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If employers are mandated to provide health insurance,will it be a job killer?  Will it cost American workers income in the form of lost wages?

For the anti-American conservative forces in this country, the answer to this question is a no-brainer – a resounding “Absolutely!”.

For those less ideologically hamstrung, the answer might be “Don’t jump to conclusions”.

The Robert Wood Johnson Foundation (RWJF) released a study recently that concluded conservative fears were without basis.

In the words of the RWJF:

“In contradiction to past research and long-held economic theories, a new study finds that that when facing a “pay-or-play” mandate requiring employers either provide health benefits or contribute to a public option health plan, employers did not lay off staff or cut wages appreciably as a result.”

Novel legislation

The San Francisco law was notable in several ways.  Several states had attempted to legislate some form of an employer mandate.  All were vigorously opposed by anti-American conservatives and business interests who argued – guess – that it would hurt business, cost jobs, and therefore hurt workers.  Those efforts that survived were challenged in court on the grounds that the ERISA preemption clause prevented states from taking this course.

The San Francisco law survived both gauntlets with the Supreme Court deciding just a year ago not to hear an appeal of a lower court decision upholding the law.

The law requires that employers with more than 20 employees to spend a minimum amount for health insurance for their employees who work more than 10 hours per week.  They can satisfy that requirement in one of three ways: Paying for health insurance directly; paying into a medical reimbursement account; or paying into the city’s “Healthy San Francisco” public option health plan.

For smaller (less than 100 employees), the required spending amount is $1.17 per hour and for larger employers, it is $1.76.  This is not a lot of money.  $1.76 per hour for a full time employee represents less than half the cost of comprehensive coverage in San Francisco.

Study conclusions

So how did the anti-American right wing hysteria hold up to rational scrutiny?  Not to well.

They find little to no effect on employment and little to know effect on wages.  They explain the results with the observation that “high impact” industries such as the restaurant industry, had little room to lower wages, businesses would not be at a competitive disadvantage by complying with the law, and consequently they could pass along some of the costs to customers.  Only 10% of employers with more than 20 employees did not offer health insurance prior to the 2007 law.  But surprsingly 75% of firms needed to increase spending to meet the mandate.

Only about 25% of restaurants in the San Francisco area employ more than 20 workers, but those restaurants employ more than 2/3 of the workers in the industry.  About ¼ of those restaurants chose to tack on a surcharge to their menu prices which they attributed to the new mandate.

I use the phrase “attribute to the new mandate” because the researchers also determined that more than two-thirds of those restaurants offered health insurance prior to the 2007 mandate.  Now it could be that “offer” is not the same as election, which might raise employer costs.  It could be that the restaurants simply wanted to raise prices and they judged a surcharge might be more palatable to their customers.  Or it could be that they wanted to make a political statement.  Not tied to the same scientific rigor as the researchers of this study, I would choose the last option as the most likely explanation.  It will be interesting to see how many surcharges continue now that the legal challenge is settled.

Ideology challenged

I was particularly intrigued by the part, “in contradiction to past research and long-held economic theories”.  The researchers conclude

While neoclassical theory indicates that in the long run workers pay for these additional benefits either through real wage reductions or lay-offs for low-wage workers, these effects have been muted in San Francisco in the first two years into implementation of the employer health spending mandate. …thus far the Health Care Security Ordinance has expanded coverage with little negative impact on the labor market.

Because this study challenges neoclassical economic theory, I am sure there will be funding from conservative think tanks to discover and amplify its faults.

Meanwhile, a whole lot more San Francisco workers have access to the health care in the Bay City.

And I understand you can still find good food in restaurants there.

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There is a group of people that has not been engaged in this debate about health care reform.

Yet the debate is about this very group of people – the uninsured.

But when the dust settles, the shouting is over, the ink is dry, and the regulations are in translation, those disengaged uninsured will emerge from their shells.  Like Punxsatawney Phil their heads will rise above their immediate struggles and they will check out the new climate for health care.

Will the sun shine and point the way for a brighter future for so many who have hidden in the burrows of our society?

Or will they see no discernible change and crawl back into an indefinite health insurance winter?

A recent report by the Robert Wood Johnson Foundation and the Urban Institute attempts to answer the question, how will the current reform proposals affect the number of uninsured.

It is full of impressive numbers, but offers insufficient concrete evidence that a “reformed” maze will be any easier to navigate than the current one.

One number is instructive.  Almost 30% of the currently uninsured are eligible for some form of public health insurance programs?  Half of those are children.  Why aren’t they enrolled?

Can we expect expanded access to public programs to generate expanded enrollment, even with an individual mandate?  What are the current obstacles to enrollment?

Who are the uninsured anyway?

Two-thirds are from families where at least one person works.

Only 20% of those have access to employer sponsored health insurance.

Of those with access to either employer sponsored health insurance or other private insurance, one third would pay between 10 and 49% of their income on premiums.  One fourth would pay more than 50% of their income on health insurance.  Another 7% are uninsurable due to their own or a family member’s health status.

One quarter are between the ages of 45 and 64.

Over two thirds (68 %) live in the South(44%)  or West (24%).

So what are the reform proposals?

The proposals by the three key legislative committees, differ only in detail and share a common approach to expanding access to health care.

Expanded access to Medicaid up to some percentage of the federal poverty level.

Subsidies to purchase health insurance for individuals and families up to as high as 400% of the federal poverty level(FPL).

Those with income above the limits would be favorably impacted by reforms to the health insurance markets that include a health insurance exchange

a individual mandate

requirements for guaranteed issue and renewability

Eliminating medical underwriting

A note.  The analysis does not count undocumented immigrants who would not be eligible for expanded access to public programs or to subsidies.

According to the report authors, 39% of currently uninsured would be eligible for an expanded Medicaid program and 38% would be eligible for subsidies.

Almost 60% of those newly eligible for public programs would be childless adults who are particularly disadvantaged under the current system.

Only 19% of those currently uninsured have access to employer sponsored health insurance.  For those eligible for subsidies under the reform proposals, 27% have access to employer sponsored health insurance, but for 45% of that group, the cost of insurance, including employer sponsored health insurance, is between 10 and 45% of family income.

The key passage in the report is describes the administrative processes.

“Understanding and removing the barriers to enrollment for families who are eligible for Medicaid will be critical to covering the eligible but uninsured.  Eligibility  determination processes remain burdensome in many states, especially for parents…Improved outreach strategies, application assistance, simplified eligibility determination processes would help enroll this population with or without reform.”

Imagine a hypothetical 45 year old worker with children who can no longer work at their $60,000 per year job because of an illness.  He or she is already living pay check to paycheck.  She is not eligible for unemployment compensation, because she can not work.  She is concerned about making the next rent or mortgage payment.  What hoops will she have to jump through to maintain coverage?

Will she see the sun shine?  Or will she stay hidden in her health care burrow?

In the answer to that question rests the fate of the Democrats and their leader.

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I have a hard time getting my arms around the public plan option debate.  As other have said far better than me, it is not central to health reform, although it clearly central in the debate around health care reform.  Instead it is a proxy for a lot of other issues.

UHCAN Rally June 25

Just about everyone in the health care debate/discussions has their lynch pin issue.  It’s what I call the “just fix this” syndrome. They range from, “If everyone would just exercise more,” to “if the government would just pay for everything.”  In between is a whole range of touchstone issues, including numerous proposals for delivery system reform, payment reform, tax reform, the list goes on.

My three key issues

First is  “universal affordable coverage.”  Everyone tosses those words around, but few people grasp their own words.  How do you make sure that the guy who lost his job and his health care coverage (in today’s world) yesterday, can “afford” health care tomorrow?

How does a tax rebate, for example, help someone who can’t make his next mortgage payment.  He or she lived paycheck to paycheck before the job loss.

Or the guy my daughter met recently selling picnic tables he made who also had two part time jobs.  He had no health insurance.

We do have a model in this country that addresses that – the Taft-Hartley multi-employer health funds.  Employers pay a fixed amount per hour worked and the fund pays for coverage for the families and during periods of unemployment.

We also have many models of companies who charge employees for health care coverage a percentage of income, some on a graduated scale.

These examples demonstrate that payments based on income rather than “the cost of insurance” is not Un-American.

Payment Reform

The second key issue is payment reform.  For me that means that physicians and hospitals get paid the same regardless of who they treat.  No insurance company should gain market power by leveraging reimbursement.  The current system that pays providers less for treating poor people compounds already existing health care disparities.  The only thing differentiating provider payment should be provider performance.

The third key issue is to deprive providers, primarily doctors, of any incentive to perform unnecessary services.  As long as there is fee for service compensation, cutting service fee rates only provides an incentive to perform more unnecessary procedures.  That could perversely increase total costs.  There needs to be payment reform that puts doctors at risk for managing care within a budget.

It can be capitation, or episode of care reimbursement, or some other form of global reimbursement.

Many years ago, I was at a seminar at Dartmouth.  A panel of three medical directors addressed this new phenomenon called “managed care”.  They dared to suggest that we were entering a “new paradigm”.  This new paradigm would demand that physicians not treat each patient as if unlimited resources were available, but instead that resources for this patient might deprive the next patient of needed care.  We never got there.

The current paradigm is “Stand at the gate until you can pay the freight.”

I recent article in the New Yorker by Dr. Gawande that has attracted a lot of attention describes the perverse incentives of fee for service medicine without calling it out.

The debate around the public plan option addresses very few of these key issues.  Instead it is a debate of form over content.  It is a debate that is frustrating only because it is long overdue

The debate around the public plan option is more about “public” and less around “plan.”  It is clear that the public wants public.  Poll after poll supports that idea.  They don’t trust the private insurance companies.  And private doesn’t want “public”.  Campaign coffers and lobbying contracts offer ample evidence of that.

The argument is ultimately about our values as a society and about the public trust.

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Some things I don’t understand!

I just don’t quite get the “public plan option” idea.

I read Jacob Hacker’s proposal for a public plan option again.  Professor Hacker is a scholar with his heart in the right place, a rare combination.  He gained my immense respect after I heard him speak about his book, The Great Risk Shift, a couple of years ago.

Professor Hacker makes a compelling case that a public plan is not only administratively more efficient than private plans, but that they have a convincing record of introducing large scale quality initiatives and payment reforms into the marketplace.

He then goes on to describe the dismal record of private insurers in comparison to public plans.

So why are the private plans an option if the public plans are superior?

That’s what I don’t get!

Don’t get me wrong.  I am not a knee jerk enemy of the insurance companies.  They perform a vital role as intermediaries in the public plans that Professor Hacker and the single payer advocates extol.  I think they bring some capabilities to the table that would be useful in a future health care system.

There are some aspects of this “public plan option” idea that I have not seen adequately explained.

For example, how will providers be paid?  Any reformed system that perpetuates the disparate payments based on who the patient is unacceptable.  We now have a system that pays providers little for poor people (Medicaid), a bit more for old people (Medicare), and even more if they are working.  And even then it depends on the insurance they have.

The “negotiating power” that Professor Hacker extols is really a method of cost shifting under the current system.  That is inherently unfair.  And form of equitable payment reform should not depend on the power of individual purchasers.  I would propose the equivalent of industry bargaining to set prices.  Those “prices” would be the reimbursement rates for all intermediaries (insurance companies).  Disparities in payment should be explained by disparities in performance not by disparities in bargaining power.

How does this proposal guarantee that the private plans have benefit designs that:

• Provide real coverage
• Are comprehensible to the average person?

How will this “public plan option” eliminate the waste inherent in the marketing costs of a competitive insurance market?

Why should the public plans be exempt from the rules that govern the private plans?

The public plan option promises affordable premiums and affordable co-pays and deductibles. In today’s marketplace, affordable premiums are inherently incompatible with affordable out of pocket expenses  (lumping together co-pays, deductibles, and non-covered expenses).  That only works with government subsidies – an idea incompatible with a competitive market.  Or the public plan is more affordable because it negotiates below market reimbursement rates – the provider community’s worst fear.

According to Professor Hacker:

“The main reason that the public plan in these proposals can promise such benefits, as the next section makes clear, is that public insurance has the proven capacity to provide the same level of benefits for less than private insurance, as well as to better restrain the increase in spending over time.”

If this is true, why bother with the private plans?