CATO's Michael Tanner on the Senate healthcare plan

[unixronin]

Back when he was running for president, Barack Obama promised that health-care reform would save the average family $2,500 per year.  That promise has long since been abandoned, but one might still expect that health-care reform won't leave the average American worse off.

Increasingly, it looks like that won't be the case.  On Monday the Congressional Budget Office released a new report showing the Senate health bill would actually increase premiums by 10–13 percent for the millions of Americans who buy their insurance on their own.  Those increases are over and above the increases that would occur if we did nothing.  Today, an average insurance policy can cost about $2,985 for an individual or $6,328 for a family.  Without reform, that cost is expected to rise to $5,500 for an individual or $13,100 for a family by 2016.  But under the Senate bill, those premiums will increase to $5,800 for an individual worker and $15,200 for a family plan.  In other words, the Senate bill would cost a typical family an extra $2,100.

And that doesn't even include tax increases, or take into account that the Senate plan's mandatory minimum plan requirements would force people who have plans now that they're happy with but which don't meet government minimums (for instance, if the mandatory minimums include coverages they don't need or don't want) to upgrade to "approved" plans, or face fines that could hit $6750 for a family of four, which puts the offense into felony range, with various future impacts on their civil rights and employment.  (There would also be tax penalties for having insurance that covers too much.  They'll get you one way or the other.  It's almost inevitable that Congress itself, with its choice of no less than six different no-cost luxury medical plans, will — doubtless through the agency of some well-hidden small print — turn out to be exempt from this "Cadillac plan tax".)  The CBO also predicts that the bill will increase the cost of employers hiring workers, and that this will disproportionately inpact the low-wage and unskilled workers who are exactly those most likely to be unable to afford healthcare coverage now.

In military campaigns, this gets called "collateral damage", but as we know, that nice, clean, antiseptic euphemism turns out at street level to look like innocent civilians dead and maimed for being in the wrong place at the wrong time.  The military tries as best it can to minimize collateral damage.  Congress just pretends there won't be any, then when it turns up after all, looks for someone else to blame it on.

And as if that wasn't enough, "savings" projected for the bill rely on the willingness of future Congresses — not, naturally, this one — to make "huge cuts" in Medicare spending.  We all know that in the real world, that will be all but politically impossible.

Barack Obama keeps telling is that "we can't afford to do nothing".  But in reality, however bad doing nothing may be, it is becoming clearer and clearer that the current "healthcare reform" plans will be both worse than doing nothing, and worse than what we have now.  You can't fix a broken system by adding more of what's wrong with it in the first place.

Comments

[skellington.livejournal.com]

I haven't done the research, but Krugman claims that the same CBO report doesn't say that at all..

http://krugman.blogs.nytimes.com/2009/11/30/the-cbo-on-insurance-premiums/

(And some references I spot elsewhere on the 'net say that they expect insurance premiums to rise, because people get more extensive policies. Which gets to the question of "Total out of pocket medical costs" vs. "Cost of insurance". The former being the real kicker, not the latter. The article linked to here explains that it's comparing a current 60% coverage policy vs a theoretical 70% coverage policy that costs 6% more. So 15% more insurance for 6% more money. See http://www.politico.com/static/PPM145_final_try.html )

Mass, which implemented a similar plan, so 40% premium reductions in the individual market.

And the fines are, IIRC, 2% of income. So the only way to get over $6000 in fines is if your income is $300,000 or more and you don't buy insurance. And it's only a felony if you mis-report your income (claiming to make $30k, when you're really making $300k) or falsely claim to have bought insurance when you didn't, not if you don't pay it. And the income tax you'd have evaded would also be a felony in this case.

And Medicare spending is going to have to be dramatically cut if medical spending continues to grow at the present rate. Medicare is going to require massive tax increases or spending cuts one way or another. If insuring everyone (and other reforms) does successfully reduce the growth of medical expenses in this country, future Congresses will naturally reduce the forecasted spending on Medicare. I don't see how this is a problem...

As to some people not being employable if they're getting paid a survival wage (which would include being able to afford $5000+ / year in health insurance), I think that's a problem outside the scope of our health care debate..

[unixronin.livejournal.com]

What I've heard, both from pundits, from people who live there, and from doctors who work in MA, is that the Massachusetts plan has been a disaster that has driven costs, taxes and waiting lists up, and quality of care down.

As to some people not being employable if they're getting paid a survival wage (which would include being able to afford $5000+ / year in health insurance), I think that's a problem outside the scope of our health care debate.

Not if the regulations of the proposed healthcare system are what makes them unemployable.

[skellington.livejournal.com]

If you can't afford to buy food, housing, and medical care on your salary, IMO you're unemployable in this country.

If you need (and get) emergency health care you can't pay for (and don't have insurance for), you're getting welfare paid via back-door taxes on the rest of us. (And getting care in an emergency situation is usually much more expensive than getting it earlier in the process.)

So the question is, how do we want to tax people to pay for that medical care (or do we want to just deny it to people who can't obviously pay.) Do we do it by indirectly taxing those buying insurance (who subsidize the hospitals, etc. who aren't getting paid for the deadbeats)? Do we do it via an employer mandate? Do we tax people explicitly and provide health-care subsidies to everyone?

(Without an employer mandate, and subsidies for private plans, employers are naturally motivated to stop providing coverage so their employees can get the subsidy. Which leads to effectively everyone getting subsidies at significant expense to the feds / taxpayers.)

[unixronin.livejournal.com]

The correct question isn't "how do we pay for the inflated costs of the current system". It's "how do we reduce the costs of the system." And the first line of attack there is to eliminate waste, and a HUGE proportion of that waste is insurance-related overhead — much of it overhead processing small amounts for services that wouldn't even need to be covered by the insurance, except that the insurance companies insist everything has to pass through them. Many doctors who have stopped taking insurance, and do business only for cash, have found that without the need to have two or three clerical staff just to keep up with all the insurance paperwork, they can do an office visit without insurance for about the same as the copay on an office visit with insurance. In other words, the insurance company is contributing nothing but overhead to those office visits and minor procedures.

Add this to soaring malpractice premiums driven by frivolous lawsuits, sometimes for conditions which couldn't possibly have been the doctor's fault, sometimes just because the patient died although the doctor did everything right but the plaintiff has the unreasonable expectation that the doctor should cure 100% of the patients 100% of the time, and it's a recipe for disaster. Have you looked at the stats of how many doctors have retired from practice over the last 20 years or so simply because they weren't making enough money at their practice to be worth it by the time they paid their malpractice premiums, even though they'd never faced a malpractice suit?

[skellington.livejournal.com]

No significant disagreements on the cost of insurance overhead, which runs, IIRC, 30% at the insurance company level (including marketing, profits, etc.) plus whatever doctors overhead is caused by all the different forms, policies, etc.

Note that this overhead is dramatically reduced in places such as Canada, with a single payer system.

But the majority of medical spending in this country is on catastrophic care. Your motorcycle accident & followup; my friend's recent aorta transplant; my coworkers 16-week preemie baby, etc. And those costs, even if reduced somewhat, are still going to have to go through some kind of insurance.

As to the malpractice insurance question, I've seen lots of moaning about it, and it might drive some unnecessary testing, etc. to avoid being sued, but from the numbers I've seen the payouts on malpractice cases have been steady or declining over the last two decades. Premiums may be going up, but that would be a failure of the free market at providing the insurance competitively; not a factor of the underlying payouts.

(I've also seen a figure that less than 2% of actionable malpractice is every pursued... And reducing doctor's errors, which are concentrated in relatively few doctors, would significantly lower medical costs. But that's another discussion.)

Can you provide any hard data that malpractice lawsuits, or insurance, is really that big of a deal?

I'm more than willing to consider malpractice reform, but I just don't see that it's a huge deal, at least directly. (Indirect costs, such as excessive testing, are harder to quantify.)

[unixronin.livejournal.com]

Can you provide any hard data that malpractice lawsuits, or insurance, is really that big of a deal?

I know I've read some lengthy articles on the subject, but it was some years ago and in print. I don't have anything I can point you to right now. Excessive overhead for procedures and visits that shouldn't even need to be covered by insurance are probably a much larger part of the overall problem.

Another thing that would help a lot os if medical providers were required to provide services to privately insured patents or patients not using insurance at the same price that they contract to provide them to insurance companies. As it is, when people without insurance pay full price while insurers get to pay 5¢ to 30¢ on the dollar, people without insurance are effectively subsidizing those who do — and that is totally unfair.

[skellington.livejournal.com]

Depending on the numbers you look at, 60+% of all medical spending is on catastrophic care.

My friend who just had his aorta replaced (genetic condition), is guessing that the operation will cost more than has been spent on his entire family for their entire lives.

So eliminating the overhead on 20-30% of relatively minor spending is good; but it doesn't really dig into the big problem.

If we eliminated the insurance companies and went to single payer, we'd be looking at being able to reduce medical costs by something like 20% by eliminating that middle-man. But "Socialized Medicine" is teh evil, so won't happen any time soon.

And the fact that the consumer doesn't have any idea about prices, competitive pricing, etc. is part of why a free market has great difficulty in improving the situation as well. (Especially when you get into catastrophic care.)

The whole scene is ugly, and we couldn't possibly have come up with a more disfunctional system if we'd tried.

[smandal.livejournal.com]

As some others on my friend's list have noted, the problem is that "healthcare reform" is just more half-assing. The best healthcare systems in the world (France, Australia) are completely socialized.

And, the argument can be made that the situation in the US would be better if it were made completely free market (no tax incentives, break the AMA cartel).

[lebo-superman.livejournal.com]

So, let's see if I get this right. Let's start with a hypothetical family of 5 (I know one) that makes a combined income of $40k/yr.

After income taxes (Fed & State, with FICA & SS tossed in) their net is around $22k/yr.

Rent costs them $9600/yr. (and the house needs major work, but the landlord won't do it).

His employer offers an opt-in health insurance plan that would cost them $6500/yr.

Food for a family of 5 costs $6240/yr. ($120/wk - not extravagant at all)

The kid's education expenses run around $2700/yr.

9600+6240+2700= 18540 without any transportation expense, clothes, emergency spending or savings.

So, where is the money for the opt-in health care expense supposed to come from?

[skellington.livejournal.com]

If you're a family of 5 making $40K / year (assuming 3 kids 17 or under), your expected federal income tax liability is $0.

FICA is about $3000 / year.

In Georgia, your state income tax would not exceed $2400 (6%), and would probably be under $1500. Other states might be higher, but I can't imagine much over $5K.

So for starters, you're missing about $10K-$15K in your budget.

As for your question; are you asking about "in the present system", or "under the senate proposal"?

[lebo-superman.livejournal.com]

True enough on the tax liability, but it's my experience (I used to do taxes for Jackson-Hewitt) that most people prefer to pay the tax and get a refund (as opposed to trying to estimate withholding so they maximize their weekly spending money). That's how they avoid owing at the end of the year.

Also, the people who get refunds do not generally use that money for food or shelter. They use it for cars, computers, & big screen TV's. I can't count the number of people who've sat across the desk from me when I did their return, and said they were heading to Wal-Mart as soon as they got their check. Not smart, but true; and our economy is partially built on it.

I'm mostly talking about the proposal. I know they have suggested there will be vouchers for low-income families, but I've yet to see any actual numbers on who would qualify for the voucher, or how much it would be. Without numbers, I choose not to count it.

[skellington.livejournal.com]

The link from Krugman (above) shows the subsidized premium being $2000 on the private insurance plans for a family of 4 making $38.6K. He's got the subsidies for other income levels as well on that chart.

IIRC, the Senate proposal doesn't subsidize the poor as much as the House version.

I assume that both versions require substantial contributions by the employers if not 100% coverage, but I can't find specifics. (The employers wouldn't be complaining about it if they didn't have to provide subsidies.)

[skellington.livejournal.com]

And my point still stands that we're really talking about an income of $32K-$35K after taxes.

(And I don't think most people making $40K / year wrangle themselves a $10K income tax return. Especially if they can follow the instructions on the withholding form at all...)

[randwolf.livejournal.com]

Those arguments have been fairly well debunked, I believe. The Cato Institute is simply not a reliable source. However, there's plenty of other reasons to oppose both House and Senate plans as they stand, though the Senate plan is far and away the worse of the two. (There is no "Obama plan" as such.)

1. Both plans place a huge and regressive tax ("mandate") on the lower half of the middle class. People who don't now have health insurance because they can't afford it will be required to purchase it. Currently there are very limited requirements on what the insurance companies must provide, so they will not even be getting good insurance for their money. A large number of people will be impoverished by this requirement. I am reminded of 1960s low-income housing schemes, in which the lower-middle-class were made to pay for the public housing that their neighborhoods and businesses were destroyed to build.

2. Both are giveaways to the insurance and pharmaceutical industry. As Robert Reich, writing about the "public" option (http://robertreich.blogspot.com/2009/11/harry-reid-and-what-happened-to-public.html), puts it, "But what more can possibly be compromised? Take away the word 'public?' Make it available to only twelve people?"

It would be possible to do incomplete reforms that would produce good results. Sensible reforms like making Medicare available down to age 55, outlawing some of the worst insurance and pharmaceutical industry practices, and funding preventative care would all gather wide popular support. But these have not cleared the Senate, which is dominated by the large corporations. I've come around to the view that we need to reform or eliminate the Senate, which has, throughout the history of the USA, consistently been dominated by wealthy and powerful minorities and is obstructionist to boot, letting problems like the health care system fester until they become emergencies.

[unixronin.livejournal.com]

I don't think the Senate should be eliminated. I do think that the entirety of Congress needs a good thorough housecleaning and disinfecting, and that the accumulated Federal bureaucracy needs a massive pruning. We simply cannot afford to continue to pay for this much government, fiscally alone, let alone the cost of everything it does while trying to justify its own continued existence and funding.