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Ball of Confusion

David Brooks wants to save your employer coverage by eliminating your employer coverage. In an article called A Choice, Not a Whine, David Brooks wants us to see that there is a plausible Republican alternative to Obamacare. He begins, of course, by softening up the opposition. "The case against Obamacare is pretty straightforward." he says. Obamacare centralizes power (by which he means centralized Federal power, not centralized state power). There will be lots of new Federal offices; no one knows how many, but there will be lots. Obamacare has led to 4,103 pages of regulations, which is supposed to sound like a very large number, even for a national overhaul of the entire healthcare system. He is also worried that "The law also creates the sort of complex structures that inevitably produce unintended consequences. The most commonly discussed perverse result is that millions of Americans will lose their current health insurance."Good lord, did I hear that right? Is he saying that millions will become uninsured under Obamacare?

He goes on. "A report by the House Ways and Means Committee found that 71 of the Fortune 100 companies had an incentive to drop coverage... a Congressional Budget Office study this year estimated that 20 million could lose coverage under the law."It's hard to tell, but he is not actually saying that people would lose their coverage and join the ranks of the uninsured. What is is saying is that 20 million people could lose their coverage at work and instead begin to get their coverage on the state exchanges. The "incentive" for the 71 Fortune 100 companies is that it might be cheaper for them to pay their workers directly to buy their own insurance. (To be honest, that 71 sounds low; everyone knows that business wants to get out of the health benefits business. I'd expect that aside from the insurance companies themselves the number would be closer to 100.)But 71 big companies. 20 million workers. Big scary numbers. Do the Republicans have a plan to stop this? But of course.Brooks cites an essay to be found in National Affairs called How to Replace Obamacare by James C Capretta and Robert E. Moffit. According to Brooks, Capretta and Moffit "lay out the basic Republican principles."The first principle kicks off with a cliche - "patients should have skin in the game... they should bear a real share of the cost." (And here I thought that with years of reduced benefits, higherco-pays, deductibles, and coinsurance consumers were already feeling some dermal soreness.) How would the Republicans make people have more skin in the game? By eliminating the current tax exemption that businesses (alone) get for providing health benefits. Instead, the consumer would get a tax credit to use to buy their own insurance on the market. Having each person shop for their own insurance would force people to buy high quality, low premium plans. Why business is supposedly not shopping this way themselves is laid out in the Capretta and Moffit article. Since business gets a tax exemption on employee benefits, it has an incentive to keep them as rich as possible.Unfortunately, business doesn't know that it's supposed to be doing this. Instead it has been cutting benefits and transferring costs to their employees for years. Now, however, Brooks wants business out altogether. It wouldn't be 20 million people losing their employer coverage. It would eventually be everyone.To be fair to Capretta and Moffit, they believe that this transfer of risks and benefits should be legged into starting with employers of 200 workers or fewer. The really large employer groups, seeing what a good deal this is (and the workers too, delighted at having potentially more skin in the game; in fact, their entire pelts) would eventually come aboard too. Obamacare problem solved.Brooks is full of other great ideas too. Defined contributions for Medicare which would amount to each enrollee getting a fixed amount they would spend on (presumably) private insurance plans to get a minimum level of benefits that they could then supplement out of their own pockets. And a rule that says "any new spending would be offset with cuts so that healthcare costs do not continue to devour more and more of the federal budget." This would put a zero sum cap on federal medical spending so that if, say, 77 million baby boomers came into the system, or Medicaid was eliminated for a voucher system, benefits would be reduced for everyone in order to compensate.Sounds like a choice to me.

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The experience in Massachusetts, where we have had Romneycare for about 5 years, is that more employers now provide health insurance than before. The national averages in 2001 and 2010 were that 68 to 69% of employers provided employee health insurance. From 2001 to 2010, Massachusetts employers providing health insurance increased from 69% to 77%98% of Massachusetts residents now have healh insurance.

"What is is saying is that 20 million people could lose their coverage at work and instead begin to get their coverage on the state exchanges. The incentive for the 71 Fortune 100 companies is that it might be cheaper for them to pay their workers directly to buy their own insurance."At the last non-profit I ran, I was trying to figure out a way to make something like that happen. As a small group employer,we were paying the same premiums individual purchasers were. So I was paying a lot of money for awful coverage. I toyed with going for a high-deductible plan where we, the employer, would also fully funded linked HSAs- it actually would have been more attractive, but employees were so scared off by the idea of a high deductible plan, I scratched it.Medicaid provided better benefits than our insurance plan. When the program for the moderate-income uninsured came out, that was also better. I started looking into whether I could drop the group plan and just fully reimburse my staff for their costs of purchasing their own insurance for a year or so until they could qualify for family health plus. There were barriers to doing that, as well, though,(I forget what they were).My stepson has been doing organizing around healthcare in Vermont; it looks like the advocates there have been successful in winning a singe-payer system, I hope that takes off and other states replicate it. http://www.insurancejournal.com/news/east/2012/07/02/254158.htm

"...but employees were so scared off by the idea of a high deductible plan..."That's a natural first reaction on many people's part, and it's a shame. People progress from appehension, to consideration, to embracing--not unlike many other human encounters. Ultimately, it requires a kind of faith, that some people don't yet have.

I understand the "skin in the game" argument as a hypothetical, but I can't see it happening in the real world. It's one of those economists' assumptions like the time the economist fell into a hole, and to get out he assumed a ladder.Look, I don't know if my doctors are worth what they charge Medicare and my secondary. How would I? I like them. They have diplomas hanging on their walls. They seem to know what they are doing. I never see hearses parked outside their offices. But I can no more compare the quality and price of their services than I can flyspeck the computations of the search for the Higgs boson.I understand that Bob Moffit doesn't want me to waste valuable resources by taking my common cold to my doctor, but there will be times when my common cold feels like pneumonia to me. If I take it to the doctor, and it turns out to be a cold -- take an aspirin -- and we exchange a few thoughts about politics (as we do), Moffit is pleased if I pay an economic penalty in higher insurance prices, but what does the economic penalty have to do with medicine? I dunno.In medicine, an informed customer is a rarity, so the skin he has in the game is pretty much like the skin he puts in the state lottery.

Think dental care and dental insurance. Relatively fewer people have the kind of low co-pay for dental services. It means if your kid needs braces, okay, but it's going to cost you some 'skin.' On the other hand, once again, if you are poor, even if you are on medicaid, you're quite likely to have bad teeth -- sometimes horribly bad and unhealthy teeth leading to infections and loss of teeth and underlying bone. But, it you are in the top 1 or 2%, no problem, as long as you floss.

The losers under high deductible plans are people with chronic conditions for which they need routine periodic care and, usually, continuing prescription medications. HD plans are required to make preventive benefits part of first dollar coverage, but asthma medication (for instance) isn't considered preventive. In this respect HD plans operate pretty much as an increase in premiums directed solely at people with pre-existing conditions. It's a backdoor way to do that which the 1996 law prohibited.You cannot compare the cost of medical care when medical providers routinely refuse to share the cost of their services. And believe me, as someone who has been associated with the business end of dealing with wayward doctors, people have no idea what constitutes good care -- they go mostly for bedside manner and seem positively nonplussed if someone tells them, for instance, that the sweet young and handsome OB they love abandoned some of his patients during labor (fell asleep in his office and forgot to turn on his pager). "But I love him! He's so nice!" You can argue until you are blue in the face about skin in the game (which is kind of laughable anyway since unagidon is absolutely correct, almost everyone already has skin in the game), but the asymmetry of information regarding medical care -- quality, cost, in both absolute and relative terms -- is simply too great for that to be anything but neutral to punitive as a national policy. I would guess that one reason why employers in Massachusetts have not abandoned health insurance is that the connector (exchange) actually provides a level of transparency even for them that is by and large absent in existing marketplace dynamics.

There is a huge economic reason for not having employers provide health insurance. That is that it makes employees more mobile. They WILL leave their current employer in order to better themselves. So you should obviously embrace "single payer" ie government. As almost every other western nation does, because it is shown to considerably reduce cost, provides longer life expectancy, and fewer children die before age one.But in a country like the USA, where every politician is beholden to the insurance companies, that is obviously not going to happen, far to democratic.

Mark Proska,High-deductible plans can be a terrible deal for people planning to have children. See this from WebMD, for example.

Assuming an uncomplicated pregnancy ending in a vaginal birth, patients would pay between $1,455 and $7,884 out-of-pocket, depending on how generous the consumer-directed plan. The typical uncomplicated pregnancy runs about $14,000 in total cost.But a complicated birth requiring a cesarean section, early labor, or a newborn stay in a neonatal intensive care can balloon out-of-pocket costs to $8,800 for the most generous plan and a staggering $21,200 for the least generous.Families could be liable for $15,000, $20,000, $22,000 for the cost of care, warns Karen Pollitz, a Georgetown University researcher who co-authored the study.As many as 4.5 million Americans are now using consumer-directed plans for their coverage. The plans lower premiums and wide choices offer an attractive alternative, especially to people who cant afford other forms of coverage. Employers like the plans because they can contribute a set amount of cash into a tax-free account without being on the hook for rising health costs.One tradeoff is the plans high deductibles, sometimes reaching $5,000 or higher per year for individuals and $10,000 for families. Because few of the plans cover maternity services unless customers buy special riders, those deductibles can be easily reached, experts say.Young families could even find themselves paying their annual deductible twice if their pregnancy spans two calendar years. For a nine-month pregnancy, the odds are good that will happen, Pollitz says. . . .

HD plans are a crap shoot. You are betting that your have good health and won't really need to use your plan very often if at all, so you save money on your monthly "contribution" to the insurance premiums.Once you get slammed, you are sucking "skin" until the next open enrollment period at which time you can make up for your past mistakes.Of course, if cost is not object .... have a go, mate.

I would guess that one reason why employers in Massachusetts have not abandoned health insurance is that the connector (exchange) actually provides a level of transparency even for them that is by and large absent in existing marketplace dynamics.Barbara, i think that's right, even though only employers with 50 or fewer employees can use the Connector. Larger employers still make their own arrangements with insurance companies or plan administrators.

If David Brooks felt he had such strong arguments against Obamacare, and that the Republicans had a strong alternative, why on earth did he wait till after the Supreme Court ruling to come out with it? Something seems off--I think he wanted to have an attack on the record to restore his standing with conservatives. And the possibility that Republicans would embrace the plan he describes is fantastically unlikely. Much of the Republican outrage is open posturing for the base, and if they take the presidency and congress, all of it will instantly disappear. We see them rewriting history every day. Obamacare will turn into a continuation of Romneycare and the Republicans will take credit for passing it.

"Unfortunately, business doesnt know that its supposed to be doing this. Instead it has been cutting benefits and transferring costs to their employees for years. Now, however, Brooks wants business out altogether. It wouldnt be 20 million people losing their employer coverage. It would eventually be everyone."If some businesses aren't doing what Capretta/Moffit (among lots of others) say they are (buying so-called "Cadillac" Plans) then why is there an excise tax penalizing these plans in the PPACA that kicks in in 2018? Estimates that I have seen suggest that this tax could affect 7 out of 10 employers in a wide range of industry sectors. Indeed, the Cadillac plan excise tax is precisely the kind of pro-market, cost-control feature that "Republicans" like Brooks, Capretta & Moffit are advocating. In fact, this feature was part of Pres. Bush's proposal in 2007, and then-candidate Obama denigrated it when he was running in 2008, only to slip in to his own bill. What is confusing to me is the Pas du chat you have done here and in your other posts with respect to the cost issue. You have welcomed PPACA as bringing into the market lots of people (THAT part I understand, seeing as how you are an insurance company executive), yet have also said that PPACA is likely not to have a significant impact on costs. Brooks et. al. are saying the coverage problem is in part (how big or small may be debatable) a function of the cost problem. How are they wrong? Indeed, I suspect that if you asked someone who buys their insurance individually whether they'd love to have the same favorable tax treatment that businesses enjoy today, I'd suspect they would say it's a no-brainer. You say "individuals in the market are insufficient to lower costs." That strikes as an odd statement, as it doesn't appear true in any other sector. And of course, you're about to be in a market that has very high participation because of the mandate. So your response/threat that "well you're just shifting the exorbitant costs from the businesses who don't like them anyway to the employee without a pay raise" seems hollow if, as you have assured us, Big Insurance is working to lower costs as diligently as they can (which would contradict reports that I've seen of insurance rolling over when so-call "must have" hospitals keep charging higher), and if there's a little added pressure brought to bear on them by consumers. Again, I think we can look at the PPACA for the model here. Indeed this was the view of about 23 prominent health care economists who supported the PPACA, who wrote: "The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committees proposal suggests that the excise tax on high-cost insurance plans would increase workers take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers." http://economix.blogs.nytimes.com/2009/11/17/economists-letter-to-obama-... Some of the ideas in Brooks' piece aren't actually Republican ideas at all, i.e. the defined benefit plan is something Alice Rivlin and John Breaux came up with.

If some businesses arent doing what Capretta/Moffit (among lots of others) say they are (buying so-called Cadillac Plans) then why is there an excise tax penalizing these plans in the PPACA that kicks in in 2018? Estimates that I have seen suggest that this tax could affect 7 out of 10 employers in a wide range of industry sectors.

There might be some sectors (law? finance?) where the workers are getting Cadillac Plans, but in general they appear in places where management gets the Cadillac and the workers get a Buick. So they do exist widely but they are not used widely.

What is confusing to me is the Pas du chat you have done here and in your other posts with respect to the cost issue. You have welcomed PPACA as bringing into the market lots of people (THAT part I understand, seeing as how you are an insurance company executive), yet have also said that PPACA is likely not to have a significant impact on costs. Brooks et. al. are saying the coverage problem is in part (how big or small may be debatable) a function of the cost problem. How are they wrong? Indeed, I suspect that if you asked someone who buys their insurance individually whether theyd love to have the same favorable tax treatment that businesses enjoy today, Id suspect they would say its a no-brainer.

I said that the PPACA will not itself raise insurance costs. I didn't say that the PPACA solved the cost increase problem in health care (whose costs would continue to rise without the PPACA). High costs are a problem, but high costs only become an access problem if one thinks that entitlements are a problem. In theory, the cheaper the medical costs the more people could be insured without spending any more federal dollars. Brooks and his friends basically want to privatize the whole system, including Medicare and Medicaid. (There would still be something called Medicare, but it would become a sort of voucher system.) They believe that the system has high prices because of Medicare, which they claim does not do any cost control. What the health care business needs is some discipline and what better way to do it than to sharply limit the amount of money going into the system. With less money in the system, demand should fall, because consumers would finally have "some skin in the game" and falling demand coupled with a decline in the amount of cash in the system would cause prices to fall. We can ignore the fact that aggregate demand might rise with 77 million Baby Boomers entering the system, because Brooks et al would cut benefits from the system as a whole to compensate for this additional demand. Less money in the system would naturally cause providers to cut their own costs to get some of it. The idea that demand might increase and increased demand against less money might cause prices to rise simply won't happen because, you know, the free market or something.Regarding tax breaks, people want them of course. But if you asked someone if they wanted a tax break in return for being personally responsible for buying their own insurance with no guarantee that they would get any kind of COLA increase in future years, I think I know what they would tell you to do with the tax break.

You say individuals in the market are insufficient to lower costs. That strikes as an odd statement, as it doesnt appear true in any other sector. And of course, youre about to be in a market that has very high participation because of the mandate.So your response/threat that well youre just shifting the exorbitant costs from the businesses who dont like them anyway to the employee without a pay raise seems hollow if, as you have assured us, Big Insurance is working to lower costs as diligently as they can (which would contradict reports that Ive seen of insurance rolling over when so-call must have hospitals keep charging higher), and if theres a little added pressure brought to bear on them by consumers. Again, I think we can look at the PPACA for the model here. Indeed this was the view of about 23 prominent health care economists who supported the PPACA, who wrote: etc.

The 23 prominent health care economists are wrong. In the world of Brooks, businesses are unsophisticated consumers of health services who, despite working hard to keep overall wages down, are like drunken Santa Clauses when it comes to providing Cadillac level health benefits to workers who consume unnecessary tests like jelly beans. All this money going to professional insurance brokers and consultants; who knows what those people do for a living. In Brooks' world, insurance companies don't compete with each other. "Must have" hospitals just pick up the phone and call in the rates that the companies will have to pay because hospitals don't compete either.All of this would be changed if we transferred health insurance decision making from business to individuals. It stands to reason that a larger number of consumers playing with the same money will have more market power. Hospitals and physicians, used to pushing lazy insurance companies and businesses around will shake in their boots when confronted with Joe Consumer. And Joe Consumer will be motivated because they will have less money to spend than is being spent on their behalf by business. So they will shop around when little Tommy burns himself on the barbecue or Aunt Sally gets cancer. And it the provider doesn't play, well, there's always homeopathy.The most egregious outright lie is this idea that if companies pay their workers their health benefits directly, all this cash will flow into the economic system because everyone gets "a big raise". Somehow all this ready cash will be a game changer for reasons I have outlined above. The possibility that many people in our rotten economy would use the money to pay more pressing bills (after all, they got a big raise!) doesn't matter, because the market will soon discipline them for being so imprudent.

PS- Some of the ideas in Brooks piece arent actually Republican ideas at all, i.e. the defined benefit plan is something Alice Rivlin and John Breaux came up with

.Don't tell me. Brooks is the one who said that these are Republican ideas.

One other interesting thing that Brooks said:

There are other possible perverse effects. According to a report from the Department of Health and Human Services, over the next 75 years Medicare payment rates for inpatient hospital services would steadily fall from around 67 percent of private insurance payment rates to an implausibly low 39 percent. Doctors would either flee the program in droves or Congress would override the law, exploding the costs.

Medicare pays about 67 percent of private insurance payment rates because Medicare pays about 98 percent of costs while private insurance pays about 130 percent of costs. The whole current system is subsidized by private insurance. Costs falling "to an implausibly low 39 percent" over 75 years is a more interesting idea. Brooks doesn't know what private insurance rates will be in 75 years. (If he does, he's in the wrong business). What he is really saying is that costs are projected to fall by about half in 75 years. On one hand, this is a projection of what Medicare reimbursements will do if the current statute runs unimpeded for the next three quarters of a century. On the other hand, Brooks himself is proposing that costs are sharply cut over time. Who knows how low they will be relatively in the next 75 years. But the point is, he is arguing that Medicare reimbursement will go down and doctors will leave the system, and then in the next breath he proposes that Medicare reimbursements go down and doctors will work hard to reduce their own costs.It's a ball of confusion.

Thank you again, especially for your patience, Unagidon.

unagidon, regarding your last comment, let me be the skeptic: I don't believe anything that hospitals say about their true costs because there are simply too many cross subsidies and perverse incentives in the system for most hospitals to be able to say for sure who pays what percentage of what. So the Medicare DRG "only" pays 98% of costs (which, for pity's sake COULD NOT EVER POSSIBLY BE BROUGHT DOWN THROUGH EFFICIENCIES ETC.) but that's without regard to DSH, IME, outliers, etc. And then there's all those other things, like "own use" and PHSA status pricing (others: if you don't know what these things stand for you probably shouldn't wade into the deep end of this particular pool). For instance: I worked on a project to create a system of medical home clinics out of existing but uncoordinated resources. The idea was truly to re-orient people away from ERs. Local hospitals were mostly uncooperative. Why? Because they get a lot of extra government revenue from providing "uncompensated" care in their ER and they didn't want to undermine it by actively cooperating with efforts to direct people to "more appropriate" sites of care. Just remember that the next time a hospital cries and whimpers about having to provide care to the uninsured. It's not that they don't want the system to change, they do, but it has to radically change to get rid of these kinds of perverse incentives. A little medical home initiative wasn't enough to do that, so they were more concerned about protecting their existing funding.Thus, a paradigm of universal coverage should result in certain types of costs being eliminated or naturally redistributed, and hospitals being compensated in a more direct way for the care they actually provide to people. Only then will we really be able to evaluate who is subsidizing whom.

"The 23 prominent health care economists are wrong."Your entire response appears to be "trust me, I work for an insurance company, and all these people who seem to think they know what they're talking about don't." By the way, some of us believe Medicaid should be wholly federalized. So, no, we actually don't want to the privatize the entire system. We just think based on the government action so far, we could do worse than try something else.

As the example given above from David Brooks, why do conservative Republicans seem to give the impression that they never learned to read?So what if there are a lot of regulations? We live in a complex society. We need enormous bureaucracies to manage our common way of life. This is not the small little world of first Postmaster General Ben Franklin delivering mail to rural farms dotted along the edges of the American wilderness.I think there is something called progress and evolution. Conservatives, like Brooks, just have a hard time with all the complexity of modern life. They pine to return to an idyllic yesterday that never really existed.One of the characters of maturity is the ability to balance and process the multiplicity and complexity of life. Isn't it about time we expect our conservative brethren, like Brooks, to grow up?And another thing: I'm sick and tried of footing the bill for the support of the commons through my taxes for unenlightened, fearful, so-called conservative, sadly working-class white people who seem to dominate politics in mostly Republican ["Red"] states who don't want pay for their overseas military adventures, their profligate use of petroleum, their Social Security, their Medicare, their Medicaid, their postal services, their prisons, their police and enforcement agencies, their FEMA services, and on, and on, and on.I'm sick and tried of my taxes going to support those states who don't pull their weight and who don't want to pay their taxes at the same rate as I do.We should just withdraw all Federal installations [especially military ones], which dump billions of dollars into the economies of places like Florida, Louisiana, South Carolina, Texas, North Dakota, etc., until these states assume an equal share of the burden of our common society.Let's see how well these states do without all of that Federal welfare we have been pumping into them for decades!

Your entire response appears to be trust me, I work for an insurance company, and all these people who seem to think they know what theyre talking about dont.

No, it's not. But it saves you a lot of work to think so, doesn't it?

A few thoughts.1. If 71 out of the Fortune 100 corporations drop their self-funded employee health plans and pay the penalty (which I doubt, but will admit is possible), who thinks that employees will find a "similar plan" in the exchanges at the price that those employers have been paying? What increase in compensation will employers give to employees for the purpose of buying health insurance? Will the compensation increase with medical inflation? At what point will this be seen as a more costly alternative for both Fortune 100 employers and their workers? Who believes that the government will not increase the penalty if the the penalty is too low versus the real cost of these employer health plans, or similar plans in the exchanges. 3. If the PPACA plan (s), will be subject to Medicare-Medicaid pricing, who believes that 100% of physicians and other providers will enroll as providers....especially given the fact that $500 billion will be cut from Medicare.....and that provider reimbursement rates are forecasted to be LESS in 2019 than they are today? Today, most private plan reimbursement subsidize public entitlement plans....as providers count on higher private plan rates to offset lower Medicare-Medicaid rates. When the percentage of a providers practice becomes dominated by PPACA reimbursement (e.g., Medicare-Medcaid), then you have a problem....their incomes will dramatically decrease. I can see a big drop in provider participation, as well as employee or member access. 3. The so-called Cadillac plan is not the typical large corporate plan. It is closer to the generous bargained union plans in the U.S. Given the increase in costs oner the past 10 years, and the absolute price tag of coverage, today's large employer plans have much higher annual deductibles, copays and employee cost/premium sharing than 10 years ago. Plus some union benefits have be modified as well. 4. If workers getting coverage through exchanges find that many plans have reduced benefits to support a particular price tag, at what point will private employees revolt especially as they compare "what they had and what they paid for it under their employer's plan?" Of course, those that never had coverage will be happy...to a point...provided they can afford these plans.5. The bottom line always circles back to costs, access and quality. All I see is underestimated costs, overestimated savings, access and provider participation issues.

"No, its not. But it saves you a lot of work to think so, doesnt it?"You'll forgive my lingering skepticism, but against an array of folks, papers, policies, etc. (listed below just for work's sake), in addition to the aforementioned Brooks, Capretta/Moffit, the 23 economists you assert are "all wrong", and of course the PPACA itself, there is you, a lone voice saying, "No, you're wrong." [Apparently you can't post more than 4 links at a time, so I'll break it up.]Ezra Klein: http://voices.washingtonpost.com/ezra-klein/2009/05/health_reform_for_be... Cohn: http://www.tnr.com/article/politics/tax-my-health-benefits-please"But most economists will tell you something else: The exclusion distorts the market. It tilts the incentives for purchasing insurance; people tend to buy more than they really value, which in turn can foster over-consumption of medical services. And while sometimes this is a good thing--some people underestimate their risk of illness and financial catastrophe--the tax break also skews its benefits in a way that reinforces inequality. As a break on personal income taxes, its value is relatively higher for people in higher tax brackets. Throw in the fact that richer people tend to have more generous benefits anyway, and what you have is a really nice tax break for people who are well-off and have the most generous health benefits--generally speaking, the people who need help from government and society the least."Andrew Sullivan: http://andrewsullivan.thedailybeast.com/2012/01/why-you-cant-fire-your-i...(quoting Peter Suderman):http://reason.com/blog/2012/01/10/why-you-probably-cant-fire-your-insura... mentions Ron Wyden (D-OR): "Under Mr. Wydens plan, American employers would no longer provide health coverage, as they have since the second world war. Instead, they would convert the current cost of coverage into additional salary. Individuals would use this money to meet the requirement that they be insured. Buying coverage directly would encourage consumers to use healthcare more efficiently. Getting rid of the employer tax deduction, which costs $200 billion a year, would free funds to cover those who are not poor enough to qualify for Medicaid but not wealthy enough to afford insurance."[to be continued]

Avik Roy: http://www.forbes.com/sites/aroy/2012/05/12/how-employer-sponsored-insur... Urban Institute: http://www.taxpolicycenter.org/UploadedPDF/411176_TPC_DiscussionPaper_19..."The federal government spends $140 billion or more a year on tax incentives for employersponsored health insurance. Those incentives encourage employees to participate in health insurance plans, reducing adverse selection and free ridership. At the same time, the subsidy causes employees to demand more comprehensive health insurance than they would if they had to pay the full price. More comprehensive insurance exacerbates moral hazard (Congressional Budget Office 1994). The tax incentive could be a significant contributor to high health care costs. Combined with state laws and courts that put pressure on insurers to provide more and more benefits, health insurance costs in the small group and individual markets tend to climb out of reach of low- and moderate-income households."

Jeff Landry, good work.

Youll forgive my lingering skepticism, but against an array of folks, papers, policies, etc. (listed below just for works sake), in addition to the aforementioned Brooks, Capretta/Moffit, the 23 economists you assert are all wrong, and of course the PPACA itself, there is you, a lone voice saying, No, youre wrong.

Here is what your 23 experts said that I said was wrong: (you'll note that I didn't say that all experts were wrong all of the time).

The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committees proposal suggests that the excise tax on high-cost insurance plans would increase workers take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers.

Let's look at this in detail.

The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount.

Limiting the cost of plans (how? price controls?) to a tax free amount. This will limit premiums that are paid by business, true. But will it provide anything like the same benefits? No. This looks (and I think it is written to look) like it will mean a reduction in health care costs. What it actually means is that it will mean a reduction of healthcare costs for business, not the individual. Or rather, it will lead to a reduction of benefits for individuals who will then have to cover the cost themselves.

In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committees proposal suggests that the excise tax on high-cost insurance plans would increase workers take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers.

Business is going to give the money they save to the worker? Then why is business getting out of the insurance business? But let's pretend for a moment that this is true. Everyone gets a raise. But their insurance benefits have fallen. To get what they used to have, they are going to have to use their extra cash to purchase more insurance or cover the massively increased out of pocket costs. There is no extra money in the system waiting to be unlocked when business either cuts benefits or gets out of the benefit business altogether. This section is simply written in bad faith.The whole passage is a sleight of hand.

The pas du chat continues..."But will it provide anything like the same benefits? No."Precisely! Their main contention (and the contention I take you to be denying) is that the employer deduction incentives employers to provide insurance benefits well-beyond what the employees would themselves pay for - which contributes to an increase in costs. Here's a quote from a paper from the the Center on Budget and Policy Priorities linked to by Ezra Klein (just to make sure I don't include any nasty Republican ideas): "[T]he exclusion makes the problem of high and rising health care costs somewhat worse, encouraging employers and individuals to purchase costlier coverage than they otherwise would."Or as you say: "Or rather, it will lead to a reduction of benefits for individuals who will then have to cover the cost themselves." Yes! It will mean consumers can judge for themselves how much health care they want to consume, and will tie the cost more closely to the demand. THIS is what Brooks et. al. mean by "skin in the game." The assertion by 37-odd policy makers, pundits and commenters (an assertion you deny with nary a scant of evidence mind you) is that high health care costs are in some measure a function of the American consumer demanding more health care than they are willing to pay for. So by more closely aligning the consumer with the product, they will naturally demand less health care and hopefully lower costs.To put it another way, instead of "To get what they used to have, they are going to have to use their extra cash to purchase more insurance or cover the massively increased out of pocket costs[,]" they'll rationally decide that maybe they don't need "what they used to have".By the way, I just want to note that the section you are objecting to is simply a description of what's in the PPACA. So apparently I take it you oppose the excise tax on cadillac plans, and assume you agree with Mitt Romney that this is a massive tax increase?And before you jump into the "this wil hurt the poor" argument, just note that one of the main objections to the employer deduction is that it is inherently regressive, benefitting wealthier taxpayers at the expense of poorer ones.

Your citations are variations of a theme, which is probably best captured in this quote:

The federal government spends $140 billion or more a year on tax incentives for employersponsored health insurance. Those incentives encourage employees to participate in health insurance plans, reducing adverse selection and free ridership. At the same time, the subsidy causes employees to demand more comprehensive health insurance than they would if they had to pay the full price. More comprehensive insurance exacerbates moral hazard (Congressional Budget Office 1994). The tax incentive could be a significant contributor to high health care costs. Combined with state laws and courts that put pressure on insurers to provide more and more benefits, health insurance costs in the small group and individual markets tend to climb out of reach of low- and moderate-income households.

Let's look at this in detail:

At the same time, the subsidy causes employees to demand more comprehensive health insurance than they would if they had to pay the full price. More comprehensive insurance exacerbates moral hazard

First of all, the worker is paying the full price. The health benefit is part of their compensation package. It's not like they get paid and the company gifts them with free benefits. This looks like a rather typical argument that workers are corrupted by higher wages. Second, in 1994 one could still talk about full indemnity plans that covered everything, but those were basically gone by that point. We have had instead twenty years of cost shifting to the worker in the form of co-pays, co-insurance, high deductibles, health savings accounts, narrow networks, gatekeepers, tiered drug benefits etc. to control utilization. Your quote talks like none of this has happened at all. Third, the "moral hazard" would still be there if business simply handed their health care dollars to the worker to spend himself, wouldn't it.

The tax incentive could be a significant contributor to high health care costs.

Could be. But remember that the "tax break" is simply that the money paid in benefits is not taxable. It's not like a business can write a dollar off their taxes for every dollar they pay in benefits. There's no powerful incentive for business to increase benefits. There is a powerful incentive for business to cut their costs by decreasing (or eliminating) benefits. Would you rather save ten percent of a hundred dollars in taxes or save the whole hundred by not spending it in the first place. That's the reality of business.

Combined with state laws and courts that put pressure on insurers to provide more and more benefits, health insurance costs in the small group and individual markets tend to climb out of reach of low- and moderate-income households.

This is a common complaint (call it whining) that it is mandates that are driving up the costs so much. It is strange to see it appended to this person's argument, but in any case, not only is it not true, but one has to look at what the mandates are and why we need to have them. We need to have them because businesses/insurance companies have tried to cut them. The mandates put them back. Would prices drop if all mandates were eliminated? Of course. But then all the mandates would simply become out of pocket expenses for the insured.

Yes! It will mean consumers can judge for themselves how much health care they want to consume, and will tie the cost more closely to the demand. THIS is what Brooks et. al. mean by skin in the game. The assertion by 37-odd policy makers, pundits and commenters (an assertion you deny with nary a scant of evidence mind you) is that high health care costs are in some measure a function of the American consumer demanding more health care than they are willing to pay for. So by more closely aligning the consumer with the product, they will naturally demand less health care and hopefully lower costs.

You (and the GOP) talks about healthcare like it's just another consumer product. Shall I have an ice cream cone or an MRI? I might as well get a CAT scan, since they seem to be giving them away. I have lung cancer. Shall I have radiation and chemo or should I just take the chemo, since it is more cost effective. Thank god for the liberty to make a choice.Medical expenses don't work like that. They haven't for 20 years. If you're quoting studies from 1994, no wonder you are confused. Over-utilization might still be a problem, but it is not THE problem. But if you don't believe me, put it to the readership of this blog. Have they or have they not been feeling a significant increase in out of pocket medical costs in the last ten years. The population sample might skew to the middle class or higher, but good; they are the ones who you think are especially over utilizing since they supposedly have these rich benefit plans.I haven't said whether I am for the Cadillac tax or not. I am for it. But I don't think it is going to do what people claim it is going to do.To put it simply, what the Republicans are proposing is a massive wage decrease for American workers that will supposedly be paid for by a decrease in utilization, since over utilization is to them the problem in American medical costs.

"To put it simply, what the Republicans are proposing is a massive wage decrease for American workers that will supposedly be paid for by a decrease in utilization, since over utilization is to them the problem in American medical costs."What you're trying to characterize as some nefarious Republican plan is something agreed on by people like Ezra Klein, Jon Cohn, and the Urban Institute. Nevermind the PPACA itself. And of course, you're defending a tax benefit which is, as they point out, highly regressive. But calling it "Republican" will definitely show its futility. Kind of like saying "I work for an insurance company, and trust me, we would never want you to buy more insurance than you need."

"To put it simply, what the Republicans are proposing is a massive wage decrease for American workers that will supposedly be paid for by a decrease in utilization, since over utilization is to them the problem in American medical costs."By the way, the author of the Urban Institute report, which you quoted from, is Jonathan Gruber, who is considered the intellectual godfather of Obamacare. So color me skeptical that this all boils down to some dirty Republican trick designed to screw the American worker.

Will the American worker have more or less if the Republicans execute their plan (as reported by Brooks)? Will they have more or less than any industrial Western country or Japan? Answer me that and we can then talk about skin in the game and who's being skinned.

"by more closely aligning the consumer with the product, they will naturally demand less health care and hopefully lower costs."I have a friend who won't go to the doctor when she is sick because her plan has a $50 co-pay which she can't afford .She participates in her employer's group health, and contributes 10% of the premiums, but she hasn't been to any doctor for years for any of the recommended screenings, tests, etc, because she can't afford it.My friend is definitely lowering costs with her under-utilization, but it doesn't seem like it should work that way.

"Will the American worker have more or less if the Republicans execute their plan (as reported by Brooks)?"Will the American worker have more or less if the excise tax goes into effect as planned in 2018 as passed in the PPACA? I'm happy to wait and see.

Of course, those of us in the middle will have less. The new costs will be enormous, and the savings projected probably won't pan out as well as expected, and the rest of the national debt will just keep growing. But how can we sleep when those millions of children (who certainly aren't deadbeats, Mark P.) are without health care?This country is just going to keep getting poorer until *everybody* turns Keynesian and understands that there will be no recovery until somebody spends a lot more money, and that includes us middle class folks. Go read the other Skidelsky book that came out a couple of years ago, "Keynes: The Return of the Master", or read the abriged version of his masterpiece. He writes brilliantly for us non-economists.

Good health care is a right for the well off (usually employed) who can afford it and a privilige for everyone else who can't, but who may be given some kind of access based on the largesse of the Lords and Ladies Bountiful in the first category. Can't you folks get that? That is the American way. If you can pay then you can play.I loved my socialized medicine during my 8 years in the Air Force, and what I get now that I am covered by the VA.

The plan is quite simple: if you raise the cost of health care to the individual, it will drive down demand, reducing cost, or dampening the increase, at least. Pure market economics. Works so well for gasoline consumption, why not lung cancer? Oh, they don't mean 'major illness.' They mean just routine care, like preventive medicine. Oh, they don't mean that either? Well, what exactly do they mean.One thing is clear, they want to reduce demand by increasing cost.

When I was in consulting, one of my clients was the Federal Employee Plan, the largest plan in the U.S. I also consulted to major Blue Cross/Blue Shield Plans, HMOs and large corporations like Citibank and McDonald Douglas. 20% of the claimants represent 80% of total healthcare costs. Most of this cost is high cost cases (e.g., cancer). The reduced demand that is estimated from making healthcare cost more expensive to the individual will be problematic if the plan they can afford is significantly less in value than what they had under their employer's plan. Keep in mind that while many of us have comprehensive coverage, we DON'T use that coverage unless we are sick or have an accident. We all don't rush to the doctor for unnecessary tests and phantom illnesses. This does not mean that a there are no unnecessary tests and abuse in the system, but this issue has been around for 40 years and no one has really solved the problem. If you decrease provider reimbursement, you will continue to experience gaming.Has anyone compared the PPACA plan to the average Fortune 500 plan? These corporate plans are not as rich as you may think given the fact that benefits have been reduced and cost-sharing has increased. Plus there are large variations across industries based on competition for workers and other factors. ObamaCare is supposed to create some type of benchmark plan that is considered adequate, while at the same time creating exchanges that will offer a series of plans based on cost and need. Frankly, I don't understand this at all. In any case, when you are sick there is only ONE need, that is the care necessary to get better. So this idea of matching need and cost is somewhat problematic. I can understand the concept, but unless I see specifics I will remain skeptical. Finally, the real issue is not all demand (utilization) because there is good demand and bad demand. The real issue is price in terms of the factors that drive up price. When new technology gets introduced (real incremental value technology) then it gets used...most times appropriately...this is good utilization or demand. I don't see any effective programs in ObamaCare to reduce the underlying causes of healthcare cost increases. Obama is already reducing Medicare and Medicaid by $500 billion. This will cause a major problem in provider participation and employee access.

"20% of the claimants represent 80% of total healthcare costs. Most of this cost is high cost cases (e.g., cancer). "Michael, and all, I want to call your attention to this article from the Wall Street Journal. It's about a patient whose medical problems made him one of the top consumers of Medicare funding prior to his death. It seems to me to be sensitively written, and illustrates some of the cost difficulties. It also is suggestive regarding some of the moral dilemmas in trying to control costs.Headline: "The Crushing Cost of Care." Subhead: "A small percentage of challenging cases, often at the end of life, make up the great bulk of Medicare spending on hospital care. Are we anywhere close to containing the costs?"http://online.wsj.com/article/SB1000142405270230444140457748305097676618...

Thanks, Jim. An extreme case, but perhaps because of that a good illustration of why medical costs have become so badly bloated. Insurers need to say no, and people need to understand and accept that.

In urban areas, another problem is that competitive pressures lead to every hospital equipping to provide every service rather than specialize. Does every hospital need the latest MRI machine? In order to remain competitive, they feel they do. Once purchased the only way to recover the cost is to use it as much as possible -- 24 x 7. Suddenly, every patient with insurance needs an MRI. Is it 'unnecessary'? It can always be justified as a precautionary measure. Some insurance companies require pre-approval (or 'rationing' as the mis-characterization goes.) It would be interesting to see what the marginal value added is by the great increase in MRIs in the United States is.

Jim Pauwels,The statement that 20% of claimants account for 80% of total healthcare costs was not made in argument about the legitimate need for care, such as in most high cost cases. I apologize if that was the Impression. The management of high cost cases, or 'case management" suffers from a host of problems, especially at the very early stages of disease when people are relatively healthy but have medical conditions that could become serious. To date, such case management programs are voluntary and not very effective. There is little in preventative or early stage care management because the marketplace is not "wired up" so that "point of care interventions" can be effective. We will always have high cost cases but the issue if to reduct the severity of those cases but early detection and prevention and to efficiently coordinate care across providers. This has not been attempted by some HMOs with some success, but we have a long way to go.I was trying to make the point that utilization or a reduction in demand through taxes or incentives so that corporations will drop coverage leaving individuals to purchase a plan based on their needs and economic capabilities is NOT going to do anything about controlling total costs!! The coordination of care for high cost cases in one example where "best practice or treatment programs" can work especially before the person gets to the point of needing significant medical resources. This is not the only way, but one way. Reducing provider reimbursement and restructuring the 'basis' of that reimbursement can also work, but the issue is the degree of price reduction the provider community will accept and "continue to participate" in Medicare. I am all for imposing programs that will require some sacrifice on all stakeholders. However, I don't see anyone talking about what ObamaCare is really proposing...the details and specifics. To date, it is all "talking points'.I don't have the answers, but the dialogue on this blog that I was responding to was about giving employees and employers incentives in the hope that demand for services will reduce to a point that it will make a significant impact on total healthcare costs is to misunderstand the nature of the marketplace.

This has not been attempted by some HMOs with some success, but we have a long way to go.

I agree with most of what you say, Michael, but did you mean to say that this has been attempted by some HMOs with some success?

Something that ought to be considered seriously is minimal care in which extremely costly medicine is ruled out early on. There's much that can be done for an extremely sick person short of million-dollar treatments. We've been snookered into believing that the only proper treatment is the most costly one. "Proper" in this context really ought to be defined much more carefully, thoughtfully, thoroughly.We're clearly headed toward health-care quotas written in stone - or in committees - whose primary purpose will be to avoid budget-busting government expense. That sounds cold hearted, and it is, but it is of necessity, because corporations - and government is the biggest corporation of all - have - can have - no hearts. Medicine at the highest level is being taken out of the hands of compassionate independent doctors and put into the hands of employees. That's just where we are - there's nothing anyone can do about it. This implies one urgent argument for the continuation of Catholic hospitals, which, because they are operated by people who revere every individual life, can keep compassion alive where it would otherwise be honored only in the breach, at best.

I always want to scream when I hear someone -- usually someone offended by attempts to give more people access to health care -- claim "we're headed toward health-care quotas." As someone with a pre-existing conditon who's had to fight insurance companies tooth and nail on many occasions just to get minimal coverage for treatments that meant life in the face of impending death to close family members, I'm here to tell you the insurance companies ALREADY RATION HEALTH CARE...and nobody but the patient and a few close family members either know or care. At least with government in some way involved, there'd be the possibility of public oversight...and public outrage...when these things happen, oversight that isn't there under the private gulag sick people have to maneuver their way through now. Also, anyone who thinks insured patients don't already have plenty of "skin" in the game has never been really sick, or sick in the way most Americans have to be, with an insurance plan whose premium he shares with his employer, a plan that keeps covering less even as it requires patients pay more in copays, deductibles and out-of-pocket expenses every year, but a plan that just happens to be the only thing standing between him and bankruptcy. Those can add up to thousands or tens of thousands of dollars in themselves. Then, you have to figure in the amount of every single bill the insurance company labels "over and above customary charges," a mysterious claim no one seems able to either explain or account for, except that the insurance company blames the providers; the providers blame the insurance company, and YOU PAY, all of which adds up to more than a minor amount of SKIN.

Unigon,Yes, that was what I meant to say. Pardon my many typos.Beverly,I totally agree with you. It is absurd to think people don't have 'skin in the game'. I also want to point out that I myself often get confused about benefit provisions and what is covered and not. Of course, when I talk to a professional, I can get the answers but I often remind myself that I have 30 + years experience and have to 'dig' for understanding. Insurance companies are notorious for pointing out to the public those obtuse provisions, limitations and exclusions. I sympathize with all people who just want to have a health plan they can afford, understand and protect them from serious illness. It is not the insurance companies that are the problem. That does not mean they are perfect, far from it. However, It is the entire system that is the problem. Ask any insurance company and they will tell you that they are willing to offer the best plan without any pre-existing provisions etc, but guess what? It will cost you an arm and a leg. Approximately 75%-80% of the premium for small plans goes towards paying claims; for large plans more than 90% goes to pay claims; and for very large self-funded plans 95% or more of the total cost is claims cost.

Beverly, theoretically, an insurance company's "quotas" are agreed to up front by both buyer and seller, so they're limits but not quotas, which as I understand the term, are decided on unilaterally by a service provider. Of course, insurance companies and their clients will disagree in interpreting some terms of their contracts, and almost always it's the insurance company that will prevail. That makes any kind of insurance inherently risky.Which points to an often ignored difference between insurance as risk avoidance or amelioration - the traditional sense - and insurance as simple bill payer - the recent health-care definition. If I insure a ship against loss, I hope that the ship will not be lost. If I take out health-care insurance, on the other hand, I expect to be ill.Insurance companies, unlike governments, are in business to make money. As Michael points out, if they were to write policies that fully paid for all medical procedures, they'd have to charge astronomical amounts for them. If you could afford such policies, you'd likely be better off self-insuring.It all comes down to risk and choice. We can't eliminate risk. All we can do is choose how best to live with it. The government can't make risk go away, and it's unlikely to be much if any more conciliatory than private insurers when you feel you've been treated unfairly.

President Obama was asked about the "accomodation" by a reporter:

Swensen: He describes himself as a Catholic voter and wrote 'What can you say about a healthcare bill thatll mandate insurance companies to provide birth control, sterilization, etc. to employees of Catholic universities, hospitals and churches since this goes against the Catholic religion?' We know there is compromising language in place. Some say it doesnt go far enough and that the real, the much bigger issue is religious liberty, not contraception.Obama: Yeah. Well its absolutely true that religious liberty is critical. I mean thats what our country was founded on. Thats the reason why we exempted churches, we exempted religious institutions, but we did say that big Catholic hospitals or universities who employ a lot of non-Catholics and who receive a lot of federal money, that for them to be in a position to say to a woman who works there you cant get that from your insurance company even though the institution isnt paying for it, that that crosses the line where that woman, she suddenly is gonna have to bear the burden and the cost of that. And thats not fair.

Link for that interview with President Obama:http://www.wwltv.com/news/Obama-Not-fair-to-deny-contraception-coverage-... contraception question begins at 2:05 in the embedded video.

We can all debate the contraception mandate to death, but it will only be resolved by a Court of Law. This can happen in at least two ways: if Third Party Administrators (TPAs) bring a legal action against the Federal Government (ObamaCare) because they are denied 'due process' (they are being forced to pay for the products and the administration of claims without payment for such services by plan sponsors of self-funded plans)...or by the US Supreme Court if the Catholic Church decides to push this issue as a violation of Freedom of Religion, which I think they are doing.Obama has a point about Catholic Institutions that employ non-Catholics. The issue is the 'definition of a religious organization'. This is a thorny issue and only a Court will be able to decide who has the stronger case.

Michael, courts decide on legality, not morality. We can all imagine many laws that would pass constitutional muster and yet be immoral. Because morality comes before law, we need to elect legislators and executives whose life views are close enough to our own that governments don't make immoral regulations and laws.

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