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Seven Years Ago Today: Vote for Obamacare in the House

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Chronology of Obamacare

I’m never sure whether to use a stock photo of medical stuff or a stock photo of money when I write these health care posts.

My old health care posts are suddenly relevant again. Seven years ago, on March 21, 2010, the House passed Obamacare. I had a post on the subject which reflected  a number of my thoughts following the more or less year long debate that led up to the passage of that legislation. As I said at the time, I didn’t think Obamacare was well designed but I didn’t think a well-designed system could pass Congress. And the status quo was awful and getting worse.

We’ve, once again, been hearing about how everything would be cool with the health care system if only the free market was unshackled. Here is why I’m all but certain that won’t work:

To date, nobody has been able to direct my attention to an example of a successful market-based system of health care; leading me to be skeptical of whether such a thing can exist. One country that sometimes comes up in this context is Singapore. However, while its system makes use of private insurance, it also ensures affordability largely through compulsory savings and price controls.

Singapore’s system uses a combination of compulsory savings from payroll deductions (funded by both employers and workers) a nationalized catastrophic health insurance plan, and government subsidies, as well as “actively regulating the supply and prices of healthcare services in the country” to keep costs in check[.]

Markets are very good at allocating resources. However, to function properly, it seems to me that buyers need to have good information and the ability to walk away from a transaction. That’s a problem in health care negotiations. Health care decisions involve analysis of medical information that’s generally beyond the understanding of most people. And, even if you can rely on your doctor or otherwise master the medical end of the decision making process, medical pricing is often ridiculously opaque. Try calling up half a dozen hospitals and trying to get the actual price of a hip replacement. Even if they’re willing to tell you, there are likely to be an array of prices depending on who’s asking. And those will be qualified prices because any number of contingencies can affect the price, even in the middle of the surgery. Then you have the problem of getting an insurer to be clear, up front, about the terms of the insuring contract and then honoring those terms after the fact. The insurer operates from a position of strength, collecting premiums for years when there are no significant health issues, then being able to withhold a determination of whether it’s going to pay for a procedure until after the procedure is complete. Finally, any negotiating options you have in the ordinary situation pretty much go out the window once you’re in an emergency situation. It’s like negotiating with a gun to your head.

At the time, we were spending We were spending 16% of our considerable GDP on health care already. We were spending twice as much per person on health care as other countries. We were already paying for something like 45% of those costs from public funds. And costs were increasing. (And no, despite what you may have heard, medical malpractice lawsuits weren’t the prime or even substantial cause of these increases.) Despite spending half as much, those other countries had health care results that are comparable or, in some cases, superior to the U.S.

Can we do better? Sure, almost every other industrialized country is. But, for ideological and venal reasons, Congress is not looking to copy systems that are already working better than ours was in 2010 or in 2017.

Trumpcare Plan and CBO Score Released

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Healthcare in America feels like an eternal struggle, both in terms of settling on a policy goal and in terms of actually getting healthcare when you’re sick. I’m a small business owner and so, in terms of healthcare, not much better than being self-employed. My options prior to the ACA were not great. I’ve never been in love with the ACA as it came through, but it seemed better overall than the pre-Obamacare options. I was paying more and didn’t have great coverage. But, as a matter of broader policy, more people were covered and, I got the sense that, personally, if I or a member of my family got really sick, we’d have a lot stronger of a safety net with the ACA than without.

Detractors oppose Obamacare for a variety of reasons and with different levels of ferocity. There are free-market purists. There are those who get indignant when they see benefits going to the “undeserving poor.” And, there are folks who can’t see anything but the insurance mandate. I’m sure there are other reasons, but those are the three broad categories.

I think the market purists are misguided, primarily because health care isn’t a widget and doesn’t respond well to market forces. Procedures that are relatively straight forward and mostly optional are the exception — things like cosmetic surgery and lasik eye surgery are probably examples where the market works well. But, for a lot of health care, procedures aren’t optional — so, it’s not an arm’s length transaction where the customer can reasonably just go without if he or she doesn’t have the money. The necessity of various tests and procedures aren’t something a layman can reasonably evaluate without the help of a professional. And the pricing is beyond opaque. Try getting a price quote on a hip replacement, let alone a weird murmur that’s making you feel dizzy. The ability to walk away from a bad deal, knowledge of the value of the product to one’s self, and a good idea of the price are all pretty critical in creating efficient market transactions. On the subject of markets, I’ve said before that I don’t think the “selling across state lines” approach is going to generate competition and better value. Rather, it’s going to result in a regulatory race to the bottom where, like credit card companies, health insurers are all going to locate in whichever state will try to land those insurance company jobs by offering the most pro-industry, anti-consumer laws.

Not liking Obamacare is one thing, but the fact is that it was passed to address a problem. Health care was becoming more out of reach for more and more people by the year. Other countries with a socialized approach to providing care have (broadly speaking) been able to generate better health outcomes while spending less overall money. (I’m willing to concede that, for the very wealthy, the U.S. probably offers the best health care.) Now we have the Trumpcare “replacement” offered by the Republicans in Congress. (Trump apparently doesn’t want his name attached to this — which is remarkable given the number of substandard products to which he’s eager to attach his name.) The Congressional Budget Office score is out, and it’s not pretty.

The Congressional Budget Office on Monday projected that the House leadership’s American Health Care Act would result in 24 million Americans losing their health insurance while raising premiums for those covered on the individual market. Their bill would lower federal deficits by $337 billion over 10 years, largely as a result of cuts to Medicaid that would reduce its enrollment by 14 million, according to the estimate. Average premiums would rise by as much as 20 percent in 2018 and 2019 before falling in later years.

The premiums would generally fall for young, healthier people and rise for older people who tend to have more health problems.

Democrats have focused on the fact that the proposed legislation would result in a tax cut for those making more than $250,000 per year and a significant tax cut for the very wealthy. It repeals certain Obamacare taxes for “couples making more than $250,000, like a 3.8 percent surtax on investment income and a 0.9 percent surtax on wages. . . . Repealing them would cost about $275 billion over the next decade; which is to say, it would transfer $275 billion from public-health spending to the richest 1 or 2 percent.”

Other provisions, like health savings accounts, are nice if you have a lot of extra cash and don’t have significant health problems. But, for most Americans, those are going to do little or nothing in terms of paying your serious medical bills.

I know I’ve barely scratched the surface here, and — in any event — I’m not your best resource for health care policy discussions. (For that, I’d recommend The Incidental Economist.) But, I’ve noticed over the years that memories fade and hyperlinks rot. So, it’s been useful to hit the highlights on my own blog where I can generally find it again as the years pass.

 

About Selling Health Insurance Over State Lines

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Selling insurance across state lines will result in a regulatory race to the bottomOne popular conservative response to the call for a health care plan is to talk about allowing health insurance to sell policies across state lines. They respond with this item because, I think, they by-and-large like the idea, and it gives them something to talk about when the question comes up. Providing health care is a hard policy question, and finding a response that doesn’t dwell on ugly truths and/or bore your audience isn’t that easy. Currently, an insurance policy has to conform to regulations in each state. What proponents mean when they say “selling over state lines,” is that, as long as the policy conforms to the rules in the state where the company is located, the company can sell the policy to consumers in other states.

But selling insurance policies over state lines isn’t a good idea. Proponents paint the picture of a robust market where competition drives prices down. But this probably isn’t what the future would hold. We’ve seen the likely result in the context of the credit card industry: a regulatory race to the bottom where the insurers congregate in the state that gives them the most pro-insurance company regulations (which are often, of necessity, a bad deal for consumers).

Ezra Klein described it as follows:

[Conservatives] want insurers to be able to cluster in one state, follow that state’s regulations and sell the product to everyone in the country. In practice, that means we will have a single national insurance standard. But that standard will be decided by South Dakota. Or, if South Dakota doesn’t give the insurers the freedom they want, it’ll be decided by Wyoming. Or whoever.

This is exactly what happened in the credit card industry, which is regulated in accordance with conservative wishes. In 1980, Bill Janklow, the governor of South Dakota, made a deal with Citibank: If Citibank would move its credit card business to South Dakota, the governor would literally let Citibank write South Dakota’s credit card regulations. You can read Janklow’s recollections of the pact here.

Citibank wrote an absurdly pro-credit card law, the legislature passed it, and soon all the credit card companies were heading to South Dakota. And that’s exactly what would happen with health-care insurance. The industry would put its money into buying the legislature of a small, conservative, economically depressed state. The deal would be simple: Let us write the regulations and we’ll bring thousands of jobs and lots of tax dollars to you. Someone will take it. The result will be an uncommonly tiny legislature in an uncommonly small state that answers to an uncommonly conservative electorate that will decide what insurance will look like for the rest of the nation.

For those who put (in my mind) too much faith in the market, this can’t be what will happen. If the widget makers in South Dakota make low-cost but toxic, low-quality widgets while the widget makers in California make high-quality but expensive widgets, why shouldn’t consumers get to take their pick? Primarily because health care has a lot of qualities that make such a choice less than straight forward: the prices are opaque, consumers are going to have a tough time anticipating their needs, consumers aren’t doctors with an understanding of the medicine involved, health care is often not an arm’s length transaction you can walk away from if the terms aren’t to your liking.

Klein reports that a Congressional Budget Office study suggests such legislation “would not change the number of insured Americans or save much money, but it would make insurance more expensive for the sick and cheaper for the healthy, and lead to more healthy people with insurance and fewer sick people with insurance.” I’ve seen some take exception to the idea that the healthy should subsidize the sick; but that’s pretty much the whole idea behind insurance.

Chronology of Obamacare

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Chronology of ObamacareI’m posting this mainly for my own future reference. It’s an article from July 2015 by Norm Ornstein recounting the passage of Obamacare. From time-to-time, a conservative friend will complain about how the plan was “jammed” through without trying to enlist Republicans. It’s baffling to me when I hear such things because my recollection is of (what seemed at the time) interminable delays as Democrats courted Republican votes in the Senate, and what seemed like Democrats bidding against themselves as Republicans complained about this or that but didn’t propose provisions or alterations that would cause them to vote for the plan.

The Ornstein account of the process squares with my recollection. This long account of the Senate Finance Committee process is what stuck with me and makes me look sideways at folks who say that the Democrats acted precipitously on health care and didn’t try to negotiate the healthcare plan.

But with Obama’s blessing, the Senate, through its Finance Committee, took a different tack, and became the fulcrum for a potential grand bargain on health reform. Chairman Max Baucus, in the spring of 2009, signaled his desire to find a bipartisan compromise, working especially closely with Grassley, his dear friend and Republican counterpart, who had been deeply involved in crafting the Republican alternative to Clintoncare. Baucus and Grassley convened an informal group of three Democrats and three Republicans on the committee, which became known as the “Gang of Six.” They covered the parties’ ideological bases; the other GOPers were conservative Mike Enzi of Wyoming and moderate Olympia Snowe of Maine, and the Democrats were liberal Jeff Bingaman of New Mexico and moderate Kent Conrad of North Dakota.

Baucus very deliberately started the talks with a template that was the core of the 1993-4 Republican plan, built around an individual mandate and exchanges with private insurers—much to the chagrin of many Democrats and liberals who wanted, if not a single-payer system, at least one with a public insurance option. Through the summer, the Gang of Six engaged in detailed discussions and negotiations to turn a template into a plan. But as the summer wore along, it became clear that something had changed; both Grassley and Enzi began to signal that participation in the talks—and their demands for changes in the evolving plan—would not translate into a bipartisan agreement.

What became clear before September, when the talks fell apart, is that Senate Republican Leader Mitch McConnell had warned both Grassley and Enzi that their futures in the Senate would be much dimmer if they moved toward a deal with the Democrats that would produce legislation to be signed by Barack Obama. They both listened to their leader. An early embrace by both of the framework turned to shrill anti-reform rhetoric by Grassley—talking, for example, about death panels that would kill grandma—and statements by Enzi that he was not going to sign on to a deal. The talks, nonetheless, continued into September, and the emerging plan was at least accepted in its first major test by the third Republican Gang member, Olympia Snowe (even if she later joined every one of her colleagues to vote against the plan on the floor of the Senate.)

Obama could have moved earlier to blow the whistle on the faux negotiations; he did not, as he held out hope that a plan that was fundamentally built on Republican ideas would still, in the end, garner at least some Republican support. He and Senate Democratic leaders held their fire even as Grassley and Enzi, in the negotiations, fought for some serious changes in a plan that neither would ever consider supporting in the end. If Obama had, as conventional wisdom holds, jammed health reform through at the earliest opportunity, there would have been votes in the Senate Finance Committee in June or July of 2009, as there were in the House. Instead, the votes came significantly later.

To be sure, the extended negotiations via the Gang of Six made a big difference in the ultimate success of the reform, but for other reasons. When Republicans like Hatch and Grassley began to write op-eds and trash the individual mandate, which they had earlier championed, as unconstitutional and abominable, it convinced conservative Democrats in the Senate that every honest effort to engage Republicans in the reform effort had been tried and cynically rebuffed. So when the crucial votes came in the Senate, in late December 2009, Harry Reid succeeded in the near-impossible feat of getting all 60 Democrats, from Socialist Bernie Sanders and liberal Barbara Boxer to conservatives Joe Lieberman, Ben Nelson, Mark Pryor, and Blanche Lincoln, to vote for cloture, to end the Republican filibuster, and to pass their version of the bill. All sixty were needed because every single Republican in the Senate voted against cloture and against the bill. Was this simply a matter of principle? The answer to that question was provided at a later point by Mitch McConnell, who made clear that the unified opposition was a ruthlessly pragmatic political tactic. He said, “It was absolutely critical that everybody be together because if the proponents of the bill were able to say it was bipartisan, it tended to convey to the public that this is O.K., they must have figured it out.”

Now the Republican Congress is in a difficult position if they want to govern. They’ve made so much hay out of the evils of Obamacare and the need to replace it, that they probably feel like they have to do it. There isn’t much of a plan to “replace” it because Obamacare was what used to be the Republican plan. (Democrats were more on the single-payer plan that seems to result in better health care results for less money spent in most other western countries.) Obamacare was derived from Romney care, implemented in Massachusetts and that was based on the Chafee / Grassley / Durenberger / Hatch Republican alternative to the Clinton plan of the early 90s.

Repeal and Replace: The Disconnect Between Voters and Lawmakers

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This column by Drew Altman, president of the Henry J. Kaiser Family Foundation, highlights what appears to be a big disconnect between voters and lawmakers when it comes to repealing and replacing Obamacare. Trump voters and Republican lawmakers are united, it seems, in their dislike of the Affordable Care Act. Where they are divided is on what comes next. Research done by the Henry J. Kaiser Foundation indicates that the voters have pretty definite ideas on what they want to see as a replacement. Repeal does not seem as important to them except as necessary to fix the problems they are having.

Lawmakers, on the other hand, seem pretty eager to repeal Obamacare but are vague – and have been vague for seven years of opposing the ACA – on what comes next. Trump voters (and probably most voters) are going to be unhappy if lawmakers proceed on the path they appear to be on.

The study indicated that the primary concerns of these Trump voters were:

  1. A fear that they would be unable to afford coverage for themselves and their families.
  2. Anxiety about rising premiums, deductibles, copays and drug costs, and particularly surprise bills for services that turned out not to be covered.
  3. Resentment that poorer people, eligible for Medicaid, seemed to be getting a better deal than they were.
  4. Animosity toward drug and insurance companies.
  5. Frustration at being forced to change plans annually to keep premiums down, and losing their doctors in the process. (Surveys show that enrollees in the ACA marketplace generally are happy with their plans, but the average Trump voter seems to not have fared as well under Obamacare as the average citizen.)
  6. Dissatisfaction over losing an ability to purchase lower cost policies, even if that loss was cost-shifting that resulted in more and better coverage for others.

According to the column and the study:

If these Trump voters could write a health plan, it would, many said, focus on keeping their out-of-pocket costs low, control drug prices and improve access to cheaper drugs. It would also address consumer issues many had complained about loudly, including eliminating surprise medical bills for out-of-network care, assuring the adequacy of provider networks and making their insurance much more understandable.

The survey subjects were surprised and dismayed to hear about the current plans that had been floated. They recognized that “a tax credit to help defray the cost of premiums, a tax-preferred savings account and a large deductible typical of catastrophic coverage” was “not insurance at all.” They were skeptical of the concept of health savings accounts.

But, they were confident in Mr. Trump’s ability to protect people with pre-existing conditions without imposing the un-American mandates. Because, in their mind, Mr. Trump is a smart businessman, he would not allow the chaos of a gap between the repeal and replacement of Obamacare.

Well, the election is over. They won this one. But, as the George Washington character says in Hamilton, “winning is easy, young man. Governing’s harder.”

Ten Years Ago on Masson’s Blog: We had big problems with health care before Obamacare

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I don’t expect most “repeal and replace” advocates are arguing in good faith about the health care system, but in case they are, just a reminder — much as detractors like to complain endlessly about Obamacare, we had big problems that led to its passage in the first place. This post from November 2006:

Fort Wayne Libertarian Mike Sylvester has a good post on the healthcare crisis. Some of his stats:

Healthcare costs are rising 8 – 10% per year and are projected to rise at that rate through 2010.

For 2005 the cost of a comprehensive healthcare plan was $11,480 for a family of 4 for one year.

. . .

The United States currently spends 16% of the entire National GDP on healthcare. This will grow to 20% by 2015. The United States spends the HIGHEST percentage of GDP in the world on healthcare. 2nd and 3rd are Germany and Switzerland at 11% of GDP. In relative terms, we spend 1.5 times as much as the next most expensive country per capita on healthcare. Also please remember that EVERYONE in Germany and Switzerland have free healthcare of some sort.

In the U.S. we spend more and get less than just about anyone in terms of healthcare. We have all the bureaucracy of a government system without the equity that usually comes along with it.

Some links to past healthcare entries in this blog:

  • In Indiana, Rep. Orentlicher seemed to have been taking the lead in developing solutions, according to the minutes of the Select Joint Commission on Medicaid Oversight. He was looking to the Veteran’s Administration as a model for reengineering health care delivery.
  • Healthcare and poverty in Indiana. Hoosiers had the highest rate of “medical bankruptcies” per capita. 9 to 14% of Hoosiers are uninsured. $950 of a family’s annual insurance premium is used to pay for the uninsured. Soon to be ex-representative Troy “I’ll Never Vote For It” Woodruff blamed the problem on Hoosier smoking and obesity.
  • There is an effort to use schools as healthcare delivery centers for children.
  • Too many of our healthcare dollars get spent on bureacracy, wasteful subsidies, and treating catastrophic illnesses that could’ve been nipped in the bud if the patient had been able to afford routine medical care.
  • Eight conservative, good-for-business reasons for a single-payer healthcare system. (Short version: 1. Transaction costs; 2. Employer funding; 3. The basic idea of insurance; 4. Value; 5. Risk cost of receivables; 6. Service quality; 7. Efficiency; 8. Patriotism.)