Monday, October 26, 2009

p.o. news

Sen. Harry Reid is planning to announce today that the version of the Senate bill that he will bring to the floor will include a public option, with the form of option being a negative one for the states (i.e., they can "opt-out" of offering it to their publics), and, I believe, negotiated rates on reimbursement and an expanded eligibility for Medicaid (Medicare for the poor). Republicans will universally deride this compromise offering as creeping socialism, but, creep that I am, I will support it (if it's what I said it will be).

Reid has said that he is personally in favor of the p.o., but what he is doing is watering it down so that he can hold his party's caucus together on a vote to end debate on the measure (at some point). He is going with the "60 to end debate; 51 to pass" approach, rather than the "budget reconciliation" approach--which might get something through without a cloture vote requiring 60 supporting an end to debate, but could be ineffective in terms of legislation and subject to legal challenges--or the "bipartisan approach", in which there would be no p.o., or a phony one, or a triggered one (and it still might not get 60 votes in favor). This is a new version of the "Gang of 12" which solved the last "slow-motion train wreck", that of judicial appointments back in the Bushite era (see posts with that label).

I'm not going to criticize Reid for the deficiencies of the results of his head-counting, nor do I think his headcount is wrong. What he is doing is being creative in finding several Democratic senators who don't support a public option but are willing to let it through as long as their individual states can opt out of offering the program entirely. There are several small states, some of which have Democratic senators, who have some problems with Medicare reimbursement rates (though I don't think the compromise proposal will actually have them) and don't trust the Federally-backed p.o. to deal fairly.

There are also two large states which we can expect may opt out: Florida and Texas. Texas will do so just because its legislature and statehouse are controlled by greedy hogs at the trough, and their voters can't seem to get their act together to do anything about it. So, if the train pulls out without them and they see it's a fun ride, maybe they finally will get the point. Florida, I hear, has enough competition from the private insurers that they may decide--in the short run--that they don't need this option for their consumers. We'll see if that holds up.

Eat Cake, Bob, Because You Can't Also Have It

Robert J. Samuelson, frequent columnist for Newsweek and the Washington Post, is what I would call a "crank economist". He doesn't have a clear ideological slant to his economical proclamations, but he does prefer a contrarian view of any given topic. So, with the p.o., he's essentially said that it won't cut costs, won't be popular, but will somehow destroy the private insurance industry. We've covered the contradictions in this point of view before: what I want to address now is the issue of costs, and his analysis both demonstrates a popular misconception and helps us clear up another.

Samuelson is arguing that if the p.o. has the "Medicare rates" of reimbursement to health providers (early House versions had Medicare +5%), it will kill private insurers while not reducing systemic health costs (the lower reimbursement rates will be made up somewhere); if they don't have those low rates--i.e. the "negotiated rates" that I'm expecting--they will merely be on a level playing field with the private insurers, so they won't make an impact.

Samuelson may be supported by studies like the Congressional Budget Office's which will suggest that the p.o. will not cut costs, but that's because the CBO is going to be talking about costs to the government, not the consumer, or of the system in general. The way to cut costs to the consumer is to allow low-cost insurance options to those not in employer plans (which the private insurers have proven they will not do), and the way to cut costs more broadly in the system is to cut the cost of employer programs by reducing their tax-deductibility. We all know that the final bill will be tweaked so that CBO's result is neutral over a 10-year period, so their periodic readouts on the current legislation just let us know whether subsidies will need to be increased or decreased.

This issue is tied inevitably with the question of mandates, which has been another moving target in the bill. The employer mandate should be a "pay or play" one, in which employers above a certain size (and it shouldn't be too large) must either contribute to a pool, or provide a program. The amount of tax deductibility for employer-provided programs should be equal to the required contribution, so the question is just which approach provides better quality for their employees. Similarly, the amount of penalty for individuals who do not have insurance should be slightly higher than the cost they would bear for the minimum level of the p.o., and people who have no insurance should have to pay that premium (that's a true "premium") when they are treated in emergency rooms (or be arrested for vagrancy) or in doctors' offices.

This would give people a choice: pay me now--and be covered by insurance--or pay me later. Some would still choose to bet on their invulnerability and would get away with it, but most would prefer not to have to deal with it on the back end.

The combination of the proper mandates, a public option for those without employer plans, and cost controls on employer plans will be the formula for bending the systemic costs of healthcare downward over the long run.

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