Thursday, August 27, 2009

Health care reform linkfest

1. Health Insurance Exchange combines the benefits of choice that are theoretically available on the individual market with the bargaining power and scale that's generally accessible only in large employers. It will have a wide array of competing providers offering different plans with varying benefit levels, emphases and price tags. And unlike the individual market, insurers won't be able to discriminate based on your health history or your future risk. Plans will have to be certified as meeting a minimum level of comprehensiveness. All this will engender greater competition and lead to lower prices and improved quality, besides preserving access.

2. The public option plan or public insurance has been mooted with the objective of lowering costs and keeping the inefficient and predatory private insurers on their toes. In the US it has been found that Medicare holds costs down better than private health insurance. In fact, as Simon Johnson and James Kwak writes, Medicare, which dominates the over 65 year market with its 40 million consumers, is the best example of a pulic option plan. Further, the substantially public systems employed by every other industrialized nation cost less and cover more than the private insurance led American model.

Though it wouldn't replace the private insurance individuals already rely on, it provides choice enables consumers make their own decisions. It thereby serves several purposes - act as a public insurer (use market share to bargain down the prices of services, and lowers administrative costs) and use competitive pressure to the rest of the insurance industry (private insurers need to offer premiums closer to their marginal cost, and they have to cut administrative costs, and they have to work on their reputation for cruelty and capriciousness).

Read also Jacob Hacker, here and here, making an excellent case for public plans.

3. The US has a massive employer-based health insurance market due to the employer tax exclusion provision that exempts all expenditure on health insurance from taxation. In other words, as Ezra Klein writes, "If you walk out, on your own, and attempt to give your friendly neighborhood health insurer a dollar, you're taxed on that dollar. If your employer gives the health insurer that dollar on your behalf, that dollar is not taxed." Most health insurance in the US comes in the form of taxes or employer deductions from paychecks, which means insurance can seem practically free. Such employer sponsored insurance insulates the employee (or the insured) form the insurance plans and the cost of health care. It has been estimated that the tax foregone due to the exclusion provision is more than $300 billion a year in the US.

4. Ezra Klein draws attention to an alternative to employer sponsored insurance that would permit employees to shop for alternative plans in the Insurance Exchanges and swap their employer sponsored plans for a better plan. According to one proposal (Wyden-Bennett Bill) put up in the US Congress during the debate on health care reforms, families would receive a voucher worth as much as their employer spends on their health insurance, and would then buy an insurance plan on an exchange where insurers would compete for their business. Insurers would be required to offer basic benefits, and insurers that attracted a sicker group of patients would be subsidized by those that attracted a healthier group. This would also make employer-sponsored plans portable.

See also here (Emmanuel Fuchs talks about health care vouchers) and here for versions of free choice plans. David Leonhardt gives a list of proposals that favor giving employees the freedom to opt for the plan of their choice.

5. While employers write the pay-checks for their employee insurance, the real costs are borne by the employees themselves. Most Americans believe that employers pay the bulk of workers' premiums and that governments pay for Medicare, Medicaid, the State Children'sHealth Insurance Program (SCHIP), and other programs. However, this is incorrect.

It has now been well documented that employers do not bear the cost of employment-based insurance; workers and households pay for health insurance through lower wages and higher prices. Moreover, government has no source of funds other than taxes (on other things and not health care) or borrowing to pay for health care. David Leonhardt sums up the issue, "The cost of insurance comes mostly out of employees’ paychecks. If insurance costs more, employees are generally paid less. If insurance costs less, employees are paid more. The cost of insurance does not have a big effect on employers’ overall compensation costs. That’s why no one should be surprised that employers don’t make for good consumers of insurance. And it’s why insurers are not operating in a very competitive marketplace."

6. See also this comparison (pdf here) of US health care with those elsewhere.

7. David Leonhardt links to a number of articles/posts which explains and gives examples of countries with private health insurance.

8. Simon Johnson and James Kwak argue that the fiscal costs are not a deterrent against health care reforms.

9. Nicholas Kristof makes the case for universal health insurance, drawing attention to the success of the best examples of "socialized medicine" - Medicare (despite public perceptions that it is not run by government) and Veterans Health Insurance scheme.

10. This article by Robert Reich explains the raucousness associated with health care debates in the US, "Universal health care has bedeviled, eluded or defeated every president for the last 75 years. Franklin Roosevelt left it out of Social Security because he was afraid it would be too complicated and attract fierce resistance. Harry Truman fought like hell for it but ultimately lost. Dwight Eisenhower reshaped the public debate over it. John Kennedy was passionate about it. Lyndon Johnson scored the first and last major victory on the road toward achieving it. Richard Nixon devised the essential elements of all future designs for it. Jimmy Carter tried in vain to re-engineer it. The first George Bush toyed with it. Bill Clinton lost it and then never mentioned it again. George W. expanded it significantly, but only for retirees."

11. Superb post by Edward Glaeser that links to many resources that illustrate the inefficiency in American health care system. It has been found that "areas with a high concentration of specialists also show higher spending and less use of high-quality, effective care", and "the incremental Medicare dollar in high cost areas tends to be for medical specialist visits, diagnostic tests and use of intensive care and hospitalizations for medical visits". See also this testimony by CBO Director Peter Orszag on "The Overuse, Underuse, and Misuse of Health Care".

12. Times has this article on the Swiss model, with its universal and private run health insurance system. Swiss private insurers are required to offer coverage to all citizens, regardless of age or medical history. And those people, in turn, are obligated to buy health insurance. Ezra Klein however feels that the Swiss system which has the highest out-of-pocket payments of any OECD country, including the United States, is another example of the fact that substantially public systems hold down costs much better than substantially private systems.

13. Times has nice explanations of the Public Plan, Single Payer systems, and Medicare.

14. In most countries, governments set the rates that will be paid for different treatments and drugs, even when private insurers are doing the actual purchasing. In the US, the government doesn't set those rates for private insurers, which is why the prices paid by Medicare are much lower than those paid by private insurers. Ezra Klein has this excellent post, with the series of graphs that compare the prices for procedures, treatments, drugs etc in different countries. See also this (McKinsey) and this explanations for the high cost of health care in the US. See also this and this interviews with George Halvorson, CEO of Kaiser Permanente, the largest managed-care organization in the United States, about the high health care costs in the US.

15. Ezra Klein also has this article which says that Americans overpay to the tone of $477 billion per year, or $1,645 per capita due to "higher doctor salaries, higher drug costs, higher operation costs, more per day in the hospital, etc, etc." On drugs alone Americans overpay $66 bn, on doctors compensation $58 bn, $147 billion due to the fee-for-service system (wherein doctors are paid based on how many procedures they recommend and carry out), and $98 bn in additional costs of administration.

16. Excellent explanation of all the key issues in the US health care reforms debate is available here.

17. David Leonhardt on evidence based health care.

18. Moneywatch guide to health care reforms. See this nice explanation of the public option. How to make health care cheaper.

19. Fee-for-service medicine, or payment based on procedures carried out, has been identified as one of the most important reasons for over-treatment and the large health care costs in the US. See this on CT scan and MRI usage among OECD countries.

20. Prof Jonathan Gruber makes an excellent case for financing the deficit in health care plan with a "cadillac tax", a 40 percent assessment on insurance plans with premiums of more than $8,500 for singles and $23,000 for families. He writes, "Under current law, if workers are paid in wages, they are taxed on those wages. But if they receive the same amount of compensation in the form of health insurance, they are not taxed. As a result, the tax code has for years provided a large subsidy to the most expensive health plans - at a cost to the U.S. taxpayer of more than $250 billion a year."

21. Community Rating 101 from Uwe Reinhardt. Also this on the widespread use of community rating. See also this summary from Prof Reinhardt.

22. Daniel Gross calls the bluff that the Obamacare reform proposals are not a "government take-over" of health care. It does not contain either the public option or the single-payer attributes that are the characteristics of government run health insurance systems. The only big government intervention is by way of subsidies to those who cannot afford the high premiums. He also shows how successive Republican administrations had increased the share of government expenditures in health care. See also this report on health care in the US.

Maxine Udall makes this passionate plea for a comprehensive, affordable health insurance for the US. See Mark Thoma here.

23. The excellent Dartmouth Atlas of Health Care, a compendium of research on Medicare spending, (methodology here and map here) has found that the hospitals and geographic regions with the highest medical spending are often the ones delivering the worst medical care. However, this Times article has questioned the study findings and the authors respond here.

24. What makes the US health care system so expensive? Links to the full series by Aaron Carroll here and slides here.

25. American families spend almost twice as much on health care — through premiums, paycheck deductions and out-of-pocket expenses — as families in any other country. But Americans don’t live as long as people in Canada, Japan, most of Western Europe or even relatively poor Jordan. Misdiagnosis is common. Medical errors occur more often than in some other countries. Unique to the developed world, millions of people have no health insurance, and millions more, like many fast-food workers, are underinsured.

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