Politics Versus Policy

My father in Wisconsin recently wrote his Congressman to ask why the congressman favored repeal of the Affordable Care Act. The Congressman’s response reflects politics rather than facts, but its also instructive to understanding why the Affordable Care Act took the form it did and why I believe it’s the last chance for a private health care system.

I have attached the letter below, but to summarize the Congressman states the law is bad because:
• The Congressional Budget Office (CBO) estimates that many people will change plans when the ACA is implemented

• The ACA will costs too much (again the CBO is cited)
• Employer premiums have risen since the law was passed
• Nancy Pelosi said “we have to pass the bill to know whats in it”
• President Obama campaigned on lowering premiums.

As an evaluation of the law the Congressman’s letter is misleading. For example the CBO estimated that people will change plans because they will have more options under ACA. In other words they have more choices and opt for the ones that make them better off then they would be without the law.

The CBO also estimated that the law will reduce the Federal Deficit. The real answer here though is the law doesn’t really bring a lot of new money to the health system. It rearranges how health care is financed, removing much of the burden of paying for the uninsured and the costs of poor health from state taxpayers, those who purchase health insurance, and those who have a family member who is ill, and moving the costs to primarily to Federal taxpayers and those who choose not to purchase health insurance. There are other winners and losers here of course: large firms who employ significant numbers of low wage workers, people who frequent tanning booths, high wage workers, medical device manufacturers among others will shoulder higher costs. Winners include most small firms and their employees, the self-employed, people who purchase health insurance as individuals, families with chronic illnesses, and local governments among others who will all face lower costs both in accessing health care services and in avoiding the costs associated with poor population health.

The Congressmen;s other complaints are also misleading. Employer premiums for health benefits increased by about 9 percent between 2010 and 2011 according to the Kaiser Health Foundation’s survey. Attributing that the ACA is problematic at best since most of the law will not be implemented until 2014. It is worth noting that the same survey found that health care costs increased by 10% or more every year between 2001 and 2005.

What the President or Nancy Pelosi said is irrelevant to evaluating any law or legislation. One would hope that evaluation would be focused on the law itself. Of late politics has prevented good policy as neither side can admit flaws in their preferred health reform plans or comprise to address those flaws.

The Congressman’s letter concludes with a description of his plan to address health care reform:
Fully funding high risk pools to ensure people with pre-existing conditions have access to affordable coverage.
Eliminating arbitrary annual and lifetime caps on coverage so that your insurance is still good if you experience an expensive illness.
Injecting nationwide competition into the healthcare market place by allowing patients to purchase health insurance across state lines.
Ending junk lawsuits that have been causing doctors to practice defensive medicine and inflating healthcare costs by billions.
Allowing small businesses and trade groups to pool together to offer affordable health insurance to farmers and employees of small businesses.
Doubling penalties for Medicare Waste, Fraud, and Abuse and stopping Medicare scam artists by requiring Medicare to visit new healthcare providers before paying them.

With the exception of malpractice reform (bullet 4) all of these are elements of the ACA. For example as of June 30th 77,000 Americans were enrolled in the pre-existing plans, including over 2,300 Georgians.

Injecting competition into the health care market was the theory behind the design of the ACA and the reason so many of the current opponents of the law helped design and promote the ideas incorporated in the law. Merely opening a state up to insurers regulated by another state will do little to promote competition. Reforming the health insurance market may.

There are two key differences between the Congressman’s proposal and the ACA. First there is no mechanism in the Congressman’s proposal to address risk selection. As a result allowing small businesses to pool together to purchase insurance (and there hasn’t been anything preventing them from doing so for decades) will have little effect on the market for health insurance. The second key difference is the subsidies given to states and individuals to expand access to care. Without that expansion of coverage a working sustainable market for health insurance and health care services cannot be created.

Competition requires informed consumers, a measureable product or service, and equal access to a market place. For a variety of reasons the current health system does not provide those conditions. The Congressman’s proposal takes steps in the right direction, but they are baby steps and would not achieve much in the way of increased access or lower costs.

There are those who argue that health care better fits a public utility model or a single payer system. They might be right. What is clear is that the advantages of a market system where consumers decisions determine the allocation of health care resources can not be achieved without reforms similar to those contained in the ACA. The imperfections contained in the law are unlikely to be addressed as long as politics preclude compromise and prevent good policy making.

Letter to James Custer

August 2, 2012

Dear Mr. Custer,

Thank you for taking the time to contact me with your thoughts on the Supreme Court’s decision to uphold much of the President’s health care law. We share a lot of common ground in our goals for health care reform, such as ensuring affordable coverage for all Americans, including those with pre-existing conditions, and ending arbitrary yearly and lifetime caps on coverage.

In the decision, the Supreme Court ruled Congress cannot force Americans to buy particular products but it may impose large taxes on small businesses and individuals who do not have health insurance. As you may know, the Supreme Court does not rule on whether a law is sound policy or not, but only whether it is constitutional. The ruling declared that the individual mandate is a legal tax but that it is unconstitutional for the Federal Government to take away complete Medicaid funding from states that refuse the Medicaid expansion in the law.

I think nearly everyone agrees that we have needed health care reform for some time now. However, a majority of Americans believe the President’s health care reform law put too much power into the hands of Washington bureaucrats, at the expense of freedom of choices for patients and doctors. Though the President passed the reform law with the goal of allowing people to keep their current plan, we are finding out that the law will likely lead to millions of Americans being forced off the plan they have today and into a new plan. It also increased government spending in a way that I believe is unsustainable, especially given our current $15.6 trillion debt crisis. According to the nonpartisan Congressional Budget Office, the health care reform law has increased from an initial cost estimate of $938 billion over 10 years to $1.76 trillion over 10 years, only two years later. Much of this is due to the back-loading accounting gimmicks that hid the true costs of the law in order to get it passed.

Many of us remember the shocking words of then Speaker Nancy Pelosi, who said “we have to pass the bill so that you can find out what’s in it.” And with 59 of the bill’s 92 provisions having already been implemented, premiums have actually increased over $1,200 annually for the average family of four according to the independent Kaiser Health Foundation’s annual Health Benefits Survey. This is a far cry from Mr. Obama’s 2008 campaign pledge to cut insurance premiums by $2,500 for the average family by the end of his first term. Because I strongly believe in the need to make affordable healthcare available for all families, I have introduced H.R. 3682, the Patient Centered Healthcare Savings Act, which repeals the President’s health care reform law and replaces it with ideas that will make health care more accessible and more affordable, such as:

Fully funding high risk pools to ensure people with pre-existing conditions have access to affordable coverage.
Eliminating arbitrary annual and lifetime caps on coverage so that your insurance is still good if you experience an expensive illness.
Injecting nationwide competition into the healthcare market place by allowing patients to purchase health insurance across state lines.
Ending junk lawsuits that have been causing doctors to practice defensive medicine and inflating healthcare costs by billions.
Allowing small businesses and trade groups to pool together to offer affordable health insurance to farmers and employees of small businesses.
Doubling penalties for Medicare Waste, Fraud, and Abuse and stopping Medicare scam artists by requiring Medicare to visit new healthcare providers before paying them.

Based on previous estimates made by the nonpartisan Congressional Budget Office, these reforms would save money for Americans while increasing the number of those insured. You can find out more details about this plan by visiting http://duffy.house.gov/issue/health.

I look forward to working with you and our fellow Wisconsinites to shape the new debate on health care reform. Thank you again for contacting my office regarding this important issue. I consider it an honor and privilege to represent you in the U.S. Congress and would encourage you to continue to engage in the legislative process whenever you have questions or concerns.

Sincerely,

Sean P. Duffy
Member of Congress

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