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Why you can't leave health-care reform to the states

Julie Appleby has an important article listing all the cuts states are making in their health-care programs to deal with the recession. Among them:

Washington: Basic Health — the first state-subsidized program of its kind when it began more than two decades ago — will fold by July unless lawmakers find $160 million in new revenue. About 300 people a day are added to its waiting list.

Tennessee: CoverTN, which subsidizes insurance for workers at certain small businesses and for adults earning less than $55,000 a year, halted new enrollment in December.

Connecticut: Charter Oak, which offers residents insurance for $93 to $296 a month on an income-based sliding scale, must freeze enrollment this year, Republican Gov. Jodi Rell says, unless lawmakers find more money.

Pennsylvania: The state’s adultBasic will double fees for doctor visits in March to $10-$20 and add a $1,000 maximum annual charge for hospital care. The wait list more than doubled in 2009, from 165,318 to 353,301.

And the list goes on. The basic story here is an old one: The thing that costs money in public health-care programs is subsidies for people who can't afford care on their own. That group gets larger during recessions. But at the same time, state tax revenues drop during recessions. So at the very moment when the programs are most needed and most expensive, the states -- which by and large cannot deficit spend -- have the least money to keep them running. The results have always been cuts.

I wrote an article on this dynamic -- and the many state reforms it's killed -- a couple of years back. The point of the article was to explain why leaving health-care reform to the states just doesn't work. As people get more and more frustrated with Washington, that article is becoming sadly relevant again. Universal care is hard to do on the national level because of the political obstacles, but it's probably impossible to sustain on the state level due to policy obstacles.

By Ezra Klein  |  February 4, 2010; 2:51 PM ET
Categories:  Health Reform  
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Comments

Don't forget that Obama agreed to convert tens of millions of state aid to tax cuts for the wealthy, all to win Susan Collins' vote for the stimulus bill.

I've come to believe that the stimulus legislation, and the difficult debate and negotiations that preceded it, were the Original Sin from which all these other colossal policy and political problems flow. Obama went with the Summers/Geithner number over the larger Romer/Krugman/Stieglitz number. The result: a stimulus that averted catastrophe but failed to stimulate -- a terrible misstep in judgment that yielded exactly three Republican votes (none in the House) and resurrected the Reagan Deficit Zombie that will likely kill healthcare reform and possibly the jobs bill. More importantly, Obama didn't learn the lesson from that debate, which was to bypass the GOP altogether rather than to allow Collins and Grassley and Snowe dictate the terms of other policy initiatives.

Epic fail.

Posted by: scarlota | February 4, 2010 3:13 PM | Report abuse

Ezra, your problem with understanding HCR is that you only come at it from the consumer side and now you are pretenting that what is happening on the state level cannot happen on a federal scale. You are wrong. The feds are not going to be able to continue deficit spending because, at some point in the near future, our credit will no longer appeal to the people we need to borrow from. When that happens, Medicare and Medicaid will be cutting back on services. This prediction has alot more credibility than global warming.

I suggest you go to the doctor. Find out why the charge for an office visit is three or four times the rest of the industrialized world. If smart people like you, Congress and the President would attack healthcare reform from that angle, we might get somewhere.

We can fight over single-payer and socialized medicine after we get out of these deep dark woods.

Posted by: bobsteph1234 | February 4, 2010 3:21 PM | Report abuse

Yes, yes, a thousand times yes.

Over the years the states have had to take on more safety net health care programs, because the federal government has failed to take action on HCR. Funding at the state level is always precarious and directly tied to the business cycle, as Ezra says, so it is a really BAD idea to add health care to the other basic state responsibilities, like education, law enforcement, and transportation infrastructure.

Many of the states are now perched at the precipice of a massive California-style collapse. This is just one reason among many why it is essential that the Democratic Congress finish the job and pass the damn bill.

Posted by: Patrick_M | February 4, 2010 3:29 PM | Report abuse

So the federal government's key qualification is its ability to run a deficit. That speaks volumes about this idea, and on so many levels, too!

Posted by: whoisjohngaltcom | February 4, 2010 4:02 PM | Report abuse

whoisjohngaltcom,

The federal's government's "key qualification" is that it can address the entire national system and thereby lower costs system-wide.

In case you have not been paying attention, if it is passed HCR will lower future deficits, and by far more than the proposed spending freeze.

Posted by: Patrick_M | February 4, 2010 4:10 PM | Report abuse

Why you can't leave healthcare to the federal government....TOO MUCH UNCHECKED POWER!!!

The founders of this great nation warned about this!

“If people let government decide what foods they eat and what medicines they take, their bodies will soon be in as sorry a state as are the souls of those who live under tyranny.”
Thomas Jefferson

The the federal government fails to bend the cost curve the USA will be saddled with structural deficits that will sway the balance of international power in favor of China & Russia and literally end human freedom in the world!

If a state or two begins failing, people will leave and the system will correct. If some insurance companies begin failing there will be others that takeover. BUT if the federal government takes over and fails, there is no net...no recovery!

Posted by: FastEddieO007 | February 4, 2010 4:17 PM | Report abuse

The ONLY way the federal government can bend the cost curve down is by underpaying or denying coverage...and therein lies the rub:

The biggest FORK IN THE ROAD between you federal healthcare radicals and us mainstream middle class opposition is the insistence by OBAMA/PELOSI that any doctors participating in their new federal system be banned from offering out-of-pocket services.

Only doctors who choose to make their entire living out of the new federal system can offer out-of-pocket services.

This means a powerfully connected politician like Barack Obama can buy hip surgery for his dying grandmother if he chooses, but all of us middle class schmucks will be dead-out-of-luck.

THAT IS WHY INDEPENDENTS IN LIBERAL MASS SENT SCOTT BROWN TO DC TO STOP OBAMA & PELOSI!

http://www.bloomberg.com/apps/news?pid=20601070&sid=aGrKbfWkzTqc

Posted by: FastEddieO007 | February 4, 2010 4:21 PM | Report abuse

By the way, maybe Obama can offer these states federal aid to keep these experiments in socialized medicine going, rather than use it as justification to expand clear examples of failure by taking them nationwide.

Posted by: FastEddieO007 | February 4, 2010 4:25 PM | Report abuse

So you are saying the Fed should take over because they can run deficits? Do you not see the cycle - you wrote it -

"The thing that costs money in public health-care programs is subsidies for people who can't afford care on their own. That group gets larger during recessions. But at the same time, state tax revenues drop during recessions. So at the very moment when the programs are most needed and most expensive, the states -- which by and large cannot deficit spend -- have the least money to keep them running. The results have always been cuts."

So Fed revenues drop too but they can run a deficit and pile on debt so it is ok. The worst part is the gov wants me to pay taxes for the healthcare of others (which is ok for those who truly need the safety net) yet you then want to turn around and pay the docs less - which in-turn forces up my insurance and doc bill.

Posted by: Holla26 | February 4, 2010 4:30 PM | Report abuse

"Ezra, your problem with understanding HCR is that you only come at it from the consumer side and now you are pretenting that what is happening on the state level cannot happen on a federal scale. You are wrong." Posted by: bobsteph1234

Thank you, bobsteph1234. I can't figure out how it's a good thing to borrow money from the Chinese to pay for massive new entitlement programs while leaving the exclusion intact and failing to do anything to control costs.

Posted by: bgmma50 | February 4, 2010 5:02 PM | Report abuse

"In case you have not been paying attention, if it is passed HCR will lower future deficits, and by far more than the proposed spending freeze.
Posted by: Patrick_M"

Even Obama and Congress have given up on that canard. The most rosy of scenarios shows the bills to be deficit neutral. And I don't believe for a minute that the hundreds of billions of cuts in Medicare needed to fulfill Rosy Scenario will ever materialize.

Posted by: bgmma50 | February 4, 2010 5:05 PM | Report abuse

"Even Obama and Congress have given up on that canard. The most rosy of scenarios shows the bills to be deficit neutral. And I don't believe for a minute that the hundreds of billions of cuts in Medicare needed to fulfill Rosy Scenario will ever materialize."
Posted by: bgmma50

Now you are just making things up. The only "scenario" that matters is the CBO analysis of the bills, which shows significant deficit reduction over time. Obviously anything that lowers health care costs overall will also reduce the costs for programs like Medicare, the VA, etc.

There has been no change in the expectation that HCR will contribute to deficit reduction, and that remains an important part of the argument still being made by Obama and other HCR advocates.

As for your cynicism about whether Medicare savings will be achieved, it is ironic how the conservative "deficit hawks" always proclaim the need to reduce the costs of entitlement programs, until the Democrats make a detailed proposal to accomplish exactly that.

Posted by: Patrick_M | February 4, 2010 5:22 PM | Report abuse

Connecticut is insane to elect Lieberman and Rell.

Posted by: akmakm | February 4, 2010 6:13 PM | Report abuse

In addition to Ezra's comments, it is harder for the states to muster the political will to pull all four of the big insurance levers at once - guarantee issue, community rating or at least not experience rating, a mandate and subsidies. Massachusetts pulled this off because of a unique confluence of political factors, a strong economy and high levels of insurance before reform. I guess Minnesota might be in a place to pull off universal coverage as well when Pawlenty leaves. Aside from that, I don't think very many states are able and willing.

Posted by: weiwentg | February 4, 2010 6:47 PM | Report abuse

Aren't a lot of American states roughly the same size as many European countries which have universal health systems? Switzerland, Denmark, Sweden, the Netherlands - these are very small nations.

Is there any reason for states not being able to maintain a universal healthcare system on their own other than their self-imposed balanced budget constraints and their poor track record of levying sufficient taxes to fund their outlays (note that the federal government also has the latter problem)?

Posted by: justin84 | February 4, 2010 7:19 PM | Report abuse

You left out Wisconsin's BadgerCare. It hasn't been taking new applications from anyone for over a year now.

Posted by: NealB1 | February 4, 2010 7:20 PM | Report abuse

Patrick_M
"The federal's government's "key qualification" is that it can address the entire national system and thereby lower costs system-wide."

There are no significant economies of scale to be realized at the national level that can't be reached at the state level. There are "successful" socialized healthcare countries no bigger than individual US states.

"In case you have not been paying attention, if it is passed HCR will lower future deficits, and by far more than the proposed spending freeze."

The price of the current bill is buried in accounting gimmicks. The true cost is much higher than scored, and the real, dynamic cost will be higher yet. Furthermore, the proposed spending freeze is hardly a benchmark of fiscal responsibility. Don't embarrass yourself by using it as one.

Posted by: whoisjohngaltcom | February 4, 2010 8:10 PM | Report abuse

"The only "scenario" that matters is the CBO analysis of the bills, which shows significant deficit reduction over time." posted by Patrick_M


You are aware, are you not, that the "deficit reduction" is artificially contrived by including 10 years of revenue and 6 years of expenditures?


"There has been no change in the expectation that HCR will contribute to deficit reduction, and that remains an important part of the argument still being made by Obama and other HCR advocates." posted by Patrick_M

Saying it over and over and over again doesn't make it so.

"As for your cynicism about whether Medicare savings will be achieved, it is ironic how the conservative "deficit hawks" always proclaim the need to reduce the costs of entitlement programs, until the Democrats make a detailed proposal to accomplish exactly that."

Aside from the medicare savings about which I am admittedly cynical, which entitlement progams are the Democrats making detailed proposals to accomplish?

Posted by: bgmma50 | February 4, 2010 8:34 PM | Report abuse

"There are "successful" socialized healthcare countries no bigger than individual US states."

Possibly. But so what? Our pending HCR bills do not create "socialized" health care; instead we are preserving the existing private providers and insurers completely intact.

"There are no significant economies of scale to be realized at the national level that can't be reached at the state level."

It is not about the economy of scale. It is about promoting competition with the exchanges, and a variety of other steps that a single state could not effectively implement.

"The price of the current bill is buried in accounting gimmicks. The true cost is much higher than scored, and the real, dynamic cost will be higher yet."

Thanks for that. Perhaps you have the superior research and accounting resources to determine the "true cost," but since I don't have your magic decoder ring, I'll stay with the CBO scoring, as the best available real world estimate of outcomes.

"You are aware, are you not, that the "deficit reduction" is artificially contrived by including 10 years of revenue and 6 years of expenditures?"

Yes, I am aware that most revenue starts to kick in sooner than most expenditures under the plan. That does not change the fact that the program creates sustained deficit reduction. Nothing in that formula is "artficially contrived." If you think that doing nothing will result in lower deficits than will occur if HCR becomes law, you just aren't doing your homework.

"Aside from the medicare savings about which I am admittedly cynical, which entitlement progams are the Democrats making detailed proposals to accomplish?"

I did not say there were detailed proposals at this time by the Democrats to make cuts elsewhere in entitlements (nice try at changing the subject, though). I simply mentioned the obvious irony of self-proclaimed deficit hawks beating their chests and railing against the lower Medicare expenditures that are built into the HCR package.

Posted by: Patrick_M | February 5, 2010 1:58 AM | Report abuse

Patrick_M, you don't need to be an accoounting whiz to know that there are problems with CBO scoring. Even Liberal groups like Brookings agree there are. This is because the CBO can only make projections based on assumptions they recieve from Congress. Unfortunately, Congress will spend money outside the orginal bill or suspend revenue collections in favor of special interest groups. For example, the deals made to secure votes in the Senate are not part of the CBO scoring.

Posted by: bobsteph1234 | February 5, 2010 6:26 AM | Report abuse

If Democrats want to convince middle class Americans that this bill is deficit neutral they need to stop crossing their fingers every time they say it.

Nobody believes that.

The purpose of Democrats pushing this bill is to trap us on a path toward Single-payer. They do not honestly look beyond that.

Posted by: FastEddieO007 | February 5, 2010 8:56 AM | Report abuse

"I am aware that most revenue starts to kick in sooner than most expenditures under the plan. That does not change the fact that the program creates sustained deficit reduction." Posted by: Patrick_M

You're right. If we shut it down at the end of 10 years we have deficit reduction of 100 billion if we save 500 billion in Medicare. 11 plus years out and we're sc*^*^&d.


"nice try at changing the subject, though" Posted by: Patrick_M

You're the one who brought it up.

Posted by: bgmma50 | February 5, 2010 10:03 AM | Report abuse

Don't forget to mention that Massachusetts universal healthcare system is going broke. Ezra seems to think that by nationalizing healthcare that somehow the federal government will, unlike the states, magically figure out a way to make healthcare costs go down. Wrong. Other than the fact that the federal government can run budget deficits, which are massive right now, what exaclty can it do different than the states to contain costs. Each state that has done a universal government run healthcare system has found that eventually the costs spiral out of control. The only difference with the federal government doing the same thing is that those costs would be exponentially higher and will be added on to the Obama debt we are already accumulating. When people are given something for nothing, at least the costs are hidden away, they tend to use it more. Until people have a financial stake in their healthcare and the costs of that healthcare are out in the open for everyone to see the costs will continue to spiral out of control

Posted by: RobT1 | February 5, 2010 11:37 AM | Report abuse

"I'll stay with the CBO scoring, as the best available real world estimate of outcomes"

LOL. Utter foolishness. CBO scoring allows Congress to set whatever ground rules they want. The calculations assume unrealistic revenues, spending or savings that will never occur, even the impact of policies the Congress has no plans to actually pass.

There's nothing "real world" about it. It's a scam, and it shouldn't fool anyone.

Posted by: whoisjohngaltcom | February 5, 2010 10:52 PM | Report abuse

"CBO scoring allows Congress to set whatever ground rules they want. The calculations assume unrealistic revenues, spending or savings that will never occur, even the impact of policies the Congress has no plans to actually pass." posted by whoisjohngaltcom

In other words, garbage in/garbage out

But hey, under the CBO scoring, if we pay out benefits 6 years out of every 10 while collecting revenue and saving $500 billion from Medicare 10 years out of every 10, we'll be in great shape. LOL


Posted by: bgmma50 | February 6, 2010 12:27 PM | Report abuse

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