Tag: health care reform

How Much Will Universal Coverage Cost?

President Barack Obama has declared that his goal in health care reform is “expanding coverage to all Americans.”  So what’s the price tag on universal coverage?

Some reformers are throwing around numbers like $1 trillion or $1.5 trillion.  But according to the Urban Institute, the cost would be closer to $2 trillion.

Jack Hadley and his colleagues estimate, “If all uninsured people were fully covered [in 2008], their medical spending would increase by $122.6 billion.”  If we assume that the cost of covering the uninsured will grow at the same rate the federal government assumes for all health spending growth (6.2 percent), then from 2010 through 2019, the cost of covering the uninsured would be $1.8 trillion.

That’s at a minimum.  According to Hadley et al., their estimate “is neither the cost of a specific plan nor necessarily the same as the government’s costs, which could be higher, depending on plans’ financing structures and the extent of crowd-out.”  Crowd-out is like collateral damange.  When you’re dropping money from the sky, some will inevitably strike innocent bystanders (i.e., the insured).  To ensure you hit the uninsured with $122.6 billion, you need to drop a lot more than that amount.

Thus the full cost of covering the uninsured would be closer to – and possibly well over – $2 trillion.

Obamacare to Come: Seven Bad Ideas for Health Care Reform

President Obama has made it clear that reforming the American health care system will be one of his top priorities, and congressional leaders have promised to introduce legislation by this summer.

In a new study, Cato scholar Michael D. Tanner breaks down the key components of any plan likely to emerge from Congress, and explains how those proposals would “dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients.”

At National Review online, Tanner explains the different aspects to Obama’s plan, all of which could be coming to a hospital near you.  In today’s Cato Daily Podcast, he expands on his paper, describing what health care will look like in years to come.

The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill

Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:

  • Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
  • Mandate that all plans offered through those exchanges meet federal regulatory standards,
  • Mandate “guaranteed issue” in those exchanges,
  • Mandate “uniform and reliable measures by which to report quality and price information,”
  • Impose price controls on those plans by prohibiting risk-rating,
  • Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
  • Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” – essentially, trying to achieve universal coverage by nagging Americans to death.

Needless to say, I am troubled.

The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?

The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level – when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?

And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?

The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.

But the above provisions would sow the seeds of a government takeover of health care – so much so that The Washington Post’s Ezra Klein is salivating:

The word of the day is “convergence.” That – and that alone – is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.

A superficial read of the Patients’ Choice Act – which I’ve uploaded here – would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”

And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms – which it calls a “well-known, bi-partisan achievement of universal health care” – in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.

This idea – present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan – would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.

In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.

UPDATE: After discussions with Sen. Coburn’s staff, I happily issued a few corrections. Still, concerns remain.

On Taxing Employer Health Benefits

Democrats in Congress are reportedly considering taxing employer-provided health insurance benefits as a way to pay for their health care reform plan.  And, even though he brutally attacked John McCain for something similar (see below) during the campaign, President Obama may now go along with the idea.

Much of the media coverage around the idea has equated this tax hike with the McCain plan and other proposals by advocates of market-based health reform over the years that would shift the tax break from employer-provided insurance to individual insurance.  However, there is an important distinction.  The market-based proposals would have taxed employer-provided health benefits (treating them as taxable compensation), but would have provided workers with a deduction or credit for purchasing insurance regardless of whether they receive it through work or pay it on their own.  The result, for all but a handful of workers with the most expensive gold-plated employer plans, would have been tax neutral.  In fact, many workers would receive a net tax cut.   The shift in tax treatment was simply part of a larger strategy to move from a system of employer-provided insurance to one where health insurance was personal, portable, and owned by workers.

The plan being discussed by Congress, on the hand, is simply a tax hike.  It is not revenue neutral—it is a $1 trillion tax increase that will fall heavily on the middle-class.  It is designed not to change the system, but simply to raise revenue. 

That’s a very different thing!

Irony! Get Your Red-Hot Health-Care Irony!

Someone forwarded me an email update from our friends at the Center for American Progress Action Fund (motto: “Disagree with us? Then you hate progress.”).

In one blurb, CAPAF’s crack team of spin-disclosers chides Republicans for discussing health care reform using the language recommended by pollster Frank Luntz, who “advised Republicans to fearmonger” Obama’s proposals to death!  Or something.

The same email had another blurb titled, “INSURANCE COMPANIES AT THE TABLE?” There, CAPAF’s crack team of spin-disclosers describe how “health insurance companies and lobbying groups” stood beside President Obama last week to announce their support for reducing spending growth.  The blurb continues:

However, days later, the insurance companies tried to walk back their promises, saying Obama had overstated their commitments. Richard Umbdenstock, the president of the American Hospital Association, wrote to his company’s state and local affiliates to “clarify” that “[t]he groups did not support reducing the rate of health spending by 1.5 percentage points annually.” However, the letter to Obama signed by Umbdenstock and the other insurance leaders specifically pledged…

Umbdenstock and the other insurance leaders”??  Since when do we classify hospitals as insurance companies?  And if “the insurance companies…sa[y] Obama had overstated their commitments,” why not quote the insurance companies?  Could they not find such a quote?

It’s as if CAPAF’s crack team of spin-disclosers has decided to blame every development that might threaten a – ahem – government take-over of health care on the insurance companies.  Now why might they want to do that?  Could it be because insurance companies are less popular than hospitals?

And how would CAPAF’s crack team of spin-disclosers know that?  By listening to a … pollster?

Church of Universal Coverage Begins Its Campaign against that Pesky CBO

Last Monday, when lobbyists for the six biggest health care industry groups joined President Obama to announce their support for reducing health care spending by $2 trillion over 10 years, I penned and voiced my suspicion that the real motivation was to pressure the Congressional Budget Office to assume that Democrats’ health care reforms would reduce spending, despite the lack of evidence.  My wife said that hypothesis sounded a little … conspiratorial.

Last Thursday, when it was revealed that there was no actual agreement and that the White House basically manipulated the industry to get a week’s worth of good health care press, I started to doubt whether strong-arming the CBO was really the goal of that media stunt.  Then Jonathan Cohn set me straight.

In an article for The New Republic aptly titled, “Numbers Racket,” Cohn acknowledges that the biggest problem facing Democrats is that the $2 trillion cost of universal coverage has to come from somewhere.  Cohn, like many Democrats, complains that the “curmudgeonly” CBO isn’t letting reformers off the hook by assuming that universal coverage will (partly) pay for itself.  Cohn also acknowledges that pressuring the CBO was a likely purpose of last week’s media stunt:

The CBO took nearly the same positions back in 1994 – a fact not lost on either the White House or congressional leaders, who have communicated their concerns publicly and privately. One apparent purpose of bringing industry leaders to meet Obama this week was to showcase the potential for cutting costs; see, the administration seemed to be signaling, even the health care industry thinks it can save money by becoming more efficient.

Democrats have set their sights on legislation that would give government enormous power over Americans’ earnings and medical decisions.  The main political obstacle to those reforms is their cost, thus Democrats are pressuring the CBO to pretend that those costs don’t exist.  The CBO (and everybody else) should resist the Democrats’ effort to make truth yield to power.

How Does It Feel to Be at the Table Now?

On Monday, the Obama administration held a well-publicized love-fest with lobbyists for the health care industry.  It turns out that rather than a “game-changer,” the event was a fraud.  And the industry got burned.

At the time, President Obama called it a “a watershed event in the long and elusive quest for health care reform”:

Over the next 10 years — from 2010 to 2019 — [these industry lobbyists] are pledging to cut the rate of growth of national health care spending by 1.5 percentage points each year — an amount that’s equal to over $2 trillion.

By an amazing coincidence, $2 trillion is just enough to pay for Obama’s proposed government takeover of the health care sector.

Yet The New York Times reports that isn’t the magnitude of spending reductions the lobbyists thought they were supporting:

Hospitals and insurance companies said Thursday that President Obama had substantially overstated their promise earlier this week to reduce the growth of health spending… [C]onfusion swirled in Washington as the companies’ trade associations raced to tamp down angst among members around the country.

Health care leaders who attended the meeting…say they agreed to slow health spending in a more gradual way and did not pledge specific year-by-year cuts…

My initial reaction to Monday’s fairly transparent media stunt was: “I smell a rat.  Lobbyists never advocate less revenue for their members.  Ever.” The lobbyists are proving me right, albeit slowly.  (Take your time, guys.  I don’t mind.)

The Obama administration seems a little less clear on that rule.  Again, The New York Times:

Nancy-Ann DeParle, director of the White House Office of Health Reform, said “the president misspoke” on Monday and again on Wednesday when he described the industry’s commitment in similar terms. After providing that account, Ms. DeParle called back about an hour later on Thursday and said: “I don’t think the president misspoke. His remarks correctly and accurately described the industry’s commitment.”

How did the industry find itself in this position? Politico reports:

The group of six organizations with a major stake in health care…had been working in secret for several weeks on a savings plan.

But they learned late last week that the White House wanted to go public with the coalition. One health care insider said: “It came together more quickly than it should have.” A health-care lobbyist said the participants weren’t prepared to go live with the news over the weekend, when the news of a deal, including the $2 trillion savings claim, was announced by White House officials to reporters.

Gosh, it’s almost like the White House strong-armed the lobbyists in order to create a false sense of agreement and momentum.  Pay no attention to that discord behind the curtain!

At the time, I also hypothesized that this “agreement” was a clever ploy by all parties to pressure a recalcitrant Congressional Budget Office to assume that the Democrat’s reforms would produce budgetary savings.  “Otherwise, health care reform is in jeopardy,” says Senate Finance Committee chairman Max Baucus (D-MT).  Turns out there was no agreement, and the industry was just being used.

American Hospital Association president Richard Umbdenstock was more right than he knew when he told that group’s 230 members:

There has been a tremendous amount of confusion and frankly a lot of political spin.

Merriam-Webster lists “to engage in spin control (as in politics)” as its seventh definition of the word “spin.”  Its second definition is “to form a thread by extruding a viscous rapidly hardening fluid — used especially of a spider or insect.” Which reminds me…

CORRECTION: My initial reaction to Monday’s media stunt – “I smell a rat” – was transcribed incorrectly.  It should have read, “I smell arachnid.”

(HT: Joe Guarino for the pointers.)