Category Archives: Politics

No Individual Mandate, Really?

I’m resisting an individual mandate despite my left leaning ways.  Underneath it all I do not like large programs that dictate behavior. Liberty is important, but more than anything mandtaes can be impractical. How would you enforce such a thing? How much would enforcement cost?  How effective are mandates? And do we want to be punitive toward those who do not obtain insurance? These are all tough questions and questions I would direct to Hillary Clinton.

Under “My Prescription” all people would have equal access to health insurance while establishing equitable tax incentives to purchase insurance. Those people not purchasing health insurance are losing out on their tax credit and thus throwing money away. It changes the calculation.  Currently, a person looks at the $8,000 premium and walks away. No health insurance, but $8,000 in their pocket. Under “My Prescription” they look at the tax credit (let’s say $3,000), and they have the choice whether to spend $5,000 on the insurance ($8,000-$3,000 tax credit) and have health insurance or do I pay $3,000 more in taxes and not have the insurance.  That changes the game (these numbers are fictitious, but make the point) because people would now practically be paying to not have insurance. 

So do we need a mandate? I would like to give the “My Prescription” plan a chance to work without a mandate. I believe it would lower the number of uninsured tremendously.  It would eliminate the excuse that a person could not get insurance becasue of their medical history. It would make obtaining insurance very appealling, and lastly, it would have a better chance of political passage without such a mandate. If I turned out to be too optimistic in my estimates toward universal health care a mandate could be added later, but in the meantime “My Prescription” would improve quality by stimulating competition on costs and quality. It would improve incentives for public health and prevention of disease.  It would improve relationships between patient, doctor, and insurer by improving continuity of care. It would align the incentives with cost controls and quality of care. No, for now, I’m going to pass on the mandate.

Advertisements

Now We Build

Part of the “My Prescription” series.

But before we do let’s recap. In brief we need a new foundation. The employer based system is not working. So I am suggesting two fundamental changes: Health insurance exchanges and tax reform.

Health Exchanges will provide the pooling mechanism. They would be run by the States and would regulate the plans much like the New York Stock Exchange regulates stocks. The exchanges would have to force the plans to accept all applicants, to have a fairly standardized set of benefits, and I believe use a modified community rating. Community rating is when the premiums are based on the risk of the community as a whole, not the risk of the insured person and their specific circumstances. The modification is that insurers would charge everyone within their plan the same amount, but that each insurer can set that price (and thus compete on price).

I can hear the screams right now, “What about smokers? I don’t want to pay for them?” Neither do I, but I do want to make sure that the cancer survivor has access to good medical care. Further, competition would make smoking cessation programs financially viable. Second, I can anticipate, “You need to let the market operate unregulated.” I believe in the market, but without regulation insurers will only compete by avoiding high risk people, not on quality and price. Under this plan competition is limited in several aspects. I won’t deny it, but there is still competition. The insurer is competing on quality of care and efficiency of providing that care. And, “Won’t this make premiums more expensive?” Yes, community rating makes insurance premiums higher. Insuring sick people costs money, but I do believe that it is the morally correct choice.  Let’s see if this competition can reduce costs over time through directed competition.

So the next big thing is that we need publicly reported information about the quality of health plans, hospitals, physician groups, and physicians. There is an emerging movement already, but it needs to be a national priority. Competition only works when the consumer is an informed consumer. Let’s educate!

So we have exchanges that regulate health plans and use community rating. All people are included and all can choose their own plan. The plans are portable from job to job providing consistency of care and long-term relationships with insurers. The tax credits provide equity in the tax code, but still preserve the employer’s incentive to contribute. Employer’s continue to facilitate health insurance, but no longer sponsor it. Quality measures are reported to the public forcing health care plans, hospitals, and providers compete on quality and price while minimizing selection issues.

Next time we’ll discuss a few nuances of the tax proposals, why an individual mandate may not be necessary, and the need for either re-insurance or risk adjustment.

Why Won’t We Sacrifice?

Big things often demand big sacrifices. When I consider revamping our health care system to a universal or near universal health care system I am aware that it will involve sacrifices. These sacrifices will be well worth it if we redo our system in an intelligent manner. But the sacrifice is too much to ask of us – it would appear. We get scared and leave the status quo in place.

I’m going to deviate from health care for a bit here…

During this political season I have not seen such an avoidance of sacrifice than the latest debate over the gas tax holiday. McCain and Clinton propose that the federal gas tax be lifted this summer to help middle and lower class wallets. They don’t want us to sacrifice by paying higher prices in order to decrease our dependency on foreign oil or to better our environment.

And their proposal is full of pandering and complete bullshit.

I know Obama wants to use that word as well, but can’t give this proposal the descriptors it deserves. All three of them know that the proposal makes no sense, but Clinton and McCain pander so low.

Let me explain why it is bullshit before I go on. If you give a gas tax (especially a temporary one) gas prices will drop initially. Since gas refineries can’t increase output appreciably over the summer there will be no increase in supply. However, since the price will drop initially, the demand for gas will increase and prices will respond by rising. Rising to where it is now with the gas tax. So then who gets that demand driven increase in price? No, not the middle class wallet. They are paying no matter what. Our appetite for oil is too big. It is the oil companies that would reap the benefit. The tax would be shifted from going to the government to the oil companies. Meanwhile we will use more gas, pollute more, and increase our oil dependency. Sounds like a great policy.

I believe Clinton is a smart candidate. She has taken economics 101. Yale has taught her well. She knows her proposal is full of bullshit and she is pandering. She is stooping low and is being deceptive. But back to my point. Why can’t Americans be asked to sacrifice? Why are high gas prices bad? It’s the market speaking. It’s a wake-up call to move away from oil. It may hurt, but it should push us to run from oil, not snuggle up against it.

Why can’t we be asked to sacrifice when we are at war? Why can’t we be asked to sacrifice to save our planet? Why can’t we be asked to sacrifice so that all Americans can have access to health care? Are we too comfortable and lazy? Are our leaders too weak to make the demands? I’m not sure, but I do know that sacrifice is needed at times. Let’s keep an open mind and vote for the candidate that is not afraid to ask of us to do better, to make changes, and to even, if necessary, to make sacrifices.

A Most Sincere and Irreverent Letter to John McCain

Dear John McCain,

It seems that you have only listened to half of what the health care experts have told you and then were shamed into cobbling some rhetoric to cover the glaring gaps. Let me help you.

Let’s first go over what is good about your plan. I like most of your tax reform. Tax credits are better than tax deductions. They are fairer and more progressive. However, you still may want to give a small incentive for employers to stay in the game. I would hate to lose their support, and with your plan they might just all get up and leave. If they do it seems that the small government plan you are envisioning may have to grow to fill the gap. But you have the general right idea with tax credits and $2,500 per individual and $5,000 per family is getting close to the price of insurance, but still falls short. Does everyone get this credit? Is it related to income? Does it rise with inflation, or even better yet rise with health care inflation? Just wondering. Those damn details.

Cost reduction. That’s big with you and you are right to emphasize it. We spend too much on health care – over $6,000 per person. Almost double what the next most generous country spent. And some of your ideas are fine. They are the same as your Democratic rivals (good copying skills), and will only nibble at the corners, but important nonetheless. We should invest in electronic health records, have improved coordinated care, generic drugs, re-importation of drugs (very maverick of you), smoking cessation, state flexibility to encourage creativity, increased focus on chronic conditions, tort reform, and Medicaid and Medicare reform. All good suggestions. Your two sentences on each of them really demonstrates your breadth of understanding. And again your competition beat you to the punch on almost all of these. I like the bipartisan spirit, but I was hoping that since cost reduction was your big thing you might have a new trick up your sleeve. I guess your big price reducer is increased competition. So let’s talk about that.

Your plan will cripple the employer-based health care system. Not a bad thing, but since health care accounts for 16% of our GDP and you are recommending pulling the foundation out from under it (I admit a shaky foundation) you might want to say a little more than you want to put health care decisions back in the hands of the patient. So under your plan the patient would select their health plan, right? And you are assuming that the patient has the information to sort through all of the health plans to choose what is best. Surveys on this topic show that the typical person shopping for insurance bases their decision on things that do not reflect quality. How do you plan to educate America on this? Remember for a market system to work you need an informed consumer. The quality reporting systems in America are improving, but any plan that puts the insurance decisions with the consumer better focus more on quality measurement and reporting than you do. I would suggest you expand on that a bit.

Lastly, Elizabeth Edwards. You two have been so cute fighting in your sandbox, but I would listen to her. I think you have. You realized that she is right saying your plan would leave out the sick. Maybe a person with a history of melanoma? We know that insurers compete by avoiding high-risk people. Risk avoidance is where the profits are – not quality delivery systems. That pre-existing condition thing. That age discrimination thing. Shoot foiled again, and you know it. In the last minute you threw in the line, “We will work with the States,” to make sure these people are covered. What does that mean. High risk pools, perhaps? Well, that is really expensive. Under your plan the really high cost people (up to 30% of the national health care bill) would be denied coverage by insurers (remember since they are not under an employers plan they could be denied) and potentially fall into these groups which would be subsidized heavily with tax dollars. Oops, that sounds like a big government plan. So I would suggest you rethink how you are going to pool people together. Did you know that the premise behind insurance is pooling? You have to find a way for the high-risk people to be pooled with the low risk people based on something besides health. That is what employer-based health insurance was all about.

And lastly, many States have their ways of dealing with these issues. For example New York uses community rating. Under your plan with cross-state purchasing these New York plans would all collapse because nobody who is healthy would join. So much for State flexibility.

I would suggest that you go back to the table and provide a bit more detail. Again, I like the tax credits and I am okay with leaving the employer-based model, but you have to have thought through what’s next. I look forward to your third draft.

Sincerely,

Lucas Pauls

The Second Step – Tax Reform

Part of the “My Prescription” series

Yes, I’m bored already as well, and I apologize in advance. I especially feel bad as I just read “What White People Like,” and it is much more entertaining than tax reform (and it described me well. I have several New Balance sneakers). But in order for “My Prescription” series to move forward I must talk tax reform. Here goes.

Let’s first lay out the current situation. If you receive insurance through your employer both you and your employer will not pay any taxes on the money put toward the insurance (totaling $208.6 billion). Cool!

But if you buy insurance on your own you pay for that insurance with post-taxed money. Not so cool and I would add that it seems unfair, doesn’t it?

Let’s do the numbers:

The average subsidy totals $2,778 per employer sponsored employee.

In firms where half of the employees earn less than 10.43/hour (low income) the subsidy is $2,268 per employee.

In firms where more than half make more than $23.07/hour (high income) the subsidy is $3,283 per employee, that’s 45% higher.

A different analysis in 2004 puts the subsidy for families earning over $100,000 received a tax subsidy of $2,780 where families earning between $40,000 and $50,000 received a subsidy of $1,448. And for those earning less than $10,000 the subsidy totals $102.

So the more you make the greater the handout for health insurance. And we wonder why the poor have a hard time getting insurance. Not only do they have to buy the same insurance with less income, but they get less help (if any at all) than the rich do. That’s some good policy!

So I suggest getting rid of the tax deductible insurance policy and change that in for refundable, advanceable, and assignable tax credits based on income. So the people who need more help getting insurance will get it and those that don’t need the help will get a bit less. Now I still want to encourage employers to kick in for insurance.  It seems silly to lose their help by removing their carrot, so I would still offer a tax break to employers to kick in funds, but the employees’ contribution would come from the tax credit based on income (and employer contribution), not pre-tax dollars.

This adjustment will provide a more equitable tax policy.  Add that to the tax exchanges and removing the employer from sponsorship of health insurance you now have a foundation that we can build upon.  Next time we will build.

The First Step – Health Exchanges

Part of the “My Prescription” series.

I know some out there have already decided they don’t like this plan. The decision was made as their eyes rolled over the words, “Health Exchanges.” It’s not good when you lose people in your title, but I encourage those who have turned away to stick around a bit longer.

In previous posts I have detailed why employer-based health insurance is the basis of our health care system and why I think we as a workforce have evolved past employer-based health insurance. Read here and here. If we are going to consider serious reform of our health care system we need to move away from our current foundation, and health exchanges are my recommendation for doing so. 

Employer-based health insurance was how we as a society pooled people together to spread out risk, however, we know many people are left out of these pools and portability of plans is basically non-existent. The health exchanges would facilitate pooling while allowing for complete portability of plans.  The exchanges would be run by the States (could be regional as well) and would act as clearinghouses  in which insurers would compete for workers’ business while playing under standardized rules. All insurers would be required to operate within the exchanges (possible exceptions under ERISA – too complicated to explain here). Butler equates it to the stock exchange.  Neither the stock exchange nor the health exchange sells either stock or health insurance, but both provide the venue and the rules that regulate their industries.

With the exchanges in place employers would no longer sponsor health insurance meaning that they would no longer pick the available plans or if they are a small company be limited by their small workforce. The exchange would provide the pooling and spread the risk thus allowing more people entrance to the large pool insurance world. Self-employed individuals could also use the exchange making their prices equivalent to the their employed counterparts.

Further, the exchanges allow a worker to select their health plan and then to keep their insurance as they move from one job to another within their geographic area (most likely States). Now we have portability and continuous care – a huge improvement in quality of care.

The exchanges also provide the ability for the States to create risk adjustment schemes, re-insurance schemes, and/or other tactics to provide the best care for their residents.  Each exchange could set its own rules (perhaps under broad federal rules). I will talk about these possibilities in future posts, however, my point now is that the exchanges open up possibilities that are not available now.

Under this set-up employers would no longer sponsor health insurance, but they still would facilitate it.  By facilitate I mean they could still contribute to an employees plan (some dollar amount), deduct payments from payroll and adjust taxes accordingly. Employers seem to do a good job of this administrative work, and I see no reason they should stop providing this service.  Further, employers could still use their contribution to the employees plan as a way to attract workers through fringe benefits.

Ultimately, employers would no longer be sponsors, but facilitators of health insurance.    

Second step – tax reform. Aren’t you excited?

Allegations

As the Democratic nominating process extends into the spring the debate on health care policies has intensified. Health care was front and center at the Ohio and Texas debates thanks to Clinton’s persistence.  During these debates, and elsewhere on the campaign trail, both candidates have made claims and allegations against the others health care policy. Despite the media’s portrayal of the campaigns the debates have been relatively well- mannered and issue oriented.  I hope it remains that way.  However, each has made claims, and I hope to evaluate some of these claims as truths, stretched-truths, partial-truths, or complete falsehoods.

Clinton: Obama’s plan will leave 15 million people without health insurance.

That number comes from a MIT economics professor who stands by the fact that Obama’s plan will not cover everybody, but has distanced himself from the 15 million number – an educated guess.  The truth is neither of the plans provide enough detail to come up with concrete numbers. Clinton has taken a small step backward on this.  She now says things like, “15 million or so.”  The truth is that Obama’s plan is likely to cover less than Clinton’s, but using the 15 million stat is a bit of a stretch.

Stretched-truth, partial-truth

Obama: My plan will provide universal health care 

Clinton: My plan will provide universal health care

Not really.  Obama’s plan will leave people out.  So will Clinton’s.  Only a single payer system will truly include  every single American.  Clinton’s mandate will coerce more people to buy health care, but unless the penalty for not getting insurance is high some will choose to still not get insurance.

Stretched-truth (maybe a falsehood)

That leads to…

Obama: Clinton’s plan will force people to buy insurance that they cannot afford.

In a sense Obama is correct.  Clinton will create strong disincentives to not have health insurance.  Crazy double negative, but the most accurate phrasing.  We don’t know the extent of the disincentives, but they will be there. The question is what is affordable. Both Clinton and Obama will have tax credits based on income that should make insurance “affordable,” but Washington’s sense of affordable may be different than your sense of affordable.  What do people value?  Under Clinton’s plan the government will tell you how to value health insurance.  There are very good reasons for a mandate, but Obama is technically correct in his assertion. Her plan, unlike Obama’s, will force people to buy insurance who would not otherwise – good or bad. 

Partial-truth     

Obama: My plan will lower health care premiums more than any other candidates’ plans.

His re-insurance scheme should lower costs more than Clinton’s. Clinton will lower costs by getting more people (healthy people) into the insurance pools, but I think the Obama’s re-insurance scheme will be more effective in lowering costs. Both plans lack the details to be sure of this claim, but all in all, I think Obama is correct on this count.

Truth 

I invite you to throw out other claims made by our candidates with or without an analysis of the truth behind these claims.  We can discuss how true the candidates are being as they discuss U.S health care.