Tuesday, September 5, 2017

Private insurance is about making things die

Many people don't realize one of the main social benefits of any private insurance system is to let things die. Insurance is often viewed as primarily about spreading risk, and that is part of it, but pricing risk is often an arguably more important function of insurers.

This is often a good thing. You want an insurance system that effectively kills a project to build houses on a dangerous slope prone to mudslides by refusing to offer insurance or setting premiums way too high. It is good when a company with unsafe equipment/practices is shut down because they can no longer afford liability insurance.

A system that effectively kills dangerous real estate developments or businesses due to pre-existing conditions is good because people can live or work elsewhere. A system that effectively kills people by pricing them out of care because they were born with a genetic disorder is profoundly immoral. People can't choose another body.

Pre-ACA, the health insurance system didn't do a bad job; private health insurance did a very good job at something most people think is deeply unfair.

Once you remove what is normally the main social benefit of private insurance --pricing risk to make things die-- you are left with health insurance companies with only three other functions: spreading risk, negotiating with providers, and customer service. The problem is, the industry is terrible at two of these.

Private health insurance companies openly admit they can't effectively spread risk on their own since some individuals have very high cost health care problems, and these individuals can no longer be priced out. The private health insurance lobby (AHIP) has actively been calling for the government to recreate a government reinsurance program -- government insurance for the insurers that spreads the risk for them.

The private health insurance lobby also admits they are terrible at negotiating with hospital and drug makers. For most procedures, they have negotiated rates much higher than what the government did for Medicare.

We now have a weird health insurance system where the private insurance companies can't do their main job because we consider it immoral, they are asking the government to step in to perform their second most important function for them, and they admit they are really bad at their third most important job.

Sunday, September 3, 2017

Let's stop using accounting gimmicks - Obamacare Ad edition

The decision by the Trump administration to slash the Affordable Care Act exchange advertising from $100 million to just $10 million is bad policy. There are many legitimate reasons why it is bad policy, so I implore people on the left to stick to these real arguments instead of using arguments based on accounting gimmicks.

Many people have pointed out that cutting this government ad spending produces “no direct taxpayer savings,” since the money comes from a 3 percent fee added to all insurers' premiums on the exchange to cover the cost of operating the exchanges and running government outreach. The idea taxpayers aren’t paying for these ads is *technically* correct, only if we take the most extremely narrow view of government spending.

The fact is the vast majority of people who buy insurance on the exchanges qualify for affordablity tax credits. Due to the way the tax credits are designed, anything that increases average insurance premiums on the exchange causes a near identical increase in the amount the government spends on tax credits for each low income individual.

What this means is that when the HHS imposes a “user fee” on insurers using the exchange, the insurers end up just increasing premiums for people by the exact cost of the user fee. This forces the Treasury to increase spending on tax credits by basically that same amount. The design means the Treasury is effectively paying for almost all of the user fees that have been funding these outreach ads -- it just does it in a needlessly complicated, indirect, and wasteful way.

It works out that for every extra dollar HHS charges in user fees, it is effectively making Treasury give the HHS roughly 90 cents via higher tax credits.

If you think the government spending significantly less on advertising for the health insurance exchanges is bad policy, just argue that. It is easy to make that policy argument, because it is bad policy. But please stop making stupid accounting gimmick arguments that we're not really talking about taxpayer spending. We have just hidden the spending in a complicated system of fees/subsidies that really just inefficiently moves money from one part of the government to another.

This desire to pretend government spending isn’t really spending or taxes aren't really taxes has been incredibly destructive to our government and terrible for long term progressive politics. It is why we end up trying to make so much policy via inefficient tax deductions to hide the true cost, or with public/private partnerships that let us pretend mandated fees imposed on government-selected private monopolies are technically not “taxes.”

If you think the government should spend money on something, please just argue why.

Friday, August 25, 2017

Democrats still aren't treating health care as a right

Republican efforts to undermine, alter and/or repeal the Affordable Care Act expose one of the greatest logical failings of the law. Despite what supporters of the ACA claim, Obamacare did not make health insurance universal or treat health care as a right. The ACA still treats health care insurance as a welfare program that people either “deserve” or don't.

Forget what proponents of the ACA claim, the only thing that matters is the actual law -- and in cold legislative terms, the ACA makes it clear health insurance is simply not a right for Americans.

The ACA’s provisions clear define certain people unworthy of health insurance because of the choices they make. It allows companies to charge people who use tobacco 50 percent more than non-tobacco users. This surcharge could increase the cost of premiums by thousands of dollars making health insurance unaffordable. That is the point, to force people to choice between insurance or smoking. Not an easy choice given that tobacco is highly addictive.

Democrats left the door open, and now Republicans are driving a truck right through it. According to the Washington Examiner, Mick Mulvaney, Trump’s budget chief, believes that a “person who sits at home, eats poorly and gets diabetes” isn't worthy of receiving health care assistance. Similarly, Republican governors around the country are trying to add work requirements to Medicaid to deny poor people deemed unworthy of receiving this welfare.

Democrats claim to be outraged by these moves, but sadly the difference between Democrats and Republicans on this is only a matter of degrees, not principle. Republicans declaring people unworthy of affording health insurance because they drank too much soda or don't have a job is, in principle, no different than Democrats declaring that someone is unworthy of health insurance because they smoke.

Either affordable health care is a right that everyone should have access to with no exceptions, or it is a welfare program that the government can decide who is or is not deserving of. You don't lose your right to free speech or your right to freedom of religion, because you use tobacco or make other legal bad choices. That is the point of a right, it is meant to apply to everyone.  

If Democrats believe health care is a right, then they need to treat it. Obamacare didn't and it is time for Democrats to admit that and promise to change.

Wednesday, August 23, 2017

Democrats, please stop offering bad public option plans

Since the failure of the Republicans' efforts to repeal the Affordable Care Act, Democrats have started new pushes for letting people buy public insurance. While I'm glad to see movement in this direction, the three most prominent plans offered so far are just worse, limited versions of a public option. There appears to be no obvious political or policy reason for offering a worse version.
Depending on the details, I think all of these proposals would make our system marginally better, but I fail to see the political or messaging logic behind any of them compared to pushing for a universal public option/Medicare buy-in.

Politically, the health care industry is likely to fight each of these proposals as strongly as they would a universal public option. First, all of these plans would cut the industry's profits by billions, so it's a given they will oppose any of them. Second, the industry isn't stupid. They would see any of the plans as a path toward a universal public option so they would fight it with as much force as they would a fully universal proposal.

While limiting public insurance proposals will likely do nothing to reduce industry opposition, it does reduce popular support. All of these plans would potentially benefit fewer people than a universal public insurance plan, which means fewer regular people will have a reason to fight hard for them.

In addition, the message for a public option/universal Medicare buy-in is simple: private insurers suck, so we will let you buy public insurance instead. The messaging and logic behind these plans make little sense.

If private insurance doesn't work well for people at age 55, why isn't it a problem at age 54 or 53? Why shouldn't everyone else get also get to buy into Medicare?

Similarly, if we think people would benefit from a "Medicaid buy-in," why are we leaving it up to the states? This is an especially important question after we saw so many red states reject the Medicaid expansion.

Limiting the proposals isn't going to generate Republican approval either. As we just saw with Obamacare, Republicans will attack any proposal as a "big government takeover" regardless of what it does.

I understand making tough compromises to achieve goals and broaden the coalition, but there seems to be zero logic behind these compromise proposals. These plans are needlessly limited but gain nothing.

These limits won't fool the industry. They won't fool Republicans. They will only excite less of the base. And they will make it harder to sell, since the plans now lack simple, cohesive logic.

Can someone point to one reason why any of these plans would be politically easier? Can someone name one powerful industry lobbying group or bloc of voters that you gain by imposing needless limits on a Medicare buy-in? An universal Medicare buy-in already has overwhelming support.

Wednesday, August 16, 2017

Where is the Progressive push for an ERISA Waiver?

Progressives in Congress seem to have dropped the ball on what could be one of the most important health care deals of the year. The best hope for future progressive state health care reform might slip away without anyone on the left even noticing.

Currently, there is talk around a small bipartisan health care reform package. The potential proposal mainly contains Republican promises to actually continue to implement the ACA’s cost sharing reductions in exchange for a modification of the law’s Section 1332 State Innovation Waivers. That would let red states relax some of the law’s regulations. Overall, this is a terrible deal for progressives, but there is a chance to make it fair.

If progressive Democrats insisted any deal that changes ACA state innovation waivers also include the ability to waive parts of the Employee Retirement Income Security Act of 1974 (ERISA), it would be a true ideological compromise and one that could be deeply important long-term. It would achieve the conservative goal of returning more power to the states and make progressive state reform possible.

ERISA effectively prevents states from doing anything to regulate large employer health insurance. It has been a major hindrance to state health care reform efforts large and small over the decades.

For example, back in 2007 a Maryland law to make large box stores provide health insurance was overturned because it violated ERISA. Similarly, last year the Supreme Court threw out a Vermont law that would create an all-payer claims database. Without states even being able to gather basic data, it is almost impossible for states to seriously consider any reforms based on liberal or conservative principles.

ERISA would likely be a massive legal and financial hindrance to any state single payer effort, but it also prevents more modest reforms that move in that direction.

For example, Hawaii’s employer mandate is the only state law exempt from ERISA because it was approved before the federal law. The Hawaii law is highly effective, keeps costs low, and it is popular; but for four decades no other state has been allowed to copy it. Similarly, states’ attempts to make American health care more like the Swiss health care system with its all-payer system would likely face ERISA issues.

If any group or politician claims to really want state single payer but isn’t actively fighting to get an ERISA waiver included in any deal, they are simply not serious about the politics or the policy.

Achieving state single payer would be a major undertaking that will require winning numerous fights, but this is one of the most important and easiest. If the progressive grassroots isn’t even trying to fight for it right now, they might as well just give up entirely.

Monday, August 14, 2017

Three charts show why we can't move on from health care

Now that the Republicans' repeal and replace efforts have failed, you are seeing some on the left suggest that progressives move on from health care. The general idea is that the ACA is good enough, health care is hard, and Democrats should focus on other progressive policies like universal pre-K or paid parental leave.

The most prominent example of this thinking comes from Paul Krugman, who calls for Democrats making only small tweaks to the ACA:

Meanwhile, progressives should move beyond health care and focus on other holes in the U.S. safety net.

When you compare the U.S. social welfare system with those of other wealthy countries, what really stands out now is our neglect of children. Other countries provide new parents with extensive paid leave, provide high-quality, subsidized day care for children with working parents and make pre-K available to everyone or almost everyone; we do none of these things. Our spending on families is a third of the advanced-country average, putting us down there with Mexico and Turkey.

The reason progressives can’t move on from health care, even if they wanted to, is that our out of control health care industry will eventually eat everything.

The money that should be going to social programs for education, transportation, and children is effectively being stolen by the health care industry.

We could have Norway-level social programs without new taxes if we had Norwegian health care.

This is a problem which is only getting worse, not better. Large employers say insurance costs will grow by 5 percent next year, faster than the rest of the economy. The cost curve is unbent.

Even if we did create social programs like universal pre-K or paid parental leave, it is likely the ever-growing cost of health care would eventually force them to face cuts.

No social service is safe as long as health care demands a larger and larger share of the budget. Democrats current rally around free college, but that is something we effectively already had in places like California a few decades ago with the University of California system. The problem is health care kept starving the public system of money. Bring down health care costs, and California could reverse this trend. The Government Accountability Office makes this problem clear trend.

Contrary to what Krugman says, we need more than “incremental improvements in the A.C.A.” His comparison of Obamacare to the Netherlands is deeply misguided. While the ACA superficially resembles the Dutch system, it lacks the significant government cost control measures on providers and drug makers that the Dutch use to keep their spending only barely in line.

These are policies doctors, hospitals, and drug makers in America would heavily oppose. Pushing America towards Dutch-style health care would be a monumental reform effort that would face the same opposition from the health care industry that single payer would.

At some point progressives are going to need to make the health care industry stop ripping off the American people. If we don’t, all other social programs that cost money will be swallowed by this ever-growing blob. Every progressive social program is in danger until we really deal with health care.

Saturday, July 29, 2017

Why Trump’s Threat to Congress is so Bonkers

Saturday on Twitter President Trump seemed to threaten to take away Congress’s health care benefits. Let me explain why this would create one of the most amazing and bizarre acts of political irony in American politics. It would expose a dozen layers of hypocrisy, possibly end up as one of Trump’s most popular acts, and it could ultimately be what takes him down.

The hypocritical history

You may wonder why Trump has the power to mess with congressmen’s and their staff’s health care benefits. It all goes back to 2010 when Democrats were writing the Affordable Care Act. In an attempt to make Democrats look like hypocrites, Republicans offered an amendment which would force Congress to get health insurance via the new ACA exchanges. This move backfired once the Democrats decided to vote for it and even used it as a selling point for their law.

The problem is the amendment, like basically everything the GOP did during the debate over the ACA, was designed only as political theater with no concern for policy. As a result, if you actually implemented the amendment as written, it would force Congress to buy insurance on the DC exchange at full price, just as millions of Americans who make over $50,000 a year but don’t have employer coverage are doing right now.

The possibility of actually having to pay the full out of pocket cost for expensive premiums, like millions of Americans currently do, caused a bipartisan freakout. Passing a special bill to fix it, though, would open any member up to attack ads, so instead Republicans and Democrats begged the Obama administration to bend regulation in a legally questionable way to fix it. Note that hypocritical Republicans endlessly attacked Obama when he used similarly legally questionable regulatory fixes to help other groups.

The solution was to stretch the interpretation of the law to effectively treat every congressional office as its own small business. That allowed the offices to use the money that previously went to their former federal employee insurance as a special subsidy to buy insurance on the exchange. One can argue this is fair, but it is not really what a technical reading of the law says, and Congress could easily change it anytime.

More importantly, not only was this hypocritical on a process level for the GOP, but also on a policy level for both parties. After all, most Republicans just voted to repeal the employer mandate, yet they freaked out at the idea of not having their own employer provide insurance . 

Similarly, Democrats promised that even the unsubsidized insurance on the Affordable Care Act exchanges would be affordable for the middle class, but they balked at actually having to pay anywhere near that much for insurance.

In addition, members of Congress from both sides have advocated for moving away from employer-provided insurance and toward people buying their own coverage. It was John McCain’s plan in 2008 and the core of the bipartisan Wyden-Bennett plan. Yet when they were almost forced to become the test bed for this move away from employers paying for insurance, they did everything to avoid the fate they wanted for everyone else.

There is no way this works

The most bonkers part is Trump is threatening to do this to get Senate Republicans to agree on an Obamacare repeal, and there is no way that would work. The GOP just proved they can’t agree to even a skinny bill. Also, given what everyone knows about John McCain, Susan Collins, and Lisa Murkowski, there is no way they would become more willing to compromise after being publicly threatened and extorted.

The insanity of what is happening next

If Trump actually follows through on this threat, it could be very popular and one executive action he takes that is well within his legal purview. He could probably even spin it as one of his only “drain the swamp” moves. 

After all, people don’t like it when Congress gets treated differently. They also dislike political stunts. The fact that Congress never fixed the problem via legislation shows they know it is a political loser.
Ironically, though, Trump’s most popular executive action could also be what brings him down. Congressional Republicans have been putting up with a lot of questionable behavior from Trump, but if he literally takes money out of their pockets, that could change. If Congressional Republicans stop defending him, the investigation flood gates would open. 

The irony of the long term impact

The final ironic twist is if Trump actually does it, the long term effect might be to make American health care more progressive, not less. Paying full price health insurance in the United States is crazy expensive -- way more expensive than it is in any other industrialized country. Maybe if everyone in Congress is forced to feel just how out of control American health insurance premiums are for a few years, they might take serious the idea of cost control.