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Health Care Summit: Half-Time Report



February 25th, 2010
by Timothy Jost

Editor’s Note: This is the first of 2 posts from Tim Jost on the summit. Part 2 looks at budget deficit, Medicare, malpractice, and possible areas of agreement.

The health care summit has now been underway for almost 3 hours.  President Obama established in his opening statement what he hoped would come of the summit, which was to reach agreement on areas of commonality in the need for health care reform.  The President, as well as a number of the Democratic speakers, has stressed these commonalities.  The message is, of course, we both have the same goals and our bill meets these goals, so what is the problem? 

The Republicans are having none of it.  They showed up to reject the Democratic bill and present their own alternatives.  They came heavily armed with facts and figures (some of them plausible, some not), and are in a constant attack mode.  By and large this attack has to do with substance, although in some instances, notably John McCain’s speech, it is an attack on process as well.  They see the bill as a Washington takeover of the health care system, and they are vehemently opposed.

The Democrats are by and large not engaging these attacks.  Rather they are telling stories about how their constituents are suffering under the current health care system, and, like the President, stressing how their legislation embraces Republican ideas.  It is a pity that they are not more aggressively engaging the Republican claims, because they could convincingly do so.

The Republicans, for example, repeatedly come back to the issue of malpractice, a theme that plays well in the United States where the public has long since accepted as a fact that malpractice and consequent defensive medicine are major cost drivers. David Camp noted that the Congressional Budget Office concluded that the Republican changes in malpractice law, which basically make it harder for injured people to sue, would save $50 billion over 10 years.  What he did not say was that this is a half a percent of the total costs over that period, two days of health care costs per year.  He threw out larger figures from other sources, but these figures are not only contrary to unbiased research in this area, but also are belied by the fact that California and Texas have already adopted the Republican reforms and are not experiencing health care costs dramatically lower than the rest of the country.  Where was McAllen again?

Interstate Insurance Sales, Association Health Plans, And High-Risk Pools

Interstate sales of health insurance, another Republican proposal, are fine, and are encompassed in the Democratic bill, but subject to consumer protection regulation.  You cannot simply buy auto or homeowners insurance from any state in the country, but only from insurers licensed in your own state.  The same thing is true of health insurance.  MEWAs for a time permitted unregulated sales of insurance and the result was serious fraud problems.  As the President’s ACME insurance example shows, just because something calls itself an insurance company doesn’t really mean it will be there when you need it.  State insurance commissioners oppose unregulated interstate sales because they are a recipe for disaster.

Association health plans already exist in many states, and are offered by the Republicans as an alternative to the exchanges.  But association plans can freely cherry pick the best risks, leaving higher-risks in the nongroup pool, driving up costs.  They make insurance cheaper for the healthy, but much more expensive for those who really need it.  High risk pools exacerbate this problem by putting all of the high risks in one, very expensive, pool.  They have been around for decades but have not made a serious dent in the problem of the uninsured.  The exchange solution, building bigger pools and getting everyone in them is a far superior solution.

Medicare Spending: Much Is Wasted … But None Should Be Cut?

Senator McConnell claimed that one third of Medicare expenditures are wasted and that 20% are consumed by fraud.  Leaving aside the issue that these fraud statistics are simply not plausible, and that fraud also is a serious problem in the private insurance sector, the fraud claim ignores that dozens of pages of fraud prevention provisions in the Democratic bill (many of them Republican ideas) and the additional provisions in Obama’s proposal.  The greatest irony, however, is that the claim that one third of Medicare expenditures are wasted was followed by strident opposition to cutting any Medicare expenditures for securing the program’s future and funding other needs.  If there is waste in Medicare, why not go after it in a targeted way, which is what the Democrats’ bill does.  It is a shame, however, that the Democrats did not make this point more forcefully.

Insurance Premium Rates

Perhaps the most substantive disagreement between the parties was over what each plan does to insurance rates. Let’s first get some things straight.   First, the Senate bill clearly and absolutely does grandfather in both existing individual and employer plans.  Some regulations would apply to these plans over time, but not the essential benefits provisions.  Second, the Senate bill does not regulate the benefits provided by employer or large group health plans.  Third, the Senate bill does not affect HSA’s except to increase penalties for withdrawal of funds for non-medical purposes.  It does limit contributions to FSAs, but since when did anyone see “use-it-or-lose-it” FSAs as a cost-control strategy?

The Republicans are right, however, to point out that the CBO projects that health premiums in the nongroup market will go up under the Democrats bill.  What no one mentioned is that after the subsidies are applied, they will go down dramatically for most people.  Also the CBO projected that premiums would go down in the nongroup market under the Republican bill. 

The reason why the premiums go up under the Democratic bill is because the coverage is richer and more higher-risk people are covered.  One must remember that the vast majority of those going bankrupt from health care costs are in financial trouble because their coverage is inadequate to provide financial security. There is also growing evidence that the underinsured are not getting adequate health care.  The Democratic bill would put a floor under coverage.  The CBO evaluation of the Republican bill, on the other hand, notes that it will reduce premiums by covering more low and fewer high risk people and by reducing the scope of coverage.  More uninsured, more underinsured.

The Real Question 

This poses a real difference between the proposals.  Do Americans want better insurance coverage, and are they willing to see some tax increases to get it?  Do we want to see everybody covered, regardless of health status? Or would we rather have cheaper policies that cover less and that are not available to those with preexisting illnesses, but pay less in taxes (and keep Medicare expenditures high even if the money is wasted)?  This is the question the debate needs to frame more clearly.

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