Why Is Maggie Mahar Lying About Health Reform?
On November 9, Maggie Mahar is doing a book salon at Firedoglake on her book Money-Driven Medicine. I think it probably contains many useful facts, and even decided to order it last week from Amazon. For example, it correctly points out that the largest problems in the American health care system today are unnecessary procedures and overpayment for services. However, I now know that I will need to closely scrutinize its every word before accepting it as true. Why will it be hard to take this book at face value? Because Mahar has lately engaged in a complete flight of fancy about the proposed "public option."
She now exhuberantly and routinely describes the public option as "Medicare E (for everyone)" (1,2,3,4,5). This was before the rates tied to Medicare were removed, but even when they still existed, this was not an accurate characterization of the public "option." In the first place, she herself says: "At most, I'd estimate that 25% of the population will be able to choose the public plan in 2013." In my view this is not totally unreasonable, but it certainly contradicts her description. Her estimate is higher than the CBO's (10%) because she is considering who can legally join the public plan, not how many are expected to join the exchanges. She even makes what by itself is a valuable point: the CBO is not telling us that 10% of the public can legally join the public plan.
But the more important question is: how many actually will? Let's say that we had a public plan operating at near Medicare rates. CMS says its premiums would be about 11 percent lower than private premiums. Does that mean everyone would flock to the public plan? No. For one, there's another big factor that has to be taken into account in discussing consumer preferences: the provider network. For example, I can start an insurance plan in my backyard that pays at Medicare rates. No one will join it because no providers are willing to do business at those rates, unless I happen to have a pre-populated pool of customers at least somewhat comparable in size to Medicare's (43 million) to negotiate with. In fact, this is a big unsolved problem (1,2) that public option advocates have yet to address. But even assuming it can be dealt with, paying lower rates would certainly have an adverse effect on which providers accept the public option. (Today some providers even refuse Medicare itself.) That will impact consumer choices.
Indeed, if Mahar had paid more attention to the Commonwealth Fund whose work she cites in her articles, she would have noted Karen Davis's admonition that:
Unfortunately, as legislation has worked its way through congressional committees, the potential power of a public plan has been substantially eroded in three ways: by dropping the requirement that providers that receive Medicare payment also participate in the public plan; by requiring the U.S. Health and Human Services Secretary to negotiate provider payments rather than base prices on Medicare rates; and by restricting access to a public plan option to individuals and small firms. As a result, a strong public option is no longer a component of several bills now being debated in Congress.
And because the public "option" will not be a single payer system like Medicare, its administrative costs will not be as low, though they are expected to be lower than those of private insurance.
There is also no reason to believe that most who are legally eligible to enter the exchanges will do so. For individuals with employer sponsored health insurance, it would in general make no sense to purchase individual insurance on the exchanges any more than it would make sense to purchase individual insurance elsewhere. Administrative costs for individual plans are higher than for group negotatiated employer sponsored plans. It would certainly make sense for many individuals eligible for subsidies to join the exchanges, because in many cases the subsidies would outweigh the high cost of purchasing individual insurance. That is why Congress has limited the subsidies to those without access to employer provided coverage, and mandated that all except the tiniest employers provide such coverage. Arguments such as this are hence generally moot:
...anyone who becomes uninsured during the course of the year can join the Exchange. And even if their circumstances change (for instance they find a job that offers insurance), they can stick with the plan they chose in the Exchange.
Those purchasing individual insurance who are eligible for subsidies would have a clear incentive to join the exchanges. Most who currently purchase insurance individually are fairly well off, so this is a minority, but others would make the shift and the CBO did try to account for that. I wouldn't be suprised if the CBO figure is not exactly right, but there's no clear reason why it should be wildly inaccurate. Healthier people would seemingly have an incentive not to join the exchanges because of all the relatively unhealthy categories of people who would get subsidized in, thus raising premiums.
The full version and end of this blog post is available on ZBlogs. You will need to click the link twice since new visitors are redirected to the Emergency Funding Appeal.
I am, of course, not lying about Health Care reform.
If you read CBO director Elmendorf's letter to Charles Rangel where he suggests that only 30 million Americans will be in the h Exchange in 2019 (six years after reform begis) and that just 20% of the people eligible for the Insurance Exchange will choose the public plan, you would find that he has No basis for saying this. No numbers. No real analysis.
When Elmendorf explains why, in his opinion only 1/5 of the folks in the Exchange will choose the government plan, the paragraph is filled with "probably's." (I will be publishing a post quoting that pargraph very soon.)
The truth is that No One can guess what percentage of millions of Americans will choose a public plan three years from now. We don't know anything about the details of the public plan. Or the price. We know little about the private plans that will be competing.
Elmendorf is indulging in an exercise in mind-reading--guessing what millions of Americans will decide three years from now.
Why might he do this? At Harvard, where he got his degree in ecnomics, he studied with someone who is sometimes called "the dean of conservative economists." (Very smart, and very conservative)
Once he got to Washington, Elmendorf played a role in nixing the Clinton health plan, saying that it would be too expensive. (Can you begin to imagine how much less expensive universal coverage would have been in 1994!!!) He then worked with Greenspan, a Republican/libertarian former Ayn Rand enthusiast. (The Republicans ousted Paul Volcker and brought in Greenspan precisely because he was a REpublican. See my book Bull!)
It's only recently that Elmendorf went to the liberal Brookings Institute. By then it was clear that Bush was on his way out and that the Republican party was in trouble. But his conservative background-- and his general lack of enthusiasm for past and current attempts at health care reform--suggest that his conservative background may well color his thinking (just as my progressive background colors my thinking.)
But I don't use my blog to pretend that I know how many people will choose the public plan.
Elmendorf is using his postiion as CBO director to do just that. That's what bothers me.
[At this point, you might wonder: Why is this woman writing such a long comment in response to this post? The answer is that answering critics helps me clarify my thinking--and leads me ot do more research. So I guess I should thank you for providing this opportunity.}
Back to the subject at hand: because Elmendorf is CBO director, most reporters and bloggers assumed he must have some facts and figures to back up his wild guesstimate.
Thus you have now read that only 30 million people will be in the Exchange and that only a small number will pick the public plan in a great many newspapers and on a great many blogs. You have also read that the public plan will have little clout in the market--because it will be so small.
As a journalist I've learned to go back to original sources. You really can't believe what you read in the newspapers. (Most reporters are on deadline--especially these days. They don't have a lot of time to do primary research.And once a piece of misinformation gets into the media and is repeated, it is treated as fact .
I'm very lucky. I can spend as much time as I want to resarching posts. I'd rather write fewer, in-depth peices--and that's fine with my employer (a non-profit Foundation.) That was also true when I was at Barron's, so I'm used to working this way.
And when I heard that Elmendorf said only 30 million would be in the Exchange in 2019, and that the public plan would be tiny and more expensive than private plans, I wondered: how did he come up with those numbers?
So I went to the source where he laid out these figures, a letter he wrote to Rangel in late October. There I found all of the "probably's"--
and no facts to justify his conclusion.
He just assumes that because the public plan is a governement plan, it "probably" will make no real effort to control costs or utilization--which makes no sense whatsoever. Medicare makes a real effort to control costs (see below) and going forward, Medicare plans to slash some fees beginning next year (see blow). The public plan will too.
Moreover, what we know with certainty is that a public family plan will be at least $2000 less expensive because it won't have the private sector's administratie costs. (This number is from Commonwealth.) The public plan will not have to lobby. It will not spend much (if anything) on marketing and advertising. EVeryone will know that it exists, and it will get much free advertising in the many,many stories that will be written about it in the press, on blogs, plus stories on television.
The public plan will not need to pay executives mutli-million-dollar salaries.
And the public plan will not have to provide profits for investors. So its administrative costs will be much, much lower.
Commonwealth Fund offers good analysis on this point.
Finally, the public plan will not be cherry-picking. By contrast, private insurers will continue to spend vaast sums trying to figure out how to avoid the sick. One of the things we need to figure out over the next 3 years is how to regulate them so that it is very, very difficult for them to do that.
It can be done. And we have a brain trust in the White House (White House budget director Peter Orszag and his healthcare adviser, Zeke Emanuel, who) no doubt, will put their minds to this problem.
Because it's so unusual to have a brain trust in the White House,, most pundits forget that we actually have people in the administration who know an enormous amount about healthcare, and, to be perfectly candid, are much smarter than all but the most brilliant reporters and pundits.
We also know that the public plan will be modeled on Medicare, and that it will incorporate the Medicare reforms that have already begun and will continue for the next three years--lowering costs while lifting quality, Again go to the primary source. Read the legislation. Don't read what people say about the legislation (most haven't read it and are repeating others who haven't read it) .
Read the legislation for yourself. See sections on Medicare reform and sections on the public option. See what Obama has said about the public option. See what White House Budget Direct Peter Orszag has written about Medicare reform and health care reform. (He will be pivotal in how reform and the public plan are implemented.)
As for who will be in the public plan: 7% of Americans now buy individual coverage in the private market. They are relatively affluent and healthy (otherwise they wouldn't be able to get individual insurance in the private market. Half make over $56,000 (See EBRI on this).
Meanwhile, the poorest of the uninsured will go into Medicaid when it expands in 2013. (Elmendorf acknowledges this in his letter to Rangel) This means that the formerly uninsured in the Exchange (and in the public plan) will not be the poorest--and by and large not the sickest (Very poor Americans are generally sicker than the rest of us.)
A large percentage of 25-34-year olds are currently uninsured. They will be able to go into the Exchange. Some 20-somethings will choose a private plan for "young invincibles"
but as they get into their late 20 and 30s, most young adults are sensible enough to realize that
they are not immortal. Many want to start families. They realize they need real insurance.
A fair number will pick the public plan. No one can estimate how many. But, however many, this will be a relatively healthy group joining the pool.
In addition, the employees and owners of small business will be eligible for the public plan.
Some will be affluent, some will be low-income.
Some will be older, some younger. By the second year of reform (2014) people working for businesses with up to 30 employees will be eligible. That's a lot of people.
Much has been made of the fact the HHS will have to negotiate rates with providers.
There is no reason to suspect that the public plan won't insist on reasonable rates. It's likely to pay far less than private insurers--even if, in some cases, it pays slightly more than Medicare.
First of all, Medicare is already beginning to cut fees. Next year, it plans to cut fees for CT scans and MRIs by as much as 38%--as well as fee for docs who buy the equipment and do the tests in their offices. (These docs recommend twice as many tests.)
And Medicare has proposed cutting fees to cardioloigsts by 6% next year--while raising fees to primary care docs by 4% as of January.
Congress will have a chance to weigh in on this--but only 60 days --betwteen now and Jan. 1
Expect more changes in teh fee scedule over the next 3 years.
PRivate insurers have said they will follow Medicare's lead. They just want Medicare to provide political cover.
So in 2013, when the public plan is negotiating fees, it will be negotiating in an environment where many fees will be lower, while payement for the prevent services and chronic disease management will be higher. Net, net, Medicare will be saving money.
And, in 2013, the public plan will be negotiating in an enviroment where costs are lower and reimbursements are more rational.
Today, private insurers pay some brand-name hospitals 15% to 25% more than it costs them (or should cost them) to care for patients. On average, Medicare pays 98% of hospital costs. A
great many hospitals (over 40% if memory serves) make a profit on Medicare payments. See an excelletn post on my blog by Pat S. laying outthe numbers.
So if the public plan pays some hospital 7% more than Medicare, it still will be paying far less than private insurers --which means its premiums will be higher.
Why will hospitals accept the public plans lower rates? Because the public plan will not be tiny and the people in the plan will not be extremely poor patients (who are more costly to care for.(Those patients will be in the expanded Medicaid)
The public plan will be large enough that very few--if any-- hospitals will be able to see "we don't need to be in the public plan's network."
Some doctors will reject the public plan--but fewer than you think. In Manhattan, I find that Park Avenue specialists are in my insurers' network and take the insurers' payments--which are good, but not nearly as much as NY specialists who don't take insurance charge.
Moreover, I can get an appointment with a specialist even if I have never seen him/her-usually in 2-5 days.
This suggests that NY specialists need patients. The vast majority take Medicare--even though it pays significanlty less than prviate insurers.
My research suggests, that conservaitvely, 17-18% of the population will be in the Exchange during the first two years of reform. A less conservative estimate would say up to 25%. I really don't know. But I do know that the Exchange plans to open to more Americans each year,
Who will be in te Exchange? The relatively affluent self-employed who now buy their own insurance, and many of the employees and owners of small business will make the pool in the Exchange a cross-section of low-income middle-class and upper-middle class Americans --many relatively young and healthy.
Elmendorf's own numbers (from the letter to Rangel) suggest that in 2013-2014 some 49 million Americans will be not just eligible for the Exchange but in the Exchange. (He acknowledges that those who now buy their own insurance (21 million Americans) will be in the Exchange and suggests that 7 million employees and oweners from small businesses will be in there. It's hard to estimate how many of the uninsured will choose the Exchange-- some will be in Medicaid and some of the uninsured will choose to pay the penalty and not buy insurance. But, based on what Elmendorf himself says, 21 million is a conservative estimate.
That takes us to 49 million Americans- roughly 17% to 18% of the population, and all of the hard numbers that I can find suggests they'll be in the Exchange at the beginning 2013-2014.
Meanwhile, Elmendorf is talking about 30 million in the Exchange 5 to 6 years later-in 2019. That makes no sense.
The legislation makes it clear that "in subsequent years" the Exchange will be open to more Americans until it is open to all Americans. Staff of one House committee told me that kt's likely that employees of large corporations who now have employer-based insurance will be able to join the exchange "in 4 or 5 years."
Again, that's just a guesstimate.
There is much that we don't know about how this will play out.
But there is no reason to assume that Elmendorf's very pessimistic guesstimates are right--
November 6, 2009 12:32 AM | Reply | Permalink