Tuesday, September 11, 2012

Fwd: qotd: Jonathan Gruber gives qualified endorsement to premium support

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-------- Original Message --------
Subject: qotd: Jonathan Gruber gives qualified endorsement to premium
Date: Tue, 11 Sep 2012 12:30:36 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>

September 10, 2012
Mixed Message From Obama Advisers on Medicare
By Meghan McCarthy

President Obama has seized on Republican proposals to overhaul Medicare
as a top campaign issue, saying that the GOP plan to add a private
insurance option would end seniors' guarantee of government health care.
But behind the election-season politics, influential experts who have
advised Obama on health care are open to a future for Medicare that
includes competition among private insurance plans.

In e-mail exchanges with the staff of the White House-appointed fiscal
commission that were obtained by National Journal, David Cutler and
Jonathan Gruber, who have both advised Obama, gave qualified support to
a Medicare voucher plan offered by Ryan and former Clinton budget
director Alice Rivlin in talks to reduce the deficit.

Cutler and Gruber are both hot shots of the health economics world.
Cutler is a professor at Harvard, Gruber at MIT. Both advised Obama on
health care in the 2008 campaign, and both had major roles in helping
develop Democrats' 2010 health care law. When they offer counsel, the
White House is listening.

Cutler now says he was only proposing an idea for Medicare if insurance
exchanges are "shown to work well for the non-elderly population," by
getting people into good plans and lowering costs.

Gruber also said he approved of the Ryan-Rivlin plan in 2010 e-mails to
fiscal-commission staff, as long as the insurance market reforms of the
Democrats' health care law are kept in place.

Gruber now says that economists don't know enough yet to move the
majority of Medicare enrollees into private-insurance plans. As part of
the effort to expand coverage to the uninsured, President Obama's health
care law would establish insurance exchanges for people younger than 65
to buy private health care. Gruber said that this is a better way of
testing out new approaches, adding that it would be "stupid" to
experiment first on the older and sicker Medicare population.

"We are getting better, but we are not quite there yet," Gruber said in
an interview. "But premium support is ultimately where we need to be."

There are three key problems that still must be worked out, Gruber said.
First, policymakers have to figure out how to keep insurance companies
from cherry-picking healthy people and essentially forcing the sickest
patients on to traditional Medicare, which would drain the program of
money. Second, policymakers must find a way to make sure insurance
companies design benefits so they are easy-to-understand for
beneficiaries, and don't trick seniors into buying more expensive plans
that aren't suitable for them. Third, they have to figure out just how
quickly government checks for seniors to buy coverage could grow.

Still, Gruber said he could see Medicare becoming a
premium-support-style plan within a five-year timetable, after the
Affordable Care Act's health insurance exchanges start enrolling an
estimated 30 million people into insurance plans in 2014.


Comment: So Obama advisor, MIT Professor Jonathan Gruber, says,
"premium support is ultimately where we need to be." In other words, we
should replace the traditional Medicare program with vouchers that would
be used to purchase private plans. Let's look at the three problems
which he says must first be addressed.

He says that policymakers must figure out how to keep insurance
companies from insuring the healthy and sending the sick to the
traditional government program. Actually that is only one behavior that
private insurers engage in to enhance their success as private
businesses. They are always going to do everything that they can to
maximize revenues and minimize spending, as any reasonable business
would do. The drive for profits for passive investors is not in itself
inherently evil, except when it is applied to our health care system.
Manipulating sick patients for the prime purpose of generating profits
is immoral. Investor-owned insurance companies need to be removed from
our health care system.

Gruber also says that we have to figure out "just how quickly government
checks for seniors to buy coverage could grow" under premium support.
This is a problem inherent with government vouchers that cover only a
part of the costs. Instead of directing efforts to control total health
care costs, government stewards tend to control just the government
spending, passively shifting the costs of health care inflation onto the
patients. The financial burden on individuals is already too great, and
this would make it even worse.

More subtle, but perhaps even more important, Gruber says that the
design of insurance products should be easy to understand so that
seniors are not tricked into buying "more expensive plans that aren't
suitable for them." This statement represents one of the great fallacies
of private health insurance markets, that somehow there is an insurance
product that is just right for you wherein you will not have to pay for
benefits that you'll never use.

There are two problems with this. The obvious one is that future health
care needs cannot be predicted. Major acute disorders or the future
onset of chronic disease are unknowns. Plans need to be comprehensive to
insure against these potential losses, even if you hope that you won't
ever need to use the coverage that is providing you security, though you
probably will someday.

The other problem is that an ideal insurance system pools all risks and
funds the risk pool equitably. It is less expensive because of the much
greater administrative efficiency of a universal risk pool. It also
eliminates financial barriers to appropriate health care. Maybe males
don't want maternity benefits. Maybe females don't want coverage for
prostate cancer. Maybe young adults don't want coverage for cataracts.
Maybe the elderly don't want coverage for organ transplants. Maybe
children don't want coverage for vaccines, even of their parents want
them to have it.

The point is that when you start designing plans for different
populations - "only the coverage you need" - you break up the universal
risk pool and introduce many of the inequities and inefficiencies that
characterize our current dysfunctional financing system. The
administrative inefficiencies of buying "only what you need" increases
costs over the entire system and redistributes those costs inequitably.

There is no substitute for establishing a single universal risk pool,
funding the pool equitably based on ability to pay, and using the pool
to fund health care based on medical need. And that, in a nutshell, is
what a single payer national health program does.

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