Wednesday, October 08, 2008

Health Insurance - The New Republican Entitlement Program


Today, Michael Gerson rallies to McCain's defense on health care, lamenting that Joe Biden mischaracterized the tax effects of McCain's plan. He criticizes Obama for making accurate observations about the plan, such as his noting that the tax credit is payable"directly to your insurance company". He also complains,
"At least 20 million Americans," charges Obama, "will lose the insurance they rely on from their workplace." As Yuval Levin of the Ethics and Public Policy Center points out, this is a distortion. He cites a Tax Policy Center estimate that the McCain plan would result in 21 million people entering the individual insurance market by 2018 - many because individual ownership of insurance will be more attractive
Let's see what Obama actually said:
And here’s something else Senator McCain won’t tell you. When he taxes people’s benefits, many younger, healthier workers will decide that it’s a better deal to opt out of the insurance they get at work – and instead, go out into the individual market, where they can buy a cheaper plan. Many employers will be left with an older, sicker pool of workers who they can’t afford to cover. As a result, many employers will drop their health care plans altogether. And study after study has shown, that under the McCain plan, at least 20 million Americans will lose the insurance they rely on from their workplace.
So Obama accurately states that about 20 million people are projected to lose employer-sponsored health care. He specifically addresses the fact that this will result in part from workers who find private plans more appealing (younger, healthier workers) opting for those plans instead of their employers' group plans. That other people would acquire health insurance during the first ten years of the plan is neither a surprise nor relevant to the issue Obama was addressing. Further, if the number of new enrollees is something that must be mentioned, Gerson is guilty of the same sin by not acknowledging that Obama's plan is projected to insure a significantly greater number of people than McCain's.

Gerson also complains,
Obama terms the McCain plan "radical" - which is its main virtue. It goes to the root of the problem - a system that depends mainly on businesses to provide health coverage.
Er, right... How dare Obama mention the plan's "main virtue".
Over the past few decades, the rising cost of health coverage to employers has eaten up pay increases, acting as a wage cap and leaving many incomes stagnant or falling. Business-based health coverage leaves many workers afraid to change jobs - a handicap in the constant employment churn of the new economy. It discriminates against the self-employed and places unique burdens on small businesses. And it insulates workers from decisions about health-care costs.
So let's see... Under McCain's plan:
  • Rising costs of health care will continue to devour wage increases, except workers will have to absorb 100% of the increase. The employer will no longer share in that increased expense.

  • It's not clear who the people are who are "afraid to change jobs" under the current system. Even if you don't change jobs, you can't rely upon your employer to maintain the same plans or coverage from year to year under the current system. Changing jobs to an employer with inferior health coverage or no health coverage translates into a pay cut, so we shouldn't expect people to voluntarily do that. The current system can be an impediment to self-employment, but that's something McCain has chosen to ignore.

    The McCain plan does nothing to address the real problem - if you lose your job, you lose your coverage. Whether it's your employer who stops paying for it, or you who can't afford it, if the premiums aren't paid you lose your coverage. Gerson's later argument makes it plain that he understands this, so it seems dishonest of him to not admit it.

  • In terms of the current plan discriminating against the self-employed, how does that change? McCain envisions employers giving their employees raises equivalent to the employer's share of their current health plan - in his memos and talking points he likes to talk about a $9,000 raise for a family, 75% of a $12,000 health plan. Who's going to hand a raise like that to a self-employed individual? Or does he think this is a good economy in which the self-employed can raise their prices and fees? (After all, according to his reinvention of his past remarks, the self employed number among the "fundamentals of our economy", and thus they are "strong".)

  • Is it a bad thing to insulate an insured person from the costs borne by the insurer? Isn't that the whole point of insurance - to spread the costs, so that individuals aren't disadvantaged when they have unexpected medical emergencies or illnesses? So that they don't have to fret over whether they can take their child to a doctor or afford needed medications? And all assumptions aside, who says that individuals will do a better job of assessing which costs are unnecessary or avoidable? That's a nice gloss, but if Gerson wished to be honest he would acknowledge that the real goal is to shift more cost onto the consumer and, once that shift occurs, sponsors of McCain-style plans don't care if there are cost savings.

Gerson apparently rejects the McCain camp's argument that a government-sponsored insurance plan would be subsidized, instead arguing,
Unlike private companies, government can cut costs by imposing price controls and shifting costs to others (just as Medicare does). Over time, this would give the government an unfair price advantage over private insurance, causing more and more businesses to pay into the public program.
I recognize that Gerson rarely knows what he's talking about, but is he for real? Has he ever seen an "explanation of benefits" form from a private insurer, describing the discount the insurer has negotiated for medical services? An insurance company may pay $560 for a procedure that would be billed to a private consumer at $1,000. There's no "cost shift" there? Also, if an insurer (public or private) doesn't offer enough money to doctors and hospitals, they will opt out of the program. Perhaps it hasn't occurred to Gerson that this one of the reasons why many doctors, hospitals, clinics and pharmacies don't participate in certain insurance plans. He also can't explain why a private insurer couldn't negotiate the exact same rate as the government, or benefit from being able to offer a much larger network of participating doctors, hospitals and pharmacies due to even modestly higher reimbursement rates.
Obama's health plan is really slow-motion Medicare for all. And the problem with Medicare-like price controls is that they reduce the number of people willing to provide medical services, which always means longer lines and rationing.
Ah. That must be why people in nations with national health care plans are so eager to switch to "American-style" plans, and why the elderly of this nation are so unhappy with Medicare. And when did France and Germany get waiting lists? No system is perfect, but it's better to point to actual defects than to instead spout right-wing canards.

Here's where Gerson highlights the deficiency of McCain's plan that he previously glossed over - the fact that if you lose your job, you lose your insurance:
McCain's health plan has a problem of its own. It is not too radical but too timid. A refundable tax credit of $5,000 per family - in addition to increased cash wages from employers no longer burdened with paying for health care - would help middle-class workers get insurance. But for people on the lower end of the scale - who don't qualify for Medicaid - the $5,000 credit alone would not be enough to buy adequate coverage, which can cost more than double that amount.
It's interesting here that Gerson isn't suggesting that we eliminate Medicaid (or Medicare) in favor of this new "tax credit for all" - why not? Isn't that the proper "market" solution? And if we're keeping Medicaid, thereby rejecting the idea of a pure "market" solution, why not expand its reach to pick up people who can't afford private insurance? It's also interesting that Gerson claims that health coverage for a family can cost "almost double" the amount of the $5,000 tax credit. It can cost a lot more than that - and that's before we start talking about copayments and deductibles.
To be a genuine alternative, Republicans should follow their own logic and make the ownership of private health insurance an entitlement.
That should be an easy sell to the population of true "compassionate conservatives" in the Republican Party. But now that Gerson's convinced himself, how's he going to sell that idea to everyone else?
Fund the purchase of a basic health insurance plan completely, through a refundable tax credit, so every low-income American can afford insurance.
Help me out here - what's a "basic plan"? It isn't enough to provide a "basic plan" to somebody you know can't use it because they can't afford deductibles and copays, so would the "basic plan" minimize those amounts? You know, and insulate participants "from decisions about health-care costs"?

They say the devil is in the details. Apparently Gerson's religious beliefs prevent him from directly addressing the devil.

2 comments:

  1. The Obama plan is an entitlement program too with no guarantees to deliver on promises. Both candidates need a reality check because it is the insurance companies themselves that are the problem. The best thing would be to wipe out the current system and start over.

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  2. My point isn't that Obama's program is not at least as much an entitlement program as McCain's, but that the Republican Party is (supposedly) opposed to expanding entitlements. If you told a room full of Obama backers, "This is a new entitlement program," odds are most of them would see that as a neutral or even as a good thing. But you wouldn't pitch McCain's proposal to his supporters by calling it a new entitlement, let alone suggesting that they should eagerly embrace it as such.

    I think that you could design a much better, much more efficient health care system for this country if you built it from the ground up. Most people will agree with that, even if they're at loggerheads about what the new system should be. But with the size, power and wealth of the insurance companies who profit from the existing system, a "start from scratch" proposal can't get political traction.

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