• Patients’ Choice Act Needs to Meet the CBO

    As I noted Thursday, Rep. Paul Ryan‘s speech last week embracing the Patients’ Choice Act (PCA), completed the “replace” part of his call to “repeal and replace” the Affordable Care Act.  While the details of Rep. Ryan’s plan differ for the various parts of the system, the overriding idea is moving toward a defined contribution from the federal government, instead of a commitment to providing a given level of insurance coverage, shifting costs to either individuals or states. The outline of Rep. Ryan’s overall “replace” plan is:

    • Medicare (45 Million persons in 2011). No great changes for those now covered by Medicare, or who will be so covered in the next 10 years. However, for those who become eligible for Medicare more than 10 years from now, they would receive a voucher with which to purchase private health insurance. Eventually, Medicare as a government insurance plan would go away with the death of the last beneficiary, replaced by this system of private coverage.
    • Medicaid (60 Million persons in 2011). Block grant the program to states, fixing the cost to the federal government and shifting the balance to the states.

    These two policies were adopted  in broad form (235-189) when the House of Representatives passed its Budget Resolution on April 15, 2011, and have been much discussed; I am not going to get into them (Austin has written a lot on the Medicare proposal). I am going to instead focus on the last part of Rep. Ryan’s replacement strategy, the Patients’ Choice Act, that would directly impact around two-thirds of the U.S. population almost immediately if passed:

    • Privately insured (160 Million persons in 2011) and uninsured (50 Million persons in 2011). The Patients’ Choice Act represents Rep. Ryan’s vision for how health insurance would be remade for persons who are not elderly and not poor enough to qualify for Medicaid. In short, the tax preference of employer paid insurance would be repealed, all persons/families would get the same tax credit with which to purchase private health insurance, either inside or outside of state-based exchanges. The premium levels are far below average premiums today, meaning they would finance only catastrophic levels of coverage. There are many details that need to be considered. I outlined some of them last week.

    I am going to drill down on these details by going through several of the key Titles of the PCA over the next couple of weeks. However, the punch line for this analysis is clear regardless of what I think:

    • the House Republicans need to mark up the PCA in committee (Commerce and Ways and Means for sure, perhaps Budget), pass the bill out of the relevant committees, and see what the CBO has to say about them.

    Politically, it is an advantage to “have a plan” but not commit to the nitty gritty details. The PCA has been around for a while, having been introduced into the 111th Congress on May 20, 2009 but has never been scored by CBO since it did not see the light of day in the last Congress because the Democrats controlled the House of Representatives. However, the Republicans have controlled it for the past 9 months, and there is nothing standing in their way of filling in the blanks, passing the  PCA out of committee(s) and seeing what the CBO has to say. To paraphrase what a Little League umpire once told me, the PCA is nothing until CBO tells us what it is. Only then can the country understand the replace part of repeal and replace.

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    • Don- My insurance broker buddy is on leave of absence, so I have not been able to him for input. What kinds of deductibles are we talking about if you are buying catastrophic family insurance for $5700? The average family plan runs about $15,000 right now. I had guesstimated about 12k-20k. I think that this should also be tied with the amount of savings people currently average for each income quintile, ie, would such high deductibles be feasible? (Sorry to ask you these things, but hope you know them offhand. Will look for them later.)

      I predict the PCA will be scored after the election. Unless, would they score it if someone in the opposition asked them to score it?

      Steve

      • @steve
        I think for CBO to score it they need the details filled in that would transpire from marking it up in committee. I am not sure about a member of the minority asking for it to be scored, and in any event, they would have to provide numerous details to enable a score. I am not sure how high, but obviously the deductibles would be quite high. There is nothing wrong with someone making the case that what we need is catastrophic coverage, we just need the details and then hear them make the case. Steve Parente at Univ of Minnesota did some private scoring of PCA and HR3200 during the summer of 2009; I had forgotten that until writing this comment. I am out of town at an intensive meeting and cannot look into it for the next few days, but my recollection is that Steve’s private scoring had a lot more ‘behavioral action’ in scoring all plans. By that I mean that at least when comparing what he said about coverage levels of HR3200 v. what CBO said, Steve said the summer 2009 version of HR3200 would cover far more than did CBO. I say this to keep in mind if you find his private score of PCA. Sorry to not be able to provide more right now. Bottom line, we need to see what CBO thinks to take the PCA seriously.

    • This plan is based on two goals. The first goal, like the Ryan Medicare replacement program is to shift the costs of health care onto individuals. The PCA will do this, as will the Ryan plan for replacing Medicare with premium subsidies.

      The second goal is to control medical costs by competition in the private insurance industry. The PCA will not do this, the same as the Medicare replacement program will not control costs.

      See the arguments here.

      http://dismalpoliticaleconomist.blogspot.com/2011/09/private-health-insurance-premiums-rise.html

      There is a very simple question which the Ryan and Republican proposals cannot answer satisfactory. “If private insurance can control costs, why hasn’t it?”.Or do they regard the 9% increase in private insurance costs for the past year good cost control?

      We know what will happen with health care when the costs are shifted to individuals. They will adopt high deductible plans, go without medical testing and basic medical care. Then when they do become ill, it will be much more expensive and a much more serious illness.

      Also, because the health care delivery system in a high fixed costs industry, the lower usage will largely result in higher prices for procedures.

      Basic economics tells us that Ryan type plans will be the worst of all possible worlds, higher costs and a lower levels of health care. Of course, basic economics does not really fit in the Ryan type plans, it is ideologically driven, not fact base driven.

      This system could work, if the insurance industry follows the trend of purchasing health care delivery systems and merging health insurance with health care delivery. If the market forces that move, things may work out, but if not .the U. S. will continue to lead the world in health care spending and continue to fall behind the world in the quality of health care.