Dean Baker has an important post at TPM, Are Mandates Mandatory?, in which he lays out the logic of how different components of health care reform fit together. Dean shows, in particular, that the justification for imposing mandates on business to provide insurance has now collapsed, given the distrust the White House inflicted on itself on whether there will ever be a viable public option.
Let’s review what the deal was about. The insurance industry tried to sell the insurance mandate as a necessary condition for their willingness to end their abusive practices, practices that should be outlawed in any event. As AHIP’s Karen Ignagni said months ago, and Aetna’s CEO Ron Williams (appearing tonight on PBS News Hour) explained, they would agree not to deny care for prior conditions, to stop the most egregious rescissions of those who became sick, and to limit discriminatory pricing. But in that deal, the government would force everyone to purchase insurance, and impose, with exceptions, pay or play mandates on both businesses and individuals to help cover the costs and discourage free riding.
Since reformers wanted to lower costs and make coverage universal, but realized insurance premiums under today’s system would be unaffordable for many, the federal government would offer subsidies to those with incomes up to 3 or 4 times the federal poverty level. While subsidies were necessary to pay the high premiums, they would constitute a windfall for the insurance companies, by increasing the chances that their high premium charges would be paid.
But from the public’s standpoint, that was not the end of the deal.
To help make premiums more affordable for individuals/businesses required to purchase insurance and to reduce the government’s exposure to subsidies, the government would also require the private insurers to compete against a government sponsored public insurance option (PO). With hoped for cost efficiencies via ties to Medicare, the PO would both pressure private insurers to lower their costs/premiums and provide a model for insurance behavior, thus reenforcing the reforms of insurer practices and giving consumers an alternative if the insurers evaded the rules.
I don’t know whether the Obama WH intended the PO as a bargaining chip or merely blundered into making it so; the fact is they have now undermined key elements of the overall "deal."
Given this breakdown, Dean Baker logically concludes that the imposition of employer mandates is no longer justified.
But it is important to understand that the mandates are not about extending coverage, they are about preventing free-riding. They are, in effect, a form of taxation, and a very regressive one. . . .
We know that it will be necessary to revisit health care in the not too [distant] future in any case. The lack of mandates will help to ensure that this date comes sooner. Then we can talk about measures that will allow us to control costs, like a robust public plan.
But, if we can’t get a public plan in this round, why should progressives be pushing for a regressive tax that will go into the pockets of the insurance companies and their overpaid CEOs? Let the insurance companies try to make a living in the market; when they grow up and feel strong enough to compete with a public plan, then we can have mandates.
I’d adapt that logic and extend it to the individual mandates as well. If the private insurance industry is not to be confronted on price competition by a strong PO, then there is no moral justification for forcing business or individuals to purchase insurance from an industry that works relentlessly to exclude any competition and as a result has become egregiously concentrated with market power to fix prices.
Even if competitive pricing were possible in the insurance industry — and Krugman/DeLong/Baker, citing Ken Arrow, Stiglitz and others, show it isn’t possible — then the existing insurance market concentration would certainly stifle it.
That leaves the problem of 46 million uninsured and millions more underinsured. There is a straightforward solution to part, but not all, of this problem, and it’s sitting in the existing bills. Expand eligibility to Medicaid and/or Medicare.
We would collect whatever federal revenues are necessary, via any less regressive tax and/or savings, including money from ending federal subsidies to private Medicare Advantage plans, and use it instead to pay down the costs of getting millions more covered by Medicaid and/or Medicare. Move as many of the uninsured as we can into those functioning programs.
Reforms should also have the feds fully fund Medicaid — most states won’t or can’t pay for this — and move to end any inadequacies in Medicaid coverage so that patients get the same basic coverage that Medicare recipients receive. Then fill in the gaps/doughnut holes in Medicare — and tell senior’s we are going to improve and preserve Medicare, not strip it. I don’t understand why preserving/improving Medicare hasn’t been part of the core messaging from the beginning.
Then move to reform Medicare provider payment practices, including adequate funding for rural areas, better allocations to primary care etc, and reforms of provider payment incentives using a stronger MedPAC.
Note that all of this can be accomplished through reconcilation, since we don’t need the exchanges or the PO. We need 50 votes.
The private industry and conservative are adamantly opposed to even a rigged "market" in which private insurers would compete only against a very limited, hobbled, slowly phased in PO with no initial provider networks. Fine. If they can’t confront even a severely hobbled PO, then there’s no reason to pour hundreds of billions into subsidizing them. To paraphrase the President, this is neither keeping what works nor fixing what doesn’t; it’s subsidizing what doesn’t work.
We should solve the problem of insufficient coverage in the cheapest way possible, through expansion of existing programs that people trust, using existing networks of doctor/hospital providers (who need to be fairly compensated). Subsidizing inefficient, uncompetitive, powerful insurers is the most expensive and least defensible solution.
Then work on a separate bill, which may require 60 votes, to impose regulation to end the industry’s most egregious practices, not as a substitute for a PO as Mike Lux suggests, but because those practices are outrageous and should end. If the Republicans and ConservaDems want to defend coverage denials, rescission and discrimination, let them take that vote into 2010.
If the Administration seeks to trade away the PO and undermine the social compact that justified the path they were on, then Baker’s logic is where progressives should move. The White House can either support these genuine reforms or explain why they blew the best chance for health care reform in decades. It would have been better to have a trusted WH lead this effort, but apparently that isn’t to be.
More:
Arin Dube, via The Economist (and h/t DeLong), the WH letting the PO twist in the wind represents $32 billion to insurance investors.
Bob Herbert, NYT op ed, This is Reform?



17 Comments




wow. imo one of your very best posts scarecrow, and that’s saying a lot.
only one question: why wait until next year for the regulation bill? could that be done this year as well?
Yes, split the bills into the part that needs only 50 vots and the regulations that supposedly require 60, including the regulations. the argument has been you can’t get the PO or the exchange or regulations through reconciliation. So don’t do the first two, but put your money into expanding access to Medi-things. Then force votes on the separate regulatory piece, which everyone says is part of the 80 percent consensus — that will push the Republicans to protect the industry, we win or lose, but they can run on that next year and try to explain why they voted to continue rescissions and denial of access.
This like other good ideas about healthcare would require a certain degree of leadership that I do not see. If Obama stays true to form, he will blunder through on something like his present course no matter how poor the result.
This is really good Scarecrow. It’s something progressives ought to sign on to.
The so-called compromise with the industry is dead, so let’s get off the PO and do something like this. I think splitting the bills the way you propose is the right mechanics also.
And once the issues of denial of coverage and rescissions are raised in a separate bill, I think Blue Dogs would have a hard time voting against that. Republicans would be left alone.
And some of them, Collins, Snowe, and Lugar, in particular, might have a hard time voting for these things. It may even be possible to get more than 60 votes for just these items alone.
“Aetna’s CEO Ron Williams (appearing tonight on PBS News Hour) explained, they would agree not to deny care for prior conditions, to stop the most egregious rescissions of those who became sick, and to limit discriminatory pricing.”
Hope the people working on this bill understand that eliminating the practice of denying care for pre-existing conditions and accepting anyone and everyone is not something to get excited about. The healthcare industry will merely take them on for an outrageous sum unless there is some kind of price control mechanism.
I agree wholeheartedly. If the government isn’t going to provide a reasonable cost option for insurance, then it has no business mandating that either businesses or individuals buy it.
OTOH, I think many people would pay for Medicare, or for some other coverage they knew they could count on. What Medicare and Social Security should teach us is that if the rules for a program are set up correctly, bureaucrats will make it work. They’ll do what the rules require. I’ll take that over the ”free market” health insurance we have now.
My god, are any politicians talking about these ideas? i would rather see the “reform” killed than face being forced to buy insurance on the private “market”. if 47 -50 million people could do that, they would have already done that without BO and the senate going through this tortured act.
thanks scarecrow. i think your solution is far better than either no bill or mandates with any of the non viable public options now being considered.
sadly, the original hacker po apparently was never on the dem’s table (imo it was a carrot to con progressives with)…. so, i think pushing for hr 676 is still the way to go.
there are other ways to get there (universal healthcare) from here (as you point out, for example, expanding medicare by age group — maybe first to all children and 55-65?). but pushing for hr 676 defines the goals in an easy to explain way (everybody in, no copays or deductibles, choose your doctor).
anything less is a compromise and should be described as such. i know the whitehouse wants a “win” but a “win” takes the issue off the table and i don’t think we should allow that so long as we have people dying and going bankrupt because they don’t have access to healthcare.
p.s. one other thing…. new fed rules need to preserve and expand the options for states (or regions) to go futher (single payer) and/or try different things (as MA has done). even if the experiments fail (see MA) they provide important lessons we can all learn from.
You know how effective the public option would truly be . . . when you see the reichwingers coming out of the woodwork to attack it so violently, like they’ve been doing.
They’re scared to death that the PO will make it thru the legislative process successfully — just listen to their responses everytime they’re asked about it, especially creeps like Conrad . . . “Gee, I think that’s a very bad idea, blah, blah, blah.”
Why has the fact that the taxpayers subsidize the private insurance mafia to the tune of billions of dollars EVERY-F-ING year never mentioned??????
And yet, we hear the whining from the reform protesters, loud and clear (and often), about how financing a PO would mean increasing the deficit (or lead to “socialism” and other nonsense) . . .
Helllloooo! Take the money that’s going to the Healthcare Insurance Mafia and give it to the PO — duhhhhhhhhhh.
Problem solved.
the insurance industry would adamantly opposed the new regulations (no denial, no rescission) unless they got the universal mandate. So their arguments to conservatives of both parties would be to oppose regulation alone on the grounds it’s not fair. It’s not clear we could get 60 votes. There are some states that already outlaw some of these practices, but without mandates, but I don’t know what there experiences have been.
Also, wrt to expanding Medicare, it’s important to phase that in carefully, as by lowering the eligibility age. An opt-in, or opt-out policy for everyone would probably result in advsere selection and Medicare would have a difficult time controlling costs. On the other hand, the higher costs of treating sick people has to be borne somewhere, so it might as well be in a function public system, since the mechanisms for forcing the private sector to carry that risk would be very difficult to design. The incentives would encourage the private insurers to game their way out of coverage, just as they do now with fraudulent rescission practices.
Yes, I agree. What do you think could be done to lower the eligibility age this year? Do you think that lowering the eligibility age to 55 would be feasible? 45? 35? I guess this would depend on the intensity of conflict and what Blue Dogs will tolerate.
what blue dogs will tolerate .. eh ?? the damn blue dogs need to start acting like democrats .. or get out … damn DINO’s .. they’re killin’ us .. literally …
Heres how that will work. Any one who’s had to take out student loans to pay for college already know. the insurance companies will find out what the max is the government will pay, and premiums, co pays, and deductibles will be exactly TWICE that amount. Kill this bill it is unconscionable.
Not by age, by income.
but it wont make it through, because the WH dosent WANT it to make it through. if anything is clear to me now it that the white house “bargained” that away long ago. this is about “prexisting conditions” for “mandates”. Jonathan alter was on TV today practically begging shulz’s audience to “be reasonable”. that was disgusting. that clown up there begging people who have nothing, to consent to be forced(by law) to pay for a worthless product they already cant afford…for what? so alter can keep his insurance when he leaves newsweek?? im gonna throw up
Hi JKat, I agree the Blue Dogs are certainly not folks who adhere to the central values of the Democratic Party. But people like Baucus, Ben Nelson, and Blanche Lincoln could be defeated in democratic primaries if their constituents were willing. So, ultimately, the responsibility goes back to the electorates in those states. We have to admit that Republicans from those states would be even worse.