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January 23, 2007
I Was Wrong
Alright, unpleasant post to write, but I was wrong: The Bush administration's health plan is a trap. I'd counsel Democrats to oppose it, but that'll hardly be necessary. The surprising outcome would be if they even notice it. And this comes, I hasten to underscore, from someone who was willing, eager even, to give the Bush administration a chance, to believe the Democratic majority had spurred them towards more pragmatic, constructive policy-making. Fool me once...
What the early reports either didn't make clear or didn't know was that the plan's changes to health care deductibility don't set limits, they're creating, instead, a standard deduction of $7,500 for individuals and $15,000 for families. My initial understanding was that those were caps: Above them, you couldn't deduct anything further. Below them, you simply deducted what you spent. That was incorrect. Instead, everyone will get precisely those deductions no matter what they spend. If you're 23 and your health care costs $2,000 a year, you still deduct $7,500, pocketing the difference. It would, in that situation, be economically foolish of you to purchase high quality, comprehensive coverage. And that goes all the way up the line. The intent here is clear: To incentivize the purchase of low-quality, high-deductible care, particularly among the healthy, young, and/or rich. To degrade the risk pool, and encourage HSAs. To reduce coverage, costs, and health security.
It's almost laughably wrongheaded, and won't survive an instant in Congress. Pete Stark, chair of the House Health Subcommittee, has already dismissed the idea of hearings. Other Democrats, I expect, will react much the same. Bush is responding to America's fears of high health costs, inadequate coverage, and increased risks with a proposal that promises to further weaken their coverage, heighten their risk and, when they get sick, increase their costs. It's a wonder he's even bothering. As for me, I made the mistake of extending good-faith to an administration that, time and again, has proven it deserves none. The optimist in me has been grounded for a week, and won't get dessert for two.
Also at Tapped
January 23, 2007 in Bush Administration, Health Care | Permalink
Comments
Ezra: I'm nearly old enough to have been your father, yet I still want to be like you when I grow up.
Posted by: jimmmm | Jan 23, 2007 12:46:14 PM
Well, you get points for being open to new ideas, even if from a poisoned well. And double points for a straightforward retreat from support for this malicious package.
They have this mania about HSAs. It is like they perversely want to make the health care situation even worse - they can't be ignorant of its effects even if policy of any kind is produced by AEI-type-intern hacks, as it seems to be, or policy analysis and choices are just ignored altogether.
Somebody needs to write the definitive exposure of the degree which BushCo has reduced policy-making to conservative kant and Rovian politics. John Diluio made this clear fairly early in the Bush administration when he said (in a letter to Ron Suskind):
In eight months, I heard many, many staff discussions, but not three meaningful, substantive policy discussions. There were no actual policy white papers on domestic issues. There were, truth be told, only a couple of people in the West Wing who worried at all about policy substance and analysis, and they were even more overworked than the stereotypical, non-stop, 20-hour-a-day White House staff. Every modern presidency moves on the fly, but, on social policy and related issues, the lack of even basic policy knowledge, and the only casual interest in knowing more, was somewhat breathtaking—discussions by fairly senior people who meant Medicaid but were talking Medicare; near-instant shifts from discussing any actual policy pros and cons to discussing political communications, media strategy, et cetera.
...
This gave rise to what you might call Mayberry Machiavellis—staff, senior and junior, who consistently talked and acted as if the height of political sophistication consisted in reducing every issue to its simplest, black-and-white terms for public consumption, then steering legislative initiatives or policy proposals as far right as possible.
You are correct that the more HSAs attract the young, the truly wealthy, and those foolish enough to think they have beat the medical odds, the less attractive the rest of the nations risk pool becomes - and the higher the cost to insure them. BushCo is advocating the 'cream skimming' that the insurance companies would love to do routinely, even if it meant 60% of the population ended up uninsured.
I'd sure like to see the Dems include a cut-back in HSA attractiveness in some piece of legislation that Bush really wants (and won't veto). This HSA hoax needs to be exposed, cut back and drowned in the bathtub (to appropriate Grover Norquist's approach).
Posted by: JimPortlandOR | Jan 23, 2007 12:49:07 PM
Everyone makes mistakes, Ezra, but it's OK if you learn from them. Good for you.
Posted by: fiat lux | Jan 23, 2007 12:51:50 PM
Technically, it was only a potential mistake.
Posted by: scarshapedstar | Jan 23, 2007 1:02:41 PM
Cudos to Clein. And watch the spelling of "cant" Jim, you mess with a divinity there.
One aspect of the plan simple tax cuts (for young people especially, but also for the middle and lower class) and more "starve-the-beast". Divide and conquer, set demos and generations against each other when taxes must rise.
"It's almost laughably wrongheaded, and won't survive an instant in Congress"
Ezra Klein makes mistakes and admits them. Bushco may make mistakes, but this isn't one of them. This is malice.
Posted by: bob mcmanus | Jan 23, 2007 1:04:58 PM
You know, you really need more graphics to illustrate your central, trap-related point. Of course, its being proposed by Bush definitely helps its chances of being dead before arrival.
Posted by: norbizness | Jan 23, 2007 1:18:30 PM
Nothing to it, Mr. Klein. You just showed that you're in good standing in the reality-based community. Besides, your error was minor. Me, I keep thinking that a wider war with Iran is such an obviously idiotic move that even Bush and Cheney will back off. Imagine how I'm gonna feel if I'm wrong.
Posted by: sglover | Jan 23, 2007 1:26:42 PM
ezra
this is small-potatoes bamboozlement: i actually believed there were WMD (broadly defined, anyhow) in iraq.
i was against the war, but, grounded the argument on this aspect (whenever anybody asked me, which was about never) in standard "oh, sure he has *something*, but, there's no reason containment won't work...." type justifications.
somebody should start a webpage where everybody lists how and when their own particular delusion about the current admin having a scrap of intelligence/decency was shattered.
might not be enough bandwidth in the world.
joshb
Posted by: joshb | Jan 23, 2007 1:43:44 PM
What are the prospects of the Democrats "amending" the proposal to turn it into a capped tax credit on money actually spent, and then turning around and saying they were being massively bipartisan and implementing what the President would have meant if he thought before speaking?
Posted by: BruceMcF | Jan 23, 2007 2:01:00 PM
Bob: And watch the spelling of "cant" Jim, you mess with a divinity there
Sowwy, bob: (bowing down to Immanuel Kant, maybe even prostrating [not prostating] myself)
corrected copy to my comment above:
"Somebody needs to write the definitive exposure of the degree which BushCo has reduced policy-making to conservative cant and Rovian politics."
Posted by: JimPortlandOR | Jan 23, 2007 2:16:09 PM
You mention that this piece is cross-posted to Tapped, however, the AP site is still down.
Posted by: Rebecca Allen, PhD, ARNP | Jan 23, 2007 2:35:35 PM
Good for you Ezra, now lets beat this retrogressivepieceofshit.
Posted by: RW | Jan 23, 2007 2:50:19 PM
I have suggested that this was deliberate bad-cop/worse-cop tag team with AHIP given the announcement of the "grant compromise" a few days earlier:
http://www.dailykos.com/story/2007/1/22/14575/1989
For more info on health care economics and financing, and why single payer makes more sense as policy (universal quality coverage AND cost control) see:
http://www.pnhp.org/facts/single_payer_resources.php
(scroll down)
Posted by: dr.steveb | Jan 23, 2007 2:59:09 PM
I don't get it. Don't people always have an incentive to purchase cheaper health insurance? After all, it is, well, cheaper. If you look at the world through the lens you are describing, people have incentives to buy crappy cars that break down a lot because they are cheaper. But they don't because they want good cars. Same should go for health insurance. This kind of thing is just an inevitable consequence of moving away from an employer-provided structure to a consumer-purchased structure.
If your point is that because people will save more of their tax break if they buy cheaper plans, well, that is really their choice, isn't it? Buy a crappy plan, save a few bucks, get crappy insurance. Buy a better plan, get better insurance. Isn't this what markets are all about? At least this plan makes a step towards giving people financial incentives to buy insurance in the first place; a vastly different world from the one we live in today.
Posted by: Juan | Jan 23, 2007 3:24:50 PM
thank you, ezra.
a lot of the world's problems could be solved, just by people admitting errors in judgement, making a mistake and then taking accountability, or offering an apology.
.....what a great lesson to have learned at a young age.
you teach by example.
Posted by: jacqueline | Jan 23, 2007 5:01:43 PM
looks like ezra gets all the girls from now.
damn it was so easy to say I was wrong.
Posted by: anonymous | Jan 23, 2007 5:12:50 PM
if only public figures could have the humility to say those three little words...
"i was wrong"....
instead of lying, trying to delude others and defend wrongdoings and mistakes to the bitter end, how different the world would be.
since humility is such an incredible virtue, and it is actually freeing to admit a mistake and move on, i wonder why so many people have difficulty in admitting mistakes.
Posted by: jacqueline | Jan 23, 2007 5:16:25 PM
OK, Juan, I'll bite. Brave of you to stick up for an unpopular plan on a hostile blog.
1) Unlike with the purchase of cars, it's a terrible idea for people to purchase health coverage on their own. The individual health insurance market is vastly inefficient, fraud-ridden and exploitative, and a policy reform that promotes it is by definition a bad idea.
2) Rewarding young, healthy and wealthy employees for dropping out of a risk pool guarantees that older and chronically ill employees will abruptly find their premiums doubling or tripling, if they can find health coverage at all.
3) Of course it's better to leave an employer-based system behind, but not for a "consumer-purchased" system. That's just a euphemism for risk segmentation that sticks it to sick and low-income Americans.
4) As Ezra describes the plan, it would be an incredible budget-buster.
Personally, I'm disappointed that Pete Stark doesn't want hearings. I would certainly like to hear the nation's leading health financing experts share their views on this lemon. But I concede that such hearings might distract attention from more serious proposals like, well, almost anything.
Posted by: TomH | Jan 23, 2007 5:34:13 PM
This kind of thing is just an inevitable consequence of moving away from an employer-provided structure to a consumer-purchased structure.
Exactly. I posted the same thing as a comment to the cross-post on Tapped.
I'm not sure if Ezra doesn't understand or what, but the problem Ezra complains about has nothing to do with the "standard deduction for health care" that Bush is proposing, and everything to do with decoupling health care from employers. And I thought Ezra was in favor of that - or does Ezra think that health care should, in fact, be employer-based?
The standard deduction is just a plain old tax-cut to make the decoupling from employers (by doing away with the exclusion from income of employer health care insurance spending) more palatable. But (if I am reading the proposal right) the tax cut applies to everyone whoi purchases health insurance equally - it doesn't subsidize cheap plans more than generous ones.
Posted by: Al | Jan 23, 2007 6:05:13 PM
I read the Bush "plan" as a swipe at union employees when I first saw it. Sure it'd net the odd exec but I'd assume a lot of folks with nice plans won at the bargaining table would get nailed with more taxes. Just seems like something they'd do.
Posted by: Don | Jan 23, 2007 6:26:24 PM
Al-
Yes, employer based health insurance distorts the market, but it has the virtue of allowing people to buy insurance in groups. This has a number of advantages over the individual market, chief among them is that it reduces adverse selection. It would be wonderful to break the link between employment and insurance, but only if the de facto risk sharing of employer purchasing is replaced by a regulatory equivalent in the individual market, or by universal access to group insurance. Encouraging employers to dump or scale back insurance is not acceptable in the absence of reform or restructuring of the individual market. (In fact, I think it is arguable that an employer mandate might be preferable to an individual mandate and community rating, because insurance companies are more likely to abuse an individual purchaser than an employer.) Some have reasonably questioned how many employers would dump their coverage -- I refer you to the well thought out comments on the "Bush's health plan" thread about the dynamics of union negotiation. Moreover, don't underestimate the number of employers that exceed the tax threshhold because they are small and have a sick employee or are large and tend to have employees prone to sickness or injury. The president's plan creates an incentive for them to either discontinue coverage or do the insurance company's dirty work for them, by circumventing the Americans with Disabilities Act.
Indeed, the president's plan actually takes the individual insurance market a considerable distance backwards, not the least because, as P'O'Neill showed on another thread, it probably makes federal assistance to states contingent on their willingness to allow insurers to raise premiums indefinitely. Say good bye to all state efforts to regulate the rate of premium increases for persons who suffer injury or illness throughout the duration of the plan. Sorry Massachussetts. Sorry Arnold. Say good-bye, in fact, to the concept of insurance, which as everybody who has ever had an auto accident knows, is meaningless if the rates can increase because you are forced to submit a claim.
And, since the tax cut doesn't increase if the value of the plan increases, you are essentially getting a tax refund for buying a cheaper plan. Effectively, it pays you not to buy health coverage.
Moreover, encouraging people who are already in the individual market to obtain insurance reduces the number of insurable people with whom uninsurable or relatively uninsurable people in the individual market could group purchasing power, either through group purchasing plans or state reforms. Sick and without insurance? Guess what, your situation just got a little more hopeless!
Let me repeat one more time -- if you do not have insurance because insurance companies refuse to insure you, the plan does less than nothing for you.
I do not think that any reasonable person can contest that single payer is the most efficient way to deliver health care, but evidently that alternative is politically "unserious" for the time being. Fine. Lets implement univeral coverage and community rating. Eventually, people will wonder why they need to send their money to a profit-taking intermediary to group their purchasing power.
Posted by: RW | Jan 23, 2007 6:45:37 PM
Oh, and one more answer to the argument that few businesses would be affected by the tax incentives--
If few businesses would be in a position to dump their coverage, few would be in a position to pay more taxes. The plan can only be revenue neutral if it strips more people of their employer based health insurance.
Posted by: RW | Jan 23, 2007 6:47:25 PM
They do this from time to time - seem to propose something that might be tolerable. But the minute you learn anything about it, you learn that its real purpose and effect is to screw up whatever was already there even worse.
Ezra, it's well past time you learned this.
Posted by: Avedon | Jan 23, 2007 7:33:53 PM
Posted by: Juan | Jan 23, 2007 12:24:50 PM
I don't get it. Don't people always have an incentive to purchase cheaper health insurance? After all, it is, well, cheaper.
The present tax break system reduces the penalty for buying more comprehensive health insurance. That is what the traditional economics says you should do when there is a positive externality associated with a market transaction ... subsdize the purchase by the amount of the positive externality, so that something closer to the optimum amount is purchased.
The problem with the existing system is that the size of the positive externality falls away as you step up in coverage and reduce the size of deductables.
That is the foundation of the argument for the capped tax credit credit.
On the other hand, there is no case to be made for the Resident's proposal. It punishes firms that offer better than the minimum qualifying level of coverage more than the present system does.
The plan seems like it is intended to bribe the young and the healthy to take out low premium, low benefit, high deductible health insurance rather than going uncovered, and increase the pool of "presently insured", with profit of private health insurance companies to be further increased down the track by winnowing out those that actually need health insurance and using relationship marketing to increase the total health insurance purchase from those who do not need it very much. Obviously there is due diligence in that system to trying to make sure that anyone shifting from the "don't need health insurance at the moment" group to the "need health insurance at the moment" group is shifted into the category of "no longer covered".
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Posted by: reza | Jan 23, 2007 9:01:53 PM
Doesn't the proposal need to be considered in connection with various state level initiatives, such as in Massachusetts and California?
A state mandate requiring health insurance and providing access to individual policies is more likely to be successful with the Bush proposal than without, right?
Those who oppose state initiatives to address health care reform should oppose the proposal, but those who support the state-level attempts, even as a second-best option, may disagree.
Posted by: Thomas | Jan 24, 2007 1:12:24 AM
Ezra,
Your optimist is a bright but still maturing your man. Let him sit in his room for a while and really take in his mistake, then call him downstairs for his favorite desert.
The way we are betrayed by our leaders violates something so deep in our nature that it literally takes conscious practice to be able to let ourselves see all of it.
Posted by: Kevin Rooney | Jan 24, 2007 5:13:25 AM
You liberals are all alike - you just don't get it. Last week I was in an emergency room and saw two guys eating hamburgers - THATS what's wrong with health care in American.
PS: The above is not parody of Ann Althouse, honest to God, but of Cathy Seip. Read all about it - if you're not too faint of heart:
http://article.nationalreview.com/?q=MTA2YmZmODhiOTE3ZDg2NjE0NjgzMDU1ZDUxN2U1MzY=
Posted by: Bob | Jan 24, 2007 7:17:14 AM
Thomas
But what if the states want to restrict the ability of private insurers to increase your premiums upon learning of your illness? Or to simply charge you more than other purchasers because you are sick? Restrictions on the ability of insurance companies to discriminate on the basis of pre-existing conditions are, with universal coverage, the most progressive and revolutionary aspect of the California and Massachussetts initiatives. It appears that these states would be denied federal funding under the President's plan.
"To take advantage of funds under the Affordable Choices Initiative, States must take steps to make health insurance more affordable within their States, such as reducing benefit or premium mandates"
http://www.whitehouse.gov/news/releases/2007/01/20070122-3.html
Kudos to P'O'Neill for noticing it.
Posted by: RW | Jan 24, 2007 10:05:23 AM
Being optimistic is not the same thing as trusting liars.
Posted by: Matt Stoller | Jan 24, 2007 11:38:09 AM
RW, you're arguing against a separate proposal. I am discussing the proposed tax law changes, which Ezra commented on, and the interaction of those tax law changes with the new state coverage initiatives.
Posted by: Thomas | Jan 24, 2007 11:51:09 AM
Thomas
It's theoretically severable, but Bush is proposing both together
Posted by: RW | Jan 24, 2007 11:59:28 AM
"The way we are betrayed by our leaders violates something so deep in our nature that it literally takes conscious practice to be able to let ourselves see all of it."
Good grief! But then I grew up in the sixties under Johnson & Nixon.
Get it in writing. Read the fine print. Get a second opinion.
Posted by: bob mcmanus | Jan 24, 2007 12:26:05 PM
This mistake had less to do with trusting the Republicans than with trusting the NYT, which had a misleadingly phrased report on which Ezra based his reaction.
Posted by: Sanpete | Jan 24, 2007 1:41:03 PM
ditto on what Matt says. I don't understand for people in politics why you don't understand the relationship element. I would think that takes precedent over anything said.
Posted by: akaison | Jan 24, 2007 2:49:08 PM
Trivial point: how does one claim this deduction? Do you have to itemize? If so, anyone that uses the 1040EZ form might not have access to it, unless it's revised.
Posted by: Narc | Jan 24, 2007 7:31:20 PM
Going back not much farther you would find newspapaer photos had been retouched, Bob. That was all in the culture which denied public scrutiny - and practised "disinformation" -in the name of "national security". As the French say, "The more things change, the more they stay the same." Unless you think GWOT is real.
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