The Public Option – Florida Edition

I’m particularly curious as to what my co-blogger has to say about this:

 

After Hurricane Andrew hit Florida in 1992 some Floridians were having difficulty purchasing homeowners’ insurance. (The reason: rates are regulated, and at the regulated rates some properties are too great a risk.) So, the state government formed Citizens Property Insurance Corporation, which is owned and operated by the State of Florida.

As originally envisioned, Citizens would charge rates above those charged by private insurers, to make Citizens the insurer of last resort. Nevertheless, Citizens found plenty of customers.

After two bad hurricane seasons in 2004 and 2005 property insurance rates in Florida rose, and in his campaign for the office, current Governor Charlie Crist promised voters that if elected he would see that their property insurance bills “dropped like a rock.”

One tactic he used was to change Citizens’ rate structure so it was competitive with private insurers. His idea, like President Obama’s idea with health insurance, is that with a public option, private insurers would have to keep their rates in line or risk losing customers to the government insurer.

…Today about 30% of homeowners’ policies are written by Citizens, which is the largest property insurer in the state. It’s about to get bigger too. The largest private insurer, State Farm, had a rate request rejected last year, and now is pulling out of the state altogether (for property insurance; they’ll still insure your car)….

Everybody in Florida knows Citizens is a fiscal time bomb. Already, every Florida insurance policy (on homes, boats, cars, etc.) pays a surcharge that goes to Citizens, but Citizens still doesn’t have sufficient reserves to weather a major hurricane. When one comes, Florida taxpayers will be on the hook for the bill.

The legislature knows this, and actually passed a bill last year that would have done a great deal to solve the problem by partially deregulating rates private insurers could charge. State Farm would have stayed in Florida had that bill taken effect, but it was vetoed by the Governor. The public option is displacing private insurance.

In Florida, the public option has meant a substantial socialization of insurance, subsidization of the public option by those who take a private option, and the creation of a fiscally-unsound public insurance company despite the subsidy.

HT: MR.

 

Blue Cross/Blue Shield steps in it

In a bit of local news, BCBS sent out notices of rate hikes and flyers against the “unfair competition” of a public option (complete with postcards to mail to Senator Hagan expressing our putative opinion). Many people at my workplace (which is pretty lefty; I am almost certainly the most conservative person here) were pretty pissed off, and were among those who responded in this creative way:

Indignant Blue Cross customers have rebelled against the insurer’s message, complaining that their premium dollars have funded such a campaign.

They’ve hit the Internet in a flurry of e-mails to friends and neighbors throughout the state. They’ve called Hagan’s office to voice support for a public option. They’ve marked through the Blue Cross message on their postcards to instead vouch support, then dropped them in the mail — in at least one case taped to a brick — to be paid on Blue Cross’ dime. Or dimes.

 

The Senate plan

The proposed Senate plan is now available here. It is sans public option.

on the public option, briefly

So, based on my last post, I’m going to say that the last major item up for debate is the Public Option. If the Democrats can find the center of their party either for or against it, they can pass a bill, it seems. So, let’s break it down.

First, either the public option will have taxpayer subsidies or not. If it does not, I’m not sure what purpose it serves – it is then just a regular non-profit that happens to be run by a government agency. It would also be hard to imagine future politicians refraining from giving it money so they can say “I’m pro-health care!” So, it will most certainly have taxpayer subsidies. Is that a problem? Well, there are two issues which some may consider problems or features, depending on their perspective. First, without addressing costs, these subsidies end up as entitlements which grow year after year. Second, whenever there is government subsidized competition, the government pretty much takes over the market, which means a full-featured “robust” public option with subsidies will very likely end up as government healthcare. Examples here and here.

Second, if the public option is included, it could be a full-featured “robust” public option which is a full Medicare-style insurance plan, or it could be a “trigger” plan which does not exist, but could come in to being later if certain (bad) criteria are met. The “trigger” plan is just politics, which would allow more liberal democrats to claim they voted “for” the public option and the more centrist democrats to say that there is no public option. We’ve seen over and over that these triggers are non-binding, so the trigger plan, in my view, is the same as no public option. Even if the thresholds are crossed, Congress (a new one, now) will not just watch as a brand new, major entitlement and subsidy program simply automatically starts up. They will debate and either vote it up or down. All it does is trigger a debate and vote; whatever the dominant view is at the time will prevail.

I’m currently against the public option. We can cover the uninsured with a mandate, community rating and guaranteed issuance.

setting the stage for Obama’s talk next week

So, what will the next phase of the Health Care debate look like? Megan McArdle breaks it down:

At this point, all the remaining items on the table:  mandate, guaranteed issue, community rating, subsidies–are pretty much a package deal.  If you take out the mandate, guaranteed issue and community rating will make insurance very expensive, driving all but the very sick, and relatively affluent, out of the market.  If you take out guaranteed issue, the mandate is nonsensical.  Take out community rating, and you lose the main point, which is to have young healthy people pool their premiums with those of the old and sick.  And if you lose the subsidies, you will be in effect commanding people to buy something they can’t afford.

We’ve not discussed the current legislation on the table, so I’ll break down some of the terms:

Mandate: pretty obvious, the requirement that everyone purchase health insurance. This is to get the young healthy to participate to help subsidize the older and sicker.

Community Rating: This is what makes insurance companies treat everyone the same, i.e. can’t charge different premiums to people who are sick.

Guaranteed Issue: This means that if a person wants to purchase insurance, the insurance company has to sell to them.

Subsidies: This means the government will give money to lower/middle class folks who can’t afford the cost of health insurance.

I’m also quite interested to see what Obama has to say next week. The joint session of Congress is pretty rare (GWB and WJC only used it twice each in 8 years) and so everyone will be watching.

Al Franken at the State Fair

I post this video not so much for the content of the arguments, as to demonstrate the fact that reasonable people can disagree respectfully and engage this issue. I found this clip to be a welcome antidote to the continuing reports of town hall craziness. I should note that I’m not crazy about the title of the video; “angry mob” does not fairly characterize these folks.

Medicare and the Public Option

Medicare may be the crux of the whole health care debate in my view for a few reasons.

1. There is a large, voting group (those over 60 make up a disproportionately large percentage of voters – I don’t have the numbers in front of me) which has pretty limitless health coverage right now. It’s not means tested, and simply pays for whatever doctors prescribe. So it’s pretty popular. And expensive.

2. Those who claim that the Public Option will reduce costs have the burden of explaining why Medicare has not been able to or why they can’t use Medicare as it stands to do so. Medicare accounts for some 25-30% of most Hospital’s revenues. Surely they have some power to affect pricing. From Megan McArdle:

Much has been made of the government’s ability to batter down prices.  But in fact Congress has a history of passing health care cuts and then undoing them…There’s also the automatic cuts in physician reimbursement, which are ritually repealed in an annual kabuki ritual, because physicians say that they will stop taking Medicare, and/or voting for politicians who support the reimbursement cuts.

This is why I won’t let go of the costs. We can’t simply pass a bill that covers everyone because at the current cost level and given all the money spent already on bailouts and such, we will bankrupt ourselves.

But – the beauty of focusing on costs is that it leads to universal coverage. Many of the uninsured choose to be uninsured simply because it is too costly. If we can simply bring the cost down, they will voluntarily join up. I understand that won’t cover people with pre-existing conditions who are uninsurable in the current regime, but if we lower the costs for the healthy masses, it sure makes the higher costs of the fewer sick people more manageable.

Those who support a Public Option with a public mandate and community rating (no denying for pre-existing conditions) need to show how that lowers costs. Massachusetts costs went up faster than the national average. I don’t know about San Fran.

So, wait…is Medicare good or bad?

From NPR’s Steve Inskeep’s interview with RNC chairman Michael Steele (it’s worth reading the whole thing, especially the way Steele reacts with horror at the thought of being described as “nuanced”):

INSKEEP: Here’s another thing that I’m trying to figure out: Within a couple of paragraphs of writing we need to protect Medicare, you write that you oppose President Obama’s, quote, plan for a government-run health care system.

Mr. STEELE: Mm-hmm.

INSKEEP: Now you’re a veteran public policy official. You’re aware that Medicare is a government-run health care program.

Mr. STEELE: Yeah, look how it’s run. And that’s my point. Take Medicare and make it writ large across the country, because here we’re now – how many times have we been to the precipice of bankruptcy for a government-run health care program?

INSKEEP: It sounds like you don’t like Medicare very much at all…

Mr. STEELE: No, I’m not saying that. No, Medicare…

INSKEEP: …but you write in this op-ed that you want to protect Medicare because it’s politically popular. People like Medicare.

Mr. STEELE: No, no, no, no, no. Please, don’t…

INSKEEP: That’s why you’re writing to protect Medicare.

Mr. STEELE: Well, people may like Medicare, and liking a program and having it run efficiently is sometimes two different things. And the reality of it is simply this: I’m not saying I like or dislike Medicare. It is what it is.

Cost-cutting vs. Security

Mickey Kaus looks at why the public option probably couldn’t function as both a way to cut costs and as a secure backup for those who aren’t (& maybe can’t) be served by private insurers.

To the extent the public option cuts costs by aggressively managing care, doesn’t that defeat the purpose of having it as a Medicare-like backup that doesn’t aggressively manage care?

But he also (as I think I do) sees security as the main problem, not cost:

The public option is a strange hybrid of Medicare and faux-competitor, apparently. It could emphasize security or cost-cutting depending on who is running it. It seems worth a shot. But I’d feel better about the whole private/public combo if some of my conservative friends would explain to me just what it is that private insurers do that makes them worth preserving. The central problem, sketched by David Cutler in his book Your Money or Your Life, is that the free market does not reward insurers who provide excellent care. The market punishes insurers who provide excellent care, because the people who will be most attracted by excellent care are sick people, the very people who will drive insurers into bankruptcy.  If private firms want to make a profit, at least in the individual market, the surest way to do it is to think up innovative ways to screw buyers–deny care to those likely to need it, write complicated clauses into policies that allow the insurer to weasel out of paying, etc.. Everyone agrees private insurers do these things. What do they do that’s so great that makes up for it?

To the extent the public option cuts costs by aggressively managing care, doesn’t that defeat the purpose of having it as a Medicare-like backup that doesn’t aggressively manage care?

another take on the core issue: Cost

From Megan McArdle,I noticed this in particular:

There’s a further problem if you have guaranteed issue:  unless the tax penalties for failing to carry insurance are draconian, the dominant strategy is to drop your insurance, then buy insurance if and when something bad happens.

My hope is that this won’t be a big problem, but I can imagine the young, healthy, and poor-to-lower-middle-class wanting to do this if the overall cost doesn’t come down. And it is these young and healthy folks that help even out the risk pools.

I’m going to continue beat the drum of addressing costs. The plan in Massachusetts bears watching:

Thanks to new taxes and fees imposed last year, the health plan’s jittery finances have stabilized for the moment. But government and industry officials agree that the plan will not be sustainable over the next 5 to 10 years if they do not take significant steps to arrest the growth of health spending.

Because they have the same problem…

They want a new payment method that rewards prevention and the effective control of chronic disease, instead of the current system, which pays according to the quantity of care provided.

And this really concerns me:

Alan Sager, a professor of health policy at Boston University, has calculated that health spending per person in Massachusetts increased faster than the national average in seven of the last eight years. Furthermore, he said, the gap has grown exponentially, with Massachusetts now spending about a third more per person, up from 23 percent in 1980.

But this is good news:

Massachusetts also seems to be a rare state where the percentage of employers offering health benefits is actually growing. And the state government has realized substantial savings, worth about $250 million last year, from lower payments to hospitals for uncompensated care for the uninsured and underinsured.

And I like this a lot:

The commission is looking at various options, but all would do away with the fee-for-service system, which provides perverse incentives by paying physicians and hospitals for each patient visit. The changes under consideration include reimbursing for episodes of care rather than individual visits and bundling payments to groups of providers who would together take responsibility for a patient’s health.

We’ll see.