Tuesday, September 29, 2009

Samwick on Health Reform

Andrew Samwick has a great post on health care. He discusses an issue that is what I think is a central issue in our high cost of health care but is rarely explored: why does health care operate in a manner so distinct from other markets.

More ACORN Fallout

Now that ACORN has been revealed as an insidious organization (funny thing how offering to aid someone in trafficking 13 year olds for prostitution will tarnish your reputation) people are starting to look at ACORN's other activities. Kathy Kersten suggests voter registration should be an area of interest (in a rare fit of non-Michele Bachmenesque batshit insanity). It isn't such a massive stretch to think that some of these fraudulent voter registration drives might have yielded...voter fraud, which in the context of an election decided by 380 votes is troubling.

Palin's Memoir

I almost want to buy this just for spectacle aspect of it. I sincerely hope that it was not ghost written. It would be the first political tract with a heavy use of LOLcats.

Believing Your Own Spin, pt. 2

Ezra Klein again:

"Atlanta: If it's so easy to save $500-600 BILLION on medicare (doesn't Obama say: we can cut payments for medicare by that much?) - then why don't they just pass that bill?

Are they saying there is that much waste in the program? Why are they holding that money hostage? If it's the lowest hanging fruit (they say it is, it must be true) - just pass whatever needs to pass to save that money. Would anyone vote against that bill? Really?

Ezra Klein: Oh yeah. Saving that money isn't the hardest thing in the world, but nor is it the easiest. A lot of politicians are willing to do it if they also get health-care reform out of the deal. But they're not willing to do it if it's not part of a trade.

I've said this again and again, if the Republican Party included real deficit hawks, they could make an incredible bargain here. They could rip up the employer tax deduction and create a powerhouse MedPAC board and much, much more. The fact that they're just crossing their arms and shouting "no" suggests they're not particularly worried about spending, after all."

He is right that the Republicans have largely limited their participation in the reform effort to say no, however, the one substantive idea that Republicans have offered is to rip up the employer tax deduction or cap it. This was a center piece of the McCain health care plan, and consequently became the target of a very effective (and opportunistic and shameless) attack ad by the Obama campaign. Obama and the unions have taken the employer tax deduction off the table, not the Republicans. This is unfortunate because it manages to achieve two very important things at once: 1. raise revenue; 2. Control costs.

Believing Your Own Spin

Here is Ezra Klein, a blogger I regularly follow, like, and disagree with:

Second question - why this 2013 start date for reform? That's a llllong time from now.... And do you think if this passes and the Republicans regain control of Congress before 2013 they can just undo it before it even starts?

Ezra Klein: I have not, but certainly would try them.

As for 2013, there are two answers. One is that it can't be implemented till then for technical reasons. I think there's more to this than people are giving it credit for. The second is that it makes hc reform look cheaper in the 10-year window, which helps for budgeting."

Ezra gives 2 of 3 reasons why 2013 is when a lot of the health care bill is slated to ramp up:

1. Implementation is actually difficult.

2. Postponing implementation is a budget gimmick used to keep the cost artificially low (if you only show expenditures in five years out of a ten year budget window the program will appear cheaper than it really is).

And what Ezra omitted.

3. 2013 is after 2012, an election year. In the event that the reform is unpopular people will not be able to express the dissatisfaction for several more years.

That is sort of an obvious one. When you omit something like that you might as well be on payroll.

Monday, September 28, 2009

More on Health Care

Johnathon Rauch has a satirical piece probing the absurdity of health care. It's a good, if saddening, read. It is still bizarre to me that one of the major objectives of health care reform is to incentivize more people to pay a third party to pay for predictable expenses. Current proposals will simply exacerbate this perverse trend.

Tuesday, September 22, 2009

Why Community Rating is Bad

Community rating is where an insurer would be prohibited from charging policy holders different prices on the basis of risk. It is viewed as an essential part of health care reform by progressives and even some conservatives. The motivation behind community rating is sensible, some people have conditions which they have no control over and when insurers consider said condition the price of a policy is likely to be unaffordable. This is unfortunately what insurers do. Some view this as sinister but it too is sensible.

An event that is likely to occur is not an insurable event. If I wanted to build a house in area where hurricanes hit annually and houses were frequently destroyed the only way for an insurer to make a profit (or stay solvent) would be to set my premiums at the level of an expected future payout. Otherwise, given the predictability of a payout, a premium any cheaper would essentially constitute a direct transfer of wealth from the insurer to me. However, the information conveyed by the premium price is valuable. It tells the prospective homeowner that unless the homeowner is able to build a house that can withstand repeated hurricanes (or frequently rebuild a house that can't) that building the house is probably not advisable or affordable.

If you allowed insurers to price their premiums on risks where the policy holder has control over, such as their weight, activities such as smoking or excessive consumption of alcohol, or indicators such as high cholesterol or high blood sugar you would provide policy holders with stronger incentives for healthier lifestyles. This is not to say that all policyholders would adjust their behavior but at the margins some would. This would not obviate the need for other insurance reforms such as guaranteed issue and renewal, prohibition on excluding policy holders with pre-existing conditions, catastrophic re-insurance, and ex-post readjustment. But it would lead to a healthier population and lower health care costs over the long term.

Wednesday, September 16, 2009

Partying Like it's 1994

Here is an article discussing the Senate Finance bill proposed...in 1994. It's amazing how similar the current bill is to the bill discussed then. I half wonder if the Baucus bill was a copy and paste job.

Thursday, September 10, 2009

Obama's Speech

I didn't listen to the whole thing. There were aspects of it that were good, some that were innocous, some obnoxious. I love that health care reform is being billed as a free lunch. I actually agree to some extent, there is waste, fraud, and abuse in medicare and there are substantial savings to be gained. I just don't think it will happen and even if they did the savings are likely to be substantially lower than predicted. Some of those savings, such as cutting Medicare Advantage, aren't really "waste, fraud, and abuse" but cutting seniors benefits. Which is fine with me, but it is a misleading argument. I think the president deserves some credit for putting the individual mandate in there. That is an important part of health care reform and it is an unpopular part. The pay fors are stupid. This tax on insurers is absolutely absurd. The tax will be passed on to the consumer, so you might as well place it on the consumer. What I am afraid of is that the since the tax is opaque that consumers, such as public sector unions, will still insist on cadillac coverage as they aren't exposed to the full cost of coverage (you don't see the employers contribution on your pay stub) and thus will not achieve much if any cost containment (while deriving little revenue). This is just a stupid idea.

Increasingly I don't think that universal health care reform will happen. That said it's interesting to think about what a smaller scale reform package would look like. You can't really do community rating without a mandate. You can't do a mandate without subsidies. One area where you probably could get wide agreement would be on the national exchange. This would benefit those who live in states where real insurance (catastrophic) has been regulated out of existence. This wouldn't increase coverage much but it would be a significant step in the right direction. I could also see a cap on the employer exclusion making its way back into the conversation. I think what you would see is that the cap would be fairly high but not obscenely high and the tax exemption would be extended to everyone. This would be far from optimal policy but it would be an improvement nonetheless. The other thing I suspect would be part of a scaled down bill would be some form of medicaid expansion (more limited) and maybe a very limited tax credit for folks up to 300% of the poverty line.

Things that would be left out from current bills are: mandates (employer/individual); insurance reform (maybe with the exception of recission; that is probably happening regardless); anything involving medicare; any substantial pay fors (income surtax, taxing benefits; the goofy insurer tax); malpractice reform.

ONE LAST NOTE: I hated when he said it costs three times as much to buy health care on the individual market than as when your employer provides it. One might pay three times as much as their employer is not providing an premium contributions, but the cost is the same. If I have a plan through my employer that is $100 a month and my employer pays 2/3rds of the premium, the cost of the premium is still $100 a month, I just happen to pay directly $33 out of wages and another $67 (potentially) out of foregone wages. If I pay for a policy on the individual market the cost could be the same- $100 a month- but I would paying the full cost from wages. The difference is not cost but rather whether the policy is being paid for in the form of after-tax wages in the individual market or pre-tax wages/employer contributions(foregone wages). What you could say is that it costs more in relation to the tax advantage. If my marginal tax rate is 25% and I buy a policy in the individual market with $100 I would need to make $133 in before tax wages to pay for the policy. If I get my insurance through my employer the policy is paid for in pre-tax wages so that is a a real bonus (thus I would only need to earn $100 to pay for the $100 policy).

Wednesday, September 09, 2009

Worst Sports Column EVER!

See this. This may actually be the worst column ever, not just the worst sports column. By way of background, the column is directed at Jaycee Lee Dugard who was abducted when she was 11 and just recently freed from the clutches of her kidnappers 18 years later. In the interim she has had two children, so it seems safe to say that she spent a good portion of those 18 years getting raped. Anyhow, the columnist, Mark Whicker (you can email him here to tell him what a dumbass he is-mwhicker@ocregister.com) wrote an entire column on sporting events that Jaycee missed while she was kidnapped. This in of itself, while stupid, doesn't necessarily sound venal, but if you read the opening of his column he makes light of the whole situation. I don't know how this made it to print.

(hat tip- Megan McArdle