PNHP

Divorce and women’s risk of health insurance loss

Divorce and women’s risk of health insurance loss

Divorce and Women’s Risk of Health Insurance Loss

By Bridget Lavelle and Pamela J. Smock
Journal of Health and Social Behavior, November 12, 2012

Abstract

This article bridges the literatures on the economic consequences of divorce for women with that on marital transitions and health by focusing on women’s health insurance. Using a monthly calendar of marital status and health insurance coverage from 1,442 women in the Survey of Income and Program Participation, we examine how women’s health insurance changes after divorce. Our estimates suggest that roughly 115,000 American women lose private health insurance annually in the months following divorce and that roughly 65,000 of these women become uninsured. The loss of insurance coverage we observe is not just a short-term disruption. Women’s rates of insurance coverage remain depressed for more than two years after divorce. Insurance loss may compound the economic losses women experience after divorce and contribute to as well as compound previously documented health declines following divorce.

From the Discussion

Not all women are equally likely to lose health insurance after divorce. Those insured as dependents on husbands’ employer-based insurance plans are most vulnerable to insurance loss, while stable, full-time employment buffers against it. Women from moderate-income (200–300% FPL) families are particularly vulnerable. Many of these women fall into the ranks of the near-poor after divorce, with too much money to qualify for Medicaid but not enough to purchase private health insurance coverage.

Our findings also add to the body of evidence that the current health care and insurance system in the United States is inadequate for a population in which multiple family and job changes over the life course are not uncommon. It remains to be seen how effectively the Affordable Care Act (ACA) of 2010 — expected to be fully implanted by 2014 — will remedy the problem of insurance loss after divorce.

Moving forward, policy makers should be aware that a system that induces a de facto linkage between marital status and health insurance may have unintentional adverse consequences.

http://hsb.sagepub.com/content/early/2012/11/09/0022146512465758.full.pdf+html

Comment:

By Don McCanne, MD

For a wide variety of reasons, our bizarre, fragmented, though expensive system of financing health care leaves many people vulnerable to financial hardship and impaired access to care. This study shows that women who divorce are at great risk of becoming uninsured and consequently may compound both economic losses and health declines.

Even within the population of divorced women multiple factors play a role in whether or not the person is insured, or in what form of insurance the person may have – whether it is public or private, employer-sponsored or purchased in the individual market. Even if insured, the variations in coverage can disrupt established relationships with health care professionals because of non-congruent networks, and can expose the individual to a wide range of potential financial barriers because of the differences in cost sharing with the various forms of coverage.

Will the Affordable Care Act (ACA) correct these deficiencies? Some lower-income individuals may be eligible for Medicaid, but many states have indicated that they will not use the provisions of ACA to expand eligibility for the program. Divorced women with modest incomes may find that their incomes are too high to qualify for Medicaid, yet still too low to be able to pay their share of the premium after any subsidies. Some may be exempt from the requirement to purchase insurance, while others may be subject to a penalty for not having insurance, even though they simply do not have adequate funds to pay the premiums. In either instance, they will remain uninsured.

As the authors of this report state, “policy makers should be aware that a system that induces a de facto linkage between marital status and health insurance may have unintentional adverse consequences.” That statement can apply to the innumerable other factors that determine whether or not a person is covered, and, if so, by which of the highly variable public and private forms of coverage that differ in their ability to ensure both access and financial security.

Everyone should automatically have full coverage for life. Divorce, and all of the other variables throughout life, should have absolutely nothing to do with a program designed to prevent greater financial insecurity in the face of health care needs. We need to improve Medicare and provide it for everyone, automatically, for life.

Obamacare: Good intentions won’t make health care affordable

By Philip Caper, M.D.
Bangor Daily News, Nov. 15, 2012

Mercifully, the election is over. Obamacare is here to stay. A strong role for the federal government in moving toward the goal of health care as a right of everybody in the United States is now firmly and, in my opinion, irreversibly established.

Obamacare was a monumental political achievement in that it established an aspiration to health-care coverage for all Americans in federal law for the first time. President Barack Obama and former House speaker Nancy Pelosi deserve great personal credit for taking on this politically radioactive task.

But as a mechanism for providing access to health care for everybody at a reasonable cost, Obamacare has a number of serious shortcomings. Even if it works entirely as intended, it will still leave 25 million to 30 million people without any coverage at all. It lacks any persuasive mechanism for controlling the costs of public or private programs, meaning that insurance, even with federal subsidies, will likely become increasingly unaffordable.

It is way too complicated, and complications are expensive. To make it work will require thousands of federal regulations.

Deficit hawks will resist the expansion of Medicaid, the subsidies for the purchase of private insurance, the boost to community health centers, and funding for the exchanges that must be set up to create a more functional health insurance “marketplace.” The new law even includes funding for “navigators” to help people sort through the maze of insurance plans it creates.

Our fractured and fragmented health-care system will become even more so as Americans are further divided by income, employment status, and the type of insurance they choose in the exchanges. Despite the modest tax penalties, many will choose to remain uninsured, shifting the cost of care they may need to everybody else.

In previous columns, I have argued for a right to health care on moral grounds and on economic grounds. It’s actually cheaper to cover everybody than to figure out how not to cover some.

I would now like to make a case for less complexity in our health-care system. Much of the complexity of our existing system is defended as a way to preserve choice. But the virtues of choice are being vastly oversold, especially when it comes to how it’s paid for.

Most people care little about how their health care is financed. They do care about how it’s delivered. Medicare, financed largely by taxes, is far more popular with the public than private insurance.

The ability of individuals to make intelligent choices among insurance plans is an illusion. A recent column written by a Harvard-trained health-care economist drives this point home. Despite her extensive education and experience with health insurance, she was unable to choose the most appropriate coverage for herself when she really needed to. With deteriorating health and rising anxiety about her illness, worries about incurring a huge bill to get the potentially life-saving treatment for her brain tumor added to her stress.

Although some groups are more vulnerable than others to some diseases or injuries, when it comes to individuals, it’s nearly impossible to predict where and when illness or injury will strike or what its nature will be. Unless one has a pretty good crystal ball, the basic information needed to make an informed choice about a health insurance or prescription drug plan simply doesn’t exist.

The dilemma the health-care economist faced was not because of a lack of expertise, but rather a lack of necessary information.

Choice can be a good thing. But as anyone who has tried to navigate the Medicare prescription drug program can testify, there is such a thing as too much choice.

Rather than making our already byzantine health-care system more complicated, we need to make it simpler. We need to move away from health insurance and put everybody in the same tax-supported system.

As in Medicare, we could still give everybody a reasonable choice of doctors and other providers under an acceptable and enforceable budget. If every other wealthy country can do it, so can we.

Since everyone would benefit equally, it would be far more popular than what we have now. In other words, simplify our health-care system by enacting “Improved Medicare for All.”

It’s unlikely that could be done anytime soon at a national level, but I believe it could be done in Maine under the existing waiver provisions of the Affordable Care Act. Compared to our current system, it would be simpler, fairer, far more efficient and would allow us to join all other wealthy countries in making health care a right.

Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be reached at pcpcaper21@gmail.com.

http://bangordailynews.com/2012/11/15/health/obamacare-good-intentions-wont-make-health-care-affordable/print/

Jon Stewart destroys Papa John’s CEO: Should’ve pushed for single-payer

By Eric W. Dolan
The Raw Story, November 14, 2012

On his show Tuesday night, The Daily Show host Jon Stewart slammed businessmen who laid off employees after President Barack Obama was re-elected, claiming that these “job creators” were merely using Obamacare to “wriggle out of the social contract.”

The late-night comedian told companies like Papa John’s to stop pretending the election had transformed them into “reluctant assholes,” noting that businesses had a long history of shafting their workers.

Stewart noted that if Obama had pushed for a single-payer health care system, companies would no longer have to pay for health care premiums.

He advised the companies that had laid off employees or cut hours to “take all the millions you donated for partisan political purposes and pump it back into the type of health care advances that may ultimately increase business productivity.”

“And then, finally, we can just keep pizza out of politics, because at a certain point it is going to make children’s parties very uncomfortable.”

http://www.rawstory.com/rs/2012/11/14/jon-stewart-destroys-papa-johns-ceo-shouldve-pushed-for-single-payer/

Here’s the video:

Additionally, Stewart expressed his support of single-payer during his debate, the aptly named “Rumble In The Air-Conditioned Auditorium”, with conservative commentator Bill O’Reilly on October 6th, 2012.

Why employers' health benefit cost growth of 4.1% is a fraud

Employers Held Health Benefit Cost Growth to 4.1% in 2012, the Smallest Increase in 15 Years

Mercer, November 14, 2012

Decisive action by employers in 2012 – in particular, moving more employees into low-cost consumer-directed health plans and beefing up health management programs – was rewarded with the lowest average annual cost increase since 1997. According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer and released today, growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012.

With a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP.

Moving even a small number of employees out of a more expensive plan into a CDHP can result in significant savings for an employer. The cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007.

“PPACA requires that health plans cover, at a minimum, 60% of eligible health plan expenses,” says Ms. Cunninghis (Sharon Cunninghis, US business leader for health and benefits). “Some employers are resetting their health plan value to move closer to that minimum, and saving money as a result.”
 
Offering a lower-cost CDHP is one way employers “reset” plan value in 2012. Others simply raised the deductible of an existing PPO plan. The average PPO in-network deductible reached $1,427 for an individual in 2012.

“Over the past decade, employers have figured out how to stabilize health benefit cost increases through cost-shifting and other cost management techniques. Now we’re seeing a move toward even greater control through defined contribution strategies,” says Ms. Cunninghis.
 
An example of a defined contribution strategy is determining in advance what the employer contribution to the cost of coverage will be, and requiring employees to pay anything above that amount. If the employer offers a range of plans, employees can save money by choosing a lower-cost plan. Nearly half of employers – 45% – say they currently use or are considering using a defined contribution strategy.

http://www.mercer.com/press-releases/1491670

Comment:

By Don McCanne, MD

Pop the champagne corks! Businesses have held the rate of health benefit cost increases to only 4.1%! Though that is still twice the rate of inflation, it’s the smallest increase in 15 years!

How did they achieve this success? By moving employees into lower cost consumer-directed health plans. By increasing deductibles for the plans. By other forms of cost shifting. By lowering actuarial values of plans to 60% – the minimum required by the Affordable Care Act. By adopting defined contribution strategies. By shifting to private insurance exchanges. By herding employees into narrower provider networks.

So have the employers finally learned how to slow the escalation of health care costs? No! They have dumped their costs onto the backs of their employees!

So while they enjoy the bubbly in their executive suites, they have left too many of their employees without even any beer money.

If you didn’t read yesterday’s message that included the work of Thomas Piketty and Emmanuel Saez, you should. You will see that the solution is quite simple. Tax the crap out of the plutocrats and spend the proceeds on a public insurance program for all of us – an Improved Medicare for All. (I would use less inflammatory language except that wealthy employers who have such a low regard for their own employees do not deserve elegant language.)

Please note that this message does not apply to the multitude of small businesses which are struggling to maintain a modicum of success. These businesses are also victims of the burdensome health insurance costs. They too would benefit from an equitable public insurance program, if only they would make an effort to understand what it would mean for them. It’s our job to try to educate them.

Why employers’ health benefit cost growth of 4.1% is a fraud

Employers Held Health Benefit Cost Growth to 4.1% in 2012, the Smallest Increase in 15 Years

Mercer, November 14, 2012

Decisive action by employers in 2012 – in particular, moving more employees into low-cost consumer-directed health plans and beefing up health management programs – was rewarded with the lowest average annual cost increase since 1997. According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer and released today, growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012.

With a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP.

Moving even a small number of employees out of a more expensive plan into a CDHP can result in significant savings for an employer. The cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007.

“PPACA requires that health plans cover, at a minimum, 60% of eligible health plan expenses,” says Ms. Cunninghis (Sharon Cunninghis, US business leader for health and benefits). “Some employers are resetting their health plan value to move closer to that minimum, and saving money as a result.”
 
Offering a lower-cost CDHP is one way employers “reset” plan value in 2012. Others simply raised the deductible of an existing PPO plan. The average PPO in-network deductible reached $1,427 for an individual in 2012.

“Over the past decade, employers have figured out how to stabilize health benefit cost increases through cost-shifting and other cost management techniques. Now we’re seeing a move toward even greater control through defined contribution strategies,” says Ms. Cunninghis.
 
An example of a defined contribution strategy is determining in advance what the employer contribution to the cost of coverage will be, and requiring employees to pay anything above that amount. If the employer offers a range of plans, employees can save money by choosing a lower-cost plan. Nearly half of employers – 45% – say they currently use or are considering using a defined contribution strategy.

http://www.mercer.com/press-releases/1491670

Comment:

By Don McCanne, MD

Pop the champagne corks! Businesses have held the rate of health benefit cost increases to only 4.1%! Though that is still twice the rate of inflation, it’s the smallest increase in 15 years!

How did they achieve this success? By moving employees into lower cost consumer-directed health plans. By increasing deductibles for the plans. By other forms of cost shifting. By lowering actuarial values of plans to 60% – the minimum required by the Affordable Care Act. By adopting defined contribution strategies. By shifting to private insurance exchanges. By herding employees into narrower provider networks.

So have the employers finally learned how to slow the escalation of health care costs? No! They have dumped their costs onto the backs of their employees!

So while they enjoy the bubbly in their executive suites, they have left too many of their employees without even any beer money.

If you didn’t read yesterday’s message that included the work of Thomas Piketty and Emmanuel Saez, you should. You will see that the solution is quite simple. Tax the crap out of the plutocrats and spend the proceeds on a public insurance program for all of us – an Improved Medicare for All. (I would use less inflammatory language except that wealthy employers who have such a low regard for their own employees do not deserve elegant language.)

Please note that this message does not apply to the multitude of small businesses which are struggling to maintain a modicum of success. These businesses are also victims of the burdensome health insurance costs. They too would benefit from an equitable public insurance program, if only they would make an effort to understand what it would mean for them. It’s our job to try to educate them.

The Affordable Care Act: What do I need to know?

By Samuel Metz, M.D.
Street Roots (Portland, Ore.), Oct. 23, 2012

PNHP note: The following series of three articles appeared between Sept. 26 and Oct. 23 of this year in Street Roots, a member of the North American Street Newspaper Association. A fourth installment is expected soon. The writer, an anesthesiologist in Portland, is active in Physicians for a National Health Program, Mad as Hell Doctors, and Health Care for All Oregon.

Health care reform without tears: What’s the least I need to know?

Public discussions of health care reform send most people ducking under chairs and rushing for exits. Who can blame them? Our health care system is hideously complex. A flurry of opinions swirl from all parts of the political spectrum; some seem reasonable, others preposterous, and many simply make our heads ache.

This article offers a guide to the perplexed — the simplest a introduction to health care reform you will encounter. When finished, your new understanding may give you the confidence to discuss reform intelligently without fear of embarrassment.

In this first part, we start with basics. Why do we need reform? We need it because Americans spend twice as much as people in other countries, and yet our public health outcomes rank nearly last among industrialized nations, and our families’ health and finances are being devastated.

Let’s take a closer look.

Why do we need health care reform?

Although most of this year’s presidential candidates and several leading congressmen claim we have the “best health care in the world,” it is exceedingly  difficult to support this opinion. Here are reasons why.

First, U.S. health care is the most expensive in the world.

Second, on almost every measure of public health, the United States US ranks at or near the bottom of the industrialized world. There are 40 other countries where a pregnant woman and her baby have a greater chance of surviving pregnancy. American diabetics are twice as likely to suffer a foot amputation from diabetic complications than diabetics in other industrialized countries. Unless you are Paula Deen, the diabetic who makes millions selling high calorie recipes, the U.S. is a dangerous place for diabetics.

The United States ranks near the bottom in life expectancy and at the top in infant mortality. And even when life expectancy is adjusted for homicide, accidents, race, obesity, smoking and alcohol use, the U.S. ranking flirts with last place. As for our unhappy infant mortality ranking, even when compared only to countries with similar definitions of “live birth,” the United States retains first place.

Third, health care costs are devastating American families. Medical crises cause most personal bankruptcies, and most of those families had health insurance when the crisis began (so much for the illusory safety net offered by insurance policies). Most collection agency debts are medical. A diagnosis of lung cancer in the U.S. carries a 7 percent chance of bankruptcy within five years. Most labor-management disputes, such as last year’s confrontation in Wisconsin, pivot on medical benefits.

These crushing burdens are the norm in the U.S., whereas other industrialized countries have national health plans covering nearly everyone. Citizens in those nations aren’t denied treatment because they lack money. Citizens in those countries don’t lose their homes, their savings or their feet because they cannot afford health care.

It is difficult for many Americans to imagine every member of their families enjoying guaranteed access to health care no matter how old, sick, poor, unemployed or disabled they become. But guaranteed access is a fact of life in every other industrialized nation.

While wealthy Americans (notably presidential candidates and leading congressmen) sleep soundly knowing their families will always have access to health care, most of us cannot say the same.

What should health care reform achieve?

First, we want health care access for all Americans regardless of our income. Who needs a health care plan that removes access to health care when we become unemployed, sick or too poor to afford premiums, deductibles and co-pays? Assuring health care access for our families is essential.

Second, we want lower costs. Whether we pay with taxes, premiums or out-of-pocket, it’s all our money. A health care plan reducing taxes but increasing premiums, or reducing premiums but increasing out-of-pocket payments, or reducing out-of-pocket payments but increasing taxes is sleight of hand, not reform. We want lower costs.

Finally, we want better health outcomes. Our health care dollars should improve our family’s the health of Americans, and not be diverted to a growing army of hospital billing agents, whether government or private. We want better health.

What can successful health care systems teach us?

If we want to change our health care system to gain better care for less money, we should learn from other industrialized nations that provide comprehensive health care at far lower costs. Fortunately, they are easy to find: Every other industrialized country provides better care to more people for less money than we do.

A first glance, other industrialized countries finds a mind-boggling array of health care systems. But these successful systems share three characteristics.

First, all citizens have lifetime access regardless of health. American insurance companies discriminate against people who are sick or have pre-existing conditions by charging higher prices for premiums, restricting their benefits or denying care altogether. In other industrialized countries, citizens enjoy access regardless of health, wealth or employment.

Second, patients are encouraged to seek care without the penalty of high out-of-pocket costs. Rather than compelling people to determine whether they need care before they see a physician, other countries allow the physician to determine if a patient needs care after he or she sees the patient. In the United States, higher deductibles and co-pays actually deter people from seeking care.

Finally, health care financing is provided by publicly accountable and transparent not-for-profit agencies. Financing agencies are simply brokers: They transfer money from patients to providers. Although most countries allow profits to be made delivering health care, the United States is the only country to allow profit-making from financing basic health care.

What do these three attributes mean to us?

Some may dismiss all foreign health care systems as “socialized medicine,” run by governments and therefore unacceptable. Most foreign systems, however, use private (non-government) providers, and many use private financing agencies.

What does this mean for us? The U.S. can achieve real reform with as much or as little government as we think appropriate. Socialized medicine is an option, but not the only one, for reform.

Most importantly, these three characteristics — universal lifetime access, no obstacles to seeking care, and not for profit brokers — all relate to financing, not delivery. Financing determines who is included and who provides funding. Delivery, on the other hand, determines how much doctors are paid, the conditions for treatment and who qualifies for care. Successful systems teach us that when the three common financing characteristics are employed, there still are many options for health care.

We need health care reform because we spend twice as much as other nations, our public health outcomes are abysmal, and our families (and businesses) are financially and medically ravaged. We want reform to guarantee health care access to our family, to reduce our costs and improv
e our health.

We can learn from successful health care systems around the world that all provide better care to more for less. These systems teach us: (1) include everyone, (2) encourage care, and (3) finance care with publicly accountable and transparent not-for-profit agencies.

Will the Affordable Care Act, also known as “Obamacare,” change everything? The next part of this series will answer that question.

http://streetroots.wordpress.com/2012/09/26/health-care-reform-without-tears-whats-the-least-i-need-to-know/

***

Health care reform, part II: Will Obamacare save America from itself?

Just when despair engulfed our dysfunctional health care system, Congress passed the Affordable Care Act (also known, inappropriately as we will see, as “ObamaCare”). Is the Affordable Care Act a knight in shining armor, a red herring or the end of civilization as we know it?

Let’s look closer.

The Affordable Care Act (ACA) was a response to powerful health-care forces pulling in many directions — from families bankrupted by medical bills, businesses crippled by employer-sponsored insurance, hospitals and physicians paid less for Medicaid and Medicare patients than the cost to provide the care, insurance companies protecting their industry, and voters demanding that something — anything — be done to solve an apparently unsolvable crisis.

Ultimately, Congress created a 400,000-word compromise of baffling complexity. Before we review whether this effort was worth the trouble, let’s look at the major (but not the only) provisions.

By increasing both the number of Americans with private insurance policies and those participating in government health care programs, Congress hopes Americans will get the health care they need. The act’s scope covers both businesses and individuals.

The ACA encourages businesses to purchase private health insurance for their employees by fining businesses if they do not. In many cases (but not all), businesses will find it cheaper to buy the insurance rather than pay the fine. Because insurance prices go up as the number of employees goes down, small businesses may qualify for government subsidies to enable them to purchase insurance for their employees.

What about those of us who can’t get insurance through employers?

Individuals without employer-sponsored insurance must buy their own insurance or face a similar fine. This format is called a “mandate.” Individuals unable to afford any policy may qualify for government subsidies or be excused from both insurance and fine. To ease the challenge of finding insurance, Congress compelled states to create “health insurance exchanges.” These are websites where insurance companies offer policies in similar formats to make comparisons easier. Additionally, participating companies must provide minimal levels of benefits in policies sold in the exchange. The ACA does not compel insurance companies to participate in exchanges, and individuals may purchase policies outside the exchange.

What if you depend upon Medicaid or Medicare for health care?

The ACA expands some benefits for Medicaid and Medicare patients. States providing a higher level of benefits for Medicaid patients receive larger federal subsidies. Medicare benefits, especially primary and preventative care, are greatly expanded. The increased spending on Medicaid and Medicare combined with subsidies for businesses and individuals will increase government spending on health care.

To pay for this increase, the federal government will reduce other spending and seek new revenue. For example, many providers will see lower payments for Medicare patients. Most Medicare patients will pay more money out of pocket. Wealthy individuals will pay higher income taxes. Private insurance companies, drug companies and businesses that make medical equipment will pay new taxes.

And the ACA encourages health-care providers to form Accountable Care Organizations (ACOs). ACOs are variants of managed care, in which provider organizations receive a fixed annual fee for Medicare patients rather than be paid fee-for-service. In this fashion, ACOs make providers financially responsible for medical outcomes of their Medicare patients: If a Medicare patient does well and requires less money, providers keep the difference. If patients do badly, providers absorb the cost.

What happens to total government spending when all these increases and decreases are added up?

Most studies suggest overall government spending will go down.

So the ACA sounds like a heck of a deal: More insurance policies, reduced government spending and passing financial risks onto providers. What’s not to like?

Some readers may remember from Part One of this series the three fundamental goals of reform: (1) health care access when we need it, (2) lower costs and (3) better health.

Does the ACA achieve these goals?

The ACA will not provide universal access. Even when working perfectly, 40 million Americans will be underinsured. Ask any of the 750,000 Americans with health insurance who were still bankrupted by an illness (especially the 34,000 Oregonians who suffered this fate last year). Worse than that, 20 million additional Americans will have no access at all because they have no money. Result: 60 million Americans (20 percent of us) remain at risk for losing homes, limbs  or lives if we get the wrong disease at the wrong time.

Will the ACA reduce costs?

No. The savings to taxpayers in reduced federal spending will be billed to them when they become patients, with higher insurance policy prices and higher out of pocket spending. Even though it reduces government spending, the ACA neither lessens overall health-care costs nor does it stop the relentless increase in health care spending.

Will the ACA improve outcomes?

For the answer, we must take a closer look at Massachusetts.

In 2006, then-Gov. Mitt Romney signed a law of his own design compelling everyone in Massachusetts to purchase health insurance or face a fine. Sound familiar? The ACA applies the same principles of the Massachusetts law (call it “RomneyCare”) to the entire nation. The similarity was put more succinctly by Jonathan Gruber, the MIT economist who assisted in designing both laws: “They’re the same (expletive deleted) bill.”

So what happened in Massachusetts after 2006?

Nearly 100 percent of residents (98 percent in 2010) own a health insurance policy. That’s good. But public health measures have not improved, medical bankruptcies continue to rise, and Massachusetts is still the most expensive state, in the most expensive country, for health care. This does not bode well for American health care when the ACA applies those same principles on a national basis.

The ACA qualifies as health care legislation, but it fails to qualify as reform.
To its credit, the ACA has one dramatic asset: For the first time in American history, the U.S. Congress decided health care access for all citizens is a fit subject for congressional concern. Too bad Congress was unable to create a program to provide that access.

Ultimately, however, the ACA damages American U.S. health care by its very premise: It enshrines private health insurance as the sole portal to health care for most Americans. Thus, it perpetuates and strengthens the very aspect of our health care system that makes us uniquely vulnerable: our dependence upon the private health insurance industry.

Hence the disappointment in the Affordable Care Act. One would have hoped all the agony endured by Congress to generate this massive bill would have produced a result worthy of that effort. But we enjoy no progress. American health care remains
a juggernaut that devastates our families, cripples our business, smothers our economy and steals our health.

After this discouraging assessment, we deserve some good news. And there are indeed reasons to be hopeful which we’ll get to later in this series. But first we’ll visit the American health insurance industry. If the ACA can’t save America from itself, can a liberated and empowered insurance industry save our health and make our families whole again?

http://streetroots.wordpress.com/2012/10/23/health-care-reform-part-ii-will-obamacare-save-america-from-itself/

***

Health Care Reform without Tears, Part 3: Private health insurance

Part two of this series left readers with the unhappy prospect of an Affordable Care Act (ObamaCare) failing to achieve universal access, lower costs or better health. What about our private health insurance industry? Many individuals and organizations advocate unfettered competition among insurance companies on a nationwide basis, releasing them from the jungle of regulation created by 50 individual states. Free market competition brought down the costs of flat-screen televisions. Can’t it do the same for health care?

There is some foundation for this position. After all, most central Europeans finance health care with private insurance companies and their health is better than ours while spending half of what we do.

The flaw in this proposition is in vocabulary. European “Private health insurance” resembles American “Private health insurance” the way European football does to American football. Different games, different goals, different rules.

Yes, European health insurance companies both compete with each other and provide better care at lower prices than American companies do. However, they operate under regulations both alien and unacceptable to American insurance companies.

Europeans created rules to achieve specific goals: provide access for every citizen no matter how sick, or poor, or unemployed; reduce total costs; and improve everyone’s health. And European companies succeed.

Americans designed their health insurance rules to achieve what any business in America wants to achieve: to enable insurance companies to make as much money as possible. And, to be honest, American insurance companies succeed. But our rules are different and our goals are different from Europe.

Here are the European rules. Remember none apply to American companies.

(1) An insurance company can charge whatever it wants for a policy, but it must sell it at the same price to everyone regardless of health.

(2) Insurance companies cannot refuse a policy to anyone, sick or healthy. As the Good Book says, “Ask and it shall be given.” No exceptions.

(3) Insurance companies cannot drop a patient for any reason, not even failure to pay – the government will make sure premiums are paid. Patients, on the other hand, can change insurance companies at any time without notice. If your client gets one grumpy customer service agent, she takes her business elsewhere.

(4) Every policy must cover every treatable disease. No patient can inadvertently pick a policy that risks bankruptcy or death if they acquire a treatable disease. Supplemental policies may offer additional benefits, like single hospital rooms, cosmetic surgery, or experimental drugs. Patients can always get more than they need for basic health care, but they can never get less.

This next rule only applies in a few countries.

(5) If the government discovers that an insurance company still manages to cherry-pick healthier patients, the company pays a premium to subsidize companies with sicker patients.

Within these constraints, how can European insurance companies compete? There’s not much wiggle room: lower premium prices, added benefits, and improved customer care.

If you were an American insurance executive playing by American rules, how would you compete in the U.S.? Remember, no insurance company makes money selling policies costing more in health care than are collected in premiums.

Offering comprehensive coverage at affordable prices to sick patients who will need expensive care is the highway to bankruptcy.

You would compete by playing it safe.

(1) Pay expert medical underwriters high salaries to predict which patients will cost the most money. Then avoid those patients. The extra costs of underwriters can be passed on to patients by increasing policy prices.

Pricing your policies as high as possible is an excellent way to avoid sick patients. With our health care access determined by income, health follows wealth. If only healthy people can afford your policy, you have elegantly eliminated the most expensive patients to insure.

(2) Carefully craft benefit packages to reduce your financial liability. Remember most patients (and physicians for that matter) are incapable of deciphering what their policy will really pay for.

(3) Discourage policyholders from seeking health care by passing as many costs on to patients. High deductibles, high co-pays, and restricted benefits do the job quite nicely.

Remember most American workers change insurance companies every six years. It makes no sense for an insurance company to invest in preventative care if the savings ten years later accrue to a competing insurance company.

(4) Delay or deny payment to providers as long as possible. After all, you’ve got the premium money as soon as it is paid; the longer you hold on to it the more investment return you accrue. If you exhaust the patience of the provider long enough, they may even give up without any payment at all. That’s money in the bank.

These practices sound cruel, and they may be. However, in contrast to Europe, our rules align business interests against patients and providers. Competition rewards those insurance companies who avoid the sick, pass the most expenses onto patients, and deny both care and payment. Insurance CEOs who place their clients’ medical interests ahead of their company’s financial interests will, at best, be fired or, at worst, be arrested for violating their fiduciary obligation to make the interests of their owners paramount.

Removing regulatory barriers to allow free exercise of these rules is thus unlikely to promote better access, reduce costs, or improve health.

One last industry protest: Passing costs to patients (also colorfully known as “cost-sharing,” “skin in the game,” and “catastrophic-only insurance”) makes patients savvier consumers of health care and decreases their health care costs. Is this true?

The experience of European health care systems reveals the opposite. Europeans see their physicians two to four times as frequently and spend more time in the hospital than we do. At first glance they appear to be consuming more care than Americans do. Yet these non-U.S. patients spend half as much as we do for health care and enjoy better health outcomes.

Now it gets easier to understand why health care economics drive us to distraction. Health care does not follow conventional rules of supply and demand. Health care needs do not change when health care costs increase. However much we might covet flat-screen televisions, everyone has a minimal need for health care. But once that need is addressed, we have little incentive to consume more. Few people look forward to painful procedures or hospital food.

European health insurance companies have much to teach us.

If our goal is to provide better care to more people for less money, we must apply the three rules of health care financing, noted in the first part of this series and used successfully in every industrialized country other than ours.

(1) Include everyone, even the sick.

(2) Encourage patients to seek care by
lowering or removing deductibles, co-pays, and excluded conditions.

(3) Finance health care with publicly accountable, transparent, not-for-profit agencies.

With considerable disappointment, we must acknowledge neither the Affordable Care Act nor our American health insurance industry will pull our health care system back from the brink of destruction. But, as promised, the next and final part of this series will present refreshing news, that we can still create a cost-effective health care system in Oregon.

Samuel Metz is a Portland anesthesiologist active in health care reform. He is also a member of two organizations advocating publicly funded universal health care: Mad As Hell Doctors and Physicians for a National Health Plan. He is the local chapter representative to Health Care for All Oregon, an umbrella organization of over 50 groups working for better health care in Oregon. He can be reached at 3Q9A@samuelmetz.com.

Why employers' health benefit cost growth of 4.1% is a fraud

Employers Held Health Benefit Cost Growth to 4.1% in 2012, the Smallest Increase in 15 Years

Mercer, November 14, 2012
Decisive action by employers in 2012 – in particular, moving more employees into low-cost consumer-directed health plans and beefing up health management programs – was rewarded with the lowest average annual cost increase since 1997. According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer and released today, growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012.
With a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP.
Moving even a small number of employees out of a more expensive plan into a CDHP can result in significant savings for an employer. The cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007.
“PPACA requires that health plans cover, at a minimum, 60% of eligible health plan expenses,” says Ms. Cunninghis (Sharon Cunninghis, US business leader for health and benefits). “Some employers are resetting their health plan value to move closer to that minimum, and saving money as a result.”
Offering a lower-cost CDHP is one way employers “reset” plan value in 2012. Others simply raised the deductible of an existing PPO plan. The average PPO in-network deductible reached $1,427 for an individual in 2012.
“Over the past decade, employers have figured out how to stabilize health benefit cost increases through cost-shifting and other cost management techniques. Now we’re seeing a move toward even greater control through defined contribution strategies,” says Ms. Cunninghis.
An example of a defined contribution strategy is determining in advance what the employer contribution to the cost of coverage will be, and requiring employees to pay anything above that amount. If the employer offers a range of plans, employees can save money by choosing a lower-cost plan. Nearly half of employers – 45% – say they currently use or are considering using a defined contribution strategy.
http://www.mercer.com/press-releases/1491670

Pop the champagne corks! Businesses have held the rate of health benefit cost increases to only 4.1%! Though that is still twice the rate of inflation, it’s the smallest increase in 15 years!
How did they achieve this success? By moving employees into lower cost consumer-directed health plans. By increasing deductibles for the plans. By other forms of cost shifting. By lowering actuarial values of plans to 60% – the minimum required by the Affordable Care Act. By adopting defined contribution strategies. By shifting to private insurance exchanges. By herding employees into narrower provider networks.
So have the employers finally learned how to slow the escalation of health care costs? No! They have dumped their costs onto the backs of their employees!
So while they enjoy the bubbly in their executive suites, they have left too many of their employees without even any beer money.
If you didn’t read yesterday’s message that included the work of Thomas Piketty and Emmanuel Saez, you should. You will see that the solution is quite simple. Tax the crap out of the plutocrats and spend the proceeds on a public insurance program for all of us – an Improved Medicare for All. (I would use less inflammatory language except that wealthy employers who have such a low regard for their own employees do not deserve elegant language.)
Please note that this message does not apply to the multitude of small businesses which are struggling to maintain a modicum of success. These businesses are also victims of the burdensome health insurance costs. They too would benefit from an equitable public insurance program, if only they would make an effort to understand what it would mean for them. It’s our job to try to educate them.

The fiscal cliff and single payer (with thanks to Piketty, Saez & Stantcheva)

Transcript of President Obama’s Press Conference

The New York Times, November 14, 2012

Q (Jessica Yellin): Mr. President, on the fiscal cliff — two years ago, sir, you said that you wouldn’t extend the Bush-era tax cuts, but at the end of the day, you did. So respectfully, sir, why should the American people and the Republicans believe that you won’t cave again this time?

PRESIDENT OBAMA: Well, two years ago the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since the Great Depression…

But what I said at the time is what I meant, which is this was a one-time proposition. And you know, what I have told leaders privately as well as publicly is that we cannot afford to extend the Bush tax cuts for the wealthy. What we can do is make sure that middle-class taxes don’t go up…

And what we can then do is shape a process whereby we look at tax reform, which I’m very eager to do. I think we can simplify our tax system. I think we can make it more efficient. We can eliminate loopholes and deductions that have a distorting effect on our economy.

Q: You’ve said that the wealthiest must pay more. Would closing loopholes instead of raising rates for them satisfy you?

PRESIDENT OBAMA: I think that there are loopholes that can be closed, and we should look at how we can make the process of deductions, the filing process easier, simpler.

But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion dollars. And it’s very difficult to see how you make up that trillion dollars, if we’re serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work.

http://www.nytimes.com/2012/11/14/us/politics/running-transcript-of-president-obamas-press-conference.html?pagewanted=all

And…

Taxing the 1%: Why the top tax rate could be over 80%

By Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva
Vox, December 8, 2011

Top income tax rates on upper income earners have declined significantly since the 1970s in many OECD countries, again particularly in English-speaking ones. For example, top marginal income tax rates in the United States or the United Kingdom were above 70% in the 1970s before the Reagan and Thatcher revolutions drastically cut them by 40 percentage points within a decade.

At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large.

There is indeed a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares from 1975–79 to 2004–08 across 18 OECD countries for which top income share information is available. For example, the United States experienced a 35 percentage point reduction in its top income tax rate and a very large ten percentage point increase in its top 1% pre-tax income share. By contrast, France or Germany saw very little change in their top tax rates and their top 1% income shares during the same period. Hence, the evolution of top tax rates is a good predictor of changes in pre-tax income concentration. There are three scenarios to explain the strong response of top pre-tax incomes to top tax rates. They have very different policy implications and can be tested in the data.

First, higher top tax rates may discourage work effort and business creation among the most talented – the so-called supply-side effect. In this scenario, lower top tax rates would lead to more economic activity by the rich and hence more economic growth. If all the correlation of top income shares and top tax rates were due to such supply-side effects, the revenue-maximising top tax rate would be 57%. This would still imply that the United States still has some leeway to increase taxes on the rich, but that the upper limit has already been reached in many European countries.

Second, higher top tax rates can increase tax avoidance. In that scenario, increasing top rates in a tax system riddled with loopholes and tax avoidance opportunities is not productive either. However, a better policy would be to first close loopholes so as to eliminate most tax avoidance opportunities and only then increase top tax rates. With sufficient political will and international cooperation to enforce taxes, it is possible to eliminate most tax avoidance opportunities, which are well known and documented. With a broad tax base offering no significant avoidance opportunities, only real supply-side responses would limit how high top tax rate can be set before becoming counter-productive.

Third, while standard economic models assume that pay reflects productivity, there are strong reasons to be sceptical, especially at the top of the income distribution where the actual economic contribution of managers working in complex organisations is particularly difficult to measure. In this scenario, top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees. Naturally, the incentives for such ‘rent-seeking’ are much stronger when top tax rates are low. In this scenario, cuts in top tax rates can still increase top income shares, but the increases in top 1% incomes now come at the expense of the remaining 99%. In other words, top rate cuts stimulate rent-seeking at the top but not overall economic growth – the key difference with the first, supply-side, scenario.

To tell these various scenarios apart, we need to analyse to what extent top tax rate cuts lead to higher economic growth. There is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates such as the United Kingdom or the United States have not grown significantly faster than countries that did not, such as Germany or Denmark. Hence, a substantial fraction of the response of pre-tax top incomes to top tax rates may be due to increased rent-seeking at the top rather than increased productive effort.

Naturally, cross-country comparisons are bound to be fragile, and the exact results vary with the specification, years, and countries. But by and large, the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. Using our model and mid-range parameter values where the response of top earners to top tax rate cuts is due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% – as opposed to 57% in the pure supply-side model.

In the end, the future of top tax rates depends on the public’s beliefs of whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence social beliefs (through think tanks and media) and policies (through lobbying), thereby creating some reverse causality between income inequality, perceptions, and policies.

http://www.voxeu.org/article/taxing-1-why-top-tax-rate-could-be-over-80

Comment:

By Don McCanne, MD

An important result of the election is that now both Republicans and Democrats agree that an increase in tax revenues will be one requirement to avoid plunging off the fiscal cliff (i.e., avoiding the trap that Congress set for itself that would result in spending cuts that neither side wants).

There does remain a sharp divide over what should be the source of those increased revenues.

The Republicans pref
er to broaden the tax base primarily by reducing tax expenditures (reducing deductions for home loan interest, charitable contributions, state taxes, etc.), but they are adamantly opposed to any increase in income tax rates. In fact, they want a further reduction in tax rates, obviously creating more deficit that must be made up by further broadening the tax base, even though there really isn’t much leeway, if any.

Democrats have supported allowing the temporary Bush tax cuts to expire for those with over $250,000 in income. They have indicated that they are willing to negotiate, suggesting that they might leave the rates at 35% instead of the reversion to 39.6%, if they could achieve similar results through the broadening of the tax base.

This is why the work of Piketty, Saez and Stantcheva is so important. They show that we should do both. We should broaden the tax base by eliminating tax avoidance opportunities, and we should increase tax rates to a level that will fully fund all important public functions. We could set top tax rates as high as 57% without having any adverse impact on the economy, or we could set rates even higher at 83% if we wanted to compensate for rent-seeking (simply stated, the means by which the wealthy extract large amounts of money from the rest of us without providing any substantial value in return).

Although we could easily eliminate our budget deficits through these two tax policies – eliminating tax avoidance opportunities and increasing tax rates for the highest income bracket – our politicians are also proposing spending reductions. Of particular concern to health reform advocates is that some politicians want to reduce “entitlement” spending for Medicare. It is not just the Republicans since President Obama already had agreed to significant Medicare reductions in his tentative “grand bargain” he made with Speaker Boehner. This attack on Medicare should be opposed vigorously since we need to protect Medicare until we are able to replace it with a better program.

So what does this all have to do with single payer? Quite simply, it provides an answer to those who say that we cannot afford the taxes that would be required to fund equitably a single payer system. Clearly, not only could we collect enough taxes to fund the system without having a negative impact on other sectors of the economy (and health care is one of the most important sectors), but we would also accomplish two other important economic goals: 1) establish a transfer from the wealthy to fund health care for low- and moderate-income individuals and families who can not longer bear their full equally-divided share of our national health expenditures, and 2) finally begin to reverse the unfair and inequitable distribution of excess wealth to the rent-seekers.

The fiscal cliff and single payer (with thanks to Piketty, Saez & Stantcheva)

Transcript of President Obama’s Press Conference

The New York Times, November 14, 2012

Q (Jessica Yellin): Mr. President, on the fiscal cliff — two years ago, sir, you said that you wouldn’t extend the Bush-era tax cuts, but at the end of the day, you did. So respectfully, sir, why should the American people and the Republicans believe that you won’t cave again this time?

PRESIDENT OBAMA: Well, two years ago the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since the Great Depression…

But what I said at the time is what I meant, which is this was a one-time proposition. And you know, what I have told leaders privately as well as publicly is that we cannot afford to extend the Bush tax cuts for the wealthy. What we can do is make sure that middle-class taxes don’t go up…

And what we can then do is shape a process whereby we look at tax reform, which I’m very eager to do. I think we can simplify our tax system. I think we can make it more efficient. We can eliminate loopholes and deductions that have a distorting effect on our economy.

Q: You’ve said that the wealthiest must pay more. Would closing loopholes instead of raising rates for them satisfy you?

PRESIDENT OBAMA: I think that there are loopholes that can be closed, and we should look at how we can make the process of deductions, the filing process easier, simpler.

But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion dollars. And it’s very difficult to see how you make up that trillion dollars, if we’re serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work.

http://www.nytimes.com/2012/11/14/us/politics/running-transcript-of-president-obamas-press-conference.html?pagewanted=all

And…

Taxing the 1%: Why the top tax rate could be over 80%

By Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva
Vox, December 8, 2011

Top income tax rates on upper income earners have declined significantly since the 1970s in many OECD countries, again particularly in English-speaking ones. For example, top marginal income tax rates in the United States or the United Kingdom were above 70% in the 1970s before the Reagan and Thatcher revolutions drastically cut them by 40 percentage points within a decade.

At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large.

There is indeed a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares from 1975–79 to 2004–08 across 18 OECD countries for which top income share information is available. For example, the United States experienced a 35 percentage point reduction in its top income tax rate and a very large ten percentage point increase in its top 1% pre-tax income share. By contrast, France or Germany saw very little change in their top tax rates and their top 1% income shares during the same period. Hence, the evolution of top tax rates is a good predictor of changes in pre-tax income concentration. There are three scenarios to explain the strong response of top pre-tax incomes to top tax rates. They have very different policy implications and can be tested in the data.

First, higher top tax rates may discourage work effort and business creation among the most talented – the so-called supply-side effect. In this scenario, lower top tax rates would lead to more economic activity by the rich and hence more economic growth. If all the correlation of top income shares and top tax rates were due to such supply-side effects, the revenue-maximising top tax rate would be 57%. This would still imply that the United States still has some leeway to increase taxes on the rich, but that the upper limit has already been reached in many European countries.

Second, higher top tax rates can increase tax avoidance. In that scenario, increasing top rates in a tax system riddled with loopholes and tax avoidance opportunities is not productive either. However, a better policy would be to first close loopholes so as to eliminate most tax avoidance opportunities and only then increase top tax rates. With sufficient political will and international cooperation to enforce taxes, it is possible to eliminate most tax avoidance opportunities, which are well known and documented. With a broad tax base offering no significant avoidance opportunities, only real supply-side responses would limit how high top tax rate can be set before becoming counter-productive.

Third, while standard economic models assume that pay reflects productivity, there are strong reasons to be sceptical, especially at the top of the income distribution where the actual economic contribution of managers working in complex organisations is particularly difficult to measure. In this scenario, top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees. Naturally, the incentives for such ‘rent-seeking’ are much stronger when top tax rates are low. In this scenario, cuts in top tax rates can still increase top income shares, but the increases in top 1% incomes now come at the expense of the remaining 99%. In other words, top rate cuts stimulate rent-seeking at the top but not overall economic growth – the key difference with the first, supply-side, scenario.

To tell these various scenarios apart, we need to analyse to what extent top tax rate cuts lead to higher economic growth. There is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates such as the United Kingdom or the United States have not grown significantly faster than countries that did not, such as Germany or Denmark. Hence, a substantial fraction of the response of pre-tax top incomes to top tax rates may be due to increased rent-seeking at the top rather than increased productive effort.

Naturally, cross-country comparisons are bound to be fragile, and the exact results vary with the specification, years, and countries. But by and large, the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. Using our model and mid-range parameter values where the response of top earners to top tax rate cuts is due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% – as opposed to 57% in the pure supply-side model.

In the end, the future of top tax rates depends on the public’s beliefs of whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence social beliefs (through think tanks and media) and policies (through lobbying), thereby creating some reverse causality between income inequality, perceptions, and policies.

http://www.voxeu.org/article/taxing-1-why-top-tax-rate-could-be-over-80

Comment:

By Don McCanne, MD

An important result of the election is that now both Republicans and Democrats agree that an increase in tax revenues will be one requirement to avoid plunging off the fiscal cliff (i.e., avoiding the trap that Congress set for itself that would result in spending cuts that neither side wants).

There does remain a sharp divide over what should be the source of those increased revenues.

The Republicans prefer to broaden the tax base primarily by reducing tax expenditures (reducing deductions for home loan interest, charitable contributions, state taxes, etc.), but they are adamantly opposed to any increase in income tax rates. In fact, they want a further reduction in tax rates, obviously creating more deficit that must be made up by further broadening the tax base, even though there really isn’t much leeway, if any.

Democrats have supported allowing the temporary Bush tax cuts to expire for those with over $250,000 in income. They have indicated that they are willing to negotiate, suggesting that they might leave the rates at 35% instead of the reversion to 39.6%, if they could achieve similar results through the broadening of the tax base.

This is why the work of Piketty, Saez and Stantcheva is so important. They show that we should do both. We should broaden the tax base by eliminating tax avoidance opportunities, and we should increase tax rates to a level that will fully fund all important public functions. We could set top tax rates as high as 57% without having any adverse impact on the economy, or we could set rates even higher at 83% if we wanted to compensate for rent-seeking (simply stated, the means by which the wealthy extract large amounts of money from the rest of us without providing any substantial value in return).

Although we could easily eliminate our budget deficits through these two tax policies – eliminating tax avoidance opportunities and increasing tax rates for the highest income bracket – our politicians are also proposing spending reductions. Of particular concern to health reform advocates is that some politicians want to reduce “entitlement” spending for Medicare. It is not just the Republicans since President Obama already had agreed to significant Medicare reductions in his tentative “grand bargain” he made with Speaker Boehner. This attack on Medicare should be opposed vigorously since we need to protect Medicare until we are able to replace it with a better program.

So what does this all have to do with single payer? Quite simply, it provides an answer to those who say that we cannot afford the taxes that would be required to fund equitably a single payer system. Clearly, not only could we collect enough taxes to fund the system without having a negative impact on other sectors of the economy (and health care is one of the most important sectors), but we would also accomplish two other important economic goals: 1) establish a transfer from the wealthy to fund health care for low- and moderate-income individuals and families who can not longer bear their full equally-divided share of our national health expenditures, and 2) finally begin to reverse the unfair and inequitable distribution of excess wealth to the rent-seekers.

The fiscal cliff and single payer (with thanks to Piketty, Saez & Stantcheva)

Transcript of President Obama’s Press Conference

The New York Times, November 14, 2012
Q (Jessica Yellin): Mr. President, on the fiscal cliff — two years ago, sir, you said that you wouldn’t extend the Bush-era tax cuts, but at the end of the day, you did. So respectfully, sir, why should the American people and the Republicans believe that you won’t cave again this time?
PRESIDENT OBAMA: Well, two years ago the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since the Great Depression…
But what I said at the time is what I meant, which is this was a one-time proposition. And you know, what I have told leaders privately as well as publicly is that we cannot afford to extend the Bush tax cuts for the wealthy. What we can do is make sure that middle-class taxes don’t go up…
And what we can then do is shape a process whereby we look at tax reform, which I’m very eager to do. I think we can simplify our tax system. I think we can make it more efficient. We can eliminate loopholes and deductions that have a distorting effect on our economy.
Q: You’ve said that the wealthiest must pay more. Would closing loopholes instead of raising rates for them satisfy you?
PRESIDENT OBAMA: I think that there are loopholes that can be closed, and we should look at how we can make the process of deductions, the filing process easier, simpler.
But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion dollars. And it’s very difficult to see how you make up that trillion dollars, if we’re serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work.
http://www.nytimes.com/2012/11/14/us/politics/running-transcript-of-pres…
And…

Taxing the 1%: Why the top tax rate could be over 80%

By Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva
Vox, December 8, 2011
Top income tax rates on upper income earners have declined significantly since the 1970s in many OECD countries, again particularly in English-speaking ones. For example, top marginal income tax rates in the United States or the United Kingdom were above 70% in the 1970s before the Reagan and Thatcher revolutions drastically cut them by 40 percentage points within a decade.
At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large.
There is indeed a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares from 1975–79 to 2004–08 across 18 OECD countries for which top income share information is available. For example, the United States experienced a 35 percentage point reduction in its top income tax rate and a very large ten percentage point increase in its top 1% pre-tax income share. By contrast, France or Germany saw very little change in their top tax rates and their top 1% income shares during the same period. Hence, the evolution of top tax rates is a good predictor of changes in pre-tax income concentration. There are three scenarios to explain the strong response of top pre-tax incomes to top tax rates. They have very different policy implications and can be tested in the data.
First, higher top tax rates may discourage work effort and business creation among the most talented – the so-called supply-side effect. In this scenario, lower top tax rates would lead to more economic activity by the rich and hence more economic growth. If all the correlation of top income shares and top tax rates were due to such supply-side effects, the revenue-maximising top tax rate would be 57%. This would still imply that the United States still has some leeway to increase taxes on the rich, but that the upper limit has already been reached in many European countries.
Second, higher top tax rates can increase tax avoidance. In that scenario, increasing top rates in a tax system riddled with loopholes and tax avoidance opportunities is not productive either. However, a better policy would be to first close loopholes so as to eliminate most tax avoidance opportunities and only then increase top tax rates. With sufficient political will and international cooperation to enforce taxes, it is possible to eliminate most tax avoidance opportunities, which are well known and documented. With a broad tax base offering no significant avoidance opportunities, only real supply-side responses would limit how high top tax rate can be set before becoming counter-productive.
Third, while standard economic models assume that pay reflects productivity, there are strong reasons to be sceptical, especially at the top of the income distribution where the actual economic contribution of managers working in complex organisations is particularly difficult to measure. In this scenario, top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees. Naturally, the incentives for such ‘rent-seeking’ are much stronger when top tax rates are low. In this scenario, cuts in top tax rates can still increase top income shares, but the increases in top 1% incomes now come at the expense of the remaining 99%. In other words, top rate cuts stimulate rent-seeking at the top but not overall economic growth – the key difference with the first, supply-side, scenario.
To tell these various scenarios apart, we need to analyse to what extent top tax rate cuts lead to higher economic growth. There is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates such as the United Kingdom or the United States have not grown significantly faster than countries that did not, such as Germany or Denmark. Hence, a substantial fraction of the response of pre-tax top incomes to top tax rates may be due to increased rent-seeking at the top rather than increased productive effort.
Naturally, cross-country comparisons are bound to be fragile, and the exact results vary with the specification, years, and countries. But by and large, the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. Using our model and mid-range parameter values where the response of top earners to top tax rate cuts is due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% – as opposed to 57% in the pure supply-side model.
In the end, the future of top tax rates depends on the public’s beliefs of whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence social beliefs (through think tanks and media) and policies (through lobbying), thereby creating some reverse causality between income inequality, perceptions, and policies.
http://www.voxeu.org/article/taxing-1-why-top-tax-rate-could-be-over-80

An important result of the election is that now both Republicans and Democrats agree that an increase in tax revenues will be one requirement to avoid plunging off the fiscal cliff (i.e., avoiding the trap that Congress set for itself that would result in spending cuts that neither side wants).
There does remain a sharp divide over what should be the source of those increased revenues.
The Republicans prefer to broaden the tax base primarily by reducing tax expenditures (reducing deductions for home loan interest, charitable contributions, state taxes, etc.), but they are adamantly opposed to any increase in income tax rates. In fact, they want a further reduction in tax rates, obviously creating more deficit that must be made up by further broadening the tax base, even though there really isn’t much leeway, if any.
Democrats have supported allowing the temporary Bush tax cuts to expire for those with over $250,000 in income. They have indicated that they are willing to negotiate, suggesting that they might leave the rates at 35% instead of the reversion to 39.6%, if they could achieve similar results through the broadening of the tax base.
This is why the work of Piketty, Saez and Stantcheva is so important. They show that we should do both. We should broaden the tax base by eliminating tax avoidance opportunities, and we should increase tax rates to a level that will fully fund all important public functions. We could set top tax rates as high as 57% without having any adverse impact on the economy, or we could set rates even higher at 83% if we wanted to compensate for rent-seeking (simply stated, the means by which the wealthy extract large amounts of money from the rest of us without providing any substantial value in return).
Although we could easily eliminate our budget deficits through these two tax policies – eliminating tax avoidance opportunities and increasing tax rates for the highest income bracket – our politicians are also proposing spending reductions. Of particular concern to health reform advocates is that some politicians want to reduce “entitlement” spending for Medicare. It is not just the Republicans since President Obama already had agreed to significant Medicare reductions in his tentative “grand bargain” he made with Speaker Boehner. This attack on Medicare should be opposed vigorously since we need to protect Medicare until we are able to replace it with a better program.
So what does this all have to do with single payer? Quite simply, it provides an answer to those who say that we cannot afford the taxes that would be required to fund equitably a single payer system. Clearly, not only could we collect enough taxes to fund the system without having a negative impact on other sectors of the economy (and health care is one of the most important sectors), but we would also accomplish two other important economic goals: 1) establish a transfer from the wealthy to fund health care for low- and moderate-income individuals and families who can not longer bear their full equally-divided share of our national health expenditures, and 2) finally begin to reverse the unfair and inequitable distribution of excess wealth to the rent-seekers.

Patient trapped in health insurance rate hike

A patient's move from one Southern California community to another nearby triggers a 25% rate hike by Anthem Blue Cross despite no change in her care

By David Lazarus
Los Angeles Times, November 13, 2012

It’s understandable that car insurance rates can change when you move. One neighborhood might have more accidents or burglaries than another.

But health insurance?

Joan Swope, 62, moved recently from Cathedral City, just down the road from Palm Springs, to nearby Palm Desert.

She informed her insurer, Anthem Blue Cross, of the change of address. A few weeks later, Anthem responded with a notice stating that, because of the move, Swope’s monthly premium on her individual policy will increase to $524 from $418.

That’s a more than 25% rate hike. For a move of less than 10 miles.

“It’s ridiculous,” Swope told me. “I’m going to the same doctor. I’m going to the same facilities and the same drugstore. Nothing has changed.”

Nothing except her ZIP Code. And in the actuarial world of insurance, that’s a sufficiently life-altering event to justify an extra $1,272 in annual payments — on top of a $5,000 deductible.

And here’s the real kick in the teeth: It’s perfectly legal.

“Health insurers are permitted under the law to charge a different price when someone relocates to a different rating region,” said Janice Rocco, California’s deputy insurance commissioner for health policy.

What that means is that insurers have carved the state into various zones based on the average cost of local doctors and hospitals. Cross from one zone into another, and your rates can skyrocket.

But what about a situation like Swope’s? She may now live in a new rating zone, but her interaction with the healthcare system is the same as it was before — same doctor, same hospitals, same druggist.

I asked Rocco if that was fair.

All she’d say was that the federal healthcare reform law empowers the state to redraw insurers’ rating regions by 2014. She said it will be up to the Legislature to do a good job of it.

Anthem acknowledged that Swope informed that company of a new billing address when she moved last year to Cathedral City from Camarillo. And the insurer said it sent her bills to a post office box in Cathedral City.

But Anthem says Swope never explicitly said that her billing address and home address were one and the same. As far as the insurer was concerned, she still lived in Camarillo, even though her bills were being sent nearly 200 miles away.

Burton Swope, Joan’s husband, said they had no such problems with any other company they do business with. All of them, including their car insurer, figured out on their own that the couple had moved.

“Any idiot could look at my wife’s medical bills and see that she was now in the Coachella Valley,” he said. “Everyone got it except Anthem.”

Kristin Binns, an Anthem spokeswoman, suggested that Swope should consider herself lucky. Her monthly rate should have increased by about 19% when she moved from Camarillo to Cathedral City, before rising again with the move to Palm Desert.

Binns indicated that Anthem won’t try to shake down Swope for any under-payments resulting from the insurer not quite understanding where she resided.

That’s nice of them. But what this really shows — as if more proof were needed — is the utter lunacy of our healthcare system.

Step over an imaginary line drawn by some insurance bean counter, and your rate can soar 25%. In what parallel universe is this considered an acceptable way to provide healthcare?

Swope’s case also highlights another outrage: Because of a disorder involving her esophagus, she won’t be able to obtain insurance from any other company until Obamacare provides that right in 2014. In the meantime, she has no choice but to accept any rate hike Anthem throws her way.

With cars, your insurance rate is based in part on your driving record, but there are also external factors beyond your control. If you live in an area that’s more prone to accidents or vehicular damage, you may pay a higher premium to reflect the higher risk.

Healthcare is healthcare. Or at least it should be. Treating a broken arm at one facility shouldn’t cost more than elsewhere. Chemotherapy at one hospital shouldn’t cost more than using the same chemicals at another.

Of course, if you move from Pacoima to Pakistan, your potential for harm is perhaps greater, and a health insurer would be justified in setting rates at a commensurate level.

But if you move from one community in Southern California to another — whether it’s 200 miles or just a few minutes away — you probably haven’t exposed yourself to any meaningful environmental change, unless you’re now living on a toxic-waste dump.

In any case, Swope’s health and her commitment to staying well are no different today than they were before either move.

“It’s highway robbery,” said her husband, who, at 66, enjoys the peace of mind afforded by government-run Medicare. “What’s my wife going to do until the reform law kicks in? Where else can she go?”

The answer is nowhere.

Swope has been insured by Anthem since 2000. In 2002, she was diagnosed with Barrett’s esophagus, a complication of acid reflux. According to WebMD, the disorder increases one’s risk of esophageal adenocarcinoma, “a serious, potentially fatal cancer of the esophagus.”

“When I was diagnosed, my doctor told me not to even think about changing insurers,” Swope said. “They won’t take me.”

The healthcare reform law will fix that. Beginning in 2014, people who don’t have coverage from an employer will be able to shop for insurance on so-called exchanges. Insurers will be barred from denying coverage to anyone with a preexisting condition.

But that’s still more than a year away. Does Swope have any recourse until then?

She and her husband have filed a grievance with Anthem. They said the insurer has yet to respond.

Rocco, the deputy insurance commissioner, said there isn’t much her office can do. Regional rates are permitted under state and federal law, she said, making it difficult for consumers to challenge such rate hikes.

And even though Swope is a hostage to Anthem because of her preexisting condition, regulators have no authority to tell the insurer to operate differently, Rocco said.

The fault, it seems, is Swope’s. She had the temerity to cross from one arbitrary insurance zone into another. That will cost her an extra $106 a month.

For nothing.

http://www.latimes.com/business/la-fi-lazarus-20121113,0,1294415.column

AFT Wisconsin endorses H.R. 676, national single-payer health care

By All Unions Committee for Single-Payer Health Care – H.R. 676

On Oct. 27, at its convention in Manitowoc, Wis., the American Federation of Teachers-Wisconsin endorsed Congressman John Conyers’ bill, H.R. 676, a national single-payer health care program that would implement Expanded and Improved Medicare for All.

“AFT-W will … mobilize our members and our community at the grassroots to encourage other members of the House to sign on as co-sponsors of H.R. 676 when introduced in the next Congress and to encourage Senators to introduce a companion bill in the Senate,” the resolution states.

The passage of this resolution was reported by Buzz Davis, AFT Wisconsin Retiree Council Executive Board Member, who stated that “the membership understands that single-payer health care is the way to go and that insurance companies should be removed from the equation.”

Davis, a retired state planner, said that taking the Medicare program and expanding it to everyone is the way to achieve quality health care for everyone at the best price.

He said that the union also stands strongly against any cuts to Social Security, Medicare, or Medicaid. “Debt during a recession is not a problem. Public spending is what needs to be done in order to put people to work,” he said. He called the current panic over the deficit “a drummed up crisis.”

He added that the union is fighting hard to rebuild in the wake of Governor Walker’s attacks on all of Wisconsin’s unions.

AFT Wisconsin, founded in 1931, is a chapter of the American Federation of Teachers. The union represents 17,000 employees working in public schools, vocational colleges, universities, and for the state.

****

H.R. 676 would institute a single-payer health care system by expanding a greatly improved Medicare to everyone residing in the United States.

H.R. 676 would cover every person for all necessary medical care including prescription drugs, hospital, surgical, outpatient services, primary and preventive care, emergency services, dental (including oral surgery, periodontics, endodontics), mental health, home health, physical therapy, rehabilitation (including for substance abuse), vision care and correction, hearing services including hearing aids, chiropractic, durable medical equipment, palliative care, podiatric care, and long-term care.

H.R. 676 ends deductibles and co-payments. H.R. 676 would save hundreds of billions annually by eliminating the high overhead and profits of the private health insurance industry and HMOs.

In the current Congress, H.R. 676 has 76 co-sponsors in addition to Conyers.

H.R. 676 has been endorsed by 597 union organizations including 144 Central Labor Councils/Area Labor Federations and 40 state AFL-CIOs (KY, PA, CT, OH, DE, ND, WA, SC, WY, VT, FL, WI, WV, SD, NC, MO, MN, ME, AR, MD-DC, TX, IA, AZ, TN, OR, GA, OK, KS, CO, IN, AL, CA, AK, MI, MT, NE, NJ, NY, NV & MA).

For further information, a list of union endorsers, or a sample endorsement resolution, contact: Kay Tillow, All Unions Committee for Single Payer Health Care—H.R. 676, c/o Nurses Professional Organization (NPO), 1169 Eastern Parkway, Suite 2218, Louisville, KY 40217. Phone: (502) 636-1551 E-mail: nursenpo@aol.com Web: http://unionsforsinglepayer.org