Three Reasons You May Be Uneasy With Health Reform

I'm hearing a lot of ambiguity about health reform today from people who support its objectives unequivocally. Providing coverage for those who can't afford it, allowing portability of insurance, ensuring that nobody can be denied coverage for preexisting conditions -- these are inspiring goals.

Still, there's an underlying sense of unease in some quarters. Maybe that's because we haven't taken time to step back and look at the broad, unspoken assumptions behind the legislation being crafted.

There are three principles that have generally gone unstated since the debate began, and which seem to have driven policy design from the start. Some Democrats probably adopted them because of ideology, others from expediency. They are:

1. Private health insurance costs more than public insurance, but that won't be addressed.

The language used by the House Committee on Health and Labor to describe the bill today reads as follows: "The public health insurance option will play on a level playing field with private insurers, spurring additional competition." What that really means is that tying a public option's rates to Medicare -- the so-called "robust" option -- would result in such significant cost savings that it would harm the ability of private insurers to stay in business.(1)

In other words, the political calculus will not allow the creation of a program that endangers the financial viability of private insurance companies. The "level playing field" means "on the level we have now." And, while the President and others insist that the public option is a relatively minor aspect of reform, some of the reluctance to go "robust" stems from the opposite concern: that it could set forces in play that lead to major change.

A small, non-robust public option plan will have difficulty negotiating for better rates than the insurers who dominate most major markets, thanks to their exemption from anti-monopoly regulations. That means consumers will pay more, which leads us to unspoken principle number two:

2. Money saved from the Federal budget tends to come out of people's personal budgets.

"Scoring" and CBO estimates address the government costs for providing healthcare. As we've seen, the simplest way to get a better government "score" is to shift costs from the Federal budget -- borne by all Americans under a progressive system of taxation - back to middle-class households. That's done in a variety of ways, including the so-called "Cadillac tax" (which taxes union members for benefits negotiated in lieu of wages).

When the government restricts access to the public option, that costs middle-class households money. They're less likely to qualify for the lower-cost public plan, and the reduction in competition means they pay more for private-insurance premiums. When the public option isn't "robust," that costs them money too. If biotech drug patents are extended for 12 years, as has been proposed, that will have added costs too. Which leads us to unstated principle number three:

3. Reform will provide great benefit to lower-income people, but middle-class people are likely to bear most of the burden.

If health reform provides coverage to many people that can't afford it today, that will be a major accomplishment. But if President Obama and the Senate have their way, part of the revenue for those subsidies for lower-income people will be financed through a tax on union households. (The House proposes a "millionaire tax" instead.) And those restrictions on who can choose the public option mean that most healthy middle-class workers are being kept in the private-insurance pool. That should keep premiums lower, but at the expense of a cheaper "robust option" for those individuals and their employers.

In other words, people who pay directly or indirectly for their own coverage are being kept in the private-insurance pool partly to keep rates down. The term "cannon fodder" feels too harsh, but it comes to mind anyway.

These three principles have driven the entire debate, even if only unconsciously. That's why so much of the debate has been skewed. For all the talk of "fiscal responsibility," a robust public option probably never had a chance. Why? It violated Principle #1. Paying for health coverage out of general tax revenues was never considered either, because it would violate Principle #2. The "millionaire's tax" is getting pushback from the White House and the Senate because of #3.

There was much talk of the German health system, in which people pay 10% of their income for health insurance. But these proposals don't do that. They cap premiums at 10% of income (or thereabouts, depending on the proposal), but that's not the same thing at all. Under these proposals, if your premiums cost $14,000 a year you'll pay 10% of income until you make more than $140,000 per year. The more money above $140,000 you make, the less you'll pay for healthcare compared to other Americans (on a percentage basis.)

The German system isn't progressive, like regular taxes. It's more like the flat tax Steve Forbes used to talk about. But our proposed system would be regressive for most Americans. What's more, German insurance companies are nonprofit, and it's unlikely Germans face the same out-of-pocket costs people with insurance will have to bear here.

Do these three principles mean whatever amalgam of these two bills we eventually see will be unworthy of support? No. We live in a practical world, not an ideal one. While the final provisions have yet to be developed, we can at least be hopeful that the Dems will hammer out something that's better than the status quo.

We should remember that even Medicare, the crowning social legislation of the last fifty years, has regressive characteristics. Medicare is funded by payroll taxes and premiums, and there are those who would not be able to afford the premiums if not for state subsidies. Medicare recipients can still face significant out-of-pocket costs in some cases. Medicare has been improved substantially since its initial passage, and activists should be planning to push for additional improvements to whatever is passed this year. None of this is a reason to cave in today on the critical remaining issues, like the "Cadillac tax" or some of the more onerous pharmaceutical provisions. But at least it provides some perspective.

This is where we should insert that obligatory cliche about legislation being like sausage-making -- although I'd rather quote Warren Zevon and just say that the process "ain't that pretty at all." Yes, unspoken ideologies and compromises drove this bill. Yes, the president broke some campaign promises. Yes, lobbyists have so much influence that the country didn't get all the reform it deserved.

It's like the old saying says: "Some days you get what you need, and some days you get what you want. But every day you get what you get." If the end product is an imperfect reform bill, one that takes too much from the middle class in order to help those even less fortunate, that won't be what some people wanted. But it will be be an improvement, and they'll know the unspoken ideologies and compromises that shaped it.

Most importantly, they'll know what to work on changing next.

_____________________

(1)There are other issues, too, especially regarding physician income, hospital budgets, and patient access. We recognize that -- but "level playing field" means "no cost advantage through government buying power."

RJ Eskow blogs when he can at:

A Night Light
The Sentinel Effect: Healthcare Blog

Website: Eskow and Associates

 

 

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

Comments

[TaosJohn]

I see no hope in the legislation currently contemplated and believe it will only enrichen the insurance companies at the cost of everyone else's well-being, financial and physlcal. And the fact that the bills are so flawed to begin with only points out how corrupt the Congress is.

All in all, not a pretty picture.

[rockymthi]

AMEN . As the Republican party is imploding, we should not exempt the Dems. They are the drivers for this private insurance gift. I fail to see how the present bills improve things for anyone but the insurers. Let's face it: Congress is owned by Big Business, and we are just pawns to be played to secure both of their interests and incomes. Time to do a thourough house cleaning.

[barriosbabe]

The uninsured middle class ARE the less unfortunate.

When will you guys get this right?

Of course the truly poor need help.

but what about the uninsured middle class?

When will you talk to us?

Subsidies are based on income not legitimate debt load.

When will you do interviews with those of us that are working uninsured that won't even be able to afford the 11 percent rule? When? I'm so frustrated. I feel like nobody here is listening. Talk to me! Talk to half the people I know! We are working uninsured middle class people who won't even be able to afford the monthly premiums with or without subsidies - what about us? We are broke before the next paycheck not because of cars or tvs or cell phones - got rid of all that! - we ride the bus! We are broke from payments on old medical bills! interest rates! We work second and third jobs. When will you ever highlight THAT? What are we supposed to do?

[masher]

Yup. The middle class has no representation right now.

The Democrats under Obama are the party of the super rich and the poor and some unions.

The Republicans are the party of the multi-national corporations, Wall Street, and the poor.

The "fight" between the parties is really over who can best dismantle the middle class.

[JDReign]

So basically the concensus is that Congress should just drop this health care fight and let things stay the way they are? Single Payer asisde what exactly do you guys want? Is there anything about this bill you like?

[RandVictims]

This is nothing but a mind-f**k and Liberal voters will respond by staying home the next two election cycles.

A strong, *accessible* public option IS the compromise. The country is demanding Single Payer.

If Obama signs onto this, he will prove himself a liar and a fraud.

[JDReign]

Obama never promised single-payer and always said he was against it . Like the author said we need to live in reality look how big of a fight there is left go just on the public option its pure fantasy to think single payer could be implemented at this point in history

[iblogleft]

I am wondering if these blue dogs are going to pass a law telling Wal-mart they cannot negotiate drug prices.

The federal government buys vast quantities of drugs, yet is not allowed to bargain, so why is it legal in the free-market?

We buy billions of bullets, are we forced to pay whatever bullet manufacturers ask? We buy vast quantities of many commodities, but negotiating the best price for taxpayers is off limits? Something is wrong here.

[TruthJusticeForAll]

Obama promised change. He meant full price change.

[Shirley Fisk]

10/30/09
4:48am
Alexandria, VA

I'm uncomfortable with the current bill because I heard Speaker Pelosi say that even if it passes about 4% of Americans will still be uninsured. Which 4% is that?
Am I still going to be SOL?

[Tim303]

CBO Says House Health Care Bill Is Deficit Reducer In Near And Long Term

http://tpmdc.talkingpointsmemo.com/2009/10/cbo-says-house-health-care-bill-is-a-deficit-reducer-in-the-near-and-long-term.php?ref=fpa

[ThomH]

Like many others, the writer misses the mark entirely.

Begin by understanding that health insurers NEED THIS BILL. They know their business is doomed. Every year, higher prices yield fewer policy holders, and the public grows angrier at them. Their once spiffy business model is now badly broken. More broken than it was in 1965, when insuring those over 65 simply could no longer be done at a profit. So after blocking it for fifty years, they suddenly favored public health insurance for oldsters, and two weeks later Medicare was speeding through Congress.

Insurers could easily afford then to throw that business over the wall. But now its not just insuring old folks that's broken - it's the entire business that's in trouble.

Time to tap the public till. What do they want? 1. More customers. Solution: mandates. 2. A direct transfusion of taxpayer funds. Solution: subsidies. 3. Higher priced, more profitable, insurance policies. Solution: end unpopular treatment denials, yielding higher costs that can simply be marked up and passed on to customers (see 1.)

THAT'S what "Healthcare Reform" is all about. It should be called "Public Life Support For Health Insurers."

KILL THIS BILL!!!!!

Private health insurance just doesn't work anymore. Instead of putting insurers on the public dole, let's have public health insurance that covers everyone, and saves us over $1 trillion in the next decade. REAL reform: single payer Medicare For All, HR 676. Shout out for it!

[barriosbabe]

Fanned.

[swaneer]

I think what will drive private insurers out of business is not turning the public option into medicare but the government subsidy. If you have to pay say $8400 for private health insurance and the government prices it out the same but will give you a subsidy so you only pay say $5000, which would you take? The private insurers would only be left with people who make too much to be subsidized. If it were handled like medicare, my understanding is that some people might still prefer private insurance because some doctors will not accept the rate schedule and therefore the patients.
Without tort reform, drug price negotiation, more funding for medical schools and residency programs, the program does nothing to drive down costs, which we were told was the reason for this "reform".

[m66]

i'm prepared to be moderately dissatisfied with our first steps into public health care. even a modest hit to their profits might be enough to drive the vampire insurance companies out of the market, at which point we can finish the job of reform. let's just get started!

[swaneer]

As an industry, health insurers are not particularly profitable. If you want to hit corporations with the big returns on equity, you should be going after companies like Apple and Google. However you may be getting to the heart of the matter. The real purpose of the bill may be wealth redistribution rather than actual health care reform. Therefore, to the bill's drafters, it is a step in the right direction regardless of what faults it may have. The rich will certainly have to pay more taxes and the less well off will get a subsidy.

[iblogleft]

First, you have to understand what "profit" is, and how a profit and loss statement works, and how profit margins can be hidden in administrative costs and bonuses (mainly for tax reasons, but also for saving face).

Secondly, Google and Apple provide wants, not needs.

[FearlessFreep]

The key question, to me, is whether this bill will grant states the option of choosing single-payer systems. If so, it's worth supporting; if not, it isn't.

[rad21]

Looks like whatever bill and plan is passed with all its provisions, the healthcare insurance subject will have to be revisited in two years. Clearly no one can predict the behavior / response of corporations, consumers and healthcare providers (hospitals, doctors, etc), pharmaceuticals, etc to this bill; not to mention healthcare insurance availability and rates.

This is no different that Medicare part D being revisited this year, a few years after it went into effect. Hence all the details need not be fixed the first go around. No one, including CBO can nail-down the impact of all the details.

[gracie99]

Why does this writer claim that the expense would be borne by the middle class while stating that Obama and the Senate want to put the burden on union households.

In the great majority of cases, the union households are WORKING CLASS, not middle-class, janitors, clerks, secretaries, bus drivers versus white collar professionals.

Again we see Obama trying to make good on his much-repeated campaign promise to help the middle class at the expense of the working class.

This will push the working class even closer to the poverty line.

As a working class, pink-collar union employee who was unlikely to ever be able to afford to retire even before the crash, this would be a body-blow.

If such a travesty passes, I hope the unions walk in unison and stay out until Congress rights the wrong.

[x004Ronin]

A few things.
Very few Americans are union workers (about 10-12%).
Not all of those union workers have the very generous health insurance packages that would be tax, so the American union workers hurt by this 35% tax on "Cadillac" plans is smaller than 10%. Probably much smaller than 10%.
Last but not least, the smart thing would be for the unions to negotiate so that they're employers offer them less generous health insurance (cheaper than the $8,000 per individual that the bill taxes) and use the cost savings to increase union wages (which are taxed at income tax rates that are much lower than 35%).

The problems of our health insurance system are two-fold. Too many people don't have insurance, and people with good insurance consume too many healthcare services because they don't pay much out of pocket. The average Frenchman, German, and Canadian consume far less healthcare than the average American, which is one of the reasons our costs are higher despite having lower life expectancies.

[Leatherhelmet]

Haven't you learned by now that a progressive society ends up like New York and California -- broke.

A public option does not save money just like medicare does not save money. Medicare is going broke.

If America took some German ideas and Americanized them into our system there would be some hope for this plan. As it is this will end up being a complete and total disaster. It will drive unemployment up, cause doctors to leave America and close practices, cause our deficit to soar, and health care costs to go up dramatically and quality to decrease. It is a horrific bill.

[Tim303]

"Medicare going broke" is a mythical rightist meme. It's a government program, not a company. "Broke" does not apply. We are politically committed to it--or aren't you?

California is broke because Arnold said "Hasta la vista to the car tax baby!" to get elected. If enacted, we would not be in the mess we're now in. He also refused to tax oil corporations. Got it?

[barriosbabe]

I worked for decades inside the California system, Sparky, and I can tell you first hand what was breaking it - not what you call progressive society! It's the six digit salary bureaucrats with unfirable jobs. Even the unions want them out but people like Arnie protect them.

[Libby48]

**3. Reform will provide great benefit to lower-income people, but middle-class people are likely to bear most of the burden.** Yup!!!

[gracie99]

WRONG.

According the article, the Obama and the Senate want to put the burden on union households. Except in unusual instances, those are WORKING CLASS, not middle-class, blue/pink collar versus white collar.

Obama is trying to make good on his much repeated campaign promise to help the middle class. What he didn't have the guts to say is that he was going to do it at the expense of the working class.

This would increase the wage differential between the working class and the middle-class, pushing the working class even closer to poverty.

As a working class, pink-collar union employee who was unlikely to ever be able to afford to retire even before the crash, this would be a body-blow.

If such a travesty passes, I hope the unions walk in unison and stay out until Congress rights the wrong.

[mo0527]

Private health insurance premiums will increase significantly to cover the cost of the hundred-plus million dollar surcharge on insurers that is a part of the bill (which will be passed on to the consumer), the requirement to accept people with pre-existing (expensive) conditions, and the inability to drop people once they get sick. The second and third examples are agreed upon regulations by the right and the left alike but guess what, they cost money! The idea that adding new customers to the mix will pay for all of the above is simply not correct. Higher private insurance premiums is going to be a burden on the middle class.