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RJ Eskow

RJ Eskow

Posted: October 29, 2009 03:44 PM

Three Reasons You May Be Uneasy With Health Reform

What's Your Reaction?

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.

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(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

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