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The problem with paring back

Let's say you want to buy a house from me. And at the last minute, your portfolio take a big hit and you realize you have less money than you think. "Pare it back," you say. What do I do?

I can't just rip out the foundation. Then there's no house at all. The frame is important, too. So is the plumbing and the wiring. I can't leave that stuff half-finished, or the place is unusable. I can downgrade the lighting fixtures, but they won't save you much money.

Fundamentally, the things that make the house expensive all exist in concert with one another. The things that exist on their own -- track lighting, say -- no one really cares about. You can decide not to buy this house and instead buy a cheaper house. But you can't just make this house cheaper and still expect it to function as shelter. So too with health-care reform.

Let's say you want to take out everything but the insurance regulations. If sick people can buy insurance for the same price as healthy people, sick people will rush into the system, healthy people will rush out, and premiums will become unaffordable for both sick and healthy people. Let's say you want to keep the regulations and the individual mandate, so healthy people stick around. Well, without the subsidies, premiums will be too expensive for people, and you'll be penalizing them for something they can't afford, which will create a massive and rapid backlash. Let's say you want subsidies with no insurance regulations. Insurers will jack up prices on the sick and exult in the new rush of healthy customers. The pieces of this bill aren't like different courses of a meal. They're like different legs of a stool.

If you want to pare back, you need a different approach altogether. You could reduce the cost, the size of the bill, the complexity of the legislation, and the number of regulations by just expanding public programs that helps the most vulnerable groups: Let people over age 50 into Medicare, expand Medicaid to people under 200% of the poverty line, and pay for it through a tax on the rich. The second-best alternative to the Senate bill is not a pared-back version of the Senate bill that doesn't work. It's a bill that does work, and doesn't carry the baggage of the current legislation.

By Ezra Klein  |  January 21, 2010; 9:12 AM ET
Categories:  Health Reform  
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Next: Some comments on 'staying home'


There's also the thing where, you know, you have to go back to the Senate and maybe get 60 votes. Again. Six months from now, we'll be paring back the pared-back plan.

Just pass the Senate bill already.

Posted by: WHSTCL | January 21, 2010 9:17 AM | Report abuse

the problem that i think you'll have many conservatives say is that liberals are thinking let's pass the senate bill AND then go back and do every progressive thing we wanted through reconciliation.

If you just did the senate bill and then left it be and then focused on jobs and the economy so that people could actually have jobs to pay for their insurance then you'd have acceptance. The problem is that if you listen to the left wing pundits they're not paying attention to what happened. Some are but many aren't. Pass the senate bill through the house and then leave it at that. If you try to go for more through reconciliation then you'll see another backlash come November because by the time they do that we'll be well into May possibly and still haven't focused on jobs which btw, they said they were going to focus on over a month ago and Republicans were asking them last summer to focus on them with their "Where are the jobs" one minute speeches on the House floor.

You are right though. You cannot do it in pieces like a McCaskill suggests. They're pieces to a puzzle that must fit together just as you say. Those that don't get that simply don't understand how the system works.

Posted by: visionbrkr | January 21, 2010 9:23 AM | Report abuse

In this instance, paring back is a political calculation, rather than a practical one. It's not an attempt to save money, it's an attempt to save face.

And even paring back significantly isn't going to win over many (if any) Republicans. Unless the bill is expanding Medicare and Medicaid plus significant malpractice reform and allowing for the sale of insurance products across state lines . . . and maintains medical savings accounts. Which doesn't seem likely at this point, because even then, the Republicans smell blood in the water, and they are more excited about winning seats in November than they are about passing any sort of legislation in the current climate.

Posted by: Kevin_Willis | January 21, 2010 9:23 AM | Report abuse

"Well, without the subsidies, premiums will be too expensive for people,"

If you insist that subsidized government health care look just like employer provided gold plated plans, your statement is correct.

However, to further your housing analogy, you are basically insisting that we provide everybody with a $200,000 suburban home, when the Section 8 home subsidy we provide to the indigent buys far less.

One of the massive failures of this plan is its failure to address the cost issue. By mindlessly replicating what we already have and extending it to tens of millions of subsidized new patients without expanding the supply of health care providers, hospitals, and clinics, the Democrats have insured that costs will explode.

Posted by: bgmma50 | January 21, 2010 9:25 AM | Report abuse

I completely disagree with those who allege that "the Republicans" will never pass a good, workable, sensible bill. You still have 59 Senators, you know. And there are Republicans, probably more than you realize, that will vote "yes" when presented with something along the lines of what Ezra is proposing. I am a Republican who has been adamantly opposed to this monstrosity, to the overreaching, the shoddy dealmaking, the giveaways, the whole thing. But I see a lot of merit in Ezra's current proposals. I see the beginnings of a sensible, workable solution.

Posted by: bgmma50 | January 21, 2010 9:31 AM | Report abuse

The longer the health care discussion goes on, the more the Republicans will gain the advantage by disseminating false information. It's worked so far: government takeover; wreck the economy and increase the deficit; death panels,etc. - all lies that are now conventional wisdom. Dems need to pass something *now* and move on to legislation that will shore up their image (like banking reform). I don't see an alternative to the House passing the Senate bill as is with the understanding that tinkering can occur later.

Dems cannot let this opportunity pass. We won't get another chance in generations, and the party will look ridiculous if it can't make something work with the majority we have now.

Bush rammed through some pretty serious legislation with a far smaller majority.

Posted by: mwallace8831 | January 21, 2010 9:36 AM | Report abuse

Ezra - If you're going to suggest a Medicare buy-in for people 50+ you should also provide some support for why this is achievable. Because I don't think it is. Hospitals and Docs will be against it and i'm very skeptical you can get a majority of the House or Senate to back the idea in the face of opposition from those groups.

Posted by: MBP2 | January 21, 2010 9:36 AM | Report abuse

I sympathize with Democrats who are growing weary of being John the Baptist, screaming until they have a sore throat that the current system is unsustainable. We're getting to the point where its more rational for them to just let this ship sink, and come back 15 years from now when nobody in his right mind will be able to argue the status quo is acceptable. Maybe 30 million uninsured isnt high enough, maybe we oughta just kick back and let people die every year, let insurance premiums continue to careen out of control, and let the number of uninsureds rise to say 50 or 60 million.

Posted by: zeppelin003 | January 21, 2010 9:38 AM | Report abuse

From original post: "Let people over age 50 into Medicare, expand Medicaid to people under 200% of the poverty line, and pay for it through a tax on the rich."

This is terrible--this would be the end of health care reform for all time. It would fix the problem for everyone over 50. If everyone over 50 votes for the status quo, there is no possibility of reform.

A better idea would be to extend free coverage to all children under 18 or 12 or something, and pay for that through a tax on the rich. Then every election season we campaign not on a massive, complicated, comprehensive change, but just adjusting the cutoff age upwards.

Posted by: dcrimbchin | January 21, 2010 9:40 AM | Report abuse

I was hoping you would touch on this topic.

So let's have the mandate wars one more time, but this time with more information on what's happened since the Dem primaries.

"Let's say you want to take out everything but the insurance regulations. If sick people can buy insurance for the same price as healthy people, sick people will rush into the system, healthy people will rush out, and premiums will become unaffordable for both sick and healthy people."

Let's make this a little more accurate. There's a rate of free-riding that would occur under this scenario. There's a lower rate of free-riding that would occur under the existing HCR legislation, since the penalties are fairly low-- for $750 a year, you get the option to buy insurance only when you need it. (The insurance industry has been clamoring for higher penalties to reduce the rate of free riding). The question is how long does the expected rate of free-riding need to occur before the impact on premiums becomes a problem-- your so-called death spiral.

Here's the fun part-- the proposed legislation provides the answer: more than five years! In the proposed legislation, the insurance regulations go into effect immediately, the penalties are the following: $95 in 2014; $495 in 2015; $750 2016; adjusted for inflation thereafter. 2014 is really a tester year, 2015 is the first "real" year. So that's five years from now.

So the real answer is that its clearly actuarially feasible to pass the insurance reforms now, and revisit mandates and penalties in a few years. The political beauty of this approach, is that with actual free-riding in the future, you've got something to justify mandates/penalties-- the stories of people free-riding while the majority of hard-working, honest Americans pay their insurance premiums.

Regardless of whether this approach is followed-- the point is that the actual proposed legislation completely validated Obama's argument in the primary. "Community rating today, maybe penalties in the future-- I'll revisit that issue if I need to." That's pretty much what's being offered. The real reason for "mandates today" was to give insurance companies 30 million more lives in exchange for their support.

Posted by: wisewon | January 21, 2010 9:41 AM | Report abuse

" The second-best alternative to the Senate bill is not a pared-back version of the Senate bill that doesn't work. It's a bill that does work, and doesn't carry the baggage of the current legislation."

the smartest person i know, in almost every pragmatic matter, has always said, "if you dont move forward, you start moving backward."
i am trying to understand how any of the alternatives could work.
for the sake of the american people who are already suffering way too long with the consequences of this indecision, this moderate bill cannot.should not be pared down any further. and it seems to me that any further delays, with the climate as angry, frenzied, demoralized and chaotic as it is, would weaken the obama administration so much, that nothing would be accomplished, and democrats would rue the day they ever helped to tear down the administration and weaken and run and not accelerate passage of this bill.
waiting now, it seems to me, is going to fix nothing. acquiescing again, and trying to build consensus....trying now to pass a more liberal can these alternatives work???
i may be completely wrong, because unexpected things happen each day....but if we dont pass it now, the next months will be unbearable and the government will be frozen in its tracks, at a time when we need action and help more than ever.
they have to pass this bill.

our health care system is in a state of emergency.
you dont stand around and demur in a time of emergency.
when a child is about to fall off of swing, you dont decide to go back to the drawing board and discuss how to improve the situation, and teach safety pointers.
there is a time for discussion, and a time for ACTION.
common sense. when people work hard for months on something that needs to be done, and their effort is the best that can be AGREED upon...after ceaseless have to do something.


if they cant get this together, i may be wrong and often am, but i think it is going to be the beginning of the end for all of us.

Posted by: jkaren | January 21, 2010 9:43 AM | Report abuse

Take back the last sentence-- there are no "mandates today" so ignore that. The rest of the post holds.

Posted by: wisewon | January 21, 2010 9:49 AM | Report abuse

"for $750 a year, you get the option to buy insurance only when you need it."

That's exactly right. In effect, it's a form of catastrophic coverage, under which the individual pays for their own basic, routine health care needs, and pays $750 per year for "insurance" in the event they become truly ill.

I like it! Make the penalty an actuarially sound number and give me a few thousand a year pre-tax in a health savings account and I'm in!

Posted by: bgmma50 | January 21, 2010 10:01 AM | Report abuse

and to continue the individual mandate argument its ludicrous to make it a set dollar amount. It should be a percentage of income up to a capped amount. $95 to $750 is a drop in the bucket in NYC but in Mississippi its a lot more. A percentage of income smooths out the differences and makes it more equitable for all.

Posted by: visionbrkr | January 21, 2010 10:13 AM | Report abuse

Ezra, I hope you count yourself amongst "the rich" that will be paying for other people's overpriced health care.

The key element of health reform is cost reduction. If you don't have a solution for that, we're not even going to be able to afford the level of support we currently enjoy. That is the tragedy, that is the thing we are on a short crushing timeline to fix. Giving care to more people doesn't fix it, it just makes the problem bigger and harder to fix.

If we don't change the payment system to one that incentives health care consumers to choose lower cost options, we are going to be stuck with the higher cost forever.

Posted by: staticvars | January 21, 2010 10:20 AM | Report abuse

Even if you wanted to pare back, isn't the best way forward to pass the Senate bill and use that as leverage to get a bipartisan pared-back bill? I can't see an easy victory on something bipartisan before November because the Republicans need the anger, but for it to be possible at all, I'd prefer to be sitting at the table with the Senate bill in my pocket and a nicely poll-tested set of modifications ready to go through reconciliation. The public option works as policy, as politics and as leverage even if it is so weak as to be effectively purely symbolic.

Posted by: windshouter | January 21, 2010 10:24 AM | Report abuse

The most tortured set of metaphors I've seen in awhile. Which is it, a house, stool or meal? Hard to follow the argument when you jump around like that -- I was doing acrobatics in my head.

Posted by: mnetter | January 21, 2010 12:49 PM | Report abuse

"It should be a percentage of income up to a capped amount."

It is. Something like 0.5% of income or the levels mentioned above, whatever is greater. I was trying to simplify my above post.

Posted by: wisewon | January 21, 2010 12:53 PM | Report abuse

I think we should pay for this by taxing overpaid socialist journalists and columnists who have very little worthwhile to actually contribute to society otherwise.

Posted by: nosocialism | January 21, 2010 8:48 PM | Report abuse

"Let people over age 50 into Medicare, expand Medicaid to people under 200% of the poverty line, and pay for it through a tax on the rich."

That would help to advance the liberal cause of Universal Coverage but it would do nothing to create a viable market for individual and small group insurance.

If I was given limited resources I would opt to fix the insurance market, using the revenues to provide "tax breaks" to people who want and can afford to purchase insurance inside the exchange.

To avoid gaming the system I would have six month waiting period if don't purchase insurance when the exchange is created. I don't think many people would take the risk of going without out insurance for six months after they get sick.

Posted by: cautious | January 22, 2010 4:31 AM | Report abuse

Nonsense. Here are some problems that could be solved purely incrementally:

1) You have a pre-existing condition and want to leave your job and go out on your own - but can't buy reasonably priced individual insurance.

2) Your have a pre-existing condition and your current individual insurance is cancelled or gets too expensive. No one will issue another policy due to the pre-existing condition.

3) You've had insurance for years -- but come down with an illness and the insurance company claims that you didn't adequately disclose info on your initial application.

These are the types of 'security' problems that the 70% of people who are insured worry about.

They could be fixed by simply fairly minor modifications in the existing HIPAA law to ensure that any new policy can't exclude pre-existing conditions that are covered by your current policy -- and that there is a limited time for any exclusion based on medical history.

Such a change would be fairly cheap and non-bureaucratic and have wide bi-partisan support.

It wouldn't deal with the problem of the uninsured -- but wouldn't prevent other solutions (such as subsidies or free care) from being enacted at a later date.

The main thing is that it would solve a significant health care related problem without requiring the complexities of mandates or universal coverage.

Posted by: andygruber | January 22, 2010 9:44 AM | Report abuse

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