Archive for category: Health Policy

The Economic Policy Institute provides a much needed counter-weight to those cheerleading the use of Cadillac-as-Chevy taxes to pay for the Senate health care bill. It shows, generally, that the millionaire’s tax used to fund the House bill is far more progressive than the Cadillac-as-Chevy tax used to fund the Senate bill, which ends up taxing those at $20-30,000 more than it taxes those at $500,000 to 1 million a year.

In fact, it makes an even more striking point. Given the way the economy has worked in the last several decades, one of the few ways to fund health care in such a way that will keep up with rising health care costs is to tax the rich.

While a funding source that grows with health care costs is a desirable goal, it should be noted that for the last three decades one of the only things in the American economy that actually has grown as fast as overall health costs is the incomes of the richest 1% of households.

The paper points out two central reasons why the excise tax won’t be as progressive as its champions claim.

Most importantly, it shows that the cost of a plan does not reflect exclusively on how generous the benefits of that plan are. On the contrary, plan cost has more to do with group size and overall health than it does with the benefits granted.

The assumption that high-cost plans are high-value plans is flawed. Many health plans are expensive because the population covered is older or sicker than average, but they still do not provide more comprehensive coverage. Moreover, this is a much larger problem than is often recognized. Gould and Minicozzi (2009) have shown that some of the most powerful predictors of a plan’s high cost are the size of the firm and the age of its workers. This is surely not a coincidence—small firms and firms with older workforces tend to have less bargaining power with insurance companies and this leads to higher prices for insurance coverage that may be no more comprehensive than lower-priced coverage for larger or younger firms. It should be noted that the Senate bill recognizes this reality and specifically exempts some health plans (those covering high-risk professions, for example) from the excise tax or raises the threshold of the tax explicitly on the grounds that high-cost is not synonymous with high-value.

Furthermore, Gabel et al. (2010) find that only 3.7% of the variation in premiums for family plans is determined by a plan’s actuarial value, that is, the share of average medical expenditures paid for by insurance (instead of by outof-pocket spending). It is also worth noting that the Joint Committee on Taxation’s (JCT) scoring of the excise tax indicates that plans with fewer enrollees are more likely to be affected by the excise tax. Given that previous research has shown that smaller firms pay premiums 18% higher than large firms pay for equivalent health coverage, it seems clear that this excise tax will be affecting many workers who have only high-cost—not high-value—health coverage (see Gabel et al. (2006)). [my emphasis]

So workers at smaller firms and those with sick co-workers will be asked to pay for the health care reform, not primarily a bunch of Goldman execs who have luxurious benefits.

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Here is how Ezra Klein’s sources explain why Harry Reid snuck a loophole into the Senate bill allowing insurers to put a cap on lifetime coverage.

Hill sources explain that this was inserted because CBO said premiums would “go through the roof” if insurers couldn’t cap benefits. The official quote from Jim Manley, Harry Reid’s spokesperson, says much the same thing. “We are concerned that banning all annual limits, regardless of whether services are voluntary, could lead to higher premiums,” he explained. “We continue to work with experts on how best to accomplish our goals of preventing insurance companies from imposing arbitrary coverage limits while providing the premium relief American families need and deserve.”

Wrong!!!!

Note carefully who told Reid that “premiums would go through the roof” if no lifetime cap were imposed: CBO.

Reid, of course, carried on about a week-long back-and-forth with CBO as he developed the bill to introduce to the Senate (of course, he’s doing precisely the same thing this week–going back and forth with CBO on a bunch of proposals suggested for the compromise bill). As a result of Reid’s last back-and-forth with CBO during which presumably they told him premiums would go through the roof if he didn’t eliminate the lifetime cap, he came out with a bill that cost $849 billion. That was a real feather in his cap because it came in significantly cheaper than the House bill, which cost $894 billion (though the Senate bill covers 5 million fewer people), which meant he didn’t have to justify why the Senate bill shouldn’t just accept the House bill as a base.

Of course, the House bill uses a different strategy for keeping premiums down: including, but not limited to, more subsidies, a lower limit on what people will be expected to spend on health care premiums, and a viable (though not robust enough) public option. Also, the House bill doesn’t do one thing that the Senate bill does, which may raise premiums: tax employer provided health care insurance.

So what Ezra’s sources really mean is that the Senate bill–partly because it has traded off other means to keep premiums down–has had to eliminate a key promise of health care reform: that families experiencing a catastrophic health care event wouldn’t lose coverage at the time they needed it the most. What Ezra’s sources really mean is that, because they chose not to pursue other strategies which would have made it unnecessary to eliminate the cap, they have instead been forced to eliminate the caps to keep the bill competitive with the House bill.

Don’t let Harry Reid fool you. The problem is not that health care “premiums would go through the roof” without caps. The problem is that Harry Reid has deliberately chosen not to use other means to prevent health care premiums from going through the roof, means that wouldn’t make families bear the brunt of the problem.

From this point forward, the debate should never be about what Reid claims is necessary. The debate should be about what Reid has claimed to be necessary because he has made other ill-advised choices that mean he can’t match the House bill outcomes without some awful gimmick like lifetime caps.

By now you’ve heard the news that Max Baucus nominated his mistress (then withdrew the nomination) to be US Attorney.

A Department of Justice official who is in a relationship with Sen. Max Baucus (D-Mont.) withdrew as a finalist for Montana U.S. Attorney to live with the senator in Washington, a Baucus spokesperson confirmed to Main Justice today.

Melodee Hanes, the Montana senator’s former state director, withdrew earlier this year after Baucus sent her name and two others to the White House as his recommendations for the state’s top federal prosecuting job.

Here’s what Hanes’ ex-husband has to say on whether their relationship had anything to do with the nomination:

“She was recommended for the position because of a very close and personal relationship with Max Baucus and she withdrew because of a very close and personal relationship with Max Baucus,” Thomas Bennett, Hanes’ ex-husband, told Main Justice. Bennett and Hanes divorced in December 2008.

Best as I can tell, the timing looks something like this:

June 2008: Baucus and Hanes dancing in manner that appeared “beyond professional”

December 2008: Hanes and former husband divorce

Spring 2009: Baucus nominates Hanes–along with two others–to be US Attorney

April 2009: Baucus and wife announce divorce

June 2009: Baucus and Hanes buy place to live in together

Now, it is pretty bad form to nominate your mistress to be your state’s top federal prosecutor. Though Baucus and Hanes did withdraw that nomination (I wonder whether their relationship would have been considered in the White House’s not-quite crack vetting process?). I also wonder whether they withdrew her nomination because it was bad form, or because Montana’s recent history with Bill Mercer makes the state very sensitive to US Attorneys who don’t actually live in Montana. And there’s the detail that Baucus was carrying on an affair with one of his staffers, though that seems to be the default in DC.

But while we’re getting all scandalized about Baucus’s bad judgment, let’s talk about the bad judgment that did hurt taxpayers, rather than the one that almost did: the way in which the revolving door on his committee staff made it very easy for the insurance industry to write the Senate’s health care reform bill. I’m much more offended–and directly affected–by the fact that former Wellpoint VP Liz Fowler wrote the Senate health care bill than I am that Baucus nominated, then withdrew, his mistress for a plum job.

Max Baucus apparently has really poor judgment, across the board, on personnel issues. But it’s not the almost-scandal of Hanes that is the most damning.

McClatchy has an important story reminding that the COBRA subsidy expires on Monday. (h/t Atrios)

Hall, 56, is among an estimated 7 million unemployed Americans who get a federal subsidy to help them buy health insurance under legislation known as the Consolidated Omnibus Budget Reconciliation Act.

For workers who are laid off or downsized between Sept. 1, 2008, and Dec. 31, 2009, the COBRA subsidy pays 65 percent of their job-based health insurance premiums for nine months.

That subsidy, however, expires Monday for Hall and untold thousands of others who began receiving it in March, when it first became available as part of the American Recovery and Reinvestment Act.

And while people who have been receiving this subsidy won’t lose their healthcare per se, at a cost of around $700/month for a family, they will no longer be able to afford health care and therefore will choose to go without. And that, I fear, is going to make the large scale long term joblessness in the Midwest a much more painful, because just as more people will be attempting to make do, cities and states are having to cut back on services to balance budgets.

I remember talking to people about this looming date several months ago–it was a moment they were anticipating when their otherwise functional ability to deal with long term unemployment was going to get really bad.