Monday, October 12, 2009

Things that make you go hmmmmm

So, late last week, the word of intensifying lobbying to dump the Senate finance committee's tax on high cost insurance plans was not surprising. Such a tax would be passed on to consumers; that is the point of it, to cap the amount of tax free income workers could get via the tax exclusion of employer paid insurance premiums, leading to some reducing the amount of insurance they hold.

And there were grumbles that the 94% coverage rate of persons in the US legally was lower than what had been expected by the insurance industry (96-97% had been the figure used in discussions that encouraged them to hold their fire over the summer). And the reduction of the penalty for indivdiuals violating the new individual mandate made insurers unhappy. After all, they were holding their fire and supporting reform in the non-group market because they would be getting millions of new customers that the insurers had been unable to sign up. Keep in mind there are only 14 Million individual market policies in force in the US (out of 307 Million people) and that CBO says Baucus will produce on the order of 27 Million folks buying individual purchase plans via the exchanges.

Yesterday the grumbles erupted into a War ruining the Columbus Day holiday for.....well, the federal gov't is the only group that gets off Columbus Day. But, this report released by PriceWaterhouseCoopers on behalf of the Assoc. of Health Insurance Plans (lobby group for for profit for profit insurance firms) argues there are four provisions in Baucus bill that could increase private insurance premiums above what they would be under no changes:

*weakening of individual coverage mandate (fines were decreased in the Baucus markup)
*tax on high cost insurance plans
*cost shifting of Medicare cuts to private insurers
*taxes imposed on health, pharma, etc.

There are a couple of fairly questionable assumptions in this report. For example, they assume that there will be no behavioral changes associated with the tax on high value plans. In other words, the tax will just be passed on to consumers (which it will) and that consumers will not seek lower levels of coverage. There is no way that is the case.

Second, they assume that the totoal value of reductions in planned Medicare payments will be 100% shifted to private health insurance. Austin Frakt is the clearest writer on this topic. And the phrase cost shift is used often (not on in this report) when in fact people describe price differences.

And Jon Gruber has answered this report (link to the word file of new analysis embedded in post by Ezra Klein) now with an analysis that counters and argues that premiums will be lower for those in individual purchase market under Baucus compared to no change. I would need to look carefully at the details of both analyses to render full judgement about relative reasonableness.....but Jon Gruber has only his credibility to 'sell' and he is one of the best health economists in the country. And the health insurance industry has insurance to sell and much to gain....they are really getting quite alot of new customers under Baucus....but they say they need more to make the insurance market reforms actually work (no pre-existing and the like). At some level I follow this logic, a key aspect of community rating is that you get everyone in and spread the risk broadly, etc.

But, what I really don't follow is the politics of putting this out now. Late last week after the score and early in the weekend, the Dems seemed to be starting the devolving into a House-Senate war whereby the tax on high cost insurance would be junked in favor of the income tax increase of the House bills. This would strip the most cost reducing aspect of Baucus (tax on high cost insurance....not as good as straight cap of tax exclusion, but the first limitation of unlimited tax free income for employer provided insurance) and perhaps set up the classic 'can the democratic party snatch defeat from the jaws of victory scenario?'

Just like when the whole guy yelling lie at the Presidents speech helped circle some of the more liberal and more conservative Dems around the President.....the insurance industry fires a shot that probably will rally the Dems again. This might be the only way the tax on high cost insurance policies could be made palatable in the House.

And even though I haven't fully digested the report and would mostly like to see the details of their models before saying it is total hooey, as I read through it over dinner this evening my first thought is that is SCREAMS FOR THE PUBLIC OPTION. It is like their computers got hacked and they sent out the wrong report? The easiest way to get the coverage levels up is to allow a public option, which CBO has said can be done cheaper. The reason cover levels are 94% instead of 96% or 97% is that health insurance is so expensive and they can't afford subsidies to make uptake to those levels feasible and hold to the $900 Billion total outlay standard implicitly set by the White House. And the penalties for not signing up were dropped in response to outcry by liberals and conservatives saying you can't have mandate without making insurance affordable if you are going to go the private insurance route.

In both cases there were allowances being made for the politics of it all.....opposition to public option for persons who were worried that would harm private insurance. But, if they are going to start firing away, then why hold back?

So, count me confused as to what they were thinking in putting this out now. Especially given that the outline of this bill has been fairly clear for nearly a month.

Here is a post (you have to read to the end) that offers a different motive....insurers worried about deals that hospitals and docs got that will hurt ability to control costs and insurance industry wanting broader cost controls. Hmmmm......

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