Saturday, September 12, 2009

Can we have a policy discussion?

I've read the house health care plan.  Similar to any law, some of it is a bit like reading Leviticus, so I won't say that I understand it all.  Based on what I do understand, from the published plan and the president's health care speech, below are the planks of "ObamaCare" if it were enacted as the president proposes.  I've used blue italics for what I consider facts to try to separate facts from my opinion and interpretation

1.  Everyone will have to buy insurance except for those on Medicare/Medicaid.

2.  Those who can't afford insurance policies will be partially subsidized by a voucher funded by tax dollars from a number of proposed sources. Vouchers are used to help pay for insurance from any company at their standard published rates.  Everyone on the voucher program will have to contribute something (no free health care except Medicare/Medicaid).  The government will set standards as to what is the minimum acceptable plan so that tax dollars are not spent for companies that do not provide adequate coverage.

3.  Insurance companies will have to insure anyone who comes up with the money to buy their standard policies at their published rates.  Thus, no pre-existing condition exclusions and no dropping people when the become sick.  Also no raising rates on individuals or small businesses just because the person or an employee becomes seriously ill.  This means that insurance contracts will be multi-year commitments that cannot be dropped or modified to adjust the insurance company's bottom line.  If insurance companies cannot drop anyone and if everyone has to buy insurance, then the unfairness of covering pre-existing conditions should disappear after an adjustment period.

4.  Small businesses and individuals can create "Cooperatives" to negotiate group rates with insurance companies in the same way that big corporations do.  In effect these are bargaining unions that multiply clout in the same way that a worker's union does.

5.  A public plan will be set up to run similar to the U.S. Postal Service.  The plan will not be subsidized (note that USPS is not subsidized - there is a lot of misinformation on this point).  The public plan will set its rates based on what it takes to pay claims and cover administrative costs.  The only subsidies will be the same that the private insurance companies are getting - through the subsidized vouchers that lower-income individuals can use to  help pay for insurance directly from a private company, through a cooperative, or from the public plan. Note that "lower income" implies someone making more than the poor who are covered by medicaid, but less than someone who can afford to spend $5K to $10K per year on a private policy. It seems to me that if the market works correctly, at the start the public plan will be cheaper than the private plans, which will force insurers to become more efficient and cut their administrative expenses.  Eventually, the public plan will be squeezed down because government programs are generally not as efficient as private companies in a competitive environment.  However, the public plan may still be able to fight back (much as the US Postal Service challenged by FedEx and UPS) to maintain some market share.  The dynamic competition between public and private should be a boon to health insurance consumers.

6.  A federal health insurance commissioner would be established to oversee regulations.  As I understand it the key issues will be
   a)  Setting the percentage of premiums that insurance companies must pay out in benefits (controlling the Medical Loss Ratio).
   b)  Setting the minimum policy coverage that will be necessary for a company to be eligible for the federal insurance voucher program.
   c)  Setting policies for creation of the Cooperatives
   d)  Overseeing development of the public plan bureaucracy.

7.  There are additional efforts proposed to reform Medicare and cut waste, fraud and abuse.  However I have not spent enough time looking at these to say that I understand them.  I welcome comments from anyone with information on these.

Back to commentary:  I'm trying as best I can to not spin things, but since I support the plan I probably have put things in their best light rather than worst.  I would really like to hear from people who have rational arguments as to why some of these are bad policies or where I have any facts wrong.   Let's have a reasoned and logical discussion.  I'm not going to change your ideology and you're not going to change mine.  But we can discuss the implications of the above policies on how the health insurance system will work or not work. I don't believe in one party rule.  Democratic republics work best when people of reasoned views can discuss and explain their viewpoints and reach a compromise.

As an example of what we might discuss, one of my major concerns is the idea of the health commissioner controlling the Medical Loss Ratio.  On the one hand, it is very satisfying to my developing progressive ideology to tell the insurance companies that they must revert to the old system of making money by investing premiums so that they are gaining the time-value of money between collection and payout (the historic approach to all insurance).  On the other hand, my well-entrenched liberal ideology (which is different than progressive ideology) says that a direct setting of the Medical Loss Ratio seems a bit like the wage and price controls implemented by Nixon, which were a disaster (note that wage and price controls are, strictly speaking, a form of either fascist or communist policy - two very different ideologies, one from the left the other from the right, the wind up in the same totalitarian place).

Right now, my liberal side is winning and I think that the direct intervention of the government through competition in the public plan would be more effective than prescriptive control.  That is, the public plan will operate with a very high Medical Loss Ratio (Medicare is 96%, compared to 84% for Wellpoint and 82% for Aetna).  If the competition from the public plan is effective the private companies will be forced to become more efficient, which will naturally drive up their Medical Loss Ratio.  I like this idea rather than mandating a specific Medical Loss Ratio.  In the long run, whenever we place regulatory mandates on an industry we find that lobbying power will eventually relax the mandates and make them irrelevant.  However, if we lose the public plan I don't see how we get sufficient competition to ensure a dynamic market, so mandating the Medical Loss Ratio may be a necessary evil.  UPDATE:  Dec 19, 2009.  It looks like the public plan is not going to be part of the senate bill, so I've given the MLR more thought. My conclusions aren't pretty:

If you're interested in this discussion, you should be able to state whether you think the present system is working or broken.  If you think that its broken and the ObamaCare policies won't work, then what are your policy prescriptions?  Is the status quo sustainable?

My views aren't set in stone, but I can't learn and adjust unless and until someone more conservative than myself can challenge me and provide some clear and reasoned ideas. As yet, I have not heard a single conservative politician, think tank or individual provide any reasoned analysis or discussion of the above points.


Anonymous said...

Here's a comment I received on FB and some of my response:

Govt shouldn't be in the business of running a business...rationed health incentive for people to enter the medical field....advances in medicine will halt...thousands put out of work (ins companies and employers having to let people go rather than paying the fines for not providing health care).....besides....I WANT TO CHOOSE - not have it chosen for me! The liberals plan is for a one payor system - the govt.

Lot of points to handle. I'll tackle them one by one as I have time. Interestingly enough, in the section of the bill entitled "Employer Responsibility" (starting pg 143 of the bill) you'll find that an employee actually gets more choice under the proposed system. If the employee doesn't like the coverage offered by the employer, she may opt out and use the money the employer would have paid to buy insurance on the private market - this is called Contribution in Lieu of Coverage. Presently, if your employer changes plans to a different network, you have to change doctors. Under the new system, if your employer changes plans you can opt out and stay with your present doctor. This increases consumer choice.

Anonymous said...

The above had a follow up
But we won't have a choice. Insurance is based on spreading out the risk. If employer X is trying to get insurance coverage for their employees and employees opt out of the plan, the risk factors aren't the same as when it was quoted on...thus driving up the rates. In which case, the insurance companies will go out of business and the liberals will have succeeded in bankrupting the industry thereby allowing for the 1 payor system that is their true agenda.

Look at what has happened with Medicare. Most physicians won't even see medicare patients because the reimbursement rates are so low. When it comes to your health, do you really want to go to sub-par physicians?

Seems to me that what you have provided is known in logic as a "slippery slope" argument. Such arguments can be valid, but are generally suspect unless the causation of each slip are clear and convincing. In the case of your argument, you are saying that more consumer choice will end up bankrupting the insurance companies and therefore leading to less choice. I don't think your point is valid because the public plan in the bill is not a subsidized plan. Are you arguing that a non-subsidized government agency (e.g. the Post Office) is going to be more efficient than a private company? If so please explain the survival of UPS and FedEx. I emphasize again - there is no subsidy for the public option that is any different than the proposed subsidy for private - namely vouchers The key part of the choice option is that it allows consumers to move between private insurance companies as well as the public option.

Anonymous said...

I followed up with a few other comments (I can never seem to shut up)

RESPONSE (continued)
By the way, you may not realize it but characterizing "liberals" as having a "true agenda" for a single payor system is really insulting. Firstly, the single-payor system is actually part of the progressive agenda, which does not include all liberals, any more than Ron Paul libertarianism includes all conservatives. Secondly, for someone on the right to characterize the motives of the left doesn't help. Its much better if we stick with what we actually know, which is our own motivations rather than that of others.

On Medicare - the argument is a red herring. You cannot logically argue that our failure to adequately fund medicare (by raising taxes to meet expenses) has any relationship with an unsubsidized public option that will have to set premiums based on the program expenses and what the negotiate with health insurers. This is exactly what private insurers do today with their health networks. There is no subsidy for the public option. None. The only difference between public and private is that the public option won't spend 16% of premiums on its "General and Administrative" expenses. The public option is not Medicare.

On the issue of "fines" I searched the health reform bill - no fines anywhere. There are taxes on employers who decide not to participate in providing health insurance. As to why this is necessary, let's consider two employee-intensive businesses - McDonalds and Burger King. If there isn't a tax, then it would be in McDonalds interest not to provide health insurance so that they could gain a competitive advantage over Burger King. Then of course, BK would have to answer by dropping their insurance. A tax on those who don't pay health insurance benefits simply levels the playing field so that companies compete in other ways. This is the same basis for the minimum wage, overtime for more than 40 hours per week, mandatory unemployment insurance - all the "liberal" workplace rules that we take for granted. The fundamental liberal idea is that in a capitalist society, no one should get a competitive advantage by mistreating their employees.

By the way, the above is also a slippery slope argument, but it requires only 2 steps - one employer dropping insurance and another responding by doing the same. The causal links are clear between the reason for one dropping and the next following.

Anonymous said...

Even more from me

RESPONSE (continued)On the issue of rationing health care. I know that my health care is right now being rationed by insurance bureaucrats. If I were to get so sick that I couldn't work and lost my job, they would drop my insurance as soon as the COBRA was up. With a pre-existing condition I would not get another policy and would end declaring bankruptcy and ending on Medicaid. That is rationing. The proposed health care plan would prevent an insurance company from dropping you when you get sick. No rationing. The public option (and all insurance companies) would be required to meet a set of minimum standards so that you could know what was actually covered - you get what you pay for, not having it pulled out from under you by insurance companies. They like to deny coverage and make you fight for your rights. Rationing is a scare word. If you want to use it you should explain a logical mechanism by which rationing would occur under the proposed bill.

"Advances in medicine will halt". I don't see the logic in this claim. Most advances in medicine are based first on key fundamental research funded by the National Institutes of Health. Once research science has shown promising pathways, the industrial researchers take over. To presume that the introduction of a public option or any of the other reforms (mostly market-based) will destroy the profit incentive in medicine is not supportable. If this is the case, then why are their amazing advances being developed in Europe, Australia and Canada? Advances haven't stopped in places that have actual socialized medicine, let alone the market-based reforms proposed by Obama.

"No incentive to enter medical field" If this were true, it would be a really sad statement. Personally, I think we're better off with docs who aren't in it for the money. My training to be a professor was every bit as long as it takes to get a medical degree and residency - 2 yr M.S., 5.5 yr PhD and 3.5 yr post-doc. For that I'm paid about 20% more than an entry-level B.S. engineer whose going into industry with a 4 year degree. I could make 50% - 70% more in the consulting world. But I wouldn't change jobs for the world. I get the satisfaction of knowing that I contribute to education. I knew this going into my job - doing what you love is more important than the pay check. I dare say there are a lot of doctors that feel the same way. I'm not sure that I want to go see a doctor that's in it for the money. And I wouldn't advise sending your kids to school where the teachers are there for the money.