UPDATE: Here is a nice analysis of how the reform bills do not do any reforming. They subsidize the same behavior that is pushing health care costs through the roof. The Dartmouth Atlas shows which areas of the country have higher costs. Other studies from Dartmouth show that higher costs do not translate into better outcomes (pdf) or better health. The Democrats’ bills all reward high cost with higher subsidies. That is exactly the wrong approach.
Olympia Snow has voted for the Baucus bill in committee but may not vote for it on the floor if it is shifted to the left. Since that will almost certainly happen, I wouldn’t be hard on her. Here is a useful summary of the critical flaw in the bill.
Insurance death spirals occur when regulators force insurers to offer coverage (“guaranteed issue”) at premiums below the known risk of those they are insuring, without any assurance that the shortfall can be made up elsewhere. When insurers comply with these rules and offer relatively low cost health insurance policies to all comers, quite predictably, many sick people step forward to sign up. When the insurers then try to turn around and charge higher premiums to the relatively healthy to cover their costs, the healthy, also quite predictably, are more reluctant to enroll because they can see the premiums they would have to pay would very likely exceed their health-care costs. So they often say “no thanks” to the insurance and decide to take their chances by going without coverage instead. As more and more healthy people exit the marketplace, insurers are then forced to raise premiums for everyone who remains, which only further encourages the lower risks to opt out. This vicious cycle of rising premiums and an increasingly unhealthy risk pool is called a ‘death spiral’ because it eventually forces the insurer to terminate the plan.
This, of course, may be a feature of the bill and not a bug since it may kill off private health insurance and force the “public option” as an alternative. The left is determined to have a single payer system on the lines of the Canadian plan or Medicare.
4. Get a public plan (or something that serves the same purpose). Passing a fully fledged public plan, the kind that has all of the bargaining power that its architects originally envisioned, still seems like a long shot. The Senate votes just aren’t there. But idea of a public plan, or something like it, is definitely getting a second look from lawmakers who once dismissed the idea out of hand. The reasons are pretty simple: The idea continues to poll well, at least in isolation, and it eases anxiety about the requirement that everybody get insurance. The most likely scenario, I continue to think, is to arrive at some sort of trigger. But a well-designed trigger might still do some good. The key is designing one that would actually scare insurers, enough to make them provide the kind of affordable coverage we all want.
In fact, the whole idea is to bankrupt private medicine.
Under the current deal, it doesn’t appear either the drug industry or the hospitals will actually be giving up much revenue; if anything, they might come out ahead. Surely it makes sense to ask them for a larger financial sacrifice, particularly if it can be done in a way that fosters more efficient care that would help reduce overall health care spending down the road. Remember, the most important aspect of these deals isn’t the cash it frees up in the short term but the behavior changes it fosters in the long run. By the way, while Congress is at it, it might want to look at the other key industry groups–namely, doctors and device-makers.
My own opinion is that this will fail because single payer of the Canadian variety and our own Medicare system are both insolvent and doomed to collapse.
Social Security, however, is not the gravest fiscal crisis that America faces. The 2005 Medicare trustees’ report estimates that providing promised Medicare benefits over just the next 10 years could require over $2.7 trillion in new tax revenues. Raising taxes by that amount would eliminate almost 816,000 jobs per year, on average, and shave an average of nearly $87 billion from the real (inflation-adjusted) gross domestic product (GDP) between 2006 and 2015. Even worse, the Medicare trustees project that providing promised Medicare benefits over the next 75 years would require $29.9 trillion in new tax revenues. Raising taxes to meet Medicare’s 75-year shortfall would cost an average of 2.3 million jobs and well over $190 billion in real GDP annually through 2015.
Historically, lawmakers have confronted new federal spending with tax increases. The economic costs of addressing Medicare in this way are, to say the least, prohibitive.
And that is without any new plan that thinks it will fund itself with “savings” from Medicare.
H[ospital] I[nsurance] does have a trust fund, but it contains only IOUs that will have to be covered by taxpayers, just like Social Security’s trust fund. Over the next 75 years, the HI trust fund will face a shortfall of $8.8 trillion, according to the trustees.
SMI consists of Medicare Part B, which covers physician, outpatient, and other medical services, and Medicare Part D, which is the new drug benefit. Those enrolled in Part B and, beginning in 2006, Part D, pay premiums covering 25 percent of Part B and Part D benefits; the remaining 75 percent of benefits are made up with general revenue transfers. Over the next 75 years, general revenue transfers for Part B and Part D are projected to total $12.4 trillion and $8.7 trillion, respectively.
Add it all up, and Medicare’s unfunded liabilities amount to $29.9 trillion over the next 75 years—more than five times as much as Social Security’s unfunded liabilities.
The Congress is lying to you. The “reforms” are lies. The politics are another interesting facet of this
Nevada! Senate Majority Leader Harry Reid, who is worried about losing his seat next year, worked out a deal by which the federal government will pay all of his home state’s additional Medicaid expenses for the next five years. Under the majority leader’s very special formula, only three other states—Oregon, Rhode Island and Michigan—qualify for this perk, on the grounds, as Mr. Reid put it recently on the Senate floor, that they “are suffering more than most.”
And New York:
That state, along with some others, has many high-value plans—in part because it boasts a lot of union members with “Cadillac” plans, in part because the state has imposed so many insurance regulations that even skimpy plans are expensive. Sen. Chuck Schumer didn’t want a lot of angry overtaxed New Yorkers on his hands, so he and other similarly situated Democrats carved out a deal by which the threshold for this tax will be higher in their states. If you live in Kentucky, you get taxed at $21,000. If you live in Massachusetts you don’t get taxed until $25,000. This carve-out is at least more sweeping, applying to 17 (largely blue) states, though that’s cold comfort if you live in Louisville.
And New Jersey:
Mr. Baucus will also pay for his bill by socking it to pharmaceutical companies, on the principle that drug companies are filthy rich and should have to contribute to health care. The view is a bit different in New Jersey. The state’s Web site boasts it is the “global epicenter” of the drug industry, where “15 of the world’s 20 largest pharmaceutical companies have major facilities.” And Sen. Bob Menendez, of the Garden State, seems concerned that his home-state employers are going to struggle to both pay their federal liabilities and to continue to grow and innovate. Thus Mr. Menendez’s quiet deal for a $1 billion tax credit for companies investing in drug R&D.
They are all crooks, as far as I am concerned.
There is a way to reform healthcare.
1. A basic reform is to stop trying to micromanage care and stop prepaid care that is called insurance. Insurance is a way to protect ourselves from unexpected events, like cancer and heart attacks. Insurance is cheap for young people. It is not that expensive for older people but there needs to be provision for catastrophic disease. The French system makes such major diseases covered services that are paid for. Nobody anticipates cancer and most people can avoid heart attacks by some life style alteration like stopping smoking and keeping their weight down. Premiums for such conditions should be adjusted like life insurance premiums are adjusted.
2. Prepaid care should be paid by the patient and not be insurable. If they want to join an HMO and have that covered, they should be able to do so. If they would rather pay their own way, that should be an option.
3. Insurance should pay a flat benefit and allow the doctor and patient to determine the price as they do in France. If I want to go to a doctor who charges more, I should be able to do so. Doctors who choose to charge more should be able to market their services and to offer special care like home visits and other features.
4. Medicare is already at the point where payment is so poor that many doctors are dropping out and Medicare beneficiaries cannot find a doctor. The ban on balance billing should be removed and doctors should be required to post their prices in the office and on the internet.
5. Insurance companies like the employer plans because employed people, as a group, are healthier than those chosen at random. Employment can be a basis for health insurance but tax subsidies should be changed to allow individuals to have the same deduction for the same service.
The command economy failed in the Soviet Union. We cannot expect it to work in health care, especially in the dysfunctional political system we have at present. Congress cannot be trusted to get anything right, let alone healthcare.