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November 09, 2007
Radical Republicans
This Time article by Ramesh Ponnuru is terrifically misleading. "Most Americans of working age get their health insurance through their employers. The Democrats running for President want to keep it that way. The Republicans don't," he writes. "[T]he truth is that it's the Republicans who make more radical proposals. They want to make a break with more than six decades of government policy."
Reading Ramesh's article, you'd think that the Republicans wanted to eliminate the employer deduction. And he's right: That would be a radical change! But they don't want to do that. George W. Bush's plan, which Ponnuru touts, doesn't do that. Giuiliani's plan, which is less ambitious than Bush's, also doesn't do that. Romney's plan doesn't do that. McCain's plan might do that, but when I called the campaign for confirmation, they never called me back, so I'm going with "no."
So yes, if they were doing this radical thing Ponnuru is proposing, then their plans might be radical. But they're not. They're not even coming close. And their tweaks to individual insurance, making it somewhat more viable, won't destroy the employer-based system either. Ponnuru misses or doesn't mention the other major reason people purchase their health insurance through their employers: Risk pooling. Within an employer's pool, your preexisting conditions don't matter, your coverage doesn't get terminated for inexplicable reasons, your insurer doesn't pick through your medical history -- you, in other words, don't become a bad deal the second you get sick. You're protected and subsidized by your colleagues. Which is important: What you want in health insurance is for it to be stable, safe, secure.
The Republicans plans don't offer that. But Ramesh knows they need to seem like they do. So he writes, for instance, of Bush's plan will "make it possible, for example, for [people] to keep their policies when they switch jobs." Yes, Bush's plan makes it possible, but not likely. Conversely, the Democrats' plans actually allow you to keep your policy when you switch jobs.
November 9, 2007 in Consumer-Directed Health Care | Permalink
Comments
I think Ramesh underestimates the degree to which people like to have their health insurance come through their jobs. It's just that most people think that if you hold down a steady job, you should be able to get health insurance.
What annoys people is not that health insurance is tied to your job, but that health insurance is tied to a specific job-- health insurance that you might not have with any other job.
There's the self-employed issue to consider, but I don't hear a lot of "risk pooling" reform, though Ezra could probably fill us in on that.
Posted by: Tyro | Nov 9, 2007 12:40:30 PM
If you read the article and think Republican's want to eliminate the employer deduction you don't know how to read. The fact that the article clearly says, "President Bush proposed letting people who buy insurance for themselves qualify for the break too." clearly shows they are proposing leveling the tax consequences.
For the pool to be stable, safe, and secure the healthy and young must stay in it. That is why you complain about the individual market, people wait till they are sick then want in and right after their bills are paid they drop out. Carriers can't insure risk such as that so they deny people and you go berserk. Are you proposing the MA route and every citizen will be required by law to carry insurance? That would do more to solve the problems with today's system then any other proposal currently being floated. Good luck telling healthy 25 year old males making a decent living they must purchase an insurance policy. If common since can't convince them the heavy hand of federal law should do the trick.
Please, I do beg you, as someone that has worked with employer benefits for 15 years, how any democratic "plan" proposes allowing you to keep your policy when you switch jobs. The only way you could possibly accomplish this would be to nationalize the insurers and no longer allow employers to purchase the plans. In which case you’re not keeping your policy with that employer, you’re keeping your policy, the only one you will ever have, the only one you have to choose from, and it has nothing to do with your employer.
If you expect an employer with 1000s of employees to be collecting premium from 100s of ex-employees please put that in writing so the business coalitions can start tearing you apart. That would be an administrative nightmare 100 times larger then COBRA. That’s what I love about policy wankers and politicians, not a clue of how things work in the real world but still propose all these solutions then pass the blame when they fail. How many socialized systems mail a letter to women every year telling them of their Mastectomy rights? How about mailing 100 terminated employees a letter reminding them of their COBRA rights so 2 of them can respond? My personal favorite is the NY State Surcharge. The geniuses in NY wanted to tax the payments made to a couple hundred facilities, instead of taxing that small base of entities they tax the 100,000s of companies and insurers that pay those entities. Even if you’re a small employer in UT with no employees in NY depending on how you provide your benefits you still need to register and file with the State of NY. That’s what happens when politicians pass reform.
Posted by: Nate O | Nov 9, 2007 1:56:13 PM
How did Time let this run?
Posted by: Justin | Nov 9, 2007 2:02:18 PM
You should think this through a little harder, Nate. You keep the insurance through the insurer. It's not terribly complicated. When you leave a job, you have the option of retaining your insurance, and paying the employer portion yourself. You don't have to leave your pool or end your benefits.
Posted by: Ezra | Nov 9, 2007 2:07:44 PM
risk pooling, what insurance really is, functions exactly as it should and at very competitve prices. Any group of people that can legally join together to purchase insurance can do so from numerous sources. You can ceed off risk from 15K per pool member on up. What most employers use to do was purchase this type of insurance then take the risk between the $500 deductible and the cap they pass it off to the insurer at. This is self funding and it is how most employees where covered until the late 90s.
The capitilist market can do this job very well because they know for every X people Y will have this much in large claims, it's very predicatable and thus insurable. What they can't insure is utilization and optional care. You can't predict those liabilities and thus can't develope rates to charge to protect against them.
This brings up one of the largest flaws in our current system. We fund Healthcare through Insurance. If you look up the word insurance it doesn't include protection from a known event. That isn't insurance it is financing. Preventative care, birth control, and other known events should not be covered by insurance. Not that they should not be stressed or delivered but it is non efficient for insurance to pay them. For every dollar you pay in premium your paying taxes, commission, and other overhead. Roughly 20% of premium goes to overhead in traditional insurance about 5-10% in self funded plans. $20 birth control cost $25 in premium. It doesn't make since for people to pay premium to have the insurance company turn around and pay the small dollar claims.
Only 2 groups can form pools, individual employers and unions. Federal law prohibts anyone/thing else from forming a pool. Republicans for years have tried to pass legislation allowing for Association Healthplans. His would allow associations of individuals or small companies to ban together to purchase insurance and ceed risk. Democrats and Unions oppose it. Wonder why?
Government has made numerious attempts since the early 70s to kill employer sponsored benefits and specifically self-funding. he market always finds a way to fight back when given the chance. The hot thing in employer benefits now is self-funding under a high deductible. The government made it impraticle to purchase the 15K in stop loss so they are buying 2K-5K deductibles from fully insured carriers and taking the risk below that. This cuts premium 25-50%. If you don't like carrier profits then you need to be supporting self-funding not the politicans that created the mess.
Posted by: Nate O | Nov 9, 2007 2:14:43 PM
This Time article by Ramesh Ponnuru is terrifically misleading.
Who could have foreseen that any screed by Ramesh Ponnuru was not only misleading, but "terrifically" so?
I just don't know if he's got a great idea to rename the Republican agenda to change health care "Death Reform 2008".
Posted by: El Cid | Nov 9, 2007 2:19:14 PM
Ezra what about the 10,000s of employers that are self-funded, they are in fact the insurance company. So you want them to now be premium collectors from terminated employees?
I have thought this through for the last 15 years, on the intricate detail of actually doing it with COBRA. Which is basicially what you propose, COBRA with no time limit. Now please allow me to rain on your utopian idea with reality of what happens;
1. I thought we where trying to reduce cost, where you use to collect money from 1 employer covering 1000 workers you want to collect potentially from each individual? It is very time consuming to process payments at the individual level. When we administer premium for a group we charge about $1 per employee per month(PEPM) to collect and distribute. When we have to bill individuals it's about $8 PEPM. Postage paper, NSFs, it's just not pretty.
2. Paying on time, everyone wants their medical bills paid. When you have a contract with an employer if they incur claims then don't pay the premium you have someone to sue. What do you do with the individual that gets their Rx filled then doesn't pay premium for the month? Are you going to wait till they pay before you pay their claims? Yes you don't get burned on the premium but then your status calls from providers skyrocket.
3. Sick people with claims greater then the cost of premium will elect this and continue. Those that are healthy with few claims will not. This is called adverse selection and makes insurance unaffordable.
4. Like COBRA the government will mandate you mail everyone a letter notifying them of this right annually and when they term. Even though only 2% will do it we can't let them be responsible to sign up themselves. The cost to "administer" the program would be huge.
No it doesn't sound very complicated till you actually sit down and try to do it. What's frustrating is the reality is never considered. Hey wouldn't it be great if people could pay the cost themselves and continue their insurance from their employer. Yes it does, I'll admit that, but it's not great when the cost to comply with it makes insurance unaffordable.
Posted by: Nate O | Nov 9, 2007 2:28:08 PM
Wasn't Ramesh Ponnuru destroyed in an interview by Stephen Colbert? It was obvious just from that little thing that he's a dishonest hack. I'm horrified he's writing anything for Time.
Posted by: hbot3000 | Nov 9, 2007 2:56:56 PM
Wasn't Ramesh Ponnuru destroyed in an interview by Stephen Colbert? It was obvious just from that little thing that he's a dishonest hack. I'm horrified he's writing anything for Time.
Posted by: hbot3000 | Nov 9, 2007 2:57:29 PM
McCain's plan might do that, but when I called the campaign for confirmation, they never called me back, so I'm going with "no."
Ezra,
Kudos to your for calling, I wasn't sure if you would. McCain himself did clarify this one or two weeks ago, after noting some confusion whether he was supporting the end of employer deduction. He did say "no."
Posted by: wisewon | Nov 9, 2007 3:05:06 PM
I don't think it's fair to attack someone else's ideas and offer none of your own to be analyzed so;
1. Require everyone be covered by a catastrophic policy 5-10K it kicks in. This can be employer provided, Union, self-bought, government program, or association. If you lose eligibility you can continue this portion for 18 months at which time you would move to a government pool, if unable to qualify for another pool. This protects employers from carrying sick ex employees for ever but allows for some continuity.
2. COBRA, Women’s health, and other mandates must be given to covered members when they sign up. After that it is their responsibility to remember. If a couple gets divorced it’s their obligation to complete the forms required.
3. Federal government nationalizes EDI. WebMD and others charge too much and it is national interest to assume it from them. Every Provider has a national provider ID that they are identified by. All Payors also have a national ID. Providers send all bills through the federal EDI system, think Banking ACH system, who then forward to the correct payor. Allows for capturing macro data for public health reasons. Payors send Payment to providers through same system.
4. Eliminate PPOs and pricing. Can’t charge one person more then another. Doctors are free to charge what ever they want and payors are free to reimburse what ever they want. Back to the old RVRBA and UCR which worked very well. Reduce the number of CPT codes to a useable number. Providers must publish what they charge for anyone to look up, Payors must publish what they pay for members to look at.
5. If employers, Unions or others what to offer coverage below the insurance policy they can, or offer an HRA or HSA which would be preferred. Making contributions to an HSA although not an employers first choice would hopefully prevail over the HRA which is more advantageous to the employer/union.
6. Under no circumstance would the Feds allow any market to be served by less then 4-5 re-insurers, those assuming the risk over 5-10K. Those pools have the option of ceding off risk to larger pools if they choose. i.e. large employers that purchase $100,000 stop-loss because of their size.
That’s a rough outline, each item would have more detailed issues to address, i.e. data mining for provider fraud, coordination of worker comp claims and non WC claims.
Shoot away!
Posted by: Nate O | Nov 9, 2007 3:25:32 PM
Ramesh Ponnuru is the furthest thing from a hack. Granted, it was stupid of him to let his book be published under that title, and he was foolish to think anyone would read it and discover (as those who did read it did discover) that--lo and behold--the referent of the title was not the Democratic Party. But why should Democrats be expected to read when they can just cry "Hack!" "He insulted us!" "Wingnut namecaller!"
If you read his contributions over on the corner, they are almost always remarkably measured and careful, not partaking of the usual hysteria that marks a lot of blogging.
He is far less partisan in his commentary than Ezra (whom I also respect, but who sets out to move a partisan agenda more than Ponnuru, as far as I can tell).
It is an endless crusade to get people in this country to (a) read what they intend to criticize, and (b) criticize with argument rather than namecalling.
I shall stop typing now and be prepared to be subjected to the usual arguments such as "why are you here, troll" or "if you saw Colbert you'd know what a putz Ponnuru is" and other such gems of dialectic.
Posted by: Bill | Nov 9, 2007 3:39:55 PM
I think the problem with Ponnuru's article is his usual one - hirs thinking is a bit slapdash and his writing doesn't connect dots like his head does (I've always had a similar problem. You have to reexamine almost everything to see that you explain enough). What I think he means - and I think it's probably true - is that Republican proposals that reduce or do away with the employer tax benefit on health insurance will drive employers out of the market, taking what is now a trickle of companies exiting insurance and making it a flood. That, in turn, will make the individual market more robust, the theory goes and lower individual rates. What seems more likely is that everyone would be screwed - employers would be under no pressure to offer insurance,healthy (and younger) individuals would opt to not take coverage, and insurers would dominate the individual market even more than they do now. Which is why I think both people happen to be right - Ezra's right to say that Republcans aren't directly proposing to eliminate the mandate; but if, as Ramesh suggests, that's the effect it will have anyway, then the proposals are - and I tend to think this too - pretty radical. And I think there's a difference between making the arguments against the Republican proposals and merely giving some blanket dismissal of "they're not serious, therefore we don't have to take them seriously." What's been proposed by Republicans is, I think, serious mischief. And it needs to be taken that way.
Beyond that discussion, I think Nate has some very good points. If we're not going to do away with the employer mandate - as the main Democratic proposals don't - than portability and transference become big issues. In the long run, we probably do need to end the employer mandate, though; and how to do that seems key. And the way not do it is the way the GOP is trying, which does an end run around actually telling people that they would probably lose their insurance, and just letting them find out - ooops, employers are leaving the market in droves! - down the road.
Posted by: weboy | Nov 9, 2007 3:45:20 PM
it is non efficient for insurance to pay them
I think you're forgetting the role insurance companies can play in negotiating low rates for their members to avail themselves of preventative care or other "known" charges.
Posted by: Tyro | Nov 9, 2007 4:15:48 PM
Ezra sez: (one of the positives of employer-based health insurance) is that you don't become a bad deal the second you get sick.
That isn't exactly or nearly the case. Ever hear of the "Medical Information Bureau" (or the MIB Group, Inc.)? See here, and here. ANY insurance claim from MIB's membership of over 700 insurance companies may be (not, will) be submitted to MIB). Recently MIB has agreed with the FTC to allow consumers to check their medical records just like they can check their credit reports.
The connection to the employer insurance issue is direct, but subtle. The employee THINKS that employer health insurance claims are private to the insurer and employer. They are not.
So, since portability between employers is not guaranteed by the existing system, the new employer can check the MIB database (via their insurer) before hiring you. If you have a history of expensive claims, you can be rejected by the employer without ever knowing the reason for rejection. It is legal to discriminate in hiring for medical/psychiatric reasons unless you are legally considered to be 'disabled'.
Have you checked you MIB online record, for free, lately? What kind of errors might there be in that record - like errors in your credit history?
Cherry picking is the by-word of health insurers and employers who want to control health insurance costs. You might not be the cherry that they want if you have an unfavorable MIB medical record. This is especially true for any employer-paid psychiatric/psychological counseling or treatment you have received.
Without 100% guaranteed portability between employer health plans, we will never achieve universal health insurance. This is a big downside to employer based health care for many people - it is not just your employer that can study your health records, but prospective employers as well. Neither has a moral reason for seeing this information.
Posted by: JimPortlandOR | Nov 9, 2007 6:12:31 PM
Good job pushing back against the "Republicans want to radically alter the healthcare system" meme. Wouldn't want that getting out there where it could do some damage.
Posted by: Sam L. | Nov 9, 2007 6:18:05 PM
We paid COBRA for our son for two years and I have two observations:
1. It is not cheap. Perhaps it is fair, because people who opt to pay for COBRA are a voluntary group. But it gives a big incentive to get insurance from a new employer eventually.
2. What is the administrative problem? If you do not pay in time, there goes your insurance, so the trouble is for the insured person only. Second, handling of the claims is exactly same as for the employees, at least the employer is at liberty to keep it that way.
3. Insurance market for individual insurance is not transparent, with brokers and comparative websites as you have for ordinary insurance (well, a bit of it) or mortgage loans. I could not find a price for an alternative to COBRA. And I have no idea how the price is computed.
4. See here a nice description of efficiencies inherent in a universal compulsory system.
5. Jokes aside, people are really not all that fond of competition, contrary to GOP dogma. Yes, when you buy a widget or a home or a movie, you want to have a choice. With K-12 schools, vouchers are surprisingly unpopular. "Privatization" of Social Security was a political disaster. The idea of depriving people of the currently best way of getting health coverage is politically insane.
I remember what happened when HMOs were the new philosophical stone of health coverage, health insurance costs stopped growing for a year or two and howling outraged was spreading through all states of the Union. Service denial! They are killing me! HMOs were tamed, service improved, growth of cost returned to normal, except that traditional coverage became astronominally expensive. Which has ridiculous consequences if your company sends you for, say. 6 months to some place, why your medical plan is bound to ground like some mediaeval peasants. Or you can pay extra 1k per months so, what the heck, I can fly 1st class if need arises.
Of course, at this point, 1st class and last minute reservations may have ridiculpus costs too, but well, there is life, there is risk.
Posted by: piotr | Nov 9, 2007 6:30:04 PM
JimPortlandOR - Employers can not check the MIB database before hiring someone. HIPAA and FCRA strictly forbid such activity. Further 15 million people who applied for individual life or health policies have MIB files. No one else even has a file. It is not legal to discriminate read the following;
The Americans with Disabilities Act allows a potential employer to inquire only about your ability to perform specific job functions. (42 USC §12101)
Further;
The FCRA also requires your specific permission for the release of medical records.
Where do you people get these crazy ideas from?
Posted by: Nate O | Nov 9, 2007 9:55:12 PM
"Where do you people get these crazy ideas from?"
From Google, I guess:
http://www.abika.com/Reports/MedicalRecordsSearch.htm
Where do you get your diehard optimism from, Nate? And your belief in the inherent benefit of unregulated capitalism? Sounds a bit crazy to me, too.
:P
Posted by: Gray | Nov 10, 2007 3:57:13 AM
I wouldn't call it optimism, picking the least bad of two terrible choices is hardly optimism. Under a capitalist system I alwasy have the choice of telling them to go F themselves and not give them my money if the product sucks that bad. When it's the government and taxes no matter how terrible the product your paying for it. Capitilist healthcare is slightly less terrible and expensive then government healthcare.
Must be crazy conservative logic but if given a choice between two bad systems one which I can withdraw from and the other I am forced to pay for no matter how poor it gets I like the one I can pull out of.
Posted by: NateO | Nov 10, 2007 3:38:40 PM
I'm self-employed. As a start, I'd like to be able to subtract my cost for buying health insurance as a business expense from my gross earnings, the way corporations do, as opposed to the current tax credit. I'd save a couple of thousand on taxes.
Posted by: Joyful Alternative | Nov 11, 2007 1:41:41 AM
I haven't been able to decide if it is better to level tax inequalities, like Joyful Alternative raises, or reduce the taxes overall? Would we be better off with more deductions or scrap the deducitons and just have a simple true rate that every business pays? In NV the companies that contribute the most get taxed the least, but does what they save in taxes cover the lobbying cost? The politicans love the present system but I think they are the only ones to benefit. We average 1-2 commissioners going o jail per year, by the way.
Posted by: Nate O | Nov 11, 2007 3:52:41 AM
Ah, but what I want is single-payer universal health insurance, for which I'm willing to pay at least as much as I pay in premiums now. I realize that the best- intentioned Democratic president will need a little time to get it in place, however.
I'd like that tax inequality fixed immediately. That won't happen, because I don't have a lobbyist.
Posted by: Joyful Alternative | Nov 11, 2007 7:31:58 AM
Joyful Alternatives would you pay 125% of what you pay now for an HMO that rationed care? What about 10 years from now, remember Medicare Just started offering Prescription coverage in 2006. That's a good 20 years after the evil corportions covered prescriptions. What future treatment will not be covered by the Federal UHC plan you desire?
We know your premiums will sky rockets because you and I who pay for our insurance will now also have to purchase the insurance of the 47 million uninsured. The cost is likely to be far greater then 25% becuase history has shown people love free insurance and will use it to death, or till taken away.
Posted by: Nate O | Nov 11, 2007 11:28:43 AM
After reading Ponnuru's TIME piece, it seemed to me that what he sketched couldn't possibly work without two things: a mandate to insurers to offer the inexpensive catastrophic-care policies it would rely on (as he described it), and a mandate to individuals to buy such policies.
Now, these are ideas I find quite reasonable, because they recreate risk-pooling on a more rational basis than what company people happen to work for. But then, a program with mandatory purchase and mandatory offerings is not a "free market" plan, it's state-regulated universal coverage. All that distinguishes such a plan (if that's what Ponnuru was suggesting, but I don't think he was) is that it has a much higher deductible than most Democratic proposals.
I think that Ponnuru does want the Republic party to be radical, and does want a "market-based" system with individual responsibility for routine care, and high-deductible voluntary insurance for expenses, offered by lightly regulated insurance companies. Alas, such a policy, while truly radical and truly getting rid of the known problems of employer-based pooling, couldn't possibly work. Small detail -- but my hunch is that is why Ponnuru did not go into the supply details, choosing instead to damn employer-based insurance and praise Republic party 'radicalism'.
That's also why I think his TIME editorial's impact will be in the lead-balloon category, too. It's too transparent for anyone who (a) has tried to buy individual insurance, or (b) has negligible disposable income already.
Posted by: PQuincy | Nov 11, 2007 6:19:14 PM
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