Senate Finance Committee hearings

I'm watching the Senate Finance Committee hearings on the Rockefeller amendment to include a "public option" in the Finance Committee markup. I'm kind of riveted - the level of debate is quite high, excepting Chuck Grassley. I appreciate Orrin Hatch's point of view, which he expressed eloquently, though I believe it is 100 percent wrong. So hurray for representative democracy.

But here's Kent Conrad comparing health insurance systems in the UK, Canada, France, Germany and so on, and he has to have a staffer hold up a big poster board behind him with summary notes. Why is there no computer projection system in the Finance Committee hearing room? Have these people never heard of Powerpoint?

Grrr

So now it looks like the Democrats, rather than just telling anti-abortion people that if they want to require that insurance plans people buy using government subsidies not cover abortion they should get themselves a Congressional majority, and having compromised and compromised on the issue without the other side giving an inch, may cave in entirely. That seems to be a pattern.

Just a few notes:

1. Let the record show that our government currently subsidizes the purchase of employer-provided health insurance to the tune of hundreds of billions of dollars a year, and nearly half of these plans cover abortion.

2. Democrats offered to force insurance companies to separate funding for abortion procedures so that abortion was paid for from the individual's contribution rather than the government's. Anti-abortion people said that's no good because money is fungible, and of course they are right. But money remains fungible even if direct provision of abortion coverage is denied: every dollar individuals save on insurance through the government subsidy is a dollar that is now freed up to spend on abortion.

3. How about the pro-choice people cave on this one, then use their prodigious fund-raising abilities to establish a multi-billion dollar endowment that will pay for abortions for deserving people? I'm not a fan of abortion, but I'll pony up just to stick it to the anti-choice people.

Another by Uwe Reinhardt

What if universities were run like our health care system?

Finally, interesting conservative ideas on health care

David Frum says the way to reduce health costs is to exploit the market power of insurance companies. Regulate insurance companies at the federal level to prevent insurers from reducing the quality of insurance through lifetime limits and so on; eliminate state-level barriers to allow consolidation of the insurance industry on a national level; rely on the resulting small number of large companies to force cost reductions by health providers.



One way this differs from Obama's system is that under ACA the federal government tries to reform health care delivery practices whereas under Frumcare that job is done by large companies in competition with each other. There's a chance that Frum is right here - I'd guess that the government would do a poorer job of reducing costs of household items than Walmart.



I don't see how Frumcare could be implemented without an individual mandate or some other guarantee of universal access however. The same adverse selection problem would apply: if insurers can't discriminate against people with pre-existing conditions then they can't prevent healthy people from opting out of the system and opting in only when they get (expensively) sick.



I don't know if Frum's idea is preferable to ACA, but I appreciate that it is an actual idea from an actual conservative. I will start reading FrumForum more regularly.

Adventures in cable

Late night cable-surfing. First, Glenn Beck telling his audience that after you spank your child, you give him a hug so he knows he's loved. After the health reform vote Beck felt like he'd been spanked. But where's the hug? Instead, Democrats propose immigration reform, an issue that "split us apart" (by which I think he means split the pro-business wing of the Republican party apart from the racist wing). He concludes, logically, that the Democrats are not "evolutionaries" but "revolutionaries." Food for thought.

Next, Mitt Romney on Larry King. Mitt says he wants Congress to repeal Obamacare. Then when King asks how Romney describes himself politically, he says "conservative." Unbidden, he explains that the personal mandate for health insurance under the Massachusetts law he signed is a conservative idea, because it says that individuals cannot rely on government for health care, they need to pay for it themselves. King did not ask: how is the personal mandate under Obamacare different from the personal mandate under Romneycare? Which parts of Obamacare are worth saving, which need to go? Commentators have begun to argue that passage of a health reform plan that is basically a national version of Romney's and the Republican party's total opposition to same dooms Romney's chances for the Republican nomination in 2012. I say the commentators vastly underestimate Republicans' capacity for cognitive dissonance.

What does health care reform do in the first year?

Here's the list from Speaker Pelosi's office. A summary:

1. Small business tax credits

2. Begins to close Medicare donut hole

3. Free preventive care under Medicare

4. Re-insurance plan for companies that provide insurance to retirees <>

5. Ends rescissions

6. Bans discrimination against children with pre-existing conditions

7. No lifetime limits on coverage

8. Restricts annual limits on coverage

9. Free preventive care under new plans

10. New appeals process

11. Insurers have to pay 80% or more of premiums in health care

12. Temporary high-risk pool available to uninsured

13. Children can be covered under parents' plans up to 27th birthday

14. More money for community health centers

15. More money to train primary care doctors

16. Prohibit discrimination based on income

17. Helps states set up offices of health insurance consumer assistance

18. Creates public long-term care insurance program

But how about the tax increases and spending cuts needed to pay for the plan? Here's a complete list of the bill's provisions. I see:

1. Indoor tanning services tax, July 2010 (really?)

2. Begins to reduce payments under Medicare Advantage (2011)

3. Pharmaceutical manufacturers fee (2011)

4. Limit health flexible savings accounts (2013)

5. Eliminates deduction for employer Medicare Part D subsidy (2013)

6. Increased threshold for itemized deductions for health care (2013)

7. Additional hospital insurance tax for high wage workers (2013)

8. Medical device excise tax (2013)

9. Fee for patient centered outcomes research (2013)

10. Health insurance provider fee (2014)

11. Excise tax on high-cost employer-provided health plans (2018)

The timing of the rollout of these provisions is smart from a political standpoint. It's going to be difficult to campaign on repeal of the plan when so many of the benefits are introduced in 2010 and the costs are delayed until 2013. It also makes sense economically: taxes are delayed until the recession is over.

Hope for Democrats in the fall?

Experience shows that the president's party usually loses seats in Congress in midterm elections, also that the party in power loses seats when the economy doing poorly. So by all rights Democrats should lose seats in the House and Senate in November. The question is how bad the losses will be - will the Republicans take over the House and (less probable) the Senate?

Until the health care vote I would have said the probability of the Republicans taking the House was 50-50 or better. Now I'm more optimistic, and here's why. Three things need to happen for the Democrats to keep losses to a minimum.

(1) Pass health insurance reform. This gives Democrats a record of accomplishment, washes the stink of loserhood off of them. It will also provide concrete benefits that Democrats can point to in the upcoming campaign - no denial of insurance to children because of pre-existing conditions, subsidies for small businesses to pay for health insurance, allowing children up to age 26 to be covered under their parents' insurance, and so on.

(2) The economy needs to start recovering vigorously. Happily, this seems to be happening. The March employment numbers will be an important indicator of things to come.

(3) The Republicans need to overreach. This too seems to be happening. Here we see Republican Congressmen making fools of themselves with the Tea Partiers. Here the Republicans allow Michelle Bachman to be their spokesman in vowing to repeal the bill. Here we see why basing a campaign on repeal of health reform is not likely to work. Come campaign season, voters are not going to want to hear Republicans lambasting the health reform bill. They are going to want to hear what the candidates have to say about the economy, financial reform, the budget deficit, immigration, and so on, not have them rehash the arguments they made months earlier about a bill that has already been passed and signed. The Republicans are going to have to moderate their tone and focus on other issues if they want to sweep - but the issues that are going to be discussed in months to come like financial regulation are not winners for the Republicans, and the base will not let them moderate.

So the three things that need to happen for Democrats to survive are happening. I'm cautiously optimistic. Still, November is a long way away and things can change rather suddenly, as we have seen.

Senate health bill is better than nothing

Considerably better, according to Jonathan Cohn. Here's how it benefits middle-income families, according to health economist Jonathan Gruber:

Kinda hard to read. Look at the original article.

Public option vs. individual mandate

The Democrats' health reform plan(s) has a grand bargain at its core: insurance companies lose the right to cherry-pick their customers through higher rates for people with pre-existing conditions and lifetime caps; in exchange, everyone is required to buy health insurance. The individual mandate is necessary because without it the market for health insurance is subject to an adverse selection problem: healthy people opt out, which raises the cost of serving the average person in the pool, which causes insurers to raise rates, which causes more healthy people to drop out, etc.

But there is a political danger in the individual mandate: how do you tell a person struggling to raise a family on $40,000 per year that he/she needs to pony up $10,000 for health insurance? Well, you subsidize the purchase, bring it down to a manageable number - $5000? $3000? But the subsidies are expensive; if insurance premiums keep rising at the rate they have in recent years the program becomes unsustainable. Enter the public option: a strong public option can help control costs and make generous subsidies feasible. At the least, allowing people the option of buying a public plan keeps them from feeling like the government is forcing them into the arms of the rapacious private health insurance companies.

But the insurance companies and their lackeys in Congress have fought the public option tooth and nail, and probably have killed it. Now liberals have to ask themselves, is the bill palatable without the public option? It's not just a matter of good policy, it's a matter of political survival for many Democrats.

Matt Steinglass argues that liberals must honor the original bargain - insurance reform for the individual mandate - and try to fix the mandate before it takes effect in 2013. That's a reasonable argument, but there's another equally reasonable one: drop the mandate, keep the reforms, and screw the insurance industry. Then put the onus on the insurance industry and its lackeys to fix the system before 2013. If they want an individual mandate, they'll have to give something - a public option, stricter regulation, generous subsidies, something. I look forward to the reception the Lieberman-Nelson Health Insurance Reform bill gets in Congress.

The House vote on health care reform

Jonathan Bernstein on the House whip count:

To review: there are probably about fifty House Democrats who want the bill(s) to pass, but without their vote, and the Democratic leadership (I'm going to call them "Pelosi" but it's really the House leadership and the White House) need a lot of them to vote yes. Many of them have already said -- and most of the rest know, and a few of them fear -- that they will vote yes if they need to, but otherwise they're going to vote no. So what's actually happening is mostly a coordination problem, and much of it will be hard for outsiders to see...

What Pelosi is dealing with is a list of fifty or so people, each of whom she understands to be (whatever they say) with her if she needs them, and each of which is probably saying (in one way or another): don't make me do it. Put me at the bottom of your list. And she has to gauge who is bluffing and who isn't, who she wants to protect from the effects of a no vote and who she doesn't, who really ranks where on that list.

I'd like to see this modeled mathematically. It sounds like each of the wavering Democrats is making a time-inconsistent promise to vote "no" on the bill - time inconsistent because they want the bill to pass, so if they're the 216th vote, they'll vote "yes" regardless of their earlier promise. But there must be some probability that each waverer will actually vote "no" when push comes to shove, either because of a cost-benefit calculation or petulance. What is Pelosi's optimal strategy if she knows this probability? If she doesn't know this probability? If she knows/doesn't know each waverer's costs of voting "yes"? Is there a market mechanism that would elicit truthful commitments from enough waverers to pass the bill?

Health reform declared unconstitutional

Well, it's just a federal court in Virginia, but it does move the issue one step closer to the Supreme Court. Just two comments:

(1) I recall that in the 2008 primaries Obama was opposed to the mandate to begin with. He argued at the time that you could insure almost everyone under a voluntary system if the subsidies were high enough.

(2) Even if the mandate were unconstitutional, surely it would be permissible for the government to tax everyone in the amount of the current penalty, then compensate people with a tax credit in the same amount if they demonstrate that they have health insurance.

Would Obama do better if he focused more on job creation?

The conventional wisdom is that his focus on health care instead of jobs is one reason for the sharp decline in his popularity over the last year. (To put it in perspective, however, no president would have sustained the popularity Obama had when he was inaugurated, and his approval rating, now around 49%, is not too far off the percent of people who voted for him in 2008.)

If the conventional wisdom is true, we'd expect Obama's support among people who are worried about their jobs to have fallen by more than it has for the relatively well-off. Is this in fact the case? Unfortunately, I can't find polling data from 2009 to compare to recent data. But Gallup issued a report in February that broke down presidential approval by employment status. It found that Obama has more support among the "underemployed" than among the fully employed:

Obama has stronger support among the underemployed than among the employed. On reflection, this is not surprising - Obama's most vocal opposition is from the Tea Party crowd, who look to me like mid-level, white-collar, self-employed, retired types, not the unemployed rabble.

This tells me that more emphasis on jobs would not necessarily help Obama. In fact, one could argue that access to health care is one of the primary concerns facing the underemployed. Obama's focus on health care may actually work in his favor among this group. The Gallup report doesn't answer this question, but it presents some alarming data on how being underemployed affects access to health care:

Public option bait and switch

Apparently the Senate is now considering an alternative to the public option under which people aged 55-65 could buy into Medicare instead of buying private insurance. This sounds to me like an ingenious bait and switch; I can't believe liberals could be this clever:

1. Liberals want single-payer universal coverage - Medicare for Everyone.
2. But that won't fly politically, so they push a "public option" instead.
3. The public option is whittled down in negotiations to a mere shadow of its desired self, off-limits to the 85% of Americans who currently have insurance.
4. But for Republicans and key conservative Democrats, even the emasculated public option is too much. The Democrats threaten a filibuster if the public option stays.
5. Meanwhile, John McCain and other Republicans take to the floor of the Senate to defend Medicare against the Democrats' promised cuts. Don't throw Granny under the bus, they cry, she loves her Medicare so!
6. So Harry Reid comes back at them: all right, we'll ditch the public option and cover the uninsured through Medicare instead. What, Medicare is socialism? But you're on record extolling its virtues - so Medicare is good enough for Granny but not good enough for her 55 year old son?
7. Befuddled, the wavering Democrats accept Medicare for Everyone (55-65 years old) in place of the public option - the liberals win! Next up: Medicare for those aged 45-55.

Urban Institute report on the "public option"

This report argues that the virtue of a public health insurance option is that it offers a plan that can offer reasonable rates to customers because it can impose low reimbursement rates on health care providers. In other words, it uses the government's market power to offset the market power of hospitals. The authors warn that a weak public option (one that negotiates rather than imposes rates) will be in no better position to negotiate favorable rates than private plans, and therefore not achieve much by way of savings. Ditching the public option, on the other hand, will ensure that rates continue to rise at an unsustainable rate:

The outcome is likely to be that costs will continue to spiral upward. In effect, the nation would be relying on the range of promising pilot approaches to cost containment that would take some time to be successful. If they are not, we may be left with increasingly regulatory approaches, such as rate setting or utilization controls that apply to all payers. This would mean much more government involvement than giving people a choice of a low-cost public option that would be required to compete with private insurers.

Liberals might offer those who oppose the public option this alternative: either a strong public option, or treat hospitals and insurance companies like public utilities and regulate their rates directly. I think the regulatory approach would actually be more effective than the public option and would be happy to go that route.

What I wish Obama would tell liberals about the public option

Look, I'm sorry I've dicked you around about this for the last year. It's a good idea, but there are other ways, but I'll push for it if the votes are there, but it's not in my consensus plan... Crikey, why one of you hasn't announced a primary challenge already I'll never know.

So here's the deal. At this point, the public option doesn't have the votes. The House managed to include it in its bill, which passed with a couple of votes to spare. But we're going to lose a bunch of the abortion nuts this time around because the bill includes the Senate language, so we're going to need to pick up some votes from conservative Democrats who aren't wild about the PO. And the Senate - good God, who knows what the Senate would do with the PO. I mean, we could have 55 votes in favor, and then Joe Lieberman throws up some roadblock to reconciliation that he dug out of the Senate rules from 1809. Plus, suppose we pass the damn thing, what have we got? The weakest possible version of the public option that practically no one will be able to use.

So we've gone another direction with this thing. No public option, but we're going to regulate the hell out of the insurance companies. Regulate 'em back to the stone age, which for them is pre-Reagan, when they were just a bunch of not-for-profit paper-pushers. We're going to repeal their anti-trust exemption, we're going to increase competition through exchanges and interstate competition, we're going to put a cap on the proportion of premiums that can go to administrative expenses, we're going to keep them from cherry-picking their customers; and if none of that works, we're going to just slap price controls on them. They're going to be regulated utilities like they are in Switzerland.

Now, if you liberals still want a PO, then you're going to have to man up. First, drop this weak crap you put in the House bill and push for something substantial like Medicare for Everyone. Then, run on this in November. Motivate the base - the only way to stave off horrendous defeat is to give the liberals something to vote for. Me, I'm going to stay out of this one, because, well, I'm kind of a wuss. But I'll tell you what I'll do for you: I'll go to the black community in every contested Congressional district and I'll tell them that their job didn't end when they left the voting booth in 2008. They didn't turn out in record numbers to vote for a failed one-term black president, did they? No, they wanted a successful two-termer who was going to make real change to benefit their communities. Well, that's going to require them to show up in big numbers in the midterms as well as in years that are divisible by four.

So let's get this thing done now, without the public option. And then you come back and fight hard in 2010 and beyond.

Curve bending

Marc Ambinder writes about the cost containment provisions of the Senate Health Reform bill. Sounds exciting, no? He quotes Jonathan Gruber, prominent health economics expert at MIT:

"I'm sort of a known skeptic on this stuff," Gruber told me. "My summary is it's really hard to figure out how to bend the cost curve, but I can't think of a thing to try that they didn't try. They really make the best effort anyone has ever made. Everything is in here....I can't think of anything I'd do that they are not doing in the bill. You couldn't have done better than they are doing."

My chief complaint about the Senate bill is that I think they make it deficit-friendly by being excessively stingy on insurance subsidies to middle income people. This is not nice, and is also politically dangerous: do Democrats really want to have to face a lot of middle class voters who are angry that the government is making them shell out thousands of dollars for health insurance that they don't think they need? Another problem is that the bill doesn't start providing health insurance subsidies until 2014. That's way too long to wait - they ought to get this puppy dog up and running by this time next year.

The conservative approach to health reform?

The NY Times op-ed piece is misleadingly titled "How the GOP can fix health care." Exhibit A for why this is misleading is that none of the five contributors is currently in government. It seems that the only chance the GOP has of fixing health care is for the current crop of Republican congressmen to turn over their seats to a new generation (or an older generation) that is actually committed to reform.

None of the five pieces identifies lack of coverage for 50 million Americans as a problem that reform needs to address. Instead, four of the five focus exclusively on containing costs. The exception is James Pinkerton, who proposes that we spend more on cures for costly diseases. There's an idea - let's get rid of disease, and then we won't need to worry about the health care system at all! The fact of the matter is that Republicans have never viewed lack of coverage as a fundamental problem. All Republican "reform" proposals aim at reducing costs. While Republicans claim that reducing costs will expand coverage, no reform I've seen would reduce costs by enough to seriously dent the ranks of the uninsured.

It's also worth noting that some of the best ideas the contributors have - having Medicare pay for outcomes rather than procedures, setting up insurance exchanges - are already in the House and/or Senate bills. Mark McClellan is the only one of the contributors to acknowledge this. In fact, he is the one contributor who seems to be advocating that the Republicans work with the Democrats to improve the Democrats' plan by adding more efforts to control costs such as tort reform, rather than simply starting from scratch. If there were five or ten McClellans in the Senate who were not afraid of opposing their party leadership, we'd have decent health reform legislation by now.

Ezra Klein explains why the Republican proposal to let insurance be sold across state lines is a very bad one

Here.

The public auction refuses to die

The liberal blogosphere and media are all a twitter about the impending revival of the public option. Ezra Klein reports that while the public option is good policy and popular with the public, it is incredibly divisive in Congress and its inclusion in any health reform package that the Senate plans to take up will reignite last summer's insanity, possibly derailing the whole effort.

Here's a modest suggestion. The Senate should take up a bill without the public option, then immediately following that take up the public option as a separate piece of legislation. Let's get the major components of reform done and behind us before restarting World War III. This approach might also make it easier to get passage in the House. I suspect that if you add up the Democrats who are opposed to the public option and that oppose the Senate language on abortion, you get enough to defeat the bill. But the broad reform bill and the public option could probably pass separately.

Blue dogs and Democrats

Democrats are engaged in a debate over whether to blame the Blue Dog caucus for the loss they suffered last week. One argument is that the Democrats lost because they pursued an overly ambitious liberal agenda which the Blue Dog members were right to oppose. On the other side are those who argue that the Blue Dogs sabotaged what was in fact a winning agenda, weakening fiscal stimulus and health care legislation both in substance and politically. Matt Bai sides with the absolve-the-blue-dogs crowd, noting that in a country where 41 percent of voters described themselves as conservative it's hard to argue that the Democrats were right to push for liberal legislation.

I look at this in a slightly different way. I think that voters punished Democrats for results and appearances, not for the content or ideological tilt of specific pieces of legislation. Had the economic recovery that looked so promising in March and April continued through the summer there would have been very little criticism of ARRA from moderates and independents (of course the Tea Partiers will be with us always). But the recovery faltered, so it was easy to label ARRA as a failed and wasteful program. I believe that health reform became unpopular not because people don't like the substance of the law - as is often noted, individual components of the law poll very well - but because the process of enacting it became such a circus and people were turned off by the horsetrading.

So what does this say about the Blue Dogs? In retrospect, I think the liberal leadership in the House and Senate should have struck a different sort of deal with the Blue Dogs. Rather than bargain with the Blue Dogs, publicly and at length, in order get a weaker version of health reform and ARRA through Congress, wouldn't it have been nice if the two groups had engaged in some straightforward logrolling? What would Blue Dogs have been able to bring home to their constituencies that would have strengthened their prospects for reelection? Meaningful long-term deficit reduction? Entitlement reform? Tax reform? Ok, in exchange for Blue Dog support for a clean health reform law (including a public option, with a faster timeline to implementation) and a strong ARRA ($1 trillion plus rather than $800 billion), the liberals promise to immediately pivot to a more Blue Dog friendly agenda. The economy would be better off with a stronger ARRA, helping everyone's re-election prospects; the stink would be off health reform; and the Blue Dogs would have real moderate-to-conservative accomplishments that they could have run on in 2010.