Saturday, January 23, 2010

Reflections on Breaking up the Healthcare Bill

One of the proposals for dealing with the new 41-59 Republican "majority" in the Senate is to break the healthcare bill into pieces and pass them one by one, daring the Republicans to vote against them. This proposal has been much criticized. From a policy perspective, it is criticized because the popular and unpopular parts of the bill are mutually indispensable and an attempt to separate them would just send premiums skyrocketing. From politics perspective, Republicans may do anything from automatically filibustering anything to supporting the pieces and then claiming credit. ("Look, we blocked the dreaded Obamacare and gave you this wonderful (if mostly the same) system instead.") Nonetheless, I would like to give my analysis, both in terms of politics and policy, of the separate parts.

Standardizing of benefits and premiums.

One of the Democratic proposals was a standardization of health insurance packets. All policies will offer the same basic benefits packet, the only difference being how much of the tab the insurer versus the insured pays. Likewise, insurance companies will be required to risk pool to offer similar rates to everyone throughout the community. To be honest, I don't have a clear sense of the merits of how this compares to the current, immensely varied system.

But regardless of the policy merits, as a political matter, Republicans will fight this tooth and nail and invoke the filibuster over it. It goes against their basic principles at two levels. First of all, having government dictate benefits packages and rates violates their sense of free market capitalism (and, by extension, freedom). Second, many Republicans propose bare-bones policies as a cost-control measure. If patients bore more of the cost of healthcare, the theory goes, they will consume less of it. Many Republican would like to encourage policies that cover only routine, preventive care and major, catastrophic care.

As a policy matter, this may not be such a bad idea. My big problem with it is there are some things too big to be routine care and too small to be catastrophic that may fend off later catastrophes. A woman who receives an abnormal Pap smear having the abnormality burned out before it becomes life-threatening cancer would be a classic example. My advice would be to allow bare bones policies, but require them to cover any intermediate condition the doctor certifies and a matter of life and death. As a political matter, my guess is that it will be embarrassing for Republicans to vote against that, and that were are unlikely to see Tea Parties demonstrating, demanding that their insurance be allowed to exclude life-saving treatment.

Pre-existing conditions, rescission, and lifetime caps.

As a matter of politics, these are the most popular part of the healthcare bill, and Republicans will probably not want to face a 30 second ad accusing them of voting against them. Nor are we likely to see too many Teabaggers out protesting demanding their insurance companies' right to drop them if they get sick and offering to die as martyrs to free enterprise.

More realistically, both Republicans and Tea Parties may resist these measures on the grounds that they will make premiums skyrocket. And, of course, that is true. As a policy matter, it is the big reason many on our side oppose breaking the bill into its constituent parts. We do recognize the basics of the market and that there is no free lunch. If insurance companies are to be forces to incur all these additional costs, they have to be allowed additional revenue.

If Republicans resist banning pre-existing conditions and lifetime caps (I can't imagine anyone defending rescission), they will undoubtedly argue that these will make insurance more expensive. Democrats should freely acknowledge as much -- and then call for subsidies to help people pay for the increased rates. Personally, though, I believe this is worth passing even if subsidies don't pass. After all, what will happen if we do force insurance companies to take on so many more costs but don't offer subsidies? Insurance rates will skyrocket. The public will be outraged. And Congress will face one of three choices: (1) do nothing; (2) change the law to allow the bad old practices; (3) create a subsidies to help people buy insurance. Granted, the Teabaggers will probably be outraged at the subsidies and call for repealing the law instead, but I am guessing they will be in the minority, and the pressure for subsidies will be too strong to resist.

Subsidies

As a matter of policy, there is no doubt that if we are going to ban denials based on pre-existing conditions, rescission, and lifetime caps, we will need subsidies to cope with the increased rates. (Really, we need them anyhow). As a matter of politics, Republicans and the Tea base will no doubt be outraged and see the subsidies as "socialism," "a complete government takeover of healthcare," and something that calls for taxes. So there will be considerable resistance to such subsidies. On the other side, there is the threat of 30 second ads that "Senator So-and-So cast the deciding vote that blocked assistance to individuals and small businesses buying health insurance." And there is the specter of public wrath when premiums skyrocket and no help is at hand. So we may be able to pry loose a few Republicans to vote for subsidies to help buy insurance.

The other question is how to fund such subsidies. Republicans have an inflexible principle: No tax increases, even, no matter what the circumstances. That's going to be a tough one to overcome. No doubt even Republicans who do agree to subsidies will insist on financing them by cutting other spending. Here's my only suggestion. There is generally less resistance to taxes if people are assured that a particular tax goes into a particular fund to support a particular program. It feels more accountable that way. I personally think this is generally a bad system and that programs should be paid for from the general fund and all compete on an equal basis. The other problem is that whatever the revenue source for the fund, there is no way to ensure that it matches actual need for subsidies. But no matter. If creating a separate tax to pay for a "trust fund" is the only way to get subsidies enacted, I say go for it. (Of course, Republicans might just filibuster anything that raises taxes anyhow, regardless of skyrocketing premiums).

Cost control.

There are three cost control measures Republicans favor: (1) limiting malpractice claims; (2) allowing insurance companies to compete across state lines; and (3) bare bones policies. Everything else is "rationing," "government control of health care," "government bureaucrats coming between you and your doctor," "pulling the plug on granny" and even "death panels," "euthanasia of seniors" and perhaps even T-4. Republicans will not yield one inch on this. It is a matter of basic principle to them. Free markets, not government, must be in charge of controlling costs.

Notice that they have been sure there were death panels in there somewhere even before the healthcare bill was proposed in the first place. Republicans began to be alarmed over the subject ever since the stimulus bill included funds for comparative effectiveness research. That alone was enough to set off their alarm bells, even though it was only research and had no authority to mandate at all. Ever since the healthcare bill was proposed, Republicans have been sure there are death panels (by one name or another) in some part of it somewhere, even if their location constantly migrates. This is a huge, HUGE issue to them; anything that may suggest government restricting access to healthcare, or rationing it.

It's useless to point out that comparative effectiveness research is something the Mayo Clinic does that allows them to deliver top quality healthcare at well below average rates. It's pointless to argue that insurance companies deny people treatment all the time. It's useless to point out that pricing people out of healthcare altogether (which is what the free market approach will do) is ITSELF a form of rationing. None of those matter. What is important to Republicans is that all those are part of the private sector. Any cost control measure in the bill will be work of the Evil Government.*

So no cost controls other than tort reform or competition across state lines will be in any bill that can get through the Senate. But don't despair. Republicans do favor "entitlement reform." "Entitlement reform" is a euphemism for cutting Medicare, something they have denounced this bill for doing. But they fear openly taking responsibility for it and want to appoint a commission to make recommendations. Maybe, with luck, we can appoint some people to the commission who will make reasonable cost control recommendations.

Next post: The most controversial issue of all: Individual mandate.

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*And, to be fair to Republicans, their fears are not entirely crazy. Larger organizations do indeed tend to be more bureaucratic and rigid than smaller ones. It may be true that what works well at the Mayo Clinic would become overly rigid and bureaucratized if done by a large insurance company, let alone the government.

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