Tuesday, April 11, 2006

Republican Universal Health Care?

So Massachusetts recently passed universal health care through its state legislature. This is quite interesting because a Republican (well, as Republican as you can be in Ted Kennedy's and John Kerry's home state) governor spear-headed the effort. Since he's taken quite a bit of flack for this from Republicans and conservatives outside the state, he's written a piece for the Wall Street Journal defending his position. It's an interesting read.

The basic plan is that if you don't qualify for Medicaid, you have to purchase some sort of health insurance. If you can't find a plan you can afford, the state has some high-deductible plans you can choose from. If you can't afford the state plan, they'll subsidize you for part to all of the expense on a need-based sliding scale. Oh and on top of that, hospitals and doctors offices now have an Internet portal available through the state that can determine if a patient is eligible for Medicaid and sign them up if they are eligible but not registered.

I have two fundamental problems with this method. One is that their old program has about $1 billion sitting in the bank at their disposal. If this plan were implemented somewhere where there wasn't a $1 billion cushion, there might a significant raise in taxes, especially at first. (There might still be one anyways if this doesn't pan out the way they think it will.) The second thing I see is that 20% of the uninsured residents of Massachusetts qualify for Medicaid but do not have it. If part of your cost reduction is giving the debt to the federal government by way of signing more people up for Medicaid, then you're not really saving money there at all. You're getting money from where it should be gotten from and that is a good thing, but somebody is still paying that. Going out there and saying that this new plan won't raise taxes is a bit disingenuous in light of this.

But in summary, the governor of Massachusetts claims he has a universal health care system in place in his state that won't raise taxes* or broaden government control of health care. Another goal of his was to have no employer mandate. A "$295 per-person fee charged to employers that do not contribute toward insurance premiums for any of their employees" was tacked onto the bill but the governor maintains that it would not effect the success or failure of the plan. I'll be interested to see how this turns out 5 to 10 years from now.

* except for the aforementioned raise in taxes caused by an increased enrollment in Medicaid.


mikey said...

I’m glad you brought this subject up, Dante, because I’ve been neck deep in healthcare research for the past couple weeks. Let me help fill in the rest of the situation, if I may.

Let’s take my state, South Carolina, as an example:

According to the most recent studies conducted by the South Carolina Health Insurance Policy Advisory Committee (see www.covertheuninsuredsc.org ):
• 19.4% of South Carolinians are uninsured
• 60% of South Carolina’s uninsured are employed.
• 43.5% of South Carolina’s uninsured make between $20,000 and $50,000 a year
• 21.82% of South Carolina’s uninsured make more than $50,000 a year.
• 50% of those eligible for public programs (i.e. Medicaid) do not enroll
• Disproportionate Share Payments (Medicaid money used to reimburse hospitals that serve a significant number of uninsured patients) totaled $489 million in 2004.
• Uninsured South Carolinians cost the system approximately $2,000 per individual ($2,000 x 850,000 = $1.7 billion annually)

Okay, those are the facts.

Now let’s take the Massachusetts Plan starting with this Medicaid portal. In 2004, South Carolina’s Medicaid program paid a little over $608 million for actual medical services. If everyone who was eligible for Medicaid was enrolled, we could bet that number to double. But considering that Universal Health Care negates the need for Disproportionate Share Payments ($489 million) we can deduct that from the increase and we end up with an increase of $119 million.

Now, I know that still sounds like a lot, but overall Medicaid spending in SC jumps that much whenever we have a particularly bad flu season.

So, in truth, Gov. Romney’s claim isn’t all that off the mark especially when you look at the long term benefits to Universal Health Care.

For one, small businesses have been reporting double-digit increases in the cost of employee coverage for the past few years making it the fastest growing cost to businesses everywhere. When that cost is contained, businesses can expand (some say by as much as 50%). More jobs mean more payroll taxes which help pay for the expense.

But it all comes down to a fundamental cycle. People without insurance don’t go to the doctor’s office for regular check-ups. They can’t afford it, so they put it off. As a result, instead of going to a private practice MD for a quick antibiotic and a couple days bed-rest, they end up in the Emergency Room with Pneumonia.

But guess what, they STILL CAN’T AFFORD IT!! So the bill goes unpaid and hospitals raise their costs to cover the loss. Then insurance companies raise premiums to cover the increased cost and more lose their insurance because they can’t pay the higher premiums. And so on….And so on.

Universal Health Care breaks this cycle and distributes cost across the entire population making it cheaper for everyone. Ask any insurance agent and they’ll tell you that a larger pool means a lower cost. It’s the basic rule of insurance.

By mandating insurance across the state, Romney has created the largest pool possible and, therefore, the lowest cost.

In other words, every single fiscal conservative in the country should be in favor of Universal Health Care because, more than anything else, it saves money and is good for business.

Dante said...

Both Mikey's numbers and the governor of Massachusetts' numbers both tell me the same thing: There are plenty of people who can afford health insurance who are spending their money elsewhere. I don't find that hard to believe at all.

Interesting semi-relacted story: I was having a conversation with some folks in my subdivision a few months back. A relatively hot topic going around there is that we have covenants requiring you to pay for the streetlight on your property. It's about $10 per month. Everyone who lives in the subdivision signed the covenants agreeing to pay for those lights before closing on their house.

One person who didn't have their light on was arguing that they couldn't afford it. I decided to ignore the obvious conclusion that they really weren't so tight on money that they could afford a $120K-$180K home but couldn't afford a $10/month light and brought up something else entirely.

They have a dish on the side of their house. Now as a former dish owner myself I know that those packages start at $25 per month so I asked the innocent question, "Well how much do you pay a month for TV?" You would've thought I suggested they kill their firstborn by the look I got.

I see that a lot. People are scraping together money just to get by but have a big screen TV and pay at least $25 per month (but often upwards of $80 after paying for expanded channels and pay-per-view) for TV service. I'm not going to tell them how to spend their money but I sure don't want to hear that they can't afford something that's bringing down my home's value.

Likewise (and to tie this back into my point), I sure don't want to hear some middle-class jackass who can't put his or her kid's health as a higher priority than watching "Hee Haw" reruns on a shiny big TV tell me how they can't afford health insurance. As long as Massachusetts' plan works out fiscally, I'm all for it. I did bring up two qualms with the plan, but one of them is more of a gripe that the governor isn't technically accomplishing what he said he would. The other is a gripe about the way things could work out but we really don't know yet.

In conclusion, it sounds like a good idea but I'm sure glad my state isn't the first one trying this out.

mikey said...

Okay, first let’s address affordability. In 2000, the South Carolina Medical Expenditure Panel Survey (MEPS) determined that the average premium for family coverage in SC was about $6,722. Considering the double digit increases of the past six years, now it looks more like $10,000. (for those of us without a calculator that’s over $830 a month).

So if you’re pulling down $50,000 a year in gross household income, 20% of it goes to cover health insurance…so we’re not talking about a minimal expense.

Now, that being said, I agree that there are a lot of people out there who can afford health insurance but don’t have it. Maybe not as many as you think, but a lot. The point is that it tends to be a low priority in family budgeting. Why? I have no idea, but it is.

That’s why we have to talk about it as a public health issue. When a significant number of people are uninsured, it drives the cost up for the rest of us. I don’t care whether or not they think they need it, they do. It’s the same idea as car insurance. You may be the safest driver in the world, but accidents still happen. Without the insurance the cost is passed on to the rest of us at a higher rate. That’s why it has to be mandated.

Same argument here.