Thursday, April 19, 2007

GOP Health Care Reform: Same Old, Same Old

Not that I was expecting much, but the health care reform plan announced by Assembly Republicans yesterday is pretty weak.

Here are the points, one-by-one:

Make HSAs state tax deductible

Unlike some on the left, I don't have a problem with the idea of HSAs, but I do have a problem with their application in our existing fragmented health care system. There are a littany of reasons, but here are the high points:
  • The majority (70 percent) require preventative care to be applied to the deductible, which provides incentives for people to skimp on routine care that can catch many ailments when they're minor and relatively inexpensive to treat.
  • One-third of people with employer-sponsored HSAs do not receive any contribution from their employer, meaning they're forced to foot the $2000-$10,000 annual deductible completely on their own (the other two-thirds get an average employer contribution of $1185, which could be reasonable if the deductible is closer to the lower end of the HDHP spectrum).
  • HSAs, as they currently exist, tend to attract healthy and wealthy participants, which increases the risk -- and subsequently the cost -- associated with traditional plans that are needed by many of the less healthy and less wealthy.
All of this isn't to say HSAs aren't viable in any format. If they come as part of a comprehensive plan that eliminates system fragmentation and ensures consumer/patient safeguards like covered preventative care, a reasonable amount of annual start-up funding for the HSA, a reasonably low annual deductible and out-of-pocket maximum, and ensures successful community rating, then HSAs can have some beneficial effects of weeding out unnecessary care that adds to the overall cost of the system. The GOP plan, however, offers none of this.

Make health insurance premiums state tax deductible.
This is a good idea, and it's already part of Governor Doyle's '07-'09 budget. But to put the proposal in perspective, for those without insurance or those who are currently under-insured, making the premiums tax deductible won't do much to make adequate coverage affordable. [Updated -- see below.] According to the numbers put forward by the Doyle administration, the tax deduction would mean a family that spends $3600 per year in premiums would save $236. That's helpful, but it's not a solution.

Encourage workplace wellness
Employer-sponsored wellness programs have shown good potential, but -- in and of themselves -- they still amount to nothing more than tinkering around the edges of what makes our health care system so expensive. Similar to HSAs, these programs would be a great addition to a comprehensive health care proposal, but their effect is going to be muted in our existing fragmented health system where the uninsured, under-insured, and our inefficient payer structure are still the primary problems.

Improving Transparency of Health Care Costs
Nobody is going to disagree with more transparency, but its effectiveness is very much in question. Studies have shown patients don't take the time to "shop around" for care, in part because they can't -- especially for the non-elective procedures that actually cost a lot of money -- but also because of the geographic disbursement of most health care providers (a trend that's growing as systems continue to consolidate). And for more intricate procedures that tend to be the expensive ones, another problem is that costs are unpredictable since the way the human body reacts to treatment is often unpredictable. New treatments may become necessary that weren't initially anticipated.

Also, other studies show most patients tend to rely on the recommendation of their primary care doctor rather than scoping out prices prior to receiving treatments. Adding to the problem is that studies have shown that quality care ratings often don't correlate with quality care; so while it may be easy to compare price, it's not easy to compare the bang you're getting for your buck.

In the end, while the GOP plan isn't surprising, part of me was still holding out hope for a bold free marketer plan like the one I discuss here by CATO economist Arnold Kling. Kling's plan is to essentially transform health insurance as we know it by only covering catostrophic care and opening up the rest to individual consumerism.

I don't agree with Kling's plan, as I detail in the post cited above, but at least it's something bold rather than the same old, same old tinkering that's become a mainstay of the GOP's proposals for dealing with our nation's top domestic issue.

UPDATE: Initially this post said that employer-sponsored insurance premiums are already state tax deductible. That's not always the case; evidently many large employers allow employee premiums to be paid through a pre-tax payroll deduction, but this isn't a universal practice in the state.

This certainly adds some weight to that part of the proposal, which, again, is already in Doyle's '07-'09 budget. But while saving $236 on a $3600 annual premium bill is nice, it doesn't come close to addressing our fundamental health care problems.

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Blogger Dad29 said...

Actually, there's a VERY large employer in Milwaukee (10,000+ ees) who provides HSA and an HRA contribution. The HSA is employee-funded, the HRA is not.

As to "premium deductibility," you seem to be forgetting that there are many plans which require an employee contribution to the premium--usually $100-$300/month (depending on the plan.) A deduction there would be meaningful.

Finally, it's about time that unions get very, very pro-active on the workplace health issues--cooperating with employers rather than contentiously. There's still a lot of industrial-engineering which could be applied with great benefit to a LOT of repetitive-motion jobs.

April 19, 2007  
Blogger Seth Zlotocha said...

What's your point about the VERY large employer in Milwaukee? Were you saying that it does contribute to the HSA or it doesn't? If it does, then how much it contributes in relation to the deductible level becomes the key question (along with whether preventative care is applied to the deductible). And even if the answer to all of these questions are positive, you can't base public policy for the state on the voluntary actions of one company. The key is ensuring that these patient/consumer safeguards are in place before providing more incentives for employers to use HSAs.

I agree making premiums tax deductible is a good policy; all I was saying is that it's not going to have a very significant impact on the primary problems that face our health care system.

Unions aren't the cause of our growing health care crisis. And many -- including the state AFL-CIO, WEAC, and a number of locals -- have gotten proactive about reform by joining a number of other groups like the Wisconsin Council of Churches, the Lutheran Office for Public Policy in Wisconsin, the state AARP, and many others under the umbrella organization called the Wisconsin Health Care Reform Campaign. It's the state GOP, along with the WMC, the insurance industry, and the hospital industry that are standing in the way of serious reform.

April 19, 2007  
Blogger Dad29 said...

My point was that (contrary to your implication) there ARE employer(s) who not only sponsor an HSA arrangement but who also make HRA contributions.

They do not contribute to the HSA, only to the HRA.

And as to unions: I don't dispute that they are helpful--but I think there's more that can be done. Not knocking them, just 'pushing' a bit.

However, joining the HCRC is not the same as proactive and rational assistance in reducing workplace-health issues.

April 20, 2007  
Blogger Seth Zlotocha said...

I'm well aware that some employers use HRAs that are fully controlled and funded by the employer. In fact, I've noted that in other posts (and, for the record, the number of HDHPs with HRAs is quite low -- 10% of them, according to 2005 Kaiser Family Foundation numbers). But the GOP plan doesn't pertain to HRAs, it pertains to HSAs, which is why I didn't mention HRAs in this post.

April 20, 2007  
Blogger Seth Zlotocha said...

And, for the record, you can only have both a HSA and a HRA under limited circumstances. General HRAs make someone ineligible for a HSA. But, for instance, if the HRA is limited to specific coverages like dental or vision, then you can still have a general HSA.

But, again, the number of HDHPs with HSAs (12%) or HRAs (10%) are very low, and there are currently no patient/consumer safeguards for either arrangment when it comes to preventative care or making sure the employer contribution (if there is one, in the case of HSAs) covers a reasonable portion of the deductible. This also means only those who can afford it (because they're wealthy) or can risk it (because they're healthy) will move toward HSAs or HRAs in our current system, leaving those who can't afford it (because they're less wealthy) and those who can't risk it (because they're less healthy) to face even higher costs in traditional plan pools as their community rating erodes.

April 20, 2007  

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