It's been two whole years since the Speakeasy's inaugural post explaining the concept (and, sort of, the name). We've covered a lot of ground in the 137 posts since but there's a lot more ground to cover. So let's keep it alive.
Raise your mugs to the Speakeasy!
Saturday, September 25, 2010
Tuesday, September 21, 2010
Happy (Belated) Constitution Day
I don't want to step on our resident historian's toes but I'd like to make a brief(-ish) historical note in honor of Constitution Day. And since I missed the actual Constitution Day due to a logic board failure, this note is a bit late.
Sometimes people seem to get in their heads the idea that politics and opportunism developed sometime after the Founders were all dead or that the basic philosophical questions that divide us today--the proper role of government and best interpretation of the Constitution--weren't key points of controversy for the founding generation. But of course it didn't and indeed they were.
Five years or so after the Federalist No. 9 and the Federalist No. 10 warned of the dangers of domestic faction, the First Party System in American history arose. The nascent political parties comprising it were led by, ironically, the authors of those two documents. The Federalists embraced a strong federal government and a fairly broad interpretation of the Constitution's general welfare clause. They followed the lead of their founder, Alexander Hamilton, who wrote in his famous Report on Manufactures:
This is one of the authors of the Federalist papers (and a signer of the Constitution) writing here. One would think if opinions of long-dead men are key here, Hamilton's would carry at least as much weight as Thomas Jefferson's (Jefferson, of course, was not a signer of the Constitution and wasn't present in Independence Hall during that momentous summer of 1787). Nevertheless, modern-day proponents of a strict construction of the Constitution often quote Jefferson to make their point.
Jefferson, along with "Father of the Constitution" and co-Publius James Madison, led the other major political party, the Democratic-Republicans, who took a much more restrictive view of the general welfare clause. Today, strict construction-types sometimes seize on his writings--like his description, in a letter to Albert Gallatin, of the central philosophical differences on Constitutional interpretation--to bolster their position:
But did Jefferson really believe that funds raised through taxation could only be spent on items specifically enumerated in the Constitution? Students of history will remember that, in 1803, Jefferson was famously put in the odd position of committing a large amount of money in pursuit of an action not explicitly authorized by the Constitution. Napoleon, looking to unload some real estate, made one of Jefferson's consiglieres an offer he couldn't refuse: $15 million for the vast tract of land that would become known as the Louisiana Purchase. And while Jefferson himself was reportedly deeply troubled by the Constitutionality of this decision, the purchase certainly triggered a lively debate in Congress. Did Jefferson find unlikely allies in the loose constructionist Federalist Party and uncomfortable foes among the ranks of his own strict constructionist Democratic-Republicans? Not quite. A variation of the public administration maxim known as Miles's law--"where you stand depends on where you sit"--came into play, as it often does in politics.
The Federalists, their power dwindling at this point and eager to throw roadblocks in front of the Democratic-Republicans, argued against the Louisiana Purchase on constitutional grounds (such naked opportunism!). What did Jefferson's Democratic-Republicans present as a counterargument to justify their purchase? Amazingly, the general welfare clause! Here's a leading Democratic-Republican in the House of Representatives, Caesar Rodney, making the case:
Four years later that devoted soldier for the party became Jefferson's attorney general. He retained the post for most of Madison's first term. The point here is that even among the founding generation--even within the party of the patron saints of strict construction--a decidedly loose interpretation of the general welfare clause was employed when it was politically expedient to do so.
Today, 223 years after the Constitution was signed, we face the same questions and the same naked political maneuvering. Is the Constitution "alive" in some sense and thus adaptable to changing circumstances? Or is it, for lack of a better antipodal adjective, a dead document, equipped only to govern a late 18th century agrarian society and allowing no interpretation that would enable application of its basic structure to a post-industrial society? And should it concern us that so many people who seem to hold the latter view may well be strolling through the halls of Congress in a four months?
Sometimes people seem to get in their heads the idea that politics and opportunism developed sometime after the Founders were all dead or that the basic philosophical questions that divide us today--the proper role of government and best interpretation of the Constitution--weren't key points of controversy for the founding generation. But of course it didn't and indeed they were.
Five years or so after the Federalist No. 9 and the Federalist No. 10 warned of the dangers of domestic faction, the First Party System in American history arose. The nascent political parties comprising it were led by, ironically, the authors of those two documents. The Federalists embraced a strong federal government and a fairly broad interpretation of the Constitution's general welfare clause. They followed the lead of their founder, Alexander Hamilton, who wrote in his famous Report on Manufactures:
The National Legislature has express authority "To lay and Collect taxes, duties, imposts and excises, to pay the debts and provide for the Common defence and general welfare" [...] These three qualifications excepted, the power to raise money is plenary, and indefinite; and the objects to which it may be appropriated are no less comprehensive, than the payment of the public debts and the providing for the common defence and "general Welfare." The terms "general Welfare" were doubtless intended to signify more than was expressed or imported in those which Preceded; otherwise numerous exigencies incident to the affairs of a Nation would have been left without a provision. The phrase is as comprehensive as any that could have been used; because it was not fit that the constitutional authority of the Union, to appropriate its revenues shou'd have been restricted within narrower limits than the "General Welfare" and because this necessarily embraces a vast variety of particulars, which are susceptible neither of specification nor of definition.
It is therefore of necessity left to the discretion of the National Legislature, to pronounce, upon the objects, which concern the general Welfare, and for which under that description, an appropriation of money is requisite and proper.
This is one of the authors of the Federalist papers (and a signer of the Constitution) writing here. One would think if opinions of long-dead men are key here, Hamilton's would carry at least as much weight as Thomas Jefferson's (Jefferson, of course, was not a signer of the Constitution and wasn't present in Independence Hall during that momentous summer of 1787). Nevertheless, modern-day proponents of a strict construction of the Constitution often quote Jefferson to make their point.
Jefferson, along with "Father of the Constitution" and co-Publius James Madison, led the other major political party, the Democratic-Republicans, who took a much more restrictive view of the general welfare clause. Today, strict construction-types sometimes seize on his writings--like his description, in a letter to Albert Gallatin, of the central philosophical differences on Constitutional interpretation--to bolster their position:
Whereas, our tenet ever was, and, indeed, it is almost the only land-mark which now divides the federalists from the republicans, that Congress had not unlimited powers to provide for the general welfare, but were restrained to those specifically enumerated;
But did Jefferson really believe that funds raised through taxation could only be spent on items specifically enumerated in the Constitution? Students of history will remember that, in 1803, Jefferson was famously put in the odd position of committing a large amount of money in pursuit of an action not explicitly authorized by the Constitution. Napoleon, looking to unload some real estate, made one of Jefferson's consiglieres an offer he couldn't refuse: $15 million for the vast tract of land that would become known as the Louisiana Purchase. And while Jefferson himself was reportedly deeply troubled by the Constitutionality of this decision, the purchase certainly triggered a lively debate in Congress. Did Jefferson find unlikely allies in the loose constructionist Federalist Party and uncomfortable foes among the ranks of his own strict constructionist Democratic-Republicans? Not quite. A variation of the public administration maxim known as Miles's law--"where you stand depends on where you sit"--came into play, as it often does in politics.
The Federalists, their power dwindling at this point and eager to throw roadblocks in front of the Democratic-Republicans, argued against the Louisiana Purchase on constitutional grounds (such naked opportunism!). What did Jefferson's Democratic-Republicans present as a counterargument to justify their purchase? Amazingly, the general welfare clause! Here's a leading Democratic-Republican in the House of Representatives, Caesar Rodney, making the case:
A recurrence to the Constitution will show that it is predicated on the principle of the United States acquiring territory, either by war, treaty, or purchase. There was one part of that instrument within whose capricious grasp all these modes of acquisition were embraced. By the Constitution Congress have power to "lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defence and general welfare of the United States." To provide for the general welfare! The import of these terms is very comprehensive indeed. If this general delegation of authority be not at variance with other particular powers specially granted, nor restricted by them; if it be not in any degree comprehended in those subsequently delegated, I cannot perceive why, within the fair meaning of this general provision is not include the power of increasing our territory, if necessary for the general welfare or common defence.
Four years later that devoted soldier for the party became Jefferson's attorney general. He retained the post for most of Madison's first term. The point here is that even among the founding generation--even within the party of the patron saints of strict construction--a decidedly loose interpretation of the general welfare clause was employed when it was politically expedient to do so.
Today, 223 years after the Constitution was signed, we face the same questions and the same naked political maneuvering. Is the Constitution "alive" in some sense and thus adaptable to changing circumstances? Or is it, for lack of a better antipodal adjective, a dead document, equipped only to govern a late 18th century agrarian society and allowing no interpretation that would enable application of its basic structure to a post-industrial society? And should it concern us that so many people who seem to hold the latter view may well be strolling through the halls of Congress in a four months?
Dulling the Blade
To make an obvious point about the cost-cutting scalpels and chainsaws mentioned in that last post: the idea of trying them out and seeing which ones work is contingent upon us not deliberately dulling their blades. Which some would like to do:
At its core, the GOP plan will focus on spending and whittling away the health-care law, the Democrats' landmark achievement, which extends insurance to 32 million Americans. House Republicans say a full repeal would pick up a few Democratic votes, but acknowledge the effort would fail in the Senate.
Instead, they plan other means to chip away at it, by trying to choke off appropriations funding for key pieces, since House approval is required to pass such spending.
Republican congressional aides and advisers say their focus would including blocking funding to hire new Internal Revenue Service agents, who are needed to enforce the law's tax increases. They also would consider barring spending for a new board that approves Medicare payment cuts as well as on research that compares the effectiveness of medical procedures.
Friday, September 10, 2010
The Demi-Decade of Coverage or: The Scalpel and the Chainsaw
Once again we have some confusion over this health reform law. The culprit now is a paper written by a group of economists and actuaries working at CMS, the agency that oversees Medicare and the federal portion of Medicaid. I'm not entirely sure why their conclusions are being viewed by some as big news, as their core message doesn't differ substantially from an estimate of the law's effects released by the Chief Actuary at CMS in April. The headline here is that in February (pre-reform law) these folks released an estimate of national health care spending--i.e. all the money, public and private, being spent on health care in our economy--through 2019. That was based on then-current law, which didn't yet include the health reform law. On Thursday they released an update to that paper that takes into account the reform law. By their calculations, we as a nation will be spending a little bit more in 2019 when you factor in the reform law:
The problem, some have argued, is that reform is supposed to be reducing costs and spending on heath care, not pushing spending up, if only by a small amount. To borrow an exceedingly overused expression from health policy circles, reform ought to "bend the cost curve" downwards, meaning it should stop the runaway health spending that's characterized our economy for decades. At the very beginning of the legislative debate over health reform last year, Gallup released a poll examining public attitudes. As you might imagine, the relative importance of a person's concern about health costs or expanding coverage (i.e. cutting down the number of uninsured) depended on whether or not they had insurance:
Most people do have insurance and you can see that most of them are more worried about their costs than helping the uninsured, which makes sense (though they also tend to fear losing their own coverage).
So we're back at a common complaint: "this law does nothing to control costs, it focuses entirely on coverage." As this is a pretty important allegation, it's worth thinking about in detail. But we need to take a policy-philosophical detour first.
Below you'll see a crudely constructed figure showing what's sometimes called the health policy triumvirate: cost, quality, and access. These are the three key factors that define our health care system. In physics, there's something call the "no-hair theorem" that tells us black holes are completely described by only three physical characteristics: mass, electric charge, and angular momentum. I'll go out on a limb and suggest a health care system is like a black hole in some ways (particularly when it comes to money). We might as well propose an analogue of the no-hair theorem for health care systems: three characteristics--cost, quality, and access--will characterize your system completely.
You can see that, at the risk of possibly violating that principle, I've gone a step further in that graphic--I've started making secondary colors (you know, figuratively). The way the various tips of the triangle interact are themselves noteworthy. If you've got a high-quality health system with widespread access to its facilities, you've probably got pretty good population health, i.e. people in your nation are, on average, pretty healthy. If you have a high-quality system at a relatively low cost, you're getting good value for your health care dollar. The U.S. notoriously has very good care, though still comparable to other advanced nations along many metrics, but pays much more than anyone else to get it. So it's possible to have great care but get relatively little value for your health care dollar. And finally, if you've got a low-cost system in which access to its facilities is widespread, you've got what I'll call equity. It's possible to cut costs by cutting access but that doesn't make for a very equitable system.
Historically, the conventional wisdom about the cost-quality-access triangle has boiled down to two words: "pick two." You can cover everyone in a high-quality system, but it will be prohibitively expensive. Or you can have a low-cost, high-quality system but it won't be very equitable--not everyone gets to play. Or you can have a system with universal access at a low-cost but the care won't be any good.
Somewhere along the line that paradigm has shifted. I haven't been around long enough to know when that began but I do know the date the paradigm shift was enshrined in law: March 23, 2010. The philosophy underlying the health reform law is that we can have it all. Some, no doubt, would dismiss that as naive and mere wishful thinking. But it's a powerful thought.
Contrast that with the thinking underlying H.R. 4038, the "replace" in the Republican repeal-and-replace proposal. I don't want to sell it short--there is, after all, a decent amount of stuff in there--but for me it basically boils down to two things: 1) deregulation and 2) high-risk pools. The form of the deregulation is specific to health insurance and it's something we've looked at on here before: selling insurance across state lines (they literally just lifted the language for that section of their bill out of Shadegg's Health Choice Act). A complaint you'll often hear from the right is that we have too many mandates, insurers are required to provide too many benefits. At the same time, you'll sometimes hear that if only insurance were less expensive, coverage would increase because more people could afford to buy it.
But the limits of that possibility become clear when you realize that the plan is to lower costs by limiting access. What's the underlying principle here? Namely, that less is less: if we find a way to make it easier for insurers to jettison expensive customers and shed benefits (i.e. cover less), insurance will get cheaper. Get rid of consumer protections, sell potentially inferior products, and the products get cheaper. It's not wrong--the CBO score of their bill did find that it will lower average premiums in the individual and small group market. But it won't cover any more people; even with the high-risk pools they include to help the uninsurable gain access to coverage their bill leaves the percentage of the population without heath insurance unchanged. And I suspect it wouldn't be particularly beneficial to population health. But as I said, it's not wrong--that is a way to cut costs, I'm just not attracted to it philosophically. And, at a pragmatic level, I believe there are better options for getting better results. We need not take the Khan Noonien Singh approach, dismissing the uninsured with a helpless shrug and leaving them marooned for all eternity in the center of a dead planet, buried alive.
Most people agree that when it comes to our health care system we have too much: too much fraud, too much unnecessary treatment, too much inefficiency, too many preventable expenses. And that means we're going to have to cut if we're going to contain costs. So let's jump into the two broad philosophies of cost containment--what I'll call the Scalpel and the the Chainsaw--and then we can finally get to the punchline: how health reform promises to contain costs.
The Chainsaw
The Chainsaw is a blunt instrument. It accepts only that we've got to cut and it concedes that it's going to be bloody and imprecise. And, just maybe, employing the Chainsaw won't be good for the health of people in its path. Folks on the right tend to favor the Chainsaw when it comes to reeling in costs. We touched on this a bit above but let's look at exemplary statements from prominent conservatives and bloggers,Statler and Waldorf economist Gary Becker and econo-judge Richard Posner.
Several months ago, Becker argued:
That second bit is the argument Republicans make: we need fewer consumer protections and less comprehensive insurance. The former is interesting, philosophically, because it assumes people just want extra care because it's cheap--or, rather, that pricing people out of care is the best way to allocate it. Or as blogmate Posner suggests, it's like going to a buffet!
I kid, of course, they're making valid points here. But I fundamentally disagree with the premise. Certainly there is an enormous amount of unnecessary care provided in our system (Thomson Reuters pegs the number at $250-$325 billion annually--that's up to 13% of all the money we spend on health care in a year). And I agree that in the absence of higher cost-sharing (an incarnation of the Chainsaw), people will tend to consume more care than they would if they were in the Chainsaw's path. But health care isn't equivalent to mashed potatoes in a buffet line. Gorging at a buffet is enjoyable, for a time anyway, and has no immediate costs (you have to wait until a bit after dinner to encounter the costs of your excess). Receiving care has many costs, be they in terms of time, anxiety, discomfort, and so on. If someone asked me if I'd rather spend an all-expenses-paid evening in a hospital or at a buffet, there'd be no contest. One is pleasurable; one is horrifying.
The reality is that people don't seek excess care because they just love soaking up additional health care resources and low cost-sharing allows them to indulge that default urge; rather, they don't know any better. Which if how you get incoherent responses like these in polls:
Let that sink in for a moment. Roughly half the respondents in this poll recognize that overtreatment--unnecessary care--is a problem in our system (though only 16% responded that they personally had gotten a test or treatment that was probably unnecessary). Simultaneously, 67% believe undertreatment is a serious problem. I suppose you could try and spin that as a recognition or expression of concern about inequality--perhaps some respondents believed lots of people are being overtreated and lots of other people, on some lower tier, are being undertreated. But it seems more likely to me that this is an indication that we, the consumers, don't know what unnecessary care is, we wouldn't recognize it if it was pounding on our chest and defibrillating us. We fear that someday we'll be denied the treatment we need (only 14% of people actually thought this had already happened to them), even as we recognize that other people are probably getting care they don't need. We don't want unnecessary care in the same way we want that unnecessary third helping of prime rib at the buffet, we simply don't know it's unnecessary.
Which is exactly why price signals alone, coupled with individual budget decisions, aren't the best way to cut through this mess. The health care system/market is not even close to being transparent, science-based, and patient-centered enough to allow people to make informed decisions about the best balance between their pocketbooks and their personal health. But the Chainsaw approach doesn't particularly care. More cost-sharing means we've placed a financial barrier in people's way that will discourage them from utilizing care--the Chainsaw lops off that spending and in the aggregate cost growth slows. But note that this individual decision isn't rooted in evidence-based, medical decision making. It's a blunt instrument that invariably cuts more closely the further down the income ladder you travel.
The Chainsaw isn't ideal for equity or population health concerns, but it probably will put the brakes on rising costs. And two of the primary long-term cost controls in the new reform law are forms of the Chainsaw: the excise tax on high-cost group insurance plans and the creation of an Independent Payment Advisory Board for Medicare. The excise tax goes into effect in 2018 and the threshold at which it kicks in will grow with the rate of inflation; however, since medical costs tend to rise faster than that, more and more plans will be affected by it with time. The idea is that it will cause employers to keep plan costs down (i.e. buy less expensive insurance plans) to avoid the tax and shift some of the costs to employees, something that's increasingly happening right now. The IPAB will be empowered to find ways to cut costs from Medicare, most likely by changing reimbursement rates. Luckily, these will be combined with cost control attempts with a bit more finesse.
The Scalpel
While the Chainsaw approach cuts costs in the goriest and most undiscerning manner possible ("less! less! damn the population health consequences!"), the Scalpel approach relies on more delicate instruments. Therein lies the fundamental philosophical shift that reform is institutionalizing: we can meet our cost containment goals by providing smarter and better care. Reform is partnering with efforts that began in last year's economic stimulus package to fundamentally shift our approach to health care. Right now it is too much like a buffet: a disconnected, uncoordinated smorgasboard oftreatment dining possibilities with various people scattered around giving conflicting advice, often based as much on personal tastes as anything else. But imagine instead a smarter alternative: a restaurant in which a team of expert foodies is available to you for each course of the meal, each relying on a well-established, Kid-Tested-Mother-Approved™ evidence base for the best food for your particular appetites, and with the efforts of each food expert ultimately coordinated by one server who remains your go-to guy throughout the process. You might call that the patient-centered medical home customer-centered culinary home.
But I digress. And the food analogy becomes incoherent remarkably quickly. Let's go back to the stimulus, because the nexus between the stimulus and the health reform law is hugely important (disclosure: I'm biased--that nexus is primarily where I live now, professionally). The stimulus made two health-related investments that stand to be very significant in the long-run: 1) comparative effectiveness research, and 2) health information exchange. The former refers to building a strong, scientific evidence base to guide clinical decision-making and help us understand what works best for who in which circumstances (notably, one-size-fits-all doesn't necessarily work, which is why understanding of this "treatment response heterogeneity" is important). The latter refers to not only storing health data electronically--on electronic health records--but having the means to transmit and use that data. I'll be writing about that in detail at some point because it's near and dear to my heart. But the moral here is that the stimulus set on us on the path toward embracing data-driven health system improvement. More science, less art. After all, medical knowledge with predictive power is an impressive thing to witness:
The reform law doubles down on comparative effectiveness research, creating a Patient-Centered Outcomes Research Institute to fund and consolidate this research, and it gets specific on ways to improve the way health care is delivered. It tackles the primary incentive in our system for unnecessary care--a payment structure that pays per service, prioritizing quantity over quality--by experimenting with payment schemes that reward quality and limit hospital readmissions. It supports relatively new models of coordinated care, known as medical homes and accountable care organizations. Bundled payment initiatives will further being launched to encourage providers to coordinate care and deliver it in a cost effective manner.
The essential thing to understand here is that while there are dozens of initiatives in the law aimed at determining what works to lower costs and improve quality, they are experiments. That is, they're generally pilot (demonstration) projects operating on some limited scale (e.g. in a handful of states), though, to be clear, there are some things in there that aren't merely demonstrations. These changes, demonstrations or not, occur within the programs over which the government has primary authority: Medicare and Medicaid. But, excitingly, the reform law establishes a Center for Medicare and Medicaid Innovation that will be empowered to rapidly roll out successful experiments on a wider scale within Medicare and Medicaid (the assumption is that successful models will also spread to use in the private sector). We don't know exactly which mechanisms are going to work best, which is why the law takes an FDR-esque philosophy: "It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something."
The shift here--and this goes back to the point I was making about the increasing emphasis on data-driven improvement--stands to be pretty fundamental: we're stumbling toward a future in which health is priced as an output good. Right now, we generally don't pay for health, we pay for procedures; if they don't work and you end up needing yet another procedure, so much the better for the provider accepting your payments (that's one of the volume-based incentives that drives up unnecessary care). One would think that this sort of shift is a necessary pre-condition for treating the health care market as a well-functioning market, as conservatives like Messrs Becker and Posner might like. But before that can work, we need some big changes in place. We need to start pricing health as an output good, we need transparent indicators (like reliable and accurate quality reporting) to aid shoppers, and we need readily available information on clinical effectiveness to better inform doctor and patient-as-customer alike when it comes to making medical decisions.
And those changes require laying down the appropriate infrastructure. If we're going to pay providers based on what works, we need to know what "working" is, we need the means to evaluate whether the criteria for that (whatever they may be) have been met, and we need doctors themselves to know what's most likely to work for a given patient in a given situation. And that requires an incredible capacity for processing information, whether that be collecting quality indicators from physicians via electronic health records or evaluating the comparative effectiveness of various treatments. But we're about to set off down that path. Exciting. But this law is the beginning of the journey, not the end. We'll need to continually tinker with it, building on its successes and frankly evaluating its failures, tweaking it, adding to it. Vigilance is the price of long-term cost containment.
The Demi-Decade of Coverage and the Long March Toward Cost Containment
And so, at long last, we arrive at the heart of the matter: are my premiums going to go down, are costs contained? As I intimated above, the reform law is extremely ambitious. It goes after the trifecta on the notion that cost, quality, and access can all be addressed without the need to sacrifice one. Access--which here I'm somewhat imprecisely using as a synonym for insurance coverage--is often the odd man out in our country but it's also the low-hanging fruit. Coverage is easier to address than are cost and quality, particularly when the primary strategy for reigning in long-term costs is based on improving the quality of our woefully inefficient system. And in the first decade of the reform law's existence--or, really, the first roughly half-decade, since the law doesn't fully kick in fully until 2014 and we tend to only think as far as 2019--will address coverage in a big way. This period is what I'd call the Demi-Decade of Coverage, because its most visible achievement will be insuring another 30-odd million people, fully ten percent of the American population. There will still be uninsured folks at the end of the decade--some by choice--but substantially fewer than there are today.
Meanwhile, the tinkering will begin. The Chainsaw of the excise tax will begin revving up at the end of the decade (2018) and the Scalpels of various payment and delivery system reforms aimed at constructing a smarter, leaner, more coordinated health system will make their first incisions over the next few years. It will take time for these programs to operate and be evaluated for effectiveness. The stimulus programs for encouraging adoption and meaningful use of electronic health records (i.e. health information) won't wrap up until 2021. All of this means that we can't really expect real cost curve bending to happen until the second decade of the law's existence (the 2020s). The primary cost control items operating over the next few years will be the insurance market reforms--which get all the press anyway--like the construction of the health insurance exchanges mentioned in my last post, which bring transparency and cost competition into state marketplaces. But those gains will be somewhat offset by the influx of newly insured people and the increasing quality of insurance plans available in the marketplace (read: benefit mandates). Which is exactly what the paper from the CMS actuaries that I opened this post with is saying:
The Demi-Decade of Coverage won't see total national spending change substantially, which is actually pretty impressive given the number of people who will be entering the system. Premiums will continue to rise faster than inflation year after year. It won't look like we've done much, except provide care to more people, which in some corners is considered laudable all by itself. But the Scalpels will be behind the scenes, finding the most precise ways to cut. And then the Chainsaw will begin at the end of the decade, giving even more urgency to the mission of the Scalpels--finding ways to ensure that the cuts the Chainsaw will force are targeted, smart, and don't harm population health. Frankly, I'm excited about these two very different cutting tools working together. I love the idea of the Scalpels and I believe that in the long run a number of them will be found to work pretty well, transforming our system into something much better in the process. But I also like that the threat of a buzzing Chainsaw will be lighting a fire under the Scalpels' asses.
But in the end, we'll have to have patient. Going for the trifecta is inherently a long-term process. We could lower insurance costs tomorrow by throwing as many sick people out of insurance pools as we can but I don't think that fits with the vision of what our health care system should--and can--be that many of us have. Too much Chainsaw, not enough Scalpel. So hang in there, the journey's just beginning. And if you've actually read all the way down to this point, I know you do have patience. This much-too-long post is now mercifully at an end.
Relative to our February 2010 projections under prior law, average annual growth in national health spending over the projection period is estimated to be 0.2 percentage point higher than our previous estimate. The health care share of gross domestic product (GDP) is expected to be 0.3 percentage point higher in 2019.
The problem, some have argued, is that reform is supposed to be reducing costs and spending on heath care, not pushing spending up, if only by a small amount. To borrow an exceedingly overused expression from health policy circles, reform ought to "bend the cost curve" downwards, meaning it should stop the runaway health spending that's characterized our economy for decades. At the very beginning of the legislative debate over health reform last year, Gallup released a poll examining public attitudes. As you might imagine, the relative importance of a person's concern about health costs or expanding coverage (i.e. cutting down the number of uninsured) depended on whether or not they had insurance:
Most people do have insurance and you can see that most of them are more worried about their costs than helping the uninsured, which makes sense (though they also tend to fear losing their own coverage).
So we're back at a common complaint: "this law does nothing to control costs, it focuses entirely on coverage." As this is a pretty important allegation, it's worth thinking about in detail. But we need to take a policy-philosophical detour first.
Below you'll see a crudely constructed figure showing what's sometimes called the health policy triumvirate: cost, quality, and access. These are the three key factors that define our health care system. In physics, there's something call the "no-hair theorem" that tells us black holes are completely described by only three physical characteristics: mass, electric charge, and angular momentum. I'll go out on a limb and suggest a health care system is like a black hole in some ways (particularly when it comes to money). We might as well propose an analogue of the no-hair theorem for health care systems: three characteristics--cost, quality, and access--will characterize your system completely.
You can see that, at the risk of possibly violating that principle, I've gone a step further in that graphic--I've started making secondary colors (you know, figuratively). The way the various tips of the triangle interact are themselves noteworthy. If you've got a high-quality health system with widespread access to its facilities, you've probably got pretty good population health, i.e. people in your nation are, on average, pretty healthy. If you have a high-quality system at a relatively low cost, you're getting good value for your health care dollar. The U.S. notoriously has very good care, though still comparable to other advanced nations along many metrics, but pays much more than anyone else to get it. So it's possible to have great care but get relatively little value for your health care dollar. And finally, if you've got a low-cost system in which access to its facilities is widespread, you've got what I'll call equity. It's possible to cut costs by cutting access but that doesn't make for a very equitable system.
Historically, the conventional wisdom about the cost-quality-access triangle has boiled down to two words: "pick two." You can cover everyone in a high-quality system, but it will be prohibitively expensive. Or you can have a low-cost, high-quality system but it won't be very equitable--not everyone gets to play. Or you can have a system with universal access at a low-cost but the care won't be any good.
Somewhere along the line that paradigm has shifted. I haven't been around long enough to know when that began but I do know the date the paradigm shift was enshrined in law: March 23, 2010. The philosophy underlying the health reform law is that we can have it all. Some, no doubt, would dismiss that as naive and mere wishful thinking. But it's a powerful thought.
Contrast that with the thinking underlying H.R. 4038, the "replace" in the Republican repeal-and-replace proposal. I don't want to sell it short--there is, after all, a decent amount of stuff in there--but for me it basically boils down to two things: 1) deregulation and 2) high-risk pools. The form of the deregulation is specific to health insurance and it's something we've looked at on here before: selling insurance across state lines (they literally just lifted the language for that section of their bill out of Shadegg's Health Choice Act). A complaint you'll often hear from the right is that we have too many mandates, insurers are required to provide too many benefits. At the same time, you'll sometimes hear that if only insurance were less expensive, coverage would increase because more people could afford to buy it.
But the limits of that possibility become clear when you realize that the plan is to lower costs by limiting access. What's the underlying principle here? Namely, that less is less: if we find a way to make it easier for insurers to jettison expensive customers and shed benefits (i.e. cover less), insurance will get cheaper. Get rid of consumer protections, sell potentially inferior products, and the products get cheaper. It's not wrong--the CBO score of their bill did find that it will lower average premiums in the individual and small group market. But it won't cover any more people; even with the high-risk pools they include to help the uninsurable gain access to coverage their bill leaves the percentage of the population without heath insurance unchanged. And I suspect it wouldn't be particularly beneficial to population health. But as I said, it's not wrong--that is a way to cut costs, I'm just not attracted to it philosophically. And, at a pragmatic level, I believe there are better options for getting better results. We need not take the Khan Noonien Singh approach, dismissing the uninsured with a helpless shrug and leaving them marooned for all eternity in the center of a dead planet, buried alive.
Most people agree that when it comes to our health care system we have too much: too much fraud, too much unnecessary treatment, too much inefficiency, too many preventable expenses. And that means we're going to have to cut if we're going to contain costs. So let's jump into the two broad philosophies of cost containment--what I'll call the Scalpel and the the Chainsaw--and then we can finally get to the punchline: how health reform promises to contain costs.
The Chainsaw
The Chainsaw is a blunt instrument. It accepts only that we've got to cut and it concedes that it's going to be bloody and imprecise. And, just maybe, employing the Chainsaw won't be good for the health of people in its path. Folks on the right tend to favor the Chainsaw when it comes to reeling in costs. We touched on this a bit above but let's look at exemplary statements from prominent conservatives and bloggers,
Several months ago, Becker argued:
The most important needed reform is an increase the fraction of total medical costs that come from out-of pocket expenses in the form of large deductibles and significant co-payments. [...]
The US health care market is over-regulated rather than under-regulated. One example is that families in one state are generally not allowed to buy their health insurance from companies located in other states. Another example is the mandates that states impose on insurance companies, such as coverage of the costs of normal birth deliveries. Such coverage has little to do with insurance against unexpected health costs, whereas coverage of extraordinary delivery costs is a desirable protection against unexpected health care risks.
That second bit is the argument Republicans make: we need fewer consumer protections and less comprehensive insurance. The former is interesting, philosophically, because it assumes people just want extra care because it's cheap--or, rather, that pricing people out of care is the best way to allocate it. Or as blogmate Posner suggests, it's like going to a buffet!
A second demand-related cost effect will result from the fact that insurance,(even with deductibles and copayments, drives a wedge between the cost of a service and its price, and so increases demand. (It’s like a restaurant with a buffet: the marginal cost of eating all you want is zero.) Persons who are uninsured are deterred from consuming medical services in quantity— because of cost (they are billed for such services at very high prices and may be forced into bankruptcy if unable to pay), because of difficulty of obtaining quality service from charity hospitals or other “free” providers, or simply because, though they can “afford” insurance, they prefer to gamble on remaining healthy. These persons, when they become insured, will increase their utilization of medical services, because those services will now be cheaper to them.
I kid, of course, they're making valid points here. But I fundamentally disagree with the premise. Certainly there is an enormous amount of unnecessary care provided in our system (Thomson Reuters pegs the number at $250-$325 billion annually--that's up to 13% of all the money we spend on health care in a year). And I agree that in the absence of higher cost-sharing (an incarnation of the Chainsaw), people will tend to consume more care than they would if they were in the Chainsaw's path. But health care isn't equivalent to mashed potatoes in a buffet line. Gorging at a buffet is enjoyable, for a time anyway, and has no immediate costs (you have to wait until a bit after dinner to encounter the costs of your excess). Receiving care has many costs, be they in terms of time, anxiety, discomfort, and so on. If someone asked me if I'd rather spend an all-expenses-paid evening in a hospital or at a buffet, there'd be no contest. One is pleasurable; one is horrifying.
The reality is that people don't seek excess care because they just love soaking up additional health care resources and low cost-sharing allows them to indulge that default urge; rather, they don't know any better. Which if how you get incoherent responses like these in polls:
Let that sink in for a moment. Roughly half the respondents in this poll recognize that overtreatment--unnecessary care--is a problem in our system (though only 16% responded that they personally had gotten a test or treatment that was probably unnecessary). Simultaneously, 67% believe undertreatment is a serious problem. I suppose you could try and spin that as a recognition or expression of concern about inequality--perhaps some respondents believed lots of people are being overtreated and lots of other people, on some lower tier, are being undertreated. But it seems more likely to me that this is an indication that we, the consumers, don't know what unnecessary care is, we wouldn't recognize it if it was pounding on our chest and defibrillating us. We fear that someday we'll be denied the treatment we need (only 14% of people actually thought this had already happened to them), even as we recognize that other people are probably getting care they don't need. We don't want unnecessary care in the same way we want that unnecessary third helping of prime rib at the buffet, we simply don't know it's unnecessary.
Which is exactly why price signals alone, coupled with individual budget decisions, aren't the best way to cut through this mess. The health care system/market is not even close to being transparent, science-based, and patient-centered enough to allow people to make informed decisions about the best balance between their pocketbooks and their personal health. But the Chainsaw approach doesn't particularly care. More cost-sharing means we've placed a financial barrier in people's way that will discourage them from utilizing care--the Chainsaw lops off that spending and in the aggregate cost growth slows. But note that this individual decision isn't rooted in evidence-based, medical decision making. It's a blunt instrument that invariably cuts more closely the further down the income ladder you travel.
The Chainsaw isn't ideal for equity or population health concerns, but it probably will put the brakes on rising costs. And two of the primary long-term cost controls in the new reform law are forms of the Chainsaw: the excise tax on high-cost group insurance plans and the creation of an Independent Payment Advisory Board for Medicare. The excise tax goes into effect in 2018 and the threshold at which it kicks in will grow with the rate of inflation; however, since medical costs tend to rise faster than that, more and more plans will be affected by it with time. The idea is that it will cause employers to keep plan costs down (i.e. buy less expensive insurance plans) to avoid the tax and shift some of the costs to employees, something that's increasingly happening right now. The IPAB will be empowered to find ways to cut costs from Medicare, most likely by changing reimbursement rates. Luckily, these will be combined with cost control attempts with a bit more finesse.
The Scalpel
While the Chainsaw approach cuts costs in the goriest and most undiscerning manner possible ("less! less! damn the population health consequences!"), the Scalpel approach relies on more delicate instruments. Therein lies the fundamental philosophical shift that reform is institutionalizing: we can meet our cost containment goals by providing smarter and better care. Reform is partnering with efforts that began in last year's economic stimulus package to fundamentally shift our approach to health care. Right now it is too much like a buffet: a disconnected, uncoordinated smorgasboard of
But I digress. And the food analogy becomes incoherent remarkably quickly. Let's go back to the stimulus, because the nexus between the stimulus and the health reform law is hugely important (disclosure: I'm biased--that nexus is primarily where I live now, professionally). The stimulus made two health-related investments that stand to be very significant in the long-run: 1) comparative effectiveness research, and 2) health information exchange. The former refers to building a strong, scientific evidence base to guide clinical decision-making and help us understand what works best for who in which circumstances (notably, one-size-fits-all doesn't necessarily work, which is why understanding of this "treatment response heterogeneity" is important). The latter refers to not only storing health data electronically--on electronic health records--but having the means to transmit and use that data. I'll be writing about that in detail at some point because it's near and dear to my heart. But the moral here is that the stimulus set on us on the path toward embracing data-driven health system improvement. More science, less art. After all, medical knowledge with predictive power is an impressive thing to witness:
The reform law doubles down on comparative effectiveness research, creating a Patient-Centered Outcomes Research Institute to fund and consolidate this research, and it gets specific on ways to improve the way health care is delivered. It tackles the primary incentive in our system for unnecessary care--a payment structure that pays per service, prioritizing quantity over quality--by experimenting with payment schemes that reward quality and limit hospital readmissions. It supports relatively new models of coordinated care, known as medical homes and accountable care organizations. Bundled payment initiatives will further being launched to encourage providers to coordinate care and deliver it in a cost effective manner.
The essential thing to understand here is that while there are dozens of initiatives in the law aimed at determining what works to lower costs and improve quality, they are experiments. That is, they're generally pilot (demonstration) projects operating on some limited scale (e.g. in a handful of states), though, to be clear, there are some things in there that aren't merely demonstrations. These changes, demonstrations or not, occur within the programs over which the government has primary authority: Medicare and Medicaid. But, excitingly, the reform law establishes a Center for Medicare and Medicaid Innovation that will be empowered to rapidly roll out successful experiments on a wider scale within Medicare and Medicaid (the assumption is that successful models will also spread to use in the private sector). We don't know exactly which mechanisms are going to work best, which is why the law takes an FDR-esque philosophy: "It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something."
The shift here--and this goes back to the point I was making about the increasing emphasis on data-driven improvement--stands to be pretty fundamental: we're stumbling toward a future in which health is priced as an output good. Right now, we generally don't pay for health, we pay for procedures; if they don't work and you end up needing yet another procedure, so much the better for the provider accepting your payments (that's one of the volume-based incentives that drives up unnecessary care). One would think that this sort of shift is a necessary pre-condition for treating the health care market as a well-functioning market, as conservatives like Messrs Becker and Posner might like. But before that can work, we need some big changes in place. We need to start pricing health as an output good, we need transparent indicators (like reliable and accurate quality reporting) to aid shoppers, and we need readily available information on clinical effectiveness to better inform doctor and patient-as-customer alike when it comes to making medical decisions.
And those changes require laying down the appropriate infrastructure. If we're going to pay providers based on what works, we need to know what "working" is, we need the means to evaluate whether the criteria for that (whatever they may be) have been met, and we need doctors themselves to know what's most likely to work for a given patient in a given situation. And that requires an incredible capacity for processing information, whether that be collecting quality indicators from physicians via electronic health records or evaluating the comparative effectiveness of various treatments. But we're about to set off down that path. Exciting. But this law is the beginning of the journey, not the end. We'll need to continually tinker with it, building on its successes and frankly evaluating its failures, tweaking it, adding to it. Vigilance is the price of long-term cost containment.
The Demi-Decade of Coverage and the Long March Toward Cost Containment
And so, at long last, we arrive at the heart of the matter: are my premiums going to go down, are costs contained? As I intimated above, the reform law is extremely ambitious. It goes after the trifecta on the notion that cost, quality, and access can all be addressed without the need to sacrifice one. Access--which here I'm somewhat imprecisely using as a synonym for insurance coverage--is often the odd man out in our country but it's also the low-hanging fruit. Coverage is easier to address than are cost and quality, particularly when the primary strategy for reigning in long-term costs is based on improving the quality of our woefully inefficient system. And in the first decade of the reform law's existence--or, really, the first roughly half-decade, since the law doesn't fully kick in fully until 2014 and we tend to only think as far as 2019--will address coverage in a big way. This period is what I'd call the Demi-Decade of Coverage, because its most visible achievement will be insuring another 30-odd million people, fully ten percent of the American population. There will still be uninsured folks at the end of the decade--some by choice--but substantially fewer than there are today.
Meanwhile, the tinkering will begin. The Chainsaw of the excise tax will begin revving up at the end of the decade (2018) and the Scalpels of various payment and delivery system reforms aimed at constructing a smarter, leaner, more coordinated health system will make their first incisions over the next few years. It will take time for these programs to operate and be evaluated for effectiveness. The stimulus programs for encouraging adoption and meaningful use of electronic health records (i.e. health information) won't wrap up until 2021. All of this means that we can't really expect real cost curve bending to happen until the second decade of the law's existence (the 2020s). The primary cost control items operating over the next few years will be the insurance market reforms--which get all the press anyway--like the construction of the health insurance exchanges mentioned in my last post, which bring transparency and cost competition into state marketplaces. But those gains will be somewhat offset by the influx of newly insured people and the increasing quality of insurance plans available in the marketplace (read: benefit mandates). Which is exactly what the paper from the CMS actuaries that I opened this post with is saying:
For 2015–19, national health spending is now projected to increase 6.7 percent per year, on average—slightly less than the 6.8 percent average annual growth rate projected in February 2010. However, the year-by-year pattern of growth is anticipated to be different (Exhibit 5). Enrollment shifts associated with the Affordable Care Act coverage expansions are projected to continue, contributing to continuing relatively faster spending growth rates through 2016. Thereafter, spending growth is projected to decelerate more substantially as a result of Affordable Care Act–mandated reductions to Medicare provider payment updates and the excise tax on high-cost insurance plans starting in 2018.
The Demi-Decade of Coverage won't see total national spending change substantially, which is actually pretty impressive given the number of people who will be entering the system. Premiums will continue to rise faster than inflation year after year. It won't look like we've done much, except provide care to more people, which in some corners is considered laudable all by itself. But the Scalpels will be behind the scenes, finding the most precise ways to cut. And then the Chainsaw will begin at the end of the decade, giving even more urgency to the mission of the Scalpels--finding ways to ensure that the cuts the Chainsaw will force are targeted, smart, and don't harm population health. Frankly, I'm excited about these two very different cutting tools working together. I love the idea of the Scalpels and I believe that in the long run a number of them will be found to work pretty well, transforming our system into something much better in the process. But I also like that the threat of a buzzing Chainsaw will be lighting a fire under the Scalpels' asses.
But in the end, we'll have to have patient. Going for the trifecta is inherently a long-term process. We could lower insurance costs tomorrow by throwing as many sick people out of insurance pools as we can but I don't think that fits with the vision of what our health care system should--and can--be that many of us have. Too much Chainsaw, not enough Scalpel. So hang in there, the journey's just beginning. And if you've actually read all the way down to this point, I know you do have patience. This much-too-long post is now mercifully at an end.
Thursday, September 9, 2010
A long Heritage of hackery...and exchanges
At the heart of the new health reforms is a structure known as a heath insurance exchange. Or rather, between 50 and 100 of them, since each state will be constructing at least one and possibly two. You can read more about what this is here in a wonderful background piece from GWU's Health Reform GPS ("navigating implementation") project. Exchanges are essentially new, transparent, regulated (i.e. level playing fields) insurance markets.
Having been tried before in various places, these aren't an entirely new concept. Some attempts, like the Commonwealth Connector in Massachusetts, seem to be working pretty well. Other attempts, like those made in California, Texas, and North Carolina in the past, have failed for various reasons. States have between now and January 1, 2014 to design their exchanges; the failures of some previous efforts underscores the importance of getting that design right.
Switching gears for a moment, you've got to love the Heritage Foundation. Recently they lauded some health reform experiments Utah has been conducting in this piece: Consumer Power: 5 Lessons from Utah’s Heath Care Reform. Of course, beinghacks who they are, they had to get in a gratuitous shot at the federal reform law:
Contrast that with the glowing review they give to Utah's reforms:
But what element lies at the center of the reforms in Utah? As you can probably guess from the context of this post, it's a health insurance exchange. In fact, they just took their pilot program statewide a little over a week ago:
They especially like the "defined contributions" aspect of Utah's exchange. That means instead of having an employer choose a plan or small menu of plans for its employees (as my employer does), the employer instead makes a set contribution toward the employee's plan, which the employee is free to choose from any plan offered in the exchange. Under that design, employers still contribute to their employees' plans but the employees have much greater choice and thus the market itself experiences much more competition between plans. I can see why Heritage likes it.
How does this jibe with the federally mandated health insurance exchanges? Well, it depends. Federal guidance is still forthcoming but as this great look at the policy issues surrounding the exchanges can attest, these new exchanges may well operate by exactly the same rules as Utah's exchange:
If things go as described in the second paragraph, the exchanges in every state will work just like Utah's new exchange. And then we can eagerly await a Heritage piece praising the federal health reform law. Or perhaps scrubbing their website of any positive mentions of Utah's reforms. Reversing (and attacking) their positions once Democrats adopt them wouldn't exactly be new for them.
While in 2009 Heritage was dying to explain to you Why the Personal Mandate to Buy Health Insurance Is Unprecedented and Unconstitutional, what they neglect to mention is that the dreaded individual mandate was their idea.
In 1990, at a time when Democrats leaned toward an employer mandate, Heritage presented an alternative, in line with the conservative catch-phrase "individual responsibility":
And in case you're wondering, this isn't just an idea they toyed with twenty years ago and then dropped. As recently as 2003, the individual mandate appeared in proposals offered by Heritage staffers to Congress:
Let's hope the "general lessons for every state about how to establish an affordable quality health care system" learned from Utah indeed spread to the health insurance exchanges in every state, facilitated by a Democratic health reform law. I can't think of a better way to make Heritage despise them.
Health insurance exchanges are designed to help individuals and small employer groups be better positioned to purchase high quality health insurance by creating “organized markets” that simplify the job of selecting and enrolling in coverage and securing performance information about available products. [...]
Health insurance exchanges are designed to overcome a basic problem, namely the lack of a robust, organized market for the purchase of health insurance by individuals and small business. In the absence of an organized market, the price of coverage rises because of the additional costs incurred in marketing to and supporting thousands of small customers. In addition, the lack of an exchange means the absence of an organized group of individuals and small business purchasers across whom the cost of coverage can be spread.
Having been tried before in various places, these aren't an entirely new concept. Some attempts, like the Commonwealth Connector in Massachusetts, seem to be working pretty well. Other attempts, like those made in California, Texas, and North Carolina in the past, have failed for various reasons. States have between now and January 1, 2014 to design their exchanges; the failures of some previous efforts underscores the importance of getting that design right.
Switching gears for a moment, you've got to love the Heritage Foundation. Recently they lauded some health reform experiments Utah has been conducting in this piece: Consumer Power: 5 Lessons from Utah’s Heath Care Reform. Of course, being
The new federal health legislation is deeply unpopular, highly disruptive, unaffordable, and subject to extensive and growing litigation. As a result, it might be repealed or substantially altered by a future Congress.
Contrast that with the glowing review they give to Utah's reforms:
Utah’s specific model could yield positive results in other states, but states should adapt Utah’s broader approach to their own individual markets and conditions. Utah’s reform agenda provides a blueprint to empower health care consumers through conservative principles of free enterprise and consumerism. Utah’s experience provides general lessons for every state about how to establish an affordable quality health care system.
But what element lies at the center of the reforms in Utah? As you can probably guess from the context of this post, it's a health insurance exchange. In fact, they just took their pilot program statewide a little over a week ago:
Employees of participating Utah businesses can now use the exchange to "shop" for health insurance policies that best fit their individual needs, similar to arming employees with a debit card of sorts, to use for health insurance. If an employee desires a more expensive plan than what the employer covers, the employee would then make up the difference themselves. The defined contribution component, according to Utah's Office of Consumer Health Services spokesman Matt Spencer, is the cornerstone of the exchange system.
Rather than have one or two options that are pre-selected by their employers, workers can choose from more than 60 different plans from four of Utah's largest insurance companies: Humana, Regence, Select Health and United Healthcare.
By state statute, all plans offered through the Utah Health Exchange must meet federal standards for employer-sponsored coverage, which ensures all plans offered provide quality coverage from responsible carriers. It is also expected that the element of consumer choice — employees selecting their plans directly from carriers — will put downward pressure on prices and upward pressure on coverage quality.
They especially like the "defined contributions" aspect of Utah's exchange. That means instead of having an employer choose a plan or small menu of plans for its employees (as my employer does), the employer instead makes a set contribution toward the employee's plan, which the employee is free to choose from any plan offered in the exchange. Under that design, employers still contribute to their employees' plans but the employees have much greater choice and thus the market itself experiences much more competition between plans. I can see why Heritage likes it.
How does this jibe with the federally mandated health insurance exchanges? Well, it depends. Federal guidance is still forthcoming but as this great look at the policy issues surrounding the exchanges can attest, these new exchanges may well operate by exactly the same rules as Utah's exchange:
The ACA sets out in some detail the size of the employers that may participate in the exchange but is less clear as to how exactly employer participation would work. A “SHOP exchange” is identified but not described in the legislation. It could possibly be intended as an exchange in which small employers themselves purchase group plans for their employees. This would seem to be consistent with section 1312(f)(2), which defines a qualified employer as an employer “that elects to make all full-time employees of such employer eligible for 1 or more qualified health plans offered in the small group market through an Exchange.”
Elsewhere, however, the ACA seems to countenance an arrangement under which small employers play a more passive role, simply contributing to the premiums used by their employees to purchase insurance as individuals. For example, the law states: “A qualified employer may provide support for coverage of employees under a qualified health plan by selecting any level of coverage under 1302(d) [bronze, silver, gold, or platinum] to be made available to employees through an Exchange.”143 The provision goes on to say that employees may choose any plan within the tier of coverage chosen by the employer.
If things go as described in the second paragraph, the exchanges in every state will work just like Utah's new exchange. And then we can eagerly await a Heritage piece praising the federal health reform law. Or perhaps scrubbing their website of any positive mentions of Utah's reforms. Reversing (and attacking) their positions once Democrats adopt them wouldn't exactly be new for them.
While in 2009 Heritage was dying to explain to you Why the Personal Mandate to Buy Health Insurance Is Unprecedented and Unconstitutional, what they neglect to mention is that the dreaded individual mandate was their idea.
In 1990, at a time when Democrats leaned toward an employer mandate, Heritage presented an alternative, in line with the conservative catch-phrase "individual responsibility":
The second central element-in the Heritage proposal is a two-way commitment between government and citizen. Under this social contract, the federal government would agree to make it financially possible, through refundable tax benefits or in some cases by providing access to public-sector health programs, for every American family to purchase at least a basic package of medical care, including catastrophic insurance. In return, government would require, by law every head of household to acquire at least a basic health plan for his or her family.Thus there would be mandated coverage under the Heritage proposal, but the mandate would apply to the family head, who is the appropriate person to shoulder the primary responsibility for the family's health needs, rather than employers, who are not. By no longer restricting tax relief for medical care to employer-provided plans, and by restructuring tax assistance to help those Americans most in need, the Heritage proposal significantly would improve the American health system.
And in case you're wondering, this isn't just an idea they toyed with twenty years ago and then dropped. As recently as 2003, the individual mandate appeared in proposals offered by Heritage staffers to Congress:
The current social contract should be replaced with a more rational one. In a civilized and rich country like the United States, it is reasonable for society to accept an obligation to ensure that all residents have affordable access to at least basic health care - much as we accept the same obligation to assure a reasonable level of housing, education and nutrition.
But as part of that contract, it is also reasonable to expect residents of the society who can do so to contribute an appropriate amount to their own health care. This translates into a requirement on individuals to enroll themselves and their dependents in at least a basic health plan - one that at the minimum should protect the rest of society from large and unexpected medical costs incurred by the family. And as any social contract, there would also be an obligation on society. To the extent that the family cannot reasonably afford reasonable basic coverage, the rest of society, via government, should take responsibility for financing that minimum coverage.
The obligations on individuals does not have to be a "hard" mandate, in the sense that failure to obtain coverage would be illegal. It could be a "soft" mandate, meaning that failure to obtain coverage could result in the loss of tax benefits and other government entitlements. In addition, if federal tax benefits or other assistance accompanied the requirement, states and localities could receive the value of the assistance forgone by the person failing to obtain coverage, in order to compensate providers who deliver services to the uninsured family.
Let's hope the "general lessons for every state about how to establish an affordable quality health care system" learned from Utah indeed spread to the health insurance exchanges in every state, facilitated by a Democratic health reform law. I can't think of a better way to make Heritage despise them.
Monday, September 6, 2010
Seinfeldian Economic Policy
In the renewed scramble to propose, if not actually pass, some new measures to boost the economy, today we've got a $50 billion infrastructure investment and this one (which reminds me of some classic television):
Obama to Propose Plant and Equipment Tax Write-Off
Obama to Propose Plant and Equipment Tax Write-Off
WASHINGTON (Reuters) - President Barack Obama will propose on Wednesday that businesses be allowed to write off all their new investments in plant and equipment through 2011, an administration official said on Monday.
The plan, aimed at jump-starting job growth, would cut business taxes by some $200 billion over two years, the official said.
Subscribe to:
Posts (Atom)