January 26, 2007

Bush's health care proposal

From the NYTimes:
The new health care proposals announced by President Bush this week purport to tackle the two toughest problems confronting the American health care system: the rising number of uninsured Americans and the escalating costs of medical care.

But on both counts, they fall miles short of what is needed to fix a system where — scandalously — 47 million Americans go without health insurance.

The financial sinkhole in Iraq and huge tax cuts for wealthy Americans have left the administration with no money to really address the problem. To keep the program “revenue neutral,” Mr. Bush would instead use tax subsidies to encourage more people to buy their own health insurance, while imposing additional taxes on people who have what Mr. Bush deems “gold plated” insurance.

It is a formula that would do little to reduce the number of uninsured Americans and would have a high risk of producing pernicious results. Even White House officials acknowledged earlier this week that they expected the number of uninsured to drop by only three million to five million people as a result of Mr. Bush’s proposals. They expect the states to take on most of the burden.
After the proposed starting date in 2009, the administration estimates, about 80 percent of workers with employer-provided policies would pay lower taxes and 20 percent would pay higher taxes, unless they reduced the value of their health coverage to fit within the standard deduction.

The new standard deduction would almost certainly entice some people to buy health insurance who had previously elected not to. But a tax deduction is of little value to people so poor that they pay little or no income tax. And unfortunately, it is those people who account for the vast majority of the nation’s uninsured.

Instead of trying to fix that fundamental flaw, the administration has decided instead to buck it to the states. The White House has offered few details. But its idea is to allow states to redirect federal money that now helps to finance hospitals that provide charity care and use it instead to subsidize health insurance for the poor.

If the administration really wanted to help low-income people, it would have proposed a refundable tax credit that would have the same dollar value for everyone — instead of a tax deduction, which primarily helps people in high tax brackets. Even those who do not pay taxes would get a check for the dollar value of the credit, providing them at least some money to help pay for health insurance. Congress ought to recognize that credits are the better approach for even such a limited plan.

As for the tax increases on those “gold plated” health policies, the White House is hoping to discourage people from using high-priced comprehensive health policies that cover everything from routine office visits to costly diagnostic procedures that are not always necessary.

The administration’s goal is to instead encourage people to take out policies that might reduce the use of medical services, like policies with high deductibles or co-payments, or managed care plans. But even “copper plated” policies can exceed $15,000 in cost if they are issued in areas where medical prices are high or to groups with high numbers of older or chronically ill workers.

The whole approach rests on the premise that comprehensive prepaid health policies are a major factor in driving up costs; the theory is that people will tend to use services if they are covered. There is probably some truth in that.

But the main drivers in rising health costs are the costly services, high-priced drugs and hospitalizations for people who are seriously ill with catastrophic diseases or multiple chronic illnesses. Making their health coverage less generous would simply make it harder for them to get the care they need.

The greatest risk in the president’s proposal is that it would seem likely to lead many small- and medium-size employers to stop offering health benefits altogether on the theory that their workers could buy affordable insurance on their own. That would leave many more Americans at the mercy of the dysfunctional individual policy market, where administrative costs are high and insurers strive to avoid covering people who are apt to become sick and need costly care.

For all its fanfare, Mr. Bush’s plan would be unlikely to reduce the ranks of the uninsured very much. And if things went badly, it could actually increase their numbers. That’s not the answer Americans are waiting for and not what they deserve.
Wow, what a shock. Again, a plan from Bush that favors the insurers and health care corporations and is designed to squeeze the middle class ever further.

The way this plan is designed, it only affects those making enough income to own fairly steep income taxes, which of course leaves out millions of people. Beyond that, Bush apparently thinks that those lucky enough to enjoy good health care have "gold plated" coverage and should have to pay more for it, the assumption being that these people can afford it. Unfortunately, that's not always the case. Teachers, nurses, certain union members, and others often are not paid very high wages, but much of their compensation is in the form of good health insurance. These folks will now have to either give it up or pay big for it from often middling incomes.

Even the White House estimates that this plan would result in only 5% of uninsured people in the country buying insurance. Not exactly a great stride forward.

Paul Krugman offers his observations on the issue:
On the radio, Mr. Bush suggested that we should “treat health insurance more like home ownership.” He went on to say that “the current tax code encourages home ownership by allowing you to deduct the interest on your mortgage from your taxes. We can reform the tax code, so that it provides a similar incentive for you to buy health insurance.”

Wow. Those are the words of someone with no sense of what it’s like to be uninsured.

Going without health insurance isn’t like deciding to rent an apartment instead of buying a house. It’s a terrifying experience, which most people endure only if they have no alternative. The uninsured don’t need an “incentive” to buy insurance; they need something that makes getting insurance possible.

Most people without health insurance have low incomes, and just can’t afford the premiums. And making premiums tax-deductible is almost worthless to workers whose income puts them in a low tax bracket.

Of those uninsured who aren’t low-income, many can’t get coverage because of pre-existing conditions — everything from diabetes to a long-ago case of jock itch. Again, tax deductions won’t solve their problem.

The only people the Bush plan might move out of the ranks of the uninsured are the people we’re least concerned about — affluent, healthy Americans who choose voluntarily not to be insured. At most, the Bush plan might induce some of those people to buy insurance, while in the process — whaddya know — giving many other high-income individuals yet another tax break.

While proposing this high-end tax break, Mr. Bush is also proposing a tax increase — not on the wealthy, but on workers who, he thinks, have too much health insurance. The tax code, he said, “unwisely encourages workers to choose overly expensive, gold-plated plans. The result is that insurance premiums rise, and many Americans cannot afford the coverage they need.”

Again, wow. No economic analysis I’m aware of says that when Peter chooses a good health plan, he raises Paul’s premiums. And look at the condescension. Will all those who think they have “gold plated” health coverage please raise their hands?

According to press reports, the actual plan is to penalize workers with relatively generous insurance coverage. Just to be clear, we’re not talking about the wealthy; we’re talking about ordinary workers who have managed to negotiate better-than-average health plans.

What’s driving all this is the theory, popular in conservative circles but utterly at odds with the evidence, that the big problem with U.S. health care is that people have too much insurance — that there would be large cost savings if people were forced to pay more of their medical expenses out of pocket.

**UPDATE** I neglected to specifically note that the tax portions of Bush's proposal are DOA. Charlie Rangle, chair of the House Ways and Means committee where tax measures must originate, said immediately that he'd not consider that part of the proposal. So in that respect, much of the idea is meaningless. The only part remaining is jiggering the federal aide to states.

Such a relief to see that congress now has at least some means of blocking White House efforts to continually help out the already well-off while punishing the lower and middle class.


At 1/27/2007 12:33 PM, Blogger illinidem said...

Bush’s plan is not a plan. The other plans being put forward and California and Massachusetts come closer, but are so complicated that they will be a nightmare to administer.

A single payer system is the only reasonable solution. Health care should not be tied to employment, nor should businesses be forced to grapple with more than 10-20% increases in premiums annually to stay competitive in the employment market. Single payer systems such as Medicare have proven to be far more efficient than market driven plans underwritten by private insurers.

Single payer plans are not government health care. Market forces still will drive delivery and encourage innovation. The larger question is whether any of our leaders will have the political courage to step out and support such a system

At 1/27/2007 5:20 PM, Anonymous Anonymous said...

>>But even “copper plated” policies can
>>exceed $15,000 in cost if...

You know, Bu$h was just here in Kansas City (honky suburb Lees Summit if you want to be picky), touting the above. Of interest is that in our metro of 1.7 million people, we have over 100,000 people who do not even make $15,000 per year, let alone medical insurance.

But none of those people live in Lees Summit or were able to attend the speech. They were busy at one of their two <35 hours-per-week jobs, working 70 hours for no insurance.


Blue in Kansas

At 1/28/2007 7:30 AM, Anonymous Anonymous said...

Bush's plan s not a plan, but the Dem's have offered nothing better. Their plan is, 'let the government subsidize (give) everyone full healthcare' (which has never worked in anything the government has ever done - and is against everything the free market system is about...what next, 'everyone has the right to free and unadulterated travel, so the government will supply every family with a car (and then every driver a car?).

It seems to me that everyone is overlooking the primary problem with healthcare - the cost issue.

A single-payer system is doomed for failure, if we do not deal with the cost issue - in fact, costs may increase. However, if we deal with the cost issue first and foremost, the solution to the un-insured problem may work itself out - at a minimum, it will be easier to solve.

Let's face it, the problem is a cost issue and until that is addressed, everything else is 'rearranging the deck chairs on the Titanic.'

At 1/29/2007 12:17 PM, Blogger The Inside Dope said...

Anon 7:30.

How do we control costs?

And a single payer system would, could, and has worked. But the enormous corporate interests which would be hurt or eliminated will make it impossible to implement in this country. I wouldn't worry.

At 1/29/2007 1:34 PM, Anonymous Anonymous said...

Where has a single payer system worked?

Not in Canada - where they ration medical services.

Not in England - where they do the same.

Do you really believe that people in the US would stand for rationing? They will not, and the country cannot affort to pay for the healthcare of 300,000,000 million people in a manner at which we are accustomed.

My issue - control costs,

1. No advertising by drug companies or hospitals (there is a 15+/-% savings right there),
2. Tort reform. Profit has to be taken out of doctors making mistakes. Blatant malpractice is one thing, but we have to accept that people indeed die - and not sue everytime it happens.
3. Maybe hold people responsible for their personal health...an obesity tax. Why should someone who is grossly overweight (and a greater risk) have a 'single payer system' pay for all of their medical costs at the same clip as someone that has taken care of themselves?

There are means to control costs...

But to your point - where has it worked?

At 1/29/2007 1:52 PM, Blogger The Inside Dope said...

Canada and England.

And while you're punishing obese people, why stop there?

Why not impose higher costs on people who can't afford to join health clubs? And tax people who eat at fast food joints because they can't afford the pricier restaurants too.

Hell, why not just make people who can't afford sky-high medical care pay for it all?

Or maybe we could spread the cost across mulitple millions of people and it would reduce the cost to all.

That would reduce delivery costs and save untold millions of dollars by providing preventitive care rather than forcing people to wait until they're about to die before they show up at an ER when they're already very ill for vastly expensive treatment.

Nah... that's a bad idea.

We do that with highways, the military, and thousands of other things and that hasn't worked at all.

Besides, some wealthy people might actually have to pay a few bucks more, and we can't have THAT.

At 1/29/2007 7:53 PM, Blogger illinidem said...

Single payer and government run (i.e. U.K. and Canada) health care are very different things. Single payer is a model similar to Medicare. While it is not perfect, the percent of health care dollars spent on administration are not anywhere near the costs incurred in traditional commercial insurance.

Anon, there are several problems with your line of reasoning:

*Advertising is nowhere near the price you have quoted. While I actually agree with eliminating advertising, it is nowhere the cost savings you describe.

*If tort reform were undertaken in the most extreme fashion, it would still only result in a savings of less than 1% of the total costs. In states where the tort reform measures have passed, there has not been a corresponding reduction in insurance premiums.

*Controlling costs is very important, but first look at the costs that are easily controllable rather than trying social engineering experiments. About twenty cents of every commercial health care insurance dollar are spent on administration, marketing and profits for the company, leaving about 80 cents on the dollar for actual health care expenses paid to doctors, hospitals etc. Medicare, by contrast pays about 98 cents of every dollar on actual health expenses.

Finally, if you do not believe rationing happens now, you have not been a health care consumer recently. Rationing is another word for pre-approval and plan of care requirements which are commonplace in modern medicine. For any procedure, medicine and diagnosis there are pre-determined levels of coverage, visit limits and authorized treatments. The idea that a patient can go into a doctor’s office and get anything they want is a myth from a time gone by.

At 1/30/2007 7:19 AM, Anonymous Anonymous said...

illinidem - I like the thought out manner of your presentation. However,

Administrative costs for Medicare is greater than 2% - are you kidding me? In no way does government, at any level, work as efficiently as stated.

Malpractice lawsuits and the corresponding insurance rates is indeed killing healthcare - and the availability of it. I do not advocate a free pass for malpractice, but reasonable laws are indeed needed. If you save a OBGYN $200,000+++ on insurance premiums and rates do not drop - then someone needs to step in...but indeed this is an issue.

Rationing certainly happens, to a degree now, however, it pales in comparison to the rationing found in Canada and England.

The issue is that there is no perfect system, likely will not be. However, the place to start is controlling costs - not giving away the pot of gold at the end of the rainbow.

I certainly do not understand all the possible means to control costs - some means will include government intervention, however, cost control has to be the point of beginning, otherwise, with our government...we'll never get there.

At 2/01/2007 4:05 PM, Anonymous Anonymous said...


As long as cost is not an issue...

It is not fair that some people have to take the bus, while others drive old cars. I believe that fair is fair - everyone should have the right to drive a Cadilac, or at least a nice Buick.


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