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March 24, 2005

The CAP Health Care Plan

Now for the promised health care post. I don't claim to know as much about health policy as Brad does, so his objections -- that stopgap measures will make bad policy and we really need to go to single-payer -- should be taken seriously. Not only that, but I agree with them. Nevertheless, politics is the art of the possible (and occasionally, the train-wreck of the impossible), and there's simply not a constituency for single-payer right now.

I should back up here. The CAP plan, released yesterday, works like this:

• Coverage for All

• Expand the Federal Employee Health Benefits Program (FEHBP) to anyone lacking job-based health insurance, any employer who wants to buy in, and any individual who wants to buy in. In addition, contributions to the plan would be capped at 5-7.5% of income so no one was felled by health care costs (good call, since the new bankruptcy law allows them to put you in the stocks if a health catastrophe takes out your finances). For those who paid over, a tax credit would be assessed.
• Expand Medicaid to cover anyone below 100-150% (a number would be chosen) of the poverty line. Currently, various states have differing eligibility requirements. No longer. Everybody making X or less is covered. In addition, the federal government would take on all increased costs.
• Health care is mandatory. Now that everyone can buy into a plan, if you don't, you're charged an income-related assessment under the rationale that you will eventually use health services.

• Improve the Value of Coverage

• Create a national focus on disease prevention and wellness. Coverage for preventive services would be carved out of private insurers. Would be directed be the U.S preventive Services Task Force. Standard stuff though, like Brad, I'm a bit unclear on their proposed structure.
• Develop better comparative information on treatments. Currently, most medicines are studied in a vacuum -- do they beat the placebo? This'll put money towards funding studies pitting them against each other in an effort to figure out which drugs and procedures are most cost-efficient and effective.
• Increase the use of IT.

• Financing

• The plan would cost between $100-160 billion a year. The authors think it'd lead to substantial savings, but since they can't be accurately predicted, they're not assumed. So how to pay? The answer is a dedicated financing source -- a 3-4% VAT tax, similar to what the EU uses. Along with us, Australia is the only developed country without a VAT tax. Why a VAT? It's quite fair, hard to get out of, and even some conservatives, like Bill Thomas (he of the "President's privatization plan is a dead horse" fame) support it.

So what? It's not single-payer, which Brad says we need, and I agree with. But I don't think it's possible. Don't believe me? Just check out Jeff Jacoby's scare op-ed from a few days ago, imagine a 24/7 drumbeat of those. This plan, even if the FEHBP is a bit inefficient, is quite good. Most health care economists I've read seem to think it a perfectly desirable way to expand coverage but, more importantly, it's enormously powerful politics. One of the stronger arguments used by Republicans in favor of privatization is that Senators use it -- I assume they mean 401(k)'s -- so why shouldn't Americans? Well, congressmen use FEHBP too. So does most every federal employee. Arguing that every American should have the right to buy into the same health care plan that the country's leaders use is a very, very strong argument. From there, if the plan proves inefficient or problematic, we can set about making the necessary changes, tweaks, and improvements.

The critical thing, for now, is to codify universal coverage as part of the American consensus -- this plan does that, and it does so in a way that I think can pass. And that's the important thing right now. It's not that i don't want single-payer, in fact, i think we'll need it eventually. But for now, we can't get it, and in the meantime, too many languish with nothing. If we can push the conversation to accept universal health care as a given, a necessity, then we can argue about how best to do it, the left can emerge with their single payer plans, the right can try and stop them, etc. At the moment, Democrats need to regain momentum on the issue, recent years have seen all the energy with Newt and his absurd HSA's.

The one downside I see to this proposal is that, assuming Brad's fears are correct and it doesn't work well, it could quell the appetite for government-run health care when the real solution is more government-run health care (God, do I sound like a liberal or what?) or, if it works moderately well, accustom people to this stopgap approach and kill the demand for single-payer. That's in contrast to Arnold Relman's argument from a recent TNR, which is that HSA's would be such a free-market disaster that they'd create a consensus for single-payer.

Maybe so, but I'm always skeptical of plans like that working as we'd expect. Republicans can still demagogue over the few protections Democrats have kept in place, Americans can just think anything promoted by the government is crap, etc. So I don't like those risks. The CAP plan, by contrast, looks to me like an excellent stop-gap measure, and one with the political sweeteners to pass. Havving just read a book on the failure of Clinton's health care proposal and having watched Bush's privatization plan take a battle between the eyes, I've little confidence in America's appetite for major change. So, for now, I come down on the side of single-payer as essentially impossible, and not worth holding out hope for. The promise to cap premiums might be a bit unrealistic, but it's brilliant in a debate of this kind -- you could sell the plan by repeating that point over-and-over. And, looking at how bad health care in this country has become, I think we should.

By the way, I really enjoyed reading the plan and writing this post (hope you guys liked reading it). Brad's right -- I am being assimilated. What's scary is that I like it.

March 24, 2005 in Health Care | Permalink

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Comments

OK, but here's what I don't get: why do you think we can pass CAP's plan? That seems about as likely as a full single payer plan.

I've actually come around to Brad's position over the last couple of years. Stopgap measures might actually make things worse, and they have little chance of being implemented anyway. Why not spend our energies instead on the longer term goal of building a coalition for a really good overhaul of our healthcare system?

Posted by: Kevin Drum | Mar 24, 2005 4:05:19 PM

You've got it right this time on incrementalism versus starting from ground zero on a new national health care plan.

I responded to your earlier post on this topic by pointing out the obstacles to single-payer, and urging incrementalism based on an expansion of coverage using the Fed. Employees Heath Benefit Plan (FEHBP) for those not currently insured.

This option should also apply to businesses that wish to buy in to FEHBP for their employees instead of contracting with insurance firms themselves - this gaining the benefits of a larger risk pool and lower administrative costs for the business. This is another signficant step to a national plan.

Quoting myself (if you can, link to yourself, i can quote myself), here's a point I think needs restating:

Optional buy-in to the Federal employee health care system by employees (through their employer, or privately by citizens - perhaps with diversion of Medicaid funds by states and the federal government for those unable to pay the standard federal insurance rates) seems like a good first step toward creating a consistent nation-wide health care system based primarily on private insurance but administered nationally like the current federal insurance program, and supported for those for those segments of the economy that now are supporting or dependent on the existing-system's reliance on private health insurance.

Important point here: the states are overburdened with declining Federal suppport for Medicaid at the same time demand for care is rising - particularly for long-term care of elders/disabled.

If both state and federal per-person support under MedicAid (for normal care, not long-term care for the elderly/disabled) are diverted to paying the premium for FEHBP for the low-income uninsured workers and the unemployed, in effect the states have relief from a major burden that greatly impacts society and the health system (emergency-room medicine).

Then this more-limited and continuing state role for long-term care support can benefit from state-level experimentation, with the political benefit that overwhelming numbers of people will support federal contributions to the continuing MedicAid long-term care plan since everybody is confronts this problem (seniors, their children and grandchildren) - rich and poor alike.

One of the major strains on the health system (long-term care) gets a new national constituency for federal monetary support, free of the problems of the day/day care of the uninsured and unemployed. How could the GOP/CONS argue against support for their parents?

Meanwhile, normal (and preventative care) are separated from MedicAid for the uninsured of all types, and added to the risk pool of all in the same situation plus all federal employees - avoiding adverse selection problems that usually occur with individual health insurance.

Posted by: JimPortlandOR | Mar 24, 2005 4:10:33 PM

Kevin asks the question: why do you think we can pass CAP's plan?

- small business would support a plan that doesn't require them to directly get into health care - their employees just buy into FEHBP, with premium cost support for the lower income workers.

- state governments get to reduce their medical care concerns to "long-term care", with normal day/day care of the poor/disabled diverted to FEHBP. This will cost them less then state level insurance programs or emergency-room reimbursement. In addition, the state governments retain responsibility for long-term care of the elderly/disabled, but with a much broader national base of support to provide the funding, since MedicAid morphs into a long-term care plan for everybody.

- the medical/hospital professions will support it because the current system burdens them with the costs of the uninsured, and their consciences are cleared by not having to limit/reject care for the poor.

- big businesses could support this because they could buy into FEHBP, replacing their own insurance plans in a larger risk pool that will provide decreased costs - and save the cost of their own internal health care administration.

- the health insurance companies could support this because they are not forced out of business by a single-payer plan, and they can compete to be a provider under the FEHBP as they do today, but with more participants and not much risk of adverse selection because of the much larger risk pool.

- GOP moderates can support this because it keeps a basically non-governmental insurance system yet solves a major problem for their states - medical costs of the uninsured in their states for 'normal' care.

If the country can solve this uninsured-person health-care problem for $150 billion/year (per the CAP estimate), this is a huge bargain.

How do the conservatives argue against this? Hard to tell, but they can't argue about 'big government' intervention or 'Hillary-care' because this is the same program that exists today and is based on private health insurance.

The CONS can't argue about 'choice' since the FEHBP offers a wide variety of insurance plans from private companies - accompanied by the assurance that the performance of these companies will be overseen by the federal government. FEHBP works!

This IS our best shot at national health coverage in this decade.

For those who want to fight the insurance companies to move beyond expanded-FEHBP to single payer - this plan creates a national market for health coverage with real incentives for all to get aboard.

It might take decades (or never occur) to gain consensus that the insurance companies could be eliminated from this national plan.

Posted by: JimPortlandOR | Mar 24, 2005 4:36:16 PM

It's my understanding (at least what I learned somewhere in school) that VAT are unconstitutional becuase it could be considered a tax on exports, which is forbidden by the constitution. I don't remember exactly why it is, perhaps someone could refresh my memory.

Posted by: Lavoisier1794 | Mar 24, 2005 5:54:51 PM

Along with us, Australia is the only developed country without a VAT tax.

Australia has had a GST since 2000.

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Posted by: peter.w | Sep 15, 2007 4:19:10 AM

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