Friday, December 29, 2017

Making new state payroll taxes better with health insurance

Several progressive economists and thinkers are promoting the idea of a new state payroll tax to get around the fact that the Republican tax plan has limited the deduction on state and local income taxes. I think this is a good idea, but if we are changing blue states' tax structures we can also improve health insurance coverage at the same time. 

The Republican tax also repealed the individual mandate. While there is a serious debate about how much impact the loss of the mandate will have on enrollment and premiums, it is likely it will reduce the number of people with health insurance. This has given Democrats an opportunity to come up with a new, better, and more popular way of expanding coverage. 

My suggestion is to make the new state payroll tax roughly $2 per hour more than what is needed to replace the state income tax but to give employers a $2 per hour deduction for providing health insurance. For the vast majority of employers/employees who already have coverage via work, this would have zero impact, but it would work as a soft employer mandate for companies that don’t offer coverage. This is similar to the Healthy San Francisco program adopted in 2007, which successfully expanding coverage/access in the city.

This employer mandate would directly increase the number of people with health insurance since some companies would likely offer coverage as a result. It would also provide a pool of money to improve affordability and/or access. It could be used to do a reinsurance program, provide coverage for immigrants not eligible for Medicaid, provide wrap around tax credits on the state exchanges, or provide funding for public health insurance efforts.

My preferred policy would be for states to also create a public option/Medicaid buy in and use the money from the employer mandate to provide subsidies to make it affordable for everyone. Between the cost savings from the public plan being able to negotiate lower prices and the extra money from the employer mandate, the state should be able to actually make coverage truly affordable for everyone.

Monday, November 27, 2017

Los Angeles’ marijuana plan: the illusion of social equity

Los Angeles is deciding to focus on racial equity in their recreational marijuana licensing system, but I think the way they are going about it suffers from a serious problem in framing. Their concept of equity relies too heavily ensuring that the small number of people who get marijuana licenses includes some local low-income minorities. Instead of making sure a few minorities are among the small number getting rich off of the recreational marijuana business, true equity would be the not letting any individuals get rich off of it. All the potential profits should go to help people across the city.

Portland, Oregon has 155 recreational marijuana stores and a population of 639,863. Assuming Los Angeles ends up with a similar ratio of stores to people, that would be 963 marijuana stores. This estimate is close to projections of the number of medical marijuana dispensaries operating legally or illegally in LA: 1500.

Let's assume LA actually manages to create a system that is even capable of giving out licenses in a way that corrects for the city's history of racist arrests, so the vast majority go to low-income minorities. Let’s also assume everyone who gets a license is capable of running a successful small business -- something that is also not guaranteed given high failure rate for small businesses -- and manages to create a business worth a million dollars.
  • The best possible scenario is that these efforts effectively serve as a lottery with just a few hundred winners in a city of 4 million people. Big rewards delivered to a tiny group is a strange way to correct for broad social discrimination.
  • The worst case scenario is the city spends a significant amount of money and effort helping a few low-income individuals trying to start marijuana businesses, but due to a federal crackdown or normal business problems, many end up worse off.

If Los Angeles wants to focus on true social equity, the better strategy would be not to worry who gets the licenses but who gets all the profits. The profits should go to the public, not to individuals or companies. The Los Angeles government could directly run all the marijuana stores, like North Bonneville, Washington has. Or the city could give licenses only to existing community non-profits with a proven track record and an explicit commitment to use all proceeds for certain activities like free health clinics. Or the city could focus on maximizing taxes and licensing fees to allow the city to extract almost all the value.

The recommended approach of giving special loans or waiving licensing fees for a few ‘deserving’ individuals is not how to create true equity. That is the illusion of equity. The fact that the Los Angeles Cannabis Task Force: Social Equity Committee was made up of “ both inside and outside the cannabis industry in Los Angeles” including “existing business owners, entrepreneurs, [and] investors” is likely why it used this limited problematic framing. Their idea that give the licensing system the veneer of social justice and equity, but still assure a few well placed people will make the profits.

Currently, LA is planning to set aside some of its marijuana tax revenue to help communities hurt by the drug war. The city could amplify this plan to make sure all of the profits from the marijuana industry go towards programs like free pre-k for all low-income residents.

Finding ways to make sure almost every dollar of profit goes to the city government would do way more to help communities hurt by the drug war than effectively handing out a handful of lottery tickets.

Monday, October 30, 2017

Trump's accidental health care experiment

The Trump administration's ham-fisted attempts to sabotage Obamacare are going to make this open enrollment one of the biggest natural experiments in health care, and we should learn from it.

Trump has done two big things to try to hamstring the Affordable Care Act exchanges.
  • One was to dramatically cut funding for outreach ads and navigators to help people select insurance plans, but many blue states that run their own exchanges will continue to spend as much on outreach as they did in the past.
  • The other was to end cost sharing reduction payments to insurers, which is having a very weird impact. In some states it has resulted in big increases of affordable tax credits, making insurance much more affordable for those making between 200-400% FPL. How big the impact is varies significantly across states.
What this has created is a massive natural experiment on two metrics. Some states will see a large increase in premium tax credits for this group but very little outreach spending. Some will see large increases in premium tax credits and strong outreach spending. Some will see only small increases tax credits and little outreach spending, and others will see small tax credit increases and strong outreach spending.

It will be a real chance to see what impact the tax credit level and outreach spending have on enrollment, as well as to test just how rational individuals are when it comes to buying health insurance. We will get to see how much impact outreach efforts really have and how big a difference more subsidies make.

Trump has created needless chaos, but it would be stupid not to learn from it. I would hope experts in health care would make predictions now that can compared against the real world data.

 (I personally think the impact of outreach spending is being overstated and the impact of providing more tax credits will be far more significant. The CBO predicted the short term impact of ending the cost sharing reduction payments would be a modest drop in the number of insured, but I suspect the number could easily increase.)

Friday, October 13, 2017

Democrats should only accept permanent cost sharing reduction payment

Now that President Trump has stopped payments for the cost sharing reduction for low income individuals on the Affordable Care Act exchanges, he is talking about using this as leverage for negotiations with Democrats. Democrats should make it clear they will vote for nothing short of a full and permanent appropriation of the cost sharing reduction. They should reject any short term, one-year or two-year appropriation or any attempt by Trump to trade it for something he wants.

This move by Trump was a spiteful act of policy nihilism. It is going to cause real chaos for insurers and individuals. Some people will be financially hurt, but the damage is fairly manageable. Thanks to the design of the ACA, not paying the cost sharing reduction just causes the premium tax credit to go up even more, making insurance cheaper for some people. Ironically, this move might even have, on net, a positive impact on the number of people who can afford care. Even if it doesn’t, Trump will very likely lose the coming lawsuits about it anyway.

So while this is a vengeful and dramatic act of sabotage, Democrats should make it clear it is one they are willing to live with.

Trump has proven himself to be a bully, which is why it is critical Democrats stand up and say they will not be bullied. Make it clear they will not negotiate to undo Trump's inflicted chaos.

This is a great issue for Democrats to take a stand on and not give an inch for because even if they lose, the policy fallout is manageable. But if Democrats reward Trump's bullying tactics by voting for anything short of permanent appropriation with no strings attached, it will only encourage him to do it again and again.

This fight is already bad enough, but I shudder think about how, if successful, Trump might use this tactic when the stakes are much higher, like over the debt ceiling or starting another war.

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.