Health Care: A Reader Request

By , 27 October, 2009, 1 Comment

A reader emailed yesterday asking what I made of Harry Reid’s decision to bring the public option back from the dead, and whether I could explain the politics and policy in lay terms. Here’s what I wrote [some day-after edits in parens]:

Basically, the various committees in the Senate and the House have each developed their own bills, which have passed the committee’s own votes. Harry Reid, as Senate leader, gets to take those bills and combine them into a NEW bill, which the whole Senate then votes on. It has to get 60 votes to pass a [procedural] barrier called cloture. Basically, 60 Sens vote for it, and after that, the Senate has 30 hours before it has to pass the bill or not. During those 30 hours, they can consider amendments relevant to the bill but cannot consider any other policy matters. And on those amendments, only 51 votes are needed.

Once the full Senate passes the bill, that version goes back to the House, where they can either pass it as is, OR if they tweak it too, the full Senate has to re-vote on it. That can be dangerous, because the House is further left than the Senate and is likely to add things the Senate won’t pass. So Reid is likely to try and manage the negotiations such that the Senate votes on the bill in a form the House can quickly pass and send straight to the Prez. It seems that the Schumer opt-out version of the pub-op is the one that can potentially get through both House and Senate.

How can it get through the Senate? Two ways–either Reid knows of a few senators who will vote for it but haven’t said so yet, in which case, he writes it INTO the bill he brings to the floor and it gets 60 votes at cloture, after which they tweak/amend some and its over. OR he can only get the 50+ votes for it we know about right now in which case he DOESN’T put it in. They get 60 votes cloture on a bill sans public option, and then introduce the pub-op AS an amendment, at which point they only need to get 51.

On the policy of this [opt-out] version of the pub-option: I’m not a fan but it’s better than the Snowe trigger compromise.

One of the big problems with health care markets right now is that they are too localized, with there just being one or two providers in each state. It’s BETTER to override states rights in this case to get a giant national market where all those providers have to compete with one another–competition breeds innovation and lowers cost. A strong public option, because it would be national and have national-scale efficiencies would FORCE all the state-level insurance companies to operate AS THOUGH they were national anyway. Granted, the more centrist bill I preferred would’ve achieved the same goal at NO taxpayer expense simply by letting all the insurance firms from each state trade in all the other states too, but that’s water under the bridge at this point.

Both the trigger compromise and the opt-out compromise [and the opt-in compromise that’s somewhere between them] undercut this major benefit of a public option by tying it to particular local markets. However, the trigger compromise [and the opt-in] is [are] worse because they tie that localization to health risk too–the only places where the public option would get ‘triggered’ would be the sickest, most expensive places, where costs are naturally high. And the people who would sign up would be the poorest people in that market too. So basically it would just be taxpayers directly paying for the care of the sickest and poorest.

I’m a good liberal, so I don’t have an intrinsic problem with that BUT we already have a program to pay for care for the very poorest and uninsurable–it’s called Medicaid. There’s no reason to just rip apart the whole system to expand Medicaid. Moreover, because the public option in a triggered system would only include the highest risk people, it wouldn’t be able to reduce costs because the whole way that insurers reduce costs is by balancing the premiums from healthy people against the medical bills of the sick. Unlike Medicaid, which pays for direct care. So this would be much worse on the public fist than the opt-out. [The opt-in, I think, works the same way–the people who opt-in would be the same folks who would get triggered in]

Why? The opt-out starts out as a national public option, and only changes to a state system if a state–its healthy and sick, rich and poor citizens combined–votes to do so. Because, as first implemented, the public option will affect the market for everyone, not just the sick and poor, it will only get ‘repealed’ by certain states if rich and poor alike are dissatisfied with it, and that’s not likely. It will still cost money, but it will be marginally less disastrous from a deficit perspective than the trigger. So of the compromises on the table right now, it is the best.

However, ALL of the above assumes that all the people in all the markets buy insurance as the mandate dictates. But who is to stop you from just disobeying the mandate? It’s not a federal crime to do so, just a taxable offense. And the fine for not buying is so low (in the 100s of dollars) that many healthy people, who can afford their own care since they have so little of it, will just not buy. Since all insurance systems, public and private, need healthy people’s premiums to pay for sick people’s care, healthy people not buying (and thus failing to drive down costs to an affordable level for the sick) is a big problem. Indeed, it’s precisely the problem we have now. By reducing the penalities/fines to almost nil, they’ve basically insured that we get an expansion of the insurance market to include a pub-op that we, the People, will have to pay for without the attendant benefit–and professed goal–of actually expanding coverage.

If they want to salvage this into meaningful policy and not waste my tax dollars on maintaining the status quo, they should increase the penalties and pass the opt-out.

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