The New Republic

So tell me Mr. Cohn, how much will this mandate cost someone to buy private insurance who makes, say, $70k/year, has a family of 4 or 5 and right now doesn't buy insurance since it's too expensive? Typical family plans are in the 10-15k/year if not more, and after taxes that family may have $50k/year in spendable $$. That describes my brother, who's self-employed. His policy was nearly $20/year and he was struggling to afford it. The only "break" he got was via his wife getting a job with county gov't and getting insurance through her plan. His $20k/yr plan also had several caveats, the big one being no coverage for pre-existing conditions. Please correct me if I'm wrong. The bill from the Senate seems to impose big new costs on the individual and allows a completely unregulated insurance market to charge what it cares to. Show me in the bill where costs are brought down for insurance policies and doesn't bust the budget by transfering tax dollars to the insurance companies, just like the GOP drug plan did. I just don't see how this "crosses" any line but instead "calls 'um like they sees 'um".

- tnmats

December 16, 2009 at 4:18pm

Oops, a misprint: that was $20k/year, not $20/year. Sorry.

- tnmats

December 16, 2009 at 4:19pm

tnmats, great questions. Seems to me the people calling for mandates the most (besides the insurance companies) are people who have insurance through their own company. if there is no public option then what you have is enforced servitude wherein the federal government criminalizes not buying from a for profit insurance company, and don't give me any bs about car insurance, I drive a bicycle to work so I don't pay jack shit to any car insurance company. Most people want to have health insurance, but there are times in peoples lives where they simply can't afford it but make too much for subsidies, criminalizing survival techniques isn't productive, and lets face it, I simply can't see how the enforcement will work, and will only open up a lot of instances of outright fraud (where I pay some fly by night insurance company $50 a year that does nothing more than provide insurance numbers). I am not for calling up the politically impossible, I am simply stating that getting rid of the individual mandate is a reasonable compromise.The individual mandate was a bust in Mass. so why replicate it nationwide and subject us to stories of how some young peoples live are being ruined by health care people who are in cahoots with rapacious insurance companies. And for heaven's sake, the Dutch system? Like bringing up the Dutch will convince anyone besides a few wonks. The only time to bring up the Dutch is to shut up some rightwing ahole who brings up the British.

- blackton

December 16, 2009 at 9:19pm

by the way via politico this is what Obama himself said and which you in no way rebutted: The mailing that we put out accurately indicates that the main difference between Senator Clinton's plan and mine is the fact that she would force, in some fashion, individuals to purchase health care. If it was not affordable, she would still presumably force them to have it, unless there is a hardship exemption, as they've done in Massachusetts, which leaves 20 percent of the uninsured out. And if that's the case, then, in fact, her claim that she covers everybody is not accurate. Now, Senator Clinton has not indicated how she would enforce this mandate. She hasn't indicated what level of subsidy she would provide to assure that it was, in fact, affordable. And so it is entirely legitimate for us to point out these differences. Again, don't scrap the bill just try to get rid of the individual mandate. The only reason not to is if holy Joe from the great state of Insurance companies has another of his fits. Still in all, you seem a little too happy to be eating his shit. You don't have to self righteously shove it down our throats.

- blackton

December 16, 2009 at 9:36pm

Blackie, I'm one of the lucky ones that has insurance though my employer. I still shell out nearly $3-4k/year, and that's with my big company shelling out 80% for my policy. I'm out $2400/year for my portion of the plan then easily $1000-2k more out of pocket. That's for a family of 4. I'm also sensitive to the mandate as my father was self-employed as is my brother right now. Ask either of them what they think of insurance companies; it isn't pretty. My father, the "capitalist" business owner (now retired) will tell you in no uncertain terms that Medicare and his VA benefits far outstrip what he ever got from private plans. He loves his "government" insurance and will tell you as much, that making private plans the default is a recipe for disaster. I just do not understand how giving a subsidy to an already profitable insurance company is a good way to spend public money. It's a transfer from the middle class and poor to the wealthy. I thought I voted for something different. What I guess galls me the most is it was give-give-give from the progressive side whenever the GOP yelled loud enough or a supposed Democrat (aka Lieberman/Nelson) blocked anything. No repercussions, just slap down any progressive that dared to say anything against them. It's "be lucky you get this". I don't see "this" as anything better than what is the status quo, if not worse. Oh, and by the way, I had my benes cut quite a bit for 2010 and a premium increase. I see nothing, I mean nothing, in the bill that remotely benefits me nor would provide me protections from a capricious CONNECTICUT based insurance company. Thanks Lieberman.

- tnmats

December 16, 2009 at 10:12pm

tnmats- Let me say, first, this is a totally reasonable question. I'm actually working on a long post, which I hope to publish in the next few days, breaking out some numbers that get at your question. But just to give you a rough answer, you can use the Kaiser Foundation's premium calculator, which is here: http://healthreform.kff.org/SubsidyCalculator.aspx Just for purposes of illustration, let's assume your brother is older -- say, 55 -- and that the size of his family is four. Now plug in $70,000/year income and, as you'll see, the projected premium cost is around $15,300, like you said. BUT he's also eligible for a rather large federal subsidy of $8,500. As a result, he's going to pay just $6,800. Now, he and his family will still be on the hook for cost-sharing -- deductibles, copayments, etc.. I dont have time to look them up now, but they are considerable. Still, I can assure you that the coverage he gets under reform, which will be through a regulated insurance exchange, will be more comprehensive than what he's getting now on the individual market. How much comprehensive depends, a bit, on some details we haven't yet seen. But one thing we know is that it will not exclude coverage for pre-existing conditions. Add it all up, and I think he ends up spending a lot less than he does now. For the record, I'd still like to see some improvement in those numbers, particularly on the cost-sharing part. And that can happen when it comes time to combine the Senate bill with the House bill, which is considerably more generous. But it won't happen unless somebody pushes for that. Seems to me that might be a good thing for progressives to start demanding...

- Jonathan Cohn

December 16, 2009 at 10:58pm

blackton- Why do you say the individual mandate was a bust in MA? Seems to me it's working quite well. Most people now have coverage (97 percent, highest by far in USA) and fewer people report forgoing care because they can't afford it. Premiums are rising quickly, but they were rising quickly before the reforms. And the MA reforms, unlike national ones, didn't even try to tackle the overall cost issue. As for sending subsidies to for-profit insurers, it's not my ideal solution. But it doesn't really bother me, either, if they're serving the public good. And while I agree they'll never do that as much as I (and apparently you) would like, I think the regulations we're putting in place will push them pretty far in that direction. I share the indignation at letting Lieberman and Nelson basically dictate the terms of this. You want to elect more progressives or get rid of the filibuster? Sign me up. But that's not the choice we have right now. It's this bill or burying health reform for another 10 years. I think the choice is pretty clear cut.

- Jonathan Cohn

December 16, 2009 at 11:05pm

If the goal is to cover more people with insurance, the bill does that and "the choice is clear." I thought health care reform had general appeal by making our industries more competitive because "X" percent of health insurance expense was in the cost of a car, and "Y" number of companies were locating in Canada as opposed to the United States because of the high cost of medical insurance for U.S. employees. I am skeptical whether features like an insurance exchange or purchasing insurance by crossing state lines is anywhere near enough to accomplish the latter objective.

- Nusholtz

December 17, 2009 at 8:29am

Thanks for the link to the calculator. Although, it seems, I would not get any subsidy under any scenario, even if I were self-employed. Once again, I do agree with tnmats that the political risk here is that middle class peeps like me see this as yet another wealth transfer to the wealthy and the poor. I get the social insurance idea--through my plan I already subsidize the old and those with kids. That's fine. But to do that through my taxes too...bad idea. From a health policy perspective, Jonathan is of course correct in his pass-something-anything position. A position it seems the President shares. But the political consequences will not be pretty in the short term.

- Tilghman

December 17, 2009 at 9:00am

Jon, I agree with you on the substance of the bill -- from a progressive position, it surely deserves to pass -- but I'm not so sure about the politics. From what we know about Lieberman, Ben Nelson, Mary Landrieu, etc, I'm persuaded that they're not wading around in policy details. Their reluctance/opposition to the public option or the Medicare buy-in, I think, comes from from a moderate and centrist 'positioning.' Their role in Congress, as they see it, is to tame the supposedly irresponsible progressive horde by exacting a centrist-seeming concession from every liberal measure. The more liberals like something, the more their skepticism grows, and the greater their insistance on compromise. There's direct evidence that this was the case for Lieberman and the Medicare buy-in (http://ta-nehisicoates.theatlantic.com/archives/2009/12/liebermans_vanity.php). At first I was pretty upset with Howard Dean and his public calls to "kill the bill" -- but thinking about the politics of it, I think Dean is (unintentionally) helping its passage. Only when people like Howard Dean and the netroots are actively upset at the health care compromise will Lieberman in particular feel his their work is done. Otherwise he might just keep insisting on smaller, incremental concessions until the whole of the bill really is eviscerated. To make good on his conception of himself as a heroic centrist, he needs both sides of the debate to be really mad at him. Now that they are, I expect him to support it the rest of the way.

- karpmj

December 17, 2009 at 9:19am

Mr. Cohn, I am trying very hard to get my head around this, and as much as I would like to see reform ( I have posted in the past about a family member who suffered financial ruin under our current system), I see too many negatives in this bill. If the choice truly is “this bill or burying health reform for another 10 years”, then I am afraid I am coming out on the side of burying it. Sometimes it is better to do nothing, to start over and to get it right. If it takes 10 years, then it takes 10 years. Frankly, I care more about my children’s future than I care about Obama’s legacy. And besides, the “now or never” threat sounds to me like another scare tactic, similar to the ones that we are all so quick to point out when idiots like Palin bring up “death panels.” As for subsidies to for-profit insurers, I agree completely with Blackton’s point. You can try to spin it as positive, but it is in fact “enforced servitude” as Blackton so eloquently put it. That fact alone, in my view, completely negates any positive spin that you try to put on it. This entire exercise looks to me as if it has become more about politics and egos than about meaningful reform that positively impacts people’s lives. Sure you can point to much good in this bill, but so can any reasonable and fair person point to much bad (which people on both the left and the right are doing). Even strong supporters, like yourself, now almost constantly use some form of that familiar qualification: “It’s not perfect, but…….”.

- nacnud1

December 17, 2009 at 9:29am

What amazes me is that we've been debating health care for over a year, and none of the strengths and weaknesses of this bill and the House version were unknowable or even unknown. The President started out saying that he could cover everyone for less money. That's laughable, and he has stopped saying it, to his credit. Neither this bill nor any other will reduce costs, because we have an aging population and ever more expensive technologies, including better drugs. This is well known. The MA example is instructive. 97% coverage is not nothing. Costs have continued to rise. End of story. That seems to be the bargain this time around - more coverage at higher costs to some (young healthy kids who will be forced to buy insurance) and lower costs to others (maybe). If you think this constitutes "reform" vote for the bill. The bill (whatever its final form) will certainly NOT be health care reform. There is practically nothing that changes fee for service medicine, and nothing that deals with the medical profession's need to practice defensive medicine for fear of law suits. There is nothing generally regarding cost controls. If, and it's a big if, Medicare reimbursements to doctors and hospitals are cut by the amounts being talked about in order to help pay for expanded coverage, a certain % of doctors will stop taking Medicare patients. How does this help them? In any case, it's too late to turn back now (as the song says), and a bill will be passed, likely on a party line basis. Since benefits won't kick in until 2013 (?) and tax increases start immediately, expect the GOP to run against this bill, and be fairly successful. "It's better than nothing" does not inspire confidence. We'll see.

- butchie b

December 17, 2009 at 9:54am

I'm afraid I agree with tnmats too and great post Tlighman. I do see where Dean is coming from. As I understand it, the supposedly rich get to hand over more money to the insurance companies, with no discernible checks on cost. Nice. (Sorry if you posted otherwise on cost checks in this scenario Jonathon, perhaps I just don't get it). One of the reasons the Democrats won back the Senate was Schumer's focus on the struggling upper middle class - yes, we're allowed to struggle too. He wrote a pretty good book about his strategy. Look, we know we're lucky by any measure on earth and are humbled by it, but our standard of living and sense of safety have been trashed for years too. We're one pink slip away like alot of folks. Both my husband and I worked our own way up from the middle class of our youth, tending bar and waiting tables for years to go through too much school. (We are defensive about being considered threatening after that hard work by lighly educated people - not that there's anything wrong with that - with a chip like Palin. We have to be targeted to deflect her insecurity. But I digress). If this set of folks is left holding the whole bag with no cost controls we can cleary understand, the Dems are toast.

- WandreyCer

December 17, 2009 at 10:07am

Costs go up because of no competition in the health insurance industry Butchie. This isn't an unfixable dynamic. But since Senator Insurance Industry from CT single handedly decided that the profits of his clients were more important than the safety of Americans, here we are. I mean, the man has an election to preen about in front of cameras. What will Joe do next? This is of utmost importance. The campaign has to be financed somehow, things are expensive! He'll have no love from the Dems obviously. Holy Joe is always one step ahead of us in his craven glory.

- WandreyCer

December 17, 2009 at 10:37am

Wandrey, then why hasn't it been fixed? Why do costs continue to go up in MA, where they cover 97% of the populace, faster than inflation by a large multiple? Even in the sainted countries of Old Europe, their costs continue to rise, because an older population is a sicker population, competition notwithstanding. I take no position on your screed re: Sen. Lieberman. But I note that he does sort of cheese y'all off, no?

- butchie b

December 17, 2009 at 10:42am

Good question butchie. Maybe Karl Marx was right about democracy making lazy citizens, but I still have not figured out how to make an amoral industry cease making profits off of sorrow...by paying off the elite. Can you help me out on that?

- WandreyCer

December 17, 2009 at 10:50am

"Sometimes it is better to do nothing, to start over and to get it right. If it takes 10 years, then it takes 10 years. " OMG. Get real. (Sorry, but that's the most sophisticated, intellectual response I could muster while in a fit of despair/laughter.)

- Fishpeddler

December 17, 2009 at 11:12am

Get real in what way? Care to expand?

- nacnud1

December 17, 2009 at 11:21am

I return to an old theme of mine: the health insurers are not particularly profitable. You can look it up; in fact, please do look it up. The reason they are not particularly profitable? Them pay out a lot of money in claims. Who among us loves insurance companies; whatever the hell they are insuring? They are a perfect scapegoat. If the Dutch are achieving satisfactory universal coverage, through private insurers, at a lower cost than we do, you would think that would be of interest to Democrats and Republicans alike. But it is almost as if there is a bipartisan conspiracy to keep the Dutch rationale a secret. I don't pretend to have the answer, but I have a very strong suspicion the answer is rationing. One way or another that appears to be the answer all over Western Europe. Does European rationing dispatch their grannies to early graves? Not so far as I can tell. What it does do is avoid wasting hundreds of thousands of dollars on futile care for granny when she is inevitably bound for an early meeting with her maker. Did any of you watch the 60 Minutes piece the other week? Of course, they picked the most extreme examples, but it actually is possible here to sneak in a charge for a pap test on a terminally-ill octogenarian spending her last few days in the hospital. Both parties have notions about addressing coverage issues; neither seems to want to do anything beyond posturing on costs.

- lsernoff

December 17, 2009 at 12:12pm

Mr Cohn, Thanks for pointing out the calculator. What still isn't answered is cost to us all; you never addressed the issue of cost to the country as a whole. The Medicare drug bene is an example; the cost of the program is way too high as you have to have a for-profit industry "cut" that raises cost for all, with no real cost containment. Again I use the example of regulated auto insurance. That's not in the is bill, so I just do not see where the cost curve gets moved. I still see this as a wealth transfer, force transfer, to big corporate interests.

- tnmats

December 17, 2009 at 12:32pm

Megan McArdle sums up the problem with all the complaining on the left. Basically, there was never any chance that anything the Left wanted was going to happen. It might be sad, but I agree with her. http://meganmcardle.theatlantic.com/archives/2009/12/the_naive_negotiator.php

- SJ_LEX_LEO@YAHOO.COM

December 17, 2009 at 12:35pm

Another problem I see: the cost increases are immediate, the benefits aren't. The calculator points to cost to my brother being lowered, but 4+ years from now? That's the political part that will explode in the Democrats' face.

- tnmats

December 17, 2009 at 12:37pm

Wand: to the extent that the Canadian health care system is politically successful, despite its occasional short-comings, it is because the middle and upper middle classes are the chief beneficiaries of public health care. Frankly, if my self-employed father is to pay (say) $20K/yr for insurance, he'd rather do it through a public system (and through the general taxation) than to help prop up the balance sheet of a European or Chinese insurance company. And while I certainly do not use the health care system as much as I pay into the general pool, I know that my elderly parents benefit from it directly; there, too, the distribution and pooling of risks through general taxation and public payment takes care of many of the issues related to insurance premiums for vulnerable segments of the society.

- icarusr

December 17, 2009 at 12:53pm

Jonathan, Thanks for the "envisioning" which I have been advocating for some time now. Every family's case will be different, but only by playing out a real-live case will we see how policyholders will be affected--and how high the premiums will be. Moreover, we'll be able to calculate how many tax dollars are going to the coffers of the private insurers by means of the subsidy. And let's have the truth about the Dutch system. Are the profits of the private insurers limited? I'll bet they are. How can you say you are not bothered by the 20-30 cents on every health care dollar wasted on US insurers--the marketing, the lobbying, the exec salaries? Money we need for care! No matter which bills are enacted by Cangress, the profiteers will find a way to fleece us--within the parameters of the new legislation. And the Massachusetts mandate plan? How can you support a plan that doesn't allow for cost control, nor can low-income families find an affordable option. Let's play out the effects on a MA family. And don't forget the deductible that keeps people from seeking care. If the MA plan is so great--why aren't other states implementing it? Let's hear a round of applause for Bernie Sanders!

- hmseil01

December 17, 2009 at 1:00pm

Well, Wandrey, there go the defense contractors. But I can respect your desire for single payor, which has its good and bad points, as well.

- butchie b

December 17, 2009 at 1:18pm

Thanks to icarusr. A local university held a forum on various health care systems during International Ed Week. I explained single payer, using Canada as an example. I had just explained that the Canadian system is paid for by taxes (income and payroll). If you pay taxes you contribute according to your income, but pay no premiums, etc. and our northern neighbors end up with more discretionary income. During questions, a student asked, "What if you are unemployed, have no income--what happens then?" I replied that Canadians have made a decision to stand by one another. It might be your son or granddaughter unemployed, it might be your baby or 55-yr-old grandfather who needs treatment. No one knows what life will bring. When and if you need it--good care is there for you. The student seemed satisfied with my reply.

- hmseil01

December 17, 2009 at 1:21pm

butchie - defense contractors have feelings too, I worked for one in the distant past (it was so small that Newt Gingrich shutting down the government for two weeks killed it). Yes, I'm a single payor gal - although that dream is dead. I deeply admire the lefties for not going down without a fight on this. I know they will lose and I basically agree with the arguments against them. I'm just glad someone is bothering to say the objective truth in all this - irrelevant as it clearly is. There is real heroism in that. Icarus, OK. What you say is fair. All I ask is for a somewhat stable number I'll need to regularly pay, I just don't see how that's possible in this bill as it exists now. I've said all along I would gladly pay more - whatever they might ask - for a single payor system or at least a public option. That we don't have either is suspect to me. Honestly, anything that forces real capitalism in to this evil bloodsucking racket called the health insurance "industry" is worth whatever money I might have left. I really hate those guys. (Its nice to feel lefty righteousness for a day or so, let it all hang out. I have to wonder if we can reinforce our roller coaster momentum just by showing fight, spine - we do it so rarely in this party). The idea of simply giving these horrible firms more money after what they have put the country through goes down rough. A pox on all of them even if they have already won, just like their head lobbyist crowed the other day. I do think the greater good is served if Dean loses his Don Quixote final attempt, I just need to bare my teeth at the bad guys. One and all: I'm deeply sorry to be so vulgar, but here goes - bending over for both Joe Leiberman and the insurance industry the week before Christmas is enough to drive anyone round the bend. At least Andy Card refuses to. He does it gracefully and with great moral force. Bless him.

- WandreyCer

December 17, 2009 at 2:32pm

Um, Andy Stern? Maybe Andy Card, too, for all I know. Hey, as vulgar as you wanna be with me, kiddo. :-)

- butchie b

December 17, 2009 at 3:27pm

thanks for the correction butchie! And the nice words.

- WandreyCer

December 17, 2009 at 5:20pm

Congratulations Wandrey. Now you know how some of us feel about the financial sector, especially those outfits that were bailed out but now amazingly profitable. And I feel the same about the medical insurers. I've suffered from their capricious deeds more than once in my lifetime. And if you want an earful, talk to my dad or brother (both self-employed) about medical insurance companies. What they'd say would make the most foul-mouthed cretin blush.

- tnmats

December 17, 2009 at 7:43pm

With regard to the calculator, it seems that it does not account for the fact that there is nothing to prevent insurers from raising premiums to absorb part or all of the subsidies. Is there any reason whatsoever to believe that will not occur absent some type of regulatory price control? Isernoff comments that medical insurers are not particularly profitable. I have heard it said that the insurers’ profit-margin is only 2.5 to 3%. And yet, most of them fall within the Fortune 500. So what are we missing? What types of expenses are being counted as costs? Big salaries? Shareholder dividends? Sales commissions? Other costs of sales? Do the profit margins account for money made on investments? If the profit margins are really that thin, then introducing any meaningful competition, whether through a public option, allowing sales across state lines, and/or repealing the antitrust exemption, will put most insurers out of business, right?

- dhurtado

December 17, 2009 at 9:41pm

tnmats- Quickly, because I'm working on like five other things, but I've addressed the issue of overall costs many times, most recently here: http://www.tnr.com/blog/the-treatment/see-the-curve-bend

- Jonathan Cohn

December 17, 2009 at 10:26pm

I did read that Mr. Cohn when you first published it. The 10 yr. projections imply a lessening of cost increase then it accelerates, reverting at 10 yrs. to about the same. And the annual outlay graph shows virtually no difference. In EE terms, we'd call that shot noise. The errors in the projections are likely bigger than the differences. And your 2nd graph shows the biggest political risk, that benes don't start for years, but costs to the individual start quickly. Please explain how you don't get beat for that politically.

- tnmats

December 17, 2009 at 10:41pm

Profit margins for insurers may be low but they are VERY profitable. Want an easy to grasp example? Walmart and Target. Both work off razor thin profit margins but they make a whole lotta cash. Same goes for Cigna/Aetna/etc. They may have small margins but a lot of volume. Don't be fooled by a small margin, they make a good profit and a lot of it.

- tnmats

December 17, 2009 at 10:45pm

I don't see any value added in having for profit insurance. The many other countries that insure everyone for less money have a single system that's not for profit. None rely on for profit insurance. Competition among insurers makes them compete to avoid risk; take in more premiums through subsidies and mandates, raise copays and deductibles - I'm afraid that's what we'll be looking at. If the insurance and pharmaceutical companies are too big to fail, or even take a hit now, we'll only make them stronger. I hope some state can lead the way with a single, not for profit system to show the way.

- bsemple

December 18, 2009 at 2:31am

tnmats- I understand and agree with what you say about volume profits. But the pro-insurer argument is that significant, across-the-board reduction in premiums (without a corresponding reduction in the cost of services) will eat up the 2.5 to 3% profit margin, regardless of how much money that margin represents if left intact. Hence my question as to whether that 2.5 to 3% is a real number. bsemple- I am in favor of a single-payer system. But absent that, I am not following your reasoning that true competition among insurers would result in higher premiums and reduced benefits. Mandates and subsidies present an issue separate from that of competition. As I noted above, I agree with that mandates and subsidies would tend to drive premiums up.

- dhurtado

December 18, 2009 at 9:33am

- [Crossposted] I see two narratives and both place the electorate in the role of an audience watching a Hitchcock film: 1. The White House knew it couldn't please the base with any bill congress would pass. So, they refused to lead or champion any cause(s) which were doomed to fail. 2. Obama knew any bill would require a sales effort after passage. The months and years that followed would determine if the public shared his ownership of the result. He'd squander his ability to persuade if he committed too early and had to defend against his own buyer's remorse for a bill which didn't match his specs. It was said of Hitchcock, "His flair was for narrative, cruelly withholding crucial information (from his characters and from us) and engaging the emotions of the audience like no one else.". Not to stretch the analogy but no one is leaving the theater & health care won't be Obama's "Citizen Kane". He will continue to please or not please but I expect him to engage the emotions of his audience like no one else. Oh, "Don't bet against Barack Obama." -

- michael

December 18, 2009 at 12:53pm