Thursday, August 23, 2007

Government health care or not?

Depending on the topic, the Senate Democrat's "Healthy Wisconsin" plan is either a revolutionary salvation of the state's health care system or something that essentially leaves our current system of private health insurance in place.

It becomes the latter when the question becomes whether the proposal can fairly be called "government health care." Local advocates of government health care, responding to a WMC poll which apparently shows that lots of people don't like that idea, have resolutely denied that this is what the HW plan is.

Are they right? Mostly not. It certainly is true that HW retains the services of private "insurers" who will presumably be eligible to participate in the plan if they offer coverage that meets the plan requisites for coverage and pricing. This certaily permits some room for competition on, say, lowering administrative costs and, perhaps, offering supplementary coverages.

If the idea behind HW was to offer a basic bare bones plan, that might leave much of the price and scope of coverage to the market. But that's not the idea at all. HW is supposed to provide comprehensive coverage equal to the "Cadillac" provided to state employees (but apparently not to the Rolls provided to teachers who are to remain outside the plan).

That being the case, it seems likely that, if it serves its stated purpose, HW will tend to replace private coverage (although it may interact with federal law in a way that makes this less likely). The tax imposed on employers and employees is high - it has to be to offer that much coverage - and it seems likely that HW will basically be what you get.

In the make-believe world dreamed of by consultants, that will be just fine. HW will provide more coveragte to more people for less money. We will all be strong, good-looking and above average.

In the real world, it seems likely that HW will be unable to deliver what it promises without tax increases or benefit reductions. Proponents respond that this is no differenct than the current system where there are choices made between cost and coverage are made all the time.

Here is where we arrive at a fundamental difference between the plan's opponents and proponents. Seth Zlotocha regards rationing under the current system as sort of irrational and happenstance ("either your employer offers good coverage or it doesn't").

That's not quite right. Your employer does not offer good coverage or not based upon her astrological chart or whether she is a naughty or nice. She provides it if she needs to do so in order to attract the type of workers that she needs and can afford.
The market does not work as well as it might here because of the remove between the consumer and the payer, but there at least some notion of trying to give employees what they demand.

HW advocates say that this will happen under their plan too. People will demand what they want through the political process.

This assumes, of course, that these choices ought to be collectivized. Everyone (and it will be mostly everyone under HW) should get more or less the same thing with a majority choosing what that will be.

This has, I suppose, the advantage of being egalitarian and, if this is your highest value, it may be a good idea.

But is that the only value that a health care system needs to serve? Are we concerned that a state run system will, like those elsewhere, tend to choose low cost, low innovation, low service systems? Are we concerned that, while market results may be heavily influenced by the distribution of wealth, political rationing is influenced by rent seekers with intense special interest?

We generally don't think that the allocation of goods and services by government fiat produces the best result. I agree that there are reasons for departing from a pure market mechanism for health care, but, for the most part, it seems to me that the market ought to be the rule rather than the exception.

This point is underscored by the Wisconsin Policy Research Institute. It points out that only 5% of Wisconsin residents lack insurance and that the quality of care here, while expensive, is very high. Does that really suggest a need for a revolution


Seth Zlotocha said...

I don't mind if you spell my name incorrectly, Rick, but at least link to me if you're going to quote me. :)

You're right, a plan like Healthy WI or the WHP would take health coverage out of the dictates of the labor market. I'd say that's one of the best features of this type of reform. As health care becomes more and more expensive, fewer and fewer employers are offering it to employees. People with advanced degrees like you and me could probably find a new job that offers adequate health coverage through the labor market if our current employer dropped it; but an increasing number of people aren't so lucky. And, the larger question is, should health coverage really be dependent upon your position in the labor market? That's what I meant when I said the rationing our country currently uses is irrational -- it's not based upon need or cost-effectiveness of the treatment, but rather whether you can afford it.

I know that raises funding issues for you since employers would be relied upon the heaviest under HW and the WHP for revenue. This is a legitimate gripe, but, at the same time, it's an outgrowth of the fact that health care has been employer-funded for so many years. Plus, it's not like employers will necessarily get stuck holding the bag on this. Similar to the way that many employers are cutting benefits -- i.e., reducing compensation -- as health care costs go up, under HW or the WHP the compensation cut would just come from somewhere else (probably wages) if the employer assessment becomes too great.

But perhaps a better answer to this dilemma of how to separate health coverage from employment is the Healthy Americans Act proposed by Dem Sen. Ron Wyden and co-sponsored by GOP Sen. Bob Bennett (among many big employers and labor unions -- imagine all of them smiling together in the same room over something like health care reform).

The basic idea is that employers would "cash out" their health coverage expenses in the form of increased wages for employees for two years. Individuals then would be required to purchase an insurance policy or face tax penalties, similar to the individual mandate in Massachusetts. This two-year "cash out" period is meant as a transition from coverage as an employer-based benefit to coverage as a personal responsibility. After the two year period, employers would no longer need to pay the extra wages, and instead would pay an assessment based upon an equation involving the average regional premium rate, the number of FTE employees, and revenue per FTE employee. This assessment would make up only about 10 percent of the total funding for the system as a whole; so, while employers would still be contributing, it would not nearly be as much as they would to a system like HW or the WHP (at least directly).

More details on the Healthy Americans Act is here. If you're interested, you should check it out.

Dad29 said...

We will all be strong, good-looking and above average.

At the rate it's raining, there'll be a lakeside home for everyone soon, too...

Rick Esenberg said...

I was blogging while dyslexic. The link got lost in editing. I've fixed both.

I do agree that having health insurance tied to your job is problematic. HW, though, doesn't completely address the irrationality of that in that it raises the cost of certain types of labor. Employers who have a higher-wage payroll like, say, a law firm or a consulting firm, will see a significant increase in the cost of labor and will have a disincentive to locate here. That is a simple fact. HW would distort the state's economy and put it at a competitive disadvantage with other states in all kinds of ways. It would be a disaster. That's why Doyle has told people that he'll never sign it.

Seth Zlotocha said...

The HW employer/employee assessment caps at SS wages, so anything over $97,500 per employee (in 2007) would be exempt from the assessment.

But, if it's still a concern, a FTE component could be added to the assessment equation, which is what the HAA does, make the impact on high-payroll employers more equitable.