Alex Blaze

Obama's going for an individual mandate in health care reform

Filed By Alex Blaze | February 25, 2009 10:00 AM | comments

Filed in: Living
Tags: Ayn Rand, Ezra Klein, health care reform, individual mandate, paul krugman, rights, universality

According to Ezra Klein, the Obama administration will be trying to include an individual mandate in health care reform. The White House wants Congress to write the bill, so it'll start there, but they're working on an outline of what they want, and universality via individual mandate is in there.

This is a good development - you might remember the war the Obama campaign declared last year on mandates during the Democratic primary. Apparently, that was a "question of politics, not of principle." A mandate would significantly lower the cost of any sort of health care plan and increase the number of people who are covered in the end.

It's looking like the administration and Congressional Democrats are serious about health care reform, which is good, because the system isn't staying as defunct as it is today, it's getting worse by the moment. While it would be great to hope for a single-payer (where the government is the biggest purchaser of health care services from private providers) or a socialized system (where health care providers are employed directly by the government), America's going to have to go through an intermediary Massachusetts-style system of individual mandates.

Hopefully, the Congressional plan will include the creation of a large, optional, government health care provider that both Clinton and Obama promised during the campaign season, which will eventually drain the private world of business as people realize that the government can do it more efficiently and cheaply than the private sphere can.

If you're feeling health care wonky, here's actual statistics as to how much a mandate could save:

So the Obama plan would leave more people uninsured than the Clinton plan. How big is the difference?

To answer this question you need to make a detailed analysis of health care decisions. That's what Jonathan Gruber of M.I.T., one of America's leading health care economists, does in a new paper.

Mr. Gruber finds that a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured -- essentially everyone -- at a taxpayer cost of $124 billion. Over all, the Obama-type plan would cost $4,400 per newly insured person, the Clinton-type plan only $2,700.

That doesn't look like a trivial difference to me. One plan achieves more or less universal coverage; the other, although it costs more than 80 percent as much, covers only about half of those currently uninsured.

It saves money because:

Why have a mandate? The whole point of a universal health insurance system is that everyone pays in, even if they're currently healthy, and in return everyone has insurance coverage if and when they need it.

And it's not just a matter of principle. As a practical matter, letting people opt out if they don't feel like buying insurance would make insurance substantially more expensive for everyone else.

Here's why: under the Obama plan, as it now stands, healthy people could choose not to buy insurance -- then sign up for it if they developed health problems later. Insurance companies couldn't turn them away, because Mr. Obama's plan, like those of his rivals, requires that insurers offer the same policy to everyone.

As a result, people who did the right thing and bought insurance when they were healthy would end up subsidizing those who didn't sign up for insurance until or unless they needed medical care.

Both those quotations come from Nobel-winning economist Paul Krugman, who's also something of a health care policy wonk. The point of health insurance or a health care system is that people who are healthy pay into the system to reduce costs for the people who are sick. They do so in case they become sick themselves.

But if costs are too high, or if they're feeling lucky (which a lot of people who are healthy do), then they don't buy insurance. Which means that there's a higher percentage of sick people in the health care system than there needs to be, and the costs for that group go up.

And they still end up paying for those folks who thought they were healthy or could afford insurance, because those people, if something happens or if they ignore a developing condition, end up in the ER, the absolutely most expensive and inefficient way to handle patients. The costs of their health care are passed on to everyone else if they can't pay, and often those folks go bankrupt, passing along the costs of their health care, again, to everyone else who bought insurance in the first place.

So, yeah, this is a big deal. Especially since many people just don't like the idea of a mandate; "Don't infringe on my rights," Ayn Rand, and "Don't force people to buy something!" are much easier to understand than Jonathan Gruber's number-crunching. Plus the traditional media is against universal health care, which means that we're fighting an uphill battle.

One other thing. If you're feeling wonky, then go read this old piece from Ezra Klein about health care systems around the world to get an idea of what the US could be doing. We shouldn't be talking "health care reform" vs. "no health care reform," or even "universal health care" vs. "no universal health care," especially when there are so many details to work out.

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I wish Obama would take a look at the HCFA plan because I think it's a good transition to public healthcare. The plan is called Health Care for America, it’s a proposal put together by the political scientist Jacob Hacker with the support of the Economic Policy Institute. I’d suggest reading Thinking Big to get a better idea of the plan, but the basic idea is that employers pay money into a public fund, enough to cover their workers. The public fund should have quality coverage for all, including preventive care. Workers get to choose - keep your insurance, choose a different private plan, or join a public health insurance plan without a private insurer middleman, pick your healthcare providers and doctors. Employers choose too. Those who prefer not to shoulder the burden of providing coverage as good as the law requires can decide to enroll their workers in the public plan at a modest cost. HCFA and Medicare would function as a single nationwide insurance pool covering close to half the population. So basically either the public plan attracts most Americans, and our system gradually evolves into single-payer or because the floor prevents a race to the bottom, the public-private competition raises the bar on care and efficiency, improving quality and cutting costs, even in the private insurance plans. The standards would be kept by a strong government watchdog (Biden! :)

That's good news about mandates! All through the campaign I was hoping that this is what would happen once they got in office. I feel (very cautiously) optimistic.

I think we can have a little hope that something will happen here. I don't think they'd be putting out so so much talk if they weren't planning on putting out some action as well.

The only real solution is socialized medicine. Anything less is just a band aid.

I don't agree. France, which has a wonderful health care system, the best in the world according to the WHO, is single-payer, not socialized. And Germany has simply a heavily regulated private sector, and that works pretty well for them.

England has socialized medicine, although their system isn't that good (about like the US's).

I think that as long as we start with a commitment to universality, quality care, and affordability, then we can make any system work. The problem is that the current system in the US isn't focused on any of these things... only profit.

Single payer, under government control, is socialized medicine.

If those governments, as in England and Germany are controlled by the rich, their system will inherently have all the distortions of a for-profit economic system. That system is so intrinsically unstable that it simply collapses from time to time, as it’s doing now.

So let me rephrase. The only real solution is socialized medicine administered by a workers government. Anything less is just a band aid. Some (French) band aids are better than others.

Whether for-profit single payer or socialized medicine it'll work best in advanced industrialized nations. Cuba, for all it attempts to have a good health system still suffers from the after effects of their time spent as a US colony and US attempts to strange them economically through the boycott. Nevertheless Cuba, ranked number 32 on WHO's list of delivery of health services does far, far better than the US, which is ranked number 72. The US is ranked below many wealthy advanced countries like The former Yugoslav Republic of Macedonia, Sri Lanka, Bosnia and Herzegovina and Albania!

The french system isn't a band-aid, it works really well! And single-payer isn't socialized medicine at all - doctors work for the government directly in socialized medicine, but in single-payer they're just reimbursed by the government.

But I agree, if managed well either system can work alright. Which is why Sarkozy (who really is a French GWB) is trying to take it apart - the people love it and it gives them faith in their government to solve basic problems.

Today the AFL-CIO nurses union CAN-NNOC faintly praised Obama's call for "comprehensive" healthcare reform but said “Only one reform, Medicare for all, effectively controls costs at the source, by eliminating the stranglehold of the insurance giants and the price gouging we see in ever-rising premiums, co-pays, deductibles, and other daily costs that have caused so much harm to so many.”

If the government pays the bills then its socialized medicine whether doctors are in private practice or not. The old Soviet model was based on shortages and on the Stalinists desire to regiment everyone by controlling their income. It’s very unlikely that’s going to be model we adopt when we change the government to represent working people instead of the rich.

It’s very likely that we'll want to nationalize (without compensation) clinics and hospitals and that epidemic control and other public health measures should remain nationalized. Pharmacological production needs to be reorganized on a decentralized not-for-profit basis with a greater emphasis on research.

I think that there's a problem with hybrid systems that your economic analysis missed. Everyone is required to participate. Fine, that covers statistical risk over the entire population. If private companies are allowed to cherry pick clients the weight of the risk shifts to the public sector which gets no contribution from private sector clients. There has to be a way to rebalance the risk.

One mechanism is to pool all the premiums. Both public and private payers draw from the same account. On the private side, profit can only be realized on the balanced risk.

This is still developing, but Obama did promise to ban private insurers from barring people from their plans and said he'd set price ceilings. We'll see if he sticks to that.