Archive for December 20th, 2009

The Senate Deal: The Price of Everything

December 20, 2009

The CBO finally scored the redrafted Senate health care bill, saying it will cost $871 billion over the next ten years. Not that anybody waited for the numbers before cutting a deal. This was never really about the numbers. It was about coming in below an arbitrary figure and passing the bill by an arbitrary date.

The CBO Director’s Blog writes that  “(t)he changes with the largest budgetary effects include expanding eligibility for a small business tax credit; increasing penalties on certain uninsured people; replacing the ‘public plan’ … with ‘multi-state’ plans  … deleting provisions that would increase payment rates for physicians under Medicare; and increasing the payroll tax on higher-income individuals and families.”

In other words, the bill now has more breaks for business but harsher punishment for uninsured individuals, it eliminates the already-weakened public option, it pays doctors less – and it costs the Federal government $23 billion more.

Hey, what’s not to love?

The idea of raising payroll taxes on higher earners is a good one.  But if you take that new revenue, add the unfair tax on higher-cost benefit plans (studies demonstrate its unfairness), throw in the pay cut for doctors, and toss the higher individual penalties on top of that, it still doesn’t offset the fiscal recklessness behind killing the public option.

Why would the public plan have saved the government money?  Because, as the CBO puts it, “it was expected to exert some downward pressure on the premiums of the lower-cost plans to which those subsidies would be tied. ”  In other words, it would have made other insurance cheaper by creating real competition.  If it’s costing the government this much money to lose the public option, can you imagine what it’s costing the rest of us as individuals?

Remember: the CBO score doesn’t include the personal value of  these policies for each of us. The Senate’s new bill won’t just increase the Federal budget. We’ll also pay higher premiums because we lost the public option, and face more out-of-pocket payments from the excise tax.    Wasn’t it Oscar Wilde who said a cynic is someone who “knows the price of everything and the value of nothing”? It’s pragmatic to take the best deal you can get, but it’s cynical to avoid the battle and then claim it’s the best deal you can get.  The main thing dividing progressives right now is that some see pragmatism and others see cynicism.

Another question:  If Joe Lieberman can single-handedly be credited with most of these changes, is it fair to call him the Twenty Billion Dollar Man?  Maybe.  But remember, it’s easy to hate Joe Lieberman – and it’s a distraction.  The Administration and the Senate leadership made a series of choices that give him this power.

Some say that the public option was always doomed – that the Administration cut a deal in which they’d make a half-heated attempt to fight for it and would then let  it die, placating the always-compliant liberal wing with another mantric repetition of the phrase “we didn’t get everything we wanted, but …” In that scenario Joe’s the Bad Cop to the President’s (and Harry Reid’s) Good Cop.  If Joe Lieberman didn’t exist it would be necessary to invent him.  “Hey, I wanted to help you out – here’s a cup of coffee – but my partner here …”

Think that’s unfair ?  I certainly hope so, but that gets us back to the string-of-blunders interpretation. Reality’s probably somewhere in the middle:  mismanagement and a back-room deal or two. (We know there was a deal with Big Pharma.)

There’s an easy way for the President and Sen. Reid to disprove the Good Cop/Bad Cop Scenario, of course:  They can fight like hell to win concessions in the House/Senate conference, to bring the  final bill more in line with the House version.  That would mean, at the very least, a public option and no excise tax.

Think they will?  Me neither – but I think they should be pressed to do so.  I expect that the House will be put under enormous pressure to cave and accept the bill as it is.  I think the President and other party leaders assume the left can always be counted on to cave in for the good of the country.  I also think that anyone who points out the flaws in this bill will be subjected to another round of scoldings from party leaders and their supporters, charged with not understanding how the world works. Wouldn’t it be better to debate the tactics on their merits instead?

Because that last charge is the biggest miscalculation of them all.  Many of the people being lectured  over this bill are the same people who have been right about matters of both policy and politics for most of the last decade.  (And about the politics – the Democrats are going to get killed if they pass this bill.)  So it was particularly satisfying to see Markos Moulitsas respond forcefully to Chris Matthews for his wave-of-the-hand dismissal to those who saw the last decade’s events more clearly than he did.

That doesn’t necessarily make them right today, of course, but I think they are.  And speaking personally, I’m not talking about “killing the bill” – I’m talking about getting a better bill.  I believe it will take a credible threat  – a “fear factor” – to get that done.

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We’re Not Switzerland

December 20, 2009

The pro-Senate health bill contingent keeps trotting out the example of Switzerland to buttress their arguments.  Here’s a quick recap of why the comparison doesn’t work:

First or all, Switzerland is a wealthier country: OECD figures show that the median household income there in 2007 was $60,288, versus $50,233 in this country. Despite their greater prosperity, roughly one-third of its citizens receive financial assistance from the government to pay their premiums.   If you increased the average American’s salary by 20% and then offered them health insurance for no more than 8% of their total income, who wouldn’t take that deal?

Defenders of the Senate’s excise tax use past wage and benefit trends to argue that the tax will cause benefits to be cut – but that employers will give that money to employees in the form of wages.  Unfortunately there are new studies like Towers-Perrin’s (pdf)  which show compellingly that isn’t true.   (Only 9% of employers surveyed said they would share any of the savings with employees, much less give them the whole amount.)

All insurance companies in Switzerland are non-profit, too. What’s more, the Swiss system includes price controls that would never pass ideological muster in the US.

Benefits are also much stronger there.  At a current exchange rate of nearly 1:1 between the Swiss franc and the US dollar (0.96:1.0), the Swiss typically have a government-mandated deductible of roughly $300 dollars for a basic plan (deductibles can be several times that under the Senate bill).  After the deductible is met, Swiss insurance pays 90% of all medical costs (much more generous than what we typically have), up to an out-of-pocket limit of – get this – roughly $700 per year per person.

So the maximum out-of-pocket cost for care in Switzerland is $1,000 per year adult (unless they choose more minimal coverage).  In a typical Swiss plan, two adults and two children would pay a maximum of $2,700 in out of pocket costs in their worst year, regardless of income.  In this country even a family of four struggling to get by on $54,000 could pay up to $5,000 under the Senate bill (and that’s after paying $4,000 in premiums).

And here’s another point:  Given the wage difference between the US and Switzerland, our family would be earning nearly $65,000, not $54,000.  That renders the US/Swiss comparison even less valid.

Ironically, any American plan with benefits like those would be a likely target for the Senate’s excise tax.  A percentage of its benefits would be taxed at 40% – meaning that plan benefits would probably be slashed.  at which point it wouldn’t be a  Swiss-style plan anymore …

But wait, there’s more.  Those nonprofit Swiss insurers are forbidden to charge any more for a 90-year-old than they do for a young and healthy adult, while wide variances (3 times or more) are permitted in the Senate bill.  Not only are the Swiss protected from having their premiums go up as they get older – a protection not afforded by the Senate bill – but the excise tax will exacerbate our  American “age penalty” by disproportionately affecting health plan whose members are older than average.

Needless to say, the Swiss pay much less in healthcare costs than we do, and their costs are rising much more slowly.

This bill doesn’t do things the Swiss way. You can’t impose a Swiss-style mandate on a system that is more expensive, provides less benefits, and is profit-based, unless you provide meaningful cost controls and more equitable coverage. If you also decide to tax any benefit plan that begins to approach Swiss-style coverage, you’ve rendered the comparison completely meaningless – if it wasn’t already.