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Taxing wealthy to pay for health care

by divorced one like Bush

As we are talking about taxes and health care this is The Real News Network article regarding raising taxes on the wealthy to pay for health care. (The Real News Network is a global online video news network that listens to and is dependent on its audience. No ads. No government subsidies, no corporate sponsorship. Check out our site.)

Make sure you catch Presidents Obama’s response to the obligatory question framed as “punishing the rich”. The article interviews Professor Richard Wolff, economist, U of Massachusetts.

If President Obama and Professor Wolff have piked your interest, or you would like to understand why they talked about taxing the rich as they did, you can read my series on taxation starting here, moving to the second one, moving to the final post.
Then you can go here and read Linda Beale’s appeal for support of eduction regarding tax literacy.

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Stagecoach Driver Waxman issues Ultimatum on HR3200: Get on Board or We Leave Without You

by Bruce Webb

Waxman: Blue Dogs must relent on health reform”
(UPDATE: the linked article has subsequently been rewritten and expanded. What follows is the version from earlier this morning)

House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) says there is “no alternative” to having healthcare legislation bypass his committee if Blue Dog Democrats don’t agree to legislation.

Waxman said if the seven Blue Dogs on his panel do not relent, they could join with the committee’s Republicans to “eviscerate” healthcare reform.

“I won’t allow them to hand over control of our committee to Republicans,” Waxman told reporters.

“I dont see what other alternative we have, because we’re not going to let them empower Republicans on the committee.”

I have been wondering about this for a while now. Do you actually need the approval of every committee with jurisdiction over the matter to move a particular piece of legislation to the floor? I don’t mean practically, you don’t want to bigfoot some other committee chairman, I mean legally. I don’t see why and this seems to prove it. We have a bill that passed out of Ways and Means where the tax experts had a look at it and out of Education and Labor where the policy people had their whack plus the committee staff and the Chairman of Energy and Commerce are on board, why would we just concede veto power to a small group of Blue Dogs who have disproportionate representations on that particular committee. And it would appear that the answer is “we don’t have to”.

This is a very promising development for those of us who want to have the whole House pass a bill and so put pressure onto Senate Finance to respond.

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What is competition?


A reader commented that market share statistics do not reflect whether competition occurs in a health insurance market. To stress a point he stated competition occurs when companies >1, and many states have competition of >2 major players, which makes for a more competitive market than a monopoly allows.

Competition to me means that at the least there is/are ‘forces’ in the market that somehow impact prices and quality of product or service, and in common usage implies lowering prices overall with some attention to quality. Many of us have cars in mind as a mental picture, and electronics.

Health Care for America Now has put together information compiled by the American Medical Association on market share enjoyed by insurers by state, and on the DOJ interest in the increasing concentration of ownership, again using AMA figures going from 33% highly concentrated in year 2000 to 51% in year 2007 as median % of market share nationally (Blue Cross/Blue Shield mainly). The trend for increasing consolidation within each state is clear.

The Department of Justice disagrees that anything less than a monopoly makes for effective competition in the health insurance market, as does economic theory in the form of an Herfindahl index. In fact, since 1982 anti trust law has used this measure along with a concentration ratio of an industry as an indicator of the relative size of firms in relation to the industry as a whole in evaluating ‘competition’.

DOJ states that in the state-based system of health insurance currently practiced:

If one company holds more than a 42 percent share of a market the U.S. Justice Department would consider that market “highly concentrated.” This means that an insurer, with impunity, could raise premiums and/or reduce the variety of plans or quality of services offered to customers.7

(7. US Department of Justice, “The Herfindahl-Hirschman Index.” Accessed here; American Hospital Association, “The Case for Reinvigorating Antitrust Enforcement for Health Plan Mergers and Anticompetitive Conduct to Protect Consumers and Providers and Support Meaningful Reform,” May 11, 2009. Accessed here.
This report makes use of data published by the American Medical Association (AMA), which is not a member of the Health Care for America Now coalition. The AMA did not collaborate with HCAN on this report.)

Without necessarily getting into health insurance competition only, since the competition meme is invoked often in many places, what are market rules that demonstrate whether competition is working or not?

Several thoughts occur, to fit the meme:

1. Competition is defined as the way to lower prices and better product by many. Does this occur naturally, freely, when two companies share 75% of a market? Or if one company has 50% market share, with more players (as in MA)?

2. When prices double for a product in 8 years, how is competition working to control costs? How is this claim for competition proved?

I have in mind a different post on market share for health insurance companies, and the nature of health care for another. This could be a post to come to terms with readers notions of competition.

Chart below the fold.

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Blue Dog House

Robert Waldmann
dares to debate Nate Silver

Nate Silver argues that health care reform might be in more danger in the House than the Senate. He notes that there are, by the standard DW-NOMINATE rating system, many conservative Democrats in the House and none (zero) in the Senate (Ben Nelson rates marginally marginally left of center). More importantly, there are many centrist Democratic Representatives and very few (arguably exactly one) centrist Democratic Senator[s].

This means that the 60th percentile of DW-NOMINATE scores in the Senate is about the same as the 50th percentile of DW-NOMINATE in the House (coincidentally 0 that is exactly centrist). Mechanical application of this calculation suggests that the vote in the House is about as tough as a cloture vote in the Senate.

So far so good. Then Silver argues that the vote in the House is, in fact tougher. I find this argument totally unconvincing. More after the jump.

1. Silver argues that the bill on the House floor will be to the left of the Senate bill. He assumed that the bill will be the Appropriations/education and labor bill. This makes no sense. Republicans plus blue dogs have a majority (of one vote) in the House energy and commerce committee. The bill that gets to the floor from that committee will be acceptable to blue dogs. Now the leadership can force a vote on the other bill, but only a gross failure at nose counting would cause them to force such a vote and lose (plus then they could go to the energy and commerce bill no ?).

2. He notes correctly that a vote for cloture is not identical to a yes vote. This is true and important and I agree with his second argument.

My real quarrel is with the third — where can arms most easily be twisted. Silver argues that it is harder to whip 40 representatives than one or two senators. I think he is totally totally wrong and has it backwards. He writes

But while you might be able to muscle one or two or three hedging members into a yea vote on health care (or a vote against a filibuster in the Senate’s case), it’s much harder to do that 40 or so legislators, where there is less individual accountability.

This is crazy. Pelosi can singe out individuals and say she will hold them responsible and punish them if they vote no. Nothing forces her to threaten all blue dogs equally. Selection can be based on who is likely to need money from the DCCC, who has constituents who support the house bill (I’d guess they all do and they are simply ignorant or lying when they say their constituents oppose soaking the rich).

But the key point is that Reid can’t threaten Nelson et al with much. They are immensely powerful and they know it. He’s going to have to beg Nelson for votes on cloture for the whole 111th congress. To eliminate Nelson’s power one would have to change the rules of the Senate — that takes 60 votes and Nelson and the Republicans will vote no.

In contrast, Pelosi can uhm fix ten blue dogs chosen at random any time she wants. Legislation is really written in conference committees. The House leadership decides who is on a conference committee. “Vote no and you will not be on a conference committee while I am speaker” should work. Also how many Representatives are eager to serve only on the Indian Affairs committee.

Recall that DeLay forced unanimity on the Republican caucus including the very few moderate Republican representatives. In the House, the whip really stings.

More broadly, can anyone remember a time when a Presidents initiative was blocked in the House and not the Senate ? Ever in US history ? I can’t and ask for information.

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Kornhauser’s Tax Literacy Project–about time

edited 072909 to correct link for giving online, by Linda Beale

One of my big gripes (in case you haven’t noticed) is the ease with which ordinary Americans can be fooled about tax issues by organizations, often ones with greedy purposes of furthering their own interests in lower taxes for themselves, that publish misleading or downright untruthful information and just keep repeating it. This has been a special problem with estate taxes, which hit only the very wealthiest amongst us and for a relatively small amount even for the large estates. It is also true of income taxes in general, the way flat taxes would work, the rationales for the corporate tax and many other key tax policies. Lobbyists frame the issues with inflammatory language, and most are too unknowing about the way tax really works to recognize the ruse for what it is.

Here are two of my pet peeves. (Many tax practitioners–and lots of tax academics–disagree with me on these.) Some of the worst phrases that have furthered the cause of cutting taxes for the wealthy so that the majority of Americans can either pay higher taxes themselves or do without the kinds of things that governments, not private enterprises, do best are “death taxes” and “double taxation” .

Much of the estate that is taxed when a decendent passes it along to his heirs as an unearned windfall has never been taxed at all during the decedent’s lifetime, in the case of wealthy people with mostly financial assets. If there is not a good-sized bite out of the estate upon the transfer to beneficiaries, there’ll be very little contribution to taxes from an agglomeration of wealth that has benefited enormously from the US legal system. And the heirs won’t have any taxes to pay either–they’ll just keep holding or will have a stepped up basis when they sell. All that is is a system for perpetuating or creating oligarchy–letting the wealthy become a ruling class with all the money and all the power without contributing anything much to help pay for the system that made all the wealth possible in the first place.

Similarly, the phrase “double taxation” is used to make people think that taxing corporations is unfair. But the decision about whether we tax entities or not is a reasonable one for societies to make. We made it a long time ago–deciding that we should treat corporations as taxpayers and thst we should tax capitalist owners of corporations on the income they are paid out of their corporate ownership as well. It is one of the most progressive parts of the federal income tax when it works, and it makes a lot of sense from a democratic egalitarianism perspective. Corporations can horde money and have enormous power because of their ability to lobby for their own benefit. Look at the way Big Pharm and Big Insurance has gotten Max Baucus in their pocket–putting money in his, and getting out of that a watered down health bill that doesn’t do half of what we should be doing to move towards a single payer, single provider system like the most advanced countries already have. The presupposition behind the term “double tax” is that you are overtaxing and that you are taxing somebody that shouldn’t be taxed. Yet corporations get to deduct salaries and purchases paid for with their own stock, which doesn’t cost them a thing to issue. Corporations get basis in property transferred to them by shareholders in exchange for issues of corporate stock, even though that stock does not represent an after-tax investment by the corporation. So the taxable income of a typical corporation is generally much less than the corporation’s actual economic income, and in addition to these provisions that are basic to the way the corporate tax is set up there are lots of provisions for reducing corporate tax–too fast depreciation, deferral of income through matching rules coming from court opinions where judges have been unduly influenced by financial accounting (the seventh circuit, in particular), depletion allowances and myriad other tax expenditure items favoring corporations, etc. Since Reagan, there has been a huge push by the same economic thinkers that brought us our current Great Recession to undo the US classical corporate tax system. It’s really a push for giving more money back to the wealthy and cutting the size of government. (Of course, the push for lower corporate taxes, more uneconomic credits like the R&D credit, etc., and the push for zero taxation of corporate dividends have been coordinated and have the same effect of huge reductions in taxes on the wealthy.) But it’s all argued in the name of economic efficiency–a theory without basis in reality that is probably more to blame for the greed that dominates today’s society and the consolidation of huge megafirms–Big Pharm, Big Oil, Big Banks, Big multinationals in general–than anything else. And strangely, no one makes the same “horrid double tax” arguments about the maid being taxed on her salary paid out of already-taxed compensation income of her lawyer-employer…

Of course, even for those who don’t pay much attention to the various organizations that are peddling particular views of tax issues and haven’t been particularly swayed by the push for repeal of the”death tax” or repeal of “double taxation”, there is a huge gap in information that isn’t filled in by the media. Most schools, for example, don’t teach much of anything about the tax system in the basic civics course. Most students don’t take a finance course in college, much less a course that teaches the basics of tax law. In fact, most law schools don’t even require that their graduates have a basic course in federal income tax law before graduating. (That is a major problem, I think, since almost every legal issue has tax consequences, one way or another, that a competent attorney should be aware of.) As a result, we are frighteningly ignorant, as a society, about how tax works, why it works that way, and what other possibilities there are. And as a consequence of that ignorance, it is all too easy for citizens to be in the dark about the consequences of tax legislation under discussions, for lobbyists to influence members of Congress to vote in their favor on bills (the public won’t know the difference), and for members of Congress to fail to fully inform their constituents about the tax issues they are voting on (or even, in far too many cases, for the members of Congress to understand, as when a certain person from Colorado supported windfalls in the agricultural bill based on his apparent failure to understand the difference between gross income (revenues without business or other deductions) and adjusted gross income (revenues with business deductions taken into account)).

So I’m glad to see Marjorie Kornhauser’s project take off. Maybe others won’t agree with me on these pet peeves, but if we have better educated citizens who have more basic knowledge about taxes and how they work, it won’t be so easy to bamboozle them into voting against their interest to support tax cuts for the wealthy and service cuts for everybody else while the boondoggles for the big corporations just keep pouring out (like an agreement that the government can’t use its bargaining power to get cheaper drugs, or that Big Pharm can prevent generics being sold for 12 years and other crap that is getting put into the “health reform” bill that is becoming, like so much else these days, a corporate giveaway).

What’s her project? It’s called The Tax Literacy Project–“a non-partisan effort to informally educate the public about taxes through popular methods such as web-based games and other internet activities.

Want to help? Donations are being accepted. What follows is the appeal, direct from Kornhauser and the ASU Foundation.

Money from Taxes Helps Every Person Every Day!

But polls show most of us do not understand anything about our taxes.

Why should we bother learning about taxes? Because:

Tax ignorance costs each of us money. Many of us pay more tax than we actually owe.

Because tax ignorance makes it hard to discuss and enact sound tax policies, we are not able to raise money in the fairest and most efficient manner possible.

Why do we need taxes?

Taxes support democracy. They fund government services and goods such as court systems and national defense that protect your life, your property, and your constitutional rights.

Taxes support economic growth. Governments use taxes to encourage economic growth in numerous ways such as maintaining a stable currency, enacting and enforcing laws that protect both workers and employers (their lives and proeprty), and helping to build and maintain large and dependable energy, transportation and communication systems.

Taxes support your daily quality of life. They help you and your family buy a house, breathe clean air, have safe food and drugs, travel safely and efficiently on highways, trains and planes. Taxes help pay for your health care (in the form of tax benefits or direct care) and they pay to educate you and your family. Taxes help you at work (e.g., enforce contracts, provide a safe workplace) and help you at play (e.g., national parks).

Become a part of a solution to the problem of tax ignorance by contributing to the Tax Literacy Project.

What is the Tax Literacy Project?

It is a non-partisan effort to informally educate the public about taxes through popular methods such as web-based games and other internet activities.

Can you support the Tax Literacy Project regardless of your political outlook?

Yes, the Project’s only pupose is to help provide information about tax, not to support any particular type or amount of taxes. No matter what kind of government people want, that government will cost money. Americans must understand how that money can be fairly and efficiently raised.

How can you make a charitable contribution?

Make your donation payable to the Tax Literacy Fund at (no appeal code necessary) or Make your check payable to the ASU Foundation and mail to the Sandra Day O’Connor College of Law, Arizona State University, PO Box 877906, Tempe, AZ 85287-7906. Please write Tax Literacy Fund (3000 4788) in the memo line of your check. Thank you in advance for your support.

For more information or to become involved–

Please contact the project director: Marjorie E. Kornhauser, Professor of Law, Sandra Day O’Connor College of Law, Arizona State University,, 480.965.0396.

All funds will be deposited with the ASU Foundation, a separate non-profit organization that exists to support ASU. YOur payment may be considered a charitable contribution. Please consult your tax advisor regarding the deductibility of charitable contributions.

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CBO on Health Care: July 14th to 20th & MSM Distortions

by Bruce Webb

Last week was kind of a busy time for CBO scoring with the result that some stories got over-reported and others not reported at all. So lets back up a little.

Tuesday July 14. CBO scores the coverage costs of HR3200, the House Tri-Committee Bill. The CBO Director’s Blog puts this announcement out House Democrats’ Health Reform Proposal: Preliminary Analysis of Major Provisions Related to Insurance Coverage Bottom line: increasing coverage to 97% of legal non-elderly residents will cost $1.048 trillion over ten years. Spending and revenue provisions of the bill not yet scored.

Thursday July 16. CBO director testifies to Senate and House Committees. The Director’s Blog describes this here: The Long Term Budget Outlook. And from the graphs included this seems to be mostly just another presentation of the LTBO released on June 25th and announced on the Director’s Blog under the same title as that on the Senate testimony Long Term Budget Outlook. The rest of this post will be exploring what Director Elmendorf actually said here as compared to how it was reported.

Friday July 17. CBO releases a new score for HR3200 which now includes the spending and revenue provisions not scored on Tuesday. PRELIMINARY ESTIMATE OF THE EFFECTS ON THE DEFICIT OF H.R. 3200, THE AMERICA’S HEALTH CHOICES ACT OF 2009 . New bottom line? $239 billion over 10 years.

Saturday July 18th. The CBO Director’s Blog announces the release of the above report released the night before. The delay between the release Friday night and CBO and Ways and Means Committee public announcements creates a major kerfluffle on dKos with accusations of hoaxing. The dust settled a little after the Director’s Blog put out this: Preliminary Analysis of the House Democrats’ Health Reform Proposal confirming the numbers above.

Saturday July 18th to Monday July 20th, the Speaker and various Chairmen release Press Releases saying that the CBO confirmed that the House Bill in combination with an additional piece of legislation actually would produce a $6 billion surplus over those same ten years. This created a lot of confusion over the weekend, did CBO report $239 billion deficit? Or confirm a $6 billion surplus? Well both and for those who wish please revisit some of the past posts here at AB from last weekend.

But I want to focus on the reporting, in particular how sound bites from the Thursday testimony seem to have overwhelmed anything else. That coming below the fold.
(UPDATE: There is some weirdness in the HTML at this point that I can’t find. The page is supposed to break, and a link from CNN display. Neither happens. The title of the CNN article is “Health Reform Bill Won’t Reduce costs, and it is datelined on Friday. I give up. It works fine in Preview).

Health reform bills won’t reduce costs and summarized with this opening:

The health reform bills released so far would increase government spending on health care without sufficiently reining in health care costs.
And at least initially they aren’t likely to significantly lower premiums for the majority of Americans with employer-sponsored health insurance.
That’s the sobering takeaway from testimony Thursday by Congressional Budget Office Director Douglas Elmendorf.
Elmendorf’s preliminary conclusions were based on a bill jointly released by three committees in the House this week and another bill passed by the Senate health committee on Wednesday.

The WaPo reported on it in much the same tone: Lawmakers Warned About Health Costs: CBO Chief Says Democrats’ Proposals Lack Necessary Controls on Spending

Congress’s chief budget analyst delivered a devastating assessment yesterday of the health-care proposals drafted by congressional Democrats, fueling an insurrection among fiscal conservatives in the House and pushing negotiators in the Senate to redouble efforts to draw up a new plan that more effectively restrains federal spending.
Under questioning by members of the Senate Budget Committee, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, said bills crafted by House leaders and the Senate health committee do not propose “the sort of fundamental changes” necessary to rein in the skyrocketing cost of government health programs, particularly Medicare. On the contrary, Elmendorf said, the measures would pile on an expensive new program to cover the uninsured.

. (Before going on we could note that it really isn’t the business of news reporters to insert editorial comment like “devastating”, but then again that is characteristic of much of Lori Montgomery’s reporting.) At this point lets take a little stock. The Director’s Blog informs us that the topic of the testimony Thursday was on the Long Term Budget Outlook and not explicitly on the Health Care bills themselves. Moreover we know now, as Director Elmendorf knew then his staff was still working up the numbers on the full cost of the Tri-Committee Bill and wouldn’t release them for a full day plus after his testimony. Yet the WaPo story immediately drops any substance of the testimony and launches right into process questions and reactions by the political players with Elmendorf’s actually testimony reduced to out of context snippets.

The CNN reporting has a little more substance and focuses on testimony by Elmendorf that claims the current bills do not do enough to reduce the bend points in the CBO trendlines, trendlines themselves the product of the Long Term Budget Outlook. Well fair enough, on the other hand it is not at all clear that that end was the particular focus of these bills to start with, that is I don’t know where anyone promised that simply providing a public option would solve long-term health care cost trends, only that they would produce a bill that was paid for under CBO scoring criteria. Plus the reporting was spun in a way that confused ‘doesn’t subtract from’ future deficits transforms to ‘adds trillion to’ without acknowledgement of scoring from Friday and announcements from Saturday end up with a House Bill at least that is fully paid for.

I guess my real point is that you have to parse the claims you see closely. Not slowing the growth rate of health care is not the same as adding to the deficit. Nor are the goals of bringing coverage to the uninsured and controlling overall costs the same. To the extent we could achieve both goals great, and in the current political climate maybe we can’t get the first without some claims to be addressing the second. But that is a political calculation and not a policy consideration per se.Instead the question should be moving forward is as the President said in somewhat different words, how does it measure against the status quo, and our we measuring that as a percentage of national health care costs or as a percentage of the federal budget?

In my opinion Director Elmendorf blurred the line between two roles: one as the scorer of the impact of legislation over the next ten-years, in which case the House Bill does very well, and two as the evaluator of the long-term economic outlook. Credulous reporters and cynical politicians (or perhaps the other way around) seem to have seized on Elmendorf’s conclusion on the latter to implicitly judge the former.

So yes the Tri-Committee Bill adds a trillion dollars to federal health care spending to achieve coverage, on the other hand it has direct spending savings, proposed revenues, and a change to Pay-Go rules to make it officially budget neutral over the official scoring period. We should not let those concepts get fatally confused.

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Fixing the fixing. Health care Deja vu

by divorced one like Bush

Responding to a couple of comments to my post yesterday, I want to present some history. PARCA. Patient Access to Responsible Care Act. 1997 by Alfonse D’Amato (R-N.Y.) and Rep. Charlie Norwood, a Georgia Republican and licensed dentist who argues: “If we can protect trees and animals, why can’t we protect patients?” (Well there is a long extinct animal!)

PARCA had this in it: PARCA states, “No insurance issuer may discriminate…in any activity that has the effect of discriminating against an individual on the basis of race, national origin, gender, language, socioeconomic status, age, disability, health status or anticipated need for health services.”

The bill was defeated. The bill was part of a response by consumers and providers to what managed care was doing in the late 90’s. People were not happy at all.

From the Frontline article:

According to a recent survey by Robert Blendon at the Harvard School of Public Health, some 48% of Americans say they personally have experienced problems with HMOs’ care, or have close friends or relatives who have run into such difficulties. Complaints include difficulty getting access to medical specialists, problems with emergency care, and excessive red tape when trying to file grievances or appeals.

From: A report from Families USA, April 1998:

…almost three out of five Americans say that managed care plans make it harder for sick people to see medical specialists. Over half say managed care has decreased the quality of care for people who are sick. More than three out of five say managed care has reduced the amount of time doctors spend with patients. And 55 percent say they are at least “somewhat worried” that if they are sick their “health plan would be more concerned about saving money than about what is the best medical treatment.”

Yet, with nothing really changed other than consolidation of the health insurance industry, we hear arguments that people are happy? Bull! Come on people, don’t you remember?

From Duke University, Marc A. Rodwin: Backlash as Prelude to Managing Managed Care, is this summary of the then accepted pro managed care thoughts:

Managed care organizations (MCOs) and the private sector, so the story goes, are not perfect, but the alternative–having legislatures manage health resources and bureaucracies make health care decisions–is even worse. Experts in the private sector should manage health care… Over the long run, however, the market will ensure that MCOs deliver high quality health care. Consumers will leave poorly performing MCOs for ones that respond to their concerns (Enthoven 1993).

A summary of the potential defeat of PARCA presents the arguments against it as this:

Insurers and employers also are lining up to defeat the bill, claiming that its provisions could drive up the cost of insurance by 23 percent to 39 percent. The naysayers argue that if this bill became law, it would cause “thousands” of employers to stop offering insurance. They also maintain that the higher cost of premiums will force millions of lower-income workers to drop their insurance… The insurance companies are obviously concerned because PARCA will hold them liable.

Same story today. Government bad, regulation not needed, don’t worry the market will fix it. Mr. Rodwin’s closing statement:

Backlash is unlikely to disappear until the industry matures and thoughtful regulatory authority protects the public, and the industry from itself.


We even were concerned in 1998 about CEO compensation for the insurers. From the Families USA 1998 report:

In keeping with the industry’s accentuated focus on costs, this report analyzes a very different facet of managed care costs–namely, the costs associated with compensation for high-level HMO executives. The report examines 1996 executive compensation for the 20 for-profit, publicly traded companies that owned HMOs with enrollments over 100,000.7 These 20 companies owned 64 of the nation’s largest HMOs in 1996.
The 25 highest paid executives in the 20 companies studied made $153.8 million in annual compensation, excluding unexercised stock options, in 1996. The average compensation for these 25 executives was over $6.2 million per executive. The median compensation for these 25 executives was over $4.8 million.
The 25 executives with the largest unexercised stock option packages in 1996 had stock options valued at$337.4 million. The average value of unexercised stock options for these 25 executives was $13.5 million. The median unexercised stock option package for these executives was over $7.2 million.
(Go here to see what it’s worth today.)

In fact, we are so having the same debate again, yet, still that, I found this regarding the 1998 congressional timing for the health care issue:

All sides in the Senate debate have used the August recess to push their managed care proposals…

We are soooooooo doing it again that we are right down to the same time of the year! AHHHHHHHHHHHH!

Which brings me to Save the Rustbelt’s comment “…but it is not some conspiracy to drive up administrative costs.” My point was not that there is a conspiracy regarding administrative costs, certainly not by Massachusetts. It is that in order to fix what was fixed they are reaching for more of the same reasoning: Control the cost via administration of the costs. It is the very reasoning that has allowed the insurance industry (just look at the sub corps that UHC owns) to develop an entirely new business that is only expending but is not delivering the product results as advertised as it adds costs. And now, we will shift the cost by shifting the administrative model to the providers via a model that is questionable.

This Massachusetts model of capitation via “accountable care organizations” (ACO) is really just a new twist on the staff model HMO. Only now the insurer will collect the money and just pass it on according to the state fee schedule (yes it is still a fee schedule whether fee for service or fee for head count), and keep the difference. If there is not state setting of premiums, then where is the cost savings to the purchaser of insurance. If there is state setting of premiums, then why go through all this when we could just have a single payer system and cut out the profit and reduce the duplication of claims management to obtain our savings?

Also, to make this work, a patient will have to remain with the same “accountable care organization” at least through to the conclusion of their health problem. Being that the new fix is just a rehash of some old models, it is reasonable to assume that there will be some limiting of the consumer of health insurance to change ACO’s. Bet it will be like the Medicare drug program; one year, which I believe is already part of the Massachusetts insurance program. I doubt that locking a consumer into a program for 1 year is long enough for an ACO to have affected a change in the consumption of health care services by the consumer. In fact, you will not know unless that consumer gets sick in such a way that there are lifetime residuals and then starts ACO shopping. Will the consumer put up with having to be locked into the ACO for more than a year? Consider that health care outcomes are looked at over 3 and 5 year periods to determine success. Can you say “administration of cost”? How will the consumer know which ACO is actually getting the product of health and healing correct for the least price without more administration? How will the consumer come to appreciate value before actually having to purchase?

Which leads me to Vtcodger’s comment: “About the best I can say for this idea is that it is new.” I hope I am making clear that this is not new. Nothing about the current discussion of the health care problem is new. It is just the game of hot potato. It is just a shifting of the costs down the line. (An approach we seem to have been using since “trickle down” theory was created.) I do agree and it is why I believe capitation did not catch on and staff model HMO’s declined, when Vtcodger states: ” I don’t think that your average primary care physician wants to be an insurer…”.

But, let me correct one assumption that like the myth of Reagan lives on regarding managed care. Again Vtcodge: Actually, HMO/PPOs etc did and do seem to work to some extent. When they were first introduced, increases in health care costs did moderate for a while.

Yes, cost did seem to moderate. But there were very specific reasons and it had little to do with manage care actually reducing the “unneeded tests and procedures”. From the Frontline article:

In the mid-1990s, HMOs made some people think that they had vanquished medical inflation — as rates to big employers increased just 0.5% to 2% a year. But the managed care plans “paid dearly for competitive pricing in 1997,” says John Erb, a benefits consultant at William M. Mercer Inc. “Many lost money and margins were slim for most of the rest.

It was the old business model to market share, cut your pricing and hope your competition folds first. It’s the big box store model. It worked. In RI land we were reduced to BC and UHC. Two years ago, UHC undercut BC to win the state contract. Prices are up.

There was a report put out by Muse & Associates for the pro PARCA coalition. In it they noted two other reports when making a conclusion about costs. Quoting from an article from my national association’s journal 4/98 (I have no link):

“Private sector average premium costs, for HMOs, the most tightly controlled form of managed care, are 18.4 percent lower than traditional indemnity plans.
Other researchers have come up with estimates reassuringly similar to the Towers Perrin figure. For example, the Lewin Group, in a 1997 report, estimated direct savings from managed care at 19 percent.
So, Muse & Associates are on sound footing in concluding: “Clearly, overall managed care savings could not exceed 20 percent. The best evidence strongly suggests that 15 percent of the 20 percent savings comes from managed care organizations reducing provider prices…”

We’re talking the same old approach to what really is a problem with the product. At least in the bad socialist health care programs they recognize that a for profit third party only adds cost and thus do not have to account for that part of our problem (it’s called savings). They just need to resolve the product quality issue. It is the only common issue to all nations.

I’m taking bets on the date of the new fix of the newly fixed, fixed system.

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