The Sovereign Mind

Free thought on politics and real life

Posts Tagged ‘HR 3200

I Think We All Know Where It’s Coming From

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At one of Obama’s recent town hall meetings on the health care proposals, a questioner brought up the misinformation that is circulating in the debate:

You touched on this. I would like you to expand a little more. This problem with misinformation in our country, it seems to me that it’s not only just hurting health care reform, health insurance reform, it’s dividing our country. (Applause.) Is it not maybe time — I think we all know where it’s coming from.

Yes, we do. It’s coming from all sides. During that same town hall, as well as those that preceded it, Obama has been using the proposed Medicare Advantage cuts as an example of where we can eliminate waste from the system in order to pay for his plans:

So I’ll give you — let me give you one particular example. We right now provide $177 billion over 10 years — or about $17 billion, $18 billion a year — to insurance companies in the forms of subsidies for something called Medicare Advantage where they basically run the Medicare program that everybody else has, except they get an extra bunch of money that they make a big profit off of. And there’s no proof, no evidence at all that seniors are better off using Medicare Advantage than regular Medicare. If we could save that $18 billion a year, that is money that we can use to help people who right now need some help.

Medicare Advantage is a system in which seniors who would normally qualify for Medicare can instead buy private health insurance plans, and have some of the cost of that plan subsidized by Medicare dollars. In 2003, the system was changed such that private insurers are given a more generous subsidy to provide these services. It is mainly this change that has prompted the concern that tax-payers are lining the wallets of insurance company executives. That is a legitimate concern. However, it is clear that those additional subsidies have encouraged insurance companies to offer more attractive plans to seniors. According to the Congressional Budget Office:

In 2004, Medicare Advantage plans accounted for 13 percent of enrollment in Medicare, the lowest level since 1996. Over the past two years, however, enrollment in those health plans has increased to about 19 percent of all enrollment, or 8.3 million beneficiaries.19 That increase resulted from changes enacted in the Medicare Modernization Act that increased payment rates and added the prescription drug benefit to complement the medical benefits provided under Parts A and B of Medicare. CBO projects that enrollment in Medicare health plans will continue to increase rapidly in coming years, to 22 percent of total Medicare enrollment in 2008 and 26 percent by 2017 (see Figure 1).

So, the higher government subsidy to insurance companies resulted in more seniors seeking after these private plans. There’s a reasonable debate to be had to be sure we are using government money wisely. However, the debate has to recognize a simple fact: if increasing the subsidy caused more attractive plans to be offered to seniors, what will happen when the subsidy is decreased? Will private insurers still offer those same plans as the same premiums to seniors? Reason says no. And yet, there’s this oft-repeated line from the President: “If you like your health care plan, you keep your health care plan.” Unless it’s a Medicare Advantage plan. Then all bets are off.

Some mock the elderly for statements such as “Keep your government hands off my Medicare.” It is true, that statement doesn’t express the frustration well, but the underlying concern is a real one. Maybe, before mocking, we should think about the fact that these people have been around many decades, and maybe have learned a thing or two about how government works. It turns out that, despite the patronizingly reassuring words that are used to try to calm the elderly on this issue, they have good reason to be concerned. If this is Obama’s example of an “inefficiency” in the system, what else might there be?

Written by Mike

August 29, 2009 at 10:34 pm

Paul Krugman vs. Paul Curtman

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Paul Krugman, nobel prize winning economist, says that the people protesting at health care town hall meetings are anti-American and amount to a mob.

Tell that to Paul Curtman:

Our country was founded on freedom, not politeness.

For those who might be tempted to brush off his criticism, please read The Federalist #41, written by James Madison, known as the Father of the Constitution.

Written by Mike

August 8, 2009 at 6:25 am

What’s Wrong With the Health Care Bill: How Small is Small?

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Continuing my series I began a few days ago, here’s another little gem within the health care bill. The plan imposes a penalty on companies that don’t contribute to health care for their employees. But don’t worry, small businesses. The Democrats are fully committed to engaging in rhetoric to ensure that you don’t think this is going to affect you. From the summary, in a section ironically entitled “Assistance for small employers”:

Recognizing the special needs of small businesses, the smallest businesses (payroll that does not exceed $250,000) are exempt from the employer responsibility requirement. The payroll penalty would then phase in starting at 2% for firms with annual payrolls over $250,000 rising to the full 8 percent penalty for firms with annual payrolls above $400,000.

Democrats know that they must continue the charade of appearing to be on the side of small business. They argue that it will only be big business that will be penalized. You know those businesses with those big pockets. (On a side note, having big pockets doesn’t always mean they have anything in them, but that’s a matter for a different day.)

But now we learn that businesses with a payroll of as little as $250,000 would be hit by a tax. Now we know that Obama means it literally when he says he wants to help the “mom and pop” businesses. Just don’t hire the uncle and a few cousins–that might put you over the limit into evil big business territory. I know that isn’t a fair representation of Obama’s position–he probably does care about helping small business. But, as is common lately, his rhetoric doesn’t match the bill. Unfortunately, congress will not be voting on the president’s speeches. They will be voting on the bill before them that they (hopefully) have read.

But I’ll ask a more fundamental question: why should it be the employers’ responsibility to contribute to health care coverage? I don’t think you can argue that employers have a responsibility to do anything except fulfill the agreement they have made with the employee when he is hired. If I’m an employer looking to hire someone, and I put out the conditions of employment, and someone looking for a job agrees with those conditions, why should the government tell us we can’t make that arrangement, or punish us for doing so.

Those who support the tax on business will argue that businesses should pay for health care because they have the deep pockets. Those who make this argument don’t understand economics. The amount that the employer has to pay for health care is approximately the amount by which they will decrease their employees’ salaries. If it were not so, then I think we should mandate businesses to pay for my groceries and mortgage also. If the money that my employer pays comes out of thin air, we could easily solve our housing crisis that way. Of course that’s ridiculous. If my employer has to pay my mortgage, my salary would decrease.

There are several problems with employer-based health coverage:

1) If I lose or change jobs, I lose my coverage. Plans aren’t portable. This contributes to the problem of the uninsured, and also makes people stay in jobs they don’t like, rather than looking for greener pastures. That is detrimental to the labor market, as it means that employers don’t have to work so hard to keep their employees happy.

2) When employers offer health care plans, they offer limited choices. Choice is essential in a free market. If I don’t like my insurance provider, I ought to be able to easily switch to another. This keeps the insurance companies honest because they would know if they do not provide good service and a reasonable price, I’d go elsewhere.

So, considering those disadvantages, why is it that we have a employer-based health system?

1) Employers are offered a tax break to give health coverage to their employees. It still costs them money, of course, but it costs them less money then it would cost their employees to buy the plan themselves, since they would not qualify for the tax break. So, employers can provide something to their employees which is of high value to them, but costs the business less. This could be solved by equalizing the tax structure so that individuals who buy health insurance benefit just as much as businesses. Businesses that want to attract the best and brightest would still be able to contribute to the health care plans for their employees, but they would not get any additional benefit from the government for doing so. In addition, those who don’t have jobs or work for companies that don’t provide health care would not be disadvantaged in the insurance market.

2) Employees like the fact that when they sign up for a health care plan through their employer, they are part of a pool. That means their cost doesn’t depend on their health status, but rather the health status of the entire work force. It means that healthy employees subsidize the health care of the less healthy. Many people see this as a good thing, but a pool is just a crutch since we don’t have a better way to charge people. A better way would be to charge people based on their behavior, which eliminates the need for pools because everyone pays what they should pay, and everyone is equally able to lower their costs by making healthy choices, regardless of pre-existing conditions.

But even if the “charge on behavior” philosophy is not palatable to some who prefer the more tried-and-true mechanism of pools, we could set up such pools at the state level, instead of putting that responsibility on the employers.

But wouldn’t taking away the incentive to provide health care (or the punishment for not doing so) from businesses cause people to lose their health insurance? It might cause some businesses to drop coverage, but it would also add revenue to the system to provide tax credits to help individuals buy coverage, as well as more help for those with lower incomes.

What I’ve outlined is true change–way more than Obama wants to take on since he is determined to build on the current system. At the very least, that proves he is wrong to suggest that the only alternative to this bill is to do nothing. One alternative is to do more. But, really it’s not about less or more. It’s about what’s right. And pinning the responsibility of health care on “big” business is wrong, costs jobs, and leads to less choice in the marketplace.

Written by Mike

July 27, 2009 at 8:58 am

What’s Wrong With the Health Care Bill: What Happened to Personal Responsibility?

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I recently read the summary of the house bill and a few parts of the actual bill that I wanted to dive into in more detail. No, I don’t have time to read the entire bill. I have to say: it’s worse than I thought.

I won’t bother about the part about the “public option”. It is the most debated part of the bill, and most of the debate is ideological. Although personally I don’t like it as I fall on the more conservative small government side, but I don’t feel I have much to add to that debate. I’d like to focus on some things that are wrong because they are wrong–not because they don’t fit a certain ideology. So this is the first post in a series (if I get around to more) on what’s wrong with the health care bill.

The summary of the bill says this:

It also limits the ability of insurance companies to charge higher rates due to health status, gender, or other factors. Under the proposal, premiums can vary based only on age (no more than 2:1), geography and family size.

(You can read the part of the actual bill that relates to this issue here.)

I actually like the idea of preventing insurance companies from charging sick people more. The unregulated free market punishes people for having the nerve to get sick. Now, some diseases are preventable and one could argue that in some cases it is justified to charge people more if they get sick due to their own poor choices. However, there are two problems with this argument:

1) Many people get sick because of bad luck, not because of anything they did wrong.
2) Many people make bad health choices but don’t get sick.

If the intent of a free market is to encourage good choices by rewarding them and discourage destructive choices by punishing them, clearly the free market does not do this well in the health care world. As I’ve argued before, the free market is a great system, but is not perfect, especially in the areas of health care and education (I’ll leave education for another day).

So what’s wrong with this proposal, then? If we’re going to take away health status as a measure of how much someone should pay, what should we replace it with? I propose that we regulate insurance companies such that their premiums must be based on behavior, not health status. For example, someone who smokes can be charged more. Someone who is overweight, but loses weight over a certain amount of time, should see his premiums decrease. That would help accomplish two important goals:

1) Make the pricing system more fair. In our current system, someone with a chronic disease, whether they acquired it because of their own poor choices or not, would have to pay enormous premiums in order to be insured. Or, they have to be in a pool where healthy people help subsidize their care. Why not make people who are making poor health care choices, but who are not yet sick, subsidize the care for those who are sick?

2) Basing premiums on behavior would be a driver to improve health choices, and therefore lower health care costs. If people know they can lower their health care premiums by making better choices, they’d be more inclined to do so. Safeway has proven it, but according to my reading of the bill, Safeway’s program would not be approved.

Fortunately, I’m not the only one making this case. Although I haven’t heard much in the media, and have yet to find any other blog post regarding this important issue. Obama likes to talk about decreasing health care costs, but I don’t see much in the bill that actually does. This would be one way to do so, and it’s not even an partisan issue.

Written by Mike

July 24, 2009 at 10:22 pm