January 3, 2007
Some Questions (Answered) About the Wyden Healthcare Plan
Kari Chisholm of “Stand Tall for America”, a web-based effort founded to promote Oregon Senator Ron Wyden’s universal healthcare plan, answers a few questions about the Wyden plan put forth by me in the comments section of the Virginia Progressive blog. (The Wyden Plan is a federal proposal different from the Rhode Island small business health insurance plan, a state-level proposal also introduced last month). My original questions are in bold. Mr. Chisholm's answers are in italics.
The Wyden Plan begins from the radically simple notion of decoupling health insurance from employment. For the first two years, Senator Wyden is proposing that employers increase the wages and salaries of their employees using monies originally allocated for the purchase of group health plans. Employees would use their pay increases to purchase individual health insurance policies. Changes in the tax code and insurance regulation would be enacted to make individual insurance purchases feasible. That's all good. However, after year two, Senator Wyden wants to begin paying for his system through a payroll-style tax. That's not so good. The post-year two payroll tax was the subject of my first question…
1. The plan, as I understand it from the Los Angeles Times summary, has people directly buying their own insurance in years 1 and 2. Why not keep with this system after year 2 and let people spend their own healthcare dollars (perhaps through a HSA) into the future? After taking employers mostly out of the mix for two years, what’s the motivation for shoehorning them back in?
People will buy their own insurance long after years 1 and 2. That’s the crux of the plan. Employers will be out - forever. After year 2, employers will pay a per-person contribution to the health care system - that roughly approximates to 25% of the cost of health care. This cuts the cost of health care for those responsible folks who have been paying for it until now; while getting a contribution from the cheapskates (Wal-Mart and friends.)
(Me again: But employers aren’t out if they are required to pay a new tax. This new tax means that after year two, most individuals will experience a sudden drop in the amount of healthcare they can afford per-hour of work. In years one and two, people will spend a certain percentage of their incomes on healthcare. After year two, across-the-board pay-cuts will be needed to pay for the new tax, even though healthcare costs will likely remain about the same. Workers won’t get as much healthcare per dollar collected by the government as they were getting per dollar paid to them directly because much of the new tax-stream will be going to subsidize healthcare for the poor. For most folks, a better solution than a payroll tax would be to allow tax-breaks for individuals and employers for monies paid into HSAs, and to allow individuals to take tax-breaks for purchasing high-deductible insurance.
Now, if you want to argue that we need a better subsidized healthcare system for the poor in this country, that is a perfectly legitimate argument, but it is a separate argument from how to provide health insurance to people that could afford it already, if not for the strange system of health insurance regulation that currently exists in America.
2. How much of the supposed cost savings comes from price controls enforced by “keying” rates to Blue Cross? Price controls tend to have adverse consequences. Is this covered in the Lewin report somewhere?
There aren’t price controls in the system. There are some administrative cost controls, and otherwise the savings come from the increased fluidity in the market. As individuals are able to shop, we’ll see the end of double-digit inflation.
(Me again: There may not be overt price controls in the system, but given recent local history, some of us hardy Rhode Islanders have to be skeptical about a government program that includes granting a particular insurance company special status. The government has a tendency to make some very heavy-handed regulation -- including backdoor price controls -- a condition of continuing that special staus. And some early supporters of Senator Wyden's plan (like Ezra Klein of the American Prospect) openly admit they like the plan because they see it as a good first step towards ever-increasing regulation of healthcare into the future...
That said, any sort of coherent, national structure opens the door to serious cost containment mechanisms down the road.If Mr. Klein doesn't mean price controls and rationing when he talks about "serious cost containment mechanisms", then what does he mean?)
3. Is a modification of the community rating system, where people who take advantage of preventative care and routine check-ups get lower rates (if there is really merit to these programs, individuals utilizing these programs should incur lower cost in the future, right?) something that should be considered?
I’m not fully versed on it yet, but there will be some sort of premium reductions for people who participate in wellness and prevention programs. Certainly, if you don’t smoke, you’ll get a premium reduction.
(Me again: I would urge designers of the plan are considering a health-savings account component to pay for the wellness/prevention programs. If a large number of people are utilizing wellness and preventative care, then both doctors and patients benefit by dealing with one another directly, instead of through an insurance company.)