Posts Tagged ‘Universal Coverage’

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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“Universal Coverage” – Only Words

April 21, 2008

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.

Even More On Mandates – and the 80% Solution

November 28, 2007

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 …

Democratic Debate Reaction: Health Mandates Are a Bug, Not a Feature

November 16, 2007

Hillary Clinton and John Edwards may have attacked one another last night, but they’re in agreement about the health care mandate issue – and that’s unfortunate. Most Democratic health reform plans include mandated coverage, and that’s a mistake on both policy and political grounds (although the Edwards plan offsets that somewhat with some interesting use of public insurance).

The Las Vegas Democratic debate was long on play-acting, short on substance. Meaningful exchanges about policy were hard to come by, and only three come to mind: Clinton vs. Obama on Social Security, Clinton vs. Obama on health mandates, and Clinton vs. everybody on her Iran vote.

Re health mandates, Obama may well be on the right track. When Clinton boasts, as she did last night, that her plan provides universal healthcare, what she’s not saying is that it does that by punishing people who don’t pay usurious prices to private companies in order to obtain coverage. Obama had the right response, althouch he expressed it in a passionless and somewhat detached way.

The New York Times is correct when it says that “many experts agree that that without a mandate, some people would not get coverage.” In addition, a voluntary enrollment plan will suffer from “adverse selection”: The sick will be more likely to enroll than the healthy, which will make the plan financially unstable.

But I disagree with many of my fellow “health wonks” on mandates. I’ve said they’re the wrong solution. They address the “selection” problem, but only partially. Compliance will continue to be a problem under the “mandate” approach unless fairly Draconian enforcement rules are put in place. (That’s what Obama was alluding to with his “garnishing wages” comment, which many viewers may not have understood.)

Secondly, mandates could become a political disaster. They could turn a Democratic political positive – public frustration with healthcare – into a negative. It’s easy to picture the Republican candidate talking about “nanny state” rules that “invade your privacy and seize your wages.”

No health plan will succeed if it forces Americans to overpay for insurance, on the hope that selection issues and other initiatives bring prices down in the future. It makes more sense to provide every American with a basic government-funded health plan. From there, policy options might include trading plan credits for enrollment in a private plan, or the purchase of supplemental private insurance.

But mandating that Americans buy insurance from private companies is a political and policy mistake. It’s true that mandates are the conventional wisdom today – but then, so was the wisdom of Massachusetts’ mandate-driven health reform initiative. We disagreed then, and said that the “Massachusetts miracle” would have serious problems. It now appears that – sadly – we were right (see here and here and here).

It remains to be seen whether mandates are a “feature” or a “bug” in the Democratic platform.

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