refer to their own machines. This type of conflict of interest results in waste of resources without much benefit to patients. Again, though, the debate on healthcare should start with accurate facts, and it is inaccurate to suggset that somehow shorter lifespans = worse American healthcare.
- lsokol
July 28, 2009 at 1:52pm
lsokol says that shorter lifespans do not equal worse American healthcare. But lifespan is hardly the only way in which our health care system fails. There are many basic public health measures on which we do less well than nations spending much less. And the medical errors that come with our chronic over-treatment add to the problem. So we not only have poorer outcomes in many basic health measures (along with some good outcomes in certain areas involving intensive and expensive interventions) but we manage to achieve this by spending something like twice as much. Why is it hard to admit that this is a problem?
dtohmatsu wants the market to fix this. I am constantly surprised by the religious belief some people have in markets. Not that I deny the power of markets, or the value of letting whem work when possible. But if you know anything about health care (and have any cognitive capacity left over once you say the magic word "market") you know that simple market dynamics do not operate in health care. You are not dealing with simple economic transactions, but with transactions involving players isolated from immediate costs and incented to increase them. Not to mention the emotional context in which health care spending choices are made. Conservatives like to prattle about incentives all the time but in health care they seem unable to apply their own insights. The more you understand about markets, the more you are able to recognize the market failures inherent in health care -- not just in any given system, but in health care inherently.
Why is this so hard for people to accept? You can debate what to do about it, but it's such a basic fact that I despair when I see how many people can't get it. As the saying goes, you're entitled to your own opinion, but not to your own facts.
- bwkling
July 28, 2009 at 5:33pm
to bwkling: I'll reiterate, it's false to equate American healthcare quality with life expectancy because they are too loosely correlated. Many things bring down life expectancy that no doctor could possibly prevent, such as murder, car accidents, drug use, or suicide. Similarly, it's foolish to look at one group, Americans, and another group, say Canadians or Japanese, and compare their healthcare quality by comparing their life expectancies when much of what separates the life expectancies doesn't relate to doctors and rather relates to the healthiness and culture of those societies.
Unfortunately, Americans' biggest health problem is that we are more unhealthy in our personal lives than any other industrialized country, rather than that our hospital system fails us. We are the most obese nation on earth. We have higher homicide rates than any other rich country. Also uninsured Americans often don't seek healthcare until they have advanced problems which, again, is not the fault of the doctors who then proceed to intervene once they present at the hospital.
To make the point simple let's use an example. Imagine two 5'10" twins, one of whom weights 290 pounds, doesn't excercise, etc..but has great doctors, and another twin who lives healthily, is normal weight, active, but has average doctors. It is easy to imagine that the healthy twin may actually live longer or the same, even if their healthcare isn't quite as good. Outcomes have as much to do with us personally as with our doctors. Similarly, if you take a typical Japanese family and move them to the U.S. you'll find that they'll tend to live about 6 years longer than Americans, but this obviously can't be due to doctors, because they'd be using American doctors, too.
One more example, two countries, one with paved roads and one without. You'll discover that in the country with paved roads cars last longer than the country without. It would be foolish to compare the quality of cars driven in the two countries by looking at the 'life-expectancy' without comparing the roads. Well, American doctors are doing the equivalent of treating human 'cars' who are unhealthy and 'drive on unpaved roads'. Rather than discuss paving the roads, we are blaming the 'mechanics' in this analogy, doctors.
- lsokol
July 28, 2009 at 7:47pm