Ezra Klein: When campaigns stop being polite and get wonky.

[rinsd]

I tend to see these long "memos" from one campaign to another over at Ambinder's place, usually arguing out the likely impact of polls, or Iowa, or an attack ad. Today, however, I got one from the Clinton campaign on...the effect of coverage mandates in bringing down health care costs. It's even got footnotes! The full document is reproduced after the jump. As quick commentary, I basically agree with the substantive case the Clinton camp puts forth, but if any other campaigns want to send me responses, rebuttals, or even policy memos on other subjects, I'll happily post them, too. I'd be glad to see the campaigns tangle over the issues, making their best arguments at whatever length they require. May the best white paper win! And now, the memo:

TO: Interested Parties

FROM: Neera Tanden, Policy Director, Hillary Clinton for President

Laurie Rubiner, Healthcare Policy Advisor, Hillary Clinton for President

RE: Why Shared Responsibility With an Individual Requirement Is Key to The Affordability and Accessibility of Health Insurance

In recent weeks, there has been a growing debate among Democratic candidates about how to make health insurance affordable and accessible. This memo explains three reasons why achieving affordable, accessible health insurance depends critically on having shared responsibility, including a requirement that all Americans have health insurance. These reasons help explain why Senator Clinton’s plan, which includes an individual requirement, will make insurance substantially more affordable and accessible than Senator Obama’s plan, which lacks this key element.

First, universal access without an individual requirement would make health insurance less affordable, not more affordable. Under the Obama plan, individuals will have an incentive to remain uninsured and not pay premiums until they actually need care – and then stop paying premiums when that need is gone. This would raise premiums for the fewer participants who stay insured when they are both healthy and sick. As economist and New York Times columnist Paul Krugman recently explained, under the Obama Plan, “people who did the right thing and bought insurance when they were healthy would end up subsidizing those who didn’t sign up for insurance until or unless they needed medical care.”

Second, the policies that will most effectively reduce long-run healthcare costs—like prevention, chronic care management and electronic medical records—can only be effectively implemented in a system where individuals are required to have insurance. Because Senator Obama’s plan does not include an individual requirement, his commitment to these cost-savings policies will be substantially less effective at containing system-wide healthcare costs than Senator Clinton’s plan.

Third, the key reforms necessary to make insurance accessible will be far more difficult without an individual requirement. In a voluntary system where coverage gaps persist, insurers will have a strong incentive to find ways to avoid enrolling sick people if they had to instantly enroll them at the same rates as other enrollees. As a result, Senator Obama’s commitment to insurance reforms that, on paper, would improve access to insurance, are likely to be undermined in practice. As one health writer recently explained, “you can’t make the necessary reforms to the insurance market without putting everyone in the coverage pool. The point of the reforms is not merely to keep insurers from gaming consumers, but to keep consumers from gaming insurers. You can’t have one without the other.”

In short, reforms to make insurance (1) accessible, (2) affordable, and (3) required are like a three-legged stool: if one is removed, the others can’t work. This is why states and past reform plans have included all three elements. And it is why affordability and accessibility for the insured as well as the uninsured can only be effectively secured by guaranteeing coverage through an individual requirement for health insurance, as Senator Clinton’s American Health Choices Plan would do.

The Link Between An Individual Requirement and Accessibility and Affordability of Health Insurance


Without an Individual Requirement Coverage Gaps Among Key Groups Would Persist: Numerous independent experts confirm that Senator Obama’s plan would leave at least 15 million people uninsured. In addition, every credible independent expert believes that you cannot achieve universal coverage without an individual requirement. One key reason why these large coverage gaps persist is because in a voluntary system, key groups of uninsured individuals will fail to enroll even if insurance is made more affordable.

Higher Income Uninsured Likely to Remain So Even if Insurance is Made More Affordable: Fully one in five uninsured Americans – 9.3 million, more than the number of uninsured children – has family income above $75,000. For many in this group, it is not just affordability that keeps them from getting health insurance. A recent survey found that 37 percent of the high-income uninsured considered themselves risk-takers and a third thought that they could overcome illness without health care.

Young Adults Are More Likely To Remain Uninsured in a Voluntary System, Even if Offered the Choice to Remain on Dependent Coverage: Another group for whom affordability is an important but only partial solution is young adults. As the healthiest group of adults, they are already likely to pay low premiums in the individual market. However, they are three times as likely to be uninsured (31.3%) as insured in this market (11.1%). Similarly, when offered employer-based insurance, young adults have significantly lower take-up rates than people age 30 and older.

Senator Obama’s advisors claim that requiring dependent coverage be extended to young adults will significantly increase coverage for this group. Yet twenty-six states already offer some type of dependent coverage for young adults, a subset of which apply this requirement to non-students. And the take-up rates in states that have this requirement have been lower than expected. Survey data finds that more than one in four uninsured people ages 18 to 24 say that they are healthy and did not need coverage. Stated simply, many young adults make the choice to go without insurance even though it is cheaper for them to purchase coverage.

More broadly, researchers have found that, independent of income or age, a significant proportion of the uninsured are willing to take the risk of remaining uninsured. Such people are also less likely to take up job-based coverage when offered it. As such, while ensuring affordability for these groups is important—and a key focus of Senator Clinton’s plan— a voluntary approach will fall well short of insuring all Americans. In Senator Obama’s case, his plan will leave at least 15 million uninsured.

Impact of Coverage Gaps on Premiums: People who are uninsured by choice impose a cost on themselves and on society. Research has extensively documented the negative personal health and financial implications of being uninsured. There is also a “hidden tax” on society because the cost of the care they inevitability need is paid for by public programs and privately insured people who pay higher rates to offset uncompensated care costs. Under the Obama plan, there would be another type of cost shifting as well. If Senator Obama were successful in implementing his proposed insurance reforms and subsidies, it could actually make it easier for people to “save” by not paying premiums when they don’t perceive the need for health care. Someone who is healthy could remain uncovered until they fell ill, and the cost of their care would be borne by whatever insurer they select and its already-insured enrollees. That is why Paul Krugman recently concluded that “letting people opt out if they don’t feel like buying insurance would make insurance substantially more expensive for everyone else…n other words, when Mr. Obama declares that “the reason people don’t have health insurance isn’t because they don’t want it, it’s because they can’t afford it,” he’s saying something that is mostly true now — but wouldn’t be true under his plan.”

Impact of Coverage Gaps on Health Costs: Persistent coverage gaps could not only raise insurance premiums, but could lower the effectiveness of system-wide cost containment policies. Therefore, while Senator Clinton and Senator Obama have many similar cost-containment proposals in their plans, Senator Clinton’s proposals will more effectively reduce system-wide costs because they will be implemented within the context of a plan with an individual requirement.

Policies to promote health and prevent diseases would be far less effective in a voluntary system where many people do not have continuous coverage. A recent study found that the uninsured—even those with high incomes—received significantly less preventative treatment, including cancer prevention, cardiovascular risk reduction, and diabetes management. As such, even if only the wealthiest opted out under the Obama plan, they would impose higher long-run costs on the health system because they avoided cost-effective prevention measures in the first place. The concern about coverage gaps and care for the chronically ill is even greater. Nearly half (45%) of the non-elderly uninsured have at least one chronic condition. Of these, more than one third (38%) report lacking a usual source of care, and nearly half (49%) report forgoing needed medical care or prescription drugs due to cost. Providers cannot effectively manage, monitor, and promote quality care for patients with chronic illness when these patients come in and out of insurance. Full implementation of an electronic medical record system could also be hindered, since insurers have been instrumental in implementing these records to date. And, the cost of fragmentation would continue in the absence of an affordable, accessible, and universal system. The cost of enrollment and disenrollment is significant and could be lowered far more under a plan that requires all Americans to be insured than one that does not.

Impact on Insurance Accessibility: Insurers would face new pressures to avoid sick people under a plan that increases access and affordability without guaranteeing coverage. Currently, insurers spend billions trying to avoid people who may become sick, since, in most states, they can deny coverage altogether to those that are sick. One study estimated that fragmentation and risk avoidance in the U.S. health system results in $98 billion in excess administrative costs, roughly $50 billion of which is associated private insurance administrative costs. If they were required to offer everyone coverage at roughly the same premiums, and people could opt in and out of coverage, then insurers’ financing could be thrown off balance by enrollment of costly uninsured people. They would have to increase enrollment of many healthy people at the community-rated premium to offset the costs of one sick, previously uninsured enrollee. As such, they would likely increase their risk avoidance practices (e.g., benefits designed for the healthy, enrollment caps, limited offerings in areas with high-risk people) – undermining a goal of accessibility and adding to administrative costs. As authors of a review of regulation concluded, “In a system where purchasing health insurance continues to be voluntary, insurers and consumers are locked into a dance of avoiding the high-risk population.”

Experience With Insurance Reforms: Both Senators Clinton and Obama have called for regulating insurers to stop them from undermining people’s access to needed health coverage and care. Yet experience at the state level suggests that implementing such reforms without an individual requirement will fall short of achieving the goal of affordable, accessible, and expanded insurance. As one health writer recently put it, “you can’t make the necessary reforms to the insurance market without putting everyone in the coverage pool. The point of the reforms is not merely to keep insurers from gaming consumers, but to keep consumers from gaming insurers. You can’t have one without the other.”

In conclusion, affordability and accessibility for the insured as well as the uninsured can only be effectively secured by guaranteeing coverage through an individual requirement for health insurance.

--Ezra Klein

http://www.prospect.org/csnc/blogs/tapped_archive?month=12&year=2007&base_name=when_campaigns_stop_being_poli