Saturday, April 1, 2017

More palatable delusions

At Real Clear Health, James C. Capretta has an article suggesting that the GOP should regroup and work with the Democrats on health-care reform.

He's pretty good in his analysis of why the proposed American Health Care Act failed ("repeal and delay" was a non-starter, and then they had to do too many contortions to fit a "repeal and sort-of replace" into the confines of a bill that could fit the requirements of "reconciliation").

And he starts off making sense on the way forward:
To produce such a plan [that might actually pass and can work], Republicans need to adjust their thinking. To begin with, the party should accept as a premise that everyone in the United States should be enrolled in health insurance that pays for major medical expenses. A plan that results in an increase of 15, 20, or 25 million uninsured Americans is not acceptable and would result in a political backlash.
But then the first sign of trouble:

The goal should be to produce a plan that covers even more people than the ACA, within a framework of a functioning market that relies less on federal control than the ACA.
Sure, covering more people than the ACA would be great. As for working markets, all else being equal they're a good thing, and if you're providing health insurance through markets they'd sure better be functioning, or you're going to have trouble. Less federal control? Well, that depends what your goal is.

Capretta's proposal has four elements:
  1. A compromise on Medicaid
  2. Higher subsidies for households with incomes just above Medicaid eligibility
  3. A workable system of incentives for staying insured
  4. Automatic enrollment into insurance
On Medicaid, he says "The GOP should accept that Medicaid is going to serve as the safety net insurance program for the lowest-income households and propose a new, nationwide income level below which there would be an expectation of Medicaid eligibility." In other words, clear progress on accepting Medicaid and its vital role, while that second half of the sentence is ambiguous: what would that "new,  nationwide income level" be? Higher or lower than what it is under the Affordable Care Act?

He never says explicitly, but he explains that states that took the Medicaid expansion should "be given time before a phase-out of the enhanced match above the new national standard commences." Which only makes sense if you're going to lower the eligibility. In other words, he's proposing that, while Republicans should accept the principle of Medicaid as a safety net, they should reduce the income threshold so fewer people qualify.

He has a very strong second point, on higher subsidies for people who don't qualify for Medicaid. The ACA has done a lot of good, but one of the holes has been people who earn too much to get Medicaid but who also don't get much of a subsidy toward the insurance that the law's individual mandate forces them to buy. That was partly a problem of states not taking the Medicaid expansion after the Supreme Court gave them that option, but that's not the whole explanation: I had a student from here in New York whose mother encountered the same thing.

Capretta explains, "The AHCA provides a refundable tax credit for households without access to employer coverage or public insurance. These credits are adequate for the middle class but they provide much less support to households just above Medicaid eligibility than does the ACA."

And what does he think should happen? "The AHCA should be adjusted to provide additional support for insurance enrollment for these households, either through higher tax credits or new funding provided to states to support coverage for these families."

Which is pretty much what the ACA does.

So, as many wits have suggested, couldn't we just rename the ACA and call it a day? If your suggestions for fixing the GOP health-insurance law amount to turning it into the Democratic law, you're not making a strong case for doing anything to change the ACA.

And how 'bout those "workable incentives" for getting people to stay insured?

Capretta doesn't say why we need those incentives, but I get the sense he knows. Perhaps the most popular part of the ACA is the requirement that insurers cover pre-existing conditions. I've heard plenty of Republican politicians say we should keep that, while getting rid of the "bad" parts, like the mandate for individuals to have insurance (which means, to buy it for themselves if they don't get it through work and they don't qualify for Medicaid or Medicare). If you want both those things (requirement for insurers to cover pre-existing conditions, but no mandate for individuals to buy insurance), you are economically illiterate. To Capretta's credit, it's implicit in his proposal and in his reference to the problem of "adverse selection" that he understands that.

He observes that, "The one-year, 30 percent premium surcharge in the AHCA, paid by those who experience more than a two-month break in coverage, is weaker than the ACA’s coverage mandate and would lead to even more adverse selection in the individual insurance market." His remedy is tougher penalties on people who leave the insurance market and who then want back in later.

In other words, taking the most unpopular part of the law and making it less popular.

In this case, he's right on the economics: if you're going to go for coverage via private markets, you do have to effectively force people in. But the premise of the whole article is that Republicans should design something that "might pass and can work," so they can get Democrats' buy-in. Given the ill-informed vitriol aimed at the existing mandate, how are any significant number of Republicans supposed to get on board with a tougher version? And given how much crap Democrats took for passing a law with a mandate, why should they relieve the Republicans of any of the political heat for making the mandate even less popular?

What does he think he's actually accomplishing with this part of his proposal?

The last item makes sense in theory: use tax info to identify people who qualify for support but who aren't using it, and then go ahead and enroll them in what is known as a "catastrophic" plan. The government would apply the tax credit that the household qualified for but wasn't taking advantage of, and use that to pay the premium. This might work, because a catastrophic plan only covers so-called catastrophic medical expenses, so the premiums are cheaper than on conventional plans.

But catastrophic plans have some serious flaws. If you're a low-income household and your insurance doesn't cover routine care, you are likely to forego a lot of that care, leading to worse problems down the road. It's bad for you. And even if we're encouraging ourselves to be heartless and not give a rat's ass about that, it's bad for the rest of us as well, because it increases society's overall medical costs.

Capretta explains that, "These plans would charge premiums that are equal to the value of the standard (not income-adjusted) credit amounts, and so most beneficiaries would owe no additional premium." (emphasis added).

So in some cases the government would auto-enroll you in an insurance product and then have to charge you an additional amount for this thing you hadn't chosen to buy, because your tax credit didn't quite cover it.

That'll be real popular. And I'm sure there's no way an action like this would be open to court challenge ...

But you know what would be even easier than scanning the tax rolls for people who qualify for credits and aren't using them? Automatically enrolling everyone. There's actually a lot less bureaucracy, because there's a lot less information that needs to be gathered and utilized, and a lot less decision-making.

But the conservative phobia of government makes straightforward solutions like this anathema.

Which brings me back to that line up at the beginning. Capretta wants to cover more people than the ACA "within a framework of a functioning market that relies less on federal control than the ACA."

At no point does he explain why it should be done through markets and why the federal role should be minimized. Nor does he deign to mention the numerous countries that have more involvement of their national government in health care than we have under the ACA, and where they get better health outcomes for less money.

That reality should not be a surprise.

Because markets are good for some things, not for others.

Federal control is the right tool for some tasks, not for others.

Markets cause some real problems when it comes to health insurance, and these have been understood by economists for a long time.

And what exactly is the benefit of restricting federal involvement in health insurance in favor of states? The idea of health insurance is relatively simple: you have to decide what gets covered, and you have to figure out what to charge for that and who pays it. If the federal government is going to take steps to see that we universal coverage (or something close to it), then the federal government will be unavoidably involved in paying for it, and in determining what counts as insurance.

These aren't hard concepts.

They are hard to accept if you're ideologically committed to the idea that government can't do much good.

(I recently wrote to my Congressman on a slightly different part of the problem.)

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