The war on the bros — January 18, 2014

The war on the bros

What Uwe Reinhardt said. In short: if you think that it’s an outrage that you have to pay more for your health insurance so that everyone can pay the same premium, including women and the elderly and the sick, then you should have been upset at the existing system of employer-based health insurance. Women and the old and the sick *at your company* are also paying the same premium as you, even though they likely go to the doctor more.

Reinhardt doesn’t even touch on the other obvious fact: one of these days you will be sick. One of these days you and your spouse may want to have a child. One of these days you will be old. When that happens, you’ll benefit from the same community rating that supposedly harms the “bros” today.

Did this country at some point lose the notions that we’re all in this together, that we’re sharing burdens, and that we’re all only one accident away from catastrophe? The phrase is “there but for the grace of god go I”; a just society protects everyone from unexpected, uncontrollable disaster. I hope we can relearn this.

Corey Robin gets at what’s so annoying about Obamacare — December 10, 2013

Corey Robin gets at what’s so annoying about Obamacare

Excellent post. Just one sample:

> A version of this notion came home to me not long ago when my wifes employer announced that they were changing their healthcare coverage. It used to be that our entire familymy wife, daughter, and Iwere covered under her plan, which provided great insurance for fairly low cost. Very old school. Then the employer announced that from now on any member of the familyi.e., mewho was eligible for coverage from their employer would have to use that insurance first. But, and heres the kicker, if that insurance didnt cover some particular procedure or doctors visit, then my wifes insurance would cover it. So now, on certain procedures or visits, I have to submit two claims: one to my insurance, and then, once they refuse to provide coverage, one to my wifes insurance. And then, because we have one of those health care accounts that makes the right so giddy, I can submit a third claim to that company (in the event that my wifes insurance does not provide full coverage).
>
> One procedure, three claims, all to get what, in more mature democracies, would be mine by right. Thats some freedom.

That comes by way of Robin’s post at Crooked Timber. Like Robin, “Im not interested in arguing here over what was possible with health care reform and what wasnt; weve had that debate a thousand times.” I too would like single-payer. I too think it would just be radically simpler. You pay your taxes, you get your services. Done.

I’m feeling this lately in particular. Our insurance has decided to emphasize “consumer-directed health care,” which means “making the user of health insurance pay more attention to how much things cost.” (We’ve also been offered a new, low-premium, higher-deductible health-insurance plan, paired with a health savings account. An HSA is like a 401(k) for your medical expenses. I hate 401(k)s and love Social Security for the same reason that I hate HSAs and love Medicare.) Two things to note about this:

1. Most of us are not responsible for most of this country’s health-care costs. Getting me to buy a generic medication rather than a name-brand one is just not going to solve any problems. So when a health-insurance company tells me that it’s “consumer-directed,” that’s when I reach for my revolver.
2. There are numerous points of negotiation in the health-care system. There’s the insurer negotiating with the provider (refusing to pay for certain services, say). There’s the insurer negotiating with the health-services consumer (refusing to cover certain procedures). There’s the health-services consumer negotiating with the provider (insisting on generics, or opting for a CAT scan at a scan center rather than at a hospital). And then there’s the government interacting with all the other parties. “Consumer-directed health care,” as I understand it, only works on the provider-consumer side. I’m not convinced that there’s very much negotiation to be had there.

Health care in this country costs more because it’s more expensive. This is not a tautology. For a given unit of care, we pay more for it. You can break down costs in various ways, but basically (total health care cost) = (cost per unit) times (number of units consumed). We don’t consume more units of care; we use hospitals less, in fact. We just spend more for a given unit of care than other countries do. One very obvious way to pay less for a given service is to change the balance of power between the provider (the doctor) and the insurer. If there were only one insurer out there that paid for all of your medical services, it could strong-arm the doctors. This is not rocket science; it’s how Wal-Mart offers low prices. It’s how Medicare offers low prices.

So whose problems is the insurance company solving when it makes me negotiate more with my doctor? It’s not solving the health system’s problem as a whole. It’s not likely to lower my prices. [foreign: A priori], my assumption is just that this is a disguised way for the insurer to make more money, by covering a smaller fraction of my costs with Obamacare’s blessing and with a friendly pat on the back while they tell me I’m on my own. If we had perfect price transparency, then maybe our negotiating power would have some teeth. And maybe Obamacare has some innovations to push in that direction; it certainly is filled with experiments that may really pay off. And Medicare is putting price data for individual providers up on the web. It’s not consumer-friendly at the moment, but it’s a start. With that sort of transparency, maybe we could actually make some use of “consumer-directed health care.” Even then, I’d still prefer that someone else — someone who spends all his or her time working to get good deals on health care — do this for me. Someone like my employer, say. But then, why would my employer want to do this? My employer is good at building software; there’s no reason to expect that it’s any good at judging which tests the doctor should give me. Let’s centralize the bargaining.

Incidentally, I’m also convinced that, within my employer, everyone is going to end up on bronze plans, or what would be called bronze plans if we were buying them through the exchanges rather than through our employers. Imagine that you have a choice between a high-deductible, low-premium plan and a low-deductible, high-premium plan. People who believe that they’re not going to need much health care (the young, the healthy) will opt for the high-deductible plan. Those who are more worried about their health will opt for the low-deductible one. This will lead to something that looks a lot like the classic adverse-selection death spiral: since the high-deductible plan is getting the healthy people, the low-deductible plan will have higher costs this time next year, which means it’ll have to raise its premiums. But then more people (now a somewhat sicker group) will rationally decide that the low-deductible plan doesn’t make financial sense for them, and will opt for the high-deductible plan. And so on.

I don’t know how much of this was planned ahead of time, but it seems perfectly obvious now. The cynical but, I’m afraid, probably correct take on it is that we now have two choices:

> to be ground down a bit at a time by technocrats who either wont admit to or do not understand the ultimate consequences of the policy infrastructures they so busily construct or to be demolished by fundamentalists who want to dissolve the modern nation-state into a panoptic enforcer of their privileged morality, a massive security and military colossus and an enfeebled social actor that occasionally says nice things about how it would be nice if no one died from tainted food and everyone had a chance to get an education but hey, thats why you have lawyers and businesses.

“Conservative” health reform — November 23, 2013

“Conservative” health reform

You should go read Uwe Reinhardt. That’s true 100% of the time, but it’s especially true here. Reinhardt writes about “conservative” health reform, where “conservative” somehow means “involving a great deal of intrusion into everyone’s life.” Remember how one of the big problems with HealthCare.gov is that it’s required to connect to so many other systems to confirm details of the beneficiary’s life? It needs to confirm that you’re not in the U.S. illegally; needs to confirm that your income is low enough to qualify for subsidies; needs to connect to private insurers’ websites; etc. How is that conservative? It’s likely to make an already inefficient system even less efficient.

Why is this so hard? I don’t need to sign up for bronze, silver, and gold national defense. I pay my taxes, and I get a service in response. Let’s just expand Medicare to everyone and call it a day. Or extend the VA hospital system to everyone and call it a day. Inasmuch as ‘conservative’ should mean ‘delivering a given level of service as cheaply efficiently as possible’, those approaches would be highly conservative. Instead we get systems that are more and more jerry-rigged over time, with more and more obvious flaws. Enough already.

LazyWeb request: Uwe Reinhardt, “The Disruptive Innovation of Price Transparency in Health Care” — November 13, 2013
Affordable Care Act silence is deafening — July 1, 2012

Affordable Care Act silence is deafening

Does it seem to anyone else like Democrats — including the President — passed the Affordable Care Act and then promptly stopped talking about it altogether? If my read on the situation is right, that’s because they perceived the law polls very poorly. But

1. If you’re going to lose an election, lose with your back straight. Either voters dislike your voting for the law or they don’t. If they don’t care how you voted, there’s no need for you to be silent about it. On the other hand, if they dislike it, and you believed in the law when you passed it, then stand up for it. You didn’t run for office just to win re-election; presumably you ran because you wanted to achieve something positive, and you thought the law was positive. If the voters do care and you didn’t believe in it when it was passed, your opponent is still going to hound you for your vote when you run for re-election. So what’s the point in hiding from it?

2. Whether something polls well or poorly isn’t an objective fact ‘out there’ in the universe; whether it polls well depends a lot on whether people whom Americans like — such as President Obama — are out there selling it. Which they aren’t.

3. The ACA as such polls poorly, because it’s been demonized as ‘Obamacare’. But some of the individual provisions — no discrimination against pre-existing conditions, lengthened coverage under one’s parents’ health insurance — poll well. In many cases I think it’s just that people don’t know what’s in Obamacare. In other cases, like the mandate, people genuinely seem to hate it. That seems like a failure of education: people need to understand that there are only a few ways to make health coverage universal without the market unraveling. Democrats have been *terrible* about selling the mandate.

4. Do you care about ensuring that everyone has health insurance, or don’t you? We really need to make clear that that’s what this comes down to: we believe in universal coverage; they don’t. If you believe in universal coverage, something like a mandate is unavoidable. (Expanding Medicare to everyone would have been another option, but insurers never would have stood for it.) Lately Republicans seem to be facing up to this, and at least admitting that they don’t care about universal coverage. If nothing else, that has the virtue of consistency. But it’s morally repugnant.

How much is the employer health-insurance subsidy worth? (Or, I regurgitate Austin Frakt.) — July 9, 2011

How much is the employer health-insurance subsidy worth? (Or, I regurgitate Austin Frakt.)

I come back to Austin Frakt’s post calculating how much the Federal subsidy for health insurance is worth every few months, and I think I have to re-study it every time. It’s a hugely important post.

Probably a lot of others don’t read wonky health-insurance blogs quite as obsessively as I do, so the background is like so: your employer (if you’re lucky enough to have an employer that supplies health insurance) doesn’t pay taxes on the health-insurance fringe benefit. When they pay you a dollar in wages, they have to pay their part of Medicare and Social Security taxes. Once they’ve paid their taxes and passed your wages on to you, you have to pay taxes on them. Health insurance isn’t like that: your employer doesn’t pay taxes on health benefits, and neither do you. So one dollar in health insurance is worth more than one dollar in wages to you and to your employer.

Turns out that the subsidy is really distorting. Professor Frakt’s exercise may already be clear to everyone, but I don’t think it was clear to me for a while. So in bullet form, trying to make it as clear as possible (to myself as much as to everyone else) it’s like so:

  • For every dollar an employer pays out in wages, a certain fraction of that dollar goes to taxes (employer pays Medicare and Social Security). Call that fraction T.
  • So for every dollar in wages that the employee receives, the employer pays $(1+T).
  • Flip that around: for every dollar in wages that the employer pays, the employee receives $1/(1+T).
  • Now the employee has his dollar in wages. Of that, a certain fraction goes to taxes (Medicare, Social Security, federal, state). Call that tax fraction E.
  • So the employee is left with $(1-E) of his dollar.
  • But his dollar was already $1/(1+T) of what the employer spent.
  • So of every dollar the employer spends on wages, what ends up in the employee’s pocket is $(1-E)/(1+T). Call this F, for “Final amount in the employee’s pocket.”
  • This means that $(1-F) goes to taxes, for every dollar the employer spends on wages.
  • Put another way: a dollar spent on health insurance, which no one pays taxes on, loses the government $(1-F). 1-F is called the “tax price.” Professor Frakt links here to a paper by the omnipresent Jon Gruber, an MIT professor who was central to building Massachusetts’ universal-coverage system, and who advised President Obama on the Affordable Care Act. The paper — “The Impact of the Tax System on Health Insurance Coverage” — sounds interesting.

To put some flesh on the numbers:

  • when the employer pays you a dollar (in wages, but not in health insurance), it spends 6.2 cents on Social Security and 1.45 cents on Medicare Part A. So T = .062 + .0145 = 0.0765.
  • you pay Social Security and Medicare Part A (same percentages as your employer), plus your Federal marginal tax rate (I’m in the 28% bracket), plus your state marginal rate (Massachusetts’ is 5.3%). So my marginal rate is 40.95%, whence E = .4095.
  • So when my employer spends a dollar on health insurance rather than on wages, the government loses 45 cents that it would have picked up in taxes. (Professor Frakt ends up with 37 cents using more-conservative assumptions, namely that the state tax rate is 5% and that my Federal marginal rate is 20%.)

This distorts the labor market — encouraging employers to buy more-expensive health-insurance plans — and costs the government money that it could be spending on other valuable things.

And it’s regressive: if you’re in the top (35%) bracket, you’re getting more of a benefit from the health-insurance subsidy than is someone in the 28% bracket. Same goes for the mortgage-interest deduction, and it may be even worse there: not only do higher-income people get more off their taxes for every dollar they spend on mortgage interest than do lower-income people, but the more you spend on a house, the more you can take off your taxes. Assuming Bill Gates’s house cost the $97 million that some random web page says it did, that he put 20% down, and that he financed it with a 2%, 30-year fixed-rate mortgage, he’ll be able to use the mortgage-interest deduction to avoid paying taxes on $26,345,019.10 in income over the life of the mortgage. Assuming he’s in the 35% bracket, that’s $9,220,756.69 that the mortgage-interest deduction saved him. Whereas if you’re in the 28% bracket and finance a $350,000 home the same way, you’ll save $33,270.77 over those same 30 years.

These “tax expenditures” cost the government money in the same way that buying a bomber or building a road costs it money. But tax expenditures haven’t, until recently, appeared on the radar in the same way that a $500 toilet seat does. We may well be paying for Bill Gates’ $500 toilet seat, but it hasn’t had the same visceral effect.

Choosing low-calorie meals (at the margin) — September 21, 2010

Choosing low-calorie meals (at the margin)

It’s one of the largely unpublicized but seemingly very important parts of the Affordable Care Act that restaurants with more than 20 establishments will have to start attaching calorie counts to their menu items. (This is in section 4205 of the bill. Because THOMAS links are still, bizarrely, after 15 years, inscrutable and impermanent, I’ve included that section below the fold.) I find this completely excellent. It may not end the obesity epidemic in this country, but it will certainly help at least some people make healthier decisions at restaurants. Quite often one just doesn’t know which items are unhealthy. It’s shocking how often a seemingly healthy menu item really isn’t; for instance, I got a Cobb salad from Cosí/Così just about every day for a few months, until I found on their website that it’s a 700-calorie salad. I no longer order that. At any lunch place that lists calories on the menu (Au Bon Pain, say), I routinely look for the lowest-calorie item. Even if I don’t pick that item, I look around the menu with that as a baseline. (The descriptor “low-calorie,” unfortunately, often means the same thing that “diet” does on soft drinks [which I also never drink]: “a natural-tasting ingredient has been replaced with the finest gross-tasting chemicals that Northern New Jersey petrochemical plants could churn out.”)

So I give huge thumbs up to this innovation. It may not solve anything, but it’ll help.

Continue reading

Health reform maybe striking a blow for gender equality? — April 8, 2010

Health reform maybe striking a blow for gender equality?

This is really out of my butt, but I do wonder:

* A lot of couples would really like to split the childcare more evenly.
* It would really be ideal, toward that end, if both members of the partnership could work part-time and take care of the kids the other part of the time.
* But there’s very little meaningful part-time work in this country.
* Part-time work is made even less of an option because health insurance largely only goes to full-time employees.
* But under health reform, you’ll be able to get health insurance through an exchange, if your employer doesn’t offer it to you. (Note to self: look up the details of who’s eligible to buy on the exchanges.)
* So some couples won’t need to send one partner into full-time work, because they’ll be able to get health-insurance with only part-time labor.

Obviously this isn’t a full solution, and obviously there are benefits to full-time labor that part-time labor still won’t be able to match. But at the margin, at least, I suspect this will lead more than a few couples to split the childcare. Which is a good thing.

T-shirt idea — March 26, 2010
Stop going off about the public option — March 22, 2010

Stop going off about the public option

Sorry to be so negative, but really: people just shouldn’t be getting pissed about the absence of a public option, for at least three reasons:

1. Even with a public option, we always would have needed to address subsidies for those with low incomes. People are welcome to chime in with other information here, but the public option does not address affordability at all. It addresses the quality of insurance. Subsidies were always the bigger deal.
2. *We got coverage for 32 million people*. We got *affordable* coverage for 32 million people. We got coverage that *saves 32 million people from health-care-related bankruptcy*. Liberals of a certain stripe have gotten monomaniacal about their preferred policy, rather than focusing on the end goal — which is *to help people who couldn’t afford good health insurance to afford good health insurance*.
3. Now we have something that we can fix. Before we had nothing. New entitlements don’t disappear, as David Frum has now-famously pointed out. Entitlements get better. So let’s make this one better.

This has been, in some ways, a great hour for the Left. In other ways, it has revealed them to be monomaniacal public-option fetishists. Now is not the time to continue the fetish. Now is the time to consolidate our gains and *keep moving forward*. You want a public option? Great! You’re closer to a public option than you were a year ago. So go get it. Donate to candidates who support it. Call Bernie Sanders’s office and ask what tactical advice he’d give. Don’t act like an armchair quarterback and complain that the big bad U.S. Congress with its big bad traitorous liberals didn’t give you what you wanted.