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December 14, 2006

But Is It Good Enough?

Lot of interesting feedback on the Wyden plan, some of which I want to explore a little further. But first, I want to ask a question: Can anybody truly see Congress passing a piece of legislation and a president signing a bill that, in one stroke of the pen, dissolves Aetna, UnitedHealthGroup, Kaiser Permanente, Blue Cross, and all the rest? We're talking about the full dissolution of multibillion dollar corporations that employ thousands and thousands of people, contribute heavily to a wide swath of politicians and provide massive tax revenues to a large collection of states, and have been the sole providers of health coverage for nearly a century now. Forget whether you, or I, think their demolition would be a good idea: Do you see it as a possibility?

I've tried to imagine it. Believe me, I have. But I can't. Not in the near-term, anyway. Which why I'm somewhat unimpressed by demands that Democratic proposals start from a single-payer stance and condemns any that don't as "signal[ing] a sell-out by the Democratic congressional leadership." Politics is the art of the possible, and so long as the health system is genuinely harming millions of Americans, the perfect can't continually be the enemy of the good -- the question must be whether what's achievable is good enough.

That said, insurers are a problem. But what you can't destroy, you may be able to reform. That's the strategy of the Wyden plan. Insurers long ago realized the easiest way to make money was to expend vast amounts of energy and resources figuring out who will actually use health care, then deny it to them. So they identify everyone who is sick, has been sick, or possibly, one day, will be sick, and price them out of the system. We're left with a system that excludes precisely those who need it. Wyden's plan imposes "community rating," which means insurers can't price discriminate between applicants. Instead, they have to cover everyone for precisely the same price. You could have an enlarged heart, a missing limb, and a lazy eye, and you're getting the same deal as the triathlete down the block.

Of course, this system could make the triathlete down the block opt-out while the ill and the old rush in, thus destroying all insurers and bringing the system to its knees. Thus the individual mandate: With everyone forced to buy in, the young, the old, the sick, the well, and everyone in between spreads out cost, ensuring no single group too heavily tilts the pool. Some folks don't like individual mandates -- I'm not one of them. Single-payer, after all, is an individual mandate too -- you just pay for it through income or sales taxes. The problem with such systems is affordability, but the Wyden plan has a genuinely robust set of subsidies, reaching all the way up to 400% of the poverty line. It is, in other words, determinedly progressive.

The real problem, as I see it, is cost containment, which will be better than our system's but worse than a nationalized system. That said, any sort of coherent, national structure opens the door to serious cost containment mechanisms down the road -- something we definitively can't implement in the current structure. Nevertheless, I'll get more information on the cost containment mechanisms as the day goes on, and report back what I find. Any other questions?

Also at Tapped

December 14, 2006 in Health Care | Permalink

Comments

Just an observation:

Community rating is just bringing the insurance industry back to its roots. Insurance was not a profit-generating mechanism. It was never designed or conceived to work within the "market." Insurance at its core is collectivism - a group of people putting together an equal amount of a given resource so that risk can be shared among a large group instead of individuals.

Any person who doesn't want health insurance because they are "young" and "healthy" are being shortsighted and fairly stupid. Part of being an adult is taking responsibility. That means homeowner's insurance, auto insurance and health insurance, paying taxes, mowing your lawn and shoveling the snow off the sidewalk in front of your house.

Every time I hear some kid whining about having to pay for insurance, "I'm healthy and young and never go to the doctor! Waah! Waah!" it makes me wonder just what the schools are teaching them.

Posted by: Stephen | Dec 14, 2006 11:36:53 AM

Stephen,

Frankly, I think you're being a little hard on us youngsters. The problem isn't that I'm upset about needing health insurance, I think it's criminal that I should be expected to pay $800 a month for it when I make under $40K a year. The idea that somehwo I'm shirking my collective duty by not doing that is insane... I can't afford it, I make too much money to get subsidized, and I make my living through a variety of freelancing theatre (an incredibly low paying industry) and temporary gigs. Yes, that is my choice. But I shouldn't be forced to choose a specific job so that I can get health insurance. I shouldn't have to structure my life around trying to figure out how to afford a doctor. That's not the way it's supposed to work. So when you hear one of us youngins complaining about it, it's probably about *the cost*.

Posted by: isaac | Dec 14, 2006 11:59:59 AM

Is this plan likely to bring down administrative costs near to that of say the VA or foreign single-payer. If it does, I can see mass layoffs in the health insurance industry.

Posted by: Mark | Dec 14, 2006 12:01:30 PM

Successive approximation.

Medicare for minors and seniors.

Then work to move the qualifying age up for kids and down for seniors, year by year, fight by politically popular fight.

But first, add a simple line covering kids to the Medicare law.

Posted by: Emphyrio | Dec 14, 2006 12:07:13 PM

Hmm. There would, of course, be costs associated with transitioning to the new system. I imagine the plan anticipates those. But what I'm wondering is why would these insurance giants support a plan such as this unless it obviously and immediately provides some further structural advantage for them?

From what you have written so far it does not, and of course as a citizen I don't want it to. But therein lies the rub. If they don't support it, how will it pass, and if they do support it, we should be very skeptical. Thoughts?

Oh, and BTW Stephen, this is basic: no young adult sees a benefit to purchasing insurance, only increased costs. As most YA's have not had or seen peers have experiences that land them unexpectedly in the hospital, why should they purcahse insurance?

"Responsibility" as you phrase it sounds like a con to them. If you wait a few years and they watch a friend or two develop a disease in their mid-20's or have to take an ambulance ride, then they come around. As it is, IMHO, they're arguably correct to shoot the odds. As Ezra points out, insurance companies' very willingness to insure this population argues against their needing insurance.

Posted by: chimneyswift | Dec 14, 2006 12:07:53 PM

Wyden's plan sounds very similar to what Ben Westlund was proposing for OR, when he was still considering a indy run for governor. I think it has a hell of a lot of merit, it would certainly be an improvement on the status quo.

The only thing that I would add would be levying "sin" taxes to defray the cost, as this does move in the direction of UHC. A substantial tax on tobacco, alcohol and (difficult to define for legal purposes) junk food, specificly to defray the increased cost of care for those who partake, would go a long ways toward leveling the playing field. I don't think that people who signifigantly increase their need for health care should be denied care, but I also don't think everyone else should pay for it.

Posted by: DuWayne | Dec 14, 2006 12:08:14 PM

I think it's criminal that I should be expected to pay $800 a month for it when I make under $40K a year.

This is pretty much bullshit, and I'm a huge fan of single payer and think that private insurance is basically payment for the privilege of arguing with the insurer to try to enforce the coverage terms. You can buy an individual high-deductible, "illness won't bankrupt me" policy for around $100/month if you shop around. I know because I did it.

Posted by: paperwight | Dec 14, 2006 12:35:25 PM

"Every time I hear some kid whining about having to pay for insurance, "I'm healthy and young and never go to the doctor! Waah! Waah!" it makes me wonder just what the schools are teaching them."

Probably something that you were not, simple math. When you purchase "insurance" from your employer today and you are young and healthy, then you may as well just walk over to your overweight, smoking, 55-year old co-worker and hand him your money. It's the same thing. When the costs of providing health care to 25 year old males begins to drive costs, then you might have an argument.

Posted by: Alex | Dec 14, 2006 1:16:52 PM

Gee, kids, did I strike a nerve?

I was taught simple math, Alex. How did you do in reading comprehension?

My remarks were A) in the context of the Wyden plan and those already whining about that and B) in the context of the fact that the whole idea behind insurance is that you get it when you don't need it, thereby having it when you do.

And, boys and girls, you will need it. If you frittered your youth away without it, then you will inevitably be whining about the cost of it when you're 40 years old and your dad's colon polyps or your mom's high blood pressure show up to bite you in the ass.

As for $800/month, as paperwight says, that's bullshit. I could insure my family - mom, dad, 2 kids, for less than that on private insurance and get a fairly decent policy to boot. And, under Wyden's plan, a single person making up to $39,200 a year would be subsidized for the cost of the plan - which most likely wouldn't be $800/month anyway.

Posted by: Stephen | Dec 14, 2006 1:28:42 PM

You can buy an individual high-deductible, "illness won't bankrupt me" policy for around $100/month if you shop around. I know because I did it. - paperwight

I'm in a similar position to isaac (post-doc at a school which doesn't give benefits to post-docs): where did you find such a plan? While I've found plans that are better deals than isaac's hypothetical, they've not quite reached $100/month ($200-$300 seems to be the norm), which is still a sizable chunk of change, if a manageable one, when you're making less than $40K/year, trying to pay off student loans, etc.

Meanwhile, even when I've had some of the best health insurance available, they still randomly deny payments and otherwise try to weasle their way out of not doing what they are supposed to do ...

Posted by: DAS | Dec 14, 2006 1:40:31 PM

paperwight and DAS--you are missing something important.

Currently, if you are young and healthy, you can get insurance for $100-$150 a month. THAT'S BECAUSE IT'S UNDERWRITTEN. With "community rating", paperwight's $800 a month is only slightly high. If health care costs are 15% of GDP, 15% of mean income is about what insurance has to cost--that's about $300 a month per person, probably about $500 a month per adult.

Posted by: SamChevre | Dec 14, 2006 1:57:12 PM

Most people who get insurance through their employers are not subject to the "only insure healthy people" dynamic that you describe. In fact, I think that in general in group plans through employers such discrimation isn't legal. Insurance companies can set their rates for group plans based on their experience with the group, though, and that can drive up costs in future years.

So who is actually subject to pre-existing condition and health-risk discrimination? Isn't it just individuals trying to obtain health insurance?

I believe the above is correct, but would like to learn if it is not.

Posted by: DaveL | Dec 14, 2006 2:13:43 PM

DaveL -

That is enough of a problem for me. The only people immune to such discrimination are those with employer based coverage. I can't get insurance that will do anything for mental health services, including meds, without paying far more than I would for the care I would get. I also have heart disease markers, coming out my ears. I simply can't afford coverage as an individual. The group plans that I could get involved with, through either the home builders ass. or the national ass. for the self employed, are acting as insurance reps. Sure the cost, even for me, is competative, but my preconditions still price it far beyond my range.

Posted by: DuWayne | Dec 14, 2006 2:34:23 PM

Stephen said:

"Any person who doesn't want health insurance because they are "young" and "healthy" are being shortsighted and fairly stupid. ..."

Actually they are just looking out for their own interests. It is not in their interest to overpay for their insurance so your insurance can be priced below cost. They are not stupid enough to fall for self serving lies about how they should be happy to overpay.

For the most part older people are better off financially than young adults and can afford to pay more for medical care. Given the numerous ways the system is already rigged to favor older adults, I don't see much justification for an additional tilt towards them.

Posted by: James B. Shearer | Dec 14, 2006 3:29:11 PM

I have not read all of Wyden's plan, but as a starting point it is not horrible. However, for true cost reform to work there are a number of other key steps that will help us get closer to better (not perfect.) Since I am in the Healthcare industry I can tell you that this industry has just enough government/regulatory intervention and some extreme elements of free market that create a perfect storm of inefficiency. If one can read through Michael Porter's exhaustive report on Healthcare reform it is worth the time if this issue is important to you. If I were King for a day here are the five steps I would take to reform healthcare and if any of these five steps were followed even to a slight degree cost and care would improve greatly - Here are the deadly five:
1) Restructure the entire Malpractice disincentive to a positive Evidence/Outcomes based inducement. Make it so that Care Providers want to be open and forthright and sharing of both positive outcomes as well as negative outcomes that should be avoided. Today these poor people are so skittish about getting sued that they are more prone to hide bad results or make patients go through needless and costly tests just so their respective backsides are covered. Quite possibly if Malpractice fees can be greatly reduced the Care Provider can then afford recommendation #2.
2) Provide a tax credit for all Care Providers to be wired electronically and set a drop dead date that all providers go electronic or they don't get reimbursed. Currently Intel and a number of other companies have realized the need to create a patient data center. This is a terrific start assuming that patient confidentiallity is properly maintained. Within this allow individuals the ability to access their records and to track their care as they are being treated.
3) Encourage Centers of Excellence for care while not creating a financial disincentive to those facilities that provide General Care. The Specialty Hospitals that focus on Orthopedics or Women's Health or Cardiac Care are far better equipped and get much better results then General Hospitals. Excellence should not be discourage (like it is today), nor should General Hospitals that serve a very important role, have to take all of the loser procedures. As part of this though, Care Centers need to meet certain outcomes in order to get reimbursed. This is not an easy task, but we must get away from paying each care center the same even though one facility could be twice as efficient as the other.
4) Make Chronic Disease Management mandatory for anyone who suffers from Diabetes, Heart Disease (CGHF and CAD), COPD (Asthsma, Emphezema,etc.)High Blood Pressure and now Obesity. These disease states will cost over a trillion dollars by the year 2018, today they are over $500 billion. For instance, only 10% of people who have diabetes take the prescribed number of blood tests in a day. Because of this an average diabetic will more likely be in a recovery mode then a proactive healthy state. Institute care protocols that create a significant financial disincentive for those who are sick who do not participate.
5) Allow the sickest people to die - without a doubt the most controversial of my recommendations, but only in the U.S do we even consider giving an 80 year old man with Congestive Heart Failure innovative and expensive new devices to help him live another six months (usually on a vent...) Especially terminally ill patients who would rather go to a better place are forced to endure pain and suffering longer then they should. The sickest 2% of our Patients inside an ICU make up almost 30% of our cost and for many of those people death is a better alternative.

Lastly, the concern about the many people who would lose their jobs if the Healthcare Insurance Companies had to comply with Wyden's plan would be an unfortunate outcome. However, if our Healthcare System is to improve more then just these folks will have to lose their jobs because the system today is grossly inefficient.

Sean

Posted by: Sean | Dec 14, 2006 4:24:57 PM

Actually they are just looking out for their own interests.

A shortsighted reply. Under our current system, trying to get health insurance after you're already sick is either impossible or financially prohibitive. That's my point, people.

Let me say it again, since it is proving very hard for people to understand: Everyone gets sick. People have accidents. Waiting to get insurance until you develop high blood pressure or you break your legs while snowboarding is a bad idea.

Should we all wait to get auto liability insurance until we have a wreck? How about homeowner's insurance? I'd like to get the premiums back on that. I'll just wait until a tornado or fire actually happens and then shop around for the best insurance rate and coverage.

Why is such a simple thing causing people so much trouble? Insurance should be like a CSA, urban food co-op or union: People give a certain amount of money on a regular basis in order to receive a particular level of services. By sharing the costs/risks, each person is able to gain more services than they would be able to individually.

Currently, if you are young and healthy, you can get insurance for $100-$150 a month. THAT'S BECAUSE IT'S UNDERWRITTEN

Also, as the young and healthy person grows older, the UNDERWRITING on them changes, so that they will be charged more premiums, services will cost more and certain conditions may be excluded entirely. That's what UNDERWRITING does. If 99% of the community were included in the "community rating," then there is no way that premiums, even for a family could come close to isaac's inflated $800/month premium.

Has anyone actually read what Ezra wrote and tailored their comments toward that? So many of the commenters have applied current health insurance conditions to Wyden's plan and then tried to speak authoritatively about how much it would suck. There's many ways in which a plan like Wyden's would reduce costs and increase services. Most of the moaning about it is actually about the current situation, only people apparently get so confused when faced with the idea of health insurance they can't tell the difference.

Posted by: Stephen | Dec 14, 2006 4:38:06 PM

Stephen said:

"A shortsighted reply. Under our current system, trying to get health insurance after you're already sick is either impossible or financially prohibitive. That's my point, people.

Let me say it again, since it is proving very hard for people to understand: Everyone gets sick. People have accidents. Waiting to get insurance until you develop high blood pressure or you break your legs while snowboarding is a bad idea."

Sure insurance is nice to have but that doesn't mean it is worth paying any price for it. It is perfectly reasonable for a young adult to feel that paying ten times his true risk for health insurance is a bad use of his money and to avoid it if possible. This is not waiting until you get sick to buy insurance, it is waiting until you can buy insurance for a reasonable price.

Young people pay more for auto insurance because they are higher risk. Strangely enough this seems perfectly reasonable to old people. But when it comes to health insurance where young people should be paying less because their risk is less suddenly old people think everyone should pay the same rate. And they call any young person who objects stupid.

Posted by: James B. Shearer | Dec 14, 2006 5:19:30 PM

It is perfectly reasonable for a young adult to feel that paying ten times his true risk for health insurance is a bad use of his money and to avoid it if possible.

Oh, well, since this is in fact going to be the case - and is even the case now under the current system - your unassailable logic has convinced me.

I understand now that young people who are currently healthy never get sick or have accidents. And since we can all know with certainty exactly when we each will develop whatever disease or condition our genetic heritage, environment and life choices bestow us, any plan to expand insurance coverage, such as Wyden's, should naturally exclude all the young, healthy people.

In fact, that's exactly what we should do. Adopt Wyden's plan, but exclude all young, currently healthy people. Those that want insurance can buy it under the current system, which will apply only to them - for life. So when today's 23-year-old is 45, 50lbs overweight and has a weak heart, he can reap the benefits of his wise decision to not pay "ten times his risk" when he was young.

Posted by: Stephen | Dec 14, 2006 5:48:52 PM

Stephen,

I know underwriting changes as you get older/sicker. My point was that the $100/mo premiums paperwight is talking about are for underwritten coverage on a young, healthy person. Premiums on community-rated polcies will have to be much higher.

I thought isaac's $800/mo is a little high for an individual, but I'd think it's low for a family. I'd like to see your numbers--here are mine.

Health care is about 15% of GDP.
Per-capita GDP is about $25,000.
So per-capita health care cost (annually) is $3750.
So monthly is about $300.
Since 1/3 of the population is children, insurance for 2 parents and a child should be unaffected by child/adult rate differences, and would be about $900/month.
And children are much cheaper to insure than adults (and insuring by families and underwriting by size allows this to be considered), so I'd expect a single person to pay at least $400/month for insurance.

Posted by: SamChevre | Dec 14, 2006 5:59:46 PM

Stephen said:

"In fact, that's exactly what we should do. Adopt Wyden's plan, but exclude all young, currently healthy people. Those that want insurance can buy it under the current system, which will apply only to them - for life. So when today's 23-year-old is 45, 50lbs overweight and has a weak heart, he can reap the benefits of his wise decision to not pay "ten times his risk" when he was young."

Simpler just to force young people to buy overpriced insurance. Just don't lie to them and tell them it is for their own good.

Posted by: James B. Shearer | Dec 14, 2006 6:08:00 PM

Stephen,

The life insurance industry has an elegant solution to the "underwriting changes" issue.

You can buy whole-life insurance. You are underwritten today, and that underwriting never changes--you can keep coverage at that underwriting level for life.

If you don't want to do that, you can buy term insurance; the underwriting is only guaranteed for a certain length of time. It's cheaper when you're young, more expensive when you're old.

What you could do, in Wyden's plan, is to add "age" as an underwriting criterion; that way, younger people would pay less, and older people more. James Shearer is right; as it is currently structured, it's another huge transfer from the (poorer) young to the (richer) old.

Posted by: SamChevre | Dec 14, 2006 6:14:52 PM

Not to be nitpicky, but there is a slight flaw in SamChevre's informative calculation: it assumes that health insurance has/will have 0 deductables, co-pays, etc. Looking again on the nets, I can indeed find health insurance for $100/month, but said health insurance has such crappy coverage -- in terms of deductables, copays, etc. -- that it would merely next to bankrupt me if I, Hashem forbid, got sick, as opposed to out and out bankrupting me.

Posted by: DAS | Dec 14, 2006 6:21:12 PM

"Simpler just to force young people to buy overpriced insurance. Just don't lie to them and tell them it is for their own good."

Exactly. You can't sell a social insurance model by pretending it is actuarially based.


Posted by: Alex | Dec 14, 2006 6:27:07 PM

Shearer,

I can only conclude that you are intentionally missing the point. Well, that's the charitable conclusion.

Alex,

Go reread the definition for "actuarily based." Then look up something called "The Law of Large Numbers" as it relates to insurance.

Those of us who advocate a social insurance model do so because we understand these concepts and the fact that a social insurance model is the best way to provide the greatest risk-sharing benefit among the largest population. This benefits the individual when they need to draw upon the resources.

Those who believe they don't need health insurance will need it at some point. We can either pay for their care efficiently, with them participating in the system, or inefficiently when they need the care and they can't afford it because they chose to not participate. I for one don't want to have to pay for others' self-centeredness.

Posted by: Stephen | Dec 14, 2006 7:08:14 PM

Hey guys,

Sorry to chime it late again. Stephen, you're right, I misunderstood the context of your point. I have no real problem (Thus far) with the Wyden plan. I am in favor of Universal Health Care of some kind, and recognize that there is no way single payer is going to happen *right now* in this country, no matter how popular the idea might poll. Paying 50% of your income in taxes, or having a large VAT like those countries that have quite good single payer systems (i.e. Denmark) isn't going to go over well. And insurance companies will kill it.

As for my $800 remark. I admit, it was kind of an exaggeration. I live in Brooklyn. NY. Looking around, most of the plans that I could find are, on average, $600-800, so I chose the highest number. The only plans that I can find right now under $300 are for what is called "Healthy New York", a fixed-price health insurance program that is for people who make less $$$ a year than I do. There's an income ceiling on it, and i'm above it. I'm in a kind of donut hole.

Now, there may be high co-pay plans that I haven't found yet, and if there are, I'd love to read about them, but I have had trouble finding anything at all reasonable here in Brooklyn.

And, like I said, I'm a freelance theater director. I don't make enough $$$ at any *one job* (temping, directing, freelance other work etc.) to qualify for the Freelancers' Union plan, but I make too much for other things. Wyden's plan sounds good to me. I'd be happy to pay into it, esp. since it'd be heavily subsidized.

BTW... doesn't the fact that it's "only" subsidized up to 400% of poverty mean that it'll satisfy those wacko Kausite "means testers"?

Posted by: isaac | Dec 14, 2006 7:50:16 PM

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