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Expect health-care reform to require more reforms

I don't follow the Massachusetts health-care reform too closely, as I don't think it's a great predictor for national health-care reform. I argued in my article "Overstated," and still believe, that most all state reforms fail over the long term for reasons having to do with state finances (they can't deficit spend, so recessions make the system totally unaffordable) and state markets (insurers can temporarily flee if they want the plan to collapse quickly, as has happened in states like Washington). In fact, I was quite confident that the Massachusetts reforms would fail when they hit a recession, and I've been surprised and impressed that they've survived.

Which is all to contextualize the disagreement over whether we should worry that one-third of 1 percent of Massachusetts's uninsured population is paying the individual mandate penalty and only buying insurance once they get sick. Megan McArdle says we should, as that number might grow. Austin Frakt says we should, if that number grows. And if it does, we should figure out how to fix it.

But, as he says, there are ways to fix it. You could set one enrollment period a year -- say, May -- so people couldn't just pay the penalty, get sick in June, and buy insurance then. You could add to the penalty itself by making it more expensive, or saying that paying it locks you out of subsidies for five years. McArdle terms these "desperate, flailing attempts to patch a Massachusetts system that's only a few years old," but they seem to me to be the sort of tweaks and changes you'd expect to have to make as you gain real-world experience running a complicated system. I'd be glad to extend Medicare to everyone and then we wouldn't have these problems, but insofar as we're trying to build a private-public hybrid that no one has really tried before, people should certainly anticipate the need for continual changes and modifications as we figure out whats works and what doesn't.

By Ezra Klein  |  July 2, 2010; 12:15 PM ET
 
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Comments

I tend to see a fair amount of conservatives, though obviously not all, that I think conflate a government or program with problems with a government or program that doesn't work or is broken. Medicare has problems, but most users like the program. The solution isn't to eliminate the program because it's flawed, but to find ways to tweak it to make it better. Any complex system is going to have problems when it's put into practice in the real world. As Ezra states, we should expect problems and be ready to evaluate the best ways to improve over time.

Posted by: MosBen | July 2, 2010 12:34 PM | Report abuse

What is the goal with mandates, penalties, and/or lock-outs?

Even if someone is not insured, we see that they get the medical care they need (for the most part). What we want is for those people to pay for, or at least contribute a reasonable share (according to their ability), to the cost of that medical care.

In that sense a mandate is a reasonable legislative action. But, of course, sustaining compliance and gaming the system become characteristics of that policy.

What amuses me is that those who rail most about the mandate ("Why should the government make be buy health insurance!!") don't seem to realize that they are "mandated" to pay for Medicare and Medicaid through taxes.

If the real Public Option was "creeping" Medicare -- employing opening policies to Medicare, like letting spouses of Medicare recipients to buy-in, rather than leaving a middle-ager to the vagaries of the private insurance market -- then one way to satisfy the individual mandate would be to let them buy into Medicare at a percentage of person income (8%?). In fact, that could become the mandated default, if one does not by private insurance.

Opening Medicare could be a positive solution to the long-term unemployed: paying out 65% to COBRA costs is a drain on government funds. Allowing younger people to buy into Medicare might actually bring revenue into the government.

Posted by: jshafham | July 2, 2010 12:41 PM | Report abuse

As an actuary, I have to disagree with you, Ezra. Remember that 5% of the population accounts for 50% of health care costs, so if even one-third of one percent weave in and out of the individual mandate, that doesn't take into account what their claim costs are when they get sick. So even if a very, very small portion of individuals weave in and out of the system, it can drive up costs an extrodinary amount.

There's a reason prices are through the roof on the Connector. The cheapest 93% AV HMO plan (a typical level of coverage for a large employer HMO) for a family of four where the husband is 30 and the wife is 28 is $1,367/mo. And the Bay State has a 2:1 composite age and region rating.

The five-year subsidy inelligibility idea won't work since the reach of the subsidies is so tiny. Massachusetts, where I live, completely phases out subsidies at 300 FPL. At the federal level, that figure is 400 percent FPL. In Boston, an entry-level position for a college grad pays more than 400 percent FPL, so a 5-year inelligibilty from subsidies won't do much to deter a 22-year-old bachelor from forgoing health insurance until they get sick since they'd probably still be inelligible for the subsidies with or without the five-year ban on subsidy eligibility.

And the once-a-year enrollment idea -- do you really think to 27-year-old bachelor that waiting one year to get health insurance means that much?

I think the best idea remains increasing the monthly financial penalty equal to the average premium for an individual's risk profile plus a 15% additional penalty. That's what the Healthy Americans Act does, and that's what I think should be done.

Posted by: moronjim | July 2, 2010 12:50 PM | Report abuse

To be fair to others, there should be a penalty attached to those who buy into an insurance plan only after they find they need it. Medicare, itself, has a penalty added to the premium for those who buy into Part B (medical insurance) or Part D (the drug plan) belatedly. And that penalty carries forward forever.

Unless we find some way to attach consequences, commensurate with the action, to the choice not to buy insurance we are simply allowing those who wait until they need it to forego "insurance" - protection against loss. Buying it when you need it isn't insurance, it's asking the rest of us to share in picking up your medical expenses.

Posted by: HealthcareAnnotator | July 2, 2010 12:53 PM | Report abuse

Even if someone is not insured, we see that they get the medical care they need (for the most part).

Really this is false. If someone is in a traumatic accident or has a life threatening episode, like a heart attack or kidney failure, then emergency rooms and hospitals won't (immediately) deny care to get them out of critical condition.

But if a person is under 65 and not indigent (ie not eligible for medicaid (yet, it doesn't take long to drain a person's net worth if they have a chronic condition) without insurance...

But if that same heart disease patient needs medication to reduce his/her chances of getting a heart attack, where is that going to come from?

If the kidney patient needs drugs or dialysis, will s/he have to sell all their assets to pay for these interventions themselves?

Just askin'

Posted by: srw3 | July 2, 2010 1:08 PM | Report abuse

Ezra

How complicated does it need to be? A second open enrollment for EVERY employer? do you have any idea of the administrative cost to so that? You're better off raising the penalty if too many opt out.

Also how so you reconcile the fact that you believe all state reforms will fail because they can't run a deficit and everyone says PPACA is just mass reforms done nationally yet you still claim to think PPACA will reduce the deficit?

Posted by: visionbrkr | July 2, 2010 1:57 PM | Report abuse

@vb: everyone says PPACA is just mass reforms done nationally yet you still claim to think PPACA will reduce the deficit?

Deficit reduction from ACA over the next 10-20 years may not be affected significantly if it runs a deficit during this great recession. Of course, a few things need to go right for this to occur (like getting out of this recession without a Japan style lost decade, are you listening repubs?), but it is more likely than not that short term deficits from ACA will be made up from long term savings in HC costs.

Predictions are hard particularly about the future...Y Berra.

Posted by: srw3 | July 2, 2010 2:07 PM | Report abuse

moronjim,
I think the idea is that the people gaming the system aren't going to be the people who are really expensive. It's the old and the sick who cost a ton, whereas the young and the healthy are the ones who are going to try to game the system.

Posted by: mschol17 | July 2, 2010 2:10 PM | Report abuse

Srw3


Seriously? When dems were SELLING hcr as reducing the deficit they never used a precursor of "if the economy improves"

Now you're changing the rules? Nice!!!!


You can't legitimately explain ezras inconsistencies.

Posted by: visionbrkr | July 2, 2010 2:21 PM | Report abuse

Srw3


Seriously? When dems were SELLING hcr as reducing the deficit they never used a precursor of "if the economy improves"

Now you're changing the rules? Nice!!!!


You can't legitimately explain ezras inconsistencies.

Posted by: visionbrkr | July 2, 2010 2:21 PM | Report abuse

" I'd be glad to extend Medicare to everyone and then we wouldn't have these problems, but insofar as we're trying to build a private-public hybrid that no one has really tried before, people should certainly anticipate the need for continual changes and modifications as we figure out whats works and what doesn't. "

You're sounding like a wannabe policy-maker, not a journalist, again.

Posted by: Mary42 | July 2, 2010 2:31 PM | Report abuse

"Buying it when you need it isn't insurance, it's asking the rest of us to share in picking up your medical expenses."

BUT
Forcing others to buy a product -- insurance -- presuming that everyone will use it SOMETIME in their lives for some procedure or otherwise unaffordable medical expense, asks non-consumers to pay for your choice to voluntarily share medical bills with those you choose to pool with.

Who's carrying who? Who is mandatorily paying off whose ill-calculated choices?

The ones forced to pay penalties and premiums for services and resource-sharing-schemes that they never access.

Therein lies the rub.

Posted by: Mary42 | July 2, 2010 2:40 PM | Report abuse

"Opening Medicare could be a positive solution to the long-term unemployed: paying out 65% to COBRA costs is a drain on government funds."

Wait until we see the boatloads of applications for Social Security Disability, for those long-term unemployed older workers who are not yet of age to access their retirement benefits.

Oy.

Posted by: Mary42 | July 2, 2010 2:44 PM | Report abuse

There will be many more people gaming the system in the National plan. I know, because I'll be one of them.

There is far more civic pride and messaging control in a state reform like Massachussets', and most people want their state to work well. However, the national health care overhaul has never even had majority support, and millions of people do want to ACTIVELY game it and bring it down.

And because of inertia and the need to actively opt-in to health care reform, many people like myself will sit out the national program entirely, by not even paying the individual mandate, for which there is no penalty for not paying. I actually consider it my civic duty to game the federal system, whereas I think few people think it's their civic duty to bring down their individual state.

And on top of it all, it will be much harder for the national gov't than a state gov't to be nimble and firm enough to crack down on people like me.

Posted by: michaelh81 | July 2, 2010 2:59 PM | Report abuse

@mschol17: Excuse me for my sloppy analysis/explanation. It's not like an HIV patient or someone else who hits the out-of-pocket cap every single year is going to be gaming the system.

My point was that the people who game the system won't game the system when they merely have an earache. The people who game the system will be the ones who broke a leg skiiing, etc. In other words, the people who weave in-and-out will still have significantly greater medical expenses when they weave into the system.

Here's an example (http://www.boston.com/news/health/articles/2010/04/04/short_term_customers_boosting_health_costs/):
"Baker’s data showed that about 40 percent of the consumers who purchased insurance from Harvard Pilgrim on the open market kept the insurance fewer than five months, and they incurred, on average, $2,400 a month in medical expenses — about six times higher than the monthly spending of other consumers."

Posted by: moronjim | July 2, 2010 3:20 PM | Report abuse

"most all state reforms fail over the long term" [...} "I was quite confident that the Massachusetts reforms would fail when they hit a recession, and I've been surprised and impressed that they've survived."

"people should certainly anticipate the need for continual changes and modifications as we figure out whats works and what doesn't."

Ok, dude.

Posted by: rmgregory | July 2, 2010 3:26 PM | Report abuse

@Mary42: "Who's carrying who? Who is mandatorily paying off whose ill-calculated choices?"

So a diabetic child made her own ill-calculated choices, and we should just let leave her lying on the classroom floor when she has a blackout in the middle of class?

Posted by: moronjim | July 2, 2010 3:31 PM | Report abuse

The real problem is that the minimum required plans are too expensive. The Mass. law and ACA both put too many restrictions on what constitutes a valid health plan. If we make plans available with high deductibles or higher percentage co-pays, we would have incentives for patients to seek better value care and cheaper options for people that don't want to use as much health care. We all are paying for the hypochondriacs that visit the doctor for every sniffle, I'd rather incentivize us to use less expensive health care when possible.

Posted by: staticvars | July 2, 2010 3:50 PM | Report abuse

Moronjim

there are many ways to game the system that many on here have never considered. Remember how Medicare is now reprocessing claims based upon the higher rate? Imagine every small employer and middle market employer who reduces their plan and increases their employees oop costs but thw change takes time to implement. Insurers never used to reprocess those claims and those increased copays and deductibles over a year, over every employer adds a lot. Just one example.

Posted by: visionbrkr | July 2, 2010 3:58 PM | Report abuse

Moronjim

there are many ways to game the system that many on here have never considered. Remember how Medicare is now reprocessing claims based upon the higher rate? Imagine every small employer and middle market employer who reduces their plan and increases their employees oop costs but thw change takes time to implement. Insurers never used to reprocess those claims and those increased copays and deductibles over a year, over every employer adds a lot. Just one example.

Posted by: visionbrkr | July 2, 2010 3:58 PM | Report abuse

@staticvars: "The real problem is that the minimum required plans are too expensive. The Mass. law and ACA both put too many restrictions on what constitutes a valid health plan."

So if you set the minimum standard even lower, how do you prevent healthy people from choosing to the lowest benefit package while the HIV patient, the family with the diabetic child, and others who are going to hit the out-of-pocket cap every single year from going to the most generous package? Even worse, with guaranteed issue underwriting, prohibition of pre-existing clauses, and a community rating, how do you prevent healthy people from enrolling in the cheapest plan while they are healthy, and then migrating to the more/most generous policies when they get sick?

Or perhaps a better question is this: do you really believe a $7,500 deductible, 20% co-insurance, and $15,000 out-of-pocket cap policy is a good public policy for a family of four earning $50K/yr. with a diabetic child? That's the reality for a lot of families.

Posted by: moronjim | July 2, 2010 4:26 PM | Report abuse

Boy, I'm having a bad analysis day.

"And the once-a-year enrollment idea -- do you really think to 27-year-old bachelor that waiting one year to get health insurance means that much?"

While I think you definitely need a once-a-year enrollment period (with exemptions for marriage, divorce, birth/adoption of children, and changing jobs), it's definitely not sufficient to prevent adverse selection -- even with a penalty.

And I may be wrong about Wyden -- he may have auto-enrollment.

Posted by: moronjim | July 2, 2010 4:32 PM | Report abuse

"So a diabetic child made her own ill-calculated choices, and we should just let leave her lying on the classroom floor when she has a blackout in the middle of class?"

1) Her parents should support her, with private insurance.
2) Absent private insurance, her parents should pay out of pocket.
3) If the parents cannot pay out of pocket, they should first look to family and friends for help. Then charity donations.
4) If they are unable to affort the medical bills for their child, they should investigate if there is a payment plan, or some charitable hospital help available. Many billing offices offer such help, if the family qualifies.
5) Most state programs -- SCHIP -- cover uninsured minors.
6) Finally, if all other options have been exhausted, then a federal plan.

BUT... forcing non consumers who wish to opt out of insurance plans and spend their limited resouces on maintaining their own health (food, shelter, preventative maintenance, etc) to pay for someone else's ill child -- particularly if the family indeed has resources -- is the wrong way to shift the burden.

Remember: this whole affordable health care act shifts the burden from those who use and can afford the system as it is, to those now outside the system -- who don't consume and therefore don't pay. If the people currently agreeing to pay premiums don't like the risks in their voluntary pool, the solution is not to rope millions of healthy innocent others into that same ill-planned system.

Get it?

Posted by: Mary42 | July 2, 2010 5:37 PM | Report abuse

Please read the story of this wealthy family who made poor choices on behalf of their son. And though they are insured, they aren't content with what their policy(contract) promises, and are pushing for more.

Now tell me: why should someone who didn't make the poor choices this family made, who doesn't have the financial resources this family has, be forced into an insurance pool with people like this? So our unused premium dollars can help offset some of the costs of their child's medical care?

Remember: it's rarely the truly poor who blow the big risky decisions and rack up medical bills for injuries (not illnesses).

Do we really want to encourage this type of risk taking behavior by those ... To Big To Fail?? (let them pay their own bills from their own assets, please.)

http://www.palmbeachpost.com/news/crime/family-of-18-year-old-in-near-fatal-759348.html

Posted by: Mary42 | July 2, 2010 5:43 PM | Report abuse

In other words, according to Mary42, in order to prevent the slightest bit of moral hazard, we should punish children and allow them to die because of their parents' choices. Yeah, I get it -- I just vehemently disagree with it.

And in my example, the parent made such a bad decision to have a diabetic child. But Mary42 would allow this child to die just so she can hopefully prevent another parent from making an incredibly irresponsible choice.

Posted by: moronjim | July 2, 2010 7:01 PM | Report abuse

Well, I can see why you call yourself moronjim. You totally misrepresented my post.

Diabetic child? I care sooooooo much -- I recommend we tackle the roots of the problem. Namely the typical American diet and the balooning obesity rates of children.

Now tell me moron: why do you hate the innocent children so much that instead of opening your own wallet (if that's your solution), you castigate me for not just opening mine, writing a premium check for services I'm not going to use, and then looking the other way, while the numbers of diabetic children in America continues to balloon, often because fully preventative measures aren't taken. I can hear the moron now...

(moron: "Oh shut up Mary. Buy the kid another 20-ouncer sodapop to keep 'em happy, nevermind encouraging healthier lifestyles and working with them in community exercise programs. Free -- volunteers putting in the hours locally... It's your $$$ we need; not your ideas. Personally, we don't really care about health at all -- it's a fiscal thang."

Yeah, good luck with that uglymoron.

Posted by: Mary42 | July 2, 2010 8:00 PM | Report abuse

So, the solution to the Massachusetts (and soon the American) individual mandate problem is to allow the sick to die.

Ok. Sure. I guess. If the solution to the solution is death, why have the solution? Is the death of those who fail to fill out a federal form the "final solution"? Or is there a "final solution" that we haven't yet heard about?

Posted by: rmgregory | July 2, 2010 8:32 PM | Report abuse

mary

I know I'm going to regret this but you do realize that not every diabetic is self induced due to diet, right?

Give the child cancer instead of diabetes? I'm sure you'll come up with another psychotic ideological stance. Listen I'm all for responsibility but your problem is that you live or die by your ideology.

Posted by: visionbrkr | July 2, 2010 8:57 PM | Report abuse

Right, because having health insurance = having good health.

It's all about money, accessing technology and providers, and taking pills.

Nevermind commonsense risk management, proper diet and exercise, and a healthy lifestyle. Nevermind that -- we've got free health insurance...

Pass the pop!

Posted by: Mary42 | July 2, 2010 8:57 PM | Report abuse

Ezra ...
Two problems with reality here ( three if you count things NEVER get fixed. People make money off the flaws. Those who do make political donations to both republican and democrat politicians. Those individuals BLOCK the fixes. )

1. Before THIS issue with mandates comes into effect. The mandates have to come in effect. Which is 2014, and we won't know until 2015 when the returns are filed how many have chosen to "game" the system.

2010 - You will lose 5 Senate seats ( at best ). That brings the Republicans up to 46 seats.

2012 - You are defending 21 seats to 12. Of those 12 the only vulnerable one is Scott Brown who is currently more popular than Kerry or Obama or any other politician in Mass.
Under standard normalization ( and it usually happens ) you can expect to lose 4-6 seats. being a General election year keep it to 4.
That makes Republicans 50.
And Dems 47 + errrrrrrrr... Rut roh.
Joe BIDEN doesn't get to vote unless Joe Liebermann says he can.
And while Crist may not be nice to Republicans he will NOT be the tie breaking vote to give Dems control. Nor be the vote on EACH and EVERY progressive fix to the HCR in lock step ...
which means in effect ...
by 2012 assuming all the MOST POSITIVE results, the republicans will have control of the Senate.
( So be careful what you do on Filibuster ... it ain't a hypothetical anymore. You can look at the calander and say "we get 2 years and they get 4-6??? ).

2014 - You are defending 20 seats to 13. Oh crap and for those 13 to have survived 2008 they are the safest of safe.
Oh crap it is an OFF year.
Oh crap the Republicans SHOULD gain 4-6 back and have a majority in the 54-56 range.
And after THREE SUCCESSIVE elections in which they made gains in the Senate they are gonna roll under and make nice on HCR?
Or repeal repeal repeal?

This leaves you with normalizing back in 2016 what you lost here. Well except Obama is termed out. Hillary and Biden are too old and there is NO-one on the horizon.
2016 at the latest. Republicans retake the Presidency minimized loses by coat-tail. POSSIBLY with a Republican controlled Senate and NO Filibuster!

There are no fixes coming on HCR before 2020 other than what happens in 2010-2012.

Second problem then kicks in ...
How much effort to fixing things like the mandate are going to happen when it isn't even known if the mandate is going to be declared unconstitutional?
Don't think like an ideologue ... think reality.
Reality says Kagan, Sotomeyer, Brennan, Ginsberg say it is.
Roberts, Scalia, Thoms, Alito say it isn't.

Kennedy is thus the ONLY legal opinion that matters.
Kennedy who has over-ruled both Dem and Rep legislation 64% of the time.
Kennedy who kept his mouth shut during the Gibbs/Roberts dust-up only to be rewarded by getting called out by NAME and slammed in public by Reid.
Kennedy who by nature makes declaring mandates illegal a 2-1 status can slam back Reid, Gibbs, and Obama and there is NOTHING they can do NADA

Posted by: chromenhawk | July 2, 2010 9:05 PM | Report abuse

"I know I'm going to regret this but you do realize that not every diabetic is self induced due to diet, right?"

Absolutely. But childhood diabetes ... the rates skyrocketing in America... if you honestly don't think that is PREVENTABLE, and there is no link between lifestyle and health...

God Bless You.

(Why does everyone pull out the "dying child" card anyway? Aren't you aware that poor children are ALREADY covered via SCHIP. This health reform overhaul has to do with passing the buck. Not protecting children from diabetes. It shows me how truly you are willing to allow others to subsidize an out-of-control system in terms of costs (none of which was addressed) under this existing reform...

Tell me: does your car insurance pay for your maintance: oil changes, tire rotations, replacing gaskets and hoses as they age? No? Why not have a "pay-as-you go" system for the routine medical care at least: office visits, the prescriptions, the annual checkups, etc. etc. etc. Then -- once people are feeling the costs of their (often unnecessary) consumption, at least you'd have some cost controls built into the process...

By only having the catastrophic care covered by insurance, you'd have lower premiums and many even those who don't access the system currently could be convinced to VOLUNTARILY join your pools. But forcing people into a sick system, because your system is so sick it will die without a fresh infusion of ... not blood, but MONEY?

No thank you. I opt out. As is my constitutional right. And I'll continue tithing and working toward ending childhood illnesses and obesity, and caring -- at home -- for our elders.

Now, how much will you propose fining me for MY irresponsible attitudes? And then, when I've helped pay your bills, you can tell me how I'm the one gaming the system... Honestly, you poor folk just don't see it, do you?

Posted by: Mary42 | July 2, 2010 9:09 PM | Report abuse

Bless you, chromenhawk.

Holding out optimism for an independent country here, where people get to choose the healthcare options that best meets their own needs.

Nevermind what the self-professed money wonks think will work today. It's all about money, not health.

Posted by: Mary42 | July 2, 2010 9:17 PM | Report abuse

Mary

I'm in NJ. I have clients with hsa plans that are group insurance (not individual coverage) where premiums are $900+ a month and increasing at still alarming percentages.

Sorry but catastrophic care is not necessarily cheap. These people can't help by 2018 pay the excise tax based upon their age (55).


Just out of curiousity have all your relatives died happily in their sleep as at least octogenarians? Or been tragically hit by a bus?

Posted by: visionbrkr | July 2, 2010 10:16 PM | Report abuse

Lol. Gotta love it.

If it isn't a poor fat diabetic kid convulsing on the school floor with cancer, it's all those mythical uninsured folk being hit by city buses out here in the heartland.

You're just SURE that I'm somehow going to be at that ER room demanding treatment on your dime one day, eh? Can't fathom people who live simple, healthy lives and don't rack up exhorbitant unpaid medical bills before they pass...

We're here. Get used it it.

Posted by: Mary42 | July 2, 2010 10:37 PM | Report abuse

You guys should stop complaining cuz one the health care we have now isnt as good as it was supposed to be. also the law has just been signed give it a try u guys are too hard on democrats they went to college and we voted for most of these people.so if u want to say u have the right to choose tell that to ur congress men or state official. as for obama people are just tryin to make it look like america made a mistake he has done things to help us and we had a full 8 years of a terrible president and i will be so as happy as ever when a obama fixes bush's mistakes. You can find full medical coverage at the lowest price from http://bit.ly/9sfoMb obama has to put up with the wo0rld judging his every move and trying to fix the mess we are in we are lucky anyone wants to be our president. STOP COMPLAINING AND GIVE HIM A BREAK. i wanna see one of yall do what he sas done. some people are just so ignorant.


Posted by: luisjustin02 | July 3, 2010 7:02 AM | Report abuse

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