Monday, March 26, 2012

Healthcare - The Left

The Supreme Court began its first day of hearing arguments on the Patient Protection and Affordable Care Act, popularly coined "Obamacare" by the Republicans.  I will refer to this by its proper acronym PPACA from here-on... you don't have to remember that here; just remember that if I use some weird acronym that might remind you of alpacas: I'm referring to this 2010 healthcare law.  This post is intended to accompany my other post (intended to be read before this post) which delves into the Republican proposals from back in 2010.

PPACA has many traits which I support and believe represent a sound long-term approach, but yet I anticipate (and somewhat hope) that the Supreme Court will overturn its individual mandate -- a key element of the entire bill.  Before I explain just why I take such a contrasting view I'll first delve into some of the positives that the individual mandate does indeed provide:

The Pros

The key issue with PPACA being challenged in the Supreme Court is the so-called "Individual Mandate", which requires every U.S. citizen to obtain health insurance or face penalty.  Now this admittedly provides benefits:

Today, those receiving medical treatment not covered by insurance are effectively covered by the government.  Note that people in this grouping can include those denied coverage (such as due to preexisting conditions), those whom can't afford coverage, and even those with insurance but whose bills have overrun what insurance will pay for.  It can also include those voluntarily without insurance, which can include healthy people who choose not to pay for insurance as they know they only rarely get sick & they deem themselves unlikely to get injured.  But we, the Taxpayers, pay their bills under our current system.

If we require the poor to get insurance: the insurance companies won't voluntarily give them a discount; we must either directly subsidize it or offer the insurance companies another revenue source.  Similarly, those with preexisting conditions or those whom overrun their coverage will also bring additional costs to the insurance companies: a government has no right to force a private company to accept bad customers, and the insurance companies rightly have a claim for these groups to be either subsidized and/or for there to be a strong revenue stream to provide an offset in these additional costs.

By requiring everyone to be insured: the taxpayer is effectively taken off the hook.  The healthy are now forced into the insurance pool, their payments offsetting the insurance companies' costs of provided for the more sick & those with injuries.  There may also still be some subsidies to provide a balance with the additional costs of companies covering the higher-cost groups, but there can still be savings to be had by leveraging the insurance companies' abilities to fine-tune their apparatus.

An individual mandate is actually a free market option.  It gets government out of figuring out how to cover the uninsured & instead gets the insurance companies motivated to figure out how to do it.

The Cons

First: no, there aren't death panels.  No, it isn't the biggest tax increase in world history.  No, this isn't Big Brother watching your every move and listening to every heartbeat.  Pretty much any soundbyte you've heard is likely to be false.  Take it from someone who doesn't support what you might call Obamacare: if you're going to oppose it- at least opposite it based on facts and not misinformation.

While I am ideologically aligned with the more Conservative approach of Darwinism, in practice the PPACA is actually the better deal as compared to the alternatives that have been offered thus far from the GOP.  But there's another side of the Individual Mandate: can we, under our current legal system, mandate a person to purchase a commercial product?

My opinion is no, we cannot.  Even the income tax required a Constitutional Amendment to become legal, and under our current system I feel that a healthcare mandate is likewise not legally permissible; and even if an amendment were proposed to make it permissible: I would not support it.

I absolutely see its benefits, but I also feel that mandating a citizen to purchase a commercial product oversteps our bounds.  Here I side with the more libertarian take in that the government should not have the authority to require such a thing.  In a rare case where I actually feel a soundbyte to be rather accurate, I have to agree with today's somewhat amusing question of how you'd feel if the government required you to eat broccoli.  Or what if, under threat of a financial penalty, it was required that everyone buy a Detroit-manufactured car to boost the auto industry?

Usually I loathe these sorts of exaggerated questions, but that's only because they often over-simplify things... here, I actually think they prove a valid point (albeit in the more sarcastic overtones more reminiscent of The Daily Show or The Colbert Report).  It's a question that I have not yet received a clear answer to.

The Alternative - A Public Option

So I have something that I see great benefits to, yet I oppose its very existence.  I try not to be a masochistic madman... so what are the alternatives?  I oppose the Republican proposals because I have not heard how they would succeed in practice, and I oppose the PPACA because I disagree with the individual mandate.

Here's where the much maligned public option actually makes some sense.  Well, it was maligned in 2010... then we forgot about it.  A public option is basically an expanded Medicare / Medicaid, and another insurance option that people would have.  I do not discuss Universal Healthcare here, which basically puts everyone under a massively expanded Medicare / Medicaid.

If we have a public option: we can require everyone to have health insurance... and if they choose not to get their own insurance: they are automatically enrolled into the public option, instead.  Instead of penalizing individuals as we do under the current system, we can instead incentivize those who do enroll in other plans.  An example:

Mr. Healthcare gets himself on a private healthcare plan and Mr. Noplan does not.  Mr. Noplan instead gets enrolled onto the public plan.  Now come April 15th: both Mr. Healthcare and Mr. Noplan are charged a $500 healthcare tax for the year.  But there is a $500 tax credit for those on private plans: Mr. Healthcаre therefore pays nothing... and Mr. Noplan pays a $500 tax.

Under the current PPACA system: Mr. Healthcare would also pay nothing and Mr. Noplan would pay a $500 penalty (not a tax).  This is the *exact* same fiscal impact to you, the individual... but we skirt around the legal hurdles of an individual mandate.

Today, as the government ultimately picks up the tab of unpaid bills & reduced economic activity: there basically is already a de facto public option, but it's one that is disorganized, inefficient, costs the government a lot of money, and bankrupts its citizens.  There's not a single win to that.  A formal public option could at least organize and improve the efficacy of the current chaos.

...And Then We Run In Circles

Under PPACA today: the uninsured (the poor, denied coverage, overruns, and voluntary) would be picked up by private companies.  With a public option this would be less likely to be the case.  The voluntarily uninsured, which tend to consist of healthier individuals, may be inclined to join private insurance companies... if they have to pay, anyway, they might decide it's worth the extra money to at least get something decent.  Or they may decide the public plan is good enough and settle for not getting the tax credit (that is, per my example in the previous section: basically paying $500/yr for the public plan).

The insurance companies would love to have healthy folk join their plans: that means new revenue without as much cost.  This could yield more profits for them or, if the insurance marketplace is competitive enough, it could eventually translate to lower premiums for all of their customers.  That's something I haven't touched upon at all: both Republican proposals as well as PPACA have some great ideas for encouraging such increased competition.  That's a whole issue on its own, but the short of it is that I think there's valid potential to both increasing interstate competition as well as creating a user-friendly database of insurance companies.

But while a few healthy folk may come onto the public option, by and large the public option is left with the poor, those with preexisting conditions, or those whom have overrun their coverage.  All three require higher costs in some degree.  What offsets these?  As best I can tell: nothing... we pay for it somehow, just as we are somehow paying for it today.

How is it different from our existing situation, whereby the government effectively covers the uninsured, anyway?  One perk is that it cuts down on the need for verifying insurance before treatment, but that's not quite as significant an issue to itself necessitate such an overhaul, is it?  Another is that we won't force our citizens to choose between bankruptcy or death... or sometimes both.

So what if we still require private insurance companies to accept individuals despite preexisting conditions... that's one of those high-cost groupings, but that's not fair to require a private industry to accept a bad customer.  We have an obligation to reimburse them for this.  If we require them to accept the poor at a discounted rate: we have an obligation to reimburse them for this.  If we require that they cover cost overruns of a high-needs customer: we have an obligation to reimburse them for this.

Perhaps some of the healthy people, now incentivized to become insured, will help boost our coffers to pay for these reimbursement; or perhaps the healthy will go to the private companies and help offset their higher costs.  But in the end, as best I can tell, it's the same money just being shifted around but otherwise achieving the same goals.

The Closest This Is Getting to a Conclusion

So basically... a public option would just be a way of circumnavigating the individual mandate.  Then we either group the high-cost groups into the public option (essentially the status quo of what we have today); or we require private companies to accept the high-cost groups and send revenue from the public option to the insurance companies to offset the high-cost groups (essentially what PPACA indirectly proposes).

I can't guarantee I have that right... but this is the conclusion I've found myself at.

With however things play out, make sure to watch for several important traits:

  • Who remains covered among the healthy, those with low incomes, or those with pre-existing conditions?
  • How will this affect access and delays to getting healthcare?
  • How will this affect costs and quality of healthcare?
  • If people can't or don't pay the bills: what happens?

[Part I - My thoughts on the Republican proposals]