Obsidian Wings

Pelosi Goes "All In" On Public Option

By Lindsay Beyerstein

Nancy Pelosi is going all in to support a public option that would hold down costs by setting reimbursement rates at Medicare plus 5%. The CBO's latest cost estimates for various House health care reform options have galvanized Pelosi in favor of a Med+5 public option, Brian Beutler reports. 

Pelosi has always favored some kind of public competition for private health insurers, but she has previously been non-committal about how hard a line a public plan could take to hold down costs.

The House Democrats are in negotiations to combine the various bills that passed their respective committees this summer. Chris Bowers has a good discussion of how Pelosi is using the CBO numbers and the Med+5 proposal to outmaneuver Blue Dog Democrats in the House and Senate. Basically, the stronger the public option the House bill proposes, the bigger the cost savings it will project. Fiscal conservatives will be hard-pressed to vote against a public option that's projected to cost less than the alternatives.

Rep. Raul Grijalva, the co-chair of the House Progressive Caucus, told Bloomberg that the caucus is gravitating towards the Med+5 plan, as opposed to a weaker proposal that would have the government negotiate rates with providers.

It's cheaper for the public to negotiate reimbursement rates for the entire plan because the massive bargaining power of the federal government drives down prices. Whereas, the public invariably gets a worse deal when rates are negotiated piecemeal. There's really no reason not to negotiate in one fell swoop, except as a gimme to vested interests.

Naturally, drug companies and health care providers want piecemeal negotiations. However, Obama has said he won't sign a bill that adds to the deficit and the House is looking for ways to save money. Letting the government drive a hard bargain is an attractive way to cut the costs of health care reform. Piecemeal negotiations would hobble one of the most powerful cost-control features of a public plan.

And this is the point .....

.... Of calling the Democrats' stimulus package A Stimulus for Tomorrow (Part 11)

by von

Andrew Sullivan mentions a piece by Daniel Gross, which purportedly reminds "conservatives"* that it's too early to label the stimulus a failure because most of the money hasn't been spent yet.

Here is my hand.  Here is my forehead.  Here is my hand smacking my forehead.  (Ouch!)

Gross' article isn't a "reminder"; it's an admission that critics of the stimulus package were right.  A principle argument against the Democrats' stimulus package was that it was misdesigned and too back-heavy.  The Democrats designed a stimulus package that would have its greatest impact in 2010 and 2011 -- not 2009.  Consequently, as designed by the Democrats, money from the stimulus would not enter the economy when it was needed:  at the start of the recession, not at (what appears to be) the recession's end.  In my words -- and why be humble about this now since I have never been before -- the Democrats designed a "Stimulus for Tomorrow."  Not today.   

I suppose that I should take some comfort in the fact that defenders of the Democratic stimulus package are now acknowledging its central design flaw.  And I'm certainly impressed with the fluidity of David Gross' arguments.  It takes a deft hand to argue that critics of the stimulus package are currently wrong because they were previously right.  Or to label as "rash" the conclusion that a stimulus package that costs $787 billion isn't much of a stimulus package if it doesn't take effect until after the recession is (probably) over. 

Despite being impressed by Gross' writing, however, Gross' article isn't an answer to the critics.  It's an admission that the critics were right.

Prior installments of "A Stimulus for Tomorrow": Parts 1, 2, Hilzoy's response, 3, 4, 5, 6, 7, 8, 9, 10.

*Notably, "conservatives" were not the only critics of the stimulus package.  I'm a critic of the Democrat's stimulus package and, 'tho not a democrat, I'm also not a conservative. 

Round Two

(Also known as: A Stimulus for Tomorrow, Part 10)

by von

Everyone should have seen this coming .... well, everyone who reads these here Wings of Obsidian.  From Salon (citing Bloomberg and The New York Times):

Call it the the stimulus that dare not be named. Bloomberg reports that the Obama administration is considering "a mix of spending programs and tax cuts to respond to widening job losses that would amount to an additional economic stimulus without carrying that label."

On the table: A boost in transportation spending, extension of unemployment benefits, and a continuation of the first time homebuyer tax credit. The New York Times adds in a possible $3000 tax credit to businesses for new hires, and a proposal to "allow more businesses to deduct their net operating losses going back five years instead of the usual two."

    Some folks will claim that a second stimulus is needed because the recession has been much worse than anyone had predicted.  We have a technical term for this view:  bullshit.  It is absolutely true that the Obama Administration misjudged the depth of the current recession, and Geoff at Innocent Bystanders has the (updated) chart to prove it.  But a lot of folks outside the Administration were warning that the Democrats' stimulus plan didn't treat the recession seriously; instead, it was full of crappy half-measures, programs of dubious benefit (ahem, cash for clunkers), and payoffs to various Democratic interests.  And, then, moderate Senate Republicans somehow, against almost all odds, made the Democratic plan worse.  Under these circumstances, a bunch of folks thought that a son of stimulus was practically guarateed.  To choose a random example: me, circa February, 2009:

The current stimulus package is too small on the front end and too bloated and unfocused on the back end.  It wasn't a stimulus bill so much as a grab bag of goodies.  Of course we can't rule out another stimulus package, because we didn't do a proper stimulus package the first time. 

   President Obama's second take at a stimulus package also doesn't fill me with the warm fuzzies.  The trial balloon for stimulus number 2 consists of more complicated tweaks to the tax system and more transportation spending.  This new plan is still too unfocused.  For instance -- in the same vein as "cash for clunkers" -- giving limited tax credits for new hires could very well have counterproductive effects (why hire now if the government might pass a tax credit tomorrow?  do tax credits encourage employers to dump older, high-wage workers for new hires?)  These types of tweaks also impose high compliance costs.  And how many new roads does a "green" economy need, anyhow?  (Or is this going to be a version of Rep. Mica's high-speed rail plan?)

Let's get serious.  The best way to create new jobs (and keep the jobs that exist) is a payroll tax cut.  It's a proposal that has been on the table from the beginning.  If you cut the payroll tax on both the employer and employee sides, you provide employers with an incentive to both keep and hire workers (because the tax consequences of hiring and retaining workers are smaller) and you provide workers with more money to spend or save (either of which is helpful behavior in light of the dual consumption/credit crunch).

Yes, even a temporary payroll tax cut is costly.  But what new program offered by the Obama Administration hasn't been costly?  Let's get it right this time. 

Prior installments:  A Stimulus for Tomorrow, Parts 1, 2, Hilzoy's response, 3, 4, 5, 6, 7, 8, and 9.

Unleash Senator Wyden

by von

Senator Wyden (D-Ore.) has a health care bill.  As I've written in the past, it's a pretty damn good bill.   I'm not alone in liking it:  lots of other folks on the left and right do as well.  Moreover, unlike all the other major health care bills out there, Wyden's bill is genuinely bipartisan:  it has a prominent Republican co-sponser in Bob Bennett (R-Utah).

Wyden has been pretty low-key regarding his plan while Sen. Baucus has tried to hammer out an alternative bill with bipartisan support.  (Bennett's been pretty low key because he risks catching hell from some on the hard right for anything that looks like cooperation with the Democrats.)  Now that Baucus' proposed compromise is in trouble -- heck, it doesn't even have the Democratic votes to make it out of committee -- Wyden has started speaking up.  This is a good thing.  His editorial in yesterday's New York Times is particularly worth reading because it hits on the fundamental problem with the other proposed "reforms" that are circulating in Washington:

Under the nation’s current employer-based system, most people have little if any choice about where they get their insurance. They just have to accept the plan that comes with their job. That insurance company, in turn, is provided a captive group of customers, so it has no incentive to earn their loyalty.

Empowering Americans to choose from a broad selection of health plans would turn the tables. Those insurers that charged affordable rates and provided good coverage would attract more customers, while those that treated customers badly would be forced to change their ways or go out of business. To stay competitive, insurers would need to follow the example of places like the Mayo Clinic and offer good, low-cost coverage.

The various bills making their way through Congress would, as the president explained, provide some consumer choice by establishing large marketplaces where people could easily compare insurance plans and pick the one that best suits their needs. Companies participating in these insurance exchanges would be required to offer coverage to anyone who wants to buy it, regardless of their age, gender or health status, and they would be barred from charging someone more for having a pre-existing condition.

The problem with these bills, however, is that they would not make the exchanges available to all Americans. Only very small companies and those individuals who can’t get insurance outside of the exchange — 25 million people — would be allowed to shop there. This would leave more than 200 million Americans with no more options, private or public, than they have today.

Three thoughts:

First, this is exactly the debate that we should be having over health care.  The fundamental problems with the American health care system are all linked, directly or indirectly, to the fact that the vast majority of folks get insurance solely through their employers.  Employers don't necessarily choose health care plans the same way that individuals do.  Having employers provide health care also restricts choice, stratifies the market, and burdens small business.  Insurers need only deal with a handful of potential customers, who vary widely in their bargaining power and position (General Electric = powerful customer; you = not so powerful customer).  

Second, the advantages of Wyden-Bennett exchanges has not been lost on Sen. Baucus -- but he's doing it wrong.  As Publius has noted, one of the good aspects of Baucus' bill is that it provides for a Wyden-like exchange.  The problem, however, is that Baucus' version of the Wyden-Bennett exchanges is fundamentally flawed because it is still linked to employer-provided health care.  It's not enough to let many employers into the exchange.  If we are going to divorce insurance from employment, we have to let individuals into the exchange. 

Third, Matt Yglesias is wrong on the strategy.  Yglesias "[p]ersonally" thinks that Wyden-Bennet "is a good idea."  But:

.... I think it’s pretty clear at this point that the most feasible way to get what Wyden wants is to enact something that falls within the broad Obama/Waxman/Baucus/Dodd family[*] of relatively cautious reform and then have the debate about opening the exchange at some point in the future when people are less freaked out.

The public opinion research indicating that it’s important to promise the insured they can keep their insurance is pretty overwhelming. Ron Wyden is right and the public is wrong, but this is one of these situations in which being right isn’t going to help you very much and tilting at this particular windmill at this moment in time doesn’t strike me as very productive.

(Emphasis mine.)

Assuming that folks are too stupid to know what's best for them is a bad idea.  If Yglesias is right, then you'll never get Wyden-Bennett because the people will never be smart enough to get it.  May as well give up.  And, true or not, you've just insulted the intelligence of the electorate.  You don't pass good bills this way.  You pass good bills by persuading folks ... and assuming that they're capable of understanding why you're right. 

Yglesias' notion that one can use a Baucus-style exchange as a camel's nose is also highly suspect.  I don't know why an exchange that includes only employers would naturally grow to include employees as well.  Indeed, it seems that employer-only exchanges are a step in the wrong direction, particularly when coupled to mandates that employers provide coverage.  Each reinforces the link between employment and insurance -- the opposite direction from where we want to go. 

Wyden might be tilting at windmills, but not for the reasons that Yglesias provides. 

UPDATE:  One of the biggest canards regarding Wyden-Bennett is that it would force people who like their current, employer-provided insurance to give it up.  This ain't true.  There's no forcing in the Wyden-Bennett exchanges. An exchange may give you options, but it won't force you to adopt any one of those options.  You could still choose to be covered by your employer, although the hope is that employer-provided health care would gradually die as individuals find that they can get a better deal through an exchange.

*I have no idea what Yglesias means by "the broad Obama/Waxman/Baucus/Dodd family of relatively cautious reform."  There are deep structural differences between these various Democratic proposals.   I think Yglesias meant to write:  "any bill proposed by a Democrat who is not Ron Wyden."

Sunshine

by hilzoy

Here's an interesting catch by Merrill Goozner:

"The House bill would create an internet accessible database that includes all health-related payments to physicians by corporations including gifts, food, or entertainment; travel or trips; honoraria; research funding or grants; education or conference funding; consulting fees; ownership or investment interests; and royalties or license fees. If I'm reading the bill correctly, it says anything over $5 must be reported. (From pg. 635 of the bill.)"

I believe the relevant section of the bill is 1451, and it does seem to say that. This is really good news. There is a lot of money sloshing around in health care. There are advisory boards, speakers' bureaus, conferences conveniently held in beach resorts, educational (and "educational") events, dinners courtesy of drug companies, gifts, etc., etc., etc. And that's not counting things like industry-sponsored research.

A lot of this is just marketing, sometimes disguised and sometimes not. Making it public would have two very good effects. First, and most obviously, it would allow people to discover any conflicts of interest that their doctors might have. Second, it might shame people. If you're an "opinion leader", or in some other way a good catch for a company, it's possible to get very considerable amounts of money from these sorts of things. If it came out that some doctors were getting, say, hundreds of thousands of dollars, not for doing research but for various marketing-esque activities, I suspect that those doctors might become less greedy. 

And that would be a good thing. Most people don't think that they would allow their judgment to be corrupted by something like a fancy dinner with a flattering sales rep, or even an all-expenses paid trip to an industry-sponsored conference at Waikiki. But there's a fair amount of research that shows that accepting a gift from someone does affect your judgment, whether you're aware of it or not. (Why else would pharmaceutical companies give all these gifts?) 

Making these gifts public is an excellent thing. Good for the House committees for writing it into their bill.

The Wrong Way To Use Antibiotics

by hilzoy

Good news from the NYT:

"The Obama administration announced Monday that it would seek to ban many routine uses of antibiotics in farm animals in hopes of reducing the spread of dangerous bacteria in humans.

In written testimony to the House Rules Committee, Dr. Joshua Sharfstein, principal deputy commissioner of food and drugs, said feeding antibiotics to healthy chickens, pigs and cattle -- done to encourage rapid growth -- should cease. And Dr. Sharfstein said farmers should no longer be able to use antibiotics in animals without the supervision of a veterinarian.

Both practices lead to the development of bacteria that are immune to many treatments, he said.

The hearing was held to discuss a measure proposed by Representative Louise M. Slaughter, Democrat of New York and chairwoman of the Rules Committee. It would ban seven classes of antibiotics important to human health from being used in animals, and would restrict other antibiotics to therapeutic and some preventive uses.

The legislation is supported by the American Medical Association, among other groups, but opposed by farm organizations like the National Pork Producers Council. The farm lobby’s opposition makes its passage unlikely, but advocates are hoping to include the measure in the legislation to revamp the health care system.

The Union of Concerned Scientists has estimated that as much as 70 percent of antibiotics used in the United States is given to healthy chickens, pigs and cattle to encourage their growth or to prevent illnesses."

This is really important. Antibiotics make diseases that used to be fatal into minor annoyances. But resistance to antibiotics is rising, and we are not developing new antibiotics to replace the ones bacteria are becoming resistant to. This is in part because spending money to develop new antibiotics doesn't make sense for pharmaceutical companies. 

For one thing, antibiotics are used for short periods of time; the real money is in drugs for chronic conditions that have to be taken indefinitely. For another, if a new antibiotic were developed, it would probably be held in reserve and used only when no other antibiotic worked, so that bacteria would not become resistant to it. This is interference with the market. We are interfering for very good public health reasons: we want to have a drug that bacteria are not resistant to in reserve. But that means that a new antibacterial will not dominate its competitors if it proves to work better than they do.

We need to find a way to promote the development of new antibiotics. In the meantime, however, we should try not to do things that promote antibiotic resistance. Feeding antibiotics to farm animals not to treat diseases, but just to make them grow faster, is one of those things. There are lots of ways of promoting animals' growth that do not put people's lives at risk. We should find them.

(Note: this would probably also lead to improvements in the treatment of farm animals. When farm animals are fed antibiotics, you can get away with much more dubious hygiene than you could otherwise. This would also be a very good thing -- though I don't support factory farming in any form.)

A Question For Megan McArdle

by hilzoy

Megan McArdle responds to my last post:

"Surely the point of worry is that many millions of people will be forced into the public system, because its existence will encourage their employers to dump their health care plans.  Since private systems have so far found it virtually impossible to deny many treatments for long, this will mean that millions of budget constrained people will find themselves with less available treatment than before. (...)

This is not a crazy worry.  What America is best at is delivering a lot of complicated care in extremis, and "quality of life" treatments.  What European countries are best at is delivering a lot of ordinary care for the sorts of things that afflict people from 0-50, which is why most of the Europhile journalists writing about Europe genuinely have very good experiences to report.  I'd rather be here to have a hip replacement, but I might rather be in the Netherlands to have a baby.  Doing something moderately ordinary here is a hassle.  Doing something extraordinary there is often not possible for the overwhelming majority of citizens, though that depends on what, and in what system."

The main point I wanted to make in my last post was this: if by 'rationing' you mean making it impossible for people to get certain kinds of care, even if they're willing to pay for it themselves or buy supplemental insurance, then no one is proposing rationing. If, on the other hand, you mean 'making people have to buy it themselves or pay for supplemental insurance', then you have to count our current system as rationing care in such a way that 47 million people, plus all those who discover that their health insurance doesn't actually cover the care they need, are 'deprived' of care. 

What you don't get to do is act as though the fate that would befall a 99 year old who needs a pacemaker (in the imaginary world in which no one has Medicare) is a horrible new scourge that Obama's plan would introduce into the world. Or, in short: you don't get to ignore the existence of the uninsured. (Or the underinsured, or those whose private plans deny them care.)

With that in mind, consider this sentence from McArdle's piece:

"I'd rather be here to have a hip replacement, but I might rather be in the Netherlands to have a baby."

A question for Megan: would you really rather be here for a hip replacement, given that you'd have about a one in six chance of being uninsured? If you say 'yes', does your answer rely on the fact that most people who need hip replacements are covered by Medicare? Would you also say 'yes' for some treatment that people your age are more likely to need?

If not, you're relying on the assumption that the people you're imagining actually have health insurance. In this context, that's not a valid assumption.

***

UPDATE: Kevin Drum questions Megan's assumption that we do, in fact, do better at managing serious diseases:

"If by "extraordinary" Megan means the most extreme 0.001% of procedures, then maybe she's right.  Maybe.  But nothing I've read about Western European healthcare systems makes me believe that there's any substantial difference between the way they treat severe illnesses and the way we do it.  And no systematic difference in success rates for such treatment either.  Nor should this come as a surprise, since most extreme medicine is practiced on older patients, who are covered by a public plan both here and in Europe."

He's right. But even if we pretend, for the sake of argument, that there is such a difference, we'd still need to bear in mind the possibility of being uninsured here when asking: where would I rather be if I needed medical care?

About That "Unfairness"

by publius

One of the most common critiques against the public option is that government subsidies will give it an unfair market advantage.  Frankly, "fairness" isn't high on my list of priorities.  But regardless, the cry for a "level playing field" is admittedly a politically powerful counterargument that needs to be addressed.

So here's the best response -- even assuming we should care about fairness, the public option (as proposed) is "fair" under the critics' definition.  That's because it will NOT be publicly subsidized by general revenues.  As Jacob Hacker explains, some of the initial startup costs will be subsidized.  After that, however, the public option would have to stand or fall on its own merits.  Hacker writes:

Moreover, this new public health insurance plan should be—and is, in the draft legislation—self-supporting after initial setup costs are financed (that is, it should be financed by the same sources as any other plan within the exchange, notably, individual premiums, employer contributions, and income-related subsidies).

On this same point, Robert Reich explains:

Under every plan that's being discussed on Capitol Hill, subsidies go to individuals and families who need them in order to afford health care, not to a public plan.  . . .  Legislation should also make crystal clear that the public plan, for its part, may not dip into general revenues to cover its costs. It must pay for itself.

 

That doesn't end the debate by any means.  And there are of course many other fights beyond the public plan that are equally important.  But I think the so-called "unfairness" argument isn't very persuasive.  And if private plans can't compete against a self-sustaining public option . . . tough.

How Much Will Cap And Trade Cost?

by hilzoy

Remember how cap and trade was supposed to "cost every family as much as $3,100 a year in additional energy costs"? Surprise, surprise: 

"CBO estimates that the net annual economywide cost of the cap-and-trade program in 2020 would be $22 billion—or about $175 per household. That figure includes the cost of restructuring the production and use of energy and of payments made to foreign entities under the program, but it does not include the economic benefits and other benefits of the reduction in greenhouse gas emissions and the associated slowing of climate change."

Here's a handy chart (via Kevin Drum):

Moreover:

"CBO’s estimate also does not include the economic benefits of other provisions in H.R. 2454. The American Council for an Energy Efficient Economy estimates that the efficiency provisions alone could save businesses and consumers $22 billion annually by 2020.  The savings would be $170 per household in 2020 –- roughly equal to CBO’s cost per household estimate for ACES in 2020."

If that study is right, then, on average, the Waxman-Markey bill would involve a net cost of ... $5 per household. John Boehner was only off by $3,095. Details, details. And even that cost would go down in future years, as more permits are sold rather than being given away, with the proceeds going to taxpayers.

And, as noted, the CBO score also doesn't include the benefits of not having the planet heat up by as much. Ezra:

"For a bit more on that subject, it's worth checking out the CBO's analysis of "Potential Impacts of Climate Change in the United States." It's basically a survey of the many, many, academic papers published on the topic, and it has the virtue of being both quite careful and quite comprehensive. (...) But as the paper makes clear, a lot of the global warming debate comes down to how much we care about people who aren't us. The actual economic drag projected for the United States in the 21st century is relatively modest: 3 percent or so. The worst of climate change comes in other countries and long into the future."

Sounds like a bargain to me.

Eat Your Spinach!

by hilzoy

This is one of those dull bills that really matters:

"The nation's complex food supply chain would become more transparent, inspections of food facilities would become more frequent and manufacturers would be required to take steps aimed at preventing food-borne illnesses under legislation proposed yesterday by key House leaders who have pledged to modernize the food safety system.

The bill, introduced by Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) and Rep. John D. Dingell (D-Mich.), would give the Food and Drug Administration broad new enforcement tools, including the authority to recall tainted food, the ability to "quarantine" suspect food, and the power to impose civil penalties and increased criminal sanctions on violators.

Among other things, the proposal would put greater responsibility on growers, manufacturers and food handlers by requiring them to identify contamination risks, document the steps they take to prevent them and provide those records to federal regulators. The legislation also would allow the FDA to require private laboratories used by food manufacturers to report the detection of pathogens in food products directly to the government.

"This is a major step forward," said Erik Olson, director of food and consumer product safety at the Pew Charitable Trusts. "This has really been needed for decades. We're still operating under a food and drug law signed by Teddy Roosevelt.""

Rick Perlstein coined the wonderful phrase "e. coli conservatism". We've been living with, and in some cases dying from, e. coli conservatism for years. It's nice to know that we're getting back to serious food safety liberalism, which, frankly, ought to be just plain common sense, and perfectly acceptable to any conservatives who care about a strong defense. After all, food-borne illness kills about 2,000 more people every year than died on 9/11; why we should spend over half a trillion dollars a year defending ourselves against human invaders while leaving ourselves open to bacteria that are every bit as lethal is a mystery that passeth all understanding.

***

Special FDA bonus: the new FDA commissioner and her principal deputy have an article outlining their plans for the agency in the New England Journal of Medicine. It's quite good. Merrill Goozner has some good analysis here.