Tuesday, September 04, 2007

Another Shot at Healthy Wisconsin Falls Short

John Torinus took another swing at Healthy Wisconsin in his Journal Sentinel column on Sunday. And, again, he missed the mark.

Torinus tries to use a Lewin Group report to criticize the Healthy Wisconsin plan. He writes:

The payroll tax to fund Healthy Wisconsin has been pegged at 14.5% - 4% from every employee in the state and 10.5% from the employer.


Now, 14.5% is a big number, but it's not the whole story.

On page 57 of the final Lewin Report, the initial payroll tax percentages are shown as 11.55% for the employer and 3.95% for the employee. That's 15.5% going in, not 14.5%.

It's true that page 57 of the final Lewin report puts the initial payroll assessment at 15.5 percent to start. But that report deals with the Wisconsin Health Plan (WHP), not Healthy Wisconsin.

This is an acknowledgement that Torinus awkwardly makes a few paragraphs later, and he tries to use it to his advantage by saying that the use of high deductibles in the WHP should really make it less expensive than Healthy Wisconsin; hence, the 14.5 percent assessment projection for Healthy Wisconsin must really be low.

To bolster his point, Torinus cites an insurance broker who makes the obvious point that premiums decrease as the deductible increases.

On the surface, it appears that Torinus has struck gold -- he's managed to use a key piece of evidence for fundamental health care reform against the Healthy Wisconsin proposal. However, if you read that evidence a little more closely, the point virtually crumbles.

The most basic reason that the WHP costs more than Healthy Wisconsin is because it covers more people -- 225,000 more, to be exact. That's a 6 percent difference, which is due to the fact that Healthy Wisconsin incorporates the BadgerCare Plus plan that would increase participation in state health programs, thereby decreasing the number of people who would be eligible for Healthy Wisconsin.

This has an impact on the assessment rate since the WHP would have more low-income participants than the Healthy Wisconsin proposal, at least as they're both currently written.

What's more, while it's true that the premiums for plans under the WHP should be cheaper -- and they probably are -- the fact that the proposal includes funding each participant's HSA with $500, at a total cost of $1.5 billion in the first year, dries up a good chunk of that savings. There are also administrative differences between the two proposals that have an affect on costs.

Here's (page 59) the cost breakdown for the WHP:

Click for larger view.
And here's (page 12) the cost breakdown for the Healthy Wisconsin proposal:
Click for larger view.
Bottom line, David Riemer and the people at the Lewin Group aren't trying to pull a fast one on the public with the Healthy Wisconsin proposal. The numbers make sense, though sometimes it takes a little more than just cherry-picking particular points in the 170-plus page Lewin report to see that.

But it was encouraging to see Torinus continue to speak positively, though in a veiled way, about the WHP. If he -- or, more importantly, the state GOP -- preferred to use that proposal as a starting point for discussions, it would be a big step in the right direction for health care reform in the state.

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Anonymous Anonymous said...

Hey Seth:

Why is John Edwards plan only going to cost $120 billion year and cover everyone in the country, about 300 million people and HW is going to cost $15 billion and cover about 5.3 million people. What is the deal here? :)

September 04, 2007  
Blogger Seth Zlotocha said...

I haven't seen a cost report for the Edwards plan, but my guess is that the $120 billion figure only represents the government-assessed portion of it. Since that plan allows employers to continue offering health care to employees on its own, it's likely those costs aren't being figured into the $120 billion figure.

The Healthy Americans Act -- proposed by Sen. Ron Wyden -- is pegged at $812.9 billion, which is about what I'd expect a national universal health care plan to cost overall.

September 04, 2007  
Anonymous Anonymous said...


One of the reasons why I am uneasy about government increased involvement in health care is what John Edwards said over the weekend. To make it mandatory to go to the doctor. WTF? This is the type of talk that really scares me.

September 04, 2007  
Blogger Seth Zlotocha said...

I understand why a statement like that would make someone worried, John. It makes some fiscal sense on paper, but there are all sorts of solid libertarian reasons for opposing a mandate like that. Although I don't consider myself a libertarian, exactly, I certainly wouldn't support that type of government intrusion into a personal decision like when to seek health care. I'm all for providing incentives for people to seek preventive care, but I don't think it should be mandatory.

And that's really the thing about Edwards' statement. He doesn't speak for all universal health care plans, and, even more fundamental than that, that mandate is a facet that has no structural importance for any health care proposal. It's an add-on, and a poor one at that.

What I'm getting at here is that there's no inherent connection between universal health care that's regulated by the government and mandatory doctor visits. There isn't a single country with universal care that requires doctor visits, at least to the best of my knowledge, and that even goes for the countries like the UK where the government literally owns and operates the entire health system -- payers and providers.

So, I'd say it's pretty clear that you can be in full support of a universal health care plan that's regulated -- even heavily regulated -- by the government without fearing that support will inevitably lend itself to support for or the existence of something like mandatory doctor visits.

September 04, 2007  
Blogger Jack Lohman said...

Torinus says "…high payroll taxes paid by employers inevitably put a damper on wage increases." Of course he's right but very incomplete. He ignores vital, offsetting factors that good business leaders would surely include.

First, the 10.5% employer tax *replaces* the 15% most employers are currently paying for employee insurance premiums, thus wages are more negatively affected today than after the 4.5% of wage savings in HW is applied.

Since when does a 10.5% cost have impact but a 15% cost doesn't? Most business leaders would swap the higher for the lower any day, but obviously not John Torinus.

Secondly, he points to the 4% employee tax and doesn't mention that it offsets part of what they are already paying -- and additionally -- it includes coverage of limited vision, dental for children, mental parity, and pharmaceuticals they are not currently getting paid for. A 16% increase in coverage, and there's no additional cost for a family plan!

September 04, 2007  
Anonymous Anonymous said...

I would like to see more discussion about cost effectiveness.

September 04, 2007  
Blogger Jack Lohman said...

jp, if you want to undestand just how effective it is, follow the money of those who are opposing it. The insurance industry has given legislators over $800K to block it, $600K to the R's, because that middleman bureaucracy consumes 31% of our health care dollars without ever laying hands on the patient. And they want to continue doing so.

September 04, 2007  
Blogger Seth Zlotocha said...


The cost-effectiveness of fundamental reform is that more people get good coverage for ultimately less money. Of course, the cost isn't going to drop off the table, but the rate of growth would be lowered.

If you want more of the particulars on that, you should check out pages 55-57 of the Lewin report cited in the post.

September 04, 2007  
Anonymous Anonymous said...

Cost effective means what is achieved for the amount of money spent regardless of who gets the money. A Washington based healthcare system bureaucracy will dwarf the “middle man bureaucracy” and result in less healthcare for the money spent.

The adverse selection impact (poor health-lifestyle) of the uninsured will result in a higher per person cost if “good coverage” is maintained. Investment in facilities and technology can help reduce the growth.

September 05, 2007  
Blogger Seth Zlotocha said...

Do you have any evidence to suggest that uninsured people lead unhealthy lifestyles at any greater percentage than insured people?

Age is typically the biggest driver of health status and, as a result, health care policy cost, especially on the aggregate -- and we all get old sometime. You can see the breakdown on page 10 of the Lewin report on the WHP, which is cited in this post. Average annual health spending more than doubles between the 25-34 and the 55 & older categories.

And, if the unhealthy not paying their fair share is a concern, that's where cost-sharing can be used to create economic incentives to be as healthy as possible. Witholding coverage altogether isn't a wise option unless you're also willing to withhold care; to be sure, when uninsureds really do need health care today, they can get it in any ER or through hospital charity care, and that, too, results in higher costs for those who have insurance. It makes economic -- in addition to moral -- sense to ensure everyone has coverage, especially preventive coverage, so that ailments can be identified sooner (i.e., when they're cheaper to treat) rather than later (i.e., when they're more expensive to treat), and you can ensure that everyone is at least paying for a portion of their care based upon income and utilization.

September 05, 2007  
Anonymous Anonymous said...

The uninsured include those who were denied coverage due to illness.
Medicare covers many of the sickest in the over 55 category.
My concern is with the unhealthy persons impact on cost not the amount they pay.
Thank you for the discussion.

September 06, 2007  
Blogger Seth Zlotocha said...

Yes, the uninsured include some who were denied coverage due to illness (which may or may not be related to lifestyle), but I haven't seen any evidence that shows that group makes up a significant portion of the uninsured population -- particularly any more significant than the portion of insured people who also suffer from chronic illnesses.

In the end, unless you're willing to say that care should be denied to people because of their health status -- i.e., rationing -- including for those who may have a chronic illness through no fault of their own, then it makes both economic and moral sense to make sure everyone has coverage.

And, just to note, Medicare doesn't kick in until age 65, so the 55 & older category includes just as many years as the 25-34 group. Also, the figures on spending per age group that I noted above are average total costs, not just what the individual spends.

September 06, 2007  
Blogger Unknown said...

(Washington, DC) Congress is gearing up for debate on a resolution authorizing the use of force in Iraq. The Senate might start debate as early as Tuesday. But Wisconsin U.S. Senator Russ Feingold is one of several Democrats asking for changes in the President's plan. Connie Walker has more.

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