I Like Barack Obama's Health Care Plan

Mark Thoma reports http://economistsview.typepad.com/economistsview/2007/06/brad_delong_oba.html that I am live in the Financial Times:

FT.com / Comment & analysis / Comment - Obama can remedy ailing healthcare system: June 3 2007 18:44: It is an iron law of American politics that Democratic party politicians who propose relatively detailed healthcare reform plans – as Barack Obama did last Tuesday – get trashed. If they propose a plan that might actually pass, securing the 60 needed votes to close off debate and proceed to a final vote in the Senate, they will be trashed for having abandoned their base and their own principles. If they propose a plan that corresponds to the world that they wish they could attain, they will be trashed as having no practical sense. In either case, they lose. It is like hitting yourself on the head with a hammer: a pointless and painful exercise.

This is too bad, as the US needs to have a debate on its healthcare system. It spends twice as much as western Europe for little clear benefit: Americans are no more healthy or long-lived than western Europeans. If the US could get the same value for its healthcare dollars as western Europe, it would have an extra $800bn a year to spend: enough to pay room, board and private college tuition for every American 18-21 year old, and still have enough left over for Marshall Plan-scale economic development programmes for Bangladesh, Pakistan, Egypt and the Maghreb.

There is an extraordinary opportunity for the US to spend the $1,700bn a year it spends on healthcare better. The most visible and damaging part of the failure of its spending is that 45m Americans lack health insurance. Mr Obama is trying to avoid performing the political equivalent of hitting himself on the head with a hammer by proposing something more like a gardening effort. Instead of doing the equivalent of declaring that there must be an aspidistra five yards from the main gate, he is talking about providing seeds, fertiliser, water and hoes. In this way, Mr Obama’s advisers hope, he will please those party activists who want a vision of utopia and those who want a successful legislative road map.

The gardening plan begins with a tax on employers who do not offer their workers employer-sponsored health insurance – “pay or play”, it is called. If this tax induces them to do so, then the number of uninsured falls to a small and manageable number that can be covered by public hospitals: this particular flowerbed flourishes. If employers do not respond, then the government collects the tax and has money for expanded public health programmes or to subsidise affordable healthcare coverage for the uninsured working poor.In the US, however, there is an additional problem. If you are a single individual without employer sponsorship it is very hard to buy affordable health coverage. “Why do you want to be insured?” the insurance companies ask. “Are you sick? The fact that you want insurance means you are a bad risk.”

Thus the second part of the gardening plan: offer the Federal Employee Health Benefit Program to everybody. It works for federal employees. It should work for everyone – especially with subsidies to cover the cost for the working poor. If the take-up is high, then well and good: uninsurance is reduced to a minor nuisance. If people do not find FEHBP attractive, then move on to the third stage of the gardening plan: health exchanges to serve small companies and individuals the way that benefits departments currently serve the workers of large corporations, collecting bids and assuring quality from insurance companies, and so offering families choices.Mr Obama’s people are betting that at least one of these three flowerbeds will flourish: that people will opt for at least one of these options and that the problem of covering the 45m uninsured will disappear. If not – if, say, young, healthy and rich people become free riders in large numbers – then they move on to mandating coverage and levying taxes. But all four roads lead to the same place: a US that no longer has a massive uninsurance problem.

In a country with rational politics, such a plan ought to be attractive. All should recognise that failure to reform healthcare is a wasted opportunity. The right should embrace it for its market elements – allowing people to vote with their feet for the mechanisms that they want and the promise to support successful institutions. The centre should embrace it because the right has no strong ideological reason to oppose it – hence it is politically viable. And the left should embrace it because it promises the utopia of ending the problems of the uninsured. Unfortunately, however, judging by the brickbats the plan has already received, Mr Obama is set to be another victim of the iron law of American politics.

Comments

[jimbo]

It's too bad that an embedded assumption of American politics is that the GOP will oppose universal health care, and that they never pay a price at the polls.

[thereisnorule6]

it doesn't matter what the assumptions are, the health care lobby is so strong that it overcomes party politics. That is what is keeping universal health care off the table.

[anne]

Yes, yes; I wanted a more but Brad DeLong is right and I too like Barack Obama's health care plan. Broadly there is emerging a consensus among the Democratic candidates on health care that could be most persuasive from 2009 on. So, we must be practical and think in term of emphasizing concensus on health care these coming months and hoping for considerable Democratic strength in the election.

Interestingly, Mitt Romney is running away from the program to broaden health care coverage in Massachusetts, which tells us to expect no quarter from Republicans on the issue.

[Slocum]

"Thus the second part of the gardening plan: offer the Federal Employee Health Benefit Program to everybody. It works for federal employees. It should work for everyone – especially with subsidies to cover the cost for the working poor. If the take-up is high, then well and good: uninsurance is reduced to a minor nuisance."

But the people who would find buying into the FEHBP attractive would be people who couldn't obtain other insurance at good rates. Which is to say, higher-risk people.

Right now, the FEHBP works as well as it does because the risk pool is Federal Employees (who are probably, I'm guessing, somewhat healthier than Americans in general). But if the pool becomes Federal employees + high-risk, high-cost others, then that's a big problem, isn't it?

If the FEHBP lets people opt in regardless of age and medical condition and does not charge higher rates for older, sicker workers...how can that possibly not blow up? Or if the FEHBP does charge high-risk people rates that reflects the cost of insuring them, we'll be right back where we started, won't we?

"Mr Obama’s people are betting that at least one of these three flowerbeds will flourish: that people will opt for at least one of these options and that the problem of covering the 45m uninsured will disappear. If not – if, say, young, healthy and rich people become free riders in large numbers – then they move on to mandating coverage and levying taxes."

Well, but the young & healthy won't necessarily have no coverage, but they (or their employers) will buy low-cost insurance from providers who sell such policies to low-cost, young & healthy customers.

It still seems to me that, "It's the risk-pool stupid", and I don't see how Obama's plan addresses that.

[save_the_rustbelt]

This is likely to change the hiring patterns of small businesses, the next employee will have to wait.

This, like many good intentioned government regulations, tends to protect the large and established from new competitors.

Beware the law of unintended consequences.

[Robert Waldmann]

You can argue political realism all you want. I stand with the solid socialist and cry out "Keep the Aspidistra Flying."

[Nate]

I didn't like it at first after reading all the reviews on the blogs, but after hearing him break it down in the debate today, it really made me reconsider. I think he got the better of his exchange with Edwards. Being universal is not as important as helping people get the coverage they need.

[shah8]

I don't think people really understand the basis for our trouble with health care...

Try to think of it in comparison to the Social Security deregulation scheme. Where the aim is give certain industries a huge pool of "customers" with which to dip in and ladle out easy profits.

Health Care is on the opposite end of that. Essentially we have too many people dipping into the customer base without leaving very much in return. The business response is to maintain that easy cash spigot going at whatever cost. The political opposition to Universal Health Care is in response to campaign donors who benefit from the high cash-low services dynamics of the current schema. However well intentioned (with the pathos of perfection being the enemy of good enough), a plan like Obama will, as a commenter states, blow up. I suppose the industry as a whole (in upper echelons) knows that they've got to cut back if they wish to maintain the kind of goodwill that allows their industry to survive. However, there are several inherent prisoners delimmas that would prevent adequate self regulation, as well as permitting some kind of effective regulation from above.

In the end, no matter how someone trys to spread FUD about the political feasibility of getting UHC passed, the reality is that we *must* have most of the features of UHC (if not all of it) in order to control the costs of health care. I.E. the "debate" will not ever end before such a state appears.

[bigTom]

I share slocums concern. A very big component of the healthcare system's illness, is the competition to avoid the high-risk pool of patients. Secondarily it is the obvious desire among all the insurance providers to not have to pay any more than needed. This second effect does provide some control on prices, but it also means an inordinate amount of effort is expended fighting over money. So moving towards a single payer system would seem to be the only viable option for ending this sorry state of affairs. Simply mandating an increase in insurance coverage won't change this dynamic.

The only idea short of single-payer that I think has a chance of working, is government subsidies for insurance providers who take on the higher-risk patient pools. I.e. paying an insurance company a bonus calculated to make up for the additional expected cost of insuring a higher-risk patient, for each such patient they add to their roles.

[Justin Rietz]

In general, I don't see how Obama's plan reduces the amount of money that the U.S. spends on healthcare. But perhaps that is not one of its goals.

I don't disagree that something needs to be done about the cost of healthcare in the U.S., but I think there are many flaws in Obama's plan:

1. The U.S. may spend more on healthcare and have the same "healthiness" as Europeans, but we also lead more unhealthy lifestyles, in general. Hence one of the reasons for higher spending.

2. The plan overlooks a major market factor in play: the drastic limitation of the number of students admitted to medical schools by the AMA. Basic supply and demand dictates that this will increase the cost of medicine.

3. The often quoted "45 million uninsured" is intentionally vague. While I don't doubt that many of the uninsured are uninsured because they are poor, there are also a significant number of people, specifically young people, who choose not to have insurance even though they can afford it.

4. Forcing businesses to pay for healthcare coverage for their employees will have a negative impact on the unemployment rate and/or real wages. Moreover, how did it become the responsibility of businesses to pay for the health care of workers? Beyond it being a traditional benefit offered by many companies, the choice to push the cost on to business is arbitrary.

[anne]

Concerns here are intelligent and similar to those for the Massachusetts plan that will be shortly implemented and will be carefully monitored. I understand the concern of Shah in particular, but prefer to be cautiously optimistic for now.

[Maynard Handley]

As Justin said, his looks like a set of plans for restructuring the way health insurance works in the US, not a plan for restructuring the way the health system works. What in this set of measures addresses the reason that US health costs so much more but delivers less than Europe?
Changing how the money is spent, but not the efficiency with which it is spent is of no interest to normal human beings.

To take one example, I am not interested in being able to enroll in FEHBP. I am interested in being able to enroll in the VA health system (which appears to be the single health system in the US that actually knows WTF to do about using computers, tracking long term health outcomes, dealing with prevention rather than cleaning up after problems occur, etc). But that, conspicuously, appears not to be on the agenda.

[jeff hoffman]

One of the beauties of the VA health system is the relatively low expectations of its subscribers. Those that do not fit into that broad category figure out a way to get their healthcare elsewhere. For example, they have a primary VA MD and get their medications through the VA,and have a doctor or several on the side, in the private sector. Physicians in the VA system often arrive there for reasons that have less to do with personally administering healthcare (which can be done anywhere) than teaching, doing research, having a housestaff to take their call, etc. and having a lifestyle from the standpoint of protected time that they have chosen for that reason, certainly not the money. The VA system may be wonderful in its own way, but certainly not as wonderful as a certain columnist for the NYT thinks it is. I've been there and don't recall it being particularly wonderful at all. Maybe Kaiser would be a better example of how the private sector can do healthcare better. The use of computers is not the exclusive right of the VA; I just returned home from a completely paperless hospital. That criticism is starting to get dated.

[jeff hoffman]

One of the beauties of the VA health system is the relatively low expectations of its subscribers. Those that do not fit into that broad category figure out a way to get their healthcare elsewhere. For example, they have a primary VA MD and get their medications through the VA,and have a doctor or several on the side, in the private sector. Physicians in the VA system often arrive there for reasons that have less to do with personally administering healthcare (which can be done anywhere) than teaching, doing research, having a housestaff to take their call, etc. and having a lifestyle from the standpoint of protected time that they have chosen for that reason, certainly not the money. The VA system may be wonderful in its own way, but certainly not as wonderful as a certain columnist for the NYT thinks it is. I've been there and don't recall it being particularly wonderful at all. Maybe Kaiser would be a better example of how the private sector can do healthcare better. The use of computers is not the exclusive right of the VA; I just returned home from a completely paperless hospital. That criticism is starting to get dated.

[Maynard Handley]

"The use of computers is not the exclusive right of the VA; I just returned home from a completely paperless hospital. That criticism is starting to get dated."

Hmm.
• I switched dentists a year ago and, what do you know, first thing he had to do was take all new full mouth X-rays.
• I see no evidence that my current doctor has any knowledge of my medical history before I first interacted with him two years ago.
• Admittedly this was about five years ago, but an attempt to acquire some X-rays taken some time earlier resulted in an (ultimately fruitless) exploration of a warehouse in San Jose.

Computerising medicine is a damn sight more than giving a prescription that's printed out rather than hand-written.

[Disinterested Observer]

As other have pointed out, it seems to me that a major issue to be addressed is how to insure "high risk" individuals, and it is not clear to me from Brad's description what the Obama plan is proposing here.

One interesting approach is that of Australia, which has a basic universal system, plus extensive private health insurance.

However, Australia makes it illegal for private health insurers to refuse insurance to anyone.

What then happens, however, is that there is a reinsurance mechanism for health insurance funds to share the costs of hospital treatment for high-claiming persons, i.e. older persons, and chronically-ill persons (persons aged 64 or below who have been hospitalized for 35 days or more in a rolling 12-month period). While health insurance funds paying benefits above their state or territory average for hospital services to high-claiming persons receive payments from the Fund, those health insurance funds paying less than the state or territory average in benefits contribute to the Fund to make up for the difference.

Since 2000 there has also been an element of age-related lifetime premiums.

for other details, see
http://nceph.anu.edu.au/Publications/Working_Papers/WP48.pdf

and http://nceph.anu.edu.au/Publications/Working_Papers/WP47.pdf

[Bruce Ferguson]

Is this a true statement?
“If you are a single individual without employer sponsorship it is very hard to buy affordable health coverage.”

It was not true in the 80s when I was buying my own insurance.

[Janes]

There is an interesting article appearing in the latest issue of eMaxhealth insurance news publication at www.emaxhealth.com/72/ which basically says that Every year, the U.S. Census Bureau reports the number of uninsured has grown--reaching 46.6 million Americans in 2005. However, the focus on the number or percentage misses the point entirely. Before elected officials look for solutions, it is even more important that they understand who are those without health insurance and why they lack coverage.

[sglover]

"The use of computers is not the exclusive right of the VA; I just returned home from a completely paperless hospital. That criticism is starting to get dated."

I'd be astonished if there are very many *hospitals* that don't keep electronic records, for a variety of technical, legal and economic reasons. My understanding is that it's the tier below hospitals, the small clinics and individual practitioners, where records are a real bottleneck. Oh sure, PC's are cheap, and there's lots of health-care office management software available -- but there seems to be little standardization *between* practitioners, which makes record-sharing cumbersome, costly, even risky.

[Observer]

Combining:

"It's too bad that an embedded assumption of American politics is that the GOP will oppose universal health care, and that they never pay a price at the polls."

and

"Changing how the money is spent, but not the efficiency with which it is spent is of no interest to normal human beings."

which both (particularly the second) seem reasonable, seems to mandate a two phase strategy. Phase one is to propose a plan that really works, but eliminates insurance companies. We assume it fails to pass the Senate. Phase two is to try to make those who vote against it pay. The ultimate goal is to eliminate some of the opposition and scare the rest into agreeing to something real.

Note that the right has been using this "move the limits of discourse" strategy for a long time. Sometimes it works, sometimes not. But I see no other with any hope of meeting criterion two.

[Observer]

The other record-keeping problem addressed by the VA system is coordination between hospitals. Things may be fine as long as you are treated at one hospital only. If your employer switches to a plan which uses a different hospital, or if you move, things get complicated.

The VA has system-wide record keeping.

[AJ]

The very fact that Obama's more timid approach hasn't inocculated him from attacks and criticism, and that his plan has inspired such tepid support, would seem to undercut the case for a plan who's primary justification is political. In effect the argument is: "People should support it because other people might support it, even though no one really supports it enthusiastically."

Counting the right, aka, hand maidens of corporate interests, to not object because something is "market oriented" is hopelessly naive. Sometimes it's better to be on the right side of the road or the left rather than in the middle with all of the traffic.

[low-tech cyclist (formerly RT)]

Brad, your FT piece strikes me as a bit of a bait-and-switch.

There you are, in paragraph 2, talking about all the wonderful things we could do if our health care system had the per-capita costs of any of the European systems. Like you say, this is a BIG reason why we need a debate over health care.

But I don't see how Obama's plan, which you praise, does anything to address those cost issues. It seems to skip right by them, addressing only the undercoverage issue.

[Will J.]

A good start, the problem is, of course, that private insurance will always have a profit margin. While I’m a good old American capitalist who enjoys profits on my investments, there’s something about an unnecessary middle man on health care that just bothers me. Doctors should be paid well. They go to school for a long time and are (usually) intelligent and hardworking. I understand why health care is expensive (although some costs could be significantly), but the frickin insurance is just a 10% tax on top of an already expensive product.

Hopefully he keeps refusing money from lobbyists and PACs and maybe, just maybe we’ll have a president who isn’t so beholden to special interests (Congress is another matter). It sounds like a pipe dream, but what if…

[JonF]

Re: The U.S. may spend more on healthcare and have the same "healthiness" as Europeans, but we also lead more unhealthy lifestyles, in general

This proposition needs to be examined very critically. In general I don't think Americans are leading grossly unhealthier lives than other First World people. Obesity after all is a world wide epidemic (even in much of the Third World) while we in the US have lower smoking rates than much of the world and our alcohol consumption rates are only in the middle of the range, internationally. Where you might have a case is if you point to the higher incidence of poverty in the United States, which does seem to be indicated as a factor in our higher child mortality rates and probably has something to do with our lower life expectancy too.