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It's a pretty good thing that touching hot things causes us sharp and relatively immediate pain. It means the incentives to avoid touching hot things are well-aligned. That's less true with health-care reform (and much less true with global warming). So much as families feel a bit burdened by health-care costs now, they're actually protected from the bulk of the system's spending: they think employers foot the bill, or the government does. In fact, they do, through lost wages, and they do again, through higher taxes. As health economist Jon Gruber explains, this makes the politics of health-care reform rather tricky: you're trying to solve a problem that's much worse than people realize, and so the real solutions are more painful than they're willing to accept. The incentives are misaligned.
Unless consumers face a financial penalty from their choices that drive health care upward, supply-side reforms will fail.
We already have an excellent example of this problem: the reaction to managed care in the late 1990s. Managed care in its strongest form was in fact successful in lowering the growth rate of medical costs; employer-sponsored insurance premiums rose by just 2 percent per year or less from 1995 through 1997.
Yet the managed care “revolution’’ ended in its infancy because of a public backlash. Consumers perceived that they were being excessively restricted in their choice of provider and denied care too frequently by care managers. In fact, there is little evidence to support this perception. The ample literature on managed care has not provided any consistent evidence that it leads to lower-quality care or outcomes. Yet the abandonment of effective care management is partly why employer insurance premiums rose at double-digit rates again in the early 2000s.
But what if consumers weren’t so insulated from the financial consequences of their health insurance choices? The typical employee pays only a small fraction of the full costs of employer-sponsored insurance and has no idea what the total costs are. Moreover, the premiums that all employers and most employees pay are exempted from both income and payroll taxation, unlike wages. This shields firms and employees from reaping the financial benefits of lowering insurance costs.
Suppose a company offers its employees a new plan that is $1,000 cheaper, and offers to pass the savings on to employees in the form of $1,000 in higher wages. The problem is that the $1,000 in higher wages would be taxed, while the more expensive insurance they now hold is not. So for the employee, the relevant savings is not $1,000 in higher wages, but $600 in after-tax wages. Many employees won’t make that trade-off.
I would like to go a lot further. I would like to see the tax preferences eliminated, and I would like to see every worker get the money their employer pays for their health care put back into their wages. Then I would like them to purchase health insurance on their own, so they see the full cost of it, and can decide whether they're willing to support more radical efforts to bring those costs down, or whether they're willing to accept more care management in order to save some money. This is, basically, how the Wyden-Bennett bill works, and it's why it's such a gamechanger. It's also why it has so little legislative support: It tries to solve the full problem when people only feel a small fraction of the problem.
Smooth LikeRemy: "Let's Get On With It Mr. President"
This why I LOVE Bill Moyers. The man tells it like it is with no BS.
Nice plug for Josh Marshall over at TPM at the end too.
Ezra Klein on The Primacy of Congress
Benen: PENCE DOESN'T DESERVE ANOTHER PLATFORM...The problem with David Brooks's column today isn't that it's wrong on the specifics. It's not, really. It would be good if the health-care proposals on the table accorded more closely with the views of the most ambitious experts. But Brooks's explanation of why health-care reform differs from this technocratic ideal is misleading to his reader. He argues that the health-care reform proposals on the table are insufficiently ambitious because of some intellectual oversight on the part of the White House. If only they read more white papers! That's simply not true: This particular White House contains more expertise on the economics of health care than any in memory. What they don't possess is the capacity to change the incentives of Congress.
Take the simplest way to both pay for health-care reform and cut health-care costs: reforming the employer tax exclusion. House Democrats quickly shot that down, no Republicans offered their vote in exchange for the policy, and the Senate Democratic Leadership eventually killed the idea. What was the White House to do?
Or take the Wyden-Bennett bill, which Brooks brings up as an ambitious alternative. When this process began, that bill had eight Republican co-sponsors. Now it has, in reality, five, and only two of them, to my knowledge, have committed to voting for it. What was the White House to do?
Or take the "Gang of Six" process, which pared health-care reform back significantly. Max Baucus, chairman of the Senate Finance Committee and thus the gatekeeper for legislation involving Medicaid, Medicare or new revenues, wanted to pull the bill into a backroom and negotiate its shape with a few of his closest friends. What was the White House to do?
To put it more simply, Congress writes and passes legislation. The president cannot write legislation or pass it. What is the White House to do about that?
The president does not have the power to substantially change the dynamics of Congress on health-care reform, or big bills in general. If they did, Clinton would have passed health-care reform, as would Nixon and Truman and FDR. But what Brooks tells his readers today is that this is, in fact, Obama's fault. It is a lack of presidential audacity as opposed to congressional will. But this is worse than untrue: It's damaging. It feeds the persistent delusion that the fix to our problems is a different president or a better White House strategy. And so we change our presidents, and the White House revamps its tactics, but we do not solve these problems. If you don't have a competent driver, buying a bunch of new cars doesn't end your transportation woes.
The president cannot pass legislation over Congress. But Congress can pass legislation over the president. That's how our system is constructed, but you wouldn't know it from the way we report on it.
House Republican Caucus Chairman Mike Pence of Indiana appeared on MSNBC the other day, and commented on his vision for health care reform."Republicans believe that in addition to tort reform what we should allow Americans to do is to purchase health insurance the way members of Congress can, the way all federal employees can and that is to buy health insurance across state lines to get out there and allow new insurance products to be created in a new competitive marketplace ... even the private insurance elements in the Exchanges, you know, are essentially government controlled and government dictated."
This is completely wrong. It reflects a fundamental misunderstanding of how the Federal Employees Health Benefits Program operates, and how exchanges work. What's more, it's keeping with the recent trend -- last month, Pence appeared on MSNBC on a Wednesday, made ridiculous and demonstrably-false claims about reform, and was invited back on Thursday to repeat the exact same demonstrably-false claims.
In other words, we learned this week that Pence is not only confused about the basics, he doesn't even understand his own health insurance plan. Matt Yglesias noted the other day, "Pence doesn't sit on any of the committees relevant to health care or to federal personnel management, which perhaps explains why he doesn't know what he's talking about. At the same time, that only raises the question of why he's talking about this on television at all."
And that's why I brought this up: Pence will be a featured guest on ABC's "This Week with George Stephanopoulos" tomorrow.
Why on earth would ABC reward Pence with another appearance? If he doesn't understand the policy, doesn't have a role in shaping the policy, can't explain his opposition to the policy, and is going to reject the policy anyway, what possible value is there in having him on to discuss it?
Every time I see Pence, I'm reminded of something Matt wrote earlier this year: "Mike Pence is a moron, and any movement that would hold the guy up as a hero is bankrupt.... I would refer you to this post from September about the earth-shattering ignorance and stupidity of Mike Pence.... [I]t's really staggering. In my admittedly brief experience talking to him, his inability to grasp the basic contours of policy question was obvious and overwhelming."
There are conservatives who can talk about health care intelligently. Pence isn't one of them. Inviting him onto national television to repeat nonsense he doesn't understand is absurd.
Ezra Klein asks: What If They Had a Health-Care Reform Bill and Nobody Could Support it?
This is sadly right on the mark.I'm firmly on the record as being willing to support all manner of compromises on health-care reform. Policy dogmatism has not, over the long history of this issue, proven a successful strategy. But there's an increasingly evident path by which health-care reform begins to hurt the very people it's meant to aid. As Jordan Rau reports, making health-care reform affordable for the centrists in the Congress could make it unaffordable for the people.
The basic structure of the bill has three main planks working in conjunction with each other: The individual mandate creates a mechanism for a universal, or near-universal, system. A universal, or near-universal, system creates the conditions for insurance market reform. The subsidies make the individual mandate affordable for people to follow.
There are a few ways to destabilize this system. The most likely way is to reduce the subsidies so that the individual mandate isn't really affordable. That seems to be happening even as we speak. At that point, reformers have two options, both of them bad.
The first option is to reduce the value of the minimum insurance policy such that buying something the government considers insurance isn't very expensive. This means policies with high deductibles and co-pays, or policies that don't cover very much. But asking someone with a relatively low income to purchase a policy with a $1,500 deductible and significant co-pays is asking them to purchase something they can't really afford to use. So we're making them spend $7,000 or $8,000 a year on something they don't necessarily want and can't really take advantage of. That's a recipe for a huge backlash.
The second option is to drop the individual mandate altogether. Obama, who didn't have a mandate in his campaign plan, might be amenable to this approach. But here, too, there are problems. The young, healthy risks will hang back from the system while the older, sicker risks will flood in to take advantage of subsidies and new regulations that stop insurers from discriminating against them. The risk pool will reflect that, and health-care insurance will become even more unaffordable for the people who need it. And because it's less affordable because of the presence of the sick, it will become even less attractive to the healthy.
The happy news is that the difference between a plan with decent benefits that's affordable for people and a plan that's not affordable for people and doesn't offer decent benefits is not that large. Optimally, you'd want to spend about $1.3 trillion over 10 years. You could probably do it for $900 billion to $1 trillion. But you can't do it for, say, $700 billion, which is a number I'm hearing fairly frequently.
The difference between doing this right and doing this wrong is, in other words, about $30 billion a year, or $300 billion over 10 years. To put that in perspective, many of the legislators who are balking at the cost of health-care reform voted for the Kyl-Lincoln bill to reform the estate tax at a cost of $75 billion a year, or $750 billion over 10 years. You can make health-care reform work at a price tag that legislators are, in theory, willing to bear, at least when the tag is attached to tax cuts.
TV guide: Franken video gets attention Sept. 4: Guest host Ana Marie Cox talks about what Sen. Al Franken, D-MN, has to do to receive national media attention.
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