Wednesday, December 16, 2009

Reviewing the Senate health bill

Here were the problems with the health bill as it stood a month ago:
1. Public option threatens a healthcare monopsony that could compromise quality of care and R+D
Addressed? Thanks to Joe Lieberman, yes.
2. Will be very expensive.

Addressed? Not sure it can be.
3. Doesn't do enough to lower costs (changing reimbursement structure, tort reform)
Addressed? No. The biggest flaw in the bill.
4. The penalty for not getting insurance is too low, leading to a major, major adverse selection problem when guaranteed issue and community rating happen.

Addressed? No. The easiest flaw to fix in the bill.
5. Subsidized people have very high implicit marginal tax rates because the subsidy rolls off as income increases.
Addressed? No. This could be solved, but not easily in the structure being proposed. It'd have to be more like "the government will pay the first $5000 of everyone's insurance, and everyone gets taxed at %X, unprogressively, to accomplish it."
6. Employers of low-skilled labor have incentives to look for illegal aliens.
Addressed? No.
7. Doctors have an incentive to stop treating Medicare and Medicaid patients.
Addressed? Sort of. If the current bill were to actually stand in its current form, this would be a disaster. Fortunately, only Paul Krugman believes this will actually reduce the deficit, and nobody believes the payouts to Medicare will actually drop 25%. So call this one an incomplete.
8. Insurance companies have an incentive to try and get out of treating high-risk customers because they can't charge high enough premiums.
Addressed? We won't know until we see the ways that insurance companies respond to the bill. Dropping coverage is one possibility, but this will probably be cracked down on. However, if everyone tries to scare off high risk clients, quality of service could be bad.
On the whole? The bill still has lots of problems. I'm glad problem 1 has been addressed. If they don't fix problem 4 before passage, it'll be seriously disgraceful.
The more interesting question is, "Is this bill better than the status quo?" or, more accurately, "would I vote for it in its current form, assuming the Medicare payouts don't drop and nobody uses this to try and springboard into a public option?"
That's a very difficult question. I think the answer is "no", simply because I don't see this program as being sustainable because it costs too much - I see it turning down dangerous "cost reduction" roads in the future, and I see the public option as the hydra that will never die. However, the no is much less emphasized than it was a month ago.

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