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What's in It for Me?

I'm sort of running out of ways to write "David Leonhardt has a good column today," but David Leonhardt has a good column today. He's trying to puzzle through (a) what's in health-care reform for the average insured American, and (b) how to explain to to them. These are, indeed, separate questions.

Leonhardt, for instance, brings up the employer tax exclusion, which acts as a massive subsidy to employers who offer health-care insurance, and has created a fractured, expensive, inefficient health-care system. But people think they benefit from this subsidy. And why not? It's countertintuitive to say that something that's making your health-care coverage cheaper than it would otherwise be this year is also making it everybody's health-care coverage, including yours, a lot more expensive over time. The key to explaining all this, Leonhardt says, is connecting it to stagnant wages:

The immediate task facing Mr. Obama — in his news conference on Wednesday night and beyond — is to explain that the health care system doesn’t really work the way it seems to. He won’t be able to put it in such blunt terms. But he will need to explain how a typical household, one that has insurance and thinks it always will, is being harmed.

The United States now devotes one-sixth of its economy to medicine. Divvy that up, and health care will cost the typical household roughly $15,000 this year, including the often-invisible contributions by employers. That is almost twice as much as two decades ago (adjusting for inflation). It’s about $6,500 more than in other rich countries, on average.

We may not be aware of this stealth $6,500 health care tax, but if you take a moment to think, it makes sense. Over the last 20 years, health costs have soared, and incomes have grown painfully slowly. The two trends are directly connected: employers had to spend more money on benefits, leaving less for raises.

Of course, then you're in a place where you need to explain exactly how the reforms will make health care cheaper. And the answer is that they won't in the next few years. Take-home pay will not increase in 2014 because of health-care reforms. But they're a start. That's the correct answer. But it's not an exciting answer. And it asks people to endure a measurable short-term harm in the hopes of a speculative long-term gain. That doesn't work out so well.

For that reason, I keep coming back to this idea of choice. When even RNC Chairman Michael Steele doesn't have a choice in health-care insurance, you're dealing with a world in which you could really help them out by giving them access to options. That's why I'm so enamored of Ron Wyden's idea. But there are no silver bullets. It's taken a long time to get health care to this place. It'll take at least a bit of time to get it to a better place. But patience is not one of the political system's virtues.

By Ezra Klein  |  July 22, 2009; 11:56 AM ET
Categories:  Health Reform  
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I'm with you, if by choice you mean that the Exchange (or whatever it ends up being called) is open to everyone right away -or at least in 2013, although I think waiting that long is just dumb and clearly works to benefit the insurance companies. I have a hard time selling this bill when people find out that a) nothing happens for them until 2013 and b) they're shut out of the big happening in 2013 and perhaps forever. It's always a real "all this way for nothing" moment.

Posted by: eRobin1 | July 22, 2009 1:09 PM | Report abuse

To an average insured American, the answer to "what's in it for me?" includes long-term insurance against the risk of developing an expensive, chronic condition.

Many Americans are happily insured against the risk of catching the flu or breaking a leg or something. If, however, they developed cancer or MS or something similar that requires many years of expensive treatments, they could face large increases in their annual premiums, particularly if they were ever to lose or change jobs. It's feasible that they would be unable to buy insurance at all, and would be forced to spend all of their assets on treatment until they have none left, at which point Medicaid and SSI would fund their treatments and provide just enough for a lifestyle of poverty. This could happen to anyone, even the relatively comfortable, insured middle class. It is not possible to buy long-term insurance against this kind of risk, presumably due to adverse selection or other market failures. Thus the government must be involved in providing insurance against these risks.

This is a very clear and important benefit that the Democrats' current proposals would provide to all Americans.

Posted by: economista | July 22, 2009 1:21 PM | Report abuse

I think, community health clinics, which might break the pricing power of providers when it comes to really simple, cheap kinds of care, might be another thing for "what's in it for me?" concerns. Also greater freedom to switch jobs, self-employ, etc. etc. But I really think the problem in this is not the American people. The problem is Washington, who apparently views any spending that does not result in campaign contributions and lobbyist jobs as spending wasted.

If there is a fault with the people, it's that we have not done sufficient organizing to keep Washington & local government honest.

Posted by: roublen | July 22, 2009 1:44 PM | Report abuse

I'd like to know how our wage stagnation compares with other OECD nations' wage changes over the last couple decades, where there are very different healthcare systems. I know the economies are very different, but if wage stagnation is a general phenomenon then we should assign blame elsewhere than employer-based coverage. (It does make intuitive sense that healthcare inflation takes out of wages, but I want to know the extent of the effect.)

For instance, Matt Yglesias noted recently that the share of employer revenues that goes to compensation has been relatively static but the distribution has gone toward the top earners rather than being broadly shared. Surely that is another reasonable explanation for wage stagnation. So how much does this explain the stagnation versus the impact of health expenditures?

Ezra, help here!

Posted by: kordsmicah | July 22, 2009 1:47 PM | Report abuse

So you support increeased choice and ending the employer subsidy? Too bad that the actual bills being considered in the House and Senate don't include either option.

Under current reform bills being considered Steele still would not have a choice beyond the health insurance option(s) decided by his employer. He would not be able to choose a plan on a health insurance exchange, unless his employer dropped coverage.

The best answer to the question of what's in it for people who already have insurance is: nothing.

Posted by: mbp3 | July 22, 2009 1:53 PM | Report abuse

I'm surprised Wyden's choice thing isn't getting more traction. For people with good insurance through their job the biggest hassle is when your company switches from one insurer to another and you can't see your old doctor anymore. Or your doctor switches from one network to another and to keep seeing him/her you'd have to switch insurers. Wyden's choice thing would let people resolve that. All this business about being able to choose your doctor is imcomplete without it.

Posted by: chrismealy | July 22, 2009 1:55 PM | Report abuse

Ezra - when my husband and I wanted to investigate new plans, our broker gave us an 11 page document outlining all the different plans we could get.

There are A LOT OF PLANS out there.

The trouble is - they're priced out of the market for the most part.

You keep talking about this exchange like it will somehow transform how the insurance industry will do business. How will it do that? Insurance companies have tons of different plans - but making them affordable - and continuing coverage after a person gets sick - and giving a small business the same great price and benefits as the large group - that's what's missing. I went back and reread your posts from earlier on the exchange and still come away with the same question - how is the exchange ANY different than what we have today? We can get lots of details about lots of different plans that all cost an arm and a leg.

What will the exchange to make insurance that will cost me just a leg? :-)

Posted by: anne3 | July 22, 2009 2:00 PM | Report abuse

But there are no silver bullets.

Like hell there aren't. Instead of trying to put a gilt roof on an outhouse, we could just choose one or another of the sane health care financing systems that exist in sane countries and copy it.

Posted by: labonnes | July 22, 2009 2:11 PM | Report abuse

Idiot patience is what it is. After forty, fifty, sixty years of waiting. After generations of Americans have waited, too patiently, for nothing, in a system of governance as badly compromised, corrupted, and co-opted by corporate oligarchs, waiting patiently a few more years is just idiotic.

Posted by: NealB1 | July 22, 2009 4:29 PM | Report abuse

The answer depends on whether you work in the private sector or the community organizing sector.

Posted by: RezkoLot | July 22, 2009 9:19 PM | Report abuse

"which acts as a massive subsidy to employers who offer health-care insurance"

Why do you continue to lie about this, Mr. Klein? This is a subsidy to EMPLOYEES who receive health care insurance.

This is not what has created the weird system we have, it is the nature of the policies themselves to prepay for all health care, instead of just offering insurance for extraordinary events. This has insulated people from the real costs of treatment.

Poor people don't just need regular insurance, they need cheap health care and money to pay for it. We need to cut costs, and that means cutting overtreatment.

Public plans answer none of the important issues and, if structured like current "insurance" plans, will further drive up total costs.

Posted by: staticvars | July 23, 2009 1:06 AM | Report abuse

Uh, sry, no, Ezra! Imho Leonhardt almost totally misses the point. Cost control amd overall cost reduction would be nice and fine4, but if the reofrm can really deliver that is unclear. What the new law will deliver, and what's really important for the average American, is more confidence in his healthcare insurance. Citzien won't be without healthcare if they lose their job. They won't get huge problems if they have preexisting conditions. They will be able to use a public option, and to avoid the arbtirary behaviour of the private insurers when it comes to payments for necessary treatments. All in all, it will be a totally new situation where Americans will have to worry LESS about healthcare for the first time in decades! That's the important point, and that's what's important for every American.

Posted by: Gray62 | July 23, 2009 12:45 PM | Report abuse

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