July 3, 2012 · 0 Comments
Source: Beat the Press
By Dean Baker:
David Brooks devotes his column today to telling the Republicans that if they don’t like Obamacare then they will have to have with an alternative to the one that President Obama and Governor Romney developed. His preferred alternative is a plan that appears in the conservative journal National Affairs.
It’s not worth going through all the details, but the essential line in the story is that if we all had individual policies somehow the market will constrain health care costs. The plan would look to move quickly in this direction by replacing the tax preference for firms with less than 200 employers with an individual tax credit. This would add tens of millions of people to the individual market.
The plan would also dissolve Medicaid. Medicaid beneficiaries would get a tax credit just like anyone else, with states deciding how much they would add to the federal credit. In principle, this would add even more people to the individual market.
The faith in the individual market is striking since we already have a large individual market today and it works horribly. The authors apparently believe that the heavy hand of stronger government regulation combined with a larger market will somehow make the individual market work. The authors key regulation is that insurers would be required to issue policies to all applicants and to charge them a uniform rate regardless of their health status. This would apply to anyone who maintained continuous coverage.
I always like to play the Dean Baker gaming game. Let’s see if we can get around this restriction. Suppose we have Joe’s insurance that charges a very low fee and provides coupons for restaurants and gym clubs to its beneficiaries. Healthy people can buy into Joe’s insurance and get most of their premiums rebated to them in its savings on restaurant meals and gyms, with Joe keeping the rest for his profit.
If healthy people then get sick, our conservative friends would require insurers to provide them coverage at the same rate as everyone else. I don’t know about other folks, but I think I would sign up with Joe’s insurance unless I get some serious health problem.
Okay, we know the government bureaucrats will shut down Joe’s insurance, preventing this obvious fraud on the system. Right, what sort of statist cretins are these people? The point here is that the continuous coverage condition they outline here would be incredibly difficult to enforce especially considering the sums involved.
Per capita health costs in the United States are close to $9,000. That comes to $27,000 for a family of three. (It’s lower for children — but stick with this for a moment.) A minimum wage earner with a full-time job takes home less than $15,000 a year. There are tens of millions of workers with family incomes under $30,000. Without some very large subsidies, these people are not going to be able to afford anything resembling real insurance. They may be able to buy Joe’s plan (perhaps the rebates would be in diapers and baby food), but not a plan that actually covers the bulk of their health care costs. Continuous coverage for these people is not going to be possible unless it is with scam insurance.
This is not the only place where these people seem troubled by arithmetic. The piece tells readers that we should look to replace Medicare with a voucher-type system like the one proposed by Representative Paul Ryan. It argues:
“While such a reform should try to capture the bulk of the huge Baby Boom generation, it should also be carefully phased in, applying only to future enrollees. A transition to a new premium-support model should exempt from the changes people who are currently in the Medicare program and those very close to retiring. (For instance, the plan offered by Republican congressman Paul Ryan and Democratic senator Ron Wyden would start with Americans who are 55 today, and so will enter the program in ten years.)”
Let’s see, the baby boom cohorts were people born between 1946 and 1964. People who are 55 today were born in 1957. How do we get the bulk of the baby boom generation covered under this new system if we only transition to people born after 1957?
(The piece also bizarrely tells us that the current ratio of workers to Medicare beneficiaries is 3.7 to 1 and is destined to fall to 2.4 to 1 in 2030. Not to be overly picky, but the Bureau of Labor Statistics tells us that we have 142.3 million people currently employed. This is almost exactly 3.0 times the 47 million people currently receiving Medicare benefits.)
One item that is curiously missing from our free market gang’s approach to health care reform is a lack of interest in more trade in health care services. Why not provide people with more incentive to take advantage of lower cost health care elsewhere in the world. Many procedures that cost hundreds of thousands of dollars here could be done for one tenth of this price in India and elsewhere in modern facilities that have high standards. Why not make it easier for people in the United States to take advantage of such options by setting up clear liability rules and having a reliable quality certification process?
Why not allow seniors to buy into foreign Medicare systems. This is a great potential win-win. With the gap in costs projected to grow into the tens of thousands of dollars per person, the government could save thousands of dollars each year for every person that chooses to buy into the health care system of the U.K. or Canada, with the beneficiary putting the same amount of money in their pocket. And, we can even pay a substantial premium above costs to make it worth the while of the receiving country.
It looks to me like Brooks and his National Affairs buddies are more interested in protecting the insurance industry and the income of health care providers than the market. They sure don’t look to the market for the most obvious gains that it could provide.