Jon, Thanks for a very nice analysis. It reminds me a bit of Kip Sullivan’s earlier analysis of one of the reasons why the Senate HELP and HR 3200 bills would fail. Namely that adverse selection and cherry picking by the privates would ensure that the PO, which couldn’t engage in these practices, wouldn’t survive competition. This is also a variation of the tragedy of the commons, where those who refrain from despoiling the common area, and are socially responsible, lose out to the selfish.

This also brings out another point, which is that maintaining a PO system on a knife’s edge so that it won’t overwhelm private competitors, or get overwhelmed by factors like adverse selection and small size is very difficult and requires a lot more regulation of the privates than we are capable of engaging in. Which brings us back again to single-payer.

This bill is doomed to failure. But we won’t be slapped in the face with its failure for five years. By then we’ll have spent half a trillion or perhaps much more, insurance prices will be 80% higher, subsidies will be out of sight, and the PO will be the refuge of sick people and the uninsured. Perhaps then we’ll be ready to admit that health insurance is not a field that can be handled privately and that we need a real Government take-over.

This bill is doomed to failure.

i’m afraid you are right. on this.

however, i don’t think the lesson learned will be that we need national health insurance. i think it will be that the fed gov is incapable of managing health insurance and that will be a stake through the heart of both single payer and hacker’s original public option plan (which i have serious reservations about, but at least it has a chance).

Yep, selise, that will be exactly the “lesson learned” from a working majority in this country (a near majority of which already feels that way). And would thus, cripple any hope of real reform for another generation (until a whole generation has come and gone).

This is why I hope the bill is KILLED. STOPPED. DEAD. Start over next year, and start with single payer, and if you have to compromise, IF, then Hacker’s original PO is the BOTTOM LINE compromise. Anything less, and we’re all just kidding ourselves.

And even with that, more steps need to be taken against the health providers too, meaning PHRMA and device manufacturers, as well as bringing some sort of sanity to specialist pay.

I’m afraid this is going to do more harm than good. At least if the bill were killed, and the situation got worse, the pressure from the public might actually become so unbearable that real reform is forced upon us. I really don’t hold much hope of that either.

I’m afraid my country has already gone too far down the fascist road now. *sigh*

By then we’ll have spent half a trillion or perhaps much more, insurance prices will be 80% higher, subsidies will be out of sight, and the PO will be the refuge of sick people and the uninsured.

As I see it, with a scenario like this only the wealthy will be able to afford health insurance, which will force Congress to implement a national health care plan.

This spell check red line is drivin’ me nuts.

Someone (Sherrod Brown?) said he feared that the PO was being set up for failure. Things would be so much simpler if they just passed a one-payer system.

Just a tiny little tweak to the mandate — you have to buy insurance, but it has to be from the Public Option instead of private insurers. And there, problem solved, no more cherry picking by the private insurers to drive up costs for the public plan.

Oh wait… that bill already exists HR676…

The biggest scam I’ve seen is Bel-Tone hearing aids. $2500 for those suckers. With the micro electronic industry where it is today there’s absolutely no reason for hearing aids to cost that much money.

That would be an improvement (the tweak to the mandate), but my Gawd can’t you just here the screaming from the right???

“SEE! I TOLD YA SO!! NO CHOICE THERE!! BIG BAD GUBMINT MAKIN YOU BUY THEIR SOCIALISTIC, COMMUNIST, NAZI GUBMINT RUN HEALTH CARE PLAN!”

CBO: Public Option Would Do Too Good A Job Of Providing High Quality, Low Hassle Health Insurance

does this sound afforable to you?

I only wish this article had been more direct about the likely chaos which will result from passing the (apparently) suggested legislation. All projections for expenditure are based on past experience, ie, those who have been insured. I am for a single-payer , universal coverage system. But if this passed now, there will be millions of previously uninsured people suddenly (even phased in as it is)on the roles. Every day in my neighborhood I walk by citizens from the nearby housing authority, each of which will need enormous amounts of money to treat illness and conditions long neglected – you have NO idea what this will cause. Does it need to be fixed, is it wrong – yes. But there has to more planning than just based on getting an inexperienced , largely inept president re-elected.

The mandate should kick in ONLY in those markets where a plan is available with a 95% pay-out ratio. That way, insurance companies would have to control their prices to receive a flood of new, healthy subscribers.

The mandate would still be fascist, but a bit less harmful.

This bill unfortunately needs to die before it makes things worse and makes the insurance companies richer and more powerful. This bill is terrible and only going to get worse in committee. Let Lieberman kill it in the Senate and take the political heat for stopping reform. Obama can take the heat for not getting his major domestic policy initiative done and then we can primary Obamanuel in 2012.

Thanks for the clear explanation, JW. It sounds like the best argument for single payer.

i agree. unfortunately people are apparently confused about what hacker’s original plan actually was. see for example chris bowers yesterday (and my comment at the end of the thread for links, etc).

p.s. i left a follow up comment at the end of our previous conversation re medicare drugs covered (will try to post some more after doing some background reading, but bottom line i think jane is mistaken — about hr 676, not about the need to prevent effectively what is an extension of drug patent law).

An additional tweak to mandate could be you have to buy insurance and anyone may buy PO. That would be real choice and shift the risk factors.

As I see it, with a scenario like this only the wealthy will be able to afford health insurance, which will force Congress to implement a national health care plan mission accomplished.

fixed it for ya *g*.

ok, maybe i’m being too cynical. but prof foland advised me (in 2006 iirc) that these were the days to release our inner cynic. been good advise so far… and it’s clear that the current legislation is set up to pit class against class for scarce healthcare dollars. the opposite of social solidarity — which hr 676 fosters because we’d all be in the same program (not medicare for the poorest, subsidized exchange for the next class, etc.). undermining social solidarity is a necessary step to creating social systems where only the relatively wealthy (and those they favor) can afford healthcare. otherwise the rest of us would unite to insist on universal healthcare.

still need an initial v large pool of participants (customers and providers) to get off the ground. start up is a bitch. btw, that’s one of the issues hacker’s original proposal addresses. here is kip sullivan’s summary:

Hacker’s papers laid out these five criteria that he and the Lewin Group said were critical to the success of the “public option”:

• The PO had to be pre-populated with tens of millions of people, that is, it had to begin like Medicare did representing a large pool of people the day it commenced operations (Hacker proposed shifting all or most uninsured people as well as Medicaid and SCHIP enrollees into his public program);
• Subsidies to individuals to buy insurance would be substantial, and only PO enrollees could get subsidies (people who chose to buy insurance from insurance companies could not get subsidies);
• The PO and its subsidies had to be available to all nonelderly Americans (not just the uninsured and employees of small employers);
• The PO had to be given authority to use Medicare’s provider reimbursement rates; and
• The insurance industry had to be required to offer the same minimum level of benefits the PO had to offer.

but even hacker’s original proposal is not universal.

Won’t any change have start-up issues? And with regard to that and to Hacker’s 1st bullet, it seems like instead of shifting people in existing programs to PO it would make more sense to add PO to existing programs…like say, Medicare for all???

But WTF, the train has already left the station and we’re gonna get what we get at this stage [sighing resignedly]

George Orwell wrote in 1944:

The word ‘Fascism’ is almost entirely meaningless. In conversation, of course, it is used even more wildly than in print. I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox-hunting, bull-fighting, the 1922 Committee, the 1941 Committee, Kipling, Gandhi, Chiang Kai-Shek, homosexuality, Priestley’s broadcasts, Youth Hostels, astrology, women, dogs and I do not know what else… almost any English person would accept ‘bully’ as a synonym for ‘Fascist’. – George Orwell, What is Fascism?. 1944.

The problem is, if any insurance company tried to be socially responsible, it would soon be flooded with sick costumers tired of being treated badly. This would end up making “bad” insurance companies more profitable because their bad behavior will drive away their unprofitable, unhealthy customers. The result is a marketplace were it is financially impossible to run a social responsible insurance company. Unless the risk adjuster is dramatically strengthened (or a very robust public option that can afford to absorb a lot of adverse selection is enacted), I can promise you reform will create incentives that prevent you from getting quality health insurance.

this is such an important point. thanks jon for continuing to make it.

imo, strengthing the risk adjuster is not an option because it depends on an administration committed to strict regulation and enforcement — not something that characterizes our current administration (and it goes without saying the republicans are worse).

that leaves the possibility of a very robust po. maybe something like hacker’s original proposal would work (but it’s important to point out that even there we don’t know — public option in a multipayer systems have never been made to work in this country).

re among all the insurance start up issues, there is the problem of a large provider network, a large customer base, and competitive costs — and these all depend on each other.

i actually do think the public option in a multi payer system is fundamentally flawed policy (which is why i ended up being an hr 676 extremist). was just trying to provide info on what hacker’s original plan was, since i suppose that might not be a spectacular FAIL. the other proposals we’ve seen are for a very weak po, that i do think will ultimately fail to control costs (costs being total national health expenditures).

Dennis Kucinich speaking on the House floor: “Healthcare or insurance care? Government of the people or by the corporations?”

http://www.obamasquagmire.com/?p=3929

I may be dense, but I think that what CBO actually means when it projects that the public plan would “probably engage in less management of utilization” is that it would be less likely to deny claims. The resultant upward pressure on costs is the downside of the advantage “low hassle.”

But who can actually say with certainty how all of the variances and differentiation between all of these contending plans will shake out? Who in hell can even begin to guess at the unintended consequences?

I appreciate Mr Walker’s ongoing analysis, but what he continues to prove is that this “reform” is going to be one colossal cluster-fuck. Any sane society would look for the elegantly simple solution … the one that is based on humanity, fairness and solidarity. We should be ashamed for having allowed our politics to become so crass and cynical.

Lower the eligible age for an improved, enhanced Medicare by 10 years every 5. Phase it in.

Currently debating whether to send a letter to my Congresscritter, John Kerry, advocating a strong risk adjuster mechanism, a public option open to all Americans, and the Wyden Amendment (with the Kucinich Amendment thrown in for good measure)…or HP 676. I know which one I prefer (the 50 page bill), but wonder whether it’s just too late.

Jon, Do you have any idea how the CBO concluded that the PO would have any of the characteristics described in the CBO excerpt you quoted? The characteristics included: the PO would have average reimbursement rates, attract numerous providers, enjoy below-average administrative costs, make less-than-average use of managed care tactics, and suffer above-average rates of adverse selection.

I’m sure you’re as aware as I am that there isn’t one word about any of this in the House bill (now HR 3962). All the House bill says is that the Secretary of HHS “shall provide” a “public option.” How in the world does anyone even hazard a guess about who will participate and whether the PO will limit patient choice of doctor or kick patients out of hospitals early?

I posted an open letter to CBO’s director on the PNHP blog on October 2 in which I asked CBO to publish the methodology it used to determine the characteristics of the PO that it has reported to members of the House. The next day I sent the letter, return receipt requested, to Elmendorf. I didn’t expect Elmendorf to answer me. My main purpose was to educate the public. In any case, I haven’t heard from Elmendorf.

I sympathize with the bind CBO has been placed in by PO advocates. From Jacob Hacker on down, no PO advocate has written a paper describing how the PO is supposed to be set up. This would be like telling me in great detail what you plan to do on the other side of the river without once telling me how you plan to cross the river.

I think CBO should have had the courage to say they need more information than is available in the House and Senate HELP Committee bills to determine anything about the PO, and until the authors of the bills provided more information CBO was going to predict zero enrollment in the PO. CBO did that make that prediction for the Senate HELP bill, then inexplicably went on to estimate other characteristics of this non-existent PO.

Kip Sullivan

From Jacob Hacker on down, no PO advocate has written a paper describing how the PO is supposed to be set up. This would be like telling me in great detail what you plan to do on the other side of the river without once telling me how you plan to cross the river.

that’s a great question, one we have not been giving much if any attention to. i’d also like to see some info on this — how does an insurance company break into well established markets? what are the critical issues that determine success?

anyway, thanks for asking the question.

Part of the problem seems to result from deception in marketing, not surprisingly. Let’s grant reluctantly that a free market is insisted upon to manage health care then enlightened consumers should at least be required.

The PO wants to claim market share by offering to spend 95% of the premium dollar on services for all enrollees regardless of their ultimate cost and it will accept all comers. The private insurers will spend less of the premium dollar on services and will set premiums commensurate with risk, and will further set additional obligations on its enrollees.

The terms for each plan should be required by law to be stated clearly. Since it is a foregone conclusion at this point that private insurers are not going to give up their lucrative business anytime soon of their own volition then the terms of the competition need to be set out clearly.

The market being disputed is 50 million give or take and the group most sought after by both plans are the healthier prospective enrollees. It may be that they will face initially slightly higher overall costs from the PO but this cost can be expected to fall as more of the healthy enter the plan.

Currently this seems to be where we are at and the success of the PO may hinge on its ability to capture market share. The legal requirement that enrollees be given the clear terms under which each plan operates should be required at the very least..

Just a few qualms, Skip.

Under no circumstances will a patient be dicharged from the hospital before it’s safe to do so. This decision is made by an MD only and he is fully responsible for this decision. First, an MD has no interest in jeopardizing his patient nor in being sued for negligence.

As to to the availability of providers, I either heard or saw that Medicare enrolled doctors would cover PO patients initially but could if they wished opt out if they pleased.

Also I don’t see where the impasse lies in the PO entering a market to compete in this case for enrollees as such. Not taking into account the need to attract the right mix of enrollees as regards to their risk. I mean I’m sure HHS is able to handle this task, since the’ve done it before.

Now I am completely in favor of a single payer system but if a PO is what we’re going to get then it is, I believe, incumbent on us to do all we can to make it work.

It may be that private insurers will hasten their own demise with their ever increasing burden on enrollees. And if we are out of options then establishing a successful PO may be what we are left with.

yes considering the huge amount less one would be paying considering the huge upside they are benefiting from. Most people cannot afford to live without many types of insurance. Health insurance costs a lot because Health care costs a lot. I’ve repeatedly tried to say this but the government and these bills are not about cutting health care costs or saving money they are ONLY about politics and shoving money around. Thats why all these plans are crap until someone with commonsense actually does something to address real problems in our system. Of course it does not help that we have so many people in this nation screaming that it is not fair that they do not get something for free but that is life as well!!