Rational Arguments

I was just on the radio talking about the meaning of Senator Snowe’s vote on health care reform, and I think it’s worth a post.

Since I admitted I was wrong about Senator Baucus’ plan, I’ve been trying to rethink whether the administration has been right in their quest for bipartisanship.  Whether or not you agree with President Obama’s agenda, you have to admit that he’s a pretty gifted politician.  I can’t count the number of times I thought, during both the primaries and the general election, that he was doing the wrong thing.  Turns out each time I was wrong, and he was right.

So maybe he was right about this, too.

You see, without Senator Snowe’s support, the administration (and the Senate) would need to negotiate with a handful of Senators, who are often far more conservative than Senator Snowe.  They are not only against the public option, they also seem to be against robust subsidies.  Now, with Senator Snowe’s support, they need to negotiate with only one reasonably moderate Republican.  If they get her support, it seems very unlikely that any Democrats would vote against the bill; certainly they won’t filibuster it.  And, really, the only support they need is to allow the bill to come to the floor for a vote.  They won’t have any trouble passing it.

Moreover, Senator Snowe has been vocal about the need for subsidies large enough to make insurance affordable to the middle class.  Negotiating with Senator Snowe may ironically yield a much more liberal bill than negotiating with Senators Lincoln, Bayh, Landrieu, McCaskill, Pryor, and Nelson.

Did they really think this far ahead?

UPDATE:  Since some you asked, here is a link to the radio interview.

A reader writes:

I am disappointed that there is no mention of dentistry in the proposed health care reforms (as far as I have seen). There is a tremendous waste of time, energy, procedures, overtreatment, undertreatment and the like I see from patients coming into my dental practice.

I couldn’t agree more about the need for dental health.  We ignore the importance of dental health, both physically and socially, at our own peril.  There is some good news, however.  Even the Senate Finance Committee bill requires as a minimum (emphasis mine):

All plans must provide preventive and primary care, emergency services, hospitalization, physician services, outpatient services, day surgery and related anesthesia, diagnostic imaging and screenings (including x-rays), maternity and newborn care, pediatric services (including dental and vision), medical/surgical care, prescription drugs, radiation and chemotherapy, and mental health and substance abuse services that at least meet minimum standards set by Federal and state laws.

So dental coverage for children is a must.  Further good news is that dental coverage is explicitly mentioned throughout the bill, although it isn’t mandated.

Bottom line, there is no mandate for adult dental insurance, but this is a start.  And mandated coverage for children is good to see.

I was just starting to write a post on the many amendments to the Senate Finance Committee bill, when I discovered that Igor Volsky had already done it, and done it incredibly well.

Go read his post.

A reader writes:

I do like my cadillac insurance plan. It costs me just $150 a month but my employer plays the other $750. Under the 2 plans, I would be charged a tax of 35% for having that plan…

I also have read the 35% tax that we will pay for our insurance premiums if the total cost of the plan exceeds $750 (that’s my amount plus the amount my employer pays for me) for a single plan. Most of us with anything close to a decent policy now will be paying this additional luxury — oh yeah, “cadillac plan” — tax.

I am completely open to debate as to how we raise money for reform.  And I acknowledge that increasing access will raise costs.  Some people feel this should be done in a progressive way, that focuses on the more well-to-do.  The tax on “cadillac” plans is one way to do that, although not my preferred method.  Others feel they should be flat, and affect everyone the same percentage.  Debate.

However, this reader is wrong on a few things.  If I read his numbers correctly, then the total premiums on his plan are $900 a month.  If he is part of a family, then this isn’t a “cadillac” plan.  Remember, the average family plan in the United States is over $13,000 a year.  That’s the average!  A Cadillac plan would have to be much, much more expensive.

If, however, his is a plan for a single person, then his plan is very expensive at $10,800 a year.  It’s almost as much as my very generous family plan!  However, the “cadillac” tax is only on that money above the cap.  And the specifics of the Baucus bill say:

Under the Baucus plan, insurers selling a plan costing more than $8,000 for an individual and $21,000 for a family would have to pay a 35 percent excise tax on the excess amount.

So this reader would owe a total of $980 of “cadillac” tax right now.  I’m not saying that’s not money, but it’s not communism either.

UPDATE: Fixed my math!

I’ve had a number of requests to weigh in on the Wyden Amendment, which, of course, is based on the Wyden-Bennett Bill. If you asked me six months ago whether we would have been talking about this, I would have answered with a resounding, “No!”  Shows how predictable this whole process has been.

Basically, “The Free Choice Proposal” (as it is known) offers the following provisions:

1) Employers that offer group health coverage must offer the equivalent of a minimum benefit plan, contribute at least 70% of the premium, and offer at least one other health plan of greater actuarial value; or

2) Employers that do not offer the choice of a low cost option must offer workers a voucher worth at least 70% of the average of the three lowest cost plans in the change; or

3) With an adequate transition, employers can take their entire group to the exchange where they would receive a group discount so long as they provide at least 70% of the cost of average of the three lowest cost plans in the exchange; or

4) Employers that do not offer health insurance choices, a voucher, or go to the exchange, would have to pay a “fair share” fee which would be a percent of the national average of the three lowest cost plans in each state.

In essence, there will be an individual mandate.  Employers will either have to offer at least two options to their employees and pay a large chunk of premiums, or give them a voucher to help them buy insurance on the exchange.  The major difference between this and all the other bills, it that it will likely result in a lot of people (if not everyone) getting their insurance through the exchange.  HR3200, and the HELP bill, actually prohibit many employers from going to the exchange.  President Obama, and many others, have been so intent on keeping the employer based system in place, that this likely scares them.

Some have argued that this could lead to a fractured risk pool.  Senator Wyden counters this with a national reinsurance pool to protect those whose costs are higher than expected.  This is accompanied by provisions already in Senator Baucus’ bill that perform risk adjustments.

On the other hand, this bill has been scored amazingly well by the CBO.  And – shockingly -the bill itself has a number of Republican co-sponsors.  It also has the support of a number of knowledgeable people all over the ideological spectrum.

If you want my opinion, here it is.  I’d feel better about it with the addition of a public option, but if you think that the competition provided by the insurance exchange is a good thing, then letting everyone in is even better.  This would do more to contain costs than anything else I’ve yet seen. The difference is that a single-payer system might contain costs by providing less money to the system overall, ideally leading to a wider discussion of how and what we want to pay for.  This plan, on the other hand, controls costs by putting the incentives on individuals to buy less.  I think the better way to reduce costs is at the provider end, not the patient end.

But I live in the real world.  I recognize that those opposed to a single payer plan fear that my preferred method would result in rationing, instead of rational decisions about the use of more cost-effective treatments that I think could occur.  I also recognize that they think incentivizing consumers will result in better shopping and price reductions without negative health consequences, instead of the forgoing of needed care that I fear might occur.

I believe the evidence shows I’m right, but smart people I respect disagree.  I also acknowledge that we can fix things down the road if they don’t work out as we hope, as nothing is forever.  Therefore, although I would prefer a single payer plan, I recognize that Senator Wyden’s amendment would at least start to contain costs while still achieving the major goals of reform.  Senator Baucus’ bill is better with it than without it.

People keep asking me to give real numbers.  Sure, I can say “families making 25% of the poverty line”, or say that “premiums cap out at 12% of income”, but what does that really mean?

And then along comes Nicholas Beaudrot to make things easy.  Here is a chart showing what the monthly premiums are for families making different levels of money under the Massachusetts plan, Senator Baucus’ plan, and his plan with different tweaks that might come from the House or Senate reconciliation:

See that red bar  The big one?  That’s the monthly premium under Senator Baucus’ plan.  As I’ve discussed before, the reason it’s more than the other plans is that he made the bill cheaper by reducing subsidies.  So, yes, the CBO scores the bill as less expensive, but it achieves this by making working class families pay more out-of-pocket every month.  How much more?  Look at the chart.  A family earning $61,000 a year will be paying almost $700 a month just in premiums; this doesn’t include co-pays, co-insurance, etc.  It’s a lot of money, and we will be mandating them to pay it.

(h/t Matt Yglesias)

A reader writes:

Since you desire questions and answer them so well, I have one for you now.  Dr. Carroll, in any of the healthcare reform bills, is there a provision that caps the amount of premium that an insurance company can charge an insured?  After all, if insurance companies are forced to cover applicants with existing health issues, those folks will pay a hefty price.  Probably more than they can afford.  Add in the additonal taxes/fees levied on insurance companies that the Baucus bill is proposing and you have the potential for health insurance premiums going through the roof. Hopefully, there will be a ceiling on how much an insurance company can charge, based on some fixed formula that isn’t inflated by the expectation of government tax credits or subsidies to insurance policyholders.   Thanks again Dr. Carroll for being a calm, sensible and intelligent contributor to the healthcare reform debate.  If you could pin your radio and/or television schedule to the blog permanently, that would be awesome.

As far as I can tell from the bills so far (I’m still working my way through the Baucus bill), there are no maximums set on how much premiums can be. There are provisions on the minimum amount of services that must be covered. There are also maximums that some people could be expected to pay at some levels of income, as a percentage of their income. This is one of the main arguments for the public plan. It’s a way – theoretically – for the government to make sure that at least one plan is still “affordable”. Otherwise, they may all cost too much.

There are regulations, however, as to the ratio between what a plan can charge based on risk. In the House bill, the most a company can charge based on age, tobacco use, or family composition is twice the cheapest amount. In Senator Baucus’ bill, that ratio is 7.5 to one. This means that premiums can likely go much higher in the Senate Finance Committee version, as described at this time. It’s still got a ways to go.

A reader writes:

Senator Baucus keeps saying his bill is cheaper and more fiscally responsible.  Even the CBO seems to agree.  So isn’t that better?

I’m going to keep repeating this because it’s so critical to honest debate.  There are good and bad aspects to everything.  There are always trade-offs.  You don’t really believe that the bill is cheaper for no reason do you? Yes, it costs less – but what did we give up in order to get that savings?

If you read the bill, one of the biggest area of savings likely comes from reduced subsidies.  Remember, those subsidies are aimed more at the middle class than anyone else.  People at the lower end of the socio-economic spectrum will get Medicaid coverage.  So Senator Baucus achieves this savings by making insurance cost more for many middle class families.

Is that a good thing?  That’s up to you.  What’s more important?  Helping families making $60,000 – $80,000 a year afford $15,000 insurance premiums (before other costs)? Should they bear the burden of a cheaper bill?  Is that good policy?

A better way to put it: Is this where we should be looking for cost savings in reform?

UPDATE:  Turns out Senator Snowe agrees with me.  She’s a Republican, right?

But just as importantly, Snowe also believes (as I do) that Baucus’ plan offers weak and inadequate subsidies. “The affordability question is crucial,” Snowe said. “It’s a central component, because at the end of the day people have high expectations they will have access to affordable health insurance.”

I admit I’m not an expert in politics. I like to think I know a bit about health policy, and I try and stay pretty informed about issues, but politics – that baffles me.

So can someone help me understand me why Senator Baucus spent months and months in secret talks, delaying this whole process, to craft a “bipartisan compromise” that has no Republican support whatsoever?  He’s given in on the public plan (raising the cost), on subsidies (lowering access), even on advance directive counseling reimbursement (no comment).  For what?  He’s produced a bill so far from the others that it’s losing Democratic support – in his own committee!

Why would you negotiate to a point where you gain no support from the other side and lose support on your own?  Who wins?  What’s the angle?

Someone please explain it to me!