28 June 2012

Defending the Mandate and its Tax/Penalty

From a contributor at the Daily Dish:

I do not understand why Democrats don't embrace the newly defined "tax", saying: you bet we raised taxes, but not on the hard-working, responsible middle class. This is a tax on those deadbeats who don't pay for their own insurance but still expect care when they show up at emergency rooms. It's a tax, all right, and I think we should agree to raise it even higher so they have more of an incentive to buy their own damned insurance and leave the rest of us alone. Let the Republicans protect the rights of deadbeats; Democrats are fighting for people who play by the rules.
This. This is exactly the right approach.

Matt, in the comments to the last post, asked a good question:
What is to stop people from paying a marginal penalty until they get a catastrophic disease, and then applying for insurance? This seems like rational behavior that will undercut the whole premise of "insurance". If I could buy car insurance with "pre-existing conditions" I'd never buy it until after I was in an accident.
Fair question. As I understand it there are two factors that make people willing to sign up for insurance when they are still healthy. The first is simply risk aversion. If you get hit by the proverbial bus or have any unexpected medical emergency, you can't sign up for insurance that day, or retroactively. So the possibility of a financially crippling medical emergency looms if you are healthy and uninsured. In fact, I believe you can't sign up until the next open enrollment period, which I think is every six months. You could be on the hook for quite a bit of medical expense (or denial of care) as a result.  This should be a powerful motivation. 

The second motivation is that in most cases, people want insurance. Sure, there are some objectors, but by and large, people perceive healthcare insurance to be a desirable thing to have. So the penalty is an incentive to buy something you already want to have. Would you rather pay $1000 and get nothing, or pay some higher number and have the thing that you actually wanted? Of course this doesn't work absent the subsidies that make the insurance affordable for working families and the medicaid expansion. 

The Massachusetts experience is that about 2% of people choose to pay the penalty, either because they are gaming the system, conscientious objectors, or in a particular financial hardship. If that number is replicated nationally, it's probably not enough to create a serious adverse selection death spiral.

18 comments:

  1. I'm OK with the tax/penalty interpretation of the mandate, and in general the idea of s system that covers everyone properly is not a bad idea. However, there are very serious problems with this as I see it.

    First, I think it's pretty clear that the system as it's written now is designed to eliminate private heath plans completely. No plan can possibly survive when you tell them that there are strict limits on what they can charge, that they have to accept everyone no matter what and that they have to pay for everything no matter what with no cap. When you place a limit on what they can charge but remove all limits from expenses the math is simple. If this system is implemented as it is currently written it seems clear that in a few years we will have single payer because all the other payers will be forced out of business. The state making a concerted effort to destroy an industry like that seems pretty wrong to me.

    Perhaps I'm wrong and there is some way for a business to survive with limits on what it can charge but no limits at all on what it has to pay, but I don't see how that could work.

    Then we get to the real problem: having the state in charge of it all. There may be times and places in which that works, I haven't done enough research to rule that out and I'm not opposed to the idea in all cases. But I do think it will be very bad here.

    We have two possibilities as I see it.

    First, everyone is on Medicaid until they are old enough or disable enough for Medicare - only Medicaid will be much bigger and therefore much more bloated, expensive and inefficient.

    Second, everyone is on a system where the state runs everything in every detail, like at the VA. Only a thousand times bigger, more expensive and less efficient.

    I think it is axiomatic that making a bureaucracy bigger does not make it more efficient or better in any way. This whole business seem to be based on the assumption that the exact opposite is true.

    I'm not sure what the answer is, but I think that both with what we have now and with what we seem likely to be getting soon, that we are the road to disaster and driving far too fast.

    As for the paying the penalty over paying for insurance,it probably won't matter. Only those of us in the rapidly shrinking middle class will have to even consider that decision. If you can get the same care either way then those that don't care about credit rating will just go for the less expensive option. I don;t think it will amount to enough people to matter though, even 2% seems unlikely to me.

    Anyway, like I said, I have no idea what the answer is, but I'm pretty sure this ain't it. Hope I'm wrong though since this seems to be what we're getting.

    (Also - my last post in the previous article was meant to defend, but rereading it I'm not sure it comes off that way. Sorry if it sounded wrong).

    ReplyDelete
  2. The mandate works like this:

    "No thank you, I do not want to buy a pack of gum."

    "Very well! The tax on that will be $2.36!"

    This will not stand. By the ballot or by the bullet, this piece of legislation will go down.

    ReplyDelete
  3. I find it cute that a liberal ER doctor is all about taxing the poor when it results in a direct increase in his paycheck.

    I've been a really, really poor uninsured person before (really really poor is defined as making about $50 more than the amount of money that qualifies you for welfare) and, guess what, despite having a chronic illness, not having health insurance for those few months was the best thing for me and my family at the time.

    If I would have been forced to spend any more money or had been fined, I would have had to either quit school to work more or have been homeless or quasi-homeless. I didn't qualify for Medicaid because I made like $80 too much per month (supporting a family of three on $1600/month gross is really hard FYI, including the $150/week in child care), and everything else was too expensive.

    If you would have taxed me to force me to buy health insurance when I was working three jobs and going to school full time, I'd probably still be a waitress and not a home-owning, vacationing, really ass-kicking nurse.

    ReplyDelete
  4. Not sure why OP hasn't added his comments, but let's break things down.

    VinceRN
    So, this argument is used by the auto industry and falls flat their too. "You can't make us build safer more efficient cars, we'll be out of business." They government can mandate that, and the manufacturers can innovate. Same with healthcare. Beyond that, they aren't making these demands without making demands of healthcare organizations. If hospitals and physicians can get costs down, that benefits the insurance companies as much as it does the users (you know them as patients) and society as a whole.
    Further, Medicaid and Medicare are run much more efficiently than any other health payment organization, and there's little reason to expect that to change. California is huge, and runs a massively complex Medicaid organization and it does just fine. The reason scientists don't use axioms is because they're just a turn of phrase, they're not a proven fact.
    There may be some health care organizations that decide to pull out of certain markets, and this is why the Medicaid expansion is important. When the state of SC, 42nd in Median household income, pulls out of the expansion, and the rest of the bill goes into effect, they will have sold more of their citizens down the river than any other state in the nation. Why? Because the market won't altruistically step in and say, "We'll cover you poor souls for free." So the SC poor suffer.
    Your break down of the two options ignores the very real option that innovations in how health care is performed (the care providers job) and how health care is managed (a good insurance companies job) can lower costs for all involved parties.
    And, though it's not actually related to health care, I take issue with anyone that espouses that there's a shrinking of the middle class, that's not how numbers work. The middle class has gotten effectively poorer and actually poorer, and that's a problem. People aren't dropping out of the middle class, the middle class is being dragged down by a lack of faith that providing care for the ailing can raise us all up. Now . . .

    ReplyDelete
  5. Scruffy
    No. Say you're a member of a combat squad. There's six of you, and you are all fantastic at your job. And you're going to go into a battle and win. And we know you guys are going to win, because with each of you fighting it's a sure bet, and even if you're one or even two guns down, the squad can still pull this off. So, out you all go. And guns start blazing and the fight starts and ends with the expected outcome. Except the whole time, you were too chicken to risk your life, so you hid behind your comrades as they fought. At the end of it all, you're going to be the shmuck that could have brought everyone else down because you were too scared.
    In healthcare, it's not cowardice though. If everyone is insured, and everyone has a means and method for paying for their healthcare, then everyone wins. We all are healthier and our overall costs diminish. But if some opt out, they became a burden. A catastrophic medical event, like being blown up by a mine, can be unbelievably costly, both in immediate life and limb saving measures, and in long term care and rehabilitation. But if that collection of people that are too goddamned stupid to bother getting something as simply good for you as health insurance remains somewhat small (say the 4 million that this tax is expected to affect) then the benefits of reform persist, and we all will get better. The rest of us will still have lower costs, but we'll end up paying for the lazy, good for nothing slackers that won't just buy some insurance and get injured.
    And BTW, I dare you to go before a public square, not Facebook, Twitter or other internet venue, but a place where you have to look people in the eye and I dare you to say that last bit again. "By the ballot or by the bullet . . . " Too often, American progressives look at illiterate, impoverished teens and say "This is why we need to reform our public education system." What they should be arguing is that, when we raise the level of education in this nation, then we raise the level of discourse, and we limit the incidence of uncivil behavior. Lastly . . .

    ReplyDelete
  6. Nurse K
    I'm glad to hear that you pulled through that tough time in your life and have gone on to such success. I'm particularly glad to hear that your chronic illness was held in check and that your kids remained healthy throughout your lapse in coverage. And I know you'll be really glad to hear, that other families that faced the difficulty you faced won't have to make the choice between paying their penalty or becoming homeless and unsuccessful. If the cost of cut-rate insurance is greater than 8% of your income, then you are exempt from paying the tax.
    Put another way, if a family of three, working without health insurance, decides not to get insurance through the markets (expected to be around $10,000 annually for a family that size) you would have to be making over $125,000 a year to trigger the tax.
    This isn't a tax on the poor. This is a tax targeted at a very specific segment of the population (about 4 million people) that HAVE money, and HAVE opportunity, but are specifically choosing not to participate in a health care system that benefits us all, and who, if they get sick or injured, will become a direct burden on all of us. To characterize that population read my reply to Scruffy above.
    As to your assertion that ShadowFax will benefit from this tax? That's pretty far off base. For one, he doesn't get any of this money, it goes to funds that, I believe, help cover the Medicaid expansion. Second, health care reform will provide increased access to OTHER health services; as in, people will be able to go see a specialist or their PCP, instead of going to the ER for their bum knee or runny nose. So, in a very real way, ShadowFax will see fewer patients, make less money but have more job satisfaction, because his patient population will be those actually in states of emergency.
    Again, I really am thrilled to hear of your success, and I love nurses more than candy, they are such an important part of this health care system, but you have been misinformed. I implore you to check out the Washington Post's coverage, particularly Ezra Klein's and also to avail yourself of the Congressional Budget Office's data and even the press coverage of the passage and results of the Massachusett's version of the Affordable Care Act. It's been all gravy there.

    ReplyDelete
  7. ShadowFax
    Great piece, I guess the one thing that concerns me in that tactic is that it's not just a situation of deadbeats. As I laid out in my reply to Scruffy, most of this 4 million will be stupid or lazy, those beng the conscientious objectors and system gamers. But there really are a number for whom a situation catches them out of sorts. I'm a writer, and I thankfully have insurance through my wife's job. But say she leaves me and takes the kid, so it's just me. And say, amidst all this I do a lot more freelancing and put together, say an annual income of $63,000. Now at that point I'm probably paying 25% in taxes, so I'm down to about $48k. Let's send 1/3 the remaining to rent, and another 1/3 to food and other essentials. We're down to about $15,000. Now let's say I'm paying child support on the kid. That's probably the other 1/3. So, now I'm wiped out. I can't afford the ~$5000 it would cost to get insured. I certainly wouldn't qualify for the Medicaid expansion, and none of these costs are going to change for me. So, I will pay (most likely through a deduction in my annual refund, truthfully) $700 annually, because I really don't have the money to pay for insurance. This could also be a realistic scenario for someone not paying child support, but who lives in a place with a MUCH higher cost of living, where those food and housing estimates can become much closer to 1/2 each.
    I think the right tactic is going to end up being aggressive education. Ads that point out that not just the poor are exempt, but you really do need to make almost $63k/yr as an individual before you're at risk. And that that figure climbs as your family grows, so if you have 15 kids, you'd have to be making as absurd an amount of money annually as you have kids before you pay the penalty.
    In fact, I think they should educate the public that there's no teeth to this tax. If you aren't getting a tax refund, and you decide not to pay this tax, the IRS won't come after you. Ever. I think the government should let people know that. And then enact a special program. After a few years, when all those stupid lazy people have avoided both getting insurance AND paying their tax, they should post all of their names on the front page of IRS.gov. So that everyone can know who they are, those moochers that expect us to pay for their care when they do get sick.

    ReplyDelete
  8. Tno -- on your hypothetical, you've constructed a very narrow slice of the population, in that your hypothetical income is just over 400% FPL, so no subsidies, and the theoretical policy is low enough so as not to trigger the hardship exemption.

    Being a bleeding-hearter, it's a bit odd for me to say "them's the breaks," but there it is. In that situation, you have to make a choice. If you have healthcare needs, you're going to have to get a shittier apartment or make some sacrifices. If, not, then you may choose to incur the penalty. Subsidies up to 400% FPL are pretty generous, after all, but you've got to draw the line somewhere.

    The silver lining for someone like you in this scenario, is that a) you'll have access to individual insurance at all, which is not a given in the current market, and b) you may be able to buy a mich cheaper "Bronze level" insurance package on the exchanges. I've not seen details, but I think these are more like the catastrophic policies some folks currently buy.

    ReplyDelete
  9. @TNO - It's nothing at all like the auto industry, not even close. The government is not telling the auto industry that there is a limit on what they can charge but no limit on what they have to pay out. IF the auto industry were being told they have to make whatever car people want, no matter what it cost, and sell it for the price of a Geo Metro then you'd be onto something.

    As for the term axiom, I think you'll find it used from time to time in math.

    ReplyDelete
  10. ShadowFax - So, you bring up one of the key areas of innovation that haven't really been covered. Those bronze plans are expected to come out pretty high at first, but a smart insurance company could turn this 4 million into a growth market. They are currently outside of this market, have access to funds and assets, and are actually a low risk population in health care terms. So, you're right, a lot of people in this group will actually get their hands on some low premium, high deductible coverage like catastrophic coverage.
    But that's why I just don't like the deadbeat motif. By making this about deadbeats not wanting to do their part, you're pushing these guys into being against the ACA, even if they could really benefit from it. You're creating enemies out of edge cases. And reading my other comments you no doubt get that I'm happy to label some of these people as cowards. Just not all.

    ReplyDelete
  11. Vince RN - The point, as I think you perceived, is that the government can mandate a hardship on an industry, as they have on the auto industry and as they have on states. They can do it, it's legal and constitutional.
    The difference between the auto industry and health care, and the whole point of the government's case that this falls under the commerce clause, is that EVERYONE will participate in the health care industry. Not everyone will participate in the auto industry. Because this is an essential service, in a way that almost no other industry is, then the government can mandate how it is distributed and how much it costs. If you think this is outlandish, take a long hard look at that TV in your room and that telephone in your pocket. The radio industry was recognized early as a tool to democratize information, and so the government specifically regulated how this would occur. They commissioned AT&T to come up with our telephone system. The airline industry was recognized as an opportunity to spur mobility, So their pricing was regulated. A key note here: during the era of regulation, the industry needed to compete on service and innovation, and customer satisfaction was high. Having since been deregulated, airlines no longer have a reason to compete on innovation, they can compete on price . . . except they don't.
    Health insurance companies have had limited reason to innovate. Their only motivation to innovate has been the fact that their customers, us, have been getting sicker and more prone to catastrophic AND long term illness, while at the same time our ability to pay for health care (wages) have diminished. Guess who's not against the ACA? Yeah. The health insurance industry.

    ReplyDelete
  12. No Tno, none of those cases are close. Private health insurance companies are now required to accept people that come to them asking for millions of dollars services a year and and are allowed to charge them only the same rate that they would charge someone who uses only basic services. In no other case does the government require any business to pay out tens of millions for a customer over a lifetime and only charge that customer a few hundred dollars a month. Without lifetime caps there it is impossible for any health plan to survive long term. Perhaps you are so anti capitalist that you think that corporations somehow have unlimited resources to draw on and that their income has no relation at all to their expenses, but I point you once again to math.

    Also, if you think that Medi-Cal (in California they don;t call it Medicaid) is doing fine or is somehow more efficient than private health care you are out of your mind. California is broke, they hospital that depend primarily on MEdi-Cal payments are falling apart - not figuratively, literally - the system is bankrupt, payments are not being made and when those payments are made they are so small that in many cases is actually winds up costing providers money out of their pockets to see those patients. Patients have trouble getting even important services in a timely manner or sometimes getting them at all. I have a good friend in California with serious medical problems who is on MEdi-Cal and is having trouble getting care that he could easily get if he could afford to be on Blue Cross or whatever. Medi-Cal is probably the worst example of what I am talking about as far as problems with state run health care, there is no better example of a broken system.

    ReplyDelete
  13. TNO: In what universe do you think that an ER doctor wouldn't benefit financially from a law that requires you to have health care coverage to PAY DOCTORS?

    Of course, this money will likely be offset by the massive increase in premiums we'll all have to pay to cover the people with pre-existing conditions on private health insurance plans.

    ReplyDelete
  14. Ok, Vince you just have a complete lack of faith in government, so good luck to you.

    Nurse, sorry, you just don't get it. Laws don't work like the conspiracy theories you see in lazy news outlets. This law is designed to lower costs, not raise costs, and by including everyone in the pool. And again, ER doctors don't actually make tons more money by seeing more patients, it's one of the downsides to being an ER doc, and one of the reasons many docs avoid it. And, this law will lead to FEWER ER visits, because people will be able to go see their own physician instead of going to the ER.

    When car insurance was mandated across the nation, we didn't attack the auto body shops for being behind it. So why are you blaming doctors because the only way for all of us to get health care, is for all of us to get health care?

    ReplyDelete
  15. TNO is totally clueless and obviously doesn't understand how an ER works. Do you understand that SOME patients currently don't pay their hospital bills (or only pay a small portion), including doctors' fees, and if there was a law that forced you to get insurance, docs would get PAID then to see the same patients instead of being forced by EMTALA to see them for free? This is called Liam makin' more money.

    Also, giving out more Medicaid does actually cause a huge upsurge in ER visits. Massachusetts can tell you that. Medicaideurs love to go to the ER. Just because you give out insurance doesn't mean anyone has to take it (except the ER). I'm guessing the people that don't already take Medicaid etc. aren't going to start taking it to accommodate the new recipients, so it's just going to be more backlog into the ER.

    It's only in happy commie socialist healthcare fantasy world that doctors start holding hands and singing songs about granola bars and Suburus and open their doors to take in giant floodgates of welfare patients. In Realityland, the ER just takes all these people.

    Medicaideurs, by the way, can already see their own doctors and they currently disproportionately use the ER for routine care. This is like ER 101.

    It's just a matter of time until private doctors will be forced to take welfare patients.

    Anyone who thinks this is going to reduce ER visits is insane.

    ReplyDelete
  16. Lots of ridiculousness/little truth in this thread.

    For one thing, unless we get the economy/jobs thing up and running none of this is going to even begin to work. Unemployment is much greater than anyone will admit. It's about to ruin this country.

    To whomever quipped about ER docs getting $$ out of this, ummm. They don't get paid "per procedure" so as a pre/post arguement, that's not even.

    AND, really the only possible boon for all this is anything outpatient, way outpatient. There is gonna be a big move to keep the hospital out of things where at all/as soon as all possible.

    -SCRN

    ReplyDelete
  17. I was in agreement with Meat until I read this: http://giveneyestosee.com/blog/2012/06/why-you-cant-afford-to-get-sick-without-healthcare-in-america/

    ReplyDelete
  18. The individual mandate is kind of a double-edged sword. It is taking away our liberty, but for the greater good. The fewer people by health insurance, the higher the premiums. The higher the premiums, the fewer people buy: positive feedback loop. The individual mandate would end the loop, but the fact remains that this is the govermnent forcing us to do something that two percent of Americans don't want to do. The question is, is it worth it? Every society must maintain a balance between freedom and safety. Too much freedom and we're ruled by anarchy; too much safety ad we're totalitarian.

    ReplyDelete