Posted on February 19, 2008

The real Irony of the Health Care Mandate Arguments


by DrSteveB
Thu Feb 14, 2008 at 08:19:11 PM PST

The real irony of the Obama vs. Hillary (and Krugman and Baker & Hacker et al) argument over individual mandates for purchasing health insurance, is even more fundamental then they are both right and they are both wrong.

The argument against individual mandates is both political and practical. They can’t really be enforced, and they are political poison.

The joke, the irony, is that individual mandates have been promoted, in part — by the oh so moderate and well minded people on our side who should know better — exactly because they thought this approach was more policically practical then Single Payer (which they actually do know is the only plan that actually, you know, works)!

The lesson of 1993-1994, already learned by some of us, is that no matter what is proposed, it will be attacked by the Health Insurance industry, Pharma, the Right.

It does not matter what compromies you make ahead of time.

It will be attacked afterwards, regardless.

If it can provide affordable and universal coverage and access to care — which at the very least requires accepting all applicants (guaranteed issue) and moderating the variation in premiums by more effectively pooling risk (larger universal insurance pools and community rating) AND somehow controlling costs including excess profit and overhead (15-18% for the privates, 4% for Medicare) it will be attacked. If it reduces Health Insurance and Pharma corporate profits and control it will be attacked.

And, as Newt Gingrich and Bill Kristol famously pointed out back in 1993-94, if it looks like it might result in a success, it has to be attacked.

So yes… as analyzed by Clinton’s advisor and respected MIT health economics Jonathan Gruber and also by our friends at the Urban Institute (and endlessly reiterated by Krugman)… in principle

absent a single payer system, it is not possible to achieve universal coverage without an individual mandate. The evidence is strong that voluntary measures alone would leave large numbers of people uninsured. Voluntary measures would tend to enroll disproportionate numbers of individuals with higher cost health problems, creating high premiums and instability in the insurance pools in which they are enrolled, unless further significant government subsidization is provided. The government would also have difficulty redirecting current spending on the uninsured to offset some of the cost associated with a new program without universal coverage.

Me… I reject the false premise.

In fact, plans depending on forced purchase of private insurance via individual mandates don’t really work either. As Don McCanne, PNHP’s Senior Health Policy Fellow, pointed out:

It is important to understand Professor Gruber’s framing and modeling since he is an advisor for various reform efforts such as those in Massachusetts and California, and he is also providing support for the proposals of leading Democratic candidates for president.

Although this paper presents modeling of “the impact of alternative interventions to increase insurance coverage,” he begins with assumptions that significantly limit the variety of options studied.
He limits his options based on “two political constraints.”

“First, it is difficult to envision a solution to the problem of the uninsured which does not involve in some way the private insurance industry… The health insurance industry in the United States has revenues of over $500 billion per year, making it a very concentrated interest that would have to be defeated to move to nationally provided health insurance.”

“The second constraint is the fiscal situation of the U.S.
government. Except for a brief window at the end of the 20th century, the U.S. government budget has been in significant deficit for thirty years, and this deficit shows no sign of abating… Given these pressures, major new expenditures to cover the uninsured are likely to engender a major political battle.”

Before he has even begun his analysis, he eliminates a single payer national health program because we must involve the private insurance industry, in spite of his acknowledgment of the high administrative costs.

Also, his modeling does not look at the impact on our total health care costs, but rather he models the impact on taxpayer costs. In so doing, he has placed a very high priority on keeping the costs of the expansions of health care coverage out of our government budgets, demonstrating that the biggest “bang for the buck” is attained by those alternatives that result in the lowest taxpayer cost per each additional individual obtaining coverage, ignoring the fact that the difference must be paid by individuals and/or employers.

He discusses two modest reforms public insurance expansion, and non-group tax credits, which are quite inadequate compared to the need.

Then, for “more fundamental reform,” he states that issues to be addressed include pooling, affordability, and mandates. He considers three options, “given the constraint that private insurance provision must be a centerpiece of any reform plan.”

His first option is to ensure universal access of individuals to an affordable insurance product. He describes state-specific pools that are community rated with guaranteed issue. Voluntary participation would be encouraged by sliding scale subsidies based on income. By his modeling, this would cover about one-half of the uninsured, at a high taxpayer cost of $4500 per individual (Obama plan - per Krugman).

His second option is to add an individual mandate to this universal access approach. He makes the assumption, without supporting evidence (theorizing that strong penalties would be effective), that “95% of those who would not voluntarily choose to insure are forced to insure through the mandate.” By his modeling, this would cover about 97% of the uninsured at a lower taxpayer cost of $2732 per newly insured (Clinton plan - per Krugman).

His third option is to remove the tax subsidy (regressive) for employer-sponsored insurance and use those funds for the pools in the individual mandate approach. The tax subsidy is so great ($200 billion) that this would result in a negative cost per dollar of insurance provided (individual mandate cost of $120 billion). But once again, this is a reduction in government spending (a government subsidy not granted) with a redistributive shift between employers and individuals of varying incomes.

Professor Gruber concludes, “To fundamentally control health care costs we need to actually be willing to deny care that does little for health – but which consumers now want. This would be accomplished either through government technology policy, medical standards, or global provider budgets… The fundamental insight of this round of reform is therefore to not hold the attainable goal (universal coverage) hostage to the (currently) unattainable goal, fundamental health care cost control.”

But isn’t that the problem? Health care costs are now so high that private insurers can no longer provide us with reasonably comprehensive plans at premiums that are affordable for middle-income individuals.

His first option of pooling (community rating and guaranteed issue) cannot make the plans affordable. His second option of an individual mandate can’t work simply because the plans are not affordable, especially when he has made keeping government budgets in check a major priority. His third option corrects a tax policy injustice, but, in itself, is hardly a reason to perpetuate the inefficiencies and injustices of the private health plans.

Jonathan Gruber and Paul Krugman deserve their reputations as being amongst the most respected economists in the nation. But their fixation on individual mandates provides about the same level of insight as to what we need in the way of health financing reform as does the insight provided by the proctologist who tries to tell us our general state of health from his perspective.

But as we have seen with the relative political success of Obama’s (gentle compared to what the Repugs will bring) critique, individual mandates are neither implementable and enforceable in the real world, nor somehow an a priori compromise that is politically viable.

An Overview Introduction to What We Mean By Single Payer:

Single-payer national health insurance is a system in which a single public or quasi-public agency organizes health financing, but delivery of care remains largely private.

Currently, the U.S. health care system is outrageously expensive, yet inadequate. Despite spending more than twice as much as the rest of the industrialized nations ($7,129 per capita), the United States performs poorly in comparison on major health indicators such as life expectancy, infant mortality and immunization rates. Moreover, the other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves 46 million completely uninsured and millions more inadequately covered.

The reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.

Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $350 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do.

Under a single-payer system, all Americans would be covered for all medically necessary services, including: doctor, hospital, long-term care, mental health, dental vision, prescription drug and medical supply costs. Patients would regain free choice of doctor and hospital, and doctors would regain autonomy over patient care.

Physicians would be paid fee-for-service according to a negotiated formulary or receive salary from a hospital or nonprofit HMO or other group practice. Hospitals would receive a global budget for operating expenses. Health facilities and expensive equipment purchases would be managed by regional health planning boards.

A single-payer system would be financed by eliminating private insurers and recapturing their administrative waste. Modest new taxes would replace premiums and out-of-pocket payments currently paid by individuals and business. Costs would be controlled though negotiated fees, global budgeting and bulk purchasing.

Key Features of “Pure” Single-Payer:

· Universal, Comprehensive Coverage:
Only this ensures access, avoids a 2-class system & minimizes expense

· No out-of-pocket payments:
Co-payments and deductibles are barriers to access, administratively unwieldy, and unnecessary for cost containment

· A single insurance plan, administered by a public or quasi-public agency:
A fragmentary payment system that entrusts private firms with administration ensures the waste of billions of dollars on useless paper pushing and profits. Private insurance duplicating public coverage fosters two-class care and drives up costs; such duplication should be prohibited

· Global operating budgets for hospitals, nursing homes, HMOs and other providers with separate allocation of capital funds:
Billing on a per-patient basis creates unnecessary administrative complexity and expense. Allowing diversion of operating funds for capital investments or profits undermines health planning and intensifies incentives for unnecessary care (under fee for service) or understatement (in HMOs)

· Free Choice of Providers:
Patients should be free to seek care from any licensed health care provider, without financial incentives or penalties

· Public Accountability, Not Corporate Dictates:
The public has an absolute right to democratically set overall health policies and priorities, but medical decisions must be made by patients and providers rather than dictated from afar. Market mechanisms principally empower employers and insurance bureaucrats pursuing narrow financial interests

· Ban on For-Profit Health Care Providers:
Profit seeking inevitably distorts care and diverts resources from patients to investors

· Protection of the rights of health care and insurance workers:
A single-payer national health program would eliminate the jobs of hundreds of thousands of people who currently perform billing, advertising, eligibility determination, and other superfluous tasks. These workers must be guaranteed retraining and placement in meaningful jobs.