Howard Baker and Universal Coverage
Add former Senate Majority Leader Howard Baker (R-TN) to the Church of Universal Coverage faithful:
Health care reform and universal coverage is [sic] indeed something [sic] whose time has [sic] come.
Baker joined fellow former Senate Majority Leaders Tom Daschle (D-SD) and Bob Dole (R-KS) to introduce a health care reform package. Daschle is already a high priest in The Church. For backing this proposal, Dole probably is too, but I don’t have any juicy quotes handy.
How Much Will Universal Coverage Cost?
President Barack Obama has declared that his goal in health care reform is “expanding coverage to all Americans.” So what’s the price tag on universal coverage?
Some reformers are throwing around numbers like $1 trillion or $1.5 trillion. But according to the Urban Institute, the cost would be closer to $2 trillion.
Jack Hadley and his colleagues estimate, “If all uninsured people were fully covered [in 2008], their medical spending would increase by $122.6 billion.” If we assume that the cost of covering the uninsured will grow at the same rate the federal government assumes for all health spending growth (6.2 percent), then from 2010 through 2019, the cost of covering the uninsured would be $1.8 trillion.
That’s at a minimum. According to Hadley et al., their estimate “is neither the cost of a specific plan nor necessarily the same as the government’s costs, which could be higher, depending on plans’ financing structures and the extent of crowd-out.” Crowd-out is like collateral damange. When you’re dropping money from the sky, some will inevitably strike innocent bystanders (i.e., the insured). To ensure you hit the uninsured with $122.6 billion, you need to drop a lot more than that amount.
Thus the full cost of covering the uninsured would be closer to — and possibly well over — $2 trillion.
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.
Church of Universal Coverage Begins Its Campaign against that Pesky CBO
Last Monday, when lobbyists for the six biggest health care industry groups joined President Obama to announce their support for reducing health care spending by $2 trillion over 10 years, I penned and voiced my suspicion that the real motivation was to pressure the Congressional Budget Office to assume that Democrats’ health care reforms would reduce spending, despite the lack of evidence. My wife said that hypothesis sounded a little . . . conspiratorial.
Last Thursday, when it was revealed that there was no actual agreement and that the White House basically manipulated the industry to get a week’s worth of good health care press, I started to doubt whether strong-arming the CBO was really the goal of that media stunt. Then Jonathan Cohn set me straight.
In an article for The New Republic aptly titled, “Numbers Racket,” Cohn acknowledges that the biggest problem facing Democrats is that the $2 trillion cost of universal coverage has to come from somewhere. Cohn, like many Democrats, complains that the “curmudgeonly” CBO isn’t letting reformers off the hook by assuming that universal coverage will (partly) pay for itself. Cohn also acknowledges that pressuring the CBO was a likely purpose of last week’s media stunt:
The CBO took nearly the same positions back in 1994 — a fact not lost on either the White House or congressional leaders, who have communicated their concerns publicly and privately. One apparent purpose of bringing industry leaders to meet Obama this week was to showcase the potential for cutting costs; see, the administration seemed to be signaling, even the health care industry thinks it can save money by becoming more efficient.
Democrats have set their sights on legislation that would give government enormous power over Americans’ earnings and medical decisions. The main political obstacle to those reforms is their cost, thus Democrats are pressuring the CBO to pretend that those costs don’t exist. The CBO (and everybody else) should resist the Democrats’ effort to make truth yield to power.
Health Policy Death Match: Klein vs. Ponnuru
I count both Ramesh Ponnuru and Ezra Klein as friends. (I’m so post-partisan.) Why, oh why must they force me to choose between them??
Ponnuru had an op-ed in yesterday’s New York Times where he reaffirmed his membership in the Anti-Universal Coverage Club. Klein responded in a way that’s sure to satisfy his base, but I think he left the reality-based community wanting. Are you ready for the fisk?
Klein suggests that if “80+ percent of Americans . . . think the system needs fundamental changes or a complete rebuild,” then 80+ percent of Americans must support universal coverage. Hmmm, bit of a stretch. In fact, I can recall one poll where nearly one-third of likely Democratic primary voters rejected universal coverage.
Klein suggests that giving consumers the freedom to avoid unwanted state health insurance regulations would mean that Arizonans wouldn’t get coverage for colorectal cancer screening, and that there would be no mammogram coverage in Idaho. Mmm, that’s good crazy. I refer my right honorable friend to the episode where The New Republic‘s Jonathan Cohn made a similar claim about mandates for prostate and cervical cancer screening. I looked up the services covered by the plans made available to the Cohn family by the University of Michigan. It turned out that six out of the seven available plans cover both prostate and cervical cancer screening — even though Michigan requires insurers to cover neither. (I offered to wager Cohn a fancy dinner that his family has coverage for both, but I never heard back from him. Foolish, really, to let me know where he gets his insurance. Klein would never give me such an opening . . . or would he?) What Ponnuru proposes is to let Arizonans and Idahoans and everyone else choose what their health plan covers. Imagine that: people rationing medical care according to their preferences, rather than the preferences of employers, interest groups, bureaucrats, health policy wonks… Why Klein clings to such regulations despite zero evidence that they actually increase access to the targeted services is beyond me.
Klein criticizes Ponnuru for proposing to replace the current tax preference for job-based coverage with a tax credit available to everyone, much like John McCain proposed during his (latest) presidential campaign. Ponnuru cites a study estimating that tax credits would reduce the number of uninsured by 20 million. Klein counter-cites one study estimating that tax credits would have zero net effect on the number of uninsured, and a second study estimating that those who transition from job-based coverage to the “individual” or “non-group” market would pay an additional $2,000 per year for an identical policy. Klein’s criticisms sound persuasive — provided you know precious little about the topic. For one thing, the two studies Klein cites are actually the same study. Pity, really. Had Klein found a second study to support his position, perhaps it would not have been quite so flawed as the one he did find. Here’s what I wrote back in September about that study’s flaws:
What ‘Universal Coverage’ Really Means: Higher Taxes, Government Rationing
An editorial in today’s Wall Street Journal earns that page a membership in the Anti-Universal Coverage Club.
The editors explain that the universal-coverage scheme Massachusetts enacted in 2006 is a perfect microcosm of what congressional Democrats are trying to foist on the rest of the nation: compel universal coverage now, worry about the costs later.
Massachusetts is three years into that strategy, thus its experience shows us where that strategy leads. Much as my colleague Mike Tanner predicted (repeatedly), it leads to higher taxes and government rationing. The WSJ editors write:
The state’s overall costs on health programs have increased by 42% (!) since 2006.
Like gamblers doubling down on their losses, Democrats have already hiked the fines for people who don’t obtain insurance under the “individual mandate,” already increased business penalties, taxed insurers and hospitals, raised premiums, and pumped up the state tobacco levy. That’s still not enough money.
So earlier this year, [Gov. Deval] Patrick appointed a state commission to figure out how to control costs and preserve “this grand experiment”…
More on that Massachusetts ‘Model’
Amid reports that the Obama administration, congress, and some conservative groups still consider Massachusetts to be a model for health care reform, the New York Times reveals that despite assessing insurers and hospitals, raising the penalty on noncompliant businesses, increasing premiums and co-payments for consumers, and raising the state tobacco tax, the program’s financing remains unsustainable.
Massachusetts has significantly reduced the number of people in the state who lack health insurance. However, it has not achieved, nor does it expect to reach, universal coverage. (The best estimates suggest that more than 200,000 state residents remain uninsured). And, significantly, roughly 60 percent of newly insured state residents are receiving subsidized coverage, suggesting that the increase in insurance coverage has more to do with increased subsidies (the state now provides subsidies for those earning up to 300 percent of the poverty level or $66,150 for a family of four) than with the mandate.
The cost of those subsidies in the face of predictably rising health care costs has led to program costs far higher than originally predicted. Spending for the Commonwealth Care subsidized program has doubled, from $630 million in 2007 to an estimated $1.3 billion for 2009.
Now the state is turning to a variety of gimmicks to try to hold down costs, including possibly cutting payments to physicians and hospitals by 3-5 percent. However, the Times quotes health reform experts who have studied the Massachusetts system as warning “the state and federal governments may need to place actual limits on health spending, which could lead to rationing of care.”
The more one looks at the Massachusetts “model,” the stronger the argument for keeping the government out of health care.
Looking to a Failed Model for Health Care Reform
CNN health care correspondent Sanjay Gupta, who was briefly considered for surgeon general in the Obama administration, reports that the administration is looking to Massachusetts as a model for its forthcoming health care reform proposal. That model would involve an individual mandate, an employer mandate, a “connector” with increased insurance regulation, and massive subsidies for the middle class.
Given that the Massachusetts plan is expected to run $2-4 billion over budget over the next 10 years, has failed to come close to universal coverage, has done nothing to reduce health care costs (indeed, may have driven up insurance costs), and has actually led to increased wait time for primary care physicians, that may not be the best model out there. In fact, perhaps the Obama administration might like to look at studies by David Hyman and me detailing the Massachusetts model’s many problems.
Schism in the Church of Universal Coverage
On the Diane Rehm Show last week, I predicted that all the lovey-dovey coalition-forming by the Church of Universal Coverage would fall apart as soon as people started talking about actual reforms instead of vague principles.
Today, The New York Times reports:
Two labor unions have pulled out of a broad coalition seeking agreement on major changes in the health care system.
The action, by the American Federation of State, County and Municipal Employees and the Service Employees International Union, shows the seeds of discord behind the optimistic talk at a White House conference on health care this week.
It also illustrates the difficulty of reaching agreement on two of the knottiest issues in the health care debate: whether to offer a new government-sponsored insurance option, and whether to require employers to help pay for employee health benefits.
I made a similar prediction in this op-ed, where I urged that a new government-sponsored insurance option and mandates are two of three proposals that must be blocked at all costs. The third: price controls.
There Ain’t No Such Thing as Market-Based Universal Coverage
Over at The Corner, Harvard Business School professor and Manhattan Institute scholar Regina Herzlinger urges conservatives to support universal coverage — but in a market-oriented way. That is an absurdity. Once the government adopts a policy of universal health insurance coverage, a free market is impossible and the casualties begin to mount.
As a model, Herzlinger points to Switzerland, “which enables universal coverage without any governmental insurance through this system.” Switzerland requires all residents to purchase “private” health insurance; dictates the content of that insurance; and dictates the price. As I explain in a recent Cato paper, once the government controls those decisions, you’ve got socialized medicine.
My colleague Mike Tanner observes that the Swiss government’s power to control the content of “private” health insurance allows special interests to lard up people’s health insurance with their services — whether Swiss consumers want them or not:
The expansion of benefits has driven up the cost of insurance…As Uwe Reinhardt has noted, “Over time, the growth in compulsory benefits has absorbed an increasing fraction of the consumers’ payment, thus compromising the consumer-driven aspects of the Swiss system.”
Tanner also reports that the government’s power to dictate health insurance premiums is harming the sickest Swiss:
Evidence shows that the community rating requirements are…leading to the over-provision of care to the healthy and the under-provision of care to the sick. In addition, the prohibition on risk management discourages the development of new and innovative products.
In this Cato paper, University of Chicago business school professor John Cochrane explains how such price controls harm sick patients and suppress innovative new products.
Herzlinger is an extremely passionate and knowledgeable advocate of market-based health care. But when it comes to universal coverage, readers of National Review are better counseled by the magazine’s editors, who write:
to achieve universal coverage would require either having the government provide it to everyone or forcing everyone to buy it. The first option, national health insurance in some form or other, would either bust the budget or cripple medical innovation, and possibly have both effects. Mandatory health insurance, meanwhile, would entail a governmental definition of a minimum package of benefits that insurance has to cover…
Republicans should go in a different direction, proposing market reforms that make insurance more affordable and portable. If such reforms are implemented, more people will have insurance.
Some people, especially young and healthy people, may choose not to buy health insurance even when it is cheaper. Contrary to popular belief, such people do not cause everyone else to pay much higher premiums. Forcing them to get insurance would, on the other hand, lead to a worse health-care system for everyone because it would necessitate so much more government intervention. So what should the government do about the holdouts? Leave them alone. It’s a free country.
Herzlinger is correct that “it is 2009, not 1992.” If we want America to remain a free country in 2009 and beyond, we must reject universal coverage.
This Is Why Universal Coverage Is a Religion — and Not about Compassion or Saving Lives
I was invited to participate in an email/online/sorta exchange for the Washington Post yesterday. Unfortunately, the effort was spiked after just a few rounds of emails. But rather than let my participation go to waste, I thought I’d post one exchange that I think highlights why I’m not just being colorful when I describe supporters of universal health insurance coverage as the Church of Universal Coverage. I could summarize the exchange, but I’m lazy. So I’ll just copy and paste.
I wrote:
All the interest groups are meeting with all the right politicians and making all the right noises, thus the Church of Universal Coverage says the stars have aligned for fundamental reform… Everyone is at the table right now because no one wants to be on the menu. But when the Democratic leadership makes its intentions clear, today’s love-fest will turn into a bloodbath.
Andres Martinez of the New America Foundation (who owes me a taco al pastor) responded:
I am a proud member of the church, Michael. As New America’s own recent study on the urgency of reform — which reads like a strong courtroom closing argument — noted, how can the world’s most prosperous nation afford to have tens of thousands of its citizens die each year because they lacked access to health care? Health care reform is a moral imperative, so your reference to a church (um, even if sarcastic) is appropriate…
I replied:
The Institute of Medicine estimates that every year, about 20,000 Americans die because they lacked health insurance, but as many as 100,000 die from preventable medical errors. What moral code compels the Church of Universal Coverage to solve the first problem before addressing the second?
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