Obama's Healthcare Speech

Katie and I didn't have a chance to catch this evenings speach live so we read it together before going to be last night. This is the only reading we've done so far on Obama's proposals and what you're about to read is based entirely on that speech. You can be sure that I'll be doing more reading, both from those who are support and oppose this bill but for now, I'm mulling over what was said during the speech. And, as always, the devil is in the details. We've all seen good ideas get ground into worthless laws by the legislative process. The specifics of the bill (which I haven't seen yet) could make the intentions expressed by the President into a unhelpful legal mess.

Using lists as a crutch, here are my thoughts:

• Federal Cost Controls I think that our national deficit is a very significant problem that seems to be commonly overlooked when it comes to legislation. I'm a member of the generation that, unless something is done, will literally be paying the consequences of our governments overspending and want something done to address the deficit sooner rather than later. I am glad that the President wants to include provisions in the bill to require the program not add to our federal deficit and if the savings the bill is intended to produce don't arrive, then it would require cuts in the budget to keep the plan budget-neutral. Not knowing any details, I'm skeptical of the level of efficiencies to be gained through the other aspects of his proposal but I am quite glad to hear that there are concrete and realistic measures being taken to keep this program from growing out of control.
• Patient Cost Controls I was most surprised to hear the President propose a requirement for annual out-of-pocket maximums and removal of lifetime maximums from insurance policies. As a patient this is good news but it is not clear to me what the long-term consequences of this will be. Insurance companies have used things like a lifetime maximum to prevent a few patients from costing the company an extra-ordinary amount of money due to having to cover expensive treatments. This is another piece of the puzzle that prevents insurance companies from only insuring the healthy (see below) and because of that, I'm generally in favor of it. There's no such thing as a free lunch, though, and I wonder how this will play out over time.
• Required Coverage I like both sides of this coin, both requiring nearly everybody to buy health insurance and requiring insurance companies to ignore "pre-existing conditions" when writing policies. These two items go together, hand-and-glove. As the President said, many insurance companies have (logically) sought to reduce their liability by trying to only insure the healthiest individuals. By removing the ability to deny coverage to anybody based on pre-existing conditions (that is, things the insurance companies know will cost them money) this bill would force the insurance industry to treat all of us like potential customers. By requiring everybody to have insurance, we make nearly our entire country the customer-base for these companies which should be something they like. They just can't pick and choose anymore and have to treat us all the same. This is a big first step in divorcing health insurance from our employers which should give us, the workers, more security by making it easier to switch employers.
• Market Forces and Public Option The key to making me happy with a public option is that it is expected to operate more like a non-profit rather than a corporation subsidized by tax-payer dollars. This seems like a great idea to me; fighting the profit-driven insurance companies with a non-profit, patient-oriented entity. If a for-profit company can offer policies that are competitive with the public non-profit policies, then they deserve the money they earn. If they value they add is not enough to justify the price of their policies or if they become solely profit-oriented at the cost of making policy-holders satisfied, then they'll lose business. More generally, I see no problem in having for-profit businesses compete with non-profits even if in this case the non-profit is a government entity. The playing field is level as long as this government non-profit must be self-sufficient. I'm not totally clear on this but Obama said in his speech "Let me be clear - it would only be an option for those who don't have insurance. No one would be forced to choose it...." If my employer offers health insurance but I find that the public option is better for me, can I choose it? I think I need to be able to do that for there to be a true marketplace where choices force competition. In short, it seems like the public option might be a good way of introducing more market forces.
• Waste and Increased Efficiencies The $900 billion price tag (over ten years) for this reform is intended to be paid for by reducing waste and inefficiencies in the current system. Specifically, this alleged waste resides in the way Medicare/Medicaid is handled by the insurance companies in their attempt to increase profits. I'm skeptical of the amount of waste alleged in the President's speech but I'm not in a good position to know one way or the other. I hope the President has good data in this regard because the ability for this reform to work well for all relies on these savings. As the President said, if these savings don't materialize, expenses have to get slashed and the reform gets gutted.
• Subsidies From what I've read, if don't get insurance through your workplace and the open-market (with both the traditional for-profit insurance companies and the public non-profit company) can't offer an affordable policy, then a tax credit will be given to you which I assume is intended to make the policies affordable for low income earners. There is also a "hardship waiver" for individuals. I'm confused by this. Does this mean that as we move down the income scale the tax credit increases but insurance is still required until a given (very low) income level where the requirement to carry insurance is removed? If this is the case, I hope that the tax credits stop at that level as well.
• Uninsured There will still be uninsured living in the US. The President made a point of saying that the insurance reform will not help illegal immigrants and he also said that there will be a "hardship waiver" for those who just can't afford health insurance. There is nothing in the speech about hospitals being allowed to turn away uninsured so I'm assuming that those that are insured will be indirectly subsidizing those that aren't insured when they go to the hospital. (Hospitals make up the money they lose on non-paying patients by raising the prices over-all for paying patients. Its the same way stores make up money lost to theft; they raise the prices on the paying customers to cover the loss). The percentage of uninsured needs to be very low for this to work.

Katie and I came up with a few items of note that this bill didn't seem to address:

• Health Insurance Complexity As you've heard me rant about before, right now our health insurance system is quite complex. There is very little transparency in pricing, it is hard to shop around, billing overhead is significant for most providers, and the whole in-network/out-of-network stuff can drive you crazy. I heard nothing in the President's proposal to make any of this simpler. Whether you have a private or public insurance plan it sounds like you'll still be jumping through the same hoops. Providers will still have a mountain of paperwork to deal with, patients will still have to try to wade through bureaucracies to figure out how much a given procedure will end up cost them. I haven't had any personal experience with Medicare/Medicaid so I don't know if having the government as the insurer makes the process easier but I doubt it.
• Healthy Living There didn't seem to be any effort to include in the bill some kind of provision to encourage us as citizens to live healthier lifestyles. Legislation like this is not easy to write but I can't recall anything the President said that would encourage people to make better lifestyle choices. There was some talk about encouraging marketplace competition so maybe insurers will come up with a way to encourage us to reduce their costs by going through some kind of wellness program. Stealing from Michael Pollan, I would love to see our government overhaul the Farm Bill in such a way that it was not so cattle/grain/pig-centric. Are their good reasons for not subsidizing fruits and vegetables instead of corn which often gets made into either cattle-feed or corn syrup?

The big take-away: health insurance will be required by law just like auto insurance is. For those who already have insurance, the cost of complying with this law should not increase and may decrease (depending on how effective this new insurance market works and other devilish details). For those currently without insurance, this will be an increased cost that there won't be any legal way around. I don't know if, on average, the dollars spent on health-care per person will increase or decrease. The hope is that by growing the market and forcing it to run more efficiently (by introducing a public non-profit into the competition) that the average will stay roughly the same while providing insurance to many more people. In short, economies of scale might just make this a win-win.