Tuesday, October 13, 2009

Health Care Reform Is Coming... But Should We Let It?

Ok, let's start with a couple of basics. Health care in America is a bit screwed up right now. We pay a lot. We get alot. But we pay alot. And in having to pay a lot, there are a lot of people who do not have health care covered.

And this is bad. Because if they cannot pay for health care, then we have sick people. Sick people go to the county ER instead of their own physician. The county hospital then has to hope to be reimbursed for all the work that gets done, or to try and recover the money from the person (who is probably too well off to be covered by a government program but not well off enough to afford health insurance). If they can't get paid, then the hospital loses money, has to lay off doctors and nurses and other people do not get treatment.

Sure that is over simplifying things, but its a fair description of the problem.

Then there are the solutions that are proposed. Some say its all the fault of the greedy insurance companies. If it was not for their overriding need to make a profit, then costs would be manageable. The insurance industry lashes back by blaming the lawyers. If it wasn't for the lawyers filing all those "frivolous" medical malpractice suits, then things would not cost so much. Some people say its the doctors fault for charging so much. The doctors point out that they have to because, well, hey, they've got bills to pay and medical malpractice premiums to boot.

And then George Bush opens his mouth about the problem and says:

But back to the actual problem.

Today, there was a vote in the Senate. Specifically, it was a vote in the Senate Finance Committee on what has become known as the Baucus Bill. Actually, its called "America’s Healthy Future Act of 2009". The bill is the Democrats answer to the problem. (As a side note, I want to know why, after 8 years in opposition, it took them until September to actually get a bill together?)

Senator Baucus has stated that this proposal is the solution for our problems. He states that the plan will pay for itself. He states that the plan will lower costs and not add to the federal deficit, and that it will encourage competition in the market place.

A lot of hardcore left wingers are not happy with this plan. They see the only solution as being single-payer health care. Now there are advantages to this idea. However, there are perils. And significant costs. Remember, nothing is for free. If we make it another entitlement, then its going to be reflected in our taxes. And once that money gets purposed and set into the federal code, its may never be changed. Don't think so? Remember, we are still paying an emergency tax on our telephone usage. The emergency that the tax was meant to fund? That would be the Spanish-American War, which happened in 1898.

Anyways, the Baucus plan. The Baucus plan has some features that are really good. However, ti also has some really bad things that almost amount to a poison pill.

The good:
Healthcare cooperatives. The Baucus bill will provide that member owned insurance cooperatives can be formed. These will be non-profits which will compete with the insurance companies, hopefully being able to provide comparable services in order to bring the cost down.

The not so good:
Individual mandates. If you do not have healthcare, you will be subject to a fine. Great. So now in addition to being required to have all sorts of other required things (driver's license, car insurance, etc), we will now how have to show proof of insurance. I can see how soon someone will propose a national ID card as cost-cutting means, since it will contain all this information about us that we are required to have anyways. There is also the idea that there might be criminal penalties involved. Sorry, every so often, I get a little paranoid about Big Brother.

Subsidy for those who are deemed to be too poor to afford insurance. Under the Baucus plan, anyone who falls under certain guidelines (an income that it under three times the Federal poverty level) will have access to subsidized plans. Apparently, this means that families of four making less than $661,150 per year will have their health care subsidized. It should probably be noted that the median income for a family of four in the U.S. is about $70,354. In California, the median is $
74,801. To me, that seems like an awful lot of people who are going to be getting subsidized health care. Sounds very expensive.

The pre-existing conditions provisions, as I read them, are good and bad. The good part is that those with pre-existing conditions will be able to get coverage. The bad is that it seems to segregate them into a special risk pool. Combined with the individual mandate, this could make things difficult.

The absurd:
According to the Baucus plan, illegal aliens will not be able to participate in this program. That's going to be interesting to enforce, especially in light of the Supreme Court's prior rulings on the subject of what happens when there is a program that the illegal alien would be otherwise entitled.

The bad:
Now some of you may remember that during the election, Senator McCain had a health care reform proposal. (Yes, he had one. Actually fairly fleshed out instead of President Obama's "I'd like to see ...") was to tax health care benefits for employer provided health care plans. Currently, they are not taxed, even though they are a benefit (something that IRS likes to call "income", and income is taxable). Under the McCain plan, the tax was balanced by an equal tax write-off for paying for a personal health care plan. Ideally, under Senator McCain's plan, you would have a net zero effect. At least, that was how it was explained to me.

The problem with Senator McCain's plan was that it did nothing to deal with the issue of pre-existing conditions. As it stands right now, if you have a preexisting condition, it damned near impossible to get individual coverage. Believe me. I have tried (and my "condition" was resolved over 10 years ago. Yet despite the fact that it is resolved, as in will never come back, I still get rejected by insurance companies when I try to buy individual insurance.).

Well now with the Baucus plan, we see that so-called "Cadillac" plans will be taxed. Let's take a step back and look at the absurdity of calling it a "Cadillac". How many people under the age of, say, 55, look at the Cadillac as the pinacle of luxury autos anymore?

Now a Cadillac plan, under the Baucus plan it is defined in Title VI "Excise Tax on High Cost Insurance", is defined as any plan that goes over $8,000 per year per person or $21,000 per year for a family. The tax would be 35 percent on anything over that. That's a pretty heft tax, one that the Senate committee is hoping will bring in a whopping $215 billion.

To me, this seems a little on the insane side of things. It is actually penalizing people for getting good health care plans. It also has no corresponding reward, other than not being taxed, for getting mediocre ones.

There is also the argument that the excise tax is going to become an AMT. The AMT, or Alternative Minimum Tax, was a tax originally designed to correct a loophole in the law which allowed extraordinarily wealthy people to escape paying income tax. In the beginning, it worked fine. However, with neglect, it has become a tax that is becoming increasingly burdensome on people are not extraordinarily wealthy, and are in fact, really just upper middle class.

In the same way, as the cost of the low end Baucus plan packages rise, middle class income families could find themselves on the receiving end of the excise tax. Seems like there is a flaw in the plan.

Then there is the idea that Medicare will come down, and that those savings will be used to fund the plan. That seems, to me, the least likely since it requires that an entitlement be cut.

Bottom line is this: this is an expensive plan. It requires that the health care exchanges get up and running in order to keep the consumer costs down. If they don't, and instead end up as not for profits, then there is not going to be any real savings in all of this. I am really uncomfortable with taxing people for getting good health care plans. I'm also a little upset with how many people we will end up subsidizing.

Then again, its not like the Republican party has offered anything other than "let the market run free" and "its all the lawyers fault".

At the bottom of it all, this bill is clearly a compromise. It is going to cost a lot of money. Under the Congressional Budget Office's scoring, which is a precise rule driven evaluation, thinks that the bill will help to reduce the federal deficit and cut the number of uninsured. However, others have criticized the CBO's numbers because of what they are not allowed to consider when doing the report on the bill. First, there is the problem that the bill will put the onus on the states to come up with some of the money. This in turn could lead to higher state taxes. It allows President Obama to keep his word not to personally raise taxes, instead leaving that bit to the legislatures of the states. Second, there is no accounting for the actual administrative cost of the plan. Third, there is little thought as to what the cost will be once people actually have health insurance, as in how much will the subsidies need to be increased in order to keep pace with a potential upswing in medical procedures.


Colby said...

Um...wow. Why is it so hard? Unbelievable to me that we are the industrialized nation who spends the most on health care, and still has the most uninsured. Uggh.

AngryBell said...

Because its a big undertaking. I mean, we have cover, or assure coverage for millions of people. My major concern is that we're fudging the numbers to get it passed, but that in the end its going to come back to hurt us with taxes that will slow economic growth.

Part of the problem also is that the government spends money on some pretty inane stuff. However, despite both parties wanting to reel that in, neither party does because they do it to appease the constituents.

Another part of the problem is that we as a nation do not like to be mandated to do things. We do not like to be told you have to do things in a particular fashion. We don't mind so much being told not to do things, but tell us you have to do it x way, and thats when the lawyers show up.