Baucus Bill Would Cost More than $2 Trillion
Sen. Max Baucus’s (D-MT) health care overhaul would cost more than $2 trillion. It would expand the deficit. But he has carefully and methodically hidden those facts – so well that he has completely hoodwinked nearly all the major media.
The media are reporting that the Baucus bill would reduce the deficit by $81 billion over 10 years. Wrong.
The Baucus bill assumes that Congress will allow the “sustainable growth rate” cuts in Medicare’s physician payments to occur beginning in 2012. Yet Congress has routinely and repeatedly blocked those cuts, making Baucus’s assumption preposterous. The CBO handled the issue delicately, but essentially said, “Sure, provided that the sun rises in the west in 2012, then yes, this bill would reduce the deficit.”
That means Baucus will come up at least $200 billion short on the revenue side, making his bill a budget-buster.
The media are reporting that the Baucus bill would cost just $829 billion over 10 years. Wrong.
As Donald Marron observes, that number omits as much as $75 billion in new federal spending. It also omits a $33 billion unfunded mandate on state governments.
But the worst part is that the Congressional Budget Office’s preliminary cost estimate omits the cost of the private sector mandates in the Baucus bill. In Massachusetts, those costs accounted for 60 percent of the total cost of reform. That suggests the actual cost of the Baucus bill – $829 billion plus $75 billion plus $33 billion, times 2.5 – is well over $2 trillion.
Yet the CBO score pretends those costs aren’t even there. It’s like a mystery novel that’s missing the last 50 pages. And the media aren’t even curious.
In the words of Brad DeLong, why, oh why, can’t we have a better press corps?
Cross-posted at Politico’s Health Care Arena.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
“Law” in Massachusetts
Wouldn’t it save time if the Massachusetts legislature would just pass a law saying that if the governor is a Democrat, he fills any Senate vacancy, while if the governor is a Republican, a special election must be held?
Friday Links
- Nearly 30 European countries have agreed to end their government mail monopolies in the next five years. The U.S. Postal Service has estimated losses of $7 billion this year. It’s time to privatize.
- If you are curious about how President Barack Obama’s health plan would affect your health care, look no further than Massachusetts. You might not like what you find.
- How the outcome of the health care debate will affect our greatest liberty — life.
- Keep an eye on the troubling voting procedures in Europe.
- Podcast: The Age of Reagan
When Governments Are Forced to Compete, the Result Is Better Policy and More Liberty
A story in USA Today is a perfect illustration of the liberalizing power of tax competition. In an effort to attract more jobs and investment, states are competing with each – even taking the aggressive step of advertising in high-tax states. This does not guarantee that states will always use the best approach since states sometimes try to lure companies with special handouts, but tax competition generally encourages states to lower tax rates and control fiscal and regulatory burdens. The same process works internationally, which is precisely why international bureaucracies controlled by high-tax nations are seeking to thwart fiscal competition between nations:
Las Vegas is running ads in California warning businesses they can “kiss their assets goodbye” if they stay in the Golden State. In New Hampshire, economic development officials pick up Massachusetts business owners at the border in a limousine and give them VIP treatment and a pitch about why they should relocate there. Indiana officials, using billboards at the borders and direct appeals to businesses in neighboring states, are inviting them to ‘Come on IN for lower taxes, business and housing costs.’ As states struggle to keep jobs in a continuing recession, they are no longer hoping businesses in other states happen to notice their lower taxes, cheaper office space and less-stringent regulations. They are taking the message directly to them and taking shots at their neighbor’s shortcomings. …No one does it more unapologetically than the Nevada Development Authority. The agency has picked on California before, but its $1 million campaign, launched this month, ratchets up the mockery of California’s budget deficits and IOU paychecks. ‘It’s all done tongue-in-cheek. But the underlying deal is, we want this business,’ Nevada Development Authority President and CEO Somer Hollingsworth said. …’They do mask the nastiness of their message with humor, but this time, their ads are over the top,’ said [California Assemblyman] Solorio, a Democrat from Santa Ana.
Filed under: Finance, Banking & Monetary Policy; International Economics and Development; Tax and Budget Policy
More ‘Success’ for the Massachusetts Model
The Boston Globe reports that Massachusetts now has the highest insurance premiums in the nation. The average family premium for plans offered by employers in Massachusetts was $13,788 in 2008, 40 percent higher than in 2003. Over the same period, premiums nationwide rose an average of 33 percent. And, according to the Commonwealth Fund, an annual family premium in Massachusetts is expected to hit $26,730 by 2020. Meanwhile CNN hails Romneycare as the model for the nation…
False Accounts of Massachusetts’ Health Reforms
Recent editorials in both the Boston Globe and The New York Times contained some staggering falsehoods about the cost of Massachusetts’ health reforms. Here is a poor, unsuccessful letter I sent to the editor of the Globe:
The editorial “Mass. bashers take note: Health reform is working” [Aug. 5] states that “the cost to the state taxpayer” of the Massachusetts health reforms is “about $88 million a year.” That claim is unquestionably false. The cost to state taxpayers is 19 times that amount, while the total cost is 24 times that amount.
The Massachusetts Taxpayers Foundation explains that the $88-million figure represents not the total cost to the state government, but the average annual increase in the state government’s costs. Worse, the editorial completely ignores new spending by the federal government and the private sector, which account for 80 percent of the law’s cost.
According to Massachusetts Taxpayers Foundation estimates, health reform will cost at least $2.1 billion in 2009. The total cost to state taxpayers is at least $1.7 billion and growing. (The fact that other states’ taxpayers bear the balance should not be a source of pride.)
One wonders how such a falsehood comes to appear on a leading editorial page.
And one I sent to the Times:
“The Massachusetts Model” [Aug. 9] understates the cost of the Massachusetts health plan.
The editorial claims, “the federal and state governments each pa[y] half of the added costs, or about $350 million” in 2010. The Massachusetts Taxpayers Foundation, which generated that estimate, assumes that Massachusetts will eliminate $200 million in subsidies to safety-net hospitals next year. Given that those hospitals are currently suing the Commonwealth and exerting political pressure to increase such payments, those assumed cuts are hypothetical. More certain is the foundation’s estimate that the on-budget cost will reach $817 billion in 2009.
Yet the foundation’s estimates also show that the law (1) pushes 60 percent of its cost off-budget and onto the private sector; (2) costs about three times the $700 million that the editorial suggests, and (3) is covering 432,000 previously uninsured residents at a cost of about $6,700 each, or $27,000 for a family of four. That’s more than twice the average cost of family coverage nationwide.
The editorial admonishes that “the public should demand an honest assessment, from critics and supporters” of the Massachusetts health plan. Indeed.
A fuller response to these spurious claims may be found here.
I wish I could run a newspaper, so I could print false stuff and then not correct it. Oh wait, I do blog…
Filed under: Cato Publications; Health, Welfare & Entitlements
Washington Post Misrepresents Individual Mandates
Here’s a poor, unsuccessful letter to the editor I sent to The Washington Post:
“Like Car Insurance, Health Coverage May Be Mandated” [July 22, page A1] paints a misleading picture of proposals to require Americans to purchase health insurance – i.e., an “individual mandate.”
First, the article lacks balance. It cites three politicians who support an individual mandate but none who oppose it, a group that includes a majority of Republicans. The article claims an individual mandate “has its roots in the conservative philosophy of self-reliance,” even though most conservatives, including the movement’s flagship magazine National Review, oppose the idea. The closest the article comes to offering an opposing perspective is one conservative who has supported an individual mandate in the past and may yet again, just not yet.
Second, the article makes the demonstrably inaccurate claims that an individual mandate “lowers overall costs” and “help[s] keep premiums down” by adding more young and healthy people to the insurance market. Forcing healthy people to purchase insurance does not affect premiums for sicker purchasers, because insurers set premiums according to each purchaser’s health risk. The article confuses a mandate with price controls, which force low risks to pay more so that high risks can pay less.
Finally, if an individual mandate reduced overall costs, then health care spending would be falling in Massachusetts, which enacted the nation’s only individual mandate in 2006. Instead, overall health spending is rising, and the rate of growth has accelerated under the mandate. Rising health spending implies rising health insurance premiums, which has also been the Massachusetts experience.
The “Washington Monument Syndrome” Backfires in Massachusetts
While politicians and bureaucrats generally are on the same side, there are occasional conflicts. For instance, if politicians want to limit the growth of an agency’s budget (an infrequent impulse, to be sure), the bureaucrats get upset and sometimes they fight back. A common tactic is to try and generate public opposition by leaking to the press that they will have to curtail something that taxpayers actually value. This is known as the Washington Monument Syndrome, which is a reference to the National Park Service’s petulant decision about 40 years ago to close national monuments two days per week because of a very small budget reduction. A very perverse example of the Washington Monument Syndrome just took place in Massachusetts, where officials at the New England Zoo threatened to kill some of the animals if their subsidy was reduced. This was so over the top that even the state’s collectivist governor felt compelled to condemn the bureaucrats for using dishonest scare tactics. The Boston Globe reports:
Governor Deval Patrick yesterday accused Zoo New England officials of creating a false and inflammatory scare with their warning that state budget cuts may force them to close two Greater Boston zoos and euthanize some animals. “As a supporter of the zoo and a parent who has visited often, the governor is disappointed to learn that Zoo New England has responded to this difficult but unavoidable budget cut by spreading inaccurate and incendiary information,’’ Kyle Sullivan, a spokesman for the governor, said in a statement. And a second Patrick aide emphatically ruled out the killing of any animals. …Zoo officials declined to comment on Patrick’s remarks yesterday. They also canceled a public event to welcome two French Poitou donkeys to the Franklin Park facility in honor of Bastille Day tomorrow. John Linehan, Zoo New England chief executive, was scheduled to attend the event. …On Friday zoo officials released a statement saying the funding reduction might require them to shutter both zoos. Then on Saturday, they issued a statement that said state bureaucrats – and not animal-care professionals – would be responsible for deciding whether some animals would have to be killed if the zoos closed. …At least one visitor to the Franklin Park Zoo yesterday suggested the operator solve the budget crisis on its own. “I wonder why the Franklin Park Zoo doesn’t raise their prices so they can support themselves,’’ said Emanuel Achidiev, 28. “They shouldn’t have to rely on the state.’’
Filed under: Government and Politics; Tax and Budget Policy
Three Worthwhile Health Care Videos
The first comes from the group Patients United Now. Keep this video in mind the next time you hear someone say that a new “public option” is not about a government takeover of the health care sector.
The next video comes from the Independence Institute in Colorado. It is a nice complement to my colleague Michael Tanner’s recent study, “Massachusetts Miracle or Massachusetts Miserable: What the Failure of the ‘Massachusetts Model’ Tells Us about Health Care Reform.”
Finally, a really disturbing video showing Christina Romer, chair of President Obama’s Council of Economic Advisors, refusing to admit to a congressman that the president’s reform plan would oust Americans from their current health plans.
It’s a shame what politics does to really smart people.
Filed under: Cato Publications; Health, Welfare & Entitlements
Sen. Kennedy’s Budget-Breaking “Reform” Bill
It appears that the Obama administration has decided to disown the venerable Senator. No wonder. The Congressional Budget Office estimated the ten-year cost of Sen. Kennedy’s bill at $1 trillion, but admitted that its analysis was incomplete.
Now the consulting group HSI Network, LLC comes foward with an estimate of $4 trillion:
The Senate Committee on Health, Education, Labor and Pensions (HELP) have proposed a health reform bill called the Affordable Health Choice Act (AHC) that seeks to reduce the number of uninsured and increase health system efficiency and quality. The draft legislation was introduced on June 9th, 2009. The proposal provided adequate information to suggest what the impact would be of AHC using the ARCOLA™ simulation model. AHC would include an individual mandate as well as a pay or plan provision. In addition, it would include a means-tested subsidy with premium supports available for those up to 500% of the federal poverty level. Public plan options in three tiers: Gold, Silver and Bronze are proposed in a structure similar to that of the Massachusetts Connector, except that it is called The Gateway. These public plan options would contain costs by reimbursing providers up to 10% above current reimbursement rates. There is no mention of removing the tax exclusion associated with employer sponsored health insurance. There is also no mention of changes to Medicare and Medicaid, other than fraud prevention, that could provide cost-savings for the coverage expansion proposed. Below, we summarize the impact of the proposed plan in terms of the reduction on uninsured, the 2010 cost, as well as the ten year cost of the plan in 2010 dollars.
HELP Affordable Health Choices Act
- Uninsurance is reduced by 99% to cover approximately 47,700,000 people
- Subsidy – Tax Recovery = Net cost:
- $279,000,000,000 subsidy to the individual market
- $180,000,000,000 subsidy to the ESI market with
- Net cost: $460,500,000,000 (annual)
- Net cost: $4,098,000,000,000 (10 year)
- Private sector crowd out: ~79,300,000 lives
HSI figures that a lot more people will take advantage of federal health insurance subsidies, driving costs up far more than indicated by the CBO figure. (H/t to Phil Klein at the American Spectator online.)
Of course, no one knows what the bill would really cost in operation. But the history of social insurance and welfare programs is sky-rocketing expense well beyond original projections. Go back and look at the initial cost estimates for Medicare and Social Security, and you will run from the room simultaneously laughing and crying.
Health care reform would be serious business at any moment of time, but especially when the country faces $10 trillion in new debt over the next decade on top of the existing $11 trillion national debt. And with the $100 trillion Medicare/Social Security financial bomb lurking in the background, rushing to leap off the financial cliff with this sort of health care legislation would be utterly irresponsible.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
Kennedy’s Health Bill: A First Look
A draft of Sen. Ted Kennedy’s health care reform bill is finally available, and it is difficult to overstate how far he would move us to a government-run health care system. An initial read-through reveals among the key provisions:
- An individual mandate, requiring that every American purchase a “qualified” insurance plan. (Sec. 161(a)) The mandate will be enforced through the tax code with Americans required to pay a penalty if they fail to comply. In an extraordinary delegation of congressional authority, the Kennedy bill would give the Secretaries of Treasury and Health and Human Services the power to determine what this penalty should be. Individuals would be required to submit information on their insurance status over the previous year to the Secretary of HHS, along with “any such other information as the Secretary may require.” (Sec. 6055(b)(2) and (3)). Individuals who already have insurance could keep it. However, if they changed plans (or presumably changed jobs), their new insurance would have to meet the definition of “qualified.”
- A “pay or play” employer mandate requiring employers to provide all workers with health insurance and pay a minimum amount of the premium, or pay a tax (Sec 162). Again, the amount of the new tax is left to the discretion of the Secretaries of HHS and Treasury. Some small employers would be exempt from the mandate, but the size of those firms remains TBA. (Sec. 3113(g)) Companies with fewer than 250 workers would be forbidden to self-ensure. (Sec. 2720)
- A new federal bureaucracy, the Medical Advisory Council, which would determine what benefits will be required to be part of your “qualified” insurance plan. (Sec. 3103(h) and (i)). Lest anyone think Congress won’t get involved. The Council’s decisions can be disapproved by Congress if, say, they don’t mandate inclusion by a favored provider group or disease constituency. (Sec 3103(g)).
- Massive new federal subsidies. Medicaid would be expanded to individuals earning 150 percent of the poverty level, and the federal government would pay all incremental costs of the increased enrollment. (Sec 152.) Single, childless adults would become eligible for Medicaid. Even more egregious, individuals and families with incomes between 150-500 percent of the poverty level ($110,250 for a family of four) would be eligible for subsidies on a sliding scale-basis.(Sec. 3111(b)(1)(A-G)).
- Insurers would be required to accept all applicants regardless of their health (guaranteed issue) and forbid insurers from basing insurance premiums on risk factors (Community rating). There does not appear to be any exception for lifestyle factors, such as smoking, alcohol or drug use, diet, exercise, etc. Thus, not only will the young and healthy be forced to pay higher premiums to subsidize the old and unhealthy, but the responsible will be forced to pay more to subsidize the irresponsible.
- A “public option” operating in competition with private insurance (Section 31__). How this plan would be funded, the level of premiums, etc. is left mostly TBA. In response to criticism, the Kennedy bill does require that the public plan pay providers 10 percent above Medicare reimbursement rates. (Sec 31__(B)). That would still allow for a considerable degree of cost-shifting to private insurance. And, we should recall that such promises are ephemeral. When Medicare began, proponents promised it would reimburse at the same rate as insurance. That promise didn’t last long.
- States would be prodded to set up “gateways,” similar to Massachusetts’ “connector.” (Sec 3104(a)) If a state fails to do so, the federal government will set one up for them. (Sec. 3104(d)) The federal government would provide grants to states to help them set up these gateways. The amount of the grants is, you guessed it, left to the discretion of the Secretary of HHS. Gateways may also fund their operations by assessing a surcharge on insurers. Sec. 3101(b)(5)(A)/
- A new federal long-term care program (Sec 171).
Kennedy does not include any estimate of how much his plan would cost, nor any proposal for how to pay for it.
More details will undoubtedly emerge, but it is very clear that the Kennedy plan would put one-sixth of the US economy and some of our most important, personal, and private decisions firmly under the thumb of the federal government.
The Economic Case for Health Care Reform
There’s an old Yiddish saying that, “If my bubba had wheels she’d be a trolley.” So goes the logic of the Obama administration in their paper released yesterday, “The Economic Case for Health Care Reform.” Their claim is that reducing health care costs would help the economy. Yes, if health care costs were reduced it would likely help the economy, though we should remember that the health care industry is part of the economy.
There is nothing in Obamacare, however, that will reduce costs. In fact, expanding coverage may cause costs to rise. One study by MIT’s Amy Finkelstein suggests that the prevalence of insurance itself has roughly doubled the cost of health care. So, if Obama succeeds in expanding insurance coverage, it’s very likely to increase the cost of care.
Take Massachusetts for example. Three years ago, Massachusetts governor Mitt Romney signed into law one of the most far-reaching experiments in health care reform since President Bill Clinton’s ill-fated attempt at national health care. Proponents promised the reforms would reduce health care costs, suggesting the price of individual insurance policies would be reduced by 25-40 percent. In reality, however, insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year. This is compared to a nationwide average increase of 5.7 percent over the same three years. Nationally, on average, health insurance for a family of four costs $12,700; in Massachusetts, coverage for the same family costs an average of $16,897.
In fact, since the bill was signed, health care spending in the state has increased by 23 percent. Thus, despite individual and employer mandates, the creation of an insurance connector and other measures that increase insurance regulations, Massachusetts has failed to bring costs down.
President Obama and Congressional leaders have endorsed expanding coverage in similar ways to Massachusetts. The proposals would undoubtedly make it easier for some people to get coverage, but would also raise insurance costs for the young and healthy, making it more likely they would go without coverage. This leaves two choices: revert to the individual mandate (President Obama opposed the mandate as a candidate) or increase subsidies to try to cut costs to young and healthy individuals, thereby adding to the already substantial cost of the proposed plans.
Ultimately, controlling costs requires someone to say “no,” whether the government (as in single-payer systems with global budgets), insurers (managed care) or health care consumers themselves (by desire or ability to pay). In reality, any health care reform will have to confront the fact that the biggest single reason costs keep rising is that the American people keep buying more and more health care.
The Health Care Battle Begins
Sen. Edward Kennedy (D-Mass.) has begun circulating drafts of his proposed health care reform legislation. Initial reports, including an op-ed in the Boston Globe by Kennedy himself, suggest that the bill will contain every one of the bad ideas that I outlined in my recent Policy Analysis on what to expect from Obamacare.
Among other things, the Kennedy bill will call for:
- An employer mandate;
- An individual mandate;
- A so-called “Public Option,” a Medicare-like plan that will compete with private insurance;
- The use of comparative-effectiveness/cost-effectiveness research to restrain costs;
- Subsidies for families earning as much as 500% of the poverty level ($110,250 for a family of four).
- Insurance regulation, including guaranteed issue and community rating. (He would also establish a Massachusetts-style Connector); and
- Government-directed health IT.
There’s no indication yet of how much the plan would cost or how Sen. Kennedy plans to pay for it.
The bill will be formally presented to Senator Kennedy’s Committee on Health, Education, Labor & Pensions (HELP) sometime next week. Hearings could be held around June 10, and committee “mark up” could begin on June 17.
Senate Finance Committee chairman Max Baucus (D-Mont.) is expected to introduce his health care bill shortly before the Finance committee begins its scheduled mark up on June 10.
Meanwhile President Obama’s campaign apparatus is planning rallies and demonstrations around the country to build support for health care reform.
The battle over the future of health care in this country has begun.
Cohn vs. AFP
The New Republic’s Jonathan Cohn accuses Americans for Prosperity (AFP) of “lies” for running an ad that claims “Washington wants to bring Canadian-style healthcare to the U.S.”
AFP’s ad is more defensible than Cohn’s criticisms of it.
Cohn elides the question of whether Shana Holmes (the woman featured in the ad) was almost killed by Canada’s Medicare system. For a supporter of single-payer like Cohn, that is tantamount to admitting that, yeah, socialized medicine sometimes kills people.
Cohn argues that the ad is unfair because Canada has many advantages over the U.S. health care sector. That may be true, but the ad doesn’t appear to defend American health care. It merely says, “government should never come in between your family and your doctor” and “Don’t give up your rights.” That’s not pro-American health care or anti-reform. It’s just anti- the type of reform that Cohn wants. And it points to one area where our semi-socialized U.S. health care sector appears to be superior to Canada’s: quicker access to intensive treatments. Sometimes, that saves lives. In fact, AFP could go farther and say that the United States has another edge over Canada, in that we develop nearly all of the best new medical technologies. In fact, our medical technologies save Canadian lives, but Canada’s health care system (and its supporters) steal the credit.
Yet “the real lie,” Cohn claims, is that the ad suggests that “Washington” wants to impose a Canadian-style system on the United States. Cohn calls that claim “demonstrably false.” But consider:
- President Obama has said he would prefer single-payer and has hinted that he would like to make incremental changes in that direction.
- Many people who support a new public plan (e.g., Paul Krugman) do so because they believe it will lead to single-payer.
- Massachusetts, which has already implemented most of the reforms that Obama and congressional Democrats are considering, is now contemplating a large leap toward Canadian-style health care by imposing capitation on its entire health care sector.
- Government rationing becomes increasingly likely as government revenues fail to keep pace with the cost of government’s health care promises. (See again, Massachusetts.)
- The Left wants government to ration care. That’s the point of the comparative-effectiveness research funding. That draft House Appropriations Committee report committed a classic Washington gaffe when it said that certain treatments “would no longer be prescribed,” because it was admitting the truth.
Cohn is correct that no politician of influence is saying she wants to impose a Canadian-style system on the United States. But I prefer to pay attention to what they’re doing.
AFP: 1. Cohn: 0.
Filed under: Cato Publications; Health, Welfare & Entitlements
GOP Health Care Alternative: Not as Bad as Advertised
Like my colleague, Michael Cannon, I was convinced by the staff summary and general spin accompanying the Republican health care bill introduced by Sens. Tom Coburn (R-OK) and Richard Burr (R-NC), and Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) that the bill headed, albeit more slowly, down the same road to government-run health care as expected Democratic proposals. However, a closer reading of the actual bill shows that, while there are still reasons for concern, it may be much better than originally advertised.
First, it should be pointed out that the centerpiece of the bill is an important change to the tax treatment of employer-provided health insurance. The Coburn-Burr-Ryan-Nunez bill would replace the current tax exclusion for employer-provided health insurance with a refundable tax credit of $2,300 per year an individual worker or $5,700 per year for family coverage. This move to personal, portable health insurance has long been at the heart of free market healthy care proposals. The bill would also expand health savings accounts and make important reforms to Medicaid and Medicare.
And, the bill should receive credit for what it does not contain. There is no individual or employer mandate. (I could live without the auto-enroll provisions, but they look more obnoxious than truly dangerous). There is no government board determining the cost-effectiveness of treatment. There is no “public option” competing with private insurance. In short, the bill avoids most of the really bad ideas for health reform featured in my recent Policy Analysis.
Other aspects are more problematic. The authors still seem far too attached to the idea of an exchange/connector/portal. The summary implied that states would be required to establish such mechanism. In reality, however, the bill merely creates incentives for states to do so. Moreover, I have been repeatedly assured that the bill’s authors are aiming for the more benign Utah-style “portal,” rather than the bureaucratic nightmare that is the Massachusetts “connector.” Still, I would be more comfortable if the staff summary had not singled out Massachusetts as the only state reform worthy of being called “an achievement.”
And, if states choose to set up an exchange, a number of federal requirements kick in, such as a requirement that at least one plan offered through the exchange provide benefits equal to those on the low cost FEHBP plan. There is also a guaranteed issue requirement.
Elsewhere, there are also requirements that states set up some type of risk-adjustment mechanism although the bureaucratic ex-post option that I criticized previously, appears to be only one option among many for meeting this requirement. And, I wish the authors hadn’t jumped on the health IT bandwagon. Health IT is a very worthy concept, but one better handled by the private sector.
And, if we should praise the bill for what it doesn’t include, we should criticize it in the same way. The bill does not include one of the best free market reform proposals of recent years, Rep. John Shadegg’s call for letting people purchase health insurance across state lines.
The bills (there are minor differences between the House and Senate versions) run to nearly 300 pages, and additional details, both good and bad, may emerge as I have more opportunity to study them. But for now, the bill, while flawed, looks to have far more good than bad.
GOP Health Care Alternative: Drinking the Massachusetts Kool-Aid
Earlier this morning, my colleague, Michael Cannon, blogged a devastating critique of the Coburn-Burr-Ryan-Nunez alternative to the Obama health plan. As he shows, while the bill has some good features (changing the tax treatment of health insurance, expanding HSAs), the good is swamped by a bizarre collection of regulation, mandates, and hidden taxes.
In fact, the bill appears to be based, in large part, on what its sponsors call “the well-known, bi-partisan achievement of universal health care through a private system in Massachusetts.” But the Massachusetts model has failed to either achieve universal coverage or control health care costs. Rather, as I noted in this recent blog, it has led to more regulation, less consumer choice, and increased insurance premiums, while running huge budget deficits that have already led to one tax increase and are now causing the state to consider premium caps and global budgets. One wonders why congressional Republicans would want to head down that road.
Notably, Coburn-Burr-Ryan-Nunez abandons Rep. John Shadegg’s proposal to allow Americans to buy insurance across state lines in favor of a requirement that states establish Massachusetts-style connectors. But the Massachusetts Connector has been one of the worst aspects of that state’s reform, acting as a super-regulatory body, adding new mandated benefits, restricting consumer’s choice of plans, and adding both regulatory and administrative costs to insurance. (In fact, the Connector adds its own administrative costs, estimated at 4 percent of premium costs, for plans that are sold through it.) What the Connector has not done is live up to its promise of breaking the link between employment and insurance, giving workers personal, portable insurance that they could take with them from job to job, and which they would not lose when they lost their jobs. Unfortunately, the Connector has not lived up to its promise in the latter regard. In fact, as of May 2008, only 18,122 people had purchased insurance through the Connector. That’s very little gain for so much pain.
Since there is virtually no chance that the Coburn-Burr-Ryan-Nunez will actually be enacted, perhaps one shouldn’t get too excised about its failings. No doubt it is far superior to Obamacare. And, it is understandable that congressional Republicans want to appear as more than the “party of no.” Still, this looks like a sadly missed opportunity.
The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill
Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:
- Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
- Mandate that all plans offered through those exchanges meet federal regulatory standards,
- Mandate “guaranteed issue” in those exchanges,
- Mandate “uniform and reliable measures by which to report quality and price information,”
- Impose price controls on those plans by prohibiting risk-rating,
- Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
- Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” — essentially, trying to achieve universal coverage by nagging Americans to death.
Needless to say, I am troubled.
The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?
The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level — when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?
And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?
The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.
But the above provisions would sow the seeds of a government takeover of health care — so much so that The Washington Post’s Ezra Klein is salivating:
The word of the day is “convergence.” That — and that alone — is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.
A superficial read of the Patients’ Choice Act — which I’ve uploaded here — would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”
And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms — which it calls a “well-known, bi-partisan achievement of universal health care” — in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.
This idea — present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan — would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.
In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.
Filed under: Cato Publications; Health, Welfare & Entitlements
A Whale of a Disgraceful ED Budget
Tad DeHaven does a fine job of exposing the mere window dressing that are the cuts in President Obama’s FY 2010 budget proposal. I’ll not add much to that other than to say that while Tad gives Obama’s predecessor a deserved hard time for his own paltry efforts to rein in spending, President Bush’s Education Department budgets looked downright Draconian compared to what the Obama team just produced.
Bush’s FY 2009 ED budget proposal included nearly $3.3 billion in cuts, generated by eliminating 47 programs. Given the dismal performance of all federal education efforts, this was obviously far too little, but compare it to Obama: His proposed budget would cut just twelve measly programs from ED’s budget, for a puny savings of about $551 million. And if that doesn’t give you a powerful feel for just how unserious this administration seems to be about saving taxpayers even a thin dime or two, look what program is not among those proposed to be cut:
EDUCATIONAL, CULTURAL, APPRENTICESHIP, AND EXCHANGE PROGRAMS FOR ALASKA NATIVES, NATIVE HAWAIIANS, AND THEIR HISTORICAL WHALING AND TRADING PARTNERS IN MASSACHUSETTS
The purpose of this program is to develop culturally based educational activities, internships, apprentice programs, and exchanges to assist Alaska Natives, native Hawaiians, and children and families living in Massachusetts linked by history and tradition to Alaska and Hawaii, and members of any federally recognized Indian tribe in Mississippi.
For this whale of a waste – and so many others in the ED budget – to have survived portends nothing but ill for the nation. Nothing but ill.
Filed under: Education and Child Policy; Tax and Budget Policy
Does the GOP Recognize Socialized Medicine When They See It?
Rumor has it that Republicans in the House and Senate will soon decide whether their alternative to the Democrats’ health care reforms will include an “individual mandate” — a legal requirement that all Americans obtain health insurance.
A recent Consensus Group statement shows that the entire free-market health policy community — including scholars from the Heritage Foundation — opposes such a move.
The Cato Institute has published one study arguing against an individual mandate in itself, and two studies critical of its use in Massachusetts. Cato will soon publish additional studies showing how an individual mandate has — as predicted — led to exploding costs and government rationing efforts in Massachusetts, and arguing against its use at the federal level.
Worse, as I explain in this study, an individual mandate is in fact a large leap toward socialized medicine — regardless of the fact that health insurance would remain nominally “private.” Republicans may oppose creating a new government health insurance program. Yet if they are willing to force Americans to purchase insurance, they will effectively nationalize the health insurance industry.
Finally, as I explain in this op-ed, an individual mandate is always accompanied by taxpayer subsidies to people who may (or may not) need aid to comply. The more people who rely on government aid for their health care, the harder life will become for the party of tax cuts. Bill Clinton showed that the best way to defeat tax cuts is to paint them as a threat to YOUR health care. Just in case doing the right thing isn’t reason enough to reject this horrid idea, Republicans should know that by supporting an individual mandate, they will be slitting their own throats.
All for an idea that doesn’t even command support from a majority of the public.
Well, At Least He Should Know What Doesn’t Work
In today’s Washington Post, Chris Cillizza predicts that Mitt Romney “will move to seize the high ground (from a policy perspective) on health care over the coming months and is likely to be Obama’s leading critic when Congress takes up the legislation in the fall.” For anyone who thinks this is good news, I refer you to my post from last week regarding the many failures of Governor Romney’s last foray into health care reform.
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