Posts Tagged ‘health care reform’

You Call That Health Reform?

December 13, 2009

These days when people ask about health reform, I’m reminded of Gandhi’s visit to England in 1931. Somebody asked him what he thought of “Western civilization” and his answer was, “I think it would be a good idea.”

That’s how I feel about health reform: It would be a good idea.

The truth is that what we’ve been calling health reform doesn’t really “reform” the system at all. It mostly shifts responsibility from one part of the economy to the other. While the Senate’s misguided excise tax places undue and unfair pressure on working people’s health plans, both bills squeeze the middle-class enormously. How? By mandating the purchase of costly and inefficient private insurance, in order to create conditions where the lower-income uninsured can receive coverage. Maybe we should call it “health inefficiency redistribution” instead, since the few cost-containment provisions are in all likelihood being oversold.

That said, the current House and Senate bills would both accomplish some very important things. But these bills do little to lower costs, and it didn’t have to be this way. This seems like a good time to get out of the weeds and look at the situation from a slightly broader perspective.

Here are some thoughts that might help sketch the outline of real reform:

People don’t understand how the money really flows in InsuranceLand.

Ezra Klein will point out that insurance company profit margins are low. They are, but as I pointed out here, the really big insurers have better-than-average margins – and most people are covered by really big insurers.

Even more importantly, margins are artificially low for health insurers. Think of it this way: Let’s say you hire me to pay your bills for $5 each. The first bill is for $1,000, so I charge you $1,005. My profit margin is very low (0.5%), but I just made five bucks and all it took was a second to write the check (and 42 cents for the stamp). Sweet. If I do that 10,000 times I day I’m rolling in cash … and I when I bitch about my profit margins, it’ll sound reasonable to lots of Democrats and liberals.

With the cost inflation we’re seeing, health insurers aren’t “managing” anything. Like my example above, they’re just writing checks. They should be treated that way – as overpaid performers of a clerical function – until they demonstrate that they can do their jobs better. We could make some accounting changes, too.

The idea that insurers have to pay 90% of whatever they charge for medical expenses sounds good, but …

if that happens, what’s the one sure way to make sure they have more profit in the years to come? Charge more! If you only get to keep ten cents on the dollar, the only sure way to get more money is to collect more dollars. Don’t think they’d do that? I hope you’re right. But at a minimum, it certainly doesn’t give them much incentive to lower costs, does it?

There are more creative ways to accomplish the same goal – and give them the right incentives.

We already have single-payer in most of the country – but it’s private single-payer.

One study has shown that 94% of health insurance market areas in this country have a near-monopoly situation, while another showed that in 16% of markets they studied one carrier had 90% or more of the market. We have near-single-payer or absolute singer-payer in wide swaths of the country – but it’s single-payer in the hands of a profit-making elite answerable to no one.

Real health reform would do something about that.

Meanwhile, here in the real world …

So, what about the health reform we do have? I had already said that the watered-down public option probably wasn’t worth keeping, and that advocates should hang tough in favor of something more robust. Medicare expansion seemed like a good alternative to that weak public option in certain ways, although that’s a tough choice to be forced to make. There are also many unanswered questions – and it could become a dumping ground for bad risk. The number of people eligible for the plan is likely to be extremely small. And I never underestimate the political process and its ability to mess up even a marginally good thing. (See reports that Kent Conrad was trying to ensure that the expanded Medicare program can’t use Medicare rates – an idea that would rob it of any real value.)

So the Medicare expansion, even if it’s not diluted any further, is a backdown from a compromise proposal that was a itself compromise from the Democrats’ 2008 campaign pledges – pledges which were themselves less than what most experts felt needed to be done. A compromise of a compromise of a compromise of a compromise: I’ll let others decide if that’s the best we can expect from (and for) our nation.

Any good news? Sure. Both the Senate and House bills provide insurance to the lower-income uninsured (although the subsidies are too weak), create portability for people with pre-existing conditions, and limit out-of-pocket costs. (Note that I said limit and not reduce. From what I’ve seen, neither bill would lower those costs much, but they’d cap them.) But would the bill be “a pretty remarkable accomplishment,” as Mike Lux put it? Only if you grade on an extremely steep curve – one in which an “A” is not the health reform we should have, or even the one that was promised by Democrats in the 2008 election, but is the result of a process that seemed to lack the best our leaders can offer in the way of imagination and decisive leadership.

Maybe, once the bill is passed, we could use the enormous reservoir of talent our leaders possess to begin work on real reform. The work won’t end then – it’ll just be beginning.

Getting Health Reform Right: A Q&A With Jacob Hacker

February 2, 2009

Wanted: a framework for comprehensive health reform that provides near-universal coverage, reduces costs, and fosters continued improvement in medical care. Oh – and the plan must be politically achievable. Jacob Hacker thinks he’s designed a plan that fits this bill, and after a Q&A with him I’ve come to think he could be right.

Health reform hasn’t received this much attention since 1994. Obama’s approach has been to lay out overall goals and let Congress work out the details, a strategy that insiders say makes reform more likely.  But Republicans are going to be cautious about handing Obama any policy victories, as we’ve seen from the House stimulus vote, and they’ll probably stick to the free-market line when it comes to health reform.  Initiatives are likely to be criticized from the left, too, if they don’t dramatically reduce the number of uninsured. But the assessment has already been made in Washington that single-payer (“Medicare-For-All”) coverage is not politically achievable.

That’s where Jacob Hacker comes in. Hacker is a Professor of Political Science at UC Berkeley.  He’s a leading health policy theorist and political commentator whose book The Great Risk Shift:  The New Economic Insecurity and the Decline of the American Dream is the best overview yet on the decline of the post-World War II social contract between workers and employers.

Professor Hacker’s proposal, Health Care for America, is based on two simple principles:  First, that both the employer-based private system and publicly-funded Medicare are essentially working for their members.  Second, that every uninsured American (or legal resident) should be able to buy into a Medicare-like public program at affordable rates, with need-based subsidies.  In theory, the Hacker plan increases coverage while lowering costs in several ways:  by bringing more people into a system whose costs are rising more slowly; by helping the government increase the scope and effectiveness of its design changes; by encouraging private plans to keep costs low: and by increasing the public system’s leverage and reach.

The plan has been well-received across the center/left spectrum, even receiving a friendly review from Don McCanne, MD, a Senior Fellow with single-payer advocacy group Physicians for a National Health Program (PHNP). But I had a number of questions, so Prof. Hacker was kind enough to agree to an email Q&A.  He was able to address many of my concerns – including economic fairness (some other plans place unreasonable burdens on uninsured working families) and the risk of dislocation within the health economy.

Health Care for America’s public/private mix is an attractive option for several reasons:

  • It minimizes the risk of creating more problems gaining access to doctors who will accept the public plan (although the this problem has sometimes been over-stated).
  • It emphasizes employer mandates rather than placing the burdens on individuals first – and it limits out-of-pocket costs.
  • It leaves private plan options in place, which minimizes the backlash that would result if people lost freedom of choice.  (As Prof. Hacker noted, “some people buy cars that Consumer Reports says are less reliable .. because they like how they look and drive … and more seriously, the private plans will be able to do things like selectively contract with small numbers of providers … some people will value these innovations.”)
  • It emphasizes “medical homes” – the idea that people should have a doctor somewhere who knows them and understands their overall health needs.
  • It gives private insurers the chance to compete with the public system.  If they control costs more effectively – or provide more attractive benefits – they can still win people away from the public plan.

That last point remains a subject of continued controversy.  Newt Gingrich once predicted that Medicare would “wither on the vine” when private-sector alternatives became available. (Prof. Hacker caught my offhanded reference to this quote in our Q&A – although I’ve always suspected Gingrich’s line was a subtle parody of Engels and “the withering away of the state.”) But, pace Gingrich, we’ve now seen that private Medicare Advantage plans are significantly more expensive than the government program. Not a lot of withering going on there.  But, interestingly, the Hacker plan provides the same sort of competition Gingrich envisioned – but for all age brackets, not just the one already receiving publicly-funded care.

Free-market health advocates still insist that the private sector can do a better job.  It’s true that private Medicare plans had no incentive to innovate, since they were heavily subsidized by the last administration. So, shouldn’t conservatives support this plan? If the private sector really is a source of greater innovation than government, what better way to prove it than in direct competition? (Or, as Prof. Hacker rather drily observes, “Perhaps they will discover inner wellsprings of cost-consciousness we didn’t know they had.”)

Health Care for America is designed as a framework for more detailed discussion. There are issues to explore and details to flesh out. But Congress and the President need a global outline around which to frame the ongoing policy debate. The Hacker plan fills that need. And, as PHNP fellow and single-payer advocate Don McCanne observed, “It is just possible that (Hacker) may have crossed the threshold of political feasibility.”

If that’s true – and I suspect it is – then Health Care for America may become the framework for genuine reform.

(The Q&A with Prof. Hacker is below)

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