Sunday, August 16, 2009

common ground on health care

Most of us have one or more of them in our lives. A good friend, a relative, a co-worker. Someone we like and respect – maybe even love – but who has become a victim of the Body Snatchers.

They believe what they hear on FOX News and read on the editorial pages of the Wall Street Journal. They send around emails claiming that Obama is a racist and a fascist and that “ObamaCare” means Sarah Palin’s kid will be euthanized by a “death panel.”

I have a couple of dear friends – great people, smart, well-educated – who have gotten themselves worked up on the issue of health care. After receiving a barrage of email from them on the subject, I took it upon myself to try to define and narrow our differences. The following is a distillation of the ensuing email exchange. If you think it might be useful, feel free to share all or parts of it with your right-wing brother-in-law (alas, I don’t think I had much success dissuading my friends from the belief that Obama is attempting to engineer a “government takeover” of the health care system):

Let’s try to find common ground.

Paul Krugman had a good summary of the core of the health care debate on his blog (“
Health reform made simple”):

Kudos to the Times for a story that, for once, emphasizes the remarkable unity of vision health reformers are showing, rather than the squabbles that are an inevitable part of passing major legislation.

The essence is really quite simple: regulation of insurers, so that they can’t cherry-pick only the healthy, and subsidies, so that all Americans can afford insurance.

Everything else is about making that core work. Individual mandates are a way to prevent gaming of the system by people who don’t sign up until they’re sick; employer mandates a way to hold down the on-budget costs by preventing a rush by employers to drop insurance; the public option a way to create effective competition and hold costs down further.

But what it means for the individual will be that insurers can’t reject you, and if your income is relatively low, the government will help pay your premiums.

That’s it. Any commentator who whines that he just doesn’t understand it is basically saying that he doesn’t want to understand it.

I think there are some things we can agree upon:

1/ The UK has a system of nationalized health care where the government actually employs medical professionals and owns the hospitals, etc. No one is proposing that in the US. We can all agree we don’t want that. So let’s take that off the table. Comparisons to the UK, therefore, are irrelevant.

2/ Canada has a “single-payer” system where the government acts like one big insurance company that pays private health care providers (i.e., government bureaucrats substitute for insurance company bureaucrats but providers remain private). Here is a good piece from the Denver Post on the Canadian health care system (“Debunking Canadian Health Care Myths”). We already have government-run single-payer systems in the US – Medicare (for the elderly) and Medicaid (for the poor) – that cover roughly a third of all Americans. So “single-payer” really isn’t all that radical. And numerous surveys have found that Medicare recipients rate their satisfaction with their quality of care higher than do customers of private health insurance:

A recent Commonwealth Fund survey found that "elderly Medicare beneficiaries reported greater overall satisfaction with their health coverage." Medicare is so popular that most Americans support expanding its coverage to Americans aged 55 to 64. According to a recent Kaiser Family Foundation poll, "over half of Americans (53 percent) 'strongly' support such a proposal and an additional 26 percent say they support it somewhat, totaling 79 percent backing." Similarly, a Health and Human Services Department-commissioned study released in June found that "56 percent of enrollees in traditional fee-for-service Medicare give Medicare a rating of 9 or 10 on a 0-10 scale," while "only 40 percent of Americans enrolled in private health insurance gave their plans a 9 or 10 rating." "The higher scores for Medicare are based on perceptions of better access to care," the National Journal noted, commenting on the surveys, adding that "[m]ore than two thirds (70 percent) of traditional Medicare enrollees say they 'always' get access to needed care (appointments with specialists or other necessary tests and treatment), compared with 63 percent in Medicare managed care plans and only 51 percent of those with private insurance."

But “single-payer” is often portrayed by opponents as a “government takeover” of health care (an official
poll-tested Republican talking point). As a result, many people who consider Medicare sacrosanct simultaneously oppose a “single-payer” system. Krugman recounts this anecdote:
At a recent town-hall meeting in suburban Simpsonville, a man stood up and told Rep. Robert Inglis (R-S.C.) to “keep your government hands off my Medicare.”

“I had to politely explain that, ‘Actually, sir, your health care is being provided by the government,’ ” Inglis recalled. “But he wasn’t having any of it.”

But regardless of whether you support a single-payer system, it was ruled out even before health care reform efforts got underway in Congress. None of the health care reform plans working their way through Congress involves a single-payer system like Medicare for the rest of us. Since no one is proposing a single-payer system, let’s agree to take that off the table, too. Comparisons to Canada, therefore, are irrelevant.

Now, you can argue that any particular health reform proposal is a “slippery slope” to either nationalized health care (#1) or a single-payer system (#2). But the “slippery slope” argument is really a non-argument – there is no logical counter to it because it is not based in logic (which is why it is such a popular rhetorical device). A public option does not inevitably lead to a single-payer system or nationalized health care. In real life, very few things inevitably lead to their logical – or illogical – extreme. (Holding hands doesn’t inevitably lead to a “home run” – much to my frustration earlier in life.) We should deal with actual proposals, not terrifying caricatures of them. Let’s just agree on #1 and #2 and judge individual proposals on their own merits.

3/ We want to find a way to extend health insurance to the nearly 50 million Americans who lack it now.

4/ We want to find a way to reduce waste and inefficiency in the health care system so that we can bring down the long-term growth (“bend the curve”) of health care costs without limiting choice or reducing services. Now obviously that is a bit utopian. It’s hard to reduce the growth in costs without changing anything. If everyone can choose any and all health care services they want, we’re probably not going to make much progress controlling costs. But at least we can all agree that if someone would prefer to have a private insurance company limit their choices instead of a government-run insurance entity limiting their choices, they should have that option. We can all agree that if you like your current insurance plan you shouldn’t be forced by the government to change to something else. And none of the plans working their way through Congress would force you to give up your current insurance plan or your current doctor.

In a lot of the discussions of health care, these points get confused, particularly #3 and #4. They are related in that everyone would like to find a way to pay for expanding coverage, to the extent possible, by reducing waste and controlling costs in the existing system. But they are not the same thing. Both of those goals -- #3 and #4 – are worthy goals by themselves and in theory at least they can be addressed separately – we can come up with some ideas for expanding coverage and other ideas for reducing cost growth. The ideas for expanding coverage don’t necessarily have to reduce cost growth and the ideas for reducing cost growth don’t necessarily have to expand coverage. But, ideally, we want to pursue both goals.

Here again, I think we have broad agreement on the principle that any changes we come up with should be at least deficit-neutral – that is, they should be paid for in some manner (mandates, taxes and/or cost savings) and not add to the long-term deficit (unlike, for example, Medicare Part D which was passed in 2004 with no discussion whatsoever of how to pay for it and is now estimated to contribute almost $8 trillion to our long-term unfunded Medicare liabilities). President Obama has made that commitment.

Can we agree on all four of those points?

Making things more complicated is that from a practical political and economic standpoint, it seems we need to preserve and build upon our existing employer-based health insurance system. In theory, if you were starting from scratch, you probably wouldn’t tie health insurance coverage to employment (few other countries do – our system is really a legacy of big business and big unions after WWII coming together and agreeing on a system that makes it difficult for employees to leave their jobs, thereby increasing the power of big business and big unions over those employees). There are proposals out there that would have us evolve away from our current employer-based system in favor of a system of individual insurance policies. The Wyden-Bennett Bill (the so-called “

Healthy Americans Act”) is one of them. And John McCain proposed one during the 2008 campaign. But these proposals are extraordinarily complex (while I understand the general concept behind the Wyden-Bennett Bill, I have never been able to fully comprehend the details). And they would constitute a radical departure from our current system. If even the incremental reforms being proposed to our current employer-based system lend themselves to fear-mongering distortions and misrepresentation, imagine trying to sell the idea that the government will take away your employer-based coverage.

In any event, from a political standpoint, there is just too much opposition from major business organizations and unions to any changes that would undermine the current employer-based system. And from an economic standpoint, shifting all the costs of health care coverage from business to government would require new taxes that few politicians would be willing to impose (even if it would take a big burden off American employers). So we’re trying to modify the existing employer-based system, not replace it.

The current employer-based system is strongly reinforced by the current tax system, which creates a huge subsidy for employer-based health insurance. Employers can deduct the cost, as they do wages and salaries, but employees don’t have to report the value of their employer-provided health care as income. (The big losers are people like me who buy their health insurance in the private market. We have to pay with after-tax dollars. Either everyone should get tax-free health care or no one should.) Most economists agree that the best way to pay for extending coverage would probably be to tax employer-provided coverage. It would make the ultimate consumers of health insurance – the employees – more sensitive to its cost. But as McCain found out during the last election, it is a big loser politically. So much so it is, as a practical matter, off the table (except, perhaps, for very high-value, “gold-plated” policies above some ridiculously high amount, like $25,000/year).

Since we’re building off the existing employer-based system, most proposals entail some kind of employer mandate to prevent employers from dropping their insurance and shifting the cost to the government. The House proposal would exempt small businesses with payrolls of less than $500,000, which would
exempt 87% of all businesses (the 13% that would be subject to the mandate employ 81% of the country’s workers). While there is some opposition to an employer mandate, there is pretty broad consensus on it – even Wal-Mart supports it. The alternative is more and more employees losing their health insurance or those insurance obligations being dumped on the government.

There is also pretty broad bipartisan agreement on the need for health insurance reform. As the
New York Times put it recently:
Lawmakers of both parties agree on the need to rein in private insurance companies by banning underwriting practices that have prevented millions of Americans from obtaining affordable insurance. Insurers would, for example, have to accept all applicants and could not charge higher premiums because of a person’s medical history or current illness. All insurers would have to offer a minimum package of benefits, to be defined by the federal government, and nearly all Americans would be required to have insurance. …

“There is wide agreement on the two elements of the legislation that the public cares about most: insurance market reforms and the expansion of coverage, with subsidies,” said Drew E. Altman, the president of the Kaiser Family Foundation, which focuses on health policy.

Some of the consumer protections in the House plan are:

• Prohibits rescission except in provable cases of fraud, provides for independent appeals process.

• Prohibits exclusions for pre-existing conditions or limitations of benefits based on health-related factors.

• Provides for standardized electronic claims filing

• Provides for standardized electronic eligibility determination at point of service

• Requires timely payment of claims.

• Requires disclosure of plan terms and conditions, financial disclosures, enrollment data, claims denials, rating practices, and cost-sharing in "plain language."

• Guarantees renewability

I think we can probably agree these are all good things.

There is also pretty broad agreement on the idea of some sort of government-run insurance exchange where consumers could go to engage in comparative shopping for health insurance.

Here is where we get to a major difference. President Obama, and most Congressional Democrats support the idea of a “public option” that would compete with private insurance companies. (There is a wide disparity in poll results on the popularity of a “public option” depending on how the question is worded and whether some explanation is given as to what exactly a “public option” is. I’ve seen it favored by as many as 76% and 72% of Americans.) According to the current House bill, this public option would have to be fully financed through premiums and co-pays with no subsidies other than the individual subsidies that would be available to private insurers. And the public option would not be available to the employees of most large employers. And it couldn't even piggyback on the existing Medicare infrastructure and provider agreements (a really stupid restriction, if you ask me -- it would just unnecessarily add to the cost structure of a public option providing no value in return other than to hobble it). A public option is most important for competition in the individual insurance market where there is very little competition today.

Despite all the talk of free markets,
most health insurance markets are highly concentrated :
Various studies have found that health insurance is one of the most concentrated markets in the U.S., and that the lack of competition may be one factor behind sharply rising premiums. Each year, the American Medical Association surveys the competitive landscape for commercial health insurers; the latest report found that out of 314 metropolitan areas across the nation, 94 percent can be defined as highly concentrated, with two companies or even a single provider dominating the market. In 15 states, one insurer has half or more of the entire market, and in seven states, a single insurer has 75 percent or more.

The hope is that a public insurance option could offer lower prices because it would be non-profit and would be able to cut down on the roughly 30% of all health care dollars bpent on overhead, administration, profits, etc. (much of it spent trying to select out customers who might actually need health care or to shift health care costs to other parties). A public option could provide some competition in the vast majority of markets where there is little or no effective competition (particularly for individual health insurance policies).

Unfortunately, it appears the insurance companies may have already won the battle over a public option. It is looking increasingly unlikely that a public option will survive deliberations in the Senate. As BusinessWeek wrote in a cover article (“
The Health Insurers Have Already Won ”) last week:
As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group (UNH), Aetna (AET), and WellPoint (WLP). The carriers have succeeded in redefining the terms of the reform debate to such a
degree that no matter what specifics emerge in the voluminous bill Congress may
send to President Obama this fall, the insurance industry will emerge more
profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling. …

The industry has already accomplished its main goal of at least curbing, and maybe blocking altogether, any new publicly administered insurance program that could grab market share from the corporations that dominate the business. UnitedHealth has distinguished itself by more deftly and aggressively feeding sophisticated pricing and actuarial data to information-starved congressional staff members. With its rivals, the carrier has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry.

… Perhaps more than any other insurer, UnitedHealth is poised to profit from health
reform. Its decade-long series of acquisitions has made the company a coast-to-coast Leviathan enmeshed in the lives of 70 million Americans.

After all, we wouldn’t want a non-profit public option to limit the profits of UnitedHealth. Here are some stats on the
compensation of its CEO, Stephen J. Hemsley:
2007 Compensation: $13.2 million
2008 Compensation (Forbes): $3,241,042
Total Value of Unexercised Stock Options (Forbes): $744,232,068
2009 Options Exercise: $127,001,281
Articles: Hemsley returns $190 million in stock options acquired as a result of practices found to be fraudulent by the SEC (American Medical News)

Last month,UnitedHealth reported that its second quarter profits doubled from the previous year, even in the midst of the current recession, to $859 million. It paid out only 83% of its premium dollars to doctors, hospitals and other health care providers.

One proposed solution, other than the public option, to address the problem of lack of competition in the private insurance markets is the idea of letting insurance companies compete across state lines. The problem with that is that all insurance companies would incorporate in the state with the most lax regulation. It would be, effectively, total deregulation of the health insurance market. One reason insurance is highly regulated is because you want to be sure the companies taking your premiums have the ability to pay off the risks they are assuming (as well as providing various consumer protections).

I think we learned last fall the dangers of deregulation in the financial markets. AIG, for the most part a financially-sound, heavily-regulated insurance company, had one part of the company that was almost entirely deregulated – essentially a hedge fund attached to an AAA-rated insurance company that took on something like $1.6 trillion in derivatives exposure and almost brought down the global financial system. When companies can choose their regulators, it is a race to the bottom. An alternative is national insurance regulation. And to some extent most of the health care proposals would have a core of national consumer protections. But a complete abandonment of state regulation of insurance companies in favor of national regulation is probably not in the cards politically. The insurance companies and the states would both oppose it.

Another battleground is attempts to repeal the current prohibition on Medicare negotiating drug prices (as any private insurer does). Back in 2004, when a Republican Congress (with very few Democratic votes) passed the Medicare Part D prescription drug benefit, Republican Senator Billy Tauzin (who took the lead in drafting the bill) made sure to make it ILLEGAL for Medicare to negotiate drug prices, saddling American taxpayers and elderly Americans with much higher costs. (Just weeks after the bill passed, Tauzin resigned from the Senate in the middle of his term to become the chief lobbyist for the pharmaceutical industry at a salary of $2 million/year, where he continues to do his dirty work to this day.) There is certain to be a big fight over attempts to repeal this guarantee of the profits of the drug companies.

Health care reform is a complex subject and I couldn’t hope to cover all the issues. My basic point is that the areas of general agreement greatly overwhelm the areas of disagreement – to a remarkable degree. But you would never know that from all the over-heated political rhetoric (intended to create disagreement where it doesn’t necessarily exist). There aren’t easy answers to everything, but there certainly isn’t anything like the fundamental disagreement that opponents are trying to stoke. Rather than making wild accusations and engaging in partisan battle, let’s begin by trying to identify the areas of agreement and build on those. Then, when areas of disagreement are identified, we can try to figure out where and why we differ.

Talk of “socialized medicine” or a “government takeover” of health care is a smoke screen. No one is proposing even a single-payer plan (like Medicare and Canada where the government acts as an insurer paying private providers) let alone government-run health care (as in the UK where the government is actually the employer of health care professionals). And certainly no one is proposing euthanasia or “death panels” or about 90% of the other nonsense that is being spread around in an attempt to scare people.

I don’t know how you could get much more “incremental” than current reform proposals unless you abandoned reform efforts altogether. From the beginning, single-payer was off the table. Same thing with any proposal that would evolve the system away from employer-provided insurance toward individual policies (as the Wyden-Bennett proposal and McCain’s 2008 campaign proposals would have). It looks increasingly like the insurance companies won’t have their profits and oligopolistic hold on individual markets threatened by a public insurance option (which would give consumers, especially those in the individual market, an additional choice where they don’t now).

What, then, is really so radical about current reform proposals? Refer back to the Krugman summary at the top of this post. I can see why progressives would be disappointed at the modest, watered-down direction of current reform proposals. Loss of a public option would be a big blow to real reform efforts. But it’s hard to understand the intensity of the right-wing opposition (apart from the fact that they are always angry and especially so with a popular African-American president in the White House).

It’s been 97 years since Teddy Roosevelt ran for a third presidential term on a
Progressive Party platform that included as a key plank universal health care. And it’s been 64 years since Harry Truman proposed a government-run national health insurance plan almost identical to the “public option” currently under consideration. (“The American Medical Association (AMA) launched a spirited attack against theTruman proposal, capitalizing on fears of Communism in the public mind. The AMA characterized the bill as "socialized medicine", and in a forerunner to the rhetoric of the McCarthy era, called Truman White House staffers "followers of the Moscow party line".) It’s been 16 years since the last attempt at health care reform was killed through a campaign of lies and distortions. Meanwhile, our “system” has only gotten worse. And this time around, even the AMA is on board with reform. The AMA is certainly not a radical organization bent on nationalization of the health care system.

It is also essential to compare reform proposals with the alternative – which is an untenable status quo. That is, effectively, the Republican alternative.

We are the only industrialized country in the world without universal health care. The number of Americans without health insurance is approaching 50 million. Our current system is bankrupting the country and American businesses. Let’s preserve the best of what works and fix what doesn’t.
“Just a broader point — if somebody told you that there is a plan out there that is guaranteed to double your health care costs over the next 10 years, that’s guaranteed to result in more Americans losing their health care, and that is by far the biggest contributor to our federal deficit. I think most people would be opposed to that. Well, that’s the status quo. That’s what we have right now.”

President Obama
July 22, 2009

1 comment:

Doug S. said...

I <3 this blog.