The Red Flags on Taxing "Cadillac" Insurance Plans
Published October 28, 2009 @ 10:42AM PT
There are some relatively popular things I just don't get. The NHL, for example. Jon & Kate Plus 8, for another. But I've been somewhat surprised with the extent to which many wonkish bloggers I enjoy reading have embraced the Senate bill's method of paying for a chunk of reform through an excise tax on so-called "Cadillac" insurance plans -- an idea that I've repeatedly called "lame." Less surprising but still fretful to me is the White House's embrace of the idea, with economic advisor Christina Roemer yesterday calling it, "probably the number one item that health economists across the ideological spectrum believe is likely to stem the explosion of health-care costs."
Will the insurance plan tax raise money for reform? No question. Will it stem costs? Well, I've got some red flags on that which I haven't seen adequately explained.
Now the forebear of this policy idea did made a lot of sense. Currently, employers don't pay taxes on health benefits like they do on salary for their employees -- a historical accident left over from WWII that fosters our dependence on employer-based insurance, with its inefficiencies and drag on our wages. The original idea was to remove some or all of this exemption and use the money to help pay for subsidies for people buying insurance through the Health Exchange -- not a bad trade-off when combined with an employer mandate to get companies to think twice before just dumping their employee benefits because they had to pay taxes on them. When that idea proved politically unpopular, Sen. Max Baucus suggested maybe they'd only remove the exemption for plans whose dollar value is well above the average -- hence, "Cadillac" because they're more expensive.
When that idea, too, proved unpopular, the senators hit upon the idea of taxing insurance companies. It sounds great (yes! Tax those greedy insurers!), but the intent is the same. If your company's benefits plan for an individual costs $9,000 (the national average is $4,500), then the portion above the threshold of $8,000 would be taxed at 40% -- your insurance company would get hit with a $400 tax on your plan. Of course, they're just going to pass that tax on to their customer -- your boss. Your company then has to decide a.) if they make you pay for that out of your employee contribution, b.) they just pay for it themselves, or c.) they go shopping for a cheaper plan that covers less. Those predicting cost control are betting on Option C winning more often than not. (By the way, the Senate Finance bill ultimately lacked the employer mandate to prevent dumping as well, which created a whole host of other problems, but that's for another day.)
Let me first mention the problem you hear the most: just because you have a "Cadillac" plan doesn't mean you have the money to buy a Cadillac car. For decades, unionized workers have negotiated for better health care benefits, particularly as a concession when their employers were intractable on raising salaries. Similarly, the excise tax does not take into account areas that are already high-cost on insurance plans. Combine those two factors and you have a lot of middle-class people whose insurance plans are about to be taxed. That's a big political problem.
Triggers, Politics and Party Tricks
Published October 28, 2009 @ 06:00AM PT
A public option “trigger” has received a lot of attention lately. Thankfully Harry Reid bypassed it for an opt-out solution instead, because it’s a proven Really Bad Idea. Since the Wonk Room's Igor Volsky thinks it's a fabulous idea to combine an opt-out public option with a trigger, let's put this one to bed once and for all. Following is a quick lesson in political science, so you can recognize this underhanded trick when you see it in future.
Consider: the intent of a trigger is to activate a remedy (a public option) in the event that certain conditions aren’t met by existing forces (private insurers.) Now, we wouldn’t be considering healthcare reform unless there were already significant, long-standing problems in virtually every aspect of our system-less healthcare. That includes $850 billion of waste every year, almost enough to pay for 10 years of reformed healthcare. The insurance reform gun has already fired. So why design a trigger to potentially address this urgent issue sometime in the distant future when things are even worse, perhaps catastrophically so?
The short answer is that doing nothing is the politically safe route. It’s a proven way to get re-elected by not rocking the boat. Olympia Snowe knows that, and probably hoped a trigger would allow her to claim she voted for a public option (what her constituents want) and at the same time kill it (what most Republicans want.) Under the trigger, a public plan would be created only if private insurers didn’t make “meaningful, affordable” coverage available to all Americans within “several years.” Believe it or not, none of these terms has been defined. So what would trigger a public option? You guessed it – nothing.
Pay For Performance: Why You Should Care (Part 3 of 3)
Published October 27, 2009 @ 06:00AM PT
Part 3: What IS That Noise?
In Part 1, we introduced P4P and mentioned some loud screeching that now accompanies it (that’s Screech up above, by the way.) In Part 2 we showed you how to use its basis, quality measurements, to get better care regardless of where you live. But now back to the noise. As we know, the healthcare industry is notoriously resistant to change. The entrenched M.O. is to sit back, wait for it and reactively dig in heels -- with as much sensationalism as deemed necessary. Healthcare leaders know reform strategies have been studied and generally talked to death for the last 16 years. Still, most resist forcefully when innovation stops being voluntary and is instead mandated. Enter Massachusetts, stage right.
In 2005, it became the first state to require health insurance coverage for all residents, with hardship exceptions. Massachusetts is now drowning in healthcare costs. Its residents are covered and 70% of doctors support the program, but the great fee-for-service “quantity over quality” healthcare juggernaut rolls on. It’s time for step 2: rein in those costs with a combination of global payments and P4P – secret code for payment based on quality, coordinated care.
5 Flavors of Public Option
Published October 26, 2009 @ 06:00AM PT
This week will reveal the frustrations of a representative democracy more than any in recent history. It’s too much to expect our Congressional representatives to vote based on what a majority of their constituents want, a public option that is cost-effective and covers most of the population. Between partisan politics and the measurable effect of even small amounts of insurance lobby money, constituents seemingly can’t make their voices heard. So Congress will be presented with 5 flavors of ice cream from which to choose. Here are the public option flavors of the week, and if you need a little musical flair to get you excited about them, we’ve got that too.
First, from the Billionaires for Wealthcare, who crashed the AHIP annual meeting in Washington, D.C., last week, here is “The Public Option” sung in show tunes:
What Happened to the Healthy Americans Act?
Published October 25, 2009 @ 09:00AM PT
Watching the Senate difficulties this week – failing to work around fancy math, having to dump fair physician payments as a result, and trying to substitute an ineffective opt-out public option for even more impotentco-ops – it makes you wonder about Wyden-Bennett. Remember S. 391, aka the Healthy Americans Act? It was billed as market-provided “single payer”, supposedly had bipartisan support, and was universally recognized as superior to the Baucus bill. And we’ve heard … nothing. Why ignore HAA (much more personal than a number, no?), a bill with much higher credibility and without a pesky public option at all? The answer turns out to be two-fold.
First though, let’s review what it had going for it. Back in August, HAA had 5 republicans and 7 democrats publicly backing it in an op-ed, including Mary Landrieu and Joe Lieberman (both none too keen on a public option.) However, three of its co-sponsors, Maria Cantwell, Jeff Merkley, and Arlen Specter, were remarkably quiet. It seems they didn’t want to step on any White House dictates, and Baucus’ process was one of them. Still, the bill was truly a bipartisan feat: it incorporated universal coverage in free-market exchanges designed to empower consumers to shop for the best value.
CBO scored HAA as revenue-neutral, the holy grail of healthcare coverage. Further, it empowered consumers to seek out the best healthcare value in a larger pool of Americans that meant better risk spread. And the basic plan was to be equivalent to the Federal Employee Health Benefits Program. Not bad! Even better, premiums could only vary based on geography and smoking status. No age or health status discrimination, period.
But on to the bad news …
Meet Medicare Part E
Published October 23, 2009 @ 06:00AM PT
How much time-consuming bluster did it take to get to this simple and obvious option? Open up Medicare to everybody, like Ted Kennedy originally proposed in the Senate HELP bill. Part E does stand for “Everybody.” While it’s only one of the three public options being considered by the House, it’s the strongest. Keith Olbermann gives us a great introduction to the concept in the video clip above. Meet Medicare Part E.
Public Option Popularity in Limbo
Published October 22, 2009 @ 06:00AM PT
Consider this a watch list update. Things are looking rosy for a public option right now. The majority of Americans support it, up to 57% from 52% two months ago. Bipartisanship is no longer in vogue, with 51% preferring a public option to a bipartisan one. Nancy Pelosi is rumored to be inserting a strong public option in the House bill, one that may be cheaper and cover more people than the combined Senate bill. Even Harry Reid is considering including “public option lite” in the Senate bill, with a state opt-out clause. So why all the talk about the public option being in limbo, of looking for alternative ways to try and keep private insurers in check?
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