Are progressives “crazy” to oppose Senate health care bill?

December 28, 2009Jon Brooks Comments Off

healthcareimage7Two views of the Senate health care bill from the left. First, Darcy Burner of the American Progressive Caucus Policy Foundation on the blog Open Left, who writes a post called “Joe Lieberman’s Healthcare Bill Is Worse Than Nothing. Kill It.” The post was written after Joe Lieberman forced the Democrats to drop an option for the uninsured to buy into Medicare at age 55.

Then, from statistician Nate Silver on his blog FiveThirtyEight, with a post called “Why Progressives are Batshit Crazy to Oppose the Senate Bill.”

First, Darcy Burner on Open Left:

The fundamental failing of the newest Senate proposal is that it requires individuals to purchase health insurance, but does nothing to rein in what insurance companies charge. There is nothing to stop spiraling health costs from eating up an ever-increasing percentage of our national productivity.

The House bill has two major cost-control mechanisms: the public option and the 85% medical-loss ratio requirement. The Senate bill is on track to have neither, and nothing new to replace them. The Senate bill is a recipe for national disaster. If it’s that bill or nothing, I prefer nothing…

There are four key questions we can use to evaluate the proposed reforms:

Affordable coverage for everyone: FAIL.

The latest CBO estimates for the Senate bill say that a family of four with a household income of $54,000/year should expect to pay 17% of their gross income on healthcare – about $9,000/year. (And that was when there was a public option to hold down costs!) That’s more than they’ll spend on federal taxes. That’s more than they’ll spend on food. I’m guessing if you took a poll, very few Americans would consider that affordable. And because of the way they’ve approached this, there’s no effective cost cap on premiums and nothing providing downward pressure, so this is a problem that would get worse rather than better over time.

Value: FAIL.

In January 2007, the McKinsey Global Institute released a study showing that the United States spends twice as much on healthcare as the rest of the industrialized world. It costs our economy a extra $480 billion per year — roughly $1,600 for every man, woman and child in the country. It’s not because we get more effective care: we have lower life expectancy and higher infant mortality. Our results are worse, even though we’re spending twice as much.

We pay more because we’ve set up the system so that the incentives to insurance companies, doctors, hospitals, and patients are all messed up. We’ve set it up so that expensive ways to treat things are preferred to inexpensive ones, even when the inexpensive ones are better. We’re not getting better care, just more expensive care. Insurance companies won’t pay to let a diabetic see a podiatrist to keep their feet healthy, instead waiting to cover amputations. Why? Because maybe by the time an amputation is necessary, somebody else — another insurance company or better yet Medicare — will have to foot the bill. Voila! More expensive, worse care.

Unless we address the messed-up incentives that are at the heart of our system being so expensive relative to the value being delivered, we aren’t really fixing the problem. A public option might have been in a position to begin to fix those problems, but nothing in the current Senate bill does.

Fixing insurance company injustices: PASS.

The biggest areas of insurance company abuse — denying coverage to people with pre-existing conditions, cancelling policies retroactively after people get sick, discriminating in rates on the basis of gender – appear to be addressed by the bill. I’ll give them the benefit of the doubt here.

Trajectory: FAIL.

Finally, the question is not only whether the bill improves each of the three areas in the short term, but whether they will improve in five years or ten years or twenty years. What the Senate is currently discussing will make healthcare more expensive for individuals, families, and businesses, with no check on the insurance companies and none of the systemic reforms that might fix the incentive problems. They’re on track to make the problems worse over time rather than better.

That’s the best the Senate can do? Thanks to Joe Lieberman, it’s worse than nothing.

We should fight for the House bill, which does a better job on all fronts. With some minor tweaks to ensure that women can get the reproductive care they and their doctors think they need, it’s a decent bill on the right trajectory.

But if it’s Joe Lieberman’s bill or nothing? Kill it.

Now, Nate Silver’s rebuttal.

…it’s clear that (a family of four) would be receiving a very substantial subsidy, on the order of $10,000 in pretax income, under the Senate’s bill. The reason I picked this particular family is because it provides a reality check against the example selected by the great Darcy Burner, who argued in an article at Open Left:

Affordable coverage for everyone: FAIL.

The latest CBO estimates for the Senate bill say that a family of four with a household income of $54,000/year should expect to pay 17% of their gross income on healthcare – about $9,000/year. (And that was when there was a public option to hold down costs!) That’s more than they’ll spend on federal taxes. That’s more than they’ll spend on food. I’m guessing if you took a poll, very few Americans would consider that affordable. And because of the way they’ve approached this, there’s no effective cost cap on premiums and nothing providing downward pressure, so this is a problem that would get worse rather than better over time.

We can debate whether $9,000 for a family earning $54,000 is “affordable”; what we know is that it’s a hell of a lot more affordable than the status quo, under which the family might have to pay more than twice as much to receive equivalent coverage.

In fact, Burner’s example is unfortunately chosen; she picked one of the groups — a low-income family in the individual market — that would benefit the most under the Senate package. Other groups would not be so beneficially impacted. Premiums are projected to rise slightly, for instance, for high-income earners in the individual market, although this is a small fraction of people and they’d get better health coverage as a result. And people in the employer market would not be much affected, except those with generous benefits packages subject to the excise tax; these folks would have to pay more out of pocket, although probably in exchange for more cash income. On the other hand, there are those who have a pre-existing condition and who are not able to buy health coverage at all, and for whom the benefit is almost incalculably large.

I understand that most of the liberal skepticism over the Senate bill is well intentioned. But it has become way, way off the mark. Where do you think the $800 billion goes? It goes to low-income families just like these. Where do you think it comes from? We won’t know for sure until the Senate and House produce their conference bill, but it comes substantially from corporations and high-income earners, plus some efficiency gains…

For any “progressive” who is concerned about the inequality of wealth, income and opportunity in America, this bill would be an absolutely monumental achievement. The more compelling critique, rather, is that the bill would fail to significantly “bend the cost curve”. I don’t dismiss that criticism at all, and certainly the insertion of a public option would have helped at the margins. But fundamentally, that is a critique that would traditionally be associated with the conservative side of the debate, as it ultimately goes to mounting deficits in the wake of expanded government entitlements…

To the extent there are critiques about this post, they are liable to revolve around the fact that $9,000 is not so affordable for our not-so-imaginary family. Two things to note on this:

Firstly, in most years, the family will not be paying $9,000. They’ll be paying closer to $4,000 — the base cost of the premium — or maybe $5,000 for a few meds and doctors’ visits and so forth. The costs will be much higher in those years when a member of the family gets sick. But the alternative in those years would be not having health insurance at all — and in that case, either the the family member might die from the condition or the family will go bankrupt trying to prevent that.

Also, frankly, the individual mandate penalty is not very harsh, especially for lower-income people, so there’s some potential for gaming the system in a way that isn’t economically optimal but would give this particular family a better deal than suggested above.

Secondly, the critiques over the level of subsidies are rather tangential to where the locus of progressive energy has been — on the public option. The presence of a watered-down public option would make very little difference in terms of this family’s cost structure — and yet, this same bill with a public option is one that most liberals would be head-over-heels for.

I happen to agree that the cost subsidies need to be improved somewhat for this type of family and indeed I wish that this is where more of the left’s energy had been directed. Fortunately, I think this is something that really can (still) be improved in conference committee or on the floor. For instance, if you adopted the House bill’s subsidies for families at under 250% of poverty, and the Senate’s (which actually become more generous) for people at greater than 250% of poverty — perhaps in exchange for a harsher (not weaker!) individual mandate penalty — you’d have a pretty reasonable compromise.

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