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October 08, 2007

Reforming Health Care...With No Sudden Movements

I agree that an individual mandate plan is imperfect, and it would be better to enroll everyone through taxes. But there's a reason politicians are so reluctant to advocate such serious changes in financing and organization. Surveys routinely show that 80-some percent of the America people are satisfied with their health care coverage. They want to change the system because they fear for their future in it, but they like what they have right now. And when you like what you have, and what you have is medical care, there's a lot of status quo bias -- it's not something you feel comfortable experimenting with.

It's exactly this attachment to the status quo that was so brutally exploited in 1994, when the various industries shredded the Clinton plan on the grounds that it would take away what people already had. That was, essentially, the attack. And it worked. Because it was true. In order to make health coverage an automatic feature of taxes, you had to construct a whole new structure. But this proposed transformation caused a lot of anxiety; folks feared what they'd end up with in the new system. So the new generation of plans ensures that everyone can keep exactly what they have. That means letting employers continue to offer their current coverage, and keeping large swaths of the current financing structure. In order to let people keep what they already have, you have to retain much of what already exists. From a policy standpoint, that's less than optimal. But from a political standpoint, it appears necessary.

The individual mandate, imperfect though it may be, is an attempt to paste universality atop a system not easily given to it. It's about the best you can do. That's why it's so important that these plans set up, and quietly advantage, federally regulated menus of public and private insurance options which both businesses and individuals can buy into. The hope is that these markets will be cheaper and more efficient, will attract the bulk of customers, and you can eventually move towards something closer to public health care. In reformer-speak, this is called "sequentialism," and all the major plans have it. But what you're seeing in these plans is the candidates attempting to create as good a health care system as an anxious public will allow. That means trading in some good policy -- like funding through taxes -- in order to retain a high level of security.

October 8, 2007 in Health Care | Permalink

Comments

Surveys routinely show that 80-some percent of the America people are satisfied with their health care coverage.

Good point. Incidentally, I've often wondered how much overlap that 80% of the satisfied has with the 80% of people who generate only 20% of costs. The healthy, that is.

Posted by: anon | Oct 8, 2007 5:39:59 PM

Surveys routinely show that 80-some percent of the America people are satisfied with their health care coverage. They want to change the system because they fear for their future in it but they like what they have right now. And when you like what you have, and what you have is medical care, there's a lot of status quo bias -- it's not something you feel comfortable experimenting with.

Here's exactly where I'm unclear with your presumed level of satisfaction with the current Dem policy proposals. All of the good stuff that health policy folks routintely discuss as necessary to improve our health care-- evidence-based medicine, unecessary care, methods of addressing rising costs, etc.-- successful implementation of those will require one of two things: 1) a leader that can translate the present level of dissatisfaction that does exist into a broad-reaching plan or 2) people's dissatisfaction with health care increases such that they are looking for these more broad-reaching reforms.

I believe #1 is the answer and #2 is not likely to occur in such a way that would allow the cost/quality reforms that are necesssary to occur.

In what political environment do you envision it being feasible for Part 2 of a health care reform package to be successfully passed, as you have suggested?

Posted by: wisewon | Oct 8, 2007 5:49:18 PM

I'm certainly supportive of keeping the fear of change equation from being exploited, as a matter of political necessity/pragmatism.

But the mandate can be equally fear-generating if exploited - and it will be.

Both can be handled with a gentle opt-for-same coverage approach.

Send each taxpayer a booklet along with their IRS tax forms. In the booklet, provide a form to attach to the tax return (or send separately).

The form has two choices:

(1) keep my existing health care coverage with (name of insurer and policy number), as paid by (self, or name of premium payer [employer].

[2] choose one of the options for new coverage:
- choice one (private insurance - explanation on page x)
- choice two (private insurance - explanaton on page y)
- choice three (public insurance - explanation of page z)

Every year I get a form from my former employer with similar choices, to be returned in late fall open enrollment for coverage starting Jan. 1. If i want to keep the previous year's coverage, I don't even have to return the form. In the first year, a form must be returned, or a default choice will be made.

Mandate is an ugly word, and no softer term softens the impact.

And there really is no way to get to universal coverage without either a mandate that can't be enforced, or to have a citizen-choice system like I've outlined.

The politically pragmatic approach is citizen choice, not mandate.

Posted by: JimPortlandOR | Oct 8, 2007 5:56:53 PM

I'm confused by the study that Ezra cites (study here, original post here).

The synopsis does make the claim that "88 percent of the insured rate their coverage as excellent or good" but I can't find any question in the rest of the document that deals with that issue at all. I'd be really interested in knowing just how they worded the question.

The thing is, compared with the rest of the study, that number is quite the anomaly. A clear majority of Americans are dissatisfied with costs, with our healthcare system as a whole, are afraid of being able to afford the coverage they currently have in the future, etc.

It could be a case similar to people's views of Congress, wherein everyone there is a crook except each person's Representative. Or it could be a quirk of American attitudes.

What does seem to be clear when we look at the study as a whole is that while most Americans who have insurance might be satisfied with the insurance they have, most of them also come out for some kind of change that would extend healthcare coverage to every person in this country, even if it means higher taxes.

Not that we don't need to worry about the ways in which any Democratic plan will be attacked, but the situation is perhaps not so dire that we actually need to convince Americans of the need for change.

Posted by: Stephen | Oct 8, 2007 6:54:45 PM

I don't know who the people that were polled were, but I don't know anyone, rich or poor, who's "satisfied" with their current coverage. Those who have coverage are "glad" they have it, but that doesn't mean they approve of the current system at all. On the contrary, pretty much everybody is concerned with whether their plans will cover them in the event of a serious illness, and pretty much everyone is quite fed up with the endless bureaucracy involved. Nearly everyone thinks that it's ridiculously expensive and inefficient.

Most people are always afraid of change, and you'll nearly always get 80% or so who want to stay with whatever the current system is (in any area), until it changes, and then they're usually happen with the changes.

Posted by: mike | Oct 8, 2007 7:30:16 PM

It's exactly this attachment to the status quo that was so brutally exploited in 1994, when the various industries shredded the Clinton plan on the grounds that it would take away what people already had. That was, essentially, the attack. And it worked. Because it was true.

Yes. Harry and Louise were right. I'm not holding my breath waiting for James Fallows to apologize to Betsy Ross, though.

Posted by: JasonR | Oct 8, 2007 7:31:59 PM

Something seems off about that 80% figure.

Let's assume for the moment that the vast majority of people who do not currently have any health insurance will answer that they are not satisfied. With 47 million uninsured out of a pool of 300 million Americans, you're looking at more or less a guaranteed 15% "not satisfied" rate right out of the box. That leaves roughly 5% of the "not satisfied" pool for people who have insurance and are not satisfied with it.

It doesn't pass my gut check -- but of course, I could be wrong.

Posted by: lux | Oct 8, 2007 8:07:03 PM

First, lux, you don't actually know that all of the uninsured are dissatisfied. It's an assumption.

Second, the point is, most people have some sort of insurance. Many of them either don't need it, or need it in some minimal way (an allergy scrip, say), that works just fine (this is the question of spreading risk - many insurers have cherry picked the healthy into insurance plans that work fine for them... and only a minority of patients consume most services - and grant, too, that for some of them, well off and well covered, they're doing okay, too).

Third, the elderly are in Medicare, and the veterans are in VA. We already know that many of them are quite satisfied with the coverage they have.

I think the skepticism to this number is key - as well as realizing that 47 million uninsured, while a serious issue, means that the vast majority of Americans are insured. I think a lot of the healthcare debate in the blogs loses sight of these things. These are real hurdles to any change in healthcare, and a big reason why it's important to keep in mind that the online discussion of healthcare - meaningful as it is - is a discussion many, many people are not having, and reflects dissatisfaction with the current status quo that many do not have. There are people, seriously, who don't really, know much if any of this. Young, white collar professionals who don't have an illness don't really know this stuff. To the extent that many of them understand there's a problem, it is someone else's and need not involve changing their own plan.

I think wisewon has the hardest point - even if you do enact a mandate, and you do move people around to some extent... there is still a large fear of change that will always be a barrier to the next round of changes designed to foster more movement to single payer. And I think it's hard to see - absent some brave leadership - how the public will move en masse to wanting it. And I think making a halfway change - which is very much our history of "healthcare reform" - is entirely possible, and could easily make more problems, not less.

Posted by: weboy | Oct 8, 2007 8:39:38 PM

The thing is, compared with the rest of the study, that number is quite the anomaly. A clear majority of Americans are dissatisfied with costs, with our healthcare system as a whole, are afraid of being able to afford the coverage they currently have in the future, etc.

Yeah, and a clear majority of Americans are convinced that the children of today are corrupted little monsters and the world will fall to ruin, but do you want to be the one to tell them, or their kids, how to act?

Posted by: Senescent | Oct 8, 2007 8:59:57 PM

a clear majority of Americans are convinced that the children of today are corrupted little monsters and the world will fall to ruin

Aside from being irrelevant, I don't believe that's the case.

Posted by: Stephen | Oct 8, 2007 9:30:39 PM

I think I am a perfect example of someone who is well satisfied with my current employer provided health insurance but anxious about the future. I also have a number of health issues and have incurred significant healthcare costs (mostly covered by insurance), especially over the last 10 years. I need to work one more year, which will give me the 15 years service I need to be eligible to purchase my employer's insurance after I retire but before I am eligible for Medicare. After Medicare kicks in, our employer insurance becomes a Medigap policy.

I think it would be enormously helpful if there were coverage readily available to those who retire before age 65, lose their job (and their health insurance) or voluntarily leave a job with health insurance to strike out on their own or join a smaller firm that doesn't offer it. An FEHBP menu of options with premiums (at large group community rates) scaled to prospective income could fill in the gaps in the current system. The same holds for the currently uninsured. Offer a menu of options with sliding scale subsidies.

All of the issues around cost control require a whole separate set of strategies. The cost issue needs to be dealt with on a parallel track to universal coverage so we can more easily afford the subsidies that will be required to cover the low income uninsured and to drive medical cost growth down to a level that is sustainable over the long term.

Posted by: BC | Oct 8, 2007 10:01:46 PM

I've seen literally dozens of studies like this. It's a constant result across many different polling organizations. And while it may not feel good in the gut, it actually vibes quite well with the history of health care reform.

Posted by: Ezra | Oct 8, 2007 10:24:58 PM

I think Ezra is dead on the money with this one. As I might have mentioned here before, I work for a health insurer. My company does satisfaction surveys regularly. Most people report that they are satisfied, and it's pretty consistent over time.

But look, it's like saying: are you satisfied with your car. Your likely answer, if you have one and aren't getting all self-conscious about it now, is that you are satisfied. But chances are, you can also imagine a car that would be much better than the one you have. And if someone told you that it would be possible to get a car that would be just as reliable and comfortable as yours but with 25% better mileage and at half the cost, you'd suddenly not be so satisfied with your car. And yet Ezra is exactly right that most people either don't know that this possibility exists, or they don't really believe it's true and aren't willing to take the risk to get that "super economy car," as it were.

And in defense of my industry, anon's suspicion that the 20% who aren't satisfied are the 20% with the most medical costs is completely wrong. The left is really in danger of believing its own propaganda too much here. As inefficient as the health insurance industry is, and as much as it has perverse incentives (particularly in the individual market) to skim risk, it still pays out over 80% of premium in claims. And the majority of that goes to the top 10% of sick people. These people generally don't have huge problems with their coverage, believe it or not, and are often grateful for how little of their total costs they actually have to pay.

Think about it: would you be happier with your health insurance if you paid more in premium than you got back in benefits, or if you got back way more than you paid in? The latter.

Of course, there are plenty of cases in which there is some administrative screw up that causes anxiety and anger, and other cases in which the insurer plays hardball and denies things it shouldn't (ethically and/or legally). But in the large majority of cases insurers pay what people expect them to pay. Those are happy customers.

Posted by: jd | Oct 8, 2007 11:08:42 PM

I think Ezra is dead on the money with this one.

On the assessment of people's satisfaction level individually vs. the system-- I'm in full agreement. (FYI-- The same is true at the physician level-- so if you tell people about docs that don't practice according to treatment guidelines-- they can appreciate the issue, but of course their physician knows what he/she is doing.)

But in terms of the conclusion that health care reform necessitates a "sequentialism" type approach and that the current Democratic plans are a good first step? I just don't think that is the right conclusion.

As I wrote earlier-- the tough stuff on health care reform is not being really addressed-- unnecessary care, overly expensive treatments-- you know the list. These are issues that from a policy perspective will require solutions that intrude on the individual physician-patient domain to some degree, i.e. the government is mandating/requiring/incentivizing/not reimbursing X even though you and your doctor may feel differently. This is the policy chasm that hasn't been crossed whatsoever by the current plans and I don't see what is being offered as a first step that will make that chasm easier to cross politically in the future. Instead, it just appears to be kicking the can down road.

Posted by: wisewon | Oct 8, 2007 11:40:46 PM

the tough stuff on health care reform is not being really addressed-- unnecessary care, overly expensive treatments-- you know the list.

I think everyone here agrees on this point. I only disagree that universal healthcare using the same elements as the current system doesn't get us closer to real system reform. People have a funny way of responding to expenses that take the form of taxes, particularly people who call themselves "Republicans" or "libertarians." Even if we still pay 16% of our economy towards healthcare in the first-generation UHC system, the fact that an additional portion will come out of taxes will animate the debate for real reform.

Why do I think that? It's because this has happened in every other country. The more that budgets dependent on tax income are used to pay for healthcare, the more payors have a way of becoming cheap and efficient. It's the opposite of what free market ideology says should happen, and yet, it's what happens in the case of healthcare.

Posted by: jd | Oct 8, 2007 11:57:34 PM

I don't see how sequentiality can happen. Seems like you have to mandate universal access to all policies (or else you'll wind up with group plans cherry-picking the healthy subscribers, which makes the default groups prohibitively expensive) and you have to mandate a minimum set of coverages (or else you don't have a prayer of providing anything like universality). Once you do that, you so level the playing field that the private plans are commoditized and you find everything collapsing instantly onto a public plan.

Mind you, I still can't figure out how any of this contains healthcare costs without causing shortages, but I don't think cost containment is possible without distinguishing between routine care. Maybe you can make routine care so commoditized that it's subject to some sort of price controls. I'm not holding my breath, though...

Posted by: TheRadicalModerate | Oct 9, 2007 12:23:05 AM

The one thing that Americans wont like even more than having their current insurance taken away is being told to buy insurance.

The 20% uncovered mostly cannot afford coverage -- meaning their mandate will have to be subsidized almost wholly via taxes. Keep this latter in mind for a moment.

Why not allow the 80% to keep their coverage (if they enjoy being overcharged approximately 45%: 30% paperwork wastage on top of 70% actual service is 42.8% overcharge) and covering the 20% uninsured with tax supported Medicare -- saving the 45% overcharge?

For employers/employees who want to switch we should be able to keep their assigned payroll tax lower than private coverage -- with said paperwork savings.

I we want to create a stampede to Medicare we can simply raise a broad based payroll tax on everyone as more and more join -- might as well get on the benefits bandwagon if you are going to pay the tax. :-)

I understand Medicare only covers 80% of its own rates leaving you or your supplemental insurance to pay the balance (I will find out for certain in about a year and a half -- in the meantime my Medicade pays of the 100% of the smallish fees it sets). Most doctors are probably satisfied to accept 80% from low income clients (better than a chicken). Employers/employees can bargain over who pays the upaid 20% of Medicare fees if they wish.

_Before we mandate 20% of Americans to purchase expensive insurance (like collision on a Rolls)__ contemplate that 25% of American earn less than LBJs minimum wage (or did until the recent slight increase).

Posted by: Denis Drew | Oct 9, 2007 12:33:40 AM

Mind you, I still can't figure out how any of this contains healthcare costs without causing shortages, but I don't think cost containment is possible...

There are a few ways you could control costs:
1) Limit physician salaries/fees. Doctors in the US make substantially more than doctors anywhere else.
2) Restrict care. (Should be obvious)
3) Eliminate insurance company profits.
4) "Consumers" track down the cheapest drugs, care providers, etc.

None of the first three options are feasible. Doctors won't agree to lower pay; people don't like having their access to care restricted; as Ezra notes, there's really no reasonable way to institute a single-payer system. Even if it were a popular idea, I don't see how we could reasonably imagine the federal government nationalizing a large portion of the economy. On general principle, business interests would stop that dead in its tracks, though for the record, I think a single payer system would be your best bet if you were beginning from scratch.

I think most democrats are a bit too dismissive of consumer driven care--it has a lot of merits--although overstated by conservative/libertarian types. That said, whatever its potential, it won't be a panacea and its impacts on costs, relative to the rest of health care spending, would never be that dramatic without shifting such a huge spending burden on people that they get angry because, well, you've restricted their care by pricing them out of it. The theory is that people will use more preventive care to avoid long-term expenses, but I think you'll get a lot of angry, sick people who won't.

In any case, I guess my point is that nothing about the way our health system operates is designed to keep costs low and grafting an individual mandate on top won't really help with that. Doctors make more by ordering extra tests or borderline procedures; insurers respond by raising rates and trying to restrict access. Since people don't want access restricted, they spend more on tests and insurance.

That said, an individual mandate coupled with subsidies for low income people is probably the best, realistic idea out there at the moment insofar as it's the most realistic way of making sure people can see doctors and go to the hospital without going bankrupt.

Posted by: brad | Oct 9, 2007 1:20:16 AM

Doctors won't agree to lower pay

Don't be so sure of that. I've said here before that there are carrots and sticks here, not least in terms of loan subsidy and forgiveness. I'd like to see how many newly-qualified doctors would take the offer to forego big salaries in their forties and fifties in order to have a very decent living through their late twenties and thirties.

My gripe with sequentialism is simple: even if an individual mandate is implemented, the private sector will do its damndest to destroy it, and any GOP legislative majority will choke it, on the Norquist Principle that government doesn't work and we'll make damned sure it doesn't. It's sowing seeds on stony ground.

Posted by: pseudonymous in nc | Oct 9, 2007 2:01:24 AM

jd,

People have a funny way of responding to expenses that take the form of taxes, particularly people who call themselves "Republicans" or "libertarians." Even if we still pay 16% of our economy towards healthcare in the first-generation UHC system, the fact that an additional portion will come out of taxes will animate the debate for real reform.

I think Medicare shows otherwise-- one of the largest items on the budget, growing out of control, absolutely no political discussion on how to rein in these costs. No politician would dare touch this issue. Given the political difficulties in implementing these necessary changes, I'd speculate that our system will need to take on another $5-10 trillion in debt (based on historical level of debt as % of GDP) before the cost growth of health care really starts impacting taxes. Republicans have failed spectacularly at "starve the beast" which is essentially what you propose (See Reagan and Bush II). Given our history, and the extreme political difficulty in addressing this issue, I'm very concerned that we are not addressing cost growth before we reach this point.

Posted by: wisewon | Oct 9, 2007 6:58:49 AM

Doctors won't agree to lower pay

Don't be so sure of that. I've said here before that there are carrots and sticks here, not least in terms of loan subsidy and forgiveness. I'd like to see how many newly-qualified doctors would take the offer to forego big salaries in their forties and fifties in order to have a very decent living through their late twenties and thirties.

Two thoughts:

1. 90% of doctors in this scenario have already "paid" with the hard years and low pay. I agree that a change in system helps for the 10% of new doctors, but what are you proposing for the 90%? They are the ones that would't let this pass.

2. Physician income really isn't the issue. Physician autonomy and decision-making is. Our health care system costs too much not because of direct physician costs (i.e. salary) but because of indirect cost-- i.e. the tests, surgeries, procedures, drugs that they order for their patients. Having systems in place where their decision-making is restricted/reviewed/overruled because they aren't practicing evidence-based/ cost-effective medicine-- that's what we need. That's a lot harder to accomplish with carrots and sticks, its a fundamental shift in the field of medicine.

Posted by: wisewon | Oct 9, 2007 7:09:26 AM

jd,

Why do I think that? It's because this has happened in every other country. The more that budgets dependent on tax income are used to pay for healthcare, the more payors have a way of becoming cheap and efficient. It's the opposite of what free market ideology says should happen, and yet, it's what happens in the case of healthcare.

One other thought here. As I've written before, the OECD has run the numbers and these countries have health care costs growing 50% faster than GDP. Read country-specific policy papers in UK, France, Germany, etc. most speak of their own health-care crises, rising costs and the non-sustainability of their current systems.

They are doing better than the US, no doubt. They have not been a success in constraining costs.

Posted by: wisewon | Oct 9, 2007 9:28:45 AM

I'm confused. I downloaded this study which begins by saying that "An overwhelming 80% of the public is dissatisfied with the total cost of care in the nation", and more than half are dissatisfied with the quality of care. While 89% are satisfied with the quality of care they receive (note the confusion implied here), a health plan that simply changes how services are paid for has no impact on the quality of care or choice of providers.

A plan that retains either an employer-based system or a system based on private insurance will not solve the cost problems people are worried about and is much more likely to negatively impact care quality and provider choice. This study certainly does not support watering down health care reform proposals in the way you suggest.

Posted by: Charles Dunaway | Oct 9, 2007 9:42:02 AM

IHMO JD is right, the people who complain about their health insurance are healthy people with high deductibles and visible premiums who complain that they get nothing for their premiums.

Posted by: Floccina | Oct 9, 2007 11:04:07 AM

Brad--

Consumer-driven price shopping can stabilize or lower costs in some areas but not all areas. A while back, I performed a little exercise where I found this table and then assigned each class of medical procedure to one of 3 categories. Using this methodology, I found that:

About 35% of all expenditures go for routine care.
About 55% go for catastrophic care.
About 10% go for end-of-life care.

(If anybody has better numbers than this, I'd love to see them. I suspect that my methodology was more than a little flawed.)

Prices for catastrophic care are going to be largely inelastic. Market dynamics aren't going to do anything for people who are scared of dying. And I have no idea what you do about end-of-life care. In any event, it seems that these categories are what insurance is for. If you've got uniform risk pools (which of course isn't the case today), it's pretty easy to come up with a reasonable premium to spread the risk. Then you can subsidize low-income subscribers through any number of different mechanisms.

Which then leaves you with the 35% of the pie that's routine expenditures. Today, you've got HMOs and insurance PPOs that act as the bargaining mechanism to hold prices down. This probably isn't giving you a very good deal, since insurance-based negotiators are only interested in holding prices down enough that their premiums are competitive. Beyond that, they just pass the prices on to their subscribers.

I suspect that you'd get better deals being done if you came up with a set of "HMO-lite" organizations, where you were offered a flat-rate deal on a very specific set of routine CPTs (CPTs are those nasty little codes that show up on your medical bills), with catastrophic insurance handling everything that wasn't covered. The HMO-lite would then handle developing a decent network of providers and applying collective bargaining for decent prices.

If you transform the bargaining model from an insurance-based paradigm to a more standard collective paradigm, you're going to get some market efficiencies that will drive down the cost of routine care. Furthermore, routine services are highly commoditized, which makes their prices extremely elastic. It'd be nice if you could wring out costs from more than 35% of the budget, but 4 or 5% of GDP ain't chicken-feed.

As for how you subsidize the poor so that they can join these HMOs-lite, all the usual methods apply: tax credits, tax deductions, government-run HMOs-lite, etc.

I like this solution because all the various pieces parts are relatively transparent. The insurance problem is an insurance problem, rather than some bizarre amalgam of risk-spreading, provider restrictions, and subscriber cherry-picking. The bargaining problem can remain market-driven and largely private. And we can have an honest debate about the size of the subsidies (i.e., taxation) needed to optimize the public health of the poor.

Posted by: TheRadicalModerate | Oct 9, 2007 11:29:13 AM

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