I got to this Matt Yglesias post and this Ezra Klein post via this Joke Line post (which sends you on a wild goose chase in search of this Ezra post) via this Lawyers Guns and Money post. I’ll return to Joke Line if I get a hankering to whack a piiñata.
But in the meantime, I’m wondering why Big Media Matt and Ezra don’t ever use the word, "profit"?
Both, you see, struggle to talk about how cool insurance companies are and how they could be the route to huge cost savings. Matt, apparently taking issue with this post (which never claimed identifying Liz Fowler’s role in the Max Tax was a "big scoop"), uses two farcical hypothetical examples to suggest that it’s not a bad thing for our public legislature to be proposing legislation written by private industry. First, he argues that a plan that uses public funds to improve bus routes would make both bus riders and bus drivers happier, which would be a good use of tax dollars.
Well, for starters you would want the buses to run more frequently. That would require, among other things, additional buses and additional bus drivers. That’s something the union representing bus drivers would like, and also something that companies that build buses would like. You could even imagine such a plan being hatched in close collaboration with the Transit Worker’s Union and the insidious forces of Big Bus. That, however, wouldn’t make the plan bad for New York City bus riders. It would be good for New York City bus riders. The city would be using tax dollars to give more buses to bus riders—it’s win-win for bus riders and bus drivers and bus makers all.
Note, first of all, how hilariously in-apt this analogy is. He’s talking about NY Transit–run by the public benefit corporation MTA and ultimately accountable to elected officials (the private parts of which, though, have a history of paying bus workers less money for the same work). He’s talking about a highly regulated monopoly. So it’d be a great example to use if we were discussing implementing a government health service, or at the very least a public plan. But of course we’re not. So in Matt’s first analogy, he can avoid discussing whether "Big Bus" (as he calls it) would have objectives that might differ from those of both the riders and the workers, as well as the clout to piggyback those objectives on top of the plan to increase route frequency.
Then Matt–a 28-year old with a steady well-paying job and, AFAIK, no family–uses his own example as a stand-in for all potential consumers of health care.
Now think about health care. The Center for American Progress offers me some pretty good health insurance through CareFirst BlueCross BlueShield. That’s pretty good for CareFirst. If CAP dropped its health plan, CareFirst would lose money. We’d be sticking it to the insurance industry. On the other hand, I’d also lose my health insurance. Which would be kind of unfortunate for me. But say CAP did decide to stick it to CareFirst by dropping my insurance. Now as an uninsured American, I can live in one of two universes. In one universe, the one we live in, it’s just not feasible to buy comprehensive health insurance on the individual market. That’s bad for me. In another universe, the one Max Baucus wants us to live in, the government will regulate the individual insurance market in a way that ensures that purchasing comprehensive individual health insurance is possible. He’s also going to make sure that many people (I make too much money though, so not me) get financial assistance from the government in order to make it more possible to afford insurance.
There’s a lot that’s wrong with this analogy, too. The depiction of CAP as the agent in this equation, not CareFirst. The neglect of the scenario in which the newly unemployed person had to get insurance. The description of health insurance–and not health care–as the ultimate objective here.
But most of all, Matt forgets to talk about the mandate. He simply doesn’t deal with the fact that the MaxTax requires middle class families totally unlike himself in terms of income and flexibility to spend up to 13% of their income for premiums that don’t guarantee, in exchange, that they won’t go deeply into debt if they have a significant–but not catastrophic–medical event. He’s not talking about the fact that the MaxTax requires people to pay far more to insure their family than to pay their federal and state taxes. He’s not talking about the fact that for some middle class families, the government is requiring an expense that is simply not affordable. He’s not talking about how little there is in this plan to limit the amount that the federal government and captive tax payers will pay to Liz Fowler’s former employer. He’s not talking about the huge incentives Liz Fowler’s former employer will have to game a proposed system that would, ultimately, weaken the few controls on Liz Fowler’s former employer that currently exist.
Matt’s not talking about the fact that Liz Fowler’s plan requires participation but does not offer, in exchange, any limits on the profits the health insurance companies will get under the system.
Now move onto Ezra. Ezra’s got a great little formula claiming to account for the only ways to control costs.
As people frequently say, health-care reform won’t work if costs continue to shoot up and insurance becomes unaffordable. The cost of health insurance, however, is really another way of saying "the cost of health care." In the ’90s, insurers managed to hold costs down, as you can see in the Kaiser graph atop this post. But people hated them for it, as they perceived, not entirely inaccurately, that they were keeping costs down by making it harder to access care (which is to say, harder to give money to providers). So they stopped doing it and costs began to shoot back up.
Conversely, Medicare keeps costs down somewhat better than private insurers, though not as well as private insurers did in the ’90s, and they do it by paying providers less money. Providers hate them for it, and that’s why doctors and hospitals and drug companies and device manufacturers have been so aggressive in opposing a public plan able to use Medicare rates. It’s also why Medicare’s growth rate is totally unsustainable — Congress keeps delaying the cuts in doctor’s payments that the Medicare law requires.
If you want cost control, though, you’re going to have to follow through on one of these strategies, and that’s going to mean making providers and patients really angry. Both like the health system better when it’s got unlimited amounts of money flowing through it.
Now, I’m really curious if Ezra has hard data to prove that the increase in the rate of cost increases came from more open access to care in the last several years.
But people hated them for it, as they perceived, not entirely inaccurately, that they were keeping costs down by making it harder to access care (which is to say, harder to give money to providers). So they stopped doing it and costs began to shoot back up.
I, for one, don’t know anyone who has more access to health care then they had in the 1990s. But maybe that’s because I live in MI. Maybe health care access really has gone up, in spite of the rising numbers of rescissions and outright denials of care.
But skip that part and note how quickly Ezra conflates "health care" with "health insurance," thereby treating the "insurance" part as a mere pass-through that doesn’t affect cost. Note that Ezra doesn’t consider whether there’s something else–in addition to lower reimbursements to providers–that keeps Medicare’s costs (as opposed to rate of increase) lower. Note that Ezra doesn’t compare outcomes.
Ezra claims that the only two ways to control costs are to limit access to care and/or to limit reimbursement to providers.
Because, I guess, it would be too radical an idea to limit reimbursement to insurers? Or too radical an idea to avoid paying the profit that insurers, as private companies, must charge, or paying the overhead required to make that profit?
Matt and Ezra both invent nice little stories where we shouldn’t worry or even pay attention to the role–and the profits–that the insurance companies are making here.
But that doesn’t change the fact that insurance profits–and particularly the MaxTax unwillingness to even consider limiting them–are one of the things that makes the MaxTax fundamentally unaffordable and unworkable in terms of containing costs.
Update: To be fair to Matt and Ezra, I am harping on their neglect of profit in this post. In other posts of theirs, they have dealt with profit (Matt hits it here, and here, for example and Ezra–in a post that pretty much makes the points I make here–here).
Update: Ezra has a very fair post on the role of profit in insurance here. Thanks, Ezra, for putting this out there.