• In case David Brooks piqued your interest this morning…

    David Brooks this morning mentioned that conservative health policy analysts James Capretta and Robert Moffit have provided one of the best available roadmaps to Republican proposals to replace ObamaCare. You may not be familiar with their piece. As luck would have it, I published several posts on it here, here here here, and here.  At your service….

    I did not address one issue–the strategies Capretta ad Moffit would provide in protecting continuously-insured individuals with preexisting conditions. I just don’t know enough now to understand how their proposal would actually protect sick people beyond what’s already on the books due to HIPAA–or what to do about the possibility that low-income or jobless people may have trouble paying insurance premiums.

    Capretta and Moffit deserve credit for presenting a reasonably concrete proposal, even if many essential details are not fleshed out. Their proposal also underscores basic differences between liberals and conservatives. As I understand it, their proposal would constrain federal spending. It also seeks to address the substantial tax expenditures associated with employer coverage. Yet it would do so by shifting costs and risks onto individuals and onto state governments, repaying the states by granting them greater flexibility to offer a more constrained package of benefits to recipients. They would also decline to cover tens of millions of people slated to be covered under current law.

    PS: Yes thanks Paul Kelleher for noting disastrous usage mistake.

    • Pet peeve: the correct word here is “piqued,” not “peaked.”

    • Yeah sorry.

    • There are some decent ideas in Capretta’s work, and Aaron’s reviews were excellent.

      Two points do come to my mind:

      1. The conservatives are right — it does happen sometimes — in suggesting that high-risk pools are ultimately cheaper than forcing insurers to take bad risks.

      Assume you are a healthy 40 year old male. Your insurance premium is just $150 a month in a state that allows tough underwriting.

      Under guaranteed issue and community rating, your premium goes up to $500 a month or maybe more. (cf. New Jersey, NY, Mass, etc.
      (As someone with an actuarial background, I am VERY skeptical that even a mandate will change this premium increase at all.)

      Whereas if a high risk pool is subsidized by taxes, then the 40 year’s health premium stays at $150 but his tax bill goes up by say 1%.

      If you are an average earning worker, that means an extra $400 a year or so in taxes. If you are a hedge fund manager, that might mean an extra $10,000 in taxes.

      So the argument is good for the conservatives — but in practice, conservative politicians have not been willing to raise the taxes and stand the heat.

      A serious nationwide high risk pool would cost at least $50 billion a year. This is very roughly a 1% increase in the payroll tax. If the income tax is used, then lower income workers would not pay any part of the increase and the hedge fund manager would pay more.

      An honest discussion of revenue has not come from any presidental candidate since about Walter Mondale in 1984, and he lost 49 states.
      Capretta has to deal with that fact and his essay does not.

      2. The Medicaid issue has to be looked at with a racial filter.

      The stingiest Medicaid programs in almost every case occur in states that have a large number of minorities but a white legislature.

      The states want to keep Medicaid stingy so that poor people are not attracted to come to their state. (immigrants too) Given what has happened to budgets in California, NY, Illinois, etc., their concern is legitimate even if there is also some racism involved.

      The only answer of course is to federalize Medicaid and make its provisions universal — Greg Anrig has written on this.

      Bob Hertz, The Health Care Crusade

    • What I fail to understand is how conservatives equate health care choices with free market decisions such as buying groceries. The difference between choosing a melon versus a pineapple or Kroger versus Publix and deciding whether to get a biopsy of a mole on one’s arm is not even quantifiable on any realistic scale. . Failure to get the biopsy will not reduce my costs in the long run unless we as a society are prepared to let people die due to their medical/insurance decisions. Example: we would need to repeal the law that requires hospitals to treat people in the ER. No insurance= you die. In effect, everyone becomes a true ‘rugged individual’ who must choose between death or paying for insurance. The hope being that many choose death thus reducing medical costs.

      Are conservatives willing to let say a six year old who accidentally spills a pot of hot water on him/herself die in the ER because his/her parents have no insurance?

    • I read the piece. It discusses options to shift costs and perhaps to ensure that Medicare and Medicaid are slightly more transparent in the costs of those programs and how they are shifted from the beneficiaries to others who use health services.

      However, nothing in the proposals actually reduces costs nor the ongoing escalation we have seen over the past few decades … except, of course, the changes in purchasing behavior you see when consumers are actually confronted with the costs of the choices they make. And, I would agree that the reliance on “consumerism” (price tags, defined contribution programs featuring individual savings, incentives, etc.) is appropriate so long as individuals are “consumers” of health services and not, in fact, “patients”. That is, all the “right” incentives in the world won’t be effective once there is a clear, demonstrated need for significant medical treatment – and, any financial incentives to moderate utilization by patients would have to be so financially significant as to likely be counterproductive, and trigger a considerable set of unintended consequences.

      The personal responsibility component is not serious unless you remove (socialize) those health care costs that cannot be easily born by employers, individuals, etc. At the same time, the personal responsibility component won’t be effective where individuals can rely on others for budgetable and regular expenses, whether funded by insurance or self-insured. That is, everyday expenses should be the responsibility of every individual throughout their lifetime – perhaps with a running tab – particularly with respect to those expenses incurred due to an individual’s personal health choices and unhealthy behaviors, perhaps with a lifetime “tote” board. At the same time, those burdens that can’t reasonably be shouldered by individuals or employers, such as catastrophic expenses due to illness and injury, should be socialized. With respect to significant or catastrophic expenses, those that cannot be effectively funded by individuals or employers, are subject to a reinsurance system where all must participate.

      Where to draw those lines? Someone much smarter than me needs to make those choices. But there are examples out there – say if you couple CoverTN with a federal reinsurance program using private insurer intermediaries.

      But whether PPACA remains in effect or you get a “repeal and replace” option, my 30+ years of experience in delivering health coverage to workers while observing their health services usage, confirms that the old adages will continue to apply here without an effective personal responsibility component:

      – “Don’t tax you, don’t tax me, tax that guy behind the tree”
      – “The best tax is the one I owe and you pay.”

      You won’t control costs so long as people perceive costs can be born/shifted to others – other people, other taxpayers, employers, “the government”, whatever. So, the central conclusion of the authors is accurate, that our current version of health reform only gives us more of the same … at least when it comes to managing costs.