The last few days on DKos and the left-wing blogosphere have been fairly rough. Democrats and progressive are understandably angry that the public option and the Medicare opt-in have been stripped from the Senate's health care bill. The consensus on this site and many others is to kill the bill and start over with one that includes a public option and can be pushed through reconciliation.
But despite the removal of the public option and the Medicare buy-in, this is actually a pretty good bill. And I think it's worth addressing some of the assertions and charges that the "Kill the Bill" crowd is making. No, a weak public option was not a major cost control. Yes, we need an individual mandate. No, subsidies for health insurance are not a corporate "bailout." And yes, regulation can work.
The anger many people have over losing the public option and the Medicare buy-in is understandable. Both were good policies that nearly passed without any strong backing by the White House. For the White House to not even try to twist arms to include either policy stings. And given people's unpleasant experiences with health insurance companies, the idea of a public alternative was an extremely alluring one.
But what bothers me is not so much the anger; it's the complete loss of perspective. Suddenly nothing matters but the public option, even though neither the public option nor the Medicare buy-in would have addressed the concerns the "Kill the Bill" crowd now raises. Everything else in the bill is somehow secondary, even though the insurance regulations, the Medicaid expansion, the exchanges, the subsidies and the employer mandate all affected tens of millions more people than either the public option or the Medicare buy-in did, even before their removal.
So while the removal of the public option and the Medicare buy-in make these bills somewhat worse, the truth is they don't fundamentally change these bills in a way that should change your mind about passing them. Nor does the removal of a public option fundamentally change the nature - or theory - behind an individual mandate, the policy that is many people's key sticking point.
Let's take a look at these points, one by one:
A mandate is a bailout of the insurance companies! You're funneling public money to private corporations!
So is Medicare a bailout of the private hospital industry? Are food stamps a bailout of the private food industry? Is heating assistance a bailout of energy companies? Should we require that all publicly-funded financial assistance be spent only on publicly-owned enterprises?
But the mandate is a government requirement to purchase insurance! You're not required to buy food and you're not required to pay for gas or electricity!
Okay, you're right. The government isn't going to penalize you if you decide to go hungry rather than spend food stamps on corporate food. And the government isn't going to penalize you if you decide not to purchase electricity or heat because it goes to a private utility. But given that most people see these things as necessities, is the government betraying the public by not offering these goods directly?
Granted, some of you may feel government should directly provide these things (especially utilities). But given that governments (federal, state, and local) generally do rely on funneling public money to private enterprises in so many other areas, why is federal assistance that goes to health insurance companies the tipping point?
The problem isn't the assistance, per se; it's that the government shouldn't fine me for refusing to pay for private insurance, especially because I can't afford it!
It you earn less than 133% of the federal poverty level (Senate bill) or 150% of the federal poverty level (House bill), then you'll get covered by Medicaid. If you fall just above that, and earn up to 300% of poverty level (Senate bill) or 400% of poverty level (House bill), you'll receive subsidies. If you earn more than that and aren't eligible for subsidies, you may fall within a hardship exemption in which case you'll have to pay neither for insurance nor a penalty tax. Nate has a good graphical depiction of how a low-income family's premiums would fare under the Senate bill.
But if you do earn enough to pay for health insurance and you still choose not to, fine. You don't have to. But then you'll be relying on publicly-funded emergency rooms and free clinics if you need serious care and it's more than appropriate that you pay a small tax - less than the cost of an insurance premium - that ultimately helps support those institutions.
But the mandate is going to cause premiums to skyrocket! The insurance companies will have a captive market! Only if people can opt out of the system will the insurance companies have an incentive to keep their prices low, since people won't otherwise purchase them.
Insurance is not a normal good. Insurance works through risk-pooling. If you require that insurers take anyone regardless of health status, and if you insist that everyone be charged the same rates, but you don't ensure that everyone buys into the system, then healthy people can opt out, and the only people purchasing insurance are those who are older, sicker, and need to use insurance more. With fewer healthy people in the system, the pool is sicker and more expensive to insure, and the cost-per-person climbs.
This is why virtually every health economist who has studied the issue says we need an individual mandate to enforce the insurance regulations. But don't take my word for it: take Paul Krugman's. He said this in 2008, comparing then-Candidate Obama's mandate-less plan with Hillary Clinton's:
Mr. Obama claims that people will buy insurance if it becomes affordable. Unfortunately, the evidence says otherwise.
After all, we already have programs that make health insurance free or very cheap to many low-income Americans, without requiring that they sign up. And many of those eligible fail, for whatever reason, to enroll.
An Obama-type plan would also face the problem of healthy people who decide to take their chances or don’t sign up until they develop medical problems, thereby raising premiums for everyone else. Mr. Obama, contradicting his earlier assertions that affordability is the only bar to coverage, is now talking about penalizing those who delay signing up — but it’s not clear how this would work.
So the Obama plan would leave more people uninsured than the Clinton plan. How big is the difference?
To answer this question you need to make a detailed analysis of health care decisions. That’s what Jonathan Gruber of M.I.T., one of America’s leading health care economists, does in a new paper.
Mr. Gruber finds that a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured — essentially everyone — at a taxpayer cost of $124 billion. Over all, the Obama-type plan would cost $4,400 per newly insured person, the Clinton-type plan only $2,700.
If you oppose an individual mandate, you need to provide an alternate way to avoid adverse selection issues that are going to creep up. And this, by the way, has nothing to do with whether a plan is public or private. Social Security and Medicare work, for example, because everybody pays in. If you allow younger people to opt out, the programs become unsustainable.
But without a public option, insurance companies will price-gouge to jack up their profits! We need a public option to keep prices in line!
Insurance companies are vile for a host of reasons. That's why I want to pass this bill - to ban abusive practices and regulate them. But it's not true to say that health insurance is especially profitable. Yes, in the aggregate, insurance companies earn large profits, but per policyholder, their profit margins are actually quite thin.
This is why the negotiated-rates public option would not have offered premiums that were much lower than the private plans in the exchange. If the only thing keeping insurance premiums high were insurance profits, then a non-profit plan should have realized enormous savings. It didn't. And that shows that many people have a fundamental misunderstanding of what drives health care costs and why single-payer is so cost-effective.
While insurance profits are part of the cost problem, they are only a small part of the problem. Insurance premiums are expensive because medical care in the United States is expensive. The reason a single-payer system holds costs down so well isn't because it lacks a profit motive - it's because by being the only payer (hence, "single payer"), and by speaking for the entire market, the government can exercise monopsony power and negotiate extremely low rates for medical services while integrating care over the entire landscape.
This is also the reason why a "Medicare+5" public option saved a lot of money. Medicare can get good rates because it has enormous scale, covering virtually everyone older than 65. By allowing the public option to piggyback off Medicare rates, you could save money since Medicare gets good rates due to its size.
The best-case scenario for a negotiated-rates public plan was for it cover a lot of people. But if at the outset it never offered rates that were lower than private insurance, then it wasn't at all clear that it would ever grow to be anything more than a sliver of the market. That's why Jay Rockefeller proposed that even a negotiated-rates public option initially offer Medicare rates. That way it could acquire a large customer base and when the plan needed to negotiate rates on its own, it would have a scale large enough to negotiate genuinely good prices. That, however, was rejected even by the House, meaning at best we would have gotten a government-chartered non-profit with practical effects little different from the OPM non-profits being offered instead.
But without a public option, why won't insurance companies jack up their rates since they have a captive market?
The exchanges already address the issue of concentrated markets. Multiple plans, from multiple insurers, will be offered within them. Unlike today, there will be a functioning market, so if any one insurance decides to jack up their rates, other plans can compete by offering lower ones.
Additionally, the exchanges enforce a high medical-loss ratio of 80-85% and the administrators of the exchange can remove a plan that violates that.
But that means that the exchanges rely on regulation. And insurance companies can game the system and circumvent the regulations.
Then improve the regulations. If you're going to argue that regulations are futile and will never work, then what's the argument for regulating anything, ever? Why don't we dismantle all other health care regulations and simply provide public options for hospitals, clinics, and doctors?
Actually, that's a bad example, because the bills already provide "public options" for health centers and doctors. Public options that will directly provide health care to 20-25 million people. (But let's throw that out, since the bill was stripped of a weak, opt-out public insurance plan with 3-4 million people.)
Regulations are only as good as the people that enforce them. If the Republicans come back to power, they'll stop enforcing the regulations and may dismantle them.
This is a fair point. But, taken to its logical extreme you're again insisting that all regulation is futile, in which case we might as well de-regulate everything since the Republicans will do it anyway when they return to power.
Also, why would a public plan be any more protected from Republican hands then regulations? Conservatives systematically de-funded the Veterans Health Administration in the 1970s and 1980s. (It took the Clinton Administration to fix it.) And the Conservatives in the UK systematically underfunded the NHS in the 1980s and 1990s.
The threat of Republican rule is no reason to argue against trying regulations, just as the threat of Republican rule is not a reason to not create public programs.
But the regulations didn't work in Massachusetts. Their plan is unaffordable and insurance premiums have gone up.
Massachusetts plans were already heavily-regulated. Virtually all the major Massachusetts insurers are non-profits with high medical loss ratios. Yes, premiums in Massachusetts are expensive and climbing. That, however, is because the cost-of-living is high in Massachusetts and because health care costs are among the highest - and fastest-growing - in the nation. The state has some of the best medical care in the country, with cutting-edge research and teaching hospitals, and prestigious institutions that charge more because they can. Moreover, in the segment of the market that was most affected by the individual mandate - the individual and small-group markets - insurance premiums have dropped 40% since the mandate was imposed. In short, insurance profits are not driving the price of premiums in Massachusetts.
That isn't to say that Massachusetts doesn't have a cost problem. But the cost problem in Massachusetts came about because Massachusetts didn't even attempt cost control measures and because the Massachusetts effort made no effort to squeeze providers. Having now covered everybody, the state is poised to enact far-reaching reforms to completely overhaul the reimbursement system, moving the entire state away from fee-for-service medicine.
But that's a Republican plan! It's "RomneyCare"! (Note: Added on update)
Don't give Mitt too much credit. The law was written by the overwhelmingly Democratic legislature and Ted Kennedy, acting as the elder statesman of Massachusetts politics. All Mitt did was smile and sign the paper. Oh, and veto several sections - vetoes that were promptly overridden by the legislature.
In fact, if you're going to credit a Republican, credit '90s governor Bill Weld, who helped implement many of the insurance reforms that preceded this effort.
But these bills have no cost controls! We're going to be forced to buy junk insurance that's going to face higher and higher costs.
The bills - the Senate bill especially - do plenty on cost control. No, it's not enough. But it's a significant start. It will save money over ten years, and will make several important changes to the system.
FireDogLake and frontpager mcjoan both ridiculed Ron Brownstein's blog post on the Senate Finance bill's cost control measures, since Brownstein ignored the cost savings that could be accrued by a robust, Medicare+5 public plan. But since the only public plan that had any chance of inclusion was a negotiated-rates plan, Brownstein's points were perfectly valid. Worth pointing to was health economist Jonathon Gruber's views on the Senate bill:
"I'm sort of a known skeptic on this stuff," Gruber told me. "My summary is it's really hard to figure out how to bend the cost curve, but I can't think of a thing to try that they didn't try. They really make the best effort anyone has ever made. Everything is in here....I can't think of anything I'd do that they are not doing in the bill. You couldn't have done better than they are doing."
Ezra Klein also runs through five major cost-saving measures in the bills, with bundled payments, "prudent purchasing," and an independent Medicare payments commission at the top of the list. Bundled payments are being strengthened by Sen. Warner. Prudent purchasing was inserted by Sen. Kerry. Meanwhile Sens. Rockefeller, Whitehouse, and, yes, Joementum, have called for strengthening the Medicare commission.
Lastly, Atul Gawande in the New Yorker argues that the Senate health care bill will likely produce even greater cost-savings in the long-term because of the numerous pilot projects it launches. None can be evaluated right now, because all are experimental and hard to model, but some may prove to be major cost-savers in the future.
... what does the reform package do about [health care costs]? Turn to page 621 of the Senate version, the section entitled “Transforming the Health Care Delivery System,” and start reading. Does the bill end medicine’s destructive piecemeal payment system? Does it replace paying for quantity with paying for quality? Does it institute nationwide structural changes that curb costs and raise quality? It does not. Instead, what it offers is . . . pilot programs.
Where we crave sweeping transformation, however, all the current bill offers is ... a battery of small-scale experiments. The strategy seems hopelessly inadequate to solve a problem of this magnitude. And yet—here’s the interesting thing—history suggests otherwise.
All told, the Senate bill alone will save, according to CBO estimates, $132 billion over ten years and up to $1.3 trillion over 20 years.
Look, even a weak public option was the best part of this bill. Without it, this bill does nothing to help people.
I would certainly dispute that. As we've already established, a negotiated-rates public option would not have been a significant cost-saver. It was a useful extra regulatory tool and it could have provided a good vector for payment and delivery reforms. But the subsidies, the insurance regulations, the exchanges, the Medicaid expansion, and the expansion of community health centers and the public health service all affected tens of millions more people than a negotiated-rates, opt-out public option.
Some of those things are good. But we should start over and write a better bill that includes a public option and push it through reconciliation.
Really? We should start all over? Start over on subsidies? Start over on Medicaid expansion? Start over on the exchanges? Start over on the insurance regulations? All for, at best, a negotiated-rates public option?
(OK, yes, there's Cenk Uyger's suggestion of a universal Medicare opt-in. But that's basically a single-payer system and even in the extreme off-chance that you could somehow marshal 50 votes for it in the Senate, given the narrow margin for the actual bill in the House, a single-payerish bill is not going to pass that body.)
Admittedly, reconciliation may have been a better strategy from the start. Both Chuck Schumer and Bernie Sanders have said you could get a pretty comprehensive bill that way, but other Senate liberals like Tom Harkin and Jay Rockefeller disagree. Still, even if you could only get a more limited expansion of public programs through reconciliation, maybe that would have been a better strategy for Obama's first year. Maybe he could have pushed through a limited expansion of Medicare and a federalization and expansion of Medicaid and SCHIP through reconciliation. Then we could have tackled the less controversial reforms later, in a couple of years.
But we are where we are. And at this point, going through reconciliation means starting all over. It isn't at all clear how much of the bill could get through. Yes, a public option would survive, but much else might not. And for all the reasons I've outlined before, I don't think a negotiated-rates public option is more important than everything else in this bill. And any bill prepared for reconciliation would have to be written and cleared by Budget Committee chairman and Conservadem, public-option skeptic Kent Conrad.
Why not just keep what's in the bill, while improving what you can now and seeking to improve more in the future?
Congress will never fix the bill! The only solution is to make Congress start all over again and produce something better, right now!
There's a disconnect here and I don't quite understand it. How can these two things be said in the same breath? If you're convinced Congress will never fix, improve, or modify existing legislation, then why are you so confident that the same Congress will start all over and produce a better bill? If Congress is too compromised to fix and improve the bill, then how are they not too compromised to produce a better bill, right now?
You're a shill for the Administration and the insurance companies! You're polishing a turd and calling it a diamond! You won't even say where these bills need to be fixed!
Ahem. I think the Administration badly-bungled the public option fight. I think they erred in not fighting to at least include the Medicare opt-in, which, though limited, was still a good policy and had a likely 59 votes. While I think presidents have less leverage over individual senators than people sometimes assume, you can't tell me that a little arm-twisting wouldn't have gotten them one extra vote.
As for the insurance companies? Frankly, I'd go farther than most on this site and say that my ideal system wouldn't just be a Canadian-style single-payer system but an American NHS based on the VA, which not only provides excellent, integrated care but does so at a far cheaper price than even single-payer.
Still, I have a sense of realism about what can pass Congress. And while I think the Obama Administration and the congressional leadership could probably have gotten something a little better, the end result is still pretty good.
Of course, there are plenty of places the final bill can be improved. Speed up the implementation. (2014? Really?) Fix the age discrimination clause by at least reducing the disparity in premiums to 2:1 like the House does, rather than 3:1 like the Senate does. Provide more subsidies. Expand Medicaid above 133%. Raise the medical-loss ratios for the OPM non-profit plans to 90%. Replace the Senate's "two exchanges per state" with a single national exchange that allows states to opt out and create their own exchanges only if they have stronger controls. Allow states to implement single-payer. See if you can allow people to buy into state employee public health plans (a public option compromise that was floated early on). Add in the House bill's antitrust provisions.
Going farther, put in a federal reinsurance program for catastrophic care, like John Kerry proposed in 2004. And although this may not be viable as part of this reform effort, federalize Medicaid and SCHIP and make them components of Medicare. (The bills already raise Medicaid reimbursements to Medicare levels and both Medicaid and SCHIP are huge fiscal burdens for the states while also being extremely inconsistent across states in terms of eligibility and administration.)
But none of these things require killing the bill. Many of these things can be fixed now, or can be added in future years, even just as part of budgetary appropriations.
So, no. Don't kill the bill. There's plenty that's good here. A weak public option did not make or break this health care bill. Don't ignore all the good things that are in this bill because of one thing that isn't.
UPDATE: Thanks for getting me on the Rec list, guys!
UPDATE #2: Hey everyone, thanks for the comments and the recs! I'm glad we're having this discussion.
A couple items I'll briefly address. Some have asked me what I think about the Nelson abortion restrictions. The policy - "one premium, two checks" - seems asinine to me. I generally defer to Barbara Boxer and Patty Murray on this, who have both said they will vote to pass, but I can understand people being upset by this. Hopefully it can be challenged in court.
(I'm all for understanding and respect of opposing viewpoints, but just for once, I'd like to see Pro-Lifers show some respect and understanding of the pro-choice position, instead of insisting that we're all a bunch of baby-killing heathens.)
Also, I've gotten some push back on a few of the points I've made, so let me quickly run through them.
(1) Slinkerwink and others objected to my comparing subsidized health insurance to food stamps, for example. Slink argued that things like heating assistance, food stamps, etc., were part of a government's social contract to provide basic necessities.
There is a potentially valid argument in here; health insurance is an intermediary that stands between a person and the needed service - health care. So you could argue that food stamps would be most comparable to direct government funding of a person's health care needs. We don't, after all, require people to buy food through private "food insurance."
Still, the insurance model is how we provide all of our medical services in this country. (Again, I don't think it's absolutely necessary, which is why I would actually prefer a VA-type American NHS to provide care directly to people.) Unless you're going to change the complete model, however, then I don't think there's really a major distinction between providing subsidies for health insurance and providing subsidies for any other privately-provided service. In the food industry, in the energy industry, and elsewhere in the health care industry, like hospitals, you have public funds flowing into private, profit-seeking enterprises. Subsidies for insurance are perfectly in line with that model.
(2) Second, there was some pushback on the claim that the negotiated rates public plan would not have offered lower rates. Yet in the very quote Slink cites, the CBO says that "The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges." Yes, the CBO did say that it would have some downward pressure on the price of low cost plans. And the CBO said it could be an attractive option for people who were sicker or harder to insure. (Although one could argue, of course, that this means that the public option was just going to be a "dumping ground" for the private insurers). Those are reasons why a "weak" public plan was a still a good idea. But they validate the point that it had a relatively small bearing on the overall nature of this bill and only a small effect on overall costs.
Now, if we were talking about a strong, Medicare-for-all option being stripped from the bill, then you could say it had been irrevocably weakened. But that's not what was pulled.
Anyway good night guys. It's late, and I just got back from seeing Avatar (which, though slightly overlong, was awesome).