Health Mandates: Why Paul Krugman's Wrong -- And A Talk With Obama's Health Advisor

The issue of health care - specifically health mandates - became the subject of heated debate between the Clinton and Obama campaigns this week, and Paul Krugman weighed in strongly on the Clinton side of this issue.

Here are excerpts from two pieces on this subject in The Sentinel Effect - a response to the Krugman piece, and an interview with Obama's health policy advisor, David Cutler. (Note: While they are strongly pro-Obama on this specific issue, that doesn't represent an endorsement of any candidate. )

from "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.

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.

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 ... 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 effect,' Obama says other measures would be used - including possibly 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 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 assertion that their plans 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. That's not the black-and-white issue some campaigns make 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: " ...If you don't buy it, then you'll be penalized in some way." Well, John Edwards has just called Mr. Obama's bluff.

John Edwards' "terrific idea," to use Mr. Krugman's words, is to automatically enroll Americans whenever they filed taxes or received medical care. No penalties? Not when they're enrolled, perhaps - but what happens when they don't pay their premiums? If a middle-class family of four is enrolled in a health plan with high monthly costs, that could be a heavy burden. And there has to be a penalty if they don't pay up, or the entire plan collapses.

... Mr. Obama ... (is) ... echoing right-wing talking points on health care.

... 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.

(the complete piece is here)

from "A Talk With David Cutler, Obama's Health Policy Advisor"

I've been engaged in a collegial debate with Ezra 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. So I discussed the issue with David Cutler. Cutler is Professor of Applied Economics at Harvard, Obama's senior health advisor, and the principal architect of the Obama plan.
________________________

"I'd like to start with a general comment," Cutler began. "Two possible reasons why people don't have health coverage are usually given. One is that the uninsured are gaming the system. The other is that they can't afford it and don't know where to get it. Most of the literature suggests that the explanation is mostly the latter. That means the single biggest thing we can do to help the uninsured is to make coverage affordable and accessible."

"That's why all the Democratic plans focus on removing excessive profits where they exist, improving information technology, and so forth," Cutler continued. "All the plans do those things, although I think the Obama plan does the most."

"The mandate argument is: You must buy something - but I'm not going to tell you what it is, how much it will cost, or where you're going to get it."

"It comes down to this," said Cutler. "You'll never get someone to buy something if it's not affordable and not accessible. People just don't do it."

That's an area where the Edwards campaign has taken the lead. They suggest automatic enrollment whenever an American intersects with the health care system or government services.

"You can enroll them," Cutler replied, "and then forcibly collect the premiums. That's one way to solve the problem. But it's not necessary to do that."

"A better approach is to do everything possible to make it affordable and available. When it is, almost everyone will have it."

There are a couple of concerns about that approach. One is the problem of "adverse selection." Sicker people - or people with a greater likelihood of becoming sick - will enroll. That will drive plan costs up, making it prohibitively expensive.

"Let's look at the level of coverage you can get without a mandate. Our estimates, based on studies in the literature, is that we can get 98% or 99% coverage without a mandate for adults. There may be some small pockets of people who choose not to buy it."

What about those people?

"If there are free riders, Obama is open to mandates. But what he is saying is 'Look, mandates seem like a panacea, but that's not where the hard work needs to be done.' Auto insurance is a mandate, too, and not everyone has that. You've got to prove to the public that you're willing to do the hard work.'"

And yet Sen. Clinton made another speech about mandates and universal coverage yesterday ... and Paul Krugman weighed in on the pro-mandate side of the debate, too.

"I know the arguments," said Cutler, "but look at the evidence. What really matters is: Can they afford the coverage?"

There's been talk that a consensus is forming among policy analysts that 10% of income is the right number for total out-of-pocket health costs, including premiums, copays, and deductibles. But that's a very high number for lots of people.

"Well, healthcare is 16% of the GDP now. Some of that cost is being borne through taxes already. So it depends what you want to count."

But 10% for whom? $4,000 for a family of four with income of $40,000 is a devastating figure. Whereas there are probably very few people in the top 2% of income who spend 10% on healthcare.

"That's where the subsidy debate comes in, and it's another reason to address the cost issue first."

(the complete writeup of the interview is here)

____________________

The Clinton and Edwards campaigns, and many progressive observers, have claimed that the mandate issue is an issue of principle. But insurance premiums are an inherently regressive way to collect money, which means mandates succeed or fail - and are fair or unfair - only after complex analyses and the creation of fairly complex subsidy schemes.

In that light, are mandates really "fairer"? Or does this debate really concern tactics more than it does principles?

One rational solution to the fairness problem is to fund a new healthcare system with taxes. But that's "single-payer," and therefore anathema to all the leading candidates. The Obama approach looks to address cost issues first, then to promote near-universal enrollment without mandates. If that approach fails, Obama would impose mandates - but he would be mandating people to enroll in plans that are (at least theoretically) less costly.

There is room for tactical debate and discussion. But, in the absence of a taxpayer-funded system, it seems to be a reasonable approach.

Follow RJ Eskow on Twitter: www.twitter.com/rjeskow

Comments

[Dantheman99]

Having a "universal" plan whatever the details is an easier political sell than one that leaves people out.

Since only Kucinich/Gravel are offering the right single-payer plan. At least Clinton & Edwards refer to "universality", even if it is by mandate.

When a program is not "universal" by name, people start to worry if they are going to be the one left out. Where does the line end? Am I or my family on the right side of the door or not?

Obama will have to really explain well how people won't be left behind who don't want to be left behind, especially working class people who aren't affluent, but make too much money to qualify for government assistance. If a health-care plan doesn't cover them, then they can say, "well, I may as well vote for the Republicans for these others reasons since I'm not going to get covered by Obama's plan anyway."

Only if the working and middles classes see how they and their families will be guaranteed basic access to health care (which is not the same thing as having mandated health insurance where a HMO bureaucrat tells you what kind of care, or if any care, you may or not may able to get), will they be motivated by it.

Anything that allows working class white voters to believe they are going to left behind, will allow the Republicans to use the other "wedge issues" they will have to use because all of their conservative policies already failed under George W. Bush's corrupt and incompetent administration.

I'm not saying that Obama's policy won't cover middle-class and working-class families. But, the lack of "universality" gives GOP an opening to exploit (i.e. lies they will tell over and over again like the Swift Boat fiasco.)

[Dantheman99]

Paul Krugman is one of the most respected progressive economists, columnists and Ivy League professors in the country. What he says about healthcare should matter to all the campaigns, from both a political and policy point-of-view.

Between a PR rep for one of the candidates and Paul Krugman, I know who I would trust more -- Paul Krugman by a mile.

The best health plan is still Kucinich/Gravel. The other three's health plan are all at some level sops to the insurance industry, who will still fight it tooth and nail.

Edwards/Cl­inton/Obam­a's plans (in that order) are all meritorious as compared to the non-plans of the Republicans.

I hope whoever the Democratic Party candidate is they make health care a major party of their campaign so that when and if they win, they have a true mandate to get their reform through Congress. This is opposed to Bush who made no mention of trying to privatize social security during the campaign and acted like he had a mandate to gut our most treasured government program after receiving only 51% of the vote in a narrow re-election.

There is also time for any of the candidates, especially Obama, who's health care plan is losing political points because it isn't really universal, to amend their plan now. They could easily say, I've listened and heard you and here is my modification.... Unlike the current President, I will listen to people and take their views into account." After 8 years of a pigheaded President who misled the nation into war under false pretenses against the wrong country, got away with it, and refuses to admit he even made a mistake, let alone lied, it would be very refreshing to have a President who can states that he will listen to people and take their views into account.

[RealBlackGirl]

Thank you for the thoughtful analysis.

[KeysDan]

Are we to understand that the Obama health care plan is to sneak universal coverage into town without mandates and then, at some later date, claim it isn't working after all and now we just need to fine tune it with proof of enrollment?

[subboy]

this was Krugman just 2 months ago: The Edwards and Clinton plans as well as the slightly weaker but similar Obama plan achieve universal-­or-near-un­iversal coverage through a well-thought-out combination of insurance regulation, subsidies and public-private competition.

in other words, Krugman had no problems with the Obama plan until Obama began making a point of saying the mandates won't work and are the wrong policy. nothing in the Obama plan has changed since Krugman wrote this (Sept 21). what's changed is that Obama is no longer willing to let his plan be described as weaker. he doesn't believe it is -- sort of why he is running, isn't it? because he believes he can do the job better. sheesh. Krugman calls this mudslinging; i think it might be better termed "politics". talking up the differences.

[jpginla]

What the debate among all the various options leaves out is that the President certainly may suggest a plan, and the President may even have a large hand in the design of an eventual plan, but it is legislation that will make it happen, which the Congress, and not the President, must write.

The notion that you should cast your democratic primary vote for President on the basis of whose theoretical plan is better is nonsense. If all of the major candidates support more or less universal healthcare (and they do), then the details don't really matter as much as whether the candidate will actually provide leadership on the issue once in office.

So, great if they have a theoretical plan, as it shows that they understand the issues somewhat. But the details at this point don't matter, since you cannot be voting for a plan, just the leadership that might bring a plan to fruition.

In terms of that leadership, I think Hillary is the only major candidate with leadership experience (though failed leadership experience). But since none of the democratic candidates would likely veto any of the proposals by any of their peers were they the sitting President, all this debate about whose theoretical plan is better is somewhat pointless. The only reason it happens at all is that the candidates find themselves needing to frame the debate in terms of costs and taxes, which is somewhat beside the point to me. You either pay the costs of premiums, or you pay taxes that pay the premiums. The costs are essentially the same, with some questions as to which would be less expensive (impossible to know), and which would be more fair (also impossible to know, but probably any universal coverage plan would be more fair than the current system).

[Doofus]

There is now a belief shared by various candidates
& even Paul Krugman that it's acceptable to *mandate*
the purchase of health insurance as a means to establish
'healthcare coverage for all'.

'Various candidates' runs the gamut from most of
the leading Demos even to Repo Romney, at least.

Fact is, there are at least a few problems. First,
how are folks who simply refuse, or are unable
to afford coverage to be 'fairly' penalized?
Second, the current private coverage schemes
are excessively profitable for their proprietors,
while the public is expecting a 'not-for-profit'
solution. How is that to be achieved?

We are expecting an approach that brings
DOWN the enormous cost of US healthcare,
said to be the highest in the world just now,
and NOT further enriching 'Big Healthcare'.

It surprises me some that even Krugman has not
dealt with these complaints, but it's more disturbing
that the top Demo contenders have not either.

[cloudy]

It's good to see some balanced coverage on this at Huffpo. I wonder if the NY TIMES will exercise a similar concern for giving equal access for all points of view in a debate. I am NOT an expert on health insurance, tho I favor single payer -- all the MORE so as I read about the debates on the mainstream Democrats' alternatives. I notice that no one has taken HRC to task for her assertion of the figure of 15 million, or even demanded an accounting of it. By the same token, 98%-99% coverage seems like an overly optimistic estimate, even for single payer.
The point about mandates in practice not being universal in this column is excellent, one that I did not know about (the 20% !!!! exceptions).

I would add that it is really disgusting that Krugman, in writing about this highly debatable issue, refers to Obama "mudslinging" merely b/c Obama doesn't favor mandates and has the sheer impudence to suggest that his approach is better than the others

[PeterAtLarge]

It's sad that no serious Democratic candidate seems willing to stick his/her head out for a single payer system. The fear of the insurance companies is deeply ingrained. It all comes back down to getting money out of politics. Then we might here some truth on this and other topics.

[jmpurser]

These are arguments over weak tea. None of the plans really does much of anything to fix anything. They amount to yet another governemnt prop to a failed system.

When a democrat wants to get serious about health care they'll find the nation is WAY ahead of them.

[Countess]

Mrs. Clinton's and Mr. Obama's health plans are both flawed because they are afraid to confront the problem head on and propose a single payer universal health care system that would fix the problem once and for all. Americans rightly distrust politicians and government but this in fact the only system that covers everyone.

[Tellmethetruth]

Joe Biden has passed health care legislation for women and breast cancer: Working to create and provide continued support for breast and cervical cancer prevention programs which ensure mammograms are available to low-income women and those without health insurance and then expanding the program beyond screening to one that also offers reliable treatment.
Originating legislation to recognizing National Mammography Day every October since 1993 to encourage women to have mammograms each year.
Supporting authorization of a special postage stamp to raise additional money for breast cancer research.
Sponsoring legislation to expand Medicare to include coverage of mammograms.
Working to ensure that insurance companies cover reconstructive surgery for breast cancer survivors.

Now you might say this isn't much, but it has accomplished more than Obama or Hillary at this stage of the game.

Joe Biden has a comprehensive Health Care plan that is universal and more comphrensive than either of the Democrats.

http://www.joebiden.com/issues?id=0003

When the voters make a choice in the primaries and the choice that it is in the voter's best interest is Joe Biden.

[MRb1000]

My way or the high way got the killary plan killed last time. No one want anybody telling them how to spend their hard earned money. Mandating is just that tell me how to spend my money. This would lose an election because most American are not stupid. You will never get something for free. Until we take a hard look at what we are willing to give up. The health care plan is not going to work by mandating it!!! 10% of my money may put me in the poor house, but 10% to you may be a drop in the bucket. The insurance company are foaming at the mouth on mandating. Guaranteed money more of your money. So when he cost go up you can say anything because you have to pay because it is mandated!!!!

[RalphB]

Fundamental problem with the Obama plan and strategy. Getting costs down will not be possible until you have everyone covered, with a mandate or without. But without a mandate, lots of people will not sign up because they don't think they need coverage and one of the major methods of cutting an individuals cost, spreading the risk to a bigger pool, will not occur.

That's Econ 101 and I don't think you want to argue with Pail Krugman. Unless you want to lose big time.

RJ REPLIES:

I have great respect for Paul Krugman, but that doesn't translate into intimidation or serve as a substitute for independent thought. Your selection argument, as it's sometimes called, has been around for years. That doesn't make it right. Real life isn't as simple as this mechanistic model makes it sound. Nor do you or other proponents cite any research that validates it against the Obama model.

Here's an important question: where are the break points that make a difference? For example, if 90% of people have insurance, will that 'selection effect' offset be significantly offset? Would that lower costs and in so doing make insurance affordable for even more Americans?

That's the Obama bet (more or less), and it's a decent one. At that point, mandates or other options could be considered if enrollment continues to fall short of the 100% mark.

The counter-option - the one Clinton and Krugman like - is to force many Americans to pay unknown (but certainly high) premiums for undetermined (but certainly) incomplete coverage.

As I said in the piece, there are shortcomings to both approaches. But unless you're willing to go with single-payer, which neither Clinton nor Obama nor Edwards is willing to do, it's a question of which imperfect approach you prefer.

Unless someone marshals better arguments for mandates than those we've heard so far, I'll continue to make the case that Obama has a better plan than the other two leading Democratic candidates.

[TurnThePageGA]

I do not claim to be an expert in this discussion, but it is obvious there are some differences in opinion on this subject. I prefer the approach of addressing cost as you implement the program. With Hillary's being in with the Insurance Industry we can reasonably guess that she will take care of them first. "Lobbyist are people too" HRC.