Rational Arguments

As we’ve discussed previously, the Senate seems to have the upper hand in negotiations on hoe to merge its bill with the House.  That doesn’t mean the House shouldn’t try, especially if the White House gives it some support.  Personally, I think there’s little chance we’re not getting an excise tax.  There is definitely not going to be a public option.  But, the House may be able to wrangle increased subsidies.  And, they may be able to improve the insurance exchanges:

The White House wants to include a national health-insurance exchange in the health bill, which would give House Democrats one of their top remaining demands, according to an official involved in the discussions.

At issue is who would run the new insurance exchanges that would allow consumers to comparison-shop for health coverage. The House’s version of the health overhaul calls for the federal government to run a single, national exchange, while the Senate’s version would let states run their own exchanges.

Proponents of a federal exchange say state exchanges could have too few enrollees to function well, or might have enrollees who on average are too sick. Those who favor state exchanges say they would allow for more flexible regulation than one-size-fits-all standards set in Washington.

For the same reason a national public option was superior to many state-based ones, a national exchange would be better.  I hope they keep pushing.

Some of those on the Left who have been arguing that we should “kill the bill” are amending (or adding to that) charge to give some subtlety to it:

There is a very insidious myth right now that there is a large group of progressive leaders who want to “kill” health care reform in its entirety. While there might be some progressive leaders out there who have advocated for this position, I have yet to hear from them. What I have heard from people like Howard Dean, Markos Moulitsas, Keith Olbermann, Jane Hamsher, etc… is that they simply want to kill the current version of the Senate bill. None of them, to my knowledge, have advocated ending all efforts to pass a health care reform bill. I believe each and every one of them have advocated for simply passing a different bill through different means. Do not heed those who are working to create a false dynamic where the only two options are passing this horrible Senate bill or passing nothing at all. The idea that there is a large group of progressive leaders trying to kill health care reform is a red herring.

The other great myth is that if this current Senate bill, thoroughly compromised to get 60 votes, does not become law it will be impossible for any health care reform to pass during this Congress. President Obama made sure to include instructions to pass health care reform using reconciliation in the budget for a reason. It is still completely possible to pass an arguably better bill with only a simple majority in the Senate using reconciliation. Progressive activists are demanding to “kill this particular Senate bill” because they know Democrats will not walk away from health care reform empty handed. If need be, they will use reconciliation. While Senator Harry Reid and Barack Obama for some reason think it is preferable to let Senators Joe Lieberman, Ben Nelson, and Blanche Lincoln gut health care reform; if they are forced to, they will use a special procedure that completely cuts these conservadems out of the debate.

That’s a legitimate plan, but darn risky.  If you want a full and thorough discussion of why that’s so, go read Nate Silver.  It’s long, but it’s thorough, and I’m not sure I could do it better.

If, however, you believe we can use reconciliation to pass a public option, or Medicare buy-in, or whatever, why can’t we just do that next year?  Or in 2011 after the midterm elections?  Of anytime before 2013 when the bills go into effect?

Why do those who support this plan believe we have to have that passed first?  Seems to me that using reconciliation might jeopardize the passage of the stuff in the bill now.  Things like the exchange, regulations on premium levels, no denials becuase of pre-existing conditions, subsidies for insurance, etc.  If you used reconciliation, I can pretty much guarrantee you aren’t going to get those things in a regular bill because you won’t get 60 votes in the Senate.  You will lose some votes.

So why not pass the bill instead of killing it, and then come back to reconciliation once those parts are safe?

Note – I’m not telling you to pass the bill.  I’m just curious why this wouldn’t be a better strategy for those who support reform efforts right now?

A reader writes:

Currently I usually work 4-7 months per year in Antarctica for an American company where I get health insurance with my job.  Then the other 5-8 months of the year I don’t work.  Do you have any idea how my health insurance would be affected in the off season (as I usually choose not to take another job during that time)?

Would I be required to carry health insurance in my off season?  Would I be required to take my Cobra (which currently is way too expensive and is pretty much junk insurance) – and take it without subsidies (as I’m sure my annual salary would qualify me for subsidies in the exchange).  Or would I be given the OPTION of choosing Cobra or choosing a plan within the exchange – with subsidies?  Or due to the short time of unemployment, would I have the option of going without insurance?  How do these health care plans intend to handle people who only work seasonally?

Excellent question.  Look, you will have to have insurance.  That’s the meaning of the mandate.  It will occur one of two ways.  If your employer gives you insurance, they will give it to you for the whole year likely.  However, in your situation, I think that’s not the way it will probably happen.

The second (and more likely) option is that you will get your insurance through the exchange.  They will likely contribute towards it during the months you are employed, and then you will be responsible for it when you are not.

COBRA is necessary right now when people can’t get decent insurance without their jobs.  You won’t want it (or need it) if reform passes.

You’re probably going to be best off with the plans in the exchange with subsidies.

I was at the gym yesterday, and a friend asked me what would happen to his insurance premiums under health care reform.  He didn’t seem too thrilled when I told him that many people would see no difference.  Part of keeping what you like means… keeping what you have.  But don’t take my word for it.  The CBO released a report on what would likely happen to insurance premiums under reform.  Here’s the gist:

Group coverage from employers

• This is what most people who get insurance through their jobs have.  The CBO says that in 2016, the average small group market premium would be around$7,800 for an individual and $19,200 for a family.  Without reform, these numbers would be about $7,800 and $19,300. In the large group market, it’s about$7,300 for an individual and $20,100 for a family with reform, and about $7,400 and $20,300 without.  Not much difference at all.
• Additionally, some people (about 12 percent) with coverage in the small group market would get a small business tax credit.  For them, insurance would be about 8 percent to 11 percent lowerthan without reform.

Nongroup (individual) policies

• These are the policies people would get on the exchange.  In 2016, the average individual policy under reform would be about $5,800 and a family policy would be about $15,200, compared to about $5,500 for an individual and $13,100 for a family without reform.
• Most of those people (about 57 percent) would get subsidies, which would cover about two-thirds of the total premiums.
• Now that’s an increase without the premiums, but most people would see a significant increase int he quality of their insurance.  That increase in quality is more than the increase in the cost.  So they still reported it’s a reduction in cost overall.

Se here’s the recap.  For most people there is going to be no difference in the cost of premiums.  Some will benefit slightly from the small business tax credit.  For people in the individual (nongroup) market, actual premiums might rise, but less than the increase in value of their insurance.  Moreover, most of them will be getting financial assistance, so that even so – the cost to them will go down.

Yes, it’s confusing, but likely good news for the administration.

The bad part, however, is that they estimate that the average premium for a family employer-provided plan will be over $19,000 in 2016.  Now it’s just over $13,000.  That’s a big increase.  And it’s still a huge amount of money.  This bill will do very little to contain costs.

Look, there will always be those who think I’m not willing to listen to opposing arguments.  I promise I will.  I’ve made the case repeatedly that there are many avenues to reform.  Moreover, I’ve tried to make it clear that I believe we all benefit from hearing clear, opposing viewpoints.  They help us to clarify our own thoughts, and sometimes we learn something new.

Because of this, I’ve been desperate to hear a Republican plan for health care reform.  But this is what we get:

“We are trying to make the current system work better,” he said. “We take a step-by-step approach by allowing people to buy insurance across state lines, by allowing small business and other groups of individuals to group together for the purpose of buying health insurance at lower costs like big business and unions can… We need to do something about junk lawsuits.”

Perhaps more telling, a GOP health care reform effort, he said, would be defined by incrementalism. “We do not attempt to cover 46 million more Americans,” he said. “We will cover millions more Americans but we won’t attempt to do this. This is not affordable… what this is going to do is bankrupt America.”

ARGH.

Let’s take this piece by piece:

We take a step-by-step approach by allowing people to buy insurance across state lines

That won’t work.

[A]llowing small business and other groups of individuals to group together for the purpose of buying health insurance at lower costs like big business and unions can

That’s called an insurance exchange.  I believe it’s part of every bill we’ve seen.

We need to do something about junk lawsuits.

The CBO already scored this.  Around $5.5 billion a year, at best?  We spent way more than that for health care each day this year.  Malpractice reform is not health care reform.

This is not affordable… what this is going to do is bankrupt America.

There are many reasons to oppose reform.  Bankrupting America isn’t one.  The CBO has scored these bills as deficit reducing.  Even if they’re wrong – and they cost a few billion a year – please.  Health care may bankrupt America, but health care reform will not.

There are conservative ideas for reforming health care.  Some of them might even work.  The American people need to hear them – from their elected officials.  I’m looking at you, Republicans.

Lots of you ask why I’m skeptical of the ability of a public option to truly effect massive change on the US health care system.  I give lots of answers, but – perhaps – many of you assume that I’m making a leap of faith instead of looking to the literature.

Not so!

One of my main concerns is that I don’t necessarily believe that when you put a public plan alongside a private plan, that you won’t wind up with unequal risk pools.  On the theoretical side, I would point to the different missions of those two types of outfits.  The public plan is focused on distributing funds for care; the for-profit plan is focused on, well, profit.  Those are not the same thing.

On the empirical side, I could point to the fact that Medicare Advantage has failed to deliver the same Medicare product for a cheaper amount (which was it’s mission), but we’ve done that before.

And there is more peer-reviewed research.

In an important paper in the New England Journal of Medicine in 1997, researchers examined how people moved in and out of Medicare HMO plans and traditional Medicare.  See, back in the 1990’s there was a swing to “managed care”.  Private HMOs began to offer their services to Medicare recipients.  If you were over 65, you could choose a Medicare HMO or regular Medicare on a month-to-month basis.  If you chose the Medicare HMO, you had to use their providers and hospitals, but otherwise it should be similar.  So, here were the rules if you were eligible for Medicare:

• You could choose the public or private system
• You could switch up and back
• No one could deny you access to their plan
• The benefits in the private plans could be more than the public, but not less

Got that?  No cherry picking allowed.  This looks very similar to how a public plan would function against private plans on the exchange.  So what happened when this was set up and let loose?  Guess:

Methods We used Medicare enrollment and inpatient billing records for southern Florida from 1990 through 1993 to examine differences in the use of inpatient medical services by 375,406 beneficiaries in the Medicare fee-for-service system, 48,380 HMO enrollees before enrollment, and 23,870 HMO enrollees after disenrollment. We also determined whether these differences were related to demographic characteristics and whether the pattern of use after disenrollment persisted over time.

What did the researchers do?  They looked at Medicare billing records for over 375,000 elderly Americans over a number of years.  This allowed them to look at how much inpatient care those people used.  They also looked specifically at how much care they used in the year before anyone went to an HMO and the three months after they left an HMO.  If there is no cherry picking, then they should find that the amount of care used should be the same in all of those groups and times.

Results The rate of use of inpatient services in the HMO-enrollment group during the year before enrollment was 66 percent of the rate in the fee-for-service group, whereas the rate in the HMO-disenrollment group after disenrollment was 180 percent of that in the fee-for-service group. Beneficiaries who disenrolled from HMOs re-enrolled at about the time that their level of use dropped to that in the fee-for-service group.

What did the researchers find?  People who wound up joining the (private) HMOs used 66% less care before joining than those who stayed in the (public) Medicare group.  Somehow the private insurance HMOs figured out a way to get the healthy people to jump ship out of the public plan into the private one!

Not only that, but people who left the (private) HMOs and went back to the (public) Medicare used 180% more care after leaving than the people who stayed.  Somehow the private insurance HMOs figured out a way to convince the sicker people to jump ship back to the public plans.

So we had a system where a private system and a public system were in an exchange like environment.  Regulations prevented cherry-picking.  And yet – somehow – the private plans figured out a way to do it.  And this was competing with a giant government program.

Can you understand my limited faith in the ability of a wimpy, tiny public plan to do any better?

The Medicare-HMO revolving door–the healthy go in and the sick go out. Morgan RO, Virnig BA, DeVito CA, Persily NA. N Engl J Med. 1997 Jul 17;337(3):169-75.

I’ve taken a lot of heat from people on both sides of the aisle this week for saying that I support reform, but that the effects of the current proposals won’t have the massive effects on cost-containment that some believe.  I’ve been consistent in my beliefs, however.  If you want to build on what we have, and increase access without touching quality, costs can’t just magically drop.

More evidence from Ezra Klein:

The graph above tracks premium growth in three markets: the employer market, the Federal Employee Health Benefits Programs, and the California Public Employees’ Retirement System . The latter two are essentially models for the exchanges. They’re regulated markets in which various insurers compete for a relatively large pool of customers who are able to choose among their offerings. And they have not, in general, held costs down much better than the employer-based market at large.

I know the public option isn’t included in this, but I’ve gone into that in detail before.  This data adds some concerning evidence that the exchanges, especially if they are hampered in the way people are proposing limiting the public option, may not reduce costs as much as we hope either.

Let me reiterate, this isn’t a reason to kill reform.  It still does everything I said before.  It’s just going to cost a lot of money, perhaps more than some expect, and we will need much more comprehensive changes to contain costs before too long.

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.