“Pro-Business” Isn’t Always What You Think. Take Health Reform, For Example.

People who think they know “what business wants” may need to think again - especially when it comes to social issues like health reform. Case in point: A recent study of New York small business owners shows that more than half believe small businesses have an obligation to provide health coverage. What’s more, 51% think they should be required to provide it.

But do they distrust government solutions, preferring to let “the market” solve everything? Apparently not: 72% support the option of joining state-run insurance pools, and a stunning 85% think government should act as a “watchdog” over health insurance companies.

Why? Partly because they know our broken health system stifles innovation. And partly because they know that many American businesses struggle with runaway health costs, or with workers who can’t get treatment for their medical problems. That means they can’t compete on a level playing field, domestically or internationally. And without a level playing field, the free market can’t operate.

Roll over, Newt Gingrich, and tell Ayn Rand the news: Sometimes capitalism can be improved when government and free enterprise work as partners. These entrepreneurs understand that.

Small Business Majority cosponsored the New York survey, whose findings are consistent with an earlier survey the group conducted in California. The California study’s key findings included the following:

1. 80% of those who expressed an opinion felt that employers should pay something to provide healthcare …
2. 75% ranked the availability of affordable healthcare as extremely or very important.
3. 57% regard health care financing as a shared responsibility among individuals, employers and government …
4. 55% were in favor of paying into a statewide pool that would enable their employees to obtain coverage at favorable rates…

“There is a range of political opinion among small business owners,” John Arensmeyer told me. Arensmeyer, the Founder and CEO of Small Business Majority, added: “They tend to be an independent-minded group. But they’re in favor of what works. They see health care as both a moral obligation on their part, and as a problem to be solved.”

The entrepreneurs polled in this study represent the second-most trusted institution in the United States, according to a Gallup poll. Small business is more trusted than organized religion, police, or even doctors. (Congress is at the very bottom - below even HMOs. Man, that’s gotta hurt …)

Arensmeyer explained why innovation’s being stifled by our broken health system. “Somewhere there’s an engineer at a computer firm with a better idea about something,” he said. “She can’t go out and start her new company, though, because she and the people she’d like to recruit all need their health coverage. How can we compete in a global economy this way? It’s crazy.”

Arensmeyer says SBM supports principles of health reform, rather than getting locked into specific models. “”We believe in shared responsibility,” he said. “Everybody needs to be a part of the system for it to work. But it needs to be affordable.”

I mentioned my past concerns with what I felt was an over-reliance on individual mandates in the Clinton/Edwards plans, which could have resulted in onerous burdens for lower-middle-class working families. “In order for a system of shared responsibility to work,” Arensmeyer answered, “it’s got to be affordable for individuals. We think the (now defunct) California bill did as good a job at that as we’ve seen anywhere.”

“The Clinton and Edwards plans didn’t reach the point of specificity,” he added. “The devil’s in the details.” That’s a position I can support, having had the same concerns early on about Massachusetts health reform. (Massachusetts eventually had to concede that 20% of uninsured residents would remain without coverage under their plan.)

Says Arensmeyer, “The Massachusetts experiences reinforces those basic principles: affordability and universality.”

Old paradigms of “left” and “right” are breaking down in social policy. The public’s becoming aware that the “business world” is comprised of different groups with differing and often competing interests.

People picture different things when they hear “small business,” because the entrepreneurial world is diverse. But these encouraging surveys suggest that a wide range of small-business owners, from small-town Main Streets to the Silicon Valley, want comprehensive health reform - with government playing a key role.

“Universal Coverage” - Only Words

It’s only words, but words are all I have to steal your heart away …¹

My wife and I stood at the curb saying goodbye to our friend Maureen last week. The election came up, and Maureen said “I like the candidate that’s going to provide universal coverage.” Here’s the problem: there’s no such candidate this year. Maureen’s been had.

But first, a question: What’s wrong with this sentence, from my friend Joe Paduda’s informative write-up of the World Health Care Congress, referring to the difference between the Clinton and Obama health plans?

“… [Clinton] wants mandated universal coverage and [Obama] does not.”

The italics were a hint: Joe and I agree, as does our mutual friend Bob Laszewski, that the two plans are essentially similar. But their primary difference, which is that the Clinton plan includes mandates for adults, can not accurately be described as “universal coverage.” The Massachusetts experience has demonstrated that conclusively.

Even if a mandate plan were to be passed, millions of today’s uninsured would - by my estimation - remain uninsured. Millions more would benefit, as they would under a non-mandated plan, but we’d have nothing like genuine “universal coverage.” And many working Americans would face new financial pressures, without receiving better health coverage in return.  (My numbers and logic are laid out in a footnote.)

I expressed early and serious concerns about the Massachusetts plan, and there’s no pleasure in reporting that they have proved justified. The plan’s been very effective in providing coverage for those who qualify for full subsidies. But it has been far less effective for lower-income working people. Subsidies don’t reach them, and the difference between plan premiums and the mandated tax penalties they face is still a big-dollar amount for their budgets.

The result? These hard-pressed Americans still don’t have health coverage … and they’ve been hit with more taxes.

The Massachusetts plan is a lot like Clinton’s, in a state with a much less complex uninsured problem that other parts of the country - and it’s been forced to exempt 20% of the uninsured. That’s not “universal coverage,” it’s health mandates - and while it will provide coverage for some, many will fall through the cracks.

Why does this matter? Why am I harping on the choice of words? Because perception drives reality in politics. Maureen thinks her candidate will provide “universal coverage” if elected. Here’s what will really happen if Maureen’s favorite gets the nomination - she’ll be hammered by her opponent in the general election over the enormous added tax burden to lower-income working families. If she wins, her plan will face far greater political opposition because of the mandate provision - which will most likely be dropped as a result. If, against all odds, these obstacles are overcome and a mandate provision is passed,

Based on rough calculations, I agree that Obama’s plan would leave approximately 15 million uninsured. But I estimate that Clinton’s plan would leave 8 million uninsured - and is far less likely to pass in Congress.² (Each plan has its own strengths in the cost-cutting and health oversight areas - and McCain’s isn’t really a “plan.” It’s more of a “wealth-transfer-device” for the already well-to-do … but that’s another topic.)

What about the argument that a mandate plan can’t pass?

Not so, says Paduda. He quotes Obama surrogate Rep. Jim Cooper as saying the mandate provision - which Joe again mischaracterizes as “universal coverage” - will get “zero Republican votes,” which he calls “a completely wrong statement.” Joe cites the mandate-driven Wyden Health Plan, with six Republican co-sponsors, as proof.

But the Wyden plan, which takes employers out of the health insurance game, has a couple of carrots to offset the “mandate” stick. One’s for working people: It requires employers who currently provide coverage to boost salaries to offset for the huge expense savings they’ll get. That puts money back in people’s pockets. The second is for employers: Salaries are rising at a much slower rate than health premiums, and they have more control over them, so this is a financial win - especially for larger corporations.³

I’ve talked to many employers over the years - large and small - who would love to get out of the health benefits business. And I’d argue that the Wyden bill can be pitched as more attractive to lower-income working people. I suspect these differences make the Wyden bill GOP-friendly enough to offset for its universal coverage mandate provisions. (That said, it’s excessive of Rep. Cooper to suggest that a mandate bill would get “zero” Republican votes. There might be handful, but probably not enough to pass …)

So we watched Maureen pull away from the curb, content in her belief that at least one Presidential candidate would bring the country “universal coverage.” Can’t blame her: a lot of smart people think so, too.

Too bad life ain’t so simple …

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¹What would a wonkish health policy post be without quoting at least one Bee Gees song? Others I could have cited here include “Stayin’ Alive” - and, of course, “Massachusetts.”

²Quick and dirty calculation: Massachusetts, which is demographically less challenging than other parts of the country (fewer illegal immigrants, etc.), was forced to exempt 20 percent of the uninsured from its plan. Planners in more variegated California expected that 30% would have to be exempted. So, even the generous assumption that mandates will do as well nationally as they have in Massachusetts gives us a 20% exemption rate. If we assume 40 million uninsured nationwide, then 20% = 8 million. That ain’t universal. Thus, the difference between an Obama plan that excludes 15 million and a Clinton plan that excludes 8 million is 7 million.

What’s left to consider? First, whether you think a mandate plan can pass Congress. If it can’t, everybody loses. Second, your personal opinion of whether mandates for hard-pressed working families are a) a way to force them to pay their fair share, or b) another regressive tax that places too much burden on those at the lower end of the spectrum.

³Re the Wyden plan, I like the concept. Unfortunately, though, I can see a number of ways that employers could game it. But that’s for another day.

Tier 4 Drugs: An Industry Response

Ezra Klein spoke with Robert Zirkelbach of America’s Health Insurance Plans regarding Tier 4 medications. Mr. Zirkelbach’s response hits a few points:

National Conversation

That we need a “national conversation” about “whether drugs that cost ten or a hundred times as much as current treatment options are producing better outcomes.” (Whatever your opinion of Hillary Clinton, I’m not particularly grateful for the insertion of the phrase “national conversation” into the political lexicon. A little less talk, a little more action, as Elvis would say.)

In this case, I would say we don’t need a “conversation” about better outcomes. We need data. It’s a research question, not a political one. If these therapies are better than the alternative, then we need a conversation - but it has to be about our level of willingness to provide insurance that pays for the best available treatment. That’s a debate worth having, and it’s also where we need some of that transparency Jonathan Cohn calls for.

Generic Alternatives

Mr. Zirkelbach says we should encourage “generic versions” of Tier 4 drugs. But, as Ezra points out, they’re not likely to be available.

Comparing New and Current Treatment Options

Lastly, Zirkelbach suggests “we need a national system in this country that compares new drugs with the treatment options currently available in the marketplace.” That’s a good point. Even under single-payer coverage, we would still need to do cost/benefit analyses on very expensive therapies - and not just for pharmaceuticals. The more information that’s made publicly available, and the more education and debate that ensues, the better.

I still say there is a point at which “insurance” becomes a misnomer. What that point may be is somewhat subjective, but in theory it’s this: When the coverage being provided no longer protects individuals from severe financial harm as a result of loss.

And I’d add this thought to the “national conversation”: When plan designs are no longer made to change behavior, but simply to transfer high-cost items back to the insured party, that’s risk transfer and not benefit design. As a result, the insurance concept is being subtly modified - and arguably undermined.

Tier 4 Meds: When Is Health Insurance Not Insurance?

Is health insurance even insurance anymore? The high cost of intensive drug therapies is being shifted back onto patients - and not because the procedures are considered “experimental.”

The New York Times’ Gina Kolata wrote a piece today about a new kind of financial catastrophe striking Americans who have - or think they have - health insurance. The problem is with so-called “Tier 4″ drugs, which are typically prescribed for severe medical conditions. These medications are extremely expensive, and insurance companies have been exempting them from the usual rules (like fixed copays and out-of-pocket limits) that protect their members from financial shock. As a result, people who think their they’re protected financially are being hit by huge drug bills.

Patients aren’t bearing more of the cost for these medications because they’re experimental - a reason that’s often used for denying certain treatments. They’re bearing more of the cost because they’re expensive, at least as far as some quick research today could determine. And, as Jonathan Cohn of The New Republic observes, the political debate isn’t even addressing this part of the problem.

How bad is it? Take one breast cancer patient in the Kolata piece, for example, who lives on Social Security disability and has Medicare coverage:

(Her insurer) declined to say what Tykerb might cost, but its list price according to a standard source, Red Book, is $3,480 for 150 tablets, which may last a patient 21 days. Wellcare requires patients to pay a third of the cost of its Tier 4 drugs.

That’s nearly $400 every three weeks. Or, how about the MS victim whose Kaiser coverage changed unexpectedly, so she didn’t find out until she picked up her usual prescription?

Now Kaiser was charging 25 percent of the cost of the drug up to a maximum of $325 per prescription. Her annual cost would be $3,900 and unless her insurance changed or the drug dropped in price, it would go on for the rest of her life. “I charged it, then got into my car and burst into tears,” Ms. Steinwand said.

Ezra Klein’s not sure how Tier 4 drugs are designated. (But he got curious about it, too. See his post and my reaction.) Ezra writes:

(Kolata’s) article vaguely implies that Tier Four is simply composed of costly drugs that insurers are dumping on patients. My understanding of the situation is that Tier Four is actually composed of largely experimental and unproven treatments that don’t seem to offer benefits in line with their cost. If it’s the former, then this really is, as the article seems to suggest, a cruel and crazed practice. If it’s the latter, then it’s exactly what we need to be doing.

I wish Ezra was right, but he’s not. Here are a couple of examples of the logic used to transfer these costs to customers. Blue Cross and Blue Shield of North Carolina says Tier 4 drugs are “medications classified by BCBSNC as those which require special dosing or administering, are typically prescribed by a specialist and are more expensive than most medications.” That’s it: nothing about “experimental.” And the UPMC health plan, affiliated with the University of Pittsburgh health system, says this:

The fourth tier is for specialty drugs, which are high-cost medications and biologicals, regardless of how they are administered (injectable, oral, transdermal, or inhalant). These drugs also have the highest level of copayment. These medications are often used to treat complex clinical conditions and usually require close management by a physician because of their potential side effects and the need for frequent dosage adjustments.

These two descriptions are typical of the way insurers describe Tier 4 drugs. Defenders of the Tier 4 system will say that health premiums will become unaffordable if these costly treatments, which can exceed $100,000/year, are paid by insurance. There’s some truth to that. But here’s the problem with that argument: The function of insurance is to protect individuals from expenses they can’t afford. Once you start withdrawing that protection, it’s a misuse of language to describe the product you sell as “health insurance.” It needs to be called “health cost offset,” or “selective health cost mitigation,” or something else that doesn’t promise more than it can deliver.

If costs have become so high that the private health insurance system can’t provide affordable coverage that protects people from financial harm, then the entire system needs to be re-envisioned. Remember: In all the debate about “universal healthcare,” most politicians are really talking about “universal health insurance.” But if it isn’t really “insurance” anymore, what are they offering voters?

(Kevin Drum has also written about this issue)

Separate And Unequal: Healthcare in the United States

The nation commemorated the 40th anniversary of Martin Luther King’s death last week. Here’s a quote from him that didn’t get much play in the testimonials: “Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” Two recent studies highlights the lack of progress we’ve made in four decades, and proposals from John McCain and the Florida State Senate show how little resonance Dr. King’s words have in some corners of public life.

Studies by the Robert Wood Johnson Foundation and the Harvard School of Public Health provide more documentation for something many Americans know from personal experience: The United States is a nation living under medical apartheid. The South Florida Times summarized the studies’ findings as follows:

“… elderly black and Hispanic patients often received substandard care for common but serious conditions like heart attacks, congestive heart failure and pneumonia. Researchers say their data suggests that the nation’s healthcare system is racially and ethnically segregated, not just for the elderly, but across the board.”

Lead researcher, Dr. Ashish K. Jha, said:

“When we see ongoing segregation in housing and education [in America,] it may not be surprising that we’re seeing very different administration of care in hospitals that serve blacks and Hispanics versus hospitals that mostly serve whites. But we’re not talking about [failures of] high tech medicine. This is basic stuff, like failing to administer aspirin or beta blockers to patients suffering a heart attack; treatments that we’ve known about for 20 years.’’

These studies are consistent with earlier findings that, at all levels of incomes, black Americans die years earlier than whites. The infant mortality rate for African American babies is 2.5 times greater than it is for non-Hispanic whites, according to data from the National Center for Health Statistics, giving us the worst infant mortality rate of any industrialized nation on Earth, except Latvia. It should be noted that these recent studies demonstrate that Hispanics in this country also experience extreme disparities in medical care.

Are you OK with that? Then how about this? Lack of health insurance results in the deaths of 18,000 Americans each year, according to studies compiled by the National Academies’ Institute of Medicine. That equates to 49 or 50 deaths every day.

How are politicians responded to this ongoing health crisis among “the least of us”? The Florida State Senate is proposing to cut $803 million in health care financing for the low-income residents, the poor, and senior citizens - a figure the Orlando Sentinel calls “staggering.” Disabled Floridians and recent transplant recipients would be among those losing medical coverage. “This is a death sentence for a lot of people,” said a bone-marrow transplant patient. He’s right.

For his part, according to the Boston Globe, John McCain is still “working out the details” of his health plan. He’s already done enough. Although some friendly reporters are emphasizing his willingness to offer tax credits, rather than just tax deductions (as his GOP predecessors have done), his plan is the same prescription for disaster that Bush’s and Giuliani’s have been. Like them, he proposes to end tax benefits for employers providing health insurance, which would effectively scrap the current employer-funded system.

McCain would replace the employer system with a tax benefit that would fall far short of covering the added costs of health insurance, especially since the bargaining clout of employers would be scrapped for a free-for-all system of individual buyers without expertise or buying power. The result would be a plan that creates substantially higher out-of-pocket costs for working Americans without extending insurance to those currently uncovered.

McCain attempts to make his plan more politically palatable than his predecessors’ by speaking in vague terms about “high risk pools” and subsidies. But, except for the inclusion of tax credits as well as deductions, he has yet to differentiate his proposal from theirs in any concrete way. His refusal to place any requirements on insurance companies, together with his abandonment of the employer-based insurance system, would create enormous financial hardship for working people who suffer from cancer and other pre-existing conditions.

What about the poor and unemployed? It’s true that some might benefit from a tax credit - but the $5,000-per-family figure McCain mentioned wouldn’t cover premiums for very many lower-income people. And they’re unlikely to be able to afford the difference between $5,000 and the actual cost of insurance, which would likely be thousands of dollars per year. The net result? Continued lack of coverage for those currently doing without medical care.

Obama and Clinton supporters are free to continue their blood feud over which has the better health plan. I’ve argued that Obama’s is more politically feasible and, in the end, more progressive. Some colleagues in the health policy world disagree. But we all agree that Sen. Clinton’s plan would also be a vast improvement over McCain’s. And the actions of the Florida State Senate are unconscionable.

To be clear, we’re talking about two distinct policy issues here - the problem of the uninsured, and the ethnic and racial divide in American healthcare. But these two issues are closely related, and both cut to the heart of what it means to be a just society in the 21st century.

Heated Debate Over Mandates

The intensity of debate around health care reform is reaching new heights, especially around mandates. They were a key part of the Massachusetts reform law and are central to the Clinton health proposal. Obama’s reform plan does not include a mandate provision, at least initially, although he indicated during the early debates that he would consider adding one later if voluntary programs don’t succeed in getting near-universal coverage.

Clinton has been hammering Obama over this issue for months, saying that her plan guarantees “universal coverage” and his doesn’t. Here’s the simple fact: Mandates do not create universal coverage. When the pundits were celebrating the “Massachusetts miracle” — including many of the same “health wonks” now touting the Clinton plan — I was one of the few to point out that the plan was actually more mirage than miracle. It kicked the unpleasant decisions down the road so that Mitt Romney and his Democratic and labor collaborators could take an undeserved victory lap at the signing ceremony.

Sure enough, the legal authority responsible for the Massachusetts plan eventually acknowledged that the plan will leave 20% of that state’s uninsured without coverage, and the real number may be higher. Why? Because there is a wide band of people who would suffer financial hardship if compelled to pay the premiums, and it’s financially infeasible to subsidize them all.

The Clinton plan, should it ever be passed, will suffer the same fate. I will happily bet Paul Krugman on that point. He should know better than to claim that the Clinton plan could provide universal coverage. Experience and political common sense say that just ain’t so.

That’s not to say there aren’t valid arguments in favor of mandates. There are, which is why they’re part of conventional health policy wisdom. Mandates solve the “selection problem,” where insurance costs become too high because only sicker people buy insurance voluntarily. They also allow funds that are now used to reimburse providers for treating the uninsured to be used in better ways. And I think the Obama team is over-optimistic about voluntary compliance levels.

Krugman and other supporters of the Clinton plan are now pointing to a study by the respected Urban Institute as a validation of their position. It’s a good study that shows mandates are the only way to achieve something like “universal coverage” — if you first exclude single-payer coverage from the mix. (They also exclude my preferred approach — core basic coverage paid from tax revenues, with the ability to “buy up” into private plans through a subsidy/voucher approach.)

Here’s one problem: The paper’s authors admit, albeit indirectly, that they overestimated the ability of Massachusetts to achieve universal coverage. They make the same mistake here. Here’s another: Sen. Clinton and the supporters of her plan have been evasive about how they would enforce this mandate, and enforcement is key to the Urban Institute’s findings. In a recent interview she was forced to acknowledge, for example, that she would consider garnishing wages. And while she has boasted about tying mandate obligations to personal income, she has been equally vague about what level of personal income she might allocate for healthcare.

Those provisions are political non-starters. Massachusetts is easy compared to the country as a whole — both in terms of political climate and the scope of the uninsured problem. Yet they had to leave 20% of the uninsured without coverage. That figure would equate to about 8 million people nationwide. If we accept Sen. Clinton’s figure of “15 million uninsured” under the Obama plan (and that figure was chosen by a journalist, not a technical study), that means a difference of seven million — in return for a plan that might actually get passed in Congress. (The gap could be filled in later, after premiums are brought under control and it becomes more politically feasible.)

And consider what mandates might do to a family of four. While Clinton won’t tell us the percentage of income she’d tie to mandates, many analysts have been using 10%. If premium assistance is provided up to 300% of the poverty level, a family of four trying to survive on $75,000 could be forced to pay $7,500 to insurance companies or in health copayments. The alternative could be tax penalties or garnished wages. That seems unfair. I also believe it’s a serious misread of American political culture to think that kind of mandate could ever get through Congress.

Krugman was outraged by an Obama ad that seemed to channel “Harry and Louise” from the 1994 anti-reform campaign. He says that mandates are to “prevent some people from gaming the system,” he writes, as if that family of four could write out that $7,500 check if not for some moral hazard. (Granted, there are “gamers,” but they tend to be the young, healthy, and relatively prosperous.)

We already have a mechanism for “shared responsibility,” and it’s called taxation. Adding 10% to struggling families’ financial burdens reads politically like a highly regressive tax to be paid to insurance companies - and the Wall Street Journal suggests that insurance companies do prefer the Clinton plan. That could create rough political waters in the general elections, especially for a Democrat.

While mandates have real value, political realities and issues of fairness suggests that the health reform process should start elsewhere. What’s even more clear is that they are not a mechanism for creating “universal coverage,” whatever the politicians say.

(extracted from a piece in the Huffington Post)

Health Mandates: A Talk With Obama Health Advisor David Cutler

Hillary Clinton, John Edwards, and Barack Obama have each presented detailed proposals for health reform. The Clinton and Edwards plans include health mandates, which require Americans to obtain health care coverage or face (unspecified) sanctions. The Obama plan does not include mandates.

Health mandates are popular among many Democratic-leaning health policy analysts. The Clinton campaign has been going after Obama aggressively on this issue. They’ve said that the absence of mandates is a basic flaw in Obama’s plan; suggested a cynical political calculus behind Obama’s position said that his position feeds a Republican narrative; and took the position that Obama’s plan is politically vulnerable while theirs (and Edwards’) is a political plus in the general election.

(The preceding positions were echoed today by Paul Krugman - see my response, “Why Paul Krugman Is Wrong …“)

I don’t support any Democratic candidate, but I do have strong opinions about health mandates. As a long-time healthcare policy analyst and health manager in the private sector, I disagree with Paul Krugman, Ezra Klein, Jacob Hacker, and others who support mandates. My differences are based on policy effectiveness, issues of fairness, and Democratic political strategy. I think mandates pose more problems than they solve, and that they could be a political loser for Democrats in the general election.

I’ve been engaged in a collegial debate with Klein, blogger/consultant Joe Paduda and others on this topic for some time (see, for example, here, here, here, and here). During an exchange with Klein over the last week it became apparent that, while I had reasons to support Obama’s policy, it was unclear to me what his team’s current thinking was on the topic.

The team published a rebuttal to Clinton’s campaign late today. Earlier I spoke with David Cutler about mandates. Cutler is Professor of Applied Economics at Harvard, Obama’s senior health advisor, and the principal architect of the Obama plan.
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Why Paul Krugman Is Wrong About Health Mandates

Now there’s an intimidating headline to write. Paul Krugman slammed Barack Obama today on the issue of health mandates. Here’s why I believe he’s wrong:

From the beginning, advocates of universal health care were troubled by the incompleteness of Barack Obama’s plan, which unlike those of his Democratic rivals wouldn’t cover everyone.

Two misstatements in this opening sentence. First, while it’s true that Obama’s plan won’t “cover everyone,” neither will anyone else’s. Mandates have never achieved 100% effectiveness. The practical design problems of subsidies, exemptions, and benefit levels that accompany mandates are complex and unwieldy.  That’s why the Massachusetts Authority responsible for that state’s plan - which Krugman would describe as “covering everyone” - just exempted an estimated 20% of uninsured residents from the mandate.

Secondly, the absence of mandates is not necessarily an incompleteness in the Obama plan. I’ll be posting my conversation on this topic with Obama health advisor David Cutler shortly.

Here’s why: under the Obama plan, as it now stands, healthy people could choose not to buy insurance — then sign up for it if they developed health problems later. Insurance companies couldn’t turn them away, because Mr. Obama’s plan, like those of his rivals, requires that insurers offer the same policy to everyone.

As a result, people who did the right thing and bought insurance when they were healthy would end up subsidizing those who didn’t sign up for insurance until or unless they needed medical care.

Mr. Krugman raises some valid concerns here. But what he doesn’t say is that this would only be a temporary problem under the Obama plan. If it failed to achieve enrollment rates high enough to offset this ’selection effort,’ other measures would be used - including potentially mandates.

The main difference between Obama’s plan and his rivals’ is this: They would mandate health coverage first and fix cost problems later. Obama would do the opposite. While both approaches are problematic, there is a strong case to be made that Obama’s plan is fairer - and much more politically progressive.

Mr. Obama claims that mandates won’t work, pointing out that many people don’t have car insurance despite state requirements that all drivers be insured. Um, is he saying that states shouldn’t require that drivers have insurance? If not, what’s his point?

His point is that the Clinton and Edwards claim - that they provide “universal coverage” - is false. If mandates don’t result in “universal coverage” - and the Massachusetts experience seems to confirm that - than this statement is hyperbole, not fact, and the debate is really about how many people to cover and how fast .  It’s not the black-and-white issue the campaigns are making it out to be.

Mr. Obama accuses his rivals of not explaining how they would enforce mandates, and suggests that the mandate would require some kind of nasty, punitive enforcement: “Their essential argument,” he says, “is the only way to get everybody covered is if the government forces you to buy health insurance. If you don’t buy it, then you’ll be penalized in some way.”

Well, John Edwards has just called Mr. Obama’s bluff, by proposing that individuals be required to show proof of insurance when filing income taxes or receiving health care. If they don’t have insurance, they won’t be penalized — they’ll be automatically enrolled in an insurance plan.

That’s a “terrific idea” with no penalties, Mr. Krugman says. Okay, let’s amend Obama’s choice of words slightly: when people are enrolled in a plan automatically and then don’t pay the premiums they’ll be “penalized in some way.” That’s not hair-splitting - it’s a huge difference. If a family of four is enrolled in a health plan with $10,000 annual premiums, that’s a burden. What will happen if they don’t pay?

We’ll fix that with subsidies, says the mandate crowd. But how much will people actually pay? They’re not saying.

I recently castigated Mr. Obama for adopting right-wing talking points about a Social Security “crisis.” Now he’s echoing right-wing talking points on health care.

I agree with Mr. Krugman about the Social Security issue. And I understand the concern about the use of words like “forced” by the Obama campaign. I understand the concern about the use of words like “forced” by the Obama campaign.  But that’s mild compared to the words the GOP will use in 2008 - and they’ll say them no matter what Obama does or doesn’t do. So rather than crying “foul” when someone challenges them, the Clinton campaign and others should use this as an opportunity to sharpen their talking points - or primary voters may conclude they don’t have it in them to make their case when the going gets tough.

Even More On Mandates - and the 80% Solution

The mandate question won’t go away because it’s central to most health reform proposals on the books today. And yet in a little-known development, the best known “mandate plan” is no longer “universal,” since Massachusetts has decided not to impose mandates on everybody.

Ezra Klein has responded to my take on his Obama slam. He echoes the pro-mandate consensus when he says this: “You can’t actually have this wonderful system everyone’s talking about without full buy-in.”

Buy-in … buy-in … that word keeps haunting me like a ghost from Dickens, and I don’t know why. Oh, wait … I do know why. Because no other industrialized nation has forced people to “buy” something that is usually provided as a social service. Which gets to my underlying problem with mandates, something I haven’t fully articulated until now:

Insurance premiums as we use them in this country are a market-driven, private-sector mechanism.* Advocates want to mandate that people pay premiums, rather than taxes, to meet a social goal. That’s a functional mismatch between the way governments typically address social goals - through taxation - and the way markets establish the price to be paid for transferring risk.

The end result? Elaborate mechanisms for trying to protect people from unfairly shouldering more of that social cost than they can personally bear. When you factor copayments and deductibles on top of premium costs, that gets very difficult.

As noted by the Progressive States Network, total health costs for some Massachusetts residents could exceed 23% of income - at a wage level where that could have a profound impact. The PSN also notes this:

… although 200,000 previously uninsured residents have obtained health insurance in the past 16 months, anywhere from 150,000 to 300,000 residents have yet to sign up with an insurance plan. …. Any uninsured residents will be penalized in 2008 by losing a $210 tax exemption. In 2009, the penalty will jump to “half the monthly cost of the least expensive plan available …” But officials recognize that the still-high costs of health care in Massachusetts make imposing this penalty unfair.

In other words, mandates are being phased in - just as Obama had initially promised to having a universal coverage law by the end of his first term. (Although, come to think of it, haven’t heard about that pledge lately.) The escalating penalties also indicate that, at least in Massachusetts, officials believe mandates have to be quite severe before enrollment increases significantly.

“The Connector authority is granting waivers to 20% of the state’s uninsured residents,” the PSN adds, “or roughly 65,000 individuals, exempting them from the individual mandate.” So the “universal coverage” plan has become the “80% solution” for the state’s uninsured.

In other words, the Massachusetts universal coverage plan is no longer “universal.”

And Massachusetts is an easy state compared to California and some others. When you’re talking about the entire country, the problems become massive.

So what about fairness? One economist said: “”What the Massachusetts decision will do is put down a marker that other advocates will use to say that costs can’t be more than 10%.”

Let’s think about that for a second: Let’s say that society has decided that the total Federal taxation burden for a middle-class family is 28% of income. Now, through mandates, that could become 38% . How can an “opportunity society” candidate argue that a vital need like healthcare should create a usurious burden on the middle class, yet cost the wealthy a small amount of their income (and nothing for the poor)?

Ezra also repeats his assertion that a plan without mandates will be a political liability. And I repeat mine - that mandates themselves will be a liability. I can see the Republicans scoring huge points with something like this: “They’ll be watching you - every time you go to the doctor’s office, or pay your taxes, or get a driver’s license. And they’ll raise your taxes by 40%. Why? Because they think you shouldn’t decide for yourself how much insurance to have.”

Good luck with that.

The alternative is to say: “We’ll invest in making the system better. Then we’ll figure out a way to finance universal coverage that everyone can live with.” Do I like kicking the financing issue down the road? No. Do I recognize that adverse selection will be tough to manage? Yes. But the only alternative is to say that every American deserves a base level of medical coverage paid for out of general tax revenues. And I don’t see any of the leading candidates saying that any time soon.

In short, there are two ways to do this: If it’s optional, it’s Obama’s plan, or something like it. If it’s universal, it’s taxation. (Maybe with vouchers, and employer tax offsets for offering benefit plans.) The in-between approach - mandates - still seems problematic to me.

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*There are countries with very different premium models, like Germany, and those are models we should seriously consider.  But that’s another day’s work to write about …

More on Mandates: Ezra’s Take

Is Obama’s decision not to include mandates for health coverage “a policy … his campaign regards as a mistake”? Ezra Klein believes so. Maybe he has some insider info that’s not available to the rest of us. But even if the Obama campaign thinks it’s a mistake, I don’t.

Ezra’s piece is an emphatic and succinct summary of the pro-mandate arguments being made from the left by a number of progressive Democratic health policy analysts. Ezra writes:

I’m getting really tired of Obama’s constant excuse that his health care plan isn’t universal because “The reason Americans don’t have health insurance isn’t because they don’t want it, it’s because they can’t afford it.” The reason Americans don’t all have flat screen televisions is because they can’t afford those, too.

That’s true, I suppose - although I’d hesitate to use an analogy between healthcare and expensive consumer electronics when critiquing a policy from the left. But we’re not mandating televisions. And the mandate we are discussing won’t achieve its stated goal of “universal coverage.”

Most experts agree that compliance with a health mandate will be notably less than universal. It will be greater under the Clinton plan than it would be under Obama’s mandate-free alternative. But we’re talking about relative degrees of coverage, not the “universality” that will remain somewhat elusive even under mandates.

We share similar concerns about each of the Democratic candidates, but Ezra specifically sees Obama’s no-mandate position as a betrayal of progressive principles. He writes of his hopes, now unrealized, that Obama would argue “we as a society needed to unify, come together, make temporary sacrifices to build a better world.” Ezra adds, “his remarkable eloquence rendered him uniquely able to articulate the larger progressive narrative, that our nation must move forward as ‘we,’ rather than continue as a country of I’s.”

Here’s my response: First, when it comes to universal coverage and mandates it’s not a black-and-white matter of “we” vs. “I.” Mandates add some more”I’s” into the “we” pile, but not all of us. How many? That remains to be seen. Massachusetts residents will have to choose between expensive health insurance or a tax penalty that starts at less than $300 but quickly escalates to half their expected premium. Many will buy the insurance, but others will take the penalty.

As Massachusetts “Connector” Authority chief Jon Kingsdale said, “There’s good evidence, whether it’s buying auto insurance or wearing seat belts or motorcycle helmets, that mandates don’t work 100%.”