Who is Douglas Holtz-Eakin and why is he saying such terrible things about health reform?

Today, the House Energy and Commerce Committee’s Subcommittee on Health will hold a hearing entitled: Unaffordable: Impact of Obamacare on Americans’ Health Insurance.  (Always nice to know that our elected representatives are keeping an open mind.)

Prominent on the list of witnesses: “Douglas Holtz-Eakin.” Even before reading his testimony, I knew what Holtz-Eakin would say: young, health Americans should brace for “sticker shock.”  Conservatives like Holtz-Eakin tend to stay on script. However stale the rhetoric, they firmly believe that if you repeat a sound-bite often enough, people will believe it.                                     

                                        Who is Douglas Holtz-Eakin?

If you recognize the name, it’s probably because Holtz-Eakin has become a familiar figure in the mainstream media, quoted in the New York Times, writing Op-eds for Reuters and Politico.com, and appearing, not only on Fox Business News, but on CNN and the PBS’ Newshour.

Alternatively, “Holtz-Eakin” may ring a bell because he served as a member of George W. Bush’s Council of Economic Advisers (CEA), and as Director of Bush’s Congressional Budget Office (CBO.)

In a remarkably candid 2011 interview, Holtz Eakin recalled his tour in the Bush administration:

“Going into the summer of 2001, things were getting worse. . . When we first went in and talked to the President, Glenn [Hubbard] and Larry Lindsey said, ‘Mr. President . . . We’re probably not going to run a surplus on budget.  We’re going to run a deficit.”

Bush’s reply: “We’re not going to run a deficit. If you come in here with a deficit, you’re both fired. Go fix it.’”

We ended up running a budget surplus of one billion dollars,” Holtz-Eakin confided, “driven by gimmicks of remarkable proportions.”
Later, Holtz-Eakin served as John McCain’s chief economic adviser during McCain’s ill-fated 2008 presidential campaign. In 2009, Holtz-Eakin consoled himself by founding a conservative think tank, the American Action Foundation (AAF).

These days, Holz-Eakin rarely mentions Bush or McCain. He prefers to be identified as “a former CBO director” as he is on the House subcommittee’s witness list. This makes him sound both neutral and knowledgeable.

This also explains how he has become a .regular source for the mainstream press, and why, when referring to the AAF,  jouranlists don’t always identify it as a “conservative think tank.”

                 The Source for Holtz-Eakin’s Testimony- A Survey of Insurers 

The testimony that Holtz-Eakin gave today is based ,on a report that he wrote for the American Action Reform in January: Insurance Premiums in 2014: A Survey. There, he argues that because the ACA “mandates” insurance and benefits, and “guarantees insurance regardless of health status,” it will force “young, healthy individuals” to subsidize “older, sicker” baby-boomers in the individual and small group Exchanges. Citing an AAF survey of insurance companies, Holtz-Eakin predicts that young Americans will see “dramatic increases” in their premiums.

                        Holtz-Eakin’s Numbers Infiltrate MedPage Today

Not long ago, a story on MedPage Today, an online newsource for clinicians, stopped me in my tracks. It reported that according to an AAF survey, in 2014 premiums for young healthy workers in the individual and small group markets, “will increase by an average of 169%. . . . To put a dollar amount on that,” the reporter continued, “the average monthly premium” in the five cities will  “jump” from $2,047 to “around $5,124.”

Hold on. If monthly premiums rise to $5,000, coverage would cost $60,000 a year!” I emailed the reporter so that he could make a correction before other bloggers picked up the bad numbers.

Then, I looked at the January 2013 AFF report. There, to my astonishment, I found the same eye-popping numbers, neatly arranged in a table headlined: “Impact on Small Group Market: Younger and Healthier Workers.”

“Somebody didn’t proof-read this table,” I thought. “These must be annual, not monthly premiums.”

                                             Readers Tespond

Comments on the MedPage post revealed that others agreed:

“JBH” wrote: “Sure hope those are annual premiums, not monthly.” Others chimed in.

But an EDITOR’s NOTE brushed them off: “Sorry, but those are, in fact, monthly figures.”

Then, another reader commented: “Be forewarned this survey comes from a conservative group that has been guilty of lying, previously. . . .See Factcheck.org” A little Googling soon uncovered a Factcheck piece about AAF headlined: “More Mediscare” .

At this point, I noticed the byline on the AAF report: “Douglas Holtz-Eakin. ” Now, I began to wonder, had the report set out to deliberately mislead readers?

                              Holtz-Eakin Plays Fast and Loose With Numbers

I knew that in the past Think Progress (a liberal blog), had  accused Holtz-Eakin of “Spreading Shoddy Research Defending Tax Breaks for Wealthy Heirs.” 

And not long ago, Paul Krugman called him out for using “false numbers” in a Reuters Op-ed that outlined a “market-based plan”, for health care reform that supposedly would build on the Affordable Care Act. . Krugman and his co-author, Avis Roy (MItt Romney’s healcare adviser) claimed that their proposal resembled Switzerland’s health care system.

Some liberals were impressed. They thought that Holtz-Eakin and Roy had moved to the center.  “From me, no gloating, no ‘I told you so,’ no smugness,” one of my favorite columists wrote. “Instead, I feel appreciation for common sense overtaking extremism and myopia”

In fact, a close-reading of the Holtz-Eakin/Roy proposal reveals that it would “build” on Obamcare by shrinking the coverage that insurers offer, and slashing the subsidies that would help middle-class Americans afford insurance. It does not build on the ACA; it guts it.

That Holtz-Eakin is able to project a sense of “common sense overtaking extremism” is precisely what makes him so dangerous.

 Ultimately, it was left to Paul Krugman to expose the lies in the Reuter’s Op-ed:  “the Swiss system is nothing like their description. In particular, they denounce community rating — but Switzerland has community rating!” (Insurers cannot charge people more because they are old or sick.)

Exasperated by some of the praise heaped on the conservative duo, Krugman returned to the subject in a later column:  “Look, I know that we’re supposed to be celebrating people like Holtz-Eakin and Roy for showing more intellectual flexibility than the rest of their party,” Krugman wrote.  “But I guess I find it hard to be encouraged when the supposed show of flexibility leads with grossly false and/or misleading numbers.”

Today Hotz-Eakin had the  opportunity to serve up more pseudo-facts as he testified before the House sub-committee. My favorite moment came when he suggested that when liberal states like New York introduce community rating, and prevent insurers from charging older customers 5 or 6 times more than 20-somethings,  premiums head for the heavens:  “There is anecdotal evidence,” he declared,”of premiums nearing $100,000 in New York.” He was actually suggesting that in New York State  some families pay $100,000 annually for the comprehensive insurance that the ACA mandates.

Anecdotal indeed. I Googled this absurd claim and found that it has been made more than once– but always without a source, and without a link. No wonder Holtz-Eakin decided to call the evidence “anecdotal.”

Note to Readers: A earlier version of this post appeared on HealthInsurance.org yesterday.  To find out where Holtz-Eakin arrived at the numbers cited in the AAF survey, and what AAF had to say when MedScape sent the reporter back for a follow-up interview, click here and SCROLL DOWN TO “A MedPage Reader Spots a Tell-Tale Footnote.” Please come back here to comment.

24 thoughts on “Who is Douglas Holtz-Eakin and why is he saying such terrible things about health reform?

  1. Mark Pauly has a long article called ‘Health Reform Without Side Effects’ that is worth reading. Pauly is one conservative with integrity.

    Meanwhile, as a person who has sold health insurance, I have noticed that there are some huge premium increases in the small individual market.

    The policies have small risk pools, and it takes just a small decrease in the enrollment of healthy persons to cause a spike in premiums. Anecdotally, I have seen healthy persons decide not to buy coverage until their state exchanges kick in.

    Plus, there continue to be some states which require a person to be uninsured for a year before being eligible for government assistance. This incidentally was the provision that really hurt the early risk pools that were sponsored by the ‘ACA in 2011. It is a cruel way to control access, and I was embarassed that the ACA used it.

  2. Bob-

    Yes there have been some big increases in individual premiums. Companies are trying to make as much money as they can before they get out of the business altogether in 2014. (A great many smaller insurers will go under, get out, or be acquired.

    The Exchanges should make good individual insurance much less expensive. (Coverage sold in teh Exchanges won’t be as cheap as “junk insurance” but junk insurance is a waste of money.) Most uninsured young people will be eligible for good subsidies, and our experience in Mass. shows that they will sign up for insurance, making risk pools much larger and healthier.

    I agree about the one-year waiting period. But in 2014, under the ACA, that will no longer apply. Anyone who doesn’t have affordable insurance at work will be able to join an Exchange.
    On Paul’s article– I read the first pages of Pauly’s piece. (After page 24 or so, you have to buy it. When I was an academic most felt strongly that information should be free and should be shared. (Academics were the first to use the Internet.) Many still do believe that no one
    No one “owns” ideas or knowledge. So I wasn’t willing to pay to read the rest of Pauly’s piece.
    From what I did read, he seems to believe that consumers know enough about medicine that they know how much insurance they need–or what type– if given
    enough information.
    This simply isn’t true. 1) Consumers haven’t been to medical school 2)No one knows what fate has in store for them. A perfectly health 28-year old may be diagnosed with a brain tumor 3 months from now.
    This is why we all need to be in an insurance pool, “pooling our risk”– with everyone, sick or well,
    young or old –all paying the same premiums into the pool.
    I notice one of his chapter headings suggests that
    “community rating” is a bad idea–so probably he doesn’t agree.
    In those opening pages he also says that health care cannot be much less expensive than it is today– which is absurd.
    Look at Europe. Health care is significantly less expensive–and often better.
    Roughly 1/3 of our health care dollars are squandered on treatments, tests, surgeries, drugs, devices and hospitalizations that do the patient no good–and expose him to unnecessary risks. (What we now know about Niacin is a recent, easy example. Billions wasted.)
    In our “for-profit health care system” a great many people are selling– and selling hard. This is the major reason why we undergo so many unnecessary treatments and take so many unnecessasy medications.
    Consumers are at the mercy of the sellers because the health care consumer hasn’t been to medical school, isn’t a medical reaseracher, and so isn’t a position to know that lowering his cholesterol will probably offer him no
    protection against death as a result of heart attack or stroke. We really don’t have good evidence that “bad cholesterol” Causes fatal cardiovascular diseases.
    (I’ve written 2 posts about this– search “Cholesterol Con”.
    Secondly, we overpay for everything. Pauly says we might be able to “squeeze” doctors’ incomes temporarily. . In fact, over time, we can bring physicians’ salaries down to European levels (adjusted for differences in cost of living and the fadt that her, physicians pay for a large share of their education. Though i would prefer simply to subsidize medical education, and pay doctors at European levels, adjusted for COL
    It’s interesting that surveys show that physicians in Europe are happier in their jobs than American doctors.
    They don’t much nearly as much money, don’t work such long hours, and their are fewer suicides, less depression, etc.
    Of course we can’t simply tell somone who is now earning $700,000 a year, next year you’re going to earn $600,000, and $500,000 the year after that. But over time
    we can lower procedures for specific services that are overpriced while riasing payment for services that involve talking to and listening ot the patient (chronic disease management, pallliative care)
    And, over time, we can reduce the total amount that we spend on physicians’ services– probably by 20% to 30%
    if we stop paying for services that offer no benefit, and stop over-paying for other services. In that scenario,U.S. doctors wouldn’t be working as many hours, and care would be safer. (These days too many surgeons do too many surgeries back to back, or with a 2 hour nap in between. As residents, they are trained to think of medicine as some sort of macho endurance test–which is extremely dangerous for patients.)
    Will young people stop applying to medical school if they know they are not likely to make more than, say, $200-$250,,000? (putting them in the top 1-2%)
    Some might. Those are the people who we really don’t want in medicine. They don’t see it s a profession, they see it as a “career move.” They should become bankers.
    They’ll do less harm.
    So from the outset, Pauly’s thesis– that health care has to be nearly as expensive as it is–skews his entire argment.
    He also exaggerates the benefits of medical technology (another reason why he thinks we can’t lower the cost of healthcare). He emphasizes that we have reduced heart disease, and fails to mention how and why: better diet and exercise, and use of very inexpensive medications–i.e. aspirin.
    (This is how is how Kaiser Permanente reduced deaths from heart disease in Northern California– the only place in the U.S. where heart disease is not the leading cuase of death.
    All of the stenting, angioplasties, etc are not the answer.
    When it comes ot the benefits of medical technology, we’ve reached a flat point on the curve. In the Sixties and Seventies we were making amazing progress . . but now most of the new drugs, devices and procedures are simply expensive versions of what we already had. “Me-too” products.
    If someone came up with a drug that stopped Alzheimer’s–that would be worth paying for. But drug companies don’t want to spend the money or take the risk of pursuing that type of reserach. (If they invested in the effort for 10 years, they might well come up empty-handed–even if they shared what they were learning, which in our for-profit system, they wouldn’t. )
    Sorry to go on at such length. (If you have a copy of Pauly’s full article and want to send it to me, I would read it.)

  3. Thanks for all the observations. I had not read all of Pauly’s piece, but at least he is not a hack.
    Like quite a few conservatives, he has been covered by
    community rated group insurance his entire adult life, but he still tries to make a case for medical underwriting.
    Richard Epstein, John McCain, Dick Cheney and others would all be rather shocked if they had to endure their own policy prescription.
    (Uwe Reinhardt has pointed this out quite deftly.)

    Incidentally I sent you a piece for your review on a yahoo.com email address…..Do you still receive email there, or is there another address I can use?

    bob hertz

  4. I couldn’t believe Holtz-Eakin would say something as ridiculous as community rating leads to $100,000 premiums. If it has any effect, it is in reducing the highest premiums because sick people are now in a pool with healthy people. The flip side for premiums going up for young adults (the cheapest) is that they go down for older people (the most expensive). I looked up his comment in the link, and what he says isn’t quite as terrible as you implied: he listed a series of reforms and said that when done together they lead to rapidly escalating premiums. One of these reforms is guaranteed issue, and when done without a mandate for coverage that really does drive premiums up and encourages actuarial death spirals, and death spirals are what you need to get $100,000 premiums.

    HOWEVER, even without guaranteed issue or community rating, actuarial death spirals happen, as long as you have a small risk pool with a few expensive people in it that the insurer can’t kick out once they’re in and can’t jack up premiums on (and if you allow an insurer to do those two things–kick people out once they get sick or jack their rates way up–you have more the illusion of health insurance than real insurance). It’s also worth noting that small risk pools are key to allowing death spirals in community rated insurance products as well, which again points to the need for a mandate (with subsidies), which we all know is exactly what is in the ACA.

    I’ve gone on too much already, so I won’t get into the dozens of other misrepresentations from Holtz-Eakin, some of which Maggie touches on.

    • Jonathan–

      Thanks for commenting.

      You’re right, Holtz Eakin also says that premiums will go down for older people. I didn’t get into that second half of his
      argument in part becuase of space consdieration on Health Insurance Org where I first posted it, and becuase for Holtz-Eakin
      lower premiums for older Americans doesn’t begin to make up for younger premiums for Younger Americans.
      He emphasizes skyrocketing costs for younger people hoping to scare them away from the Exchanges.
      He wants to see the Exchanges fail because he thinks “Obamacare” is a terrible idea.

  5. We Americans torment ourselves on how to get more young persons into health insurance pools.

    The Germans and Swiss solve it far more directly/

    In their systems, an insurance plan with more young persons and low claims must transfer money to the insurance plans with more old persons and higher claims.
    This is technically called retrospective risk adjustment.

    No one in the ACA had the temerity to propose this….it would cut deeply into insurance company profits.

    So we are left with these clumsy attempts to attract younger persons into each risk pool.

    • Bob–

      In Germany and Switzerland virtually everyone has insurance– including young people. The government has insurance companies with lower costs transfer money to insurance companies with more older people in order to even out the “risk” that companies
      face. Under the ACA we will be doing the same think with “risk adjustment” provisions.

      In addition attempts to draws younger people into the Exchanges are far from clumsy.
      Covering contraception, prenatal and materntiy virtually guarantees that young women will
      join– along with their husbands.

      The subsidies also will draw young people to the Exchanges. Most young people who are now uninsured will qualify for
      subsidies. Our experience in Massachusetts shows sthat young Americans will join.

  6. Good point about young women joining health plans.

    I am still concerned that a health plan with a high deductible AND subsidies can cost $200 a month, versus a penalty of $95 for doing nothing. Let’s see what happens.

  7. Bob–

    Thanks. I think that what the ACA means for young women will really tip the scales. (
    In the individual market and small group markets today few plans cover maternity.
    And covering contraception is Huge.
    In recent years, “the Pill” has become surprisingly expensive.
    Meanwhile, by convering contraception we save $3 for every $1 spent. (Unwanted pregnacies are much more expensive that contraception.) This is a win/ win for everyone –except, of course, the Bishops.

    I also think that young women will get their boyfriends as well as their husbands to sign up.
    Once women understand what the ACA offers, they will want their boyfriends to have it

    On deuctibles– In the Exchanges , no health plan can have a deductible over $2,000– and the deductible does not apply to preventive care. Co-pays in the Exchanges will be pretty low. (Insurers will be competing for young,
    healthy customers.) So very few young cusomters will come close to the $2,000 deductible.
    It will be interesting to see how the Exchange competition works out, but i’m pretty hopeful. (Given the fact that all plans will have to cover “essential benefits” and can’t cherry-pick, they will become commodities–all very much alike. They only way to stand out will to offer lower premiums and co-pays.

  8. I think it’s important to note that people with incomes between 300% and 400% of the federal poverty level (FPL) will have to spend 9.5% of their income for health insurance before subsidies kick in. In 2012, the federal poverty level income for a single person was $11,170 so 300% of the FPL equals annual income of $33,510. So, single people with income of 300% of the FPL will have to pay $3,183.45 for health insurance which is a lot more than the penalty which should remain an attractive alternative for those who have been healthy historically. Sure they can be in a serious accident tomorrow or be diagnosed with cancer next month but that’s not how they think. Moreover, healthcare related expenses, including insurance premiums, will only be deductible to the extent that they exceed 10% of income starting in 2013 so we’re looking at after tax dollars here. Any way you slice it, 9.5% of income is a lot of money for people in that income range especially if they live in a relatively expensive urban environment.

    It’s also important to point out that only 51% of the adult population 18 and older is married today as compared to 72% in 1960 according to Pew Research. With the penalty relatively modest, at least in the early years of the ACA, it will remain an attractive option for young, healthy people, especially if they are unmarried, in my opinion.

    • Barry–

      Our experience in Massachusetts suggests that you are wrong.
      Virtually everyone in Mass. signed up– including young people.

      I don’t know how many single 20-somethings and 30- somethings earning
      $33,150 you know. As it happens, I know a great many. (My children, their friends, & co-workers)

      They all want health insurance. They fully understand that they could be hit by a car
      tomorrow.

      $3,000 is not a huge amount to pay for insurance that gives you free preventive care plus peace of
      mind. Many young singles are self-employed. In that case, they will be able to deduct the premium
      on their income tax.

      In Switzerland, all citizens pay an average of 10% of income for heatlhcare. They are very
      satisifed with their system. (And it’s an excellent system).

      Young women, in particular, want the free contraception, pre-natal benefits
      and maternity coverage that they will have under the ACA. As you know, unmarried singles
      use contraception,and all too often often find themselves getting pregnant.

      No woman wants to worry about becoming pregnant and not having pre-natal care and maternity benefits.
      (Most young women believe in the “right to choose” but a great many younger women would not choose
      an abortion for themselves.)

      Finally young women care about their boyfriends (or husbands) and don’t want to worry about them
      being in an auto accident. For that reason, they will keep pushing them to buy insurance.

      In addition, mothers still have quite a bit of influence over 20-somethings and even 30-somethings.
      I know one mom who refused to let her 22-year-old daughter go on a cross-country trip until she bought
      health insurance for herself.
      The mother pointed out that she would be worried the entire time.

    • Barry–

      Please see my reply to Bob at 9:47.

      You were mistaken — a young person earning $33,000 would receive a subsidy.

      Also, it’s important to know that the income used to estimate premiums and subsidies
      is “modified adjusted gross income.”

      And see what I told Bob about “Enroll America”

      The same folks who brought out the vote for Obama are involved. They are very good at
      reaching young people, blacks, Latinos, and low-income Americans.

  9. Barry, I think that the $3145 a year for that person making $33,000 is on an after tax basis. I grant you there are not too many taxes on someone making $33000 a year, but there are some, and that will make the $3145 feel even worse.

    And those who pay the $3145 (about $260 a month) will get a plan with some deductibles and coinsurance. The out of pocket expense will be capped at this income but it could still bite pretty hard.

    I can see a family or single parent expecting a child being glad to sign up for health insurance with subsidies. I can see about 90% of single males not signing up at all.

    This is a recipe for an actuarial death spiral at some point.

    • Bob

      First of all, Barry was mistaken: a single individual under 40 earning $33,000
      would get a $740 subsidy and wind up paying $3009 a year in premiums
      — and this is if
      he lives in an areas where health care costs are “average.”
      he would get a subsidy of
      $1491 and still pay $3009 in premiums. See Kaiser’s health calculator based on Congressional Budget Office projections of premiums and subsidies)

      And if they are under 30, they can get a much less expensive high-deductible plan
      Very likely, many young men would go for that.

      Subsidies are based on “modified adjusted gross income.” If a young person puts money into a Keogh or IRA, has unreimbursed business expenses, or pays alimonty he might earn, say, $40,000 and have a $33,000 AGI.

      If he doesn’t have such expenses, and doesn’t itemize his AGI represents income AFTER he takes the standard deduction (around $5,500 for an individual.

      In that case, someone earning $38,500 would have an AGI of 33,000

      In that context, an annual premium of $3009 doesn’t seem such a burden.

      Moreover, a healthy young person is not likely to neeed healthcare other than preventive care. So he won’t have any co-pays and deductibles. If he does need more then preventive care, this is all the more reason why he really needs
      (and will want) health insurance.

      You’re right that young women will be quicker to sign up than young men.

      But in my experience 20-something young men don’t think they’re immortal. When
      it comes to the possibility of being in an accident, and their parents having to pay for
      their care, they understand how expensive healthcare is.

      Finally,as I suggest in my note to Barry, their girl-friends and mothers will nag them.
      And if they are eligible for a subsidy (most of those who are now uninsured will be) 90% of young men will sign up. The offer is just too good to turn down.

      Also the Commonwealth Fund points out that “Enroll America—a nonprofit that hopes to spend more than $100 million to encourage people to sign up—is going after those men with a bank-shot strategy. The group plans to get out information not only to young guys but also to their nagging moms.”Signing up the uninsured “will require campaign-style tactics, said Enroll America President Anne Filipic, a former Democratic National Committee deputy executive director and 2008 Obama campaign field director.” (If you recall they did a brilliant job of using young volunteers to bring out the vote for Obama.
      This is why he won: young people, Latinos, African Americans and low-income Americans came out. It’s the same demographic.

      “Enroll America was started with a push from the consumer group Families USA. The organization is funded by a wide range of groups, including health care industry officials with a stake in the success of enrollment such as hospitals, insurers, community health centers, Planned Parenthood women’s health centers, drug companies and major pharmacy chains” (They all have a major stake in making sure that young people enroll.)
      “Other groups are targeting young people with tactics that worked in the past. Calling on sports heroes is a popular technique. When Massachusetts expanded coverage, the state persuaded the 2006 Boston Red Sox to tout the new benefits. The Maryland advocacy group Health Care for All has used Ravens and Redskins players to promote Medicaid coverage, and an official said they will work together again. Vermont wants to deputize hockey players.

      Meanwhile, for $3000 young people will get a plan with NO deductibes and co-pays for the care they are most likely to use– preventive care.

      Bob, there wasn’t a death spiral in Massachusetts.

      Why do you possibly think there will be a “death spiral” nationwide? (This is just one of those catchphrases that conservatives like to use to scare people.)

      Over 98% of people in Mass. now have insurance.

      The Mass plan is very similar to the ACA, though the subsidies are not as good. (The ACA provides subsidies up to 400% of poverty, Mass up to 300% of poverty.
      Insurance is more expensive in Mass. than in any state in the union (this was before reform, and is still true because Mass.
      docs and hospitals charge so much. Per capita health spending in Mass is 15% higher than in the rest of the country.
      So young people pay even more than they would in other parts of the country. (though now premiums in Mass are beginning to come down.
      And in Mass. only the deductible is covered for preventive care–not co-pays.
      The penalty if you don’t buy insurance in Mass is higher– $1200 vs. $695, that’s the only difference that might make young people in Mass. more likely to buy insurance, but the fact that the ACA offers subsidies to more people, and no co-pays for preventive care, plus free contraception makes it more likely that young people will sign up for the ACA.
      .

    • barry-

      See my last (9:47) reply to Bob. You were mistaken on the numbers. They do get a
      subsidy. And the subsidy is based on modified AGI.

  10. I caught Avik Roy claiming in his blog where he sang the praises of the Swiss system that the Swiss do not have an individual mandate. I noticed he changed that claim a few months later. He has no credibility whatsoever.

    • Martha–

      Thanks for commenting.
      And I’m afraid you are right.
      Forbes needs fact-checkers. (At one time, they had great fact-checkers.)

  11. Maggie –

    I don’t think the Massachusetts experience will necessarily be replicated across the country for a couple of reasons. First, MA’s percentage of uninsured was already the lowest or second lowest in the country at the time of its 2006 reforms. Second, the biggest industries in MA – healthcare, education, high technology and state and local government pay pretty good salaries. The education level of the population is also well above average. By contrast, the largest industries in Florida, agriculture and tourism either pay poorly or have much more year-to-year variance in income. I think there are large numbers of people who just don’t think about this issue the same way that you do.

    The other issue that troubles me is that with guaranteed issue, many people think they can just wait until they get sick and buy insurance then knowing that they can’t be turned down. If they need surgery because of, say, a skiing accident, they can drop the insurance after they get their care. This sort of thing happened a lot in MA according to the former CEO of Harvard-Pilgrim Healthcare. This is why, at the very least, we need annual open enrollment periods like we have for Medicare with exceptions for circumstances like job loss, aging out of coverage on a parent’s policy and the like.

    At the same time, people who know they have health issues or a family history that suggests that they are at above average risk for developing health problems later are much more likely to buy insurance. So, the likelihood of adverse selection is high. Hopefully, as we gain actual experience with all this after the start of next year, we will be able to make necessary adjustments quickly to ensure that the system will be financially sustainable.

    • Barry–

      In states where wages are lower than in Massachusetts young people will be More Likely to sign up for insurance because they will be eligible for good subsidies.

      Surveys have shown that young people say that they don’t have health insurance, not because they don’t think they need it,but because they can’t afford it.

      But I agree that we will have to wait for actual experience before deciding whether we need to do something to discouarge people to wait until they become sick before buying
      insurance.

      (I would suggest raising the tax/fine. I don’t think we want to impose long waiting period before letting people who opted out buy insurance. The 28 year old who is suddenly diagnosed with a brain tumor needs help immediately– as does the young woman who becomes pregnant and discovers that her child is at risk.

      But if younger people are not signing up I definitely could see doubling the penalty in 2015. (I believe that, at some point, Mass. rose its penalty.)

  12. Maggie –

    In those surveys you mentioned, was there any mention of how these young people define affordable? My perception is that a young healthy male would define it in the $100-$150 per month range at most for a bronze level plan. On whether these folks will choose to buy coverage or pay the fine, I think you are placing your emphasis on the subsidies and I’m placing mine on the required out-of-pocket (after tax) cost which for those earning at least 300% of the FPL will be 9.5% of income. I know the Swiss accept paying 10% of income for health insurance but plenty of Americans don’t and won’t, in my opinion but we’ll see.

    When Charlie Baker was CEO of Harvard-Pilgrim Healthcare, he noted in one of his blog posts that people signing up for insurance just before they needed expensive care and then dropping the insurance soon after they got their care and recovered was six times what the company expected. The medical cost ratio on that subset of business was 600 percent! This is why we need an open enrollment period, at least starting in 2015 and a commitment to pay at least one year of premium after you sign up. Even Medicare beneficiaries who miss the 8 month window to sign up for Part B after they retire must wait until the next open enrollment period before they can enroll in it.

    I agree with you on the fine / tax / penalty for not buying insurance. It’s way too low.

  13. Barry is right that many, many persons will resist paying 10% of their income for health insurance.

    Here are a few reasons that come to mind:

    – When you are living from paycheck to paycheck, 10% more for anything is a big issue. A 10% increase in rent, or in fuel costs, or in gas prices are all worrisome. You might miss a meal.

    My impression of Switzerland is their lowest salaries are still enough to live on. Northern Europe in general has much more rent control and utility cost control than America.

    – I think there is resentment and jealousy of the still sizable number of Americans who get good insurance and pay next to nothing.

    I have read that up to 15 million Americans still pay nothing for employer coverage. Even a person who makes $60,000 a year and pays $250 month as their share of insurance is getting by for 5% of income.

    One of the questions I often ponder about American health care is this:

    — are we actually running out money to pay for health care?

    or

    — we actually do have plenty of money, but our governing class lacks the will and imagination to create new taxes and capture the needed wealth.

    • Bob–

      Virtually all middle-income people (with incomes in fairly wide band aroudn “median income” will be
      eligible for subsidies. They are not “liviing from paycheck to paycheck” and with the very generous subsidies , they will not be paying 10% of their income for healthcare.

      The only people living “form pay-check to paycheck” are low-income Americans–and they will receive very
      generous subsidies.

      Yes, there are far fewer truly poor people in Switzerland. Most are “middle-class” earning median income–not rich, but not poor.

      But as I explain above the subsidies take care of our poor and middle-class.

      The people who wont’ get subsidies are part of our upper-middle-class- the family of four that earnings $100,000 a year rather than $93,000 a year. If they have to buy their own insurance, they will be unhappy.
      But the fact is that the vast majority of people in that income bracket have employer-sponsered insurance –and so they get a subsidy from their employer.

      People who are jealous of those with employer-sponosored insurance should realize that even if those employees dont’ pay for it directly, they pay for it indirectly, in the form of lower wages. Employers who spend a great deal on benefits are less likely to give out raises.

      We don’t have enough money in this country to provide good health care for everyone unless we cut the waste.
      We overpay for drugs & devices. We overpay many specialists for procedures that don’t benefit patients. WE over-pay many hospitals. Reserach shows that $1 out of $3 of our heatlh care spending is squandered on over-paying and over-treatment that does not help patients.

      If we cut the waste , we can afford to provide good healthcare for everyone without significant tax increases.
      (But we do need to raise taxes for other reasons— to repair infrastructure, to improve education, more scholarhips for low-income and middle-income students so that they can go to college, reserach to address global warming, help for the poor so that children don’t go to bed hungry . . . .etc etc. We’re overspending on health care, and under-spending in many other important areas.

      The good news: the growth of health care spending has fallen sharply in the past 3 years. That’s both Medicare spending and private sector spending on health care. At this point, it’s close to growing no faster than GDP.
      That’s doable- and in the future, I’m quite certain that the Affordable Care ACt will rein in health care spending so that it’s growing more slowly than GDP.