Boehnercare Health Care Bill, Yes I realize what it sounds like Options

[Loki Ire]

It's absolutely impossible to say for sure, because so much of asset markets is psychological and speculation. Going by Japan, we could have a national debt of $35 trillion and STILL have an investment grade rating.

Japan just had their debt rating raised a couple of years ago to AA. That's the third highest. Also keep in mind that Japan has paid as much as 7.1% on 10-year government bonds.

7.1% on $1 Trillion would be $71 Billion.

The CBO is already putting US annual interest payments on the national debt at $800 Billion within 10 years from now. That's just the annual interest payment (not including the bulk of the debt servicing). To put that in perspective, we're currently paying about $530 Billion a year in debt servicing with some $170 Billion of that being annual interest.

If Fannie and Freddie debt makes it onto the books, the numbers spike.

This post has been edited by Loki Ire: Nov 5 2009, 05:22 PM

[KainIIIC]

Japan just had their debt rating raised a couple of years ago to AA. That's the third highest. Also keep in mind that Japan has paid as much as 7.1% on 10-year government bonds.

7.1% on $1 Trillion would be $71 Billion.

The CBO is already putting US annual interest payments on the national debt at $800 Billion within 10 years from now. That's just the annual interest payment (not including the bulk of the debt servicing). To put that in perspective, we're currently paying about $530 Billion a year in debt servicing with some $170 Billion of that being annual interest.

If Fannie and Freddie debt makes it onto the books, the numbers spike.

And it's actually pretty funny that you mention and talk about Japan. They're greatly criticized in the 1990s for not using a fiscal stimulus on top of lower interest rates for getting out of their bubble bursting; what did they get? terrible economic performance, a complete shrinkage of economic output potential, massive debt from lower revenues and a near-decade of deflation and stagnation.

deficit spending > a terrible economy.

[PrinceCaspian]

Anyone see Boehner's mess up today, citing the Declaration as part of the Constitution?


Edit- I encourage anyone interested in health policy to check out Switzerland and the Netherlands, two very interesting countries that have universal healthcare and a free market system.

This post has been edited by PrinceCaspian: Nov 5 2009, 09:38 PM

[Lord GVChamp]

Japan just had their debt rating raised a couple of years ago to AA. That's the third highest. Also keep in mind that Japan has paid as much as 7.1% on 10-year government bonds.

7.1% on $1 Trillion would be $71 Billion.

The CBO is already putting US annual interest payments on the national debt at $800 Billion within 10 years from now. That's just the annual interest payment (not including the bulk of the debt servicing). To put that in perspective, we're currently paying about $530 Billion a year in debt servicing with some $170 Billion of that being annual interest.

If Fannie and Freddie debt makes it onto the books, the numbers spike.

But still investment-grade. So we can still run up a good bit of debt and still be able to pay our bills. They'll get more expensive, but they can still be managed, until Congress signifies its complete unwillingness to raise taxes or cut spending.





Also, from the noted Ezra Klein, an interview with the CEO of Kaiser, an American health company:
http://voices.washingtonpost.com/ezra-klei...iser_perma.html

Why do we need private insurance at all? Other countries have national health-care systems. What value do private insurers add to the equation?

All of the European countries, just about, use private insurance. The Netherlands is all private insurance. There’s no government health care. The exceptions are the Swedes, Danes and Norwegians.

But the French have public insurance as the base in their model, for instance.

Still, 92 percent of their people have private insurance. The French public system pays only half the cost of specialty care. But Germany, Netherlands, Switzerland, Austria, Belgium, all those countries are all private coverage. The companies compete based on service, satisfaction, health programs all of that. There’s not one single person in Switzerland who has any government coverage at all. Not poor people, no one. They do a very good job subsidizing coverage. If you look at the ad campaigns in Switzerland, they look just like American ad campaigns for health plans.

Only Canada has a single-payer system that outlaws private coverage. And even in Canada they actually have health plans, because Canada doesn’t cover prescription drugs. What Canada does, instead, is a really good job negotiating drug prices, so drugs are very affordable. But everybody else, every other country has fairly robust private insurance. Some are not for profit, some are for profit.

But on the philosophical level, why should we have our system or the Swedish system as opposed to a single-payer system?

Because, if you have a private insurance system, you’re likely to have competition in a number of areas you won’t have in a single-payer system. Countries with more insurance companies have more CT scanners, more MRIs, more tests. Countries that are a single source of funds for everything tend to have a less robust care infrastructure. There are more CT scans in St. Paul than in all of Canada, or at least there were a couple years ago.

Do we have a competitive insurance market in the US?

We need to do three things. Cover everyone. Fix care, focusing on the patients with chronic care. But the third thing is we have the highest prices in the world. The unit prices here are a multiple of any other country. Look at this. (pdf)

For someone who loves graphs as much as I do. This is beautiful.

It shows you why the public plan is so attractive. When you look at other countries, you can also see what Medicare pays. On bypass surgery, all these other countries under $15,000. The United States is $50,000 and up. And Medicare is $22,000.

Why is this? What people say is that you want a single-payer system because you need a large, central buyer to secure these prices. But in these other countries, as you say, you still have competing insurers, and they’re still getting better prices.

One of the reasons is that in the Netherlands, in Germany, the government sets the fee. In Canada, the government sets the fee. Each of those countries has basically said we’ll have a single fee schedule.

So these private insurers don’t set the prices?

Right. If you’re in Paris, there’s a fee schedule for doctor’s offices.

That’s why the U.S. has a much larger range of prices among different insurance plans for the same services?

Yes. This is the difference in price between us and them. If you take U.S. care delivery and price it to the Canadian model – same care, same drug, same office treatment, same duration of stay – but price it at the Canadian fee schedule, we go from spending 17.6 percent of GDP on health care to 11.5. If you just put us in a single-payer system, we go from 17.6 to 16.9.


You’re saying as compared to when the difference isn’t price, but administrative costs?


Right. But this is complicated. There are more office visits in Europe. The length of stay in Europe is longer. Every country in Europe has a hospital day cost of $1,000 or less. Every state in the U.S. has an average cost that’s $3,000 or more. So you’re charging three times as much, care outcomes are about the same, length of stay is a little more in Europe, and half the hospitals in America lost money last year. There’s no gouging going on. Literally half lost money.

So when you say that we should have a public plan with Medicare rates, Karen Ignagni, who represents an organization you’re part of, says no, the only reason Medicare can pay so little is because we pay so much. But Europe doesn’t pay that much.

All the hospitals believe firmly that they lose money on Medicare and Medicaid. And I’ve run enough hospitals to know that’s probably true. And there will be some cost-shift. The other thing that’s happening is we have the lowest hospital days in the world, but we have increases the rate of spending per day.

We can’t jump from here to Europe. If they’re charging this much and we make them take that much, they all go out of business. But what I recommend we do is reduce the rate of increase in fees for a number of years.

The other argument you hear is that America’s overspending is subsidizing worldwide innovation. The only reason Europe can have the modern health care they enjoy, critics say, is because we’re putting up the money for research and development.

I just did a talk in Portland and a drug company executive made that argument. I said, ‘give me a formula that identifies with a lot of transparency what your research costs are, and it may be appropriate to add that explicitly to your American price structure. But there hasn’t been the transparency we might like. They’re making money in each of those other countries. They’re selling drugs below cost in some countries in Africa, but when you look at Europe, there’s no way in the world they’re selling that drug at that price and losing money on it. So when you take that price and add research, does that triple the price? Let’s do the math. Let’s do the accounting. Let’s figure out the real numbers and factor that into the equation instead of having a debate that’s entirely rhetorical.

I made the point that I find most important very big.

[Decomposition]

Yeah - I thought that the interview was very informative (and those charts that are linked to are even more informative). A related point made by Yglesias (I think) is that while defensive medicine may increase costs a fair amount (as argued repeatedly by Loki Ire) it is difficult to explain the massive inflation in health care costs using defensive medicine as a causal variable.
Any thoughts?
Perhaps Loki can chime in.

[Lord GVChamp]

Yeah - I thought that the interview was very informative (and those charts that are linked to are even more informative). A related point made by Yglesias (I think) is that while defensive medicine may increase costs a fair amount (as argued repeatedly by Loki Ire) it is difficult to explain the massive inflation in health care costs using defensive medicine as a causal variable.
Any thoughts?
Perhaps Loki can chime in.

Reading these blogs, I usually see healthcare cost inflation mostly a result of increasing already high cost healthcare. Also, one of the common narratives I've seen several times is that HMOs and stronger insurance companies were able to negotiate prices downward in the 1990s, constraining costs, but a wave of merger activity in hospitals and providers gave them leverage. And I've seen a few people blame customer backlash against HMOs and insurance companies also reducing their appetite to control costs.

But these are just my impressions and while I've heard the narratives from a bunch of people, so I don't know the accuracy of the views or how widespread they are.

[Decomposition]

Reading these blogs, I usually see healthcare cost inflation mostly a result of increasing already high cost healthcare. Also, one of the common narratives I've seen several times is that HMOs and stronger insurance companies were able to negotiate prices downward in the 1990s, constraining costs, but a wave of merger activity in hospitals and providers gave them leverage. And I've seen a few people blame customer backlash against HMOs and insurance companies also reducing their appetite to control costs.

But these are just my impressions and while I've heard the narratives from a bunch of people, so I don't know the accuracy of the views or how widespread they are.

Yeah - but why are health care cost inflation rates so high. I cannot really see how it can be defensive medicine - but then nothing else really seems to make much sense either.

[Kenadian_2006]

It's still surreal for me to see GV arguing for healthcare reform.

[Lord GVChamp]

Yeah - but why are health care cost inflation rates so high. I cannot really see how it can be defensive medicine - but then nothing else really seems to make much sense either.

Americans just started demanding more of it, maybe? The consumption of prescription drugs jumped big time in the past decade. I am not sure how that correlates to the rest of healthcare though

It's still surreal for me to see GV arguing for healthcare reform.

Everyone supports healthcare reform, it's just a different kind

Seriously, though, I'm relatively moderate. I'm not one of those of ridiculous, "Obama is a socialist" type of Republicans. I just really don't like socialists

[Kenadian_2006]

I say once again, it is surreal.

[edikroma]

Americans just started demanding more of it, maybe? The consumption of prescription drugs jumped big time in the past decade. I am not sure how that correlates to the rest of healthcare though

Considering prescription therapies play a HUGE role in Western medicine, I'd say a lot. Prescription drug costs may themselves make up a relatively small amount of the total cost for health care, but it's one of those things people need on a daily basis.

[Lord GVChamp]

I say once again, it is surreal.

I guess the future is a bit surreal then. Maybe you're just used to right-wingers that only parrot talking points, because that's often all we get here

This one is from a bit more conservative source, I think, and I wouldn't think of posting it normally, but something jumped out at me and I wanted to point it out. I'll point out a few more things since I'm posting it here anyways.
http://www.newyorker.com/online/blogs/john...are-reform.html

With the publication of H.R. 3962, the House Democrats’ mammoth, 1,990-page proposal to restructure the health-care system (the outlines of which can be found in this detailed summary), decision time is fast approaching in the big reform debate. Paul Krugman, in his usual forthright style, says, “History is about to be made—and everyone has to decide which side they’re on.” Democrats and progressives can line up behind the reform legislation that House Speaker Nancy Pelosi put forward last week, or they can help to kill reform for another generation by aligning with hard-line conservatives.

As political analysis, there’s something to be said for Krugman’s Manichean view of the world. But Krugman is also an economist—a very good one—and the economics of what is proposed bear inspection. The President is on the verge of fulfilling his campaign pledge to extend health-care coverage to many of the uninsured. He is doing this, however, not by transforming the existing system of private insurance, which gave rise to many of the current problems, but by extending it. The White House has reached a deal with the big health insurers, such as Aetna and CIGNA. 1. In return for the industry’s agreeing to cover people with preëxisting health conditions, and making various other more minor concessions, the government will force more than twenty million new customers into its arms.

I regard an expansion of the government safety net as ethically essential, economically justified, and long overdue. It is indefensible for a country as rich as the United States to fail to provide adequate health care for many of its citizens. In extending our health-care system, all we are doing is catching up with Otto Von Bismarck’s Germany, which recognized a hundred and twenty-five years ago that universal health and disability coverage, along with old age pensions and a system of public education, were essential elements of a modern society. Moreover, given the reluctance of “Blue Dog” Democrats, such as Nebraska Senator Ben Nelson, to support anything that smacks of big government, and President Obama’s determination to coöperate with moderate Republicans, the proposed reform may be the most that can be accomplished today. But we will be dealing with its consequences for decades to come, and I think it’s important to be clear about what the reform amounts to.

Let’s remind ourselves of the basics. There are two big (and linked) problems with the current health-care system. It excludes 46.3 million Americans, according to the Census Bureau, and it is inordinately expensive. The proposed reform purports to tackle both of these problems; in fact, it only addresses the first one in any systematic manner. The future cost savings that the Administration and its congressional allies are promising to deliver are based on wishful thinking and sleight of hand. Over time, the reform, as proposed, would almost certainly add substantially to the budget deficit, thereby worsening the long-term fiscal crisis that the country faces. Financing this measure alone wouldn’t break the U.S. Treasury. Other elements of the fiscal picture, such as the looming increases in interest payments on the national debt and an explosive growth in Medicare spending as the baby boomers retire—are far larger. 2. But the numbers involved in health-care reform are still significant—perhaps one per cent of annual G.D.P.

The Pelosi bill, in particular, wouldn’t do much, if anything, to address the overall escalation in health-care costs, much of which is rooted in the nature of insurance, where individuals consume costly health services, and different people—the other members of their risk pool—pay for them. This is the “moral hazard” problem that the economist Kenneth Arrow identified as long ago as 1963. (For an easy-to-understand account of Arrow’s argument, see this riveting new book on market failure.) In the past twenty years, many ideas have been tried in the effort to restrict the growth of spending within a private insurance system, the most notable of which was the creation of H.M.O.s. Some have enjoyed temporary success. None have worked for long.

If you read through the briefing papers provided by the House Ways and Means Committee, the fiscal implications of the proposed reform are pretty obvious. Under the proposed legislation, people whose employers don’t offer health coverage will receive “affordability credits” that fall with income, tapering off at about eighty-five thousand dollars a year. A lower-middle-class family of four earning, say, forty-five thousand dollars a year would be entitled to a subsidy of, say, seventy-five hundred dollars a year, to enable them to buy a basic health insurance plan that would cost them, say, eleven thousand dollars a year on the proposed Health Insurance Exchange, These estimates are based on a table on page 3 of the summary document I referred to earlier, which says that families that earn between two hundred and two hundred and fifty per cent of the federal poverty level would have to pay a maximum of eight per cent of their income in insurance premiums. Some poorer families that couldn’t afford to buy coverage even with the generous new tax breaks and subsidies would become eligible for an expanded Medicaid program. Individuals and families that failed to obtain coverage despite these inducements would be subject to a fine of seven hundred and fifty dollars for each uninsured adult.

By any standards, the subsidies in the plan are big ones. For example, they dwarf the Earned Income Tax Credits for poor and middle-income working families, which have been steadily expanded since George H. W. Bush first introduced them. From an egalitarian perspective, the establishment of these generous subsidies would be an important moment in U.S. history. But two practical questions immediately arise. Who would police the new system, and how much would it cost?

The answer to the first question is the Internal Revenue Service. If you couldn’t prove to the I.R.S. that you hadn’t obtained coverage, it would add the seven-hundred-and-fifty-dollar fine to your tax bill. A healthy, single, self-employed person in his twenties would have the choice of buying an individual insurance plan for, say, five to six thousand dollars a year (considerably less than that if he were eligible for a subsidy) or paying the fine. Undoubtedly, some people will choose to pay the fine and go uninsured. According to a Congressional Budget Office analysis of Pelosi’s plan, in 2019 there would still be about eighteen million uninsured adults. (In percentage terms, the share of legal nonelderly Americans with health coverage would rise from about eighty-three per cent today to about ninety-six per cent.)

According to the C.B.O., in summary, many more people will, with government assistance, buy private insurance coverage (some twenty-one million) and many others (about fifteen million) will become newly eligible for Medicaid, which is wholly financed by the taxpayer. Surely, this will cost considerable sums of money and add to the deficit. Or will it? The Democrat-controlled C.B.O. says that the Pelosi plan will actually reduce the deficit by a hundred and four billion dollars between 2010 and 2019, thereby satisfying President Obama’s claim that the reform will be deficit neutral. Furthermore, the C.B.O. suggests that the legislation’s impact on the deficit will continue to be negative in the following decade, from 2019 to 2029. I wish I could believe these figures, but I don’t.

Two large items underpin the Administration’s math: five hundred and seventy-two billion dollars of tax increases over ten years, and roughly the same amount of cost savings on Medicare and other existing government health programs. Most of the revenue increase would come from levying a 5.4 per cent surcharge on Americans individuals who earn more than five hundred thousand dollars a year and joint filers that earn more than a million dollars. I am a big supporter of progressive taxation, but at some point it becomes politically unsustainable. 3. If health-care reform goes through, and the Bush tax cuts expire in 2011, top earners will face a marginal tax rate of forty-five per cent at the federal level. Add in state and local taxes, plus Social Security and Medicare payments, and wealthy people in New York, say, would be facing tax rates of about sixty per cent. As sure as night follows day, this would generate more tax evasion and a political backlash. Without a doubt, the next Republican-controlled Congress would reverse the changes.

4. If it decides to forgo soaking the rich, the Administration could return to its earlier proposal, which was included in a Senate Finance Committee bill that Senator Max Baucus put forward, to tax firms that provide their employees with costly “Cadillac” health-care plans. “A policy such as this is probably the number one item that health economists across the ideological spectrum believe is likely to stem the explosion of health-care costs,” Christine Romer, the chair of the White House Council of Economic Advisers, said in a recent speech. But this idea wouldn’t work politically, either. To raise enough revenue, the tax on swanky insurance plans would have to be set as high as forty per cent. When labor unions, some of whose members enjoy coverage in these plans, learned about this punitive levy they objected loudly, prompting Pelosi to drop the idea, which, broadly speaking, amounts to taxing the upper middle class to provide benefits for the lower middle class.

What about the proposed cost savings? They, too, are questionable. Most of them consist of reductions in Medicare outlays, which, according to this C.B.O. analysis, would save four hundred and twenty-six billion dollars between 2010 and 2019 compared with current plans. 5. Look a bit more closely, and you find that more than half of the Medicare savings (two hundred and twenty-nine billion dollars) come from cutting payments to providers of services under the regular program; most of the rest (a hundred and seventy billion dollars) come from changing the way payments are set in the Medicare Advantage program. Does anybody really believe that these savings will materialize? For decades now, Congress has been promising to reduce the growth of Medicare outlays, and yet every year they continue to go up. The reasons are straightforward: the population is aging; seniors are politically active; and health-care treatments, particularly for the aging, continue to evolve in complex and costly ways.

6. To be fair, contained in its reform plan, the White House does have a proposal to address these issues: the establishment of an Independent Medicare Advisory Council (IMAC), which would provide Congress each year with cost-saving recommendations. “By removing some of the political pressure around such reforms,” Romer said in the same speech, “the IMAC would make it easier for improvements to be made year after year.” This statement can only be described as wishful thinking. I hope it will be proved right, but Washington is replete with now-defunct independent bodies and commissions that toiled dutifully, did good work, and made little difference.

So what does it all add up to? The U.S. government is making a costly and open-ended commitment to help provide health coverage for the vast majority of its citizens. I support this commitment, and I think the federal government’s spending priorities should be altered to make it happen. But let’s not pretend that it isn’t a big deal, or that it will be self-financing, or that it will work out exactly as planned. It won’t.

Many Democratic insiders know all this, or most of it. What is really unfolding, I suspect, is the scenario that many conservatives feared. 7. The Obama Administration, like the Bush Administration before it (and many other Administrations before that) is creating a new entitlement program, which, once established, will be virtually impossible to rescind. At some point in the future, the fiscal consequences of the reform will have to be dealt with in a more meaningful way, but by then the principle of (near) universal coverage will be well established. Even a twenty-first-century Ronald Reagan will have great difficult overturning it.

That takes me back to where I began. Both in terms of the political calculus of the Democratic Party, and in terms of making the United States a more equitable society, expanding health-care coverage now and worrying later about its long-term consequences is an eminently defensible strategy. Putting on my amateur historian’s cap, I might even claim that some subterfuge is historically necessary to get great reforms enacted. But as an economics reporter and commentator, I feel obliged to put on my green eyeshade and count the dollars.

1. This is a line of thinking that I really, really hate. It's partially true, but the only way to keep premiums down across the country if you're going to cover all the sick people is to cover all the healthy people, too. It's also the best way to prevent gaming the system: If you aren't REQUIRED to buy insurance, but you can buy it at a reduced rate whenever you get sick, your incentive is to not buy your insurance for your entire life until you suddenly develop health problems. That's not how social insurance works and that makes the system less sustainable.
What's MORE concerning is how the insurance companies might be able to game the system by "demarketing." Insurers will market to healthy people and not market to unhealthy people, while making it more difficult for unhealthy people to get insurance. So the public option gets loaded with all the crappy patients and has higher costs, while the insurance companies get the healthy people and generate a profit on all of them. Not the best outcome.


2. 1% of GDP doesn't SOUND bad, but that's $144 billion being tacked onto the deficit in 2008. And obviously scaled to economic size throughout the next however many years. The CBO apparently expects a 3% structural deficit after we get out of this recession already, so adding another 1% onto it tips the balance towards fiscal instability.

3. This is part of why I really dislike the Democrats. Out of all the stupidity the Republicans propose, at least they realize incentives matter, even if they drastically overstate the importance of across-the-board tax cuts. 60% tax increases sounds terribly bad to me, especially since, AFAIK, the last few Presidents wrung out a lot of the more grievous tax loopholes. So, for practical purposes, 60% is HIGHER than the tax rates we had when Reagan came into office. I know that this is just the absolute top and a very small number of people will be paying it (at least if they kept the same tax structures that they originally came up with back in the summer) but, combined with the subsidies that create implicit tax increases on the middle and lower classes as well, and I'm rather worried about how far the Democrats would go if they had more power.

4. I am much more in agreement with this tax increase. It's not really ideal, but I'll go with it. It should even reduce the rate of health-care cost growth, though I don't know how much. Unfortunately, the sentence that follows it seems correct: political non-starter.

5. This is what really bugs me and motivated me to post this article in the first place. As Loki has pointed out in this thread and other threads many times, Medicare does not reimburse healthcare providers for the full "worth" of whatever they are buying. This was part of a budget saving measure that I think Clinton passed in his later years and Bush started implementing in 2003.
What bugs me is that, according to this, the healthcare bills are being scored as deficit neutral because these cost-savings, which would occur ANYWAYS, are being scored as "savings" under the bills. I'm not sure if this is true, and if it is I'm not sure why I'm not hearing it being shouted from the roof-tops, or why the CBO created such a crappy analysis. But if true, it means these bills are NOT deficit-neutral, but are spending gains that we are already going to have. And it's pretty damn significant, too, in the hundreds of billions of dollars range. If we did NOTHING, we would have a lower deficit than what we are going to get from implementing these bills.
So calling them "deficit-neutral" strikes me as ridiculously dishonest marketing. It's also bad policy to take savings you're already making and then spending them when we have a sizable deficit that needs fixing.


6. I like this idea, but I think it needs legal power, and not just "making recommendations" power. This would be in line with my more technocratic beliefs.


7. This is the real crux of the matter. Create massive entitlements that are impossible to repeal, and then the next generation of Americans have to figure out how to pay for them. Some people are derisively calling it "stuff the beast." I think it's pretty accurate, and it also depends on Congress being willing to cut costs in the future. And that makes me very worried, because we can't even cut farm subsidies or reduce military waste.



EDIT: I might just be flat-out wrong on number 5, actually...

This post has been edited by Lord GVChamp: Nov 6 2009, 05:40 PM