Update3: The Great Health Care Debate

Hey!

Lots of us love this stuff!

KT here--

But Jayack loves it MORE.

Eliminating the deductability of employer-provided health insurance coverage would constitute a gargantuan tax increase - if a Democrat proposed this, it would quickly be labeled as the biggest tax increase in the history of humankind.

Offsetting it with some sort of piddly non-dynamic tax credit is a fig leaf that should fool no one.

One really doesn't need "math skills" to comprehend this issue.

Personally, I find this stuff brutally boring, but it's quite useful to read an actual policy debate. Keep it up!

Shorter version John McCain healthcare plan: Worse healthcare than you have now, and getting suckier by the second.

Questions regarding John McCain's plan to which I'd love answers:

What's in John McCain's plan with respect to insurers' refusal to cover the costs of "pre-existing conditions", or the industry's abuse of consumers and contract law with respect to recovering payouts for "pre-existing conditions" "discovered" by firms employed by them precisely to scrutinize customer application forms designed to maximize such recoveries?

What in John McCain's plan compels insurers not to price the sick and injured (or terminally ill, for that matter) out of coverage?

What in John McCain's plan compels insurers to pay for necessary treatments not necessarily explicitly covered by plans for which consumers have been paying expensive premiums for years (even decades), and yet discovered to be necessary for their health (or life) precisely at the moment of diagnosis--when it is too late for the consumer to change to coverage of a now "pre-existing condition"?

What Stuart said.

Great point from Kvall. The (many) criticisms of McCain's plan illustrate how less government involvement and regulation can paradoxically end up being fundamentally less capitalist than a more governmentally active approach; In McCain's eagerness to claim that his health care plan basically has nothing to do with the government, he has made the plan so incredibly complicated and inefficient that it would make Adam Smith role in his grave. Smith wouldn't like single-payer or the Democrats' plans much either - compassion was not his thing - but they don't violate the core ideals of capitalism the way McCain's plan does. The belief that larger purchasing pools will get lower prices is a fundamental idea of capitalism, as is the effectiveness of economies of scale.

MATH IS HARD!!!

McCain's plan is dumb. Healthcare, IMHO, should not be a for-profit business. The whole supply/demand thing breaks down for the worker - thinking problems in the industry are going to be solved by market efficiencies is retarded.

Then again, we know McCain doesn't understand economics.

In case anyone is confused, I have an illustration of what his plan actually will look like for the average american worker:

The McCain HealthCare plan illustrated.

(sorry for the blog whore Karen)

McCain doesn't have to worry about inflation because he's 847 years old.

stuart, I suspect you know the answers - there is nothing in Senator McCain's plan whatsoever to address either the pre-existing condition problem or the pricing problem for low-wealth individuals. Nothing.

Stuart, the answer is "nothing" to all your questions.

The brutal fact of the matter is that demand for health care is inelastic for the sick and injured at ANY price.

The industry knows it and is under no incentive to change things. And while I think in the long run Hillary and Edwards are right, we do need everyone to be in the plans, I fear that in the short run, Hillary's mandate will just give the insurance companies an excuse to enroll everyone (YOU MUST BUY COVERAGE) without an incentive to actually control costs or to pass them on the consumers.

The whole system needs to be junked.

This whole plan seems poorly thought out and aimed more at helping employers than the health care "consumer".
Was this put out just so he can say he has a plan?
Maybe hoping that it would be lost in the coverage of a certain reverand and the Democratic race?

Paul, not aimed at employers, aimed at the insurance companies.

And yes, he just wants to say, "I gotta plan too!!"

Certainly the insurance industrial complex would benefit but the reason I mention the employer is I agree with KT
from down below-
"But at a time when many employers are already scaling back, raising the cost of and even dropping health coverage for their workers,* many experts say that the kind of system envisioned under the McCain plan would encourage even more employers to get rid of health coverage."

Well, true enough Paul.

Probably is a feature, not a bug.

Please check out "The Truth vs Barack Obama"

http://savagepolitics.com/?p=317

I saw this today, and HAD to share it with everyone. It is just a brilliantly researched and written list of inconsistencies with several of Obama's stories. I think it should be done for ALL three candidates, but I guess this is a good way to start at finally looking at the candidates with some honesty.

http://savagepolitics.com/?p=317

They can't possibly mean that you get an 800 dollar tax credit if you don't spend it on insurance. What if I spent 100 dollars on a $100,000 deductible catastrophic plan? Does that mean I get $4900 dollars?

No way. The credit is up to $5000, not $5000. If it really works as a straight $5000 credit if you spending anything at all on insurance, then the young people are going to REDUCE their coverage.

Was this put out just so he can say he has a plan?

That's an interesting question. Bush won by faking plans, or at least by their not being scrutinized by anybody except Krugman. Could the long Dem primary process have obviated that strategy?

This is straight up 21st Century Republicanism. Screw the ordinary citizens at the expense of the corporation. Do it in the regulatory realm (FDA, Chinese leaded toys, EPA etc, do it in the social welfare realm, do it, most shamefully, to national guards and reservists who did NOT sign up for this.

elsylee:

Nobody wants to read spam in a comments thread.

K?Bai!

I get email:

A Japanese doctor said, Medicine in my country is so
> advanced that we can take a kidney out of one man, put it
> in another and have him looking
> for work in six weeks.'

A German doctor said,'That's nothing, we can take a lung out of one person, put it in another, and have him looking for work in four weeks.'

A British doctor said, 'In my country, medicine is so advanced that we can take half of a heart out of one person, put it in another and have them both looking for work in two weeks.'

A Texas doctor, not to be outdone said,'You guys are way behind. We took a man with no brains out of Texas, put him in the White House and now half the country is looking for work.'

So do I understand this correctly? The actual tax cut would only rise by 2% but the premiums would rise at 6%? That makes no sense. Seriously, I think politicians try and mess up good ideas with their fairy tales.

We need a whole new system. One that wipes away what we currently have and is built on fundamentals that don't screw the people that are keeping it in business. Kind of like this country started...?

Commenters:

I have no idea whether or not the answers to my questions about McCain's plan are "no" or "not" or "nothing".

I can suspect many things about his plan, but until a competent, intrepid journalist gets answers from the people putting out the plan (hint, hint), I only have suspicions, and not information. Not only do I not have this information, but the vast population of American health insurance consumers do not, either. Given that health care consistently ranks among the top three issues (even for Republicans) this cycle, I'm certain that many, many voters would appreciate getting specific answers to these questions--unlike, say, the kind of public relations-serving responses they might receive from health insurance industry representatives.

It's important that journalists ask these questions, otherwise we consumers will not be able to make good decisions about which health insurance plan--er, ahem, which personality/charm school candidate/tough guy-gal/"good character" for whom to vote.

This is, by the way, an illustration of why you shouldn't create tax breaks. There's no way they don't distort decision-making, and unintended consequences always follow. Broaden the base, lower the rates.

Health Care question:
How many posts, updates, and e-mails from the campaigns clarifying and promoting their candidates proposal have we had on Democratic side?

Sorry, if I make a claim about what Americans care about, I need to back that up with links to and quotes from polling data, otherwise I fall into the credibility abandoned mineshaft currently occupied by the likes of Broder and Brooks (and Klein).

So that should read Given that health care consistently ranks among the top three issues (even for Republicans) this cycle.

This first baseline survey shows that Iraq continues to top the public's list of issues, with 44% of the public citing it as one of the most important problems for the government to address and the same share saying they would like to hear presidential candidates talk about it. Iraq is the number one issues for Republicans, Democrats and independents alike.

But health care ranks second, with 29% citing it as one of the most important problems for the government to address, followed by the economy at 13%. Health care ranks second behind Iraq for Republicans, Democrats and independents alike. Previous Kaiser polls have shown the economy and health care tied as priorities for the public, or the economy ahead of health care, so it may be that health care is may be on the rise as a campaign national issue.

Sorry, that should read "(and Klein, with respect to election issue prognosticating)"

elsylee- The link you posted has no whatsoever connection with this thread, and responding it here would be unfair to KT.

KT- thanks for posting these for us. McCain kept flaming the democrats for raising taxes, but seems like his proposal isn't that much better.

I'm sorry. I get the arithmetic now.

PreMcCain you make 50,000 and get 12,000 in health benefits (you can see, right there, why this is not something sustainable for employers. A quarter of compensation doesn't show up on the paycheck.) 50K shows up on your W2. You are in the 28% bracket at this point.

PostMcCain, 62,000 shows up on your W2. You pay 28% on the additional 12K, $3360. BUT you apply the $5,000 (you got 12K in income) credit, and you've gotten a $1,640 dollar tax reduction.

Sorry for creating confusion.

This is incredibly expensive. It's a good thing it will never happen.

KT here--

Jayack: That's my understanding as well. Plus, it's worth noting that your health benefits DO remain deductible expenses for your employer under the McCain plan.

So why might this encourage companies to give up providing health coverage? Because it's likely that young healthy folks would find those better deals out in the open market that McCain promises would be out there, and would leave their company plans. That would leave the companies paying the cost of covering those who remain, who presumably are older and sicker. Which means it might get even more expensive for the companies to continue offering health coverage. Which means fewer and fewer would want to.

Yes, for the first few years jay and then the credit only raises 2% while the insurance premiums rise 6% and eventually you are getting taxed more. According to my calculations (I multiplied what the tax credit would be and what your insurance premiums would be according to 2% and 6% respectively after so many years to see when your taxes would become more expensive then your tax credit.), it would take 11 years.

Can anybody actually post a link to the actual plan, i.e. a pdf with the entire set of proposals, not just the stupid dumbed-down talking points that are here and here and here?

Where the crap is the actual plan?

KT here--

Um, SZ, I think that IS the plan. There is no legislative language, but in fairness, there wouldn't be at this point. (Clinton and Obama don't have it either.) They did a conference call for reporters the other day, where they probably answered questions, but yours truly wasn't on it.

So why aren't those better deals out there now?

Yeah KT but reflecting a little further, I think, at the bottom of the worksheet, it's gonna say

"Enter that amount [3360] or 5000, whichever is smaller."

sz's question is where is it on the web? We could answer questions like these for ourselves if it were an actual policy proposal.

KT here--

Jayack: that's what i mean. i don't think it's spelled out anywhere (at least that i've found) in more detail.

SB: justin fox, on his curious capitalist blog, had an interesting example that the libertarians use: elective lasik or cosmetic surgery, where the cost has indeed gone down because people have to pay for it themselves and shop for better deals. one question, of course, is whether people are really in shape to "shop" for something like, say, bypass surgery.

KT, good example. But as someone who did have lasik surgery last year (I took a loan out from my 401(k) to pay for it), I can tell you the price hasn't been reduced that drastically from what it originally was. That is, if you want a reputable, excellent doctor who knows what he's doing instead of a "clinic" where the doctors are a bit dodgy to say the least.

Plus, those are one-time surgeries, unlike a condition that needs to be treated with ongoing medical visits and medication.

Posted by Karen Tumulty | May 1, 2008 1:59 PM:

There is no legislative language, but in fairness, there wouldn't be at this point. (Clinton and Obama don't have it either.)

Karen:

You're right, none of the candidates are actually proposing legislation. But that's like saying that there's no concrete detail in any proposals, which is certainly not the case. There are differences between each of the candidates in terms of the substance of their proposals, even without the introduction of legislation.

An example of the kind of proposal that I had expected from the "serious" McCain campaign would be this PDF (warning, danger, Will Robinson!) of Hillary's plan.

The last seven pages are (as the title suggests) reasonably detailed, with footnotes to sources provided to support the figures quoted in the plan. It's authors don't treat readers quite like credulous carnival marks nodding their heads in front of a glib barker.

Did I really just say "glib barker" just then?

Anyway, I'm going through the math, too, as well as trying to get answers from McCain's speech.

Too bad you weren't on that conference call...grrr...

Posted by Karen Tumulty | May 1, 2008 2:08 PM:

...one question, of course, is whether people are really in shape to "shop" for something like, say, bypass surgery.

...and what does "shop" really mean to the family of a catastrophic car accident victim looking at an out-of-network hospital bill for the service of pronouncing their loved one dead on arrival?

If you ask me, health insurance now is like the government on war. I can picture Bush and the rest of the health insurance CEOs comparing "war" stories, while it's only 4k dead for Bush; it's more like 4 million dead for insurance companies.

Here's what John McCain basically has to say in response to my earlier questions:

Health care in America should be affordable by all, not just the wealthy. It should be available to all, and not limited by where you work or how much you make. It should be fair to all; providing help where the need is greatest, and protecting Americans from corporate abuses. And for all the strengths of our health-care system, we know that right now it falls short of this ideal...

...These reforms will take time, and critics argue that when my proposed tax credit becomes available it would encourage people to purchase health insurance on the current individual market, while significant weaknesses in the market remain. They worry that Americans with pre-existing conditions could still be denied insurance. Congress took the important step of providing some protection against the exclusion of pre-existing conditions in the Health Insurance Portability and Accountability Act in 1996. I supported that legislation, and nothing in my reforms will change the fact that if you remain employed and insured you will build protection against the cost of treating any pre-existing condition.

Even so, those without prior group coverage and those with pre-existing conditions do have the most difficulty on the individual market, and we need to make sure they get the high-quality coverage they need. I will work tirelessly to address the problem. But I won't create another entitlement program that Washington will let get out of control. Nor will I saddle states with another unfunded mandate. The states have been very active in experimenting with ways to cover the "uninsurables." The State of North Carolina, for example, has an agreement with Blue Cross to act as insurer of "last resort." Over thirty states have some form of "high-risk" pool, and over twenty states have plans that limit premiums charged to people suffering an illness and who have been denied insurance.

So, mindboggling as it may seem, John McCain's answer to the problems I outlined is:
"...those without prior group coverage and those with pre-existing conditions do have the most difficulty on the individual market, and we need to make sure they get the high-quality coverage they need. I will work tirelessly to address the problem."

He personally will work tirelessly to address the problem...In some unspecified way...Over some unspecified length of time.

Believe me, if John McCain were putting out anything approaching John Edwards' plan, I'd be singing the man's praises from the rooftops. I couldn't even bring myself to vote for Hillary, but I will defend her plan as being the best amongst the candidates at the drop of a hat. My dog in this fight is health care.

But..."I will work tirelessly to address the problem" of cancer patients being denied care due to the "discovery" of some debatable "pre-existing condition" in the application documents filled out by unsuspecting consumers by third-party firms hired specifically to save insurers from paying out claims?

"I will work tirelessly to address the problem" of health insurance policies effectively terminating each year they are "renewed", such that arthritis diagnosed on December 31st of this year becomes a "pre-existing condition" not covered by the policy on January 1st of next year?

"I will work tirelessly to address the problem" of claims being denied retroactively, i.e. after the patient has been in the midst of individually unaffordable treatments for months or years?

"I will work tirelessly to address the problem" of claims being denied by insurers due to failure by health care providers to submit properly processed claims by the insurers' deadlines --and the bills for the providers' services therefore sold directly to collection agencies, as per the contracts patients are required to sign in the office just prior to seeing a doctor?

"I will work tirelessly to address the problem" of patients being denied care because the treatments prescribed for them by doctors are deemed by the insurers to be "alternative" or "experimental" or even "not worth the trouble", such that the patients die while their doctors appeal those decisions (and hospital administrators order the doctors to wait for the insurers to commit to pay)?

Can someone please explain to me how John McCain has the credibility on this or any other subject to stand up in front of me and tell me "I will work tirelessly to address the problem" instead of telling me any part of what he actually plans to do to address the problem?

Isn't this the very sort of double-talk coming from "Washington politicians" that leads John McCain to reject the kind of "entitlement program that Washington will let get out of control"?

Karen?
Justin Fox?

Holtz-Eakin?

Anyone?

"Can someone please explain to me how John McCain has the credibility on this or any other subject to stand up in front of me and tell me "I will work tirelessly to address the problem" instead of telling me any part of what he actually plans to do to address the problem?"
SZ

You forget who you are asking about.
AMC-

"McCain's belief that he's done his part raises the specter of -- as George Will put it -- his "towering moral vanity," a phrase his staffers visibly rankle at. And it's a bit strong... but it's an artful phrase to describe how, for McCain, the most important standards are, well, McCain's. "

You would question that man?

Thanks again Karen. You are wonderful.

KT: "one question, of course, is whether people are really in shape to "shop" for something like, say, bypass surgery."

I think that is one of the reasons health care doesn't work like most markets. If people did negotiate life-critical healthcare, the cost would go down. Some people would also die. Perhaps the savings would be used to save other people, perhaps not.

I take the position that when presented with very expensive life preserving procedures, people should probably say no. I would. I do have cronic health conditions, and there is a decent chance this is not entirely hypothetical. Of course, this makes no sense to do with health insurance. It currently makes economic sense for me to have health insurance, due to my employer match. At some point, when I don't have my employer match, it will not make sense, and if I can, I will ditch health insurance and pay directly.

I don't think this attitude is shared by enough people to make a difference. I think it is only one of many large problems in the price of health care. I think that the attitude that my life is worth any price is wrong, and there is a point at which I should instead use the resources to help others. I think the health care industry would better serve society by focussing on quality of life, and efficient life-preservation. (The main doubt I have is what effect this would have on the research of new life-saving techniques, and whether it would slow their transition to efficiency.)

KT here--

Here's one of those stories about India:

http://www.atimes.com/atimes/South_Asia/HF09Df01.html

KT here--

Oops. I meant to add that to the comment thread on Update 4. Now I'm confusing myself.

Justin Fox apparently wrote: "As a mostly free-market-oriented non-economist who doesn't know all that much about the health-care system, I'm naturally sympathetic to it. But I'm also extremely dubious of how well it would work in practice."

Ideology versus common sense. Sadly amongst free-marketeers, common sense never wins this battle.

It just shows clear signs of having been designed by free-market-oriented economists who don't know all that much about the health-care system. As a mostly free-market-oriented non-economist who doesn't know all that much about the health-care system, I'm naturally sympathetic to it.

With all due respect to Justin, Karen, this kind of stuff is just so incredibily damaging. I mean, it's like debating the value of various designs of levee systems by a bunch of free-market-oriented non-engineers:

WHAT POSSIBLE VALUE IS THEIR OPINION ABOUT IT?

Jeebus, why, if you are so interested, not get the opinion of someone WHO KNOWS SOMETHING about the health care system. Urban Institute has fine, fine scientists who devote their lives to evaluating various permutations of the health care system.

These stupid, strategist-designed health care proposals are like Frankensteins, none of them are going to work. It's like designing an interstate highway system whose only criteria is that it passes through every political contributor's district. When actually, we want it so we can *get where we want to go.*

Do you realize that you are actually making the issue worse, and not better. Jeeez. At least give Ackroyd the floor on this. He understands the complexities. IT ISN'T ALL ABOUT POLITICS! Get it?

On free market discipline helping, the first wave of money savings was converting in-patient visits to safer, cheaper, less debilitating outpatient visits. There's no question that market forces have their effects. The reason the US adopted the PPGP system was that fee for service had created an incentive for unnecessary inpatient procedures, which were covered by "major medical," such as tonsillectomy and post-menopausal hysterectomy.

In that case, the market had responded to a perverse incentive, just as the emergence of mortgage brokers who lied about the income status of the borrower was a response to a perverse incentive caused by securitization and regulatory laxness.

The idea that individual elective procedures that are not medically necessary are a good proxy for a PPGP marketplace for individuals run by nationwide insurance companies is not a good one. In fact, there is no really good model. The one that comes closest in my mind is the telecommunications industry, which is quasi-governmental, ostensibly regulated and oliogopolistic, with services and prices that reflect the absence of market competition.

It's also worth noting that if those procedures were deemed medically necessary in the current environment, you would expect costs to rise, as you add in the claims processing.

Justin should read some Krugman on this subject.