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.

Tuesday, July 18, 2017

Private health insurers admit they will always behave terribly

The group America’s Health Insurance Plans came out strongly against against the Cruz amendment in the Senate Republican health care bill, but the Cruz amendment is terrible only because America’s private health insurers are collectively promising to act terribly every chance they get.

The Cruz amendment would allow insurers to sell policies that don’t cover everything and exclude people who actually need health care. AHIP rightly notes:

As the U.S. Senate considers the Better Care Reconciliation Act, we are writing to urge you to strike the "Consumer Freedom Option" from the bill. It is simply unworkable in any from and would undermine protections for those with pre-existing medical conditions, increase premiums and lead to widespread terminations of coverage for people currently enrolled in the individual market.

What is important to note, however, is that this scenario only happens if the private insurers make it happen. The Cruz amendment merely allows insurers to offer deceiptive or exclusionary non-compliant plans -- the insurers don’t have to.

If the insurers really care about people with pre-existing conditions and a stable market, the insurers could reach a collective agreement that none of them would offers these plans -- problem solved. Just because the Cruz amendment would allow them to behave badly doesn’t mean they have to. The market only destabilizes if private insurers choose to destabilize it in the pursuit of short term profits.

The fact that no one inside or outside the industry thinks such collective action is even in the realm of possibility means that while condemning the Cruz amendment, the private insurers revealed something telling about their true nature.

AHIP is promising that as an industry, insurers will eventually exploit any legal leeway they are provided to make money, even if it costs people their lives. They are promising to do things they publicly admit are morally wrong if the government doesn’t hold them back at every turn.

They are indirectly admitting they can’t stop themselves from hurting people, like a werewolf begging to be chained up in the basement before the full moon. This who is in control of the country's health care.

Yet Democrats are still wondering why an individual mandate forcing people to be customers of an industry which admits they can’t be trusted was deeply unpopular.

Friday, July 7, 2017

An easy way to solve the Medicare For All tax problem

Polling has consistently shown broad public support for Medicare For All, or single payer health care, but every policy position is vulnerable to attacks. The most common attacks used against Medicare For All revolve the around overall cost and the need to raise new taxes. These issues can be a problem, but one that is easy to solve if supporters are willing to be creative.

Traditionally, single payer plans suffer from the issue of "big, scary numbers." Take, for example, the recent bill in California where headlines about it often focused on its overall cost to the government of $400 billion instead of the net change. Much of that $400 billion sticker price simply added up to the state consolidating the billions it spends on several health programs (Medicaid, state employe benefits) into one program.

It is also easy to scare people over the tax increases needed to pay for a pure single payer system, even though it would mean individuals would pay less in taxes for healthcare than they currently pay in premiums.

Supporters of Medicare For All should engage in a multi-faceted educational effort to inform people about the value of these trade-offs, but they should also realize there is an easy way to avoid some of these political problems

First, allow companies and individuals under 65 to buy into Medicare.

Second, require all companies buy their employees Medicare or private coverage at least as good Medicare from insurers that must pay into a risk adjustment program. This is already how Medicare basically works with Medicare Advantage, except companies would be making the choice.

Most of the cost of our healthcare system is already hidden from individuals by the tax-exempt status of employer-provided insurance; so instead of trying to teach everyone about this, just modify it. This plan would hurt companies that don’t already provide coverage but cause significantly less disruption than eliminating employer-provided insurance and replacing it with a new tax.

This plan mostly eliminates the need for very large new taxes or the "big, scary number" problem. Everyone with a job will technically get coverage via their work and those without jobs could mostly be covered by moving around money already spent on Medicaid, ACA, etc…

The strong employer mandate is not a perfect funding source, but it is good enough. In practical terms it would function much like a payroll tax with a ceiling. It is basically how Germany funds its health care system, and it would effectively get us to where the country needs to be.

Wednesday, June 14, 2017

Maybe health care CEOs are just greedy and don't care about people

Almost every segment of the health care industry technically opposes the new Republican health care bill, but overall the industry's opposition has been rather tepid. David Leonhardt at the New York Times offers this explanation:

Why haven’t the big lobbying groups done more? I think there are two main answers. First, in past campaigns, groups were largely defending their own financial interests. People fight hard when their own money is at stake. Today’s opposition is at least as much about principle as profit, and lobbying groups haven’t been willing to go all-out for principle. 

Second, the groups are wary of attacking the Republican Party, given its current power. “We’re living in a world in which it’s just Republican votes,” one lobbyist told me. Speaking loudly against the bill risks alienating powerful politicians — and risks making the health care groups look partisan.

I think there is a much simpler solution. Health care CEOs are just greedy and really don't care about regular people who might need care.

The American Health Care Act would cut government spending on health care by cutting poor people off from insurance. This would marginally cut health care companies' profits, so you would think health care companies would strongly oppose it. But the law would also be a big tax cut for the rich

Leonhardt acknowledges as much in his column: "Virtually every big health care group views the Republican plan as a disaster, one that would harm many Americans largely in the service of cutting taxes for the wealthy."

The simple fact is, lobbying by large health care companies is directed by industry CEOs and other top corporate officers. All of these people will see their taxes cut by the law. Even if the law makes their companies slightly less profitable on net, most will likely be personally better off. The fact that the law would hurt a lot of poor people simply doesn't bother them that much.

There is plenty of evidence to suggest health care industry leaders are willing to put personal and corporate gain above the public good. During the negotiation with President Obama over the Affordable Care Act, the industry's top demand wasn't "make sure everyone has coverage." Instead, PhRMA pressed Obama to oppose drug re-importation and to keep Medicare from negotiating drug prices; this kept drug profits high. Similarly, hospitals wanted the ACA to omit a public option that would reduce their profits. The hospitals made this demand knowing full well that the absence of a public option would increase costs, resulting in the law covering fewer people.

For many rich people, greed is more motivating than principle. In many cases, greed is what drove them to become rich in the first place. Leonhardt writes, "I feel a pang of discomfort every time I describe the radicalism of today’s Republican Party." It can also be uncomfortable to acknowledge that many people are simply greedy.

Friday, June 2, 2017

A party's platform is about succeeding after the election

Since the national Republican and Democratic parties divide themselves along ideological lines, American politics has followed a very predictable pattern. It is defined by a punctuated equilibrium.

One party wins total control of Washington and has a brief moment to make a big impact. Inevitably, the party in power messes up and loses control of Congress. This is followed by a period where little happens until the opposition also wins the White House. The other party now has their tiny moment to make their mark-- until they mess up.

The Republicans didn’t win in 1994 -- the Democrats lost. The same is true for the Democrats' 2006 victory and the GOP's 2010 victory.

Each time, the party in power screwed up badly and could have been beaten by a group of monkeys in clown suits. Bill Clinton's job approval rating was terrible heading into the 1994 election, due to failed health care and energy tax plans. In 2006, George W. Bush owned the failed Iraq war and the aftermath of Hurricane Katrina. By 2010, Barack Obama had failed to respond to the massive housing crisis or go after anyone who caused it. People spend a lot of time studying winners to divine the secret to their success, but often the answer is they were just facing super easy opponents.

This is why an opposition party shouldn’t focus on simply winning again at all costs: that is mostly determined by the party in power stumbling. They should focus on what they want to do once they do win. These brief moments when a party has total control are the rare times anything big happens, but it only happens if the party is united behind a set of ideas.

Taking advantage of these moments of total control is also critical because of one other major characteristic of American politics: we almost never reverse legislation. Once a policy is enacted, it tends to stick. No matter how much the opposition rallies against it and promises to repeal, they almost never do.

Democrats in 2008 rallied against the corrupt Medicare Part D law, the Bush tax cuts, and Guantanamo Bay. Yet after they gained power, Obama pushed to keep the corrupt Medicare Part D deals intact, backed a law to save almost all the Bush tax cuts, and never closed Guantanamo. Similarly, the Republican party ran on the promise to “repeal and replace” Obamacare for years, and now their effort is bogged down in the Senate.

Trump has become the poster child for why a party shouldn't do anything to win, just for the sake of winning. With a lack of cohesion and discipline, the GOP is possibly squandering their moment for the next decade.

Democrats have become very focused on beating Trump, but Trump is going to do most of the work defeating Trump. The real focus should be on what they will do in that moment after.

Monday, May 22, 2017

How I would design a state single payer law

After providing an analysis of all the issues facing the pushing for single payer health care this country, I thought it was important to provide details for how I would personally design a state-based health care effort. Several states are talking about moving towards a single payer system but for any plan to work it needs to deal with the unique legal and financial hurdles a state would face. I don’t feel the need to do this at the federal level, since a federal single payer system would legally be much easier to implement.

My state plan for affordable universal health care is not what I think would be the absolute “best” policy possible, but the best I’ve been able to piece together that would have a reasonable chance of success given the political and legal hurdles. This strategy is based on four criteria that should be used to judge any proposal:

  1. It needs to, on net, make most people better off.
  2. Any step forward should weaken or at least not strengthen those institutions opposed to real reform. This is what I consider to be a major failing of the Affordable Care Act. Forcing people to buy subsidized insurance from poorly regulated private insurance companies only increases their power.
  3. It should still create a clear path for better improvements even if part of it is struck down by the courts or denied by the federal government. You don’t want a plan that would completely fall apart if one federal waiver is denied or if a court ruling goes the wrong way. If there is a single weak point, that is where it will be attacked.
  4. It should keep direct disruption to a minimum. Any real reform is going to need to take on the health care industry, and given the industry’s size there is no way to make this omelette without breaking eggs. That said, there is a big political reason to try to minimize the negative disruption it would cause to regular people.

The plan should be insulated as much as possible from potential political, financial, legal and federal attacks. I think it is important to start with the assumption that any state health care plan for real reform will face a hostile federal government and federal courts. First, history shows it likely will. Second, it is easier to add to a plan that's designed to be built on than it is to take away from a plan where all the pieces were crafted to fit together.

If facing a hostile president and federal courts: A state run public insurer that directly covers many and is open to most everyone

Even if the state can’t get any waiver from federal law or new federal funds, it should be able to build a Medicare-like public insurer, according to a Rand analysis. In addition, the state could automatically sign up most people or give them the option to join this new public insurer.

The state would first set up some type of insurance company. It could be a direct government program, like Medicare, or a corporation owned by the government, like the North Dakota Mill and Elevator.

This public insurer would operate as much like Medicare as possible, to reduce administrative work for providers. This state-based public insurer would offer three plan tiers. Tier one would have benefits, co-pays and out-of-pocket costs equal to roughly what the state currently provides state employees. Tier two would have benefits roughly equivalent to the average plan provided by middle-size private employers. Finally, tier three would be an ACA silver plan for legal reasons.

Auto-enroll state and local employees in tier one

To make this public insurance plan work well, the state would then leverage the health care dollars it does control. The public insurer would handle the state’s Medicaid program. It would also start by gradually transferring basically all state and local employees to the public insurer's tier one plans. This would minimize disruption in coverage for public employees. This large pool would give the public insurer the significant market power necessary to negotiate rates with providers. I would peg provider reimbursement rates to the Medicare rate plus 5-10%. This would allow it to offer insurance at a very good price.

Open it to all employers and add a modest employer mandate

That state would allow all companies regardless of size to buy tier one or tier two coverage from the public insurer. The public insurer should be able to offer a price that would be very attractive to companies, possibly costing more than 10% less than private insurers. It is likely within a few years a significant share of companies would switch. By making the policies similar to what people already have and putting the decision to switch on employers, this also minimizes disruption.

This would be combined with as large of an employer mandate or “pay-to-play” requirement as would likely serve as an ERISA challenge. What exact amount that would be is difficult to guess.

ACA exchange work around

The public insurer would have the tier three plan for one simple reason: To get all the federal ACA subsidies low-income individuals without employer coverage need to sign up for a silver plan on the exchanges.

The state would take action to ensure that the public insurer was basically the only option on the exchange and to make sure everyone qualified signed up. I would create an automatic enrollment and premium collection system for all individuals not covered by their employer.

Since an ACA silver plan is pretty terrible coverage and the subsidies are insufficient, the state would need to provide some extra money to make care truly affordable. The state could create its own cost-sharing subsidies to make tier three coverage the equivalent of tier two.

The money needed for these subsidies would be relatively modest. Some could come from savings in state employee health care spending. Some would come from the employer mandate fine. Some could come from the public insurer adding a small surcharge to the premiums it charges private companies. Some could come from general revenue.

The result

This would not create a true single payer system, but it would get us a lot closer within the constraints we face. Medicare would technically still be separate. Some companies would still give their employers private insurance, but within a few years it is easy to see how 80% of people are directly covered by Medicare or the new state Medicare-like public insurer. It should provide affordable care to almost everyone.

Compared to the other alternatives, it would need minimal new taxes and minimal direct disruption to people’s current coverage. For people with employer provided coverage, the government won’t “make you lose your current coverage.” If your coverage changes, it will be because employers realize it is so much better.

Most importantly, this foundation is easy to build off of if/when the federal government and federal courts are less hostile. The following elements can be added from the beginning if the federal government is willing to provide the waivers or later when a new president is elected.

If the state can get an Obamacare 1332 waiver

The Affordable Care Act does allow the HHS to grant State Innovation Waivers. States can use all of the money that would have been spent on ACA provisions for their own plan if their program will “provide access to quality health care that is at least as comprehensive and affordable as would be provided absent the waiver.”

If a state gets a waiver, this plan could be amended to eliminate the ACA exchange work around mentioned above. Instead, the state could automatically enroll anyone without qualified employer provided coverage in the tier two plan. This would be paid for with the waiver money, the other revenues discussed above and charging these people a “mandatory premium” or new income tax.

If the state can get a Medicare waiver

It is theoretically possible that HHS could grant a waiver to let a state administer Medicare, but it is untested. If the state could eventually get such a waiver, it could just have the new public insurer also operate Medicare in the state. This should streamline administration and reduce health care overhead costs in the state. It would also allow the state to take a more holistic approach when it comes to deciding reimbursement rates.

If the state can get ERISA amended

Dealing with ERISA issues would take an act of Congress, but if Congress does change the law the next step would be fairly simple. This would make reform much easier and more efficient.

Instead of encouraging employers to use the new public insurer, the state would simply require all companies to give their employees the equivalent of tier two coverage or pay a tax equal to the cost. This technically hides the cost while getting the desired outcome. This is not the “best” way to finance health care policy, but it is by far the least disruptive and most politically tenable option. These steps would move my plan from quasi-single payer to true single-payer.

First lay the groundwork

Of course, before we can get to that point, a lot of groundwork needs to be laid. States need to be made ready. On the one hand, that means pushing for legislative changes that weaken the relative lobbying power of the heath care industry. This includes health care regulations like a higher minimum loss ratio for health insurers, a mandate that only non-profit plans can be sold on the individual market, banning surprise billing, etc… It also includes political reforms like campaign finance rule changes, lobbying restrictions, etc…

At the same time, efforts should be underway to build popular support and elect candidates willing to be cosponsors for a specific legislative plan, not a vague idea. Politicians claiming support for vague principles is not as good as public support for a bill. It is easy for cynical politicians to find an excuse for why a specific bill doesn’t apply to their promise or why a bad bill does. This happened a lot in 2009 with Democrats and is especially evident right now as Republicans scramble to figure out what “repeal and replace” means.

That is why I'm putting forward this plan outline. I’m not claiming it is the best possible plan or even the one progressives need to rally around. But it demonstrates what such a plan needs: a realistic way to deal with the legal and political hurdles to any state-based reform.