Fact-Check: The Cadillac Controversy

“Cadillac Health Care Plans.”  Even the phrase suggests gilt-edged insurance for Greedy Geezers at Goldman Sachs . No wonder the Senate wants to slap a tax on insurers and self-insured employers who offer over-the-top policies beginning in 2013.

After all, plans that fetch more than $23,000 for families (or $8,500 for individuals) must encourage over treatment, right? 

If you’re not sure, that’s hardly surprisingly. In recent days, New York Times columnist Bob Herbert,  the Washington Post’s Ezra Klein,   MIT economist Jonathan Gruber,  and  Merrill Goozner, editor of Gooz News on Health,  have offered sharply conflicting reports on the tax and its likely effects.

I decided to compare the arguments, and check the facts.

The first thing you need to know is that a pricey plan is not necessarily chock full of benefits. When setting premiums, insurers are not thinking about how much value you will get from the policy; they are contemplating how much it will cost them to reimburse you. Here, two factors weigh heavily on their minds:  your age, and the cost of health care where you live.

Insurers would much rather sell a policy to a young person living in Iowa than to a woman of a certain age who has put down roots in Manhattan. To put it quite candidly, they don’t want me as a customer. So, if they can, they will charge me more. (Under the Senate plan, insurers can triple premiums for older customers and adjust premiums to reflect regional differences in the cost of care.)

Those who support the tax assume that high-priced plans cover full body scans. They seem to assume that in the private health insurance market, you get what you pay for. Higher premiums must mean more generous benefits, and more frills.

Not true.

The most recent December edition of Health Affairs online reports on a study of more than 3,000 insurance plans:  "It's often assumed that high-cost health insurance plans – sometimes called 'Cadillac' plans – provide rich benefits to plan subscribers.”  But “Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of the variation in the cost of family coverage can be explained by benefit design (actuarial value). “

Factor in plan type (whether it is a PPO, an HMO  that expects patients to stay in network, or a high-deductible plan),  and you have now accounted  for just 6 percent of the variation in prices.(Thanks to health care experts, Timothy S. Jost and Joseph White, for calling attention to this study in their article in RollCall.

The researchers report that premiums also vary by industry and “may capture some unmeasured characteristics of the workforce such as health status.”  Insurers price policies based on past experience in a given industry.

The study confirms that location matters. And age lifts premiums. . As MIT economist Jonathan Gruber observes:  smaller “firms with older employees may have higher insurance costs not because their plans are more generous but because the employees themselves are more expensive to insure.”

Would You Be Affected By the Tax?

You may be thinking, “I don’t know how much my employer pays for my family’s insurance, but I’m certain it’s not $23,000.”

Yet, as Bob Herbert notes: “because of the steadily rising costs of health care in the U.S., more and more plans would reach the taxation threshold” in the near future.

“Within three years of its implementation, according to the Congressional Budget Office, the tax would apply to nearly 20 percent of all workers with employer-provided health coverage in the country, affecting some 31 million people. Within six years, according to Congress’s Joint Committee on Taxation, the tax would reach a fifth of all households earning between $50,000 and $75,000 annually. Those families can hardly be considered very wealthy.”

Everyone realizes that insurers will pass the 40% excise tax along in the form of even higher premiums. At that point, MIT’s Gruber explains, most experts assume that employers will say “no thank you”, and begin looking for a cheaper plan. To avoid the tax, self-insured corporations also will begin shopping for a better bargain.

 But under health care reform, all plans must provide a fairly rich package of “essential benefits.”  How are they going to find less expensive insurance?

Their only recourse:  switch to policies with high deductibles and co-pays. The benefits these plans offer will meet the reformers’ requirements– even though many employees may not be able to afford to reap the benefits by actually using the insurance.

But Don’t Higher Co-pays and Deductibles Control Waste?

“Proponents see this as a terrific way to hold down health care costs,” Herbert writes. “If policyholders have to pay more out of their own pockets, they will be more careful — that is to say, more reluctant — to access health services. On the other hand, people with very serious illnesses will be saddled with much higher out-of-pocket costs. And a reluctance to seek treatment for something that might seem relatively minor at first could well have terrible (and terribly expensive) consequences in the long run.”  
Gruber, who supports the tax, sees this as progress. He believes that the surcharge  “would reduce the incentives for employers to provide excessively generous insurance, leading to more cost-conscious use of health care and, ultimately, lower spending.”

Unfortunately, Gruber overlooks a few facts. First, 75 percent of our health care dollars are spent on patients suffering from serious chronic diseases such as cancer, heart disease, stroke, and chronic obstructive pulmonary disease.

As Merrill Goozner points out: “The idea that taxing those plans will somehow encourage people to reduce their utilization is wishful thinking that ignores who actually makes health care decisions — doctors, hospitals,  drug companies, and other providers. It also ignores why most people use health care — it's because they are sick.”

If co-pays for visits to a specialist are high, some chronically ill patients  may put off seeking help, but eventually most middle-class Americans  will see an oncologist or a cardiologist, even if they have to borrow the money to cover the deductible.

Will they then be over-treated?

Perhaps. But chronically ill patients don’t make the decisions on big ticket items such as surgery, hospitalization, a battery of expensive tests, or a drug that costs $50,000 a year. Doctors and hospitals tell them what they must have to survive. Co-pays and deductibles will not make these patients more “cost-conscious.”  Cost-sharing will only give a distraught stroke victim another reason to worry.

Patients do make small decisions. Should  I visit the doctor? Should I have my blood pressure checked?  Should I try a smoking cessation clinic? And here, research shows, that if they face a co-pay, there is a 50/50 chance that they will make the wrong decision, foregoing needed care.

But, and  here’s the good news—under the Senate bill, co-pays for necessary preventive care are not allowed. If the US Preventive Services Task Force (USPSTF) gives the test or treatment an “A” (strongly recommended) or a “B” (recommended), the legislation stipulates that “a health insurance issuer offering group or individual health insurance coverage shall not impose any cost sharing requirements.” (Hat tip to Health Beat reader Fred Moolten for pointing to the exact wording in the bill.

So even if employers ratchet down to scaled-back policies, the cost-sharing will not apply to screening for colon cancer.

Still, somewhere in between the little decisions that patients make about preventive care, and the larger decisions that health care providers control, co-pays will reduce utilization. And about half the time, patients will skip needed care. .  

 

But Shouldn’t Employees Pay a Tax On Benefits ?

In theory all employees should pay income taxes on benefits as well as salaries. The current system is simply unfair.

Today, wealthier employees are more likely to enjoy comprehensive coverage, with their employer paying 75% to 100% of the premiums. Low-income workers more often work for an employer who offers either no insurance, or skimpy coverage, paying a smaller share of the premium.

The fact that high-income employees are getting such a fat tax break violates the whole notion of  “progressive” taxes.  

But the Senate plan doesn’t tax those at the top of the income ladder.. Instead, the employees who would find themselves paying more out of pocket would be those who happen to work in the wrong industry, live in a community where the cost of delivering care is especially high, or work for a small firm where many of their colleagues are older. Rich or poor, these are the people who would find themselves paying more out of pocket. There is nothing “progressive” about this.

Perhaps the solution would be to tax health care benefits for all employees?  

Those who argue for a surcharge on benefits sometimes suggest that if employees had to declare benefits as income, many employers might well get out of the insurance business. After all health benefits would be less valuable to employees, and so less useful in helping employers recruit and keep their best talent.

Those who support the tax then go on to fantasize that employers would pass on the savings to employees in the form of higher wages.

Gruber argues that if the 40% tax causes employers to “reduce their insurance generosity,” this could have a similar effect: They will “make it up in higher pay for their workers,” he writes.  “We saw this in the late 1990s,” he argues, “when the rise of managed care temporarily lowered insurance costs, and wages rose in real terms for the first time in many years.”

He must be kidding.  Take a look at unemployment.  Consider the state of the economy. Review average wages over the past twenty years. Do you really see employers hiking salaries?  Granted, hourly wages finally began to rise in the late 1990s, but this was only after years of seeming prosperity coupled with wage stagnation. Unless the job market is very tight, employers share profits with investors long before they begin handing out raises.

But you don’t have to believe me. Listen to the employers themselves. According to Herbert, “A survey of business executives by Mercer, a human resources consulting firm, found that only 16 percent of respondents said they would convert the savings from a reduction in health benefits into higher wages for employees. Yet proponents of the tax are holding steadfast to the belief that nearly all would do so.”

High Premiums Only Reflect the Underlying Problem

Ezra Klein supports the Cadillac tax because he sees it as a first step toward reining in health care inflation.

He  acknowledges that under the Senate plan there will be “losers” : the unlucky employees, many of them middle-class, who find that their employers have switched to a plan that costs them more.

But Klein argues: “In return, we'll make a start on bringing down system-wide health care costs, and we'll have a strong stick forcing insurers to create more affordable policies.”

Here Klein ignores the fact that insurers cannot make insurance more affordable unless they make U.S. health care less expensive—by covering less and slashing reimbursements to hospitals, drug-makers and doctors.

The conventional wisdom has it that insurers are making fat profits. But this just is not true. Today, the industry is looking at a measly 3% profit margin. Health insurers’ margins have lagged other industries for years. Indeed, when U.S industries are ranked for profitably, health insurers place 87th.  And this is true of the insurance industry’s leaders.

Very recently, insurers’ share prices have risen because investors are hoping that , with more customers, these companies will flourish.  Wall Street might be right, but I doubt it.  (As you may have noticed in recent years, you cannot count on “the market” to be either rational or efficient.  Put it another way:  the market is only as rational as we are.)  

As the uninsured and underinsured gain coverage, insurers will find that they have more customers, but those new customers will require more care.  Unless drug prices and specialists’ fees drop, these new policyholders will cost insurers dearly.  

Keep in mind, that over the past ten years, private insurers have watched their reimbursements to doctors, hospitals and patients levitate by an average of 8% a year, year in, year out.  There is  no sign that health care inflation is slowing down.

Meanwhile, there  is not a lot of fat in the insurance industry—it  has  been struggling to keep margins at 3%.  Could these companies spend less on advertising, marketing, lobbying and CEO salaries (though those salaries are a drop in the bucket when compared to total revenues and expenses)?

Yes—if they were operating in a different economy. But in our capitalist society, we expect them to market and advertise; this is what will make the exchanges “competitive.”  

In the end, true cost-control means addressing the underlying problems: we pay too much for virtually every pill and procedure; we over-pay for  aggressive care and under-pay for preventive care. We reward hospitals for inefficiency and waste. And too often, providers over-treat patients, exposing them to unnecessary risks.

The problem is not that premiums are sky-high because insurance plans are too generous. Premiums only reflect the problem at the  center of a healthcare system spiraling out of control: over-use of over-priced medical technologies, leading to  run-away healthcare inflation.  

And ultimately, if the nation is going rein in spending, we cannot expect insurers to do the heavy-lifting.  In many cases they simply don’t have the  power when negotiating with Big Pharma,  or the brand-name hospitals and doctors that patients want in their networks.

Moreover, we don’t want  insurers making the judgments about which procedures and products should be covered, or how valuable they are. They have neither the expertise nor the standing, morally or politically, to shape healthcare policy

Such decisions should be made by an Independent Medicare Advisory Commission (IMAC) that uses medical evidence to encourage effective care.  (I have written about IMAC here http://www.healthbeatblog.com/2009/12/glass-half-empty-glass-half-fullthe-senate-has-a-bill—-part-2-of-3.html )  If Medicare follows IMAC’s recommendations, Medicare has the clout to change the way it pays for care, saving money and lifting quality by  rewarding  value rather than volume.  Other insurers might then follow Medicare’s example.

The House Solution

    
In Conference, legislators will have a chance to reconsider the Cadillac tax. But even if they are persuaded by arguments that it will impose an unhealthy burden on many middle-class workers, those who support the Cadillac tax say it would raise $150 billion over ten years. If we ditched it, how could we raise the funds needed to finance reform?

The House proposed an alternative:  the final version of the House bill calls for a tax surcharge of 5.4 percent on income over $500,000 in the case of individuals and $1 million for families.  Over 10 years, the surcharge would bring in $540 billion.

Some would argue that there is no reason that our wealthiest citizens should pick up the tab.

The truth is that in recent years, the very rich have benefited from windfall tax cuts that added to a burgeoning deficit. It makes sense to ask them to help ensure that reform is deficit neutral.

Moreover, this group has enjoyed unparalleled prosperity, and not just in the 1990s. From 2002 to 2006, households at the very top of the economic ladder (in the top 1.2%) watched their incomes rise by roughly 42 percent. (For more numbers that reveal how income has been redistributed upward in recent decades, see my debate with Phil Kerpen, Director of Policy, Americans for Prosperity. on PBS NOW.

Finally the folks who would see their tax bills rise are now paying effective tax rates that are, by recent historical standards, surprisingly  low.  (Thanks to Conor Clarke writing  on Andrew Sullivan’s “The Daily Dish” (Atlantic Online)for this chart.  Asking those perched on the very top step of a one-hundred –step income   ladder to help finance health care for all is far from unreasonable. With last week’s vote, we as a nation, made a statement: Americans have now agreed that we want to live in a society where everyone has access to essential care. This is why conservatives are so upset by the current legislation. We have set a goal, and at this point, they fear, there is no turning back.  But to achieve that end, all of us– rich and poor, young and old, doctor and patient–must pull together.  

 

 

48 thoughts on “Fact-Check: The Cadillac Controversy

  1. Maggie Mahar is absolutely correct on this-She has said this dozens of times.
    “The problem is not that premiums are sky-high because insurance plans are too generous. Premiums only reflect the problem at the center of a healthcare system spiraling out of control: over-use of over-priced medical technologies, leading to run-away healthcare inflation.”
    WHAT WILL IT TAKE FOR THIS TO HEARD?
    Dr. Rick Lippin
    Southampton,Pa

  2. I’ve seen people with three different health insurance options–Medicare, private insurance and another private insurance. Why is it that one person has tri-coverage while others have none? Talk about Cadillac plans….most uninsured Americans would be happy with a Kia plan!

  3. We are still nibbling around the edges of this issue. The key to health care cost containment revolves around patient treatment optimization. And physicians are the key to change. Or should be. Yet when I read the AMA’s position, it focuses on preserving existing revenue streams. I hope in the near future the AMA focuses more on effectiveness.
    But we need to focus on accessibility now. Then, like when gas hit $4 a gallon, behaviors will change.

  4. I fully agree that we’re arguing points peripheral to the issue. If health care is mandated, then costs at ALL points must be controlled, from drug costs to provider services. The idea that a health insurance plan is excessive and too good, is ridiculous. A better idea would be to donate your insurance premiums to support the removal of Senators who fail to do the right thing!

  5. I am curious about the requirement of low deductibles and no co-pays on necessary preventive care.
    Let’s assume one has an investment account (subsidized, if needed) for these expenses.
    What is not spemnt is left as an inheritance.
    Are we assuming that people will not spend these funds, and not get the care, which is an easy thing to do – yet will have healthy lifestyles, which is a hard thing to do?
    Don Levit

  6. Maggie
    I was struck when the HA paper was released that the direction of the discussion was not altered. Surprisingly, Ezra, whose usually on target with these issues seemed to gloss over the evidence too loosely. The conclusions, even if they are off by several fold gives one pause.
    Having said that, actions have strange consequences. My take: as more and more folks are captured by the tax, there will be push back and the stronger MCO’s, if they exist in 5-10 years in their current operating form, will no longer act as conduits and begin to leverage power in those markets they have it (that is another post). This will happen, not because they want to egnage in this activity, but because they have to, ie, the reality of reams of individuals choosing between pills vs peanut butter will be a rude awakening.
    Perhaps we are not at the break point yet, but at some time that train will pull in. Yes, copays and deductibles will rise (and people will suffer), but again, the trip wire will blow.
    It may play out ugly, and there are cleaner ways to get from A to B, but trust me, at some point there will be a clamp down as the middle class says no to health care bills. Their budgetary problems will just get too painful.
    On the Gruber et al, economus maximus model of increasing wages in lieu of health benefits, yeah, I see it on paper, but does it jibe and sit right in the gut. Negative, and I am with you.
    Brad

  7. I don’t understand why so few people support Mike Enzi’s idea of transferring the tax exemption from the employer to individuals. That would be much fairer than the current policy in which people with employer-paid benefits get tax free coverage while those who pay their own way do so with after-tax dollars.
    If health benefits were included in taxable compensation and a new individual exemption introduced, everyone’s health insurance expenses would be treated the same — which would be a good step toward the development of a truly universal health policy. Even better, would be an additional tax credit for those who pay their own way.
    I realize that wouldn’t do much as far as raising money for the subsidies but it would result in a much more equitable policy.
    What exactly is the progressive principle that justifies forces individuals to pay for insurance with aftertax dollars yet allows others to benefit from tax-free coverage? I understand the justification for the mandate but I think it may well be brought down by the inequitable tax treatment.

  8. Fascinating.
    The final product is still in the formative stages (Conference Committee) and already we can see unintended consequences.
    One way forward is to take insurance premiums out of the tax picture altogether.
    Tax-favored insurance premiums are a smoke and mirrors tactic designed to appear beneficial to companies and/or employees when they only benefit the insurance industry in a “heads-I-Win, Tails-You Lose” manner.
    Employers with “generous” plans should shift those expenses from the expense line to employees in the form of better (taxed) income. A dose of reality is in order for all sides. Utilization then becomes less important than finding a more competitive insurance plan.
    It’s time for the voices yelling for marketplace competition to fish or cut bait and quit whinging about tax breaks.
    And Maggie’s right. The main costs (under the proposed legislation consisting of 85% of premiums, if I recall correctly) don’t come from insurance premiums. They come from medical charges paid by those premiums.
    Hello!

  9. Maggie:
    Geez on New Year’s Eve??? A couple of or a few things as I think of them.
    – What is the average annual payment for a family of 4? and Individual? Group Healthcare insurance for my wife and I was ~$13,000 between company and us.
    – The tax on healthcare benefits as I read it applies to Healthcare Insurance costs > $23,000 and not the $23,000. $8500 appears to be rather miserly as I couldn’t pick up BCBS (61) that allowed me 2 doctor visits and a $3500 deductible for anything less than $600/month.
    – Co-Pays and deductibles do squat for today’s patients. I had pneumonia with catatrophic insurance coverage for when I get run over by a bulldozer. Try getting a price from the doctor for blood tests, cultures, and imaging. You can’t which caused me to wait 48 hours until a billing person (who the question was left with) told us an outside lab would definitely be cheaper than the U of M Lab. Off we went for the 2nd half of the tests (imaging and cultures). Fortunately, the tests were covered and I was left with $298 of $914 from the blood tests and cardiogram. Still that could be an issue for a poorer person. The doctor visit was discounted from $223 to $168 . . . such a deal which included his doing the cardiogram (the hospital also charged for the equipment usage [I am sure this has been paid off many times and not set aside to buy new later]).
    – The application of the 85:15 and the 80:20 ratio in medical care to administrative costs for insurance companies. The mystery there is how do the 3:1 and the 1.5:1 age and smoking ratios tie into to the larger 85:15/80:20 ratio. It would seem to me (also), the age ratio of 3:1 is driven by the lowest cost of the youngest insuree (or average) resulting in a 3 times the lowest cost (or average) to insure an older person. I sent you a site from October 2009 (Baccus) as given to me by Bruce Webb. The article had all of the ratios (family and what not on it). The average of those 3:1, etc ratios must fit into the larger group or individual ratios of 85:15 and 80:20. Does that make sense?
    – As we both know age is a factor in cost; but, it is not the driving factor of healthcare and healthcare insurance increases. It is a convenient whipping boy and one most people appear to take for granted as well as other issues with little examination. The plethora of tests, meds, and devices having a low benefit to the patient appears to the main driver (taken from your 20th Century article and other places).
    – Wages as a proportion of productivity gains has been dropping since the eighties (Spencer at Angry Bear). You are right on the money concerning payroll wages as compared to capital gains. $50,000 per year is at the lower end of middle class and is the ~Median Household income for the US. The argument for taxing the 1 percenters of those who make >$500,000 annually is not in payroll wages (or those subject to SS withholding); it is in capital gains as that is taxed at a much lower rate than payroll wages or the equivalent of the a lower income tax rate of 15% (I believe it is that now). The bulk of capital gains comes from this group and is their prime income (Buffet has no payroll wage income).
    I would lower the income boundary to $250,000 for families and $175,000 of individuals. You would capture ~5 million taxpayers (of the 149 million taxpayers) who have the greatest disposable income and whose income is more reliant on capital gains (>$500,000 is 1 million taxpayers). Sliding scale of taxation would be appropo.
    – page 71 (or near there, been reading it and noting) of the Manager’s Amendment claims 26 – 30% of healthcare insurance cost is administrative.
    Maggie, where do we stand on this? Pass it with hopefully changes or wait another decade+ for another bill to come out?
    PS: Happy New Year and keep up the good work

  10. Maggie:
    Sorry, I did 2 of the posts, please delete one of them. I didn’t realize the post goes to the top.

  11. Run 75441 wrote: The application of the 85:15 and the 80:20 ratio in medical care to administrative costs for insurance companies. The mystery there is how do the 3:1 age ratios tie into the larger 85:15/80:20 ratio? It would seem to me the age ratio of 3:1 is driven by the lowest cost of the youngest insuree resulting in a 3 times the lowest cost to insure an older person. The average of those 3:1 ratios must fit into the larger group or individual ratios of 85:15 and 80:20. Does that make sense?
    Yes, I think it makes a lot of sense.
    Whatever the average cost of the younger insureds, 3 times that must be able to pay the expenses for the older insureds, for that year.
    Of course, with no reserves built in the current year’s premiums, the “reserves” can accumulate only through higher annual premiums (similar to yearly renewable term life insurance).
    Don Levit

  12. Hootsbuddy wrote: And Maggie’s right. The main costs don’t come from insurance premiums . They come from medical charges paid by those premiums. Hello!
    I agree with both of you, so we must be right!
    This stresses the importance of having a pool of insureds adequately mixed between low and high risks.
    When insurance is voluntarily bought, without qualifying for it medically, the insured has all the knowledge of his risk and the insurer has none.
    So, this advantage of knowledge of the risk is heavily skewed toward the insured.
    Here is an excerpt from a paper entitled “Risk Classification in Voluntary Individual Disability Income and Long-Term Care Insurance, published by the American Academy of Actuaries.
    “Financial equity (premiums that are commensurate with the likely level of benefits received)is important in voluntary individual insurance systems because people decide whether to participate in the system based on their own economic circumstances. Any subsidy tends to bias enrollment by encouraging greater participation among those benefiting from the subsidy, and in the case of an internal subsidy(requiring some market participants to pay higher premiums so that others can pay less) discouraging participation among those implicitly providing the subsidy. This results in higher average claim costs, and thus higher average premiums for the system as a whole. In extreme cases this may result in premiums that continue to spiral upwards.”
    This can be found at:
    http://www.actuary.org/pdf/health/issue_genetic_021601.pdf pages 6-7.
    Don Levit

  13. Athena, Brad & Everyone, GMason, bruce fryer, Robert, Dr. Rick
    Athena–Thanks for you comment.
    Someone has given you misinformation.
    People who pay for their own insurance also get a tax break.
    Today, if you are self-employed and buy your own health insurance, you can deduct the full cost of that insurance for your self and your family on your income taxes. (as long as you have self-employment income and are not eligible for employer-based insurance either through your employer or your spouse’s employer..)
    Instead of your employer paying part of your premium, the government pays part of your premium because you pay less taxes.
    Depending on your tax bracket and how much you pay for insurance, this above-the-line deduction can be very valuable.
    It can kick you down into a lower tax bracket.
    The big problem with buying your own insurance in the individual market now is that a) insurers can turn you down because of pre-existing conditions and b) because the administrative costs of selling insurance to individuals one by one are so much higher than selling to large groups, individual insurance tends to be very expensive.
    The Senate legislation addresses both problems: no insurer can take pre-existing condtions into account, and in the Exchanges, individuals buying their own insurnance automatically become part of a group and eligible for group rates.
    One big problem with Enzi’s plan (unless I’m missing something): employers could continue to offer insurance to their employees, but they could no longer deduct the cost.
    How could employers possibly afford this? Wouldn’t this mean the end of employer-based insurance?
    Brad & Everyone
    (I’m including “everyone” because Brad has opened up the whole larger question of what happens down the road.)
    Thanks for the comment. I, too, am suprised that so few people paid attention to the research published in Health Affairs.
    People have assumed that “cadillac insurance” means better benefits (and benefits covering frills) because they tend to assume that if something is more expensive, it must be better. The consumer must be getting “more”
    But that just isn’t true in the health insurance market. The product is priced from the point of view of the seller– how much will it cost him to cover you–not from the point of view of the comsumer (how much will this be worth to the policy-holder?).
    As to what will happen down the line if this tax goes into effect:
    Insurers might try to negotiate lower prices from providers in order to bring down the price of insurance and make it affordable for the middle-class.
    But, as you suggest, that is only if they have the clout. Right now, there is much emphasis on having more insurers in every market to create more “competition.”
    More insurers means more s
    small insurers who have very little clout when negotiating with large hospitals and powerful physician groups.
    The push to do away with the anti-trust exemption would make it harder for insurers to consolidate and gain power.
    This is one reason why the public option was so important. The public option and Medicare combined would have the clout to change pricing, paying more for the most effective treatments, less for those that are overp-priced and of little benefit to patients.
    Medicare may still do this–if Congress gives the Independent Medicare Advisory Commission the power it needs.
    But it’s interesting that even Ezra believes that we can’t cut payments to providers –“They would stop taking patients.” This is in the same column where he talks about the Cadillac tax.
    He seems to feel that providers have absolute power: patients need them. If we threaten to cut their fees, they will stop seeing us.
    This is one reason why I believe that providers must Voluntarily begin to re-organize how they deliver care, what they deliver, and how they are paid, taking cuts in their income as needed.
    (It’s worth noting that at the end of the lastest Atul Gawande piece, he and colleagues are talking about going on salary. For surgeons like Gawande this would almost certainly mean a pay cut– and make it much less likely tha this income would rise sharply in the years ahead.)
    See my comment to Bruce Fryer below.
    Bur right now, I’m afraid many Americans share Ezra’s attitude: they don’t want reimbursements to docs and hospitals cut because they fear this will affect the quality of their care and their access to care. They don’t really believe that there is waste in the system (certainly not at “my hospital”) or that they are being overcharged.
    And already, some doctors are warning their patients: “I may not be able to continue taking Medicare . . .”
    So let’s assume for a moment that the lobbies representing hositals and specialists remain strong, and that Congress doesn’t give Medicare the power to rationalize fees (at last not for ten years, by which time it will be too late.)
    Insurance becomes increasingly unaffordable for the middle class. Insurers go to state regulators (who have most of the power under the senate bill) and explain: we can’t pay providers less–they won’t join our networks.
    “But we can’t lower fees unless we change the benefit package–we need to be able to sell insurance that doesn’t include first dollar coverage for preventive care. We can’t cover more than six seessions of physical therapy. All of this mental health care is just too much. The vision care and dental care for kids is killing us.
    So the state regulators (who in many states are already in bed with the insurers) say “okay.”
    We’ll let you sell stripped down packages that don’t include mental health care, dental and vision for kids, that charge co-pays of $50 for preventive care and stictly limit physical therapy and rehab following surgery. You can call them the “Thrifty Plans for Savvy Consumers.”
    (Some consumers groups are enthusiastic. This gives them more “choice” they say, and “puts us in the driver’s seat”)
    So now the middle-class begins buying these plans.
    Some of the upper-middle class can still afford the plans that include all of the “essential benefits”, but many can’t.
    They, too buy the thrifty plans.
    Meanwhle, premiums for the comprehensive essential benefits plans continue to rise, but the wealthiest 20% bites the bullet and buys them anyway..
    Their children get detnal care. They get mental health care. They get rehab and physical therapy.
    The children from the poorer 80% of the population don’t get these “extras” and when someone has surgery, they may come home from the hospital with a crutch, and written instructions telling them how to try to do rehab on their own. (I know a young man who was on Medicaid. This is what happened to him following back surgery. If he had better insurance, the hospital would have kept him and done rehab there.)
    In other words, I can easily see us moving toward a more sharply tiered system.
    The “middle-class” in this country (households earning roughly $47,000 to $63,000 joint ) has shrunk, and as a result, they don’t have nearly as much power with politicians as they once did.
    Lower middle-class and low-income people have clout with only a small number of Washington’s politicians.
    Right now, people in the top 20% (the statistical upper middle class and upper class– joint income around $75,000 or $80,000 to “the sky’s the limit”) have power with “New Democrats”
    Though, in this recession, many at the lower end of the upper-middle class are going to find themelves slipping down the income ladder due to job losses, shrinking value of their real estate, rising cost of necessities (education, health care, food, energy.)
    So ten years from now maybe 10% of the population can afford the healthcare that the Senate bill defines as “essential.”
    Whether or not this could happen depends on a) what doctors do voluntarily and b)who is in power in D.C.
    If Obama loses the election in 2012 (and the economy combined with a backlash against Democrats in general and Obama in particular could doom him) then probably a conservative Republican would take office, along with conservative REpublicans riding his coattails into Congess.
    Why not a moderate Republican? Because there are very, very, very few moderate Republicans left. Karl Rove drummed them out of hte party in the 1990s.
    Keep in mind only 48% of white voters voted for Obama. Some of them wouldn’t vote for him today–either because he has disappointed them by being more moderate than they expected, or because he hasn’t been able to solve the problems of the economy in one year (and won’t be able to undo the damage done over 8 years in just 4 years.)
    The 52% who voted against him want a conservative Republican. Many of them are also very angry about health reform and any tax increases.
    We tend to forget that many in the population don’t want health reform.
    Bottom line if conservative Republicans re-take Washington they will not be too concerned about what happens to the middle-class or the upper-middle-class.
    Their constituency –corporations and the rich–will wind up at the top of the heap, running the country.
    I realize that this is all speculation. But it’s worth thinking about. If you are disappointed with Obama (and in many ways, I am) the likely alternative is, I’m afraid, very bad news for most Americans.
    We need to stick together, keep pushing for more progressive legislation. And maybe ask ourselves: “Why is it we didn’t like Howard Dean??”
    I know he’s not as polished as Obama. He’s an academic. He can seem goofy and awkward (part of being an academic). But Dean, Bernie Sanders, Jay Rockefeller and a few others on the liberal left aren’t taking their marbles and going home. They continue to push to improve the bill, which they have to some degree.
    I admire this.
    GMason–
    Yes, costs have to be reduced AT ALL POINTS.
    And when we’re talking about “essential benefits” the notion of an insurance plan being “too good” is ridiculous.
    People who say that tend to believe while everyone should have have insurance, all we owe the the middle-class and lower-income folks is insurance that is “good enough.”
    In other words, they believe in tiered health care rationed based on ability to pay.
    bruce fryer- I agree that physicians are “the key to change. Or should be.”
    Doctors and nurses know, better than anyone, where the waste is (at least in terms of low-hanging fruit.)
    And when it comes to caring about patients, I trust doctors more than I trust private sector insurers or politicians to care about quality and to understand that patients must come before profits.
    Some doctors are beginning to try to control costs from within; some are joining together in groups to do this.
    Many have said that what health care reform lacks is a “movement” on the ground. (Civil rights had LBJ and Robert Kennedy in Washington, but it also had Martin Luther King and many, many other civil rights leaders creating a grass-roots movement.
    We wouldn’t have had civil rights legislation if we had to depend only on LBJ and others in Washington. Though I also tend to think that if we had only the movement on the ground– and no one to send troops in– the fight for civil rights would have been much bloodier and gone on for much longer.
    We needed both.
    Robert– what kind of insurance you have is a matter of luck.
    It depends on who you work for, how old you are, where you live, and whether you are rich or poor.
    Dr Rick–
    Thank you. I do sometimes feel that I am saying the same thing over and over.
    But sometimes you need to say something 10 times–and 10 different ways — before the message gets through. This is especially true if its something that people really don’t want to hear . .
    Happy New Year!.

  14. Don-replying to Jan 1 comments —
    Don– In your Jan 1, 1:36 comment you give a very clear explanation of why we must have an individual mandate requiring that everyone buy insurance.
    I would add that the financial pensalties for opting out must be stiffer. Otherwise, too many single young,healthy, affluent people will opt out, knowing that they are healthy and that they have enough savings to cover occasional unexpected medical costs (a sports injury, a broken arm in a car accident.)
    We need everyone’s premiums in the pool, or the insurance will be too expensive.
    But, in your earlier comment (12:46) you seem to assume that younger people shouldn’t be “pooling” with older people.
    Instead, older people shouldpay 3 times as much becuase it will cost insurers 3 times as much to pay their bills.
    “Insurance” is all about sharing the risk– even when we know that some people are at higher risk than others.
    By and large older people will have higher medical bills.
    But when younger people become older, they, too, will have higher bills–and a younger generation will help pay them.
    This is fair as long as premiums reflect income–with subsidies for lower income people.
    A younger middle-class person who qualifies for a subsidy will be paying far less than a relatively affluent 55 year old who doesn’t get a subsidy.
    Meanwhile, a wealthy 30 year old who doesn’t qualify for a subsidy will pay more than a poor 55 year old who gets a subsidy.
    In other words, people won’t be penalized for age; instead those who can afford to pay more will pay more; those who can’t affofd to pay more won’t.
    This is the reverse of what we do today, when we ration care according to ability to pay, penalizing the poor.
    But we also shouldn’t penalize people for being old: it’s not their fault.
    It happens to all of us (unless we are unlucky and die young.)
    And as I explained in an earlier post,middle-class older Americans just won’t be able to afford decent insurance if they have to pay 3 times what a younger person pays.

  15. Maggie:
    I agree that older should not pay more and risk should be mitigated amongst the young and the old. My point was that the 3:1 ratio is not calculated for the highest of the young; but, it is calculated amongst the average of the young of which either 85:1 or 80:1 must be healthcare as compared to administrative. If the bulk of the young have much lower healthcare costs, those premiums will have to be determined from them and the young premiums will have to be cut. The older clientele (me included) will have there premiums determined from a much lower younger premium than before because of the 80:1 and 85:1. The general impression amongst many is the cost for the older clientele may be far greater.
    On middle class, I would say you are too low. The AMT was developed in 1967 for those making >$200,000 which was considered rich in income then. Certainly with taking inflation into account, the level for rich has increased as well as the middle class. Median household income in the US is ~$50,000 which for a family of 4 in NJ qualifies them for CHP/SCHP which has a limit of $80,000. I would suggest Middle Class runs from ~$50,000 to ~$250,000.
    We need to rethink our reasoning as to what Middle Class really is today. Getting ready to duck here!

  16. 75441–
    Happy New Yea- rAnd Rest assured, I didn’t write the post New Year’s Eve (Wrote it during the day Dec. 31)
    I spent New Year’s Eve with my son, his fiance, and husband. They’ve just decided to get married, so it was a wonderfully festive occasion!
    For them, 2010 will be a very good year, and I’m going to enjoy watching their engagement unfold.
    My son has been a serial monogamist for years, and I’ve liked almost of his girlfriends. But this is a fit that should work for the long, long-term: little drama, much happiness.
    I’m also proud to report that I’ve taken some time off over the holidays: I’ve only written two posts in the past 8 days.
    This, at the urging of my family. (My husband points out that I type in my sleep.)
    Moving on to the cost of insurance: in 2008, the averege family premium was $12,300. (In the case of employer-based large group insurance it often doesn’t make a difference if it’s a family of 2 or 4. Children are pretty cheap to insure.)
    Average cost for a single person -$7,000 to $8,000.
    This is for good comprehensive insurance.
    But most people don’t pay this much– their employer pays 60% to 100% of the total premium.
    In states where insurers can shun people with pre-existing conditions, insurance can be much cheaper-if you can get insurance.
    Your experience trying to get estimates of costs is typical. This is in part because hospitals and doctors truly don’t know how many cultures,tests etc. they’re going to run.
    Even if they’re working very efficiently, each test provides another piece of info leading to full diagnosis; given the ambiguity of medicine, it’s hard to know ahead of time when they’ll feel they have a full picture.
    The other problem, of course, is that in our extravagant health care system “one thing leads to another.”
    We need to get a much better handle on pricing and paying lump sums for episodes of care–but even then, you first need a diagnosis. And, over the course of treatment, the diagnosis can change, or be “upped” to a more expensive diagnosis as complications unfold.
    But as we get away from piecemeal payments we’ll figure out a more, rational system.
    The 85:15 and 85:20 ratios refer to what share of total revenues insurers pay out to doctors, hospitals and patients in the form of remimbursements and what share of total revenues (total premiums) they keep to cover “administrative costs”– marketing, advertising, lobbying, salaries for all employees, and profits for investors.
    The 3:1 ratio is quite separate. This refers to the fact that under the Senate plan, insurers can charge older customers premiums that are three times as high as the premiums the charge younger customers.
    This has nothing to do with how much insuers pay out in reimbursements and how much they keep.
    This is the crucial point: an insurers’r total revenues (total premiums) remain the same, but older customers pay a much larger share of those total premiums per person while younger policy-holders pay much less per person.
    Many younger Americans feel that they don’t want to help pay for older policy-holders, ignoring the fact that in most countries that have social safety nets, younger people contribute to funds that help older people, knowing that when they are older, younger citizens will be paying for pensions, healthhcare etc. for them.
    Everyone also contributes to the funds that provide long maternity leaves for people who have children–even if they themselves don’t have children
    But in the U.S. there is less collective thinking, and more of a generational divide.
    You’re right–age is a factor in costs, but not as big a factor as the CW would suggest.
    As you say, The biggest factor driving heatlh care inflation, by far, is not the aging of the population , but over-use of medical technologies–and the fact that prices keep climbing– for patients of all ages.
    I’ve written about this here: http://www.healthbeatblog.org/2008/03/will-boomers-ba.html The post includes some superb charts from Uwe Reinhardt.
    You’re entirely right, much of the income gains for the top 1% comes, not from wages, but from investment gains. This is fine, but most Americans dont’ have enough discretionary income to make large investments in the first place. As they say, “It takes money to make money.”
    Those who have the deep pockets to invest can afford to support larger societal goals. It’s interesting that the two wealthiest people in the U.S.–Bill Gates and Warren Buffet–agree on this.
    I, too, think that families earning more than $250,000 and individuals earning more than $175,000 could afford to pay more in taxes.
    But a great many people in this group don’t think of themselves as “rich.” They would insist that they are, at most, “upper-middle-class.”
    Over the past 25 years, the very rich in this country have become SO rich that it has upped the ante for everyone else.
    People read about CEOs making $11 million; the read about vacations where the hotel costs $1500-$2500 a night. They feel “left out” –and they don’t realize that less than 1% of the population is living that lifestyle.
    So to them, the $175,000 a year that they are earning seems “peanuts.”
    I think that people in the top 3%, top 5%, etc. are going to have to pay more taxes if the country is going to stay afloat (they are now paying much less in taxes than they did in the past).
    And by consolidating too much wealth at the very top, we have encouraged specultation, leading to the stock market bubble and the real estate bubble.
    But we are going to have to adjust tax rates slowly, over time. People need time to adjust. Most Americans don’t realize that we pay a much lower taxes than people in other developed countries. (You have to add up VAT taxes paid in other ocuntries as well as inheritance taxes and income taxes to see how much less affluent Americans pay.
    But if we try to change the tax schedule quickly, we give conservatives an issue that will galvanize people who have enough money to finance political campaigns, and we’ll wind up with more extreme conservatives in Washington.
    We also desperately need campaign finance reform, but that will be very, very hard, and take many years. The people who profit from enormous campaign contributions (Congress) are also the people who vote on it. . .
    When the bill states that 26% to 30% of our health care dollars go to administrative costs, the writers are not just referring to insuers’ administrative costs. They lumping together what it costs doctos and hospitals to bill insurers with the insurers’ administrative costs.
    One of the problems in this country is that our system is so fragmented–we have so many very small medical practices ( with 1 to 4 doctors) smaller hospitals in subrubs, small surgical centers.
    It’s much more efficent, (and less costly if a health care system is made up of very large medical centers with docs wroking on salary– providers and hospitals (like Kaiser Permanente, or the Cleveland Clinic, or
    Geisinger) with one “back office” that does all of the billing and enjoys eocnomies of scale.
    On what should happen now:
    I think we must pass the legislation. As Howard Dean has pointed out, given how upset the conservatives are, there must be something good about it.
    And there is. The legilsation states that we as a country have decided that we have a responsiblity to make health care available to all Americans
    I don’t think the legislation does a good job of outlining HOW we will make health care affordable for all. But at least it sets the goal.
    And we have 3-4 years to figure out how to do this in a fair, affordable manner before we try to roll it out.
    The fact that we have made the statement is an imporatnt first step. As conservatives understand, it will be hard to turn back, and try to argue that health care really isn’t a “right.”
    But they will try. They will do everything they can to repeal the bill.
    This is a reason why we must do everythng we can to stick together, support Obama, Reid, Pelosi, while encouraging those who will try to improve the bill:
    Rockefeller, Sanders, and Howard Dean.
    They have until the end of January to improve it in conference.
    More importantly, they have 3 years to improve it with further legislation.
    This is important. Some people think this is a one-shot deal. It’s not. Health care reform is a process, not an event.
    If we don’t pass a bill, the Obama adminisration becomes the Carter administration–incapable of getting major legilsation through Congress. (And I like Carter– the best ex-president we have ever had. But a disastrous first term. )
    If Obama is going to have a chance at a second term, and if Democrats are going to be the majority in Congress in 2012, we have to pass health care reform legislaition.
    The alternative: the conservatives re-take Washington.
    We have no choice: we must support the legislation.
    But we can make it better.
    Hootsbuddy:
    Good to hear from you– and thanks for hte support. Premiums are high because medical care is so expensive.
    But I have to disagree when you write: “Employers with ‘generous’ plans should shift those expenses from the expense line to employees in the form of better (taxed) income. ”
    I actually don’t disagree as to whether they “should” shift.
    I just know that they won’t give employees raises that equal what employers are now spending on health care.
    First, employers will say that what they are now spending on health care is ruining them— making them unable to compete globally. And, in some cases, they are right.
    Secondly, employers get something in return for putting a great deal of money into health benefits– “golden handcuffs.”
    Employees won’t leave for a job that offers lower health benefits, particuarly if they have a family.
    If an employer offers higher wages, they haven’t bought “golden handcuffs.”
    There is always the danger that a competitors will offer very desirable employees a higher salary.
    The competitor doesn’t have to offer all new employees the same higher salary–just this one employee that it is trying to recruit. By contrast, if the competitor offered higher benefits, it would have to lift benefits for all employees.
    Finally, we’re in the middle of a double-dip recession. Employers are not going to raise salaries, even if they cut benefits.
    I agree that the tax deduction regarding employee health benefits
    is unfair.
    But this is not the time to try to change it. We’re in the middle of a double-dip recession.

  17. Curious about what constituted a Cadillac health plan, I went to find out. Apparently I absolutely do, and absolutely don’t, have one.
    According to Slate’s Explainer, “…The top-of-the-line plans—say, the $40,000-a-year plan offered to Goldman Sachs CEOs—likely have no co-payments, no deductibles, few limits on how much you can spend, and no need for prior authorization, i.e., to get special permission before you get treated.”
    Yayy! I have a Cadillac health plan! As a retired lady on a fixed income, that’s quite a coup. Oh, wait…
    Elsewhere in the article, the Explainer explains, “…The finance committee defines high-cost or “Cadillac” as any plan with premiums higher than $8,000 for individuals or $21,000 for families.”
    Which means that my “plan” at around $4000 is far from a Cadillac, though better than a Geo Metro. Huh?
    Seems like a contradiction, but up here in Canada we don’t buy Cadillacs — we just get to drive them. After all, this is the country that we proudly say “works in practice, though not in theory.”
    Noni
    Geo Metro driver

  18. Noni
    Welcome to the blog!
    Because Canadian provinces put a cap on prices and the volume of procedures, you can get comprehensive coverage for essential care that costs far less.
    In the U.S. many Americans are very wary of any limits on heatlhcare. It will take quite a while for many of us to recognize that,in many areas, care in Canada is as good–or better–than it is here.
    We just tend to think that “more” is better– bigger cars, bigger homes, larger portions on our plates.
    Though we’re beginning to question much of this . .

  19. “Someone has given you misinformation.
    People who pay for their own insurance also get a tax break.” –MM
    Excuse me Maggie but it is you who are uninformed and I find that disheartening. I know very well what the tax treatment is for individual subscribers… because I am one.
    Your assumption that everyone who pays is own way for healthcare is self-employed is grossly inaccurate. As you well know, 40+% of small businesses cannot afford to offer any insurance and a large proportion of those who do include diminished coverage. People in that situation do not all just “go bare”. Neither do all under- and unemployed 55+ year-olds; many are are trying to hold on until they age into Medicare by paying for health insurance –either individual or COBRA –with savings. Why don’t those who take responsibility for their own coverage deserve at least equitable tax treatment?
    Under the current tax code, the only allowance accorded individuals who are not self-employed is a deduction of expenses in excess above 7.5% of their AGI …if they itemize. 50-somethings with paid off mortgages are unlikely to have any deductions anyway and, unless one experiences a medical crisis, are even less likely to have expenses that exceed that amount. These people are not wealthy — they were simply careful with their money when it counted and are effectively penalized by the tax code for their self reliance.
    Your misguided response is indicative of the short shrift that we self-payers have received throught out this faux “reform” discussion. Legislators and liberal journalists have virtually ignored those who are paying their own way. The focus has been on protecting those whose health coverage is subsidized by their employers and raising public money to subsidize more. I understand that many people have been shut out of the individual market but what about those of us who are already paying? Why don’t we deserve comparable consideration from the liberal politicians we help elect?
    Analysts and politicians who talk about a disconnect between patients and cost of care have no credibility when they advocate policies that punish those who are actually paying their own way.

  20. “One big problem with Enzi’s plan (unless I’m missing something): employers could continue to offer insurance to their employees, but they could no longer deduct the cost.” –MM
    That’s not the way I understand Enzi’s proposal. Health insurance would cease to be an above the line *exemption* for employers and become a deductible expense. In other words, it would be treated the same as other types of compensation such as salary, lodging, food, etc. – deductible for the employer and taxable to the employee. On the individual side, the taxable portion would be offset by an above the line exemption — applicable to all individuals.
    “Wouldn’t this mean the end of employer-based insurance?” — MM
    The answer is no it would not. More importantly though, you imply that preserving employer-provided insurance should be a priority for a national health policy. I find that disturbing in that it actually constitutes an obstacle to obtaining true universal coverage in this country.
    Employment-based coverage doesn’t have to mean employer-provided insurance. In France and Germany for example, health coverage is financed through payroll taxes levied on employers and employees. The monies collected go to large, non-profit funds that cover everyone equally. Companies do not decide what plan the workers will have and individuals are not held captive by employer plans but can move around freely in the marketplace and retain their coverage.
    Why do we want employers deciding on individual health plans? Why shouldn’t employees choose their coverage?
    This is one reason I am opposed to the non-reform that is going on now. A bill that protects 80% of the population from real change can not be called reform and certainly doesn’t represent a “sweeping overhaul” of anything.

  21. Athena–
    I agree that there are many problems with employer-based insurance. In particular, as you mention, employers don’t have any particular expertise when it comes to picking insurance plans.
    However, at the moment, the vast majority of Americans have employer-based insurance and don’t want to be told that they Must give it up for an unknown new plan.
    The majority would like to have the Option of switching to something else–once they see what they something else is, how it is working, and can invetigate details. (I’m a 60-year old female in Iowa. What would it cost me? What would the co-pays be on the drugs I take?)
    NO one can answer those questions until the new plan(s) is (are) up and running.
    Under the House bill, there is a national insurance exchange which includes a public option (much like Medicare) competing with private sector plans.
    Initially, under the House bill, the public option is open only to the uninsured, the self-employed and people working for small companies. Within 3 years it is open to people working in companies with up to 100 employees.
    Going forward (House committee says maybe in year 4 or 5) it is open to everyone–including people who work for large corporations and have employer based insurance.
    This the move away from employer-based insurance is phased in, giving people a chance to see how the insurance available in the Exchange compares to their insurance .
    This also gives the government a chance to figure out how to regulate the private insurers in the Exchange so tht they don’t cherry-pick all of the young, healthy patients, leaving sick, older patients for the public option.
    It will also take time to fine-tune benefits, subsidies and co-papys so that they are fair,and so that insurance is affordable.
    This seems to me a rational way to reform a $2.6 trillion industry–in phases. .
    Unfotunately, as you know, the Senate plan has no publci option, and in order to get 60 votes to pass it, liberals had to agree to give up the public option.
    Is it worth passing this plan?
    Yes. While it may not change things for you or me (it doesn’t for me), it represents a radical change for millions of low-income people who will qualify for subsidies.
    It also forces insurers to cover people with pre-existing conditions–and insurers cannot charge them more.
    For them, this is sweeping change. And these people– the sick and low-income families–are the neediest people in the nation.
    It also does many other things that we need to do, and that I have written about in other posts.
    IF we don’t pass this bill, will it mean that Congress will go back ot the drawing board and create a more liberal bill?
    No. This is a very moderate Congress, with relatively few real progressives. (For that we have only ourselves and our fellow citizens to blame. We elected them. Did you vote in each of the last four Congressional elections? Many liberals were discouraged, and didn’t. Thus, they let moderates and conservatives elect our Congres.)
    This Congress is not going to agree to a more progressive plan.
    If we pass nothing, both Congressional Democrats, and the Obama administration will be blamed for having failed to get something through.
    Conservatives will say that Democrats are inacapable of governing.
    That, combined with the bad economy means that Democrats will lose many seats in the next election, and Obama probably won’t be re-elected for second term.
    Conservatives re-take Washington, and we don’t re-visit health care reform for many years
    So we might better pass this bill, and then try to build on it.
    A public option that ultimately is open to everyone can be re-introduced as separate legislation, or as an amendement, if and when there are the votes in Congress to pass it. .

  22. Hi Maggie —
    Very good summary of the facts in the Cadillac tax issue.
    Also an excellent point that this is not the end, or even the beginning of the end, but rather the end of the beginning for US health care reform.
    It is critical for everyone — liberals, progressives, conservatives, neo-conservatives, and libertarians — to get a grasp on the facts of health care costs.
    First, the primary driver of health care costs in the US, and particularly the primary reason we are so much more expensive than other countries, is extra spending on drugs, tests, procedures, and equipment that drives prices up spectacularly while having no measurable effect — indeed sometimes a negative effect — on health outcomes. This accounts for at least $500 billion and perhaps as much as $800 billion a year in extra cost.
    Second, patients are not well equipped to make decisions regarding what is useful and what is not in terms of health spending since they quite simply do not know, and as you point out when they are asked to they make the wrong decision at least 50% of the time.
    Consequently, any successful reform MUST put the emphasis on stopping wasteful spending at the level it is controlled — the doctors ordering the treatments and tests. They should, in theory, be able to make those decisions, and if they are not (and unfortunately many of us are not) should be able to be educated to make the correct choices.
    Therefore, the Cadillac tax is wrong headed in its approach, since it targets people who are not able to make informed decisions and ignores the ones who are. If we want a “Cadillac tax,” it should apply not to insurance but to medical treatments, procedures, and tests, especially to tests and treatments that have been proven to be less useful. Or perhaps we can just use and strengthen the IMAC proposal and other features already in the Senate bill.
    Anyhow, everyone should please write this down: “health care does not respond to ordinary market economics because of absence of a critical feature for market function – information for consumers.” Please refer to that every time you are tempted to suggest “market based” features as a way of dealing with health care costs. Also, that will be on the test.
    And before anyone writes about it, yes, there is some money to be saved on insurance overhead, on incomes of highly paid specialists, and especially on simple ways of avoiding errors and complications in hospitals. However, this is a case in which the savings from all those things add up to much less than the savings from efficacy based management.
    Finally, congratulations to your son and his fiancée, and happy New Year. We are inching toward rational and fair health care in the US, and you are playing your part.

  23. “However, at the moment, the vast majority of Americans have employer-based insurance and don’t want to be told that they Must give it up for an unknown new plan.”
    IMHO, there has been too much emphasis on “plans” rather than coverage. Instead of telling people that they would be able to keep the plan they have (which can’t happen if the employer changes it anyway), a better strategy would be to say that they can keep the *coverage* they have. In other words, a guarantee that a new program would set a floor for everyone and require employers to maintain a supplement for a period of time.
    “For them, this is sweeping change. And these people– the sick and low-income families–are the neediest people in the nation.”
    All of that may be true but it doesn’t constitute a change to the health care model. It does not, as the media is wont to write, reform one-sixth of the economy. What it does is protect 80% of the model and fiddle at the margins of the other 20%.
    I didn’t vote for Obama, etal. because I thought we needed yet another poverty program to make things even more complicated. I voted with the expectation that we would get health care reform…. and that better coverage for those people would be a natural result (not the only objective) of such reform.
    “Under the House bill, there is a national insurance exchange which includes a public option (much like Medicare) competing with private sector plans.”
    In other words, the liberal position is that we can choose from more of the same dysfunctional model by ignoring the universal part of “universal healthcare” and maintaining a disparate patchwork of financing models or …more of the same dysfunction by pushing “Medicare for All”. Both models reinforce what is bad about healthcare financing in the US and ignore the strategies that have successfully delivered universal care to citizens of other countries.
    Contrary to what most of the bloggers imply, our biggest problem, is not the intransigence of industry players but a complete lack of vision on the part of both liberal politicians and talking-head “experts”. We don’t need to wait until 2010 to know that what is being enacted won’t solve the underlying problems. We need a coherent policy that will get us sustainable, continuous improvement.
    Healthcare reform cannot be viewed as a poverty program; it is matter of financial and physical security for every man, woman, and child in the country. Healthcare reform was my number one issue last year and I am totally disastified with what has happened. It appears that I am not alone; although the majority of voters still agree that healthcare is an important issue, most are not at all happy with the idea of adding yet another story to an edifice with a sinking foundation. It’s not that they are uncomfortable with the idea of change; it’s that they want reform and can recognize that no one with any influence never had of discussing real change.

  24. run 75441
    Fromo an economist’s pont of view, “middle-class” has a pretty clear meaning.
    Picture a 5-step income ladder.
    20% of Americans live on the top step
    20% one step down
    20% on the third and middle-step.
    That middle 20% is the middle class.(people earning around $48,000 to $65,000).
    You suggest that people with household income of $200,000 or even $250,000 are “middle class.”
    In fact, average household income in the top 20% nationwide is around 170,000.
    Do you think that if you earn $80,0000 more than 80% of all other Ameriican households, you’re middle-class?
    Even in NYC, $204,000 is average income in the top 20%. (This is typical of the most expensive cities in the nation.)
    So are you suggesting that people who earn $250,00– $50,000 more than the top 20% in the most expensive cities in teh U.S. are still “middle-class?”
    What you are really saying is that very wealthy people like to think they’re middle-class. Often it’s they’re way of saying they shouldn’t have to pay such high taxes: after all, “we’re having a hard time getting by on the $200,000 that we earn.”
    Why are they “scraping by” on $200,000?
    Because they define a “middle-class lifestyle” as including certain necessities:
    –private school for the kids, or a home in a very expensive suburb where the other kids in the public school are almost all white and their parents earn something in the range of $200,000.
    (Otherwise, their kids with have to mingle with the other 80% of American kids.)
    –two fairly new cars. (No public transportionation and no car-pooling of the middle-class! A few years ago, at least one of these cars had to be an SUV.
    –vacations that compare favorably with the vacations your neighbors are taking; perhpas a summer home; definitely the kids have to have the bikes, cell phones, iPods etc. that the other kids have — at age 12, if not earlier.
    –Children do not take summer jobs. Children go to to expensive camps or enrichment programs that prepare them for unpaid internships later on.
    –No tradeoffs. Just because you’re remodeling the kitchen doesn’t mean that you can’t go on an expensive family vacation this year. You don’t want to teach your children that having one thing means giving up something else!! Everything in your “lifestyle” is a priority.
    –private colleges. (A friend who lives in an affluent suburb outside NYC is sending her child to what is considered one of the two best New York State public universities. Other mothers raise their eye-brows–Really? You’re sending her there? No one else is going to a public university. Quite a few are going to private colleges that are not nearly as good academically–but, hey, they’re private! And expensive!
    MY point is this: if you live in a very expensive neighborhood and send your children to schools that are primarily limited to the wealthiest 20%, the other children–and your neighbors–will define what a “middle-class lifestyle” is for you.
    You will feel that you must live that lifestyle
    Your children will too–and for the rest of their lives they will have certain “expectatoins” about what it means to be “middle-class” in America.
    This will forever limit their choices in terms of what they can do for a living, who they can marry, where they must buy a home, etc.
    Rule #1– you don’t mingle with the other 80% of America. That’s why gated communities are nice. Also
    private cars with tinted windows.
    And private clubs where you can dine with others and complain about how much you pay in taxes.
    I raised two children living in Manhattan with householdl income of far, far less than $200,000 (in today’s dollars.)
    Sent children to good public school. (Bought a small but very nice apt. in a neighborhood with an excellent high school. Junior high was o.k. high school was very good. They went to excellent universities–one private, one public.
    Trade-offs. We didn’t go skiing–too expensive, too much equipment. We did join a gym with free membership and free swimming lessons for kids. They didnt’ need or want expensive clothes. (They Wanted to look like the other kids in their schools.) We had pets–no video games. (Mom didnt’ approve.)
    Mom defined “middle-class lifestyle”—i.e., in our family we don’t do x, we do Y. “Lauren has her own phone and her own TV in her room? That’s nice. Lauren just lives in a better hotel than you do.”
    Kids now grown, feel no need to “keep up with the Jonses”—wherever they live.

  25. To put it simply, it’s not what you earn it’s what you spend. That is much more likely to determine where you feel you are on the scale.
    But as far as tax burden, through state, local and federal taxes I give a dollar for every dollar I earn. In essence, I start making money around July and work 6 months for free. You don’t see problem if 50% of the population isn’t paying an income tax. Kinda goes against shared responsibility and everyone being in the same boat together. More like half of people on the boat are rowing the other half are not when it comes to income tax. I know you will discuss how well the top 1% did the last eight years and it’s their responsibility to pay more, how does that exempt half the population from having no income tax responsibility.

  26. Looking at your situation from the UK it’s been obvious (to me anyway) that a very large part of your problem is the sheer cost of healthcare, again obviously exacerbated by fragmentation. But it’s going to be very hard to address the twin problems of overtreatment/fragmentation and the professional standing that your healthcare providers enjoy at least in salary terms – both administrators and physicians. Drug and equipment costs are very high too clearly, as I suspect are also building costs.
    Consider that the CEO of a large US hospital can earn millions of dollars – in Europe it’s more like say $300,000. Many doctors are on an earnings trajectory that is much higher than European counterparts.
    As a quick illustration I can give you the actual costs of a small surgical day case procedure for a child (but under general anaesthetic in an operating suite) in a top Harley Street private hospital in London, converted into dollars:
    Surgeon’s bill – $150 (yes, there are no 0s missing)
    
Anaesthetist – $220

    Hospital bill inc private room, food, nurse etc – $700.
    I suspect this would be much higher in New York. And the surgeon was the same top professional we could have had for free under the NHS, but a few weeks later.

  27. Jenga —
    It is a major mistake to believe that low income people don’t pay taxes. The amount they pay in sales tax, property tax either directly or through rents, and payroll taxes is often a fairly high percentage of their income. They do not pay much income tax, but income tax pays for less than half of total federal and state spending in most states.
    Also, you need to take a look at your 2008 tax forms. You are either spending like a sailor in port or have very poor accounting advice.
    Unless you are paying a spectacular amount in state sales tax, property tax, personal property tax, or other spending related state taxes, it is almost impossible that you are paying 50% of your income in tax.
    I live in one of the higher tax states (Minnesota.) I spent years in the top tax brackets for both federal and state income tax. I never paid more than 40% of my income in taxes, and usually paid closer to 35%. That included paying self-employment taxes for social security and Medicare taxes. I based that calculation on dividing my total taxes by my total income, not — as many people mistakenly do — on my marginal tax rates.
    My taxes may have been lower than yours on some counts. As you say, a large part of taxes in many states are based not on what you make but what you spend, and I usually avoided a lot of high spending on houses, second homes, boats, expensive cars, and other toys, which minimized my sales and property taxes. Unless you are following an unusual investment pattern, the shelters on investment income (capital gains, dividends, limited partnerships, depreciation, etc.) should drive your taxes on investments much lower than the rate of your earned income taxes, reducing that tax to income ratio even further.
    On top of that, as a specialty physician, I was the beneficiary of a tremendous amount of government spending in the form of hundreds of thousands in education subsidies from the beginning of kindergarten to the end of my fellowship training, as well as government research spending that created the basis for much of what I did. In private practice a substantial fraction of my income came directly from federal and state government sources, in the form of Medicare, Medicaid, Minnesota Care, and Indian Health Service payments — income that many of the older guys who were in practice when I started 35 years ago would tell me didn’t exist when they were younger and being paid in eggs and potatoes for a substantial fraction of their services, if they were paid at all.
    In addition, my father, as a real estate developer, benefitted from billions in government spending for highways, transportation, and other infrastructure that made his projects in suburban areas practical and even necessary. In reality, almost all businesses in the US benefit either directly or indirectly from government spending that has created and protected their ability to exist and function. Some (electronics, pharmaceuticals, agriculture, transportation, and others) rest almost completely on government research and spending.
    Consequently, as a major beneficiary of orders of magnitude more government largess than most low income people ever see in their lives, I am more than willing to pay my share in return.
    I never felt I was “working for nothing” for four or five months each year. I felt I was working for the system that had allowed me to become a wealthy and privileged member of society, and probably underpaying while I was at it.

  28. Hi Maggie, nice to be here.
    You mentioned, “…Canadian provinces put a cap on prices and the volume of procedures…” Well, maybe. But this is a cap I have never bumped into, unless the delay was something very non-urgent.
    Two delays I experienced in testing and then treatment, were first for sleep apnea, and later carpal tunnel syndrome. If I had pushed a bit my apnea testing I could have gotten it sooner — but once I had the diagnosis in hand the treatment followed in a couple of weeks, paid for by the province, and still being supported by them.
    The testing for carpal tunnel came fairly quickly (6 weeks if I recall correctly) and the surgery came about 6 months after I decided to apply for it. I might have gotten it more quickly with a different doc, but this surgeon is the best in town and I am very happy with the results.
    Judging by the little I hear of actual US prices, I am guessing that those two problems might have cost me about $12,000 — does that sound about right? In which case I would never have been treated because that cost is a big chunk of my fixed annual income.
    So it boils down to how much delay you’re willing to tolerate, a few months, or a lifetime?
    Noni

  29. Jenga & Pat S.
    Jenga, please see Pat S’s
    comment which begins:
    “It is a major mistake to believe that low income people don’t pay taxes. The amount they pay in sales tax, property tax either directly or through rents, and payroll taxes is often a fairly high percentage of their income. They do not pay much income tax, but income tax pays for less than half of total federal and state spending in most states”
    He is absolutely right Much of our tax system is not at all progressive.
    Low-income people are forced to spend all of their income, just to survive. And they pay sales taxes on most of those purchases.
    Depending on where they live, they also pay high property taxes (either directly, or indirectly as part of their rent).
    Pat also is correct when he points out that income tax accounts for about half of the revenues that government spends.
    Finally, see the last two paragraphs of his post:
    “as a major beneficiary of orders of magnitude more government largess than most low income people ever see in their lives, I am more than willing to pay my share in return.
    “I never felt I was ‘working for nothing’ for four or five months each year. I felt I was working for the system that had allowed me to become a wealthy and privileged member of society, and probably underpaying while I was at it.”
    That’s a very honest statement.
    It’s worth noting that the two wealthiest people in the U.S.– Warren Buffet and Bill Gates, essentially agree. They believe that Americans complain too much about taxes, that people who are lucky enough to earn high incomes should be grateful that they have an income that leads to such high taxes.
    Pat S.–
    Thanks for taking the time to write such a thoughtful comment.

  30. Athena–
    I apologize. Regarding who buys their own insurance,you are, of course, right.
    Those who buy individual insurance include not only the self-employed, but some people who work for small businesses that don’t offer insurance, as well as early retirees.
    But my sense is that the majority of people who work for small businesses that don’t offer benefits are not well-paid,and cannot afford to buy insurance in the individual market (unless they are young and healthy.)
    And, in the vast majority of states, early retirees find it very very difficult to buy individual insurance because at their age,they suffer from some “pre-existing condition.”
    So I assume (perhpas incorectly) that the majority of those buying their own insurance are self-employed.
    But this doesn’t mean that people who work for small businesses or are early retirees don’t need help.
    .
    They absolutely do.
    Here the Senate bill does offer quite a bit of help: it provides subsides for the many relatively low-income individuals who work for small businesses, so that they can afford isnurance.
    The bill also provides financial help for many small businesses so that they can afford to provide insurance for employees.
    As for early retirees– see my posts on this blog expressing my great worry that the legislation will leave 55-64-year-old early retirees uninsured by letting insurers charge older Americans three times as much as they charge younger customers.
    This is a major problem.
    But I’m hopeful that in the next 3 to 4 years, before reform is rolled out, this will be addressed. Boomers in that age group (55 to 64) still have quite a bit of political power.
    Finally, you’re mistaken about the public health care plan in teh House bill.
    It is not based on Medicare–as-it-is.
    Both the Senate and House bills contain many pages on Medicare reforms.
    And in the House bill, it is clear that the “public plan” would incorporate the Medicare reforms.
    This is , I think how we will get to affordable health care. Medciare wil begin to rein in health care inflation, and utlimately , other payers will follow.
    It would be much easier for this to happen if we also have a public option that adopts Medicare reforms.
    .

  31. “So I assume (perhpas incorectly) that the majority of those buying their own insurance are self-employed.”
    What can I say except you are wrong. Self-employed individuals account for only 1/3 of the individual insurance market. There are in fact, more unemployed individual subscribers than there are self-employed and fully 44% are employed by very small firms (less than 20 employees). Those figures by the way, come from a Commonwealth report about individual insurance market that was published in July.
    This is important. You have been a prominent, and frequently astute, critic of the current situation but, like the politicians and other writers, you have completely ignored the plight of those whose coverage comes from their own self-reliance. I’m sure you read the Commonwealth report that described the market but you only retained the bits about the difficulties many encounter in obtaining insurance. By focusing only on those who do not have insurance, the entire legislative discussion was diverted from reform, which the majority feels is needed,to a poverty program for a sliver of the electorate.
    “Here the Senate bill does offer quite a bit of help: it provides subsides for the many relatively low-income individuals who work for small businesse…”
    You have essentially dismissed my comment about an issue pertaining to a population that has received no attention (self-payers who are penalized by the tax code) and used it as a platform to discuss a completely different population; one that has already been exhaustively covered in the media. What the new legislation does for those other people is completely irrelevant to *this* point.
    “Here the Senate bill does offer quite a bit of help: it provides subsides for the many relatively low-income individuals who work for small businesses, so that they can afford isnurance.”
    …which they will be required to buy with *after*-tax dollars while those with employer-paid coverage get an absolutely free ride.
    That is my number one problem with the mandate. I don’t understand how anyone can support a mandate that does not include an exemption for individual subscribers. How can anyone justify requiring self-payers to purchase insurance with after-tax dollars while continuing the exemption on employer-paid health benefits. In all honesty, I suspect that will be the legal downfall of the mandate — not on libertarian grounds but because it is so unequal in its execution.

  32. Athena is right, there is no logical or defensible reason why a person who has to buy his own health insurance should have to pay with after tax dollars, but an employer can pay with before tax dollars. This should be corrected one way or the other – either BOTH employer plans and individual plans are taxable or NEITHER is.
    I can see an economic argument being made that if we want to cut the cost of health care neither should be deductible – but that is a whole other long and difficult debate.
    I suspect we will not see this anomaly (deductible for companies but not for individuals) corrected because of the amount of tax revenue involved and the relatively small, non-organized status of those whose “ox is being gored”
    Now if those people who are being adversely affected got together, spent enough money and hired a lobbyist ……

  33. Although I don’t think the mandate is in any legal jeopardy, nor should it be – it’s the glue that holds healthcare reform together – Athena is right in stating that taxes on employer-provided insurance and insurance purchased by individuals are treated in a manner that discriminates unfarily between the two groups. I also believe Legacy is right in predicting that the inequity won’t be fixed in the near future. Ultimately, it should be. How? When?
    To address those questions, I think it’s important to return to a recurring theme in these blogs – healthcare costs continue to rise too fast, and must be constrained for truly effective reform to be realized. Until that happens, however, there must be some means for the government to acquire the revenue to subsidize low income families at a rate that keeps pace with the rise in the cost of premiums. As long as those premium costs rise faster than income rises, taxes on ordinary income alone is unlikely to suffice. The additional option is to tax health insurance benefits in one way or another, because they are more closely keyed to the cost of healthcare. The tax on “cadillac” plans is one approach, with problems of its own as noted here, and perhaps insufficient to fully keep pace.
    The alternative that is better in my view would be to tax employer-provided benefits as income, thereby “leveling the playing field” and providing a substantial source of revenue. This would be resisted as a “middle class tax hike”, but for middle income families most affected, could be offset by an extension of subidies.
    Unfortunately, anything that can be labeled a tax increase will be politically unpalatable, as well as a violation of the Obama campaign promise not to raise taxes on middle income families. Even beyond the politics, however, there are economic reasons why this change should not be legislated now despite the unfairness of the current system. In particular, any change in tax law that creates the impression in middle income families that they will have less money to spend is risky step in an economy struggling to recover from a deep recession.
    When the economy stabilizes, and if the rise in healthcare costs still continue to outstrip inflation, the issue should probably be revisited.

  34. Athena, Legacy, Fred
    Fred- Athena misrepresents the problem– both the number of people affected, and who they are.
    See my long comment to her.
    But briefly, let me address your concerns here:
    The majority of those who now buy their own insurance in the individual market are young (under 35), healthy (or insurers wouldn’t sell to them) pay very low premiums (because most in the pool are young and healthy)and relatively affluent (or else they wouldn’t be able to buy their own insurance. (Details below in response to Athena.)
    In addition, those who are self-employed (roughly one-third) get a significant tax break–they can deduct the full cost of insurance against their income. They need a break because, in addition to buying their own insurance, they pay an enormous self-employment tax, paying both the employers and the employees share of Medicare and Social Security taxes.
    Meanwhile, those who have employer-based insurance aren’t receviing the tax-free “gift” that many people assume.
    Research shows that employers pay lower wages when they offer health benefits. An employee who chooses a job with no benefits will, by and large, earn more.
    One study suggests that wages are reduced by as much as 83 cents for every dollar the employer pays out for insurance.
    So employees are paying a large part of the employers’ share in the form of reduced wages. Should they then be asked to pay taxes on the employers’ share?
    Clearly, this quickly gets very complicated — which is why the tax law in this area hasn’t been changed.
    Taxing employee benefits isn’t just unpopular, it’s difficult to figure out how to do it fairly.
    People with employer-based insurance also usually pay part of the premium–and have higher deductibles than those who buy their own insurance in a pool where the majority are young, and eveyone is pretty healthy.
    This is another reason to give employees the tax break– they are actuallly sharing in insuring people who are older and sicker in a more expensive pool.
    Those who can buy individual insurance benefit from the fact that in their market, insurers can shun the old and the sick.
    Athena & Legacy–
    First, the uninsured do not represent a “sliver” of the electorate.
    As you know the Commonwealth report points out that nearly 3/4 of those who shop in the individual market never buy insurance because a) they cannot afford it and/or b)they are denied coverage because of pre-existing conditions.
    16% of the population is are uninsured. Two-thirds live near or below the poverty line. 20% are children.
    In other words, this group includes some of the neediest poeple in the population; they are poor and/or they are sick.
    By contrast, those who can buy insurance in the individual market are by and large both young and healthy (only a handful of states insist that insurers ignore pre-existing conditions.)
    In fact:
    21 percent of those who buy their own insurance are between the ages of 18 and 24;
    33% are between the ages of 25 and 34.
    6.2 percent are under 18.
    Only 9% are between the ages of 55 and 64.
    In other words, roughly 60% are under 34. My guess is that you belong to that relatively lucky 60%.
    Young people are relatively cheap to insure, and so, despite high administrative costs,
    premiums in the individual market are much lower than in the employer-based market.
    Average annual premium for single coverage in the individual market is about $1,900; annual premium for a family about $4,600.
    All of the numbers above from http://74.125.113.132/search?q=cache:OB0MkUyGO-YJ:www.pr-inside.com/non-group-health-insurance-market-data-r1624982.htm+individual+market+and+health+insurance+and+taxes+and+deductible+and+2009&cd=16&hl=en&ct=clnk&gl=us
    By contrast, in the employer based market, annual premiums for an individual policy runs about $6,600 to $7,000, for a family well over $13,000. (Typically, the employee may pay 1/4 of the premium.)
    Also average deductibles are significantly lower in the individual market.
    Finally, and Perhaps Most IMPORTANTLY research shows that employees who receive employer-based coverage also receive lower wages than those who do not get health benefits.
    As this Health Affairs article points out, each dollar that an employer pays for health insurance is associated with as much as an 83 cent reduction in salaires. http://content.healthaffairs.org/cgi/reprint/18/6/58.pdf
    In other words, in many cases, employees are paying a large part of the employers’ share of the premiums as well as their share of the premiums.
    So employer-based insurance is not quite the “freebie” that it seems. Should employess pay the employer’s share (in the form of lower wages) AND pay taxes on the employers’ share???
    That doesn’t seem fair either.
    Clearly some who buy their own insurance are not young, and for some, the cost of the premiums is a strain on their budget.
    But Athna’s example– the couple in their mid fifties who have paid off their mortgage is a tiny minority.
    First of all, only 9% of those who buy individual insurance are 55 to 64. And in that age group, only one-third of homeonwers have paid off their mortage. So now we’re talking about roughly 3% of those who buy their own insurance.
    Some of those are self-employed and get the tax break. So now, maybe we’re talking about 2%??
    (For a report on what percent of American homeowners have paid off their mortgage, broken down by age, see http://www.census.gov/prod/2005pubs/censr-27.pdf)
    This, I would suggest, is “a sliver” of the population.
    Moreover, as you note, if medical expenses exceed 7.6% of income, those who buy their own insurance can write them off. You suggest that this would only happen if they have a catastrophic year. This is another clue that you may be under 35–and not very familiar with the process of aging.
    Trust me, when people are in their late 50s they often spend 7.6% of income on healthcare (premiums, deductibles, co-pays and things not covered).
    If they are self-employed, they get a good tax break.
    If they are not self-employed, but work for a small employer or are unemployed, as you point out they don’t get a tax break.
    Why a better deal for the self-employed? Because the self-employed pay a HUGE self-employment tax to cover Medicare and Social Security. If you work for someone, you see that tax on your paycheck–it’s listed as FICA. Your employer matches the amount you pay.
    But if you are self-employed you pay double what you would if you had an employer. In other words you pay teh employees share and the employers’ share. In addition, you pay for your own health insurance.
    This is a major reason why Congress decided to let the self-employed deduct their premium against their earnings.
    However, under reform, there also is relief for those who are unemployed or work for a small company and buy their own insurance.
    First– Low income and middle-income people will qualify for subsidies. .
    Secondly, small employers will get tax breaks that make it easier for them to provide insurance.
    So now the group that you feel are ignored by health care reform legislation narrows to those who are too rich for subsidies, and won’t benefit from the break for small employers.
    Most are young; the vast majority are healthy; most are paying very low premiums; in many cases their wages are higher than they would be if they were doing the same job and had health benefits.
    So the fact that health care legislation does not arrange a tax break for this group makes it “faux reform”?
    Perhaps your view is somewhat solopsistic? The legislation is deeply flawed but it does provide access to care for millions of sick, low-income and lower-middle income people.
    Moreover this is health care legistlation, not tax legislation.
    Should relatively young people who buy their own insurance at a low price and are not self-employed get a tax break of some kind? Perhaps.
    But this is not one of the most pressing questions facing the nation.
    And this is something for tax legislation to address.
    Health care reform legislation is making the poor, the sick and children its first priority.
    This is only fair.
    You would like to see “sweeping reform”: get rid of employer-based insurance.
    Clearly you have not studied the history of healht insurance in other countires. No country even close to our size has ever tried “sweeping reform” over a relatively short period of time. And with good reason. It would cause chaos.
    (Atul Gawande had a very good article about this in the New Yorker — I think it was last spring.)
    Health insurance systems evolve over long periods of time.
    And when “reforming them” no large country tries to wipe the slate clean and start over.
    You build on what you have.
    Gradually, we may phase out employer-based insurance if the Exchanges work well and provide high quality affordable insurance, employees may choose to give up their employer-based insurance and go into the exchange.
    With for-profit insurers running the show, I doubt that will happen. So unless and until we get a public option, the vast majority of employees of large businesses will stick with their employer-based insurance.
    (Please note: politicians who would like to get rid of employer based insurance and send individuals into the exchanges with vouchers or whatever to find their own insurance are, by and large, representing the insurance industry.
    The insurance industry is unhappy that so many large corporations self-insure. It would love to have those customers–especially if insurers didn’t have to negotiate terms with a large employer.
    Most individual consumers trying to pick their own plans lack the knowledge and information needed to pick a good plan; easy prey for insurers. And believe me, state insurance regulators won’t protect them.)
    Your solution–just guarantee that people will get the beefits they now get under their employer-based insurance reminds me of what H.L. Mencken once said: “For every complicated problem, there is a simple solution. And it is always wrong.”
    Finally while you believe that your group is getting “short shrift” the fact is that virtually everyone gets some benefit under reform (group rates instead of individual ratings; subsidies; the secruity of knowing that you can’t be turned down for coverage or lose your coverage if you get sick; no annual or lifetime cap on what insurance will cover etc. etc.
    Oh, and yes, you get to live in a country where the poor,the sick, the working-class and most of the middle-class are no longer uninsured.
    You show a certain scorn for “programs for the poor,” but many of us would prefer to live in a more egalitarian society

  35. “Athena misrepresents the problem– both the number of people affected, and who they are”
    It is you Maggie who have misrepresented the problem. You mistakenly assumed that the vast majority of self-payers were self-employed. Having been corrected, you have constructed another reason to ignore them (you think they are young and healthy) and proceed once more to talk about why you it’s okay to advocate a policy that discriminates against self-payers while protected beneficiaries of employer-paid coverage…because other people need assistance.
    “You would like to see “sweeping reform”: get rid of employer-based insurance.”
    You misrepresented what I said. Employer-based doesn’t have to be employer provided — it’s the latter I would like to see eliminated. Many successful universal coverage plans include employer-based financing. The US is the only industrialized country that depends on employer-provided coverage.
    “In other words, roughly 60% are under 34. My guess is that you belong to that relatively lucky 60%.”
    Once again, your guess would be wrong. But what difference would it make if I were? What does age and health status have to do with equity before the law?
    “This is another clue that you may be under 35–and not very familiar with the process of aging.”
    Actually, your observation is another clue that you have been satisfied to maintain your false assumptions. Not only do I have my own health concerns, but I have had to manage care for multiple aging relatives.
    “But Athna’s example– the couple in their mid fifties who have paid off their mortgage is a tiny minority. ”
    FACT: One third of homeowners in this country do not have a mortgage. Relatively few of those people are 30-somethings. Many are 50 somethings who prepared carefully for their retirement and did not use their homes as piggy banks to finance cars, trips, etc.
    And your calculations are off — people who do not have mortgages are much more likely to have the savings necessary to weather unemployment and pay their own way. In other words, these people account for a much higher percentage of the self-payers than you want to believe. And the mandate will pull even more into the individual, pay with aftertax dollar market.
    In any case, however few they may be, why is it okay to punish them for their financial prudence?
    “So employees are paying a large part of the employers’ share in the form of reduced wages. Should they then be asked to pay taxes on the employers’ share?
    Yes they should. There is no evidence whatsoever that workers do not have employer paid coverage have higher wages than those that do. In fact, there is considerable evidence that they are lower paid. Large corporations set wage standards and smaller companies struggle to meet them…frequently by not offering benefits.
    You are grasping at straws, trying to justify an unjustifiable inequality. Furthermore, I personally did not advocate taxing benefits: what I said is that employer-paid benefits should be included in taxable compensation *and* accompanied by an individual exclusion for premiums …which is Mike Enzi’s position,
    “Clearly you have not studied the history of healht insurance in other countires.”
    Actually I have…and have spent a good portion of my working career in countries with universal health care.
    Again though, you are arguing against something I never said. I don’t advocate a huge one-time change; I argue that we should be doing something that actually puts us on the road to change. Including healthcare benefits as taxable income then giving individuals an exemption would do just that: It wouldn’t have any immediate effect on those who are getting a free ride but it would put everyone on equal footing vis a vis the tax code.
    “Moreover this is health care legistlation, not tax legislation”
    Umm…this blog entry dealt with the cadillac *tax* (which BTW I oppose for the same reasons you do). My comment was that the tax consequences of reform and will exacerbate what is already grossly unequal tax treatment for those who must pay their own way. I have yet to read a single sentence from you that honestly addresses *that*.
    “You show a certain scorn for “programs for the poor,…”
    That is absolutely untrue. In fact, I don’t think the current plan does enough for those at the bottom. For example, I seriously doubt that it will do much for the thousands of people across the country who sleep rough every night. Those people aren’t going to get care; they are going to get endless redirections and no coverage.
    The idea that anyone who opposes the current approach to reform is inherently “anti-poor” may be a convenient straw man for those who support it but it’s not true.
    “…but many of us would prefer to live in a more egalitarian society”
    For the record: I am 100% in favor of universal health care. I believe that it is the responsibility of the government to ensure every citizen of this country has access to a common level medical treatment and that such treatment should not bankrupt himself, his company, or his government (at any level).
    I don’t care whether that means a single-payer (a la Canada or Japan), all-payer (France or Germany) or individual payer (Netherlands or Switzerland) as long as it is *universal*.
    I don’t think that what is being pushed by you and other liberal bloggers will put us on the road to achieving that. ..which is why I oppose it.

  36. Maggie – I still see a tax inequity, based on the following scenario, admittedly somewhat simplified. Compare employers A and B. Employer A pays employees $5000/month and pays $1000 in insurance premiums. Employer B pays nothing for insurance but pays employees $6000/month in salary, and the employee must pay the full cost of his or her premiums (an extra $1000 or perhaps slightly more in a reformed system with no exclusions for pre-existing conditions). As a consequence, employee B must pay income tax on $6,000 while employee A only pays income tax on $5,000. That extra tax penalty on employee B is where many see an indication of unfairness. This scenario of course assumes that an employer paying part of the insurance premiums will reduce salary roughly commensurately.
    I agree that A and B may differ in other ways that are harder to adjust for, but with the proposed reforms, some of those differences will diminish, but the tax inequity seems about to persist.

  37. Athena–
    First, I am sorry if I misjudged how you feel about programs for the poor.
    But you wrote: “I didn’t vote for Obama, et al. because I thought we needed yet another poverty program to make things even more complicated.”
    “Yet another poverty program” suggests that we have too many programs that try to help the poor.
    I believe that we have too few. We need another war on poverty. Few remember that LBJ’s war on poverty worked: the share of the population that was poor dropped significantly.
    (I have offered charts illustrating this in earlier posts.)
    Your post focuses on one issue that represents a relatively small problem for a small group of people–most of who are young and heatlhy. (I say a relatively small problem, only because the tax deduction that most might recive is only about $500– a very small sum compared to the bills that the unisnured face.)
    Single-issue advocates ignore the size and complexity of the health care crisis in this country.
    By doing that, they divide the folks who should be working , together, for health care reform.
    I seems to me that you adn I should be on the same side of this debate.
    Moving on to your comments on my remarks:
    I don’t “think” that the majority of those who buy their own insurance are young and healthy.
    A 2009 report on the non-group market offers proof (Census Bureau data plus Kaiser analysis):
    60% of those who buy their own insurance are under 34. And we know that insurers sell individual insurance to those who are sick in only 3 or 4 states.
    So the majority are under 35 and healthy. (I gave you the link to the study. )
    Similarly, you assert, without evidence: “One third of homeowners in this country do not have a mortgage. Relatively few of those people are 30-somethings. Many are 50 somethings who prepared carefully for their retirement and did not use their homes as piggy banks to finance cars, trips, etc. ”
    As I noted in my comment, only 1/3 of homeowners 55 to 64 have paid off their mortgages. Most 50-somethings have not paid off their mortgage. You are working with false stereotypes–Baby-boomers just weren’t as prudent as previous generations of 50-somethings. )
    You assert that a higher percentage of people in their 50s who buy their own insurance have paid off their mortgages because there are the responsible folks who saved, and therefore can afford insurance.
    Since insurance in the individual market is relatively cheap (even for older people, as long as they don’t suffer from pre-conditions), and since not having insurance is very, very scary in your 50s, many people in that age group who buy insurance are middle-income or even lower-middle class and scrape together the money to buy what they see (rightly) as a necessity–insurance.
    Finally, you are making a mountain out of a molehill.
    Since premiums in the individual market are so low, the deduction for a middle-class individual might be worth $400 to $500. (Average premium– $1900– if you’re in 25% tax bracket, you would save $500)
    Meanwhile, if employed, that person is likely to earn at least $500 more (often signficantly more) if his employer does not offer benefits.
    You assert: “There is no evidence whatsoever that workers who do not have employer paid coverage have higher wages than those that do. In fact, there is considerable evidence that they are lower paid.”
    I gave you a link to the best health care journal covering health care policy and economics with an article citiing a number of studies backing up what I wrote.
    I could give you many other links to good resarch.
    Without bothering to provide evidence, you assert, in essence, “this isn’t true.”
    (In fact, many employers like to claim that employees aren’t helping to pay for this insurance. It’s a self-serviing argument and much reserach says that they are wrong. )
    Also, think about all of the public school teachers and other gov’t workers who have relatively good benefits–and low pay.
    Many accept the low pay in part because of the benefits.
    Should a first-grade public school teacher who graduated from an Ivy-league college in the top third of her class, and who earns $50,000 a year (in her 4th year of teaching) doing a very difficult job have to pay taxes on her benefits?
    Do you really believe that she couldn’t find a higher paying job at a small entreprenurial company that didn’t pay benefits?
    Do you really think that she could cut a better insurance deal for herself if she went into the health insurance market on her own with a voucher?
    Navigating the insurance market, understanding the benefits, the co-pays, what it would actually cost you if you have a 20% co-pay on outpatient surgery– this is far beyond the expertise of most individuals.
    I agree with you that in a more perfect world the people in the group you describe should get tax break that may be worth $500.
    But given the enormous, sometimes tragic problems facing Americans trying to get heatlhcare in this country, I just don’t see this as a priority.
    Again, you seem to be a one-issue advocate, distracting from the larger argument about what our most vulnerable citizens need.
    When it comes to healthhcare reform, we all need to think collectively– and first about the largest problems, not our own problems.

  38. So the majority are under 35 and healthy. (I gave you the link to the study. )”
    I think that falls under the heading “non sequitar”: your conclusion doesn’t follow from the two facts you cited. The majority may indeed be younger (and in most situations, 40% is considered more than a negligible minority), but the fact that older applicants are likely to be rejected for pre-existing conditions doesn’t mean that the older individual subcribers who are paying now are healthy. In most cases it means that they got coverage when they were younger (and healthier) have absorbed premium raises as a necessary cost of living.
    “As I noted in my comment, only 1/3 of homeowners 55 to 64 have paid off their mortgages.”
    “Only” one third…so that means they don’t count? One third of that population is a lot of people. You are an advocate of extending Medicare to the 55-65 cohort but don’t see the hipocrisy in dismissing a built-in inequity as far as those *have* managed to hang on by dint of their own efforts. Every single one of your points discounts the importance of personal effort. It is not anti-poor to say that those who have managed to provide for themselves should not be penalized for that.
    “Finally, you are making a mountain out of a molehill.”
    NO I AM NOT. If you think I am, it is because you miss the my point entirely. The key issue for me is not the tax treatment of individual subscribers, it is the profound deafness of leading reformers such as yourself to anything other than their perspective of the problems. That’s what has led to the disaffection of so many who should be natural supporters of reform.
    “I gave you a link to the best health care journal covering health care policy and economics with an article citiing a number of studies backing up what I wrote”
    Read your own source again. Whether or not employers would increase salaries if they didn’t pay for health care coverage is a matter of question. That though, is is completely different from implying (as you do with your convoluted tax argument) that employers in the current market who do not offer insurance pay more for the same type of work, thereby justifying the non-taxation of employer paid benefits.
    “But given the enormous, sometimes tragic problems facing Americans trying to get heatlhcare in this country, I just don’t see this as a priority.”
    Exactly — social equity and universal *coverage* are not your priorities.
    “Again, you seem to be a one-issue advocate, distracting from the larger argument about what our most vulnerable citizens need.”
    I would argue that it’s the other way around — that it is you who are a single-issue advocate. I have simply questioned your illogic in supporting this inequality. That in no way implies that i think this is “the” most troubling issue about health care in this country, it is simply the an example of the extent to which the left has abandoned a committment to universality. Your denigration of the legitimate concerns of some people by implying that they are selfish because…well because you just don’t think they count in your larger view …is an example of why many think the reform effort went off track. My interest is in *universal* health care and I oppose anything that further divides the country into haves and have-nots.
    You define the need in terms of the visible hardships we can see all around us. To me, the uninsured represent a sypmtom of a dysfunctional model, the tip of the iceberg so to speak. Extending that dysfuntion may result in the launching of lifeboats but the ship will sink in the end unless it changes course.
    I have no problem with extending public support for medical care to as many people as need it. My problem is that anyone could refer to that as “reform”. If we as a society are to continue to grow and prosper we have to change the model so that *everyone*, working or unemployed, old or young, comfortable or poor, has the very same access to coverage and will not face financial hardship to get it.
    “When it comes to healthhcare reform, we all need to think collectively– and first about the largest problems, not our own problems. ”
    The biggest problem we have is not the [x million uninsured], it’s that we are not organized to deliver timely, quality care to anyone without bankrupting ourselves (as individuals, companies, and governments). The current legislation, which focuses on your single-issue will not make a dent in that problem.

  39. Athena:
    You pose some very deep thoughts here, and I am glad you are part of our forum.
    This is a very complex issue, and those who try to simplify the solutions are simply not aware of human nature, and the context in which we find ourselves.
    In regards to the context, this quote from Alexander Fraser Tytler is pertinent, I believe:
    “A democracy is temporary in nature. It simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public Treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public Treasury with the result that every democracy will finally collapse due to loose fiscal policy which is usually followed by a dictatorship. The average age of the world’s greatest civilizations from the beginning of history has been about 200 years.
    Instead of My Will Be Done, Maybe Thy Will Be Done can save us from our downward spiral.
    Shalom,
    Don Levit

  40. Fred–
    Insurance costs far more in the employer-based market because people suffering from chornic conditions like diabetes, heart disease are included in the pool.
    In the individual market, in almost all states, insurers can refuse to sell to individuals who are or have been sick.
    Here’s how it works.
    Let’s say I earn $50,000 plus health benefits for a single person that cost my employer $7,000. I pay $3,000, he pays $3,500.
    I pay taxes on $50,000 plus $3000 for insurance
    A competitor comes along and offers me a job. I won’t leave my current employer for less than $53,500 (my total compensation.) I am in good health, and so am able to get coverage in the individaul market at the average price– $1,900.
    I now pay taxes on $53,500 plus $1900.
    In my old job I paid taxes on $50,000 (let’s say this means $800 less in taxes–but I paid $1,100 more for insurance.
    It’s close to a wash.
    I actually pay less for insurance in the separate market.
    Meanwhile, my employer was paying an extra $3500 for the insurance to cover the fact that many people who work for hte corporation are not as healthy as I am (and would probably have a hard time getting insurance in the separate market.)
    Should I have to pay taxes on the extra $3500 that he pays to cover a diverse group? Probably not.
    If I am one of the less healthy employees, does that mean I should have to pay taxes on the extra $3500? That would mean discrimtinating against people with pre-existiing conditions, something we are trying to avoid.
    Should I be able to deduct the $1900 that I pay for insurance in my new job?
    Maybe, though it’s not clear that someone in my old job who doesn’t deduct the insurance is getting a much better deal. He pays more for insurance,less in taxes.
    Finally, consider a third individiual–somone who works for a small company that does not provide insurance. She earns $53,500. But she suffers from diabetes. When she tries to get insurance she finds out that this is a “pre-existing condition.” She can’t get insurance–at any price.
    She’s the person I worry about.

  41. Hi Maggie:
    And I thought I had issues with those who kept piling on. A few words from a fellow poster “Betty the Crow”:
    “What the people who manipulate the people like XXXXX do is constantly create new myths for their followers to entertain (or to entertain their followers, or both). By the time the reality-based community catches up with the last one, they’re on to a new one. And they keep piling up. Someone like Jack never abandons the last one; he just piles the new one on top, no matter if it contradicts the last one, and becomes ever more frightened and enraged and incoherent, and there’s no way to get through to him.
    For people who recognize the bullshit as what it is, keeping track of it and debunking it is so exhausting, because there’s so much of it, that the tendency is to just let it go and save the energy for trying to accomplish something positive. Who wants to spend all day mucking out the stables of XXXX’s “brain?”
    I am not sure you will win the battle with some posters as the story always changes. 46 million people itemize in the US and I am sure they occupy the upper strata of income which is possibly greater thean $100,000. Of that bunch, far fewr deduct healthcare insurance because it is impossible to reach 7.5% of AGI or as a business either as you have to be profitable to deduct healthcare. Often times the deductions when not profitable exceed the deductions when profitable.
    You are allowed to wear the “hair shirt” for some posters but income tax deductions are not your responsibility. That is not to say a pre-tax deduction for healtcare and insurance would not go a long way . . . but then too it would open the door to more insurance abuse.

  42. Maggie – I don’t mean to beat the tax inequity issue into the ground, but I do suspect it will remain a subject of debate for a while, and so it still deserves attention.
    My point was that employer-paid premiums as a substitute for salary are excluded from income tax, while that same dollar figure paid by a different employer as salary rather than as a portion of health insurance is taxed, leaving less money remaining to buy insurance on the individual market. That is a penalty for the latter employee. My second point was that a tax on employer contributiouns would be an additional source of revenue to help the government maintain subsidies for low income families in the face of healthcare costs that rise faster than inflation.
    You responded as follows:
    “Insurance costs far more in the employer-based market because people suffering from chornic conditions like diabetes, heart disease are included in the pool.”
    I don’t know the actual figures, and I trust your knowledge, although I suspect that the difference is mitigated by the far lower medical loss ratios that pertain to individual coverage compared with group coverage. More important in my mind, however, is that you are referring to the current insurance system, whereas the reform packages propose to end exclusions for high risk individuals and instead make them part of a common risk pool. This, I think, should end or greatly reduce any premium advantage that would apply to the individual market on average, although the age discrination in the packages will continue to give an advantage to younger individuals, while disadvantaging older subscribers.
    It is with this future in mind that I raise the issue of tax equity.
    An interesting analysis of tax exclusions for health insurance and other employer contributions has been provided by the Congressional Research Service at
    http://www.allhealth.org/BriefingMaterials/RL34767-1359.pdf
    Based on their analysis, and ignoring the political pitfalls, I would see some virtue in eliminating the tax exclusion for higher income recipients of emplopyer-paid premiums, and capping it a levels that decline with income for other individuals, so that it remains excluded for those at the lower income end.

  43. Fred, run 75441
    Fred–
    I entirely agree that the individual market is likely to become much more expensive when those with pre-existing conditions are included.
    Most analysts have emaphasized that those in the indivual market will enjoy group rates, which would lower premiums.
    But I haven’t seen any really good in-depth analysis on how much premiums will rise when insurers can no longer exclude the sick.
    No one wants to talk about this.
    I do know that in New York (where we have what is essentailly community rating and guarnteed issue–i.e. insurers must insure everyone and cannot charge more for pre-existing condtitions) I was paying $6,000 a year a few years ago just to insure myself in the individual market. And this had nothing to do with my age or health. They didn’t even ask.
    All I was trying to say to Athena is that, at this stage, it makes sense for reformers to focus first on the neediest: those who can’t get insurance and those who really can’t affod it.
    Over time we can–and will have to– fine-tune all of this.
    And, at that point, we may well need to compare what is happening to those with employer-based insurance when compared to those buying in the single payer market.
    run 75441-
    Thanks for good advice (about those who just keep piling on with reasons to oppose reform)
    But sometimes those comments lead me to learn a lot about something. Athena’s comments forced me to really looking into the individual market–who is buying the insurance, what it costs.
    That is useful information that will make my posts better-infomred in the future.
    Also, when I respond to a reader, I am also talking to others on the thread.
    Often, I am not so much concerned with “winning the battle” with that particular poster (who, I realize, may well be totally uninterested in what I have to say).
    But I am interestd in making sure that the poster does not confuse others on the thread with sophistry, misinformation, etc.
    I think of this blog as a graudate seminar.
    The commenters are people at a seminar table, talking not just to me but to each other.
    I’m moderating–trying to correct misinformatin and
    underline the very good ideas that many commenters have.

  44. [Finally, consider a third individiual–somone who works for a small company that does not provide insurance. She earns $53,500. But she suffers from diabetes. When she tries to get insurance she finds out that this is a “pre-existing condition.” She can’t get insurance–at any price.]
    But aren’t you ignoring a solution which has been adopted by 22 states: high risk pools?
    I am a diabetic in his 50s, and I would love to earn $53,500 per year. No private insurer will touch me. I am worse off than the person you are so concerned about.
    However, I am able to get insurance through my state’s high risk pool: Cover Colorado — a program which has been in existence since 1991.
    The program is far from perfect. A high deductable simply means that I might be forced to bankrupt out of a major illness (or move to Texas with all of its debtor protections).
    On the other hand, my premiums are about the same that I would pay for medications in the absence of any insurance.
    My worry is this “health care reform” could actually mess things up for me. Because once this goes into effect, the State of Colorado may no longer feel the need to support this high risk pool.
    I could be forced into a private insurance market where my premiums are significantly higher (because of my age), while the insurer may find creative ways of excluding coverage for my diabetes and related problems.
    I see no particular reason to trust the insurance industry to honor its legal and contractual obligations. My experience with insurers that they do not do anything short of a lawsuit being filed – especially when large amounts of money are involved.

  45. One third of homeowners in this country do not have a mortgage. Relatively few of those people are 30-somethings. Many are 50 somethings who prepared carefully for their retirement and did not use their homes as piggy banks to finance cars, trips, etc.
    ————————–
    In Canada, with a single payer health care system, costs are far better controlled than they are in the US insurance-run health care system. Basically health care paid through taxation costs about half of what it does in the US insurance-run system. As a result of paying health care with taxes, Canadians have an average of $1200 a month more in our pockets than Americans have paying taxes+health insurance+copays+deductables. This means that many Canadians pay off their mortagages by the time before they’re 40. Despite paying half as much for health care as Amercians do, Canadians have universal health care coverage, and the average Canadian has far better health care than the average American has, and Canadians live an average of 3 years longer than Americans. Having lived in both Canada and the US, and having used both systems, there is no doubt in my mind that Canadian health care is far better for the average person than American insurance-run health care.
    Canadians have longer lives, better health care outcomes, and peace of mind from never having hea;th care denied or going bankrupt from medical bills. I had to go to the US after being transferred there by my company, but when I had the choice to come back to Canada or not, having the choice, I chose Canadian health care over American insurance-run health care in a heartbeat.

  46. Hihplains Lawyer & John–
    High-plains —
    22 states have risk pools.
    28 don’t.
    And as you note, in the states that have them, they don’t work that well.
    Surely you’re not suggesting that we shouldn’t have health care reform that will help millions of low-income and lower-middle income people because you’re afraid that this MIGHT force you into a market where your premiums are higher??
    I don’t imagine that’s what you meant to say .. .
    If you’re concenrned about the fact that the Senate bill would let insurers charge all older American (and not just you) three times as much as younger Americans, that seems to me a legitimate concern.
    That part of the legislation needs to be fixed. (I’ve written a post about this–just scroll down and you’ll find it.)
    My guess is that as we get closer to rolling out the legislation, and more middle-aged Americans become aware of this porvision, they will fight for an amendement. Though some younger Americans, who don’t want to help pay for care for people in their 50s and 60s will fight any amendment. . .
    Finally, note that under the Senate bill, any state can protect it’s older citizens by telling insurers, “no you can’t charge them 300% as much–you can only charge them 20% more.” This is already teh law in Vermont. Other states could pass similar laws.
    John–
    Everything you say is true–except, the fact that health care is paid through taxation rather than private insurance is not the major reason that care in Canada costs half as much.
    The price of everything in our health care system is higher.
    Doctors here earn two to three times what they earn in Canada (after adjusting for differences in cost of living); we pay far more for drugs; we pay for more for hospital care; we pay far more for every test and procedure.
    In addition to the fact that prices are higher, we also provide more care. U.S. patients undergo more tests and procedures; we do far more surgeries, U.S.
    patients see many more specialists.
    Some of this care is unncessary–and exposes patients to risk without benefit.
    For example, we do many more angioplasties and bypasses, but outcomes for patients suffering from heart disease is not better in the U.S.
    The combination of higher prices and higher volume expalins most of the difference in the cost of care in the U.S. and in other countires.
    In European countires that use private insurers rather than taxation, health care spending is also much lower –and the qualtiy of care is as good–and in some cases better–than in Canada.

  47. I don’t understand why so few people support Mike Enzi’s idea of transferring the tax exemption from the employer to individuals. That would be much fairer than the current policy in which people with employer-paid benefits get tax free coverage while those who pay their own way do so with after-tax dollars.