Analyzing the Price plan Part 1

Time to start reading through Republican healthcare policy plans again as they are coming out in droves.  These plans have massive distributional, operational, financial and moral implications.  I’ll start looking at Rep. Tom Price’s plan HR 2300. Today,  I’ll describe the basic workings.   I’ll look at the distributional impact of the subsidies compared to current baseline tomorrow.

Price’s plan first repeals everything associated with the medical side of Obamacare, so the student loan reform stays in place.  This means a full repeal of the three legged stool of community rating, subsidies and mandate, it means re-allowing insurers to discriminate based on health status, it means the rates for a medically underwritten 64 year old could be a dozen times higher than the rates for a medically underwritten 19 year old male. Medicaid expansion disappears. It is a reversion to 2009 status quo.

So how does he “solve” the health insurance problem? Why with tax deferred savings vehicles — they do everything but solve the actual problem.

The next chunk is a refundable tax credit that varies on age as he contends age is a simpler criteria than income.  This has interesting distributional effects.  In the name of Freedumb, he allows people who have Medicare, VA, Tricare or other government health care to decline that high actuarial value care to shop for their own individual coverage with their inadequate tax credits.

Everyone then gets a $1,000 one time deposit to a new HSA.  HSAs are further enhanced within the tax code and high deductible health plans are renamed HSA eligible health plans (a critical policy achievement here).  HSA contribution limits are increased to IRA contribution limits.

Now the interesting thing is how he plans to finance a good chunk of the costs of his plan.  He is instituting a Cadillac tax analogue, where Individual coverage over $8,000 and Family Coverage over $20,000 is paid for with taxable dollars.  The tax rate is lower, but the number of people and plans hit by this is far higher than the Cadillac tax impact.  He then goes off on no yucky lady medicine funding for a while.

Now for the next several titles, he recreates a crippled version of the PPACA individual and small group market. He firsts “deals” with the fact that medical underwriting means a lot of people are now uninsurable by block granting 1 Billion Dollars (cue Dr. Evil laugh) per year for state high risk pools.  At the Congressional District level, that is roughly $2.3 million dollars per district or less than six months of treatment for a single hemophiliac or half a dozen kids with Cystic Fibrosis.

He also attempts to work around medical underwriting kicking people out by allowing for continuous enrollment to not be medically underwritten (this will have massive adverse selection problems for insurers as they’ll do their best to dump their sickest).

The first is that individuals can form buying co-ops to negoatiate rates.  Small businesses can do the same.  However that insurance does not have to offer preventative care, mental health care, maternal care or any other significant essential health benefits.

Furthermore, Rep. Price wants to create an economic boom in Biloxi, Mississippi as companies would now be allowed to sell their plans anywhere in the nation as long as one state approves it.  I figure Biloxi will benefit as Mississippi will gut any regulation for the job creators, and Biloxi is prettier to operate a turnkey office than Jackson.  Rep. Price wants to turn health insurance into the credit card industry.

Tort reform is another hobbyhorse in the bill.  The big changes would be the creation of a safe harbor of following best national practices (not a bad idea in and of itself) and then raising the bar to a verdict against the defense to “gross negligence” only.  Payments would be capped at $50,000 per year in an effort to deny needed care to the truly and expensively injured as well as denying a reliable funding stream for plaintiff attorneys.

Wellness programs and incentives could vary the premiums by 50% instead of the current 20%. As a side note, broad wellness programs have not been shown to reduce costs; instead broad wellness programs are a system of social control.  Targeted wellness programs at the very small number of people with very high probability of having multiple expensive chronic diseases are effective.  But those people are now uninsurable again.

Title 6 has a requirement that insurers issue timely claims reports to employer groups.  This is actually a useful piece of policy information and it will make sure the 7th floor of Mayhew Insurance employs more people.

Title 7 forbids the Department of Health and Human Services from prioritizing care based on effectiveness.

Title 8 is a doozy.  States are allowed to set up insurance plan portals where individual policies are presented in a standard format with a system to compare various plans.  This sounds like the Exchanges.  However, people can’t buy a plan on these portals.  So it is a window shopping website.

Title 9 makes some Medicare changes to allow Medicare to pay claims to doctors that don’t participate in Medicare (this will blow up cost for Medicare).  Additionally, doctors could write off more bad debt from providing emergency care (which will increase significantly as the newly insured under PPACA are no longer insured and thus can’t pay anymore).

This is a doozy.

 

 

 

 

 

28 replies
  1. 1
    rikyrah says:

    thank you for your analysis. I am sure that it is better than 99% of what will be reported in the MSM.

  2. 2
    guachi says:

    Have time to kill so I clicked your link and read the entire summary of the bill.- 11 pages.

    It’s awful. The amount of support is miniscule and most of the benefits look to go to people healthy enough to get health care and rich enough to afford it. There might be a marginal improvement compared to pre-Obamacare but it seems it would be at the high cost of tax dollars going to people who would have already had health insurance.

    It’s such a pile of suck that listing all the sucky sections would take way to long for a simple comment.

  3. 3
    satby says:

    But the right people make out like bandits (healthcare corporation CEOs) and the wrong people go back to dying for lack of health care, so it’s a winner for his constituency: the .01%

  4. 4
    guachi says:

    I will mention one section in particular for it’s massive suckitude – the Death Panels in Section 402.

  5. 5
    Belafon says:

    @satby: Exactly what I was going to say. Price’s goal is to make the rich richer, not take care of the masses.

  6. 6
    Richard Mayhew says:

    @Belafon: That’s tomorrow’s post on distributional impact (it the distributional impact is actually a bit odder than you think it would be)

  7. 7
    Ryan says:

    So buyers are going to form buying co-ops and negotiate rates with insurers? Does this guy have any grip at all in the real world anymore? Insurers aren’t going to employ used car salesmen, they’re employing lawyers and MBAs for this work. And what, IF I manage to form a buying co-op (why I can form this and not a union is beyond me) at work, what, we have to find someone with some smarts that’s going to negotiate for us for free? Maybe I’m missing the point here, but oligopolies were something we learned in high school, and they seem relevant.

  8. 8
    JPL says:

    GA just passed a law requiring additional insurance coverage for autism, Ava’s Law. Since insurance companies will want to rid themselves of my state’s pesky regulations, the cost of buying coverage in GA will skyrocket. Price’s constituents will still vote for him and blame Obama.

  9. 9
    Richard Mayhew says:

    @JPL: Under Price’s plan, all of the Georgia plans would reincoroprate in Mississippi or South Dakota or Delaware where there are no autism riders… so any Georgia plan incorporated in Georgia gets all the autism members and goes bankrupt as they death spiral out.

    @Ryan: This would be for individual market buyers, not people getting insurance through work or their union.

  10. 10
    Wag says:

    Title 7 is a doozy. The Choosing Wisely program gets tossed out the window. Time to start doing stress tests prior to cataract surgery! Never mind the fact that cataract surgery has a negligible risk and screens stress tests don’t improve outcomes or risk stratification. There’s money to be made with unnecessary testing.

  11. 11
    Ryan says:

    @Richard Mayhew: I suspected as much. Presumably some organization would come along to organize individual buyers, it just seems a little fantastic as a solution if it did not.

  12. 12
    JPL says:

    @Wag: When my son was younger he had Osgood-Schlatter disease, but it wasn’t diagnosed until multiple tests were run. We had so called gold insurance and it’s the only time the company called to question some of the tests. Guess who his doctor was.

  13. 13
    TriassicSands says:

    Richard how do you read these Republican plans without throwing up your hands (or just throwing up) and drinking yourself into unconsciousness?

    You perform an invaluable service and make the lives of your appreciative readers better. But I fear for your own sanity and well-being.

    The current system with Obamacare, Medicare, Medicaid, and the VA is a wasteful mess that still leaves people in jeopardy, but the Republican replacements would make things much, much worse. I think a lot of people thought that we’d get the flawed Obamacare in place and then, over time, we’d gradually improve things. (To me, probably the biggest problem with that plan is that there is no obvious route to get away from the PPACA’s reliance for-profit insurance companies.) But the other defect in the plan of gradual improvement is that with Republican control of both houses of Congress, there are no suggestions for improving Obamacare, even tiny incremental ones, but just absurd plans to make things worse for everyone but the wealthy.

  14. 14
    Richard Mayhew says:

    @TriassicSands: This is what I spent several years in grad school learning how to do right, so this is FUN!

    Yes, my wife looks at me funny when I explain that part of my motivation to her… but then she sees me quoted in the LA Times and understands some of the other intangible rewards I get from this…

    She also sees that the TV has far fewer dings in it when I’m writing and responding to idiocy instead of passively observing it.

  15. 15
    WereBear says:

    It seems designed for the problems of people who have a lot of money.

    And there, for most of us, is the snag.

  16. 16
    Richard Mayhew says:

    @WereBear: YEP!!!!

    The Price Plan is great for a healthy 55 year old man with an income 500% FPL (the big benefit is the HSA limits have been raised to IRA contribution limits )

    Sucks goat balls for anyone sick, or female, or poor…. for a Republican plan, that is a feature not a bug.

  17. 17
    JPL says:

    @Richard Mayhew: Please consider sending this to the NY Times for their opinion page.

  18. 18
    Davis X. Machina says:

    Title 7 forbids the Department of Health and Human Services from prioritizing care based on effectiveness.

    Leeches! Someone backstopping this bill is long on leeches.

  19. 19
    japa21 says:

    @Richard Mayhew: Being quoted is cool. Congrats.

  20. 20
    Wag says:

    @JPL:

    Ben Carson? Oh wait. He’s a neurosurgeon.

  21. 21
    PurpleGirl says:

    Heard a financial story (on NY1 this morning) about retirement and how people aren’t prepared for it and don’t have the savings to live comfortably. The reason they did not mention is that most people simply do not make enough money to save for retirement. They are barely meeting the on-going monthly bills — putting off vacations, not smoking, not eating very often, will not generate enough large amounts of money in context with a small paycheck.

    An HSA has the same problem. Most people just do not have the means to save that money. And who could save a hundred-thousand a year to pay for catastrophic medical care.

    And with banks paying a measily >1% interest, those savings don’t compound very quickly.

  22. 22
    Richard Mayhew says:

    @JPL: Do I have to remove any reference to teabagging a goat for it to be published in the NY Times?

  23. 23
  24. 24
    pseudonymous in nc says:

    The cohort of GOP physicians really isn’t an advert for Best Healthcare In The World USA USA, is it? I mean, you can clearly be a good doctor and a whackjob, but at some point you have to assume that being so fucking stupid and cruel in public life reflects how you practice medicine.

  25. 25
    pseudonymous in nc says:

    @Richard Mayhew:

    The Price Plan is great for a healthy 55 year old man with an income 500% FPL

    That’s unfair, Richard: Tom Price is 60.

  26. 26
    J R in WV says:

    @JPL:

    I’m gonna guess either Dr Osgood or perhaps Dr Schlatter…?

    If it was a eye disease I might have gone with Dr Paul, ;-) /snark – no reader of this blog would hire that deuschbag!

    It looks to me like this Republican bill would break many of the repairs made by Obamacare, instead of going forward to fix other things that the ACA didn’t fix properly, which is what the R(liar) claimed they intended to do.

    Then they take (steal) money from poor/blue-collar folks to give to their contributers. Typical Republican theft and abuse.

    Puke on their “morality” and “Christianity” – they have neither of any of those!

  27. 27
    dp says:

    One the tort reform front, the “safe harbor” is a complete red herring. If a health care provider follows best national practices, then by definition they have met or exceeded the standard of care, which is simply what a reasonable provider would do. So they aren’t negligent — already, under the existing law in all fifty states. The “gross negligence” standard and the damage caps are where the action really is here.

    This pathetic plan makes me ashamed to be named Price.

  28. 28

    […] I gave a brief overview of how Rep. Tom Price (R-GA) HR.2300 would work.  The “plan” is to repeal everything related to health […]

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