Thursday, October 01, 2009

Public Option = Massive Income Redistribution

From the Wall Street Journal article (9/29/2009) “Young Back Health Proposals Amid Potential Costs”:

Young adults remain some of the strongest supporters of a health-care overhaul, but many acknowledge they don't understand proposals that will likely saddle them with higher costs.

In the latest Wall Street Journal/NBC News poll, 18- to 34-year-olds showed some of the same apprehension as other age groups when asked whether President Barack Obama's health-care plan was a good idea. But half in that age group said they support a public insurance option, one of the most controversial elements of some of the proposals, with 43% opposed. It was the only age group in which more respondents supported than opposed a public option.

At the same time, the poll suggested many young adults didn't know what was in the legislation, with 48% saying they didn't understand or understood only somewhat what was being debated. That compared with 40% for respondents aged 65 and over.

MP: Before they throw their support so strongly behind a public insurance option, young adults might want to better understand the huge, inter-generational income redistribution that might be imposed on them if the public option passes, as outlined in these two recent reports:

From the Washington Post article (9/16/2009) “Young Adults Likely to Pay Big Share of Reform's Cost”:

As health-care legislation advances through Congress, the young adults who were so vital to President Obama's election are emerging as a significant beneficiary of his top domestic priority, but they are also likely to play a major role in funding any reform.

Drafting young adults into any health-care reform package is crucial to paying for it. As low-cost additions to insurance pools, young adults would help dilute the expense of covering older, sicker people. Depending on how Congress requires insurers to price their policies, this group could even wind up paying disproportionately hefty premiums -- effectively subsidizing coverage for their parents.

From the Wall Street Journal article (9/27/2009) “Health 'Reform' Is Income Redistribution”:

Like the homeowner who waits until his house is on fire to buy insurance, younger, poorer, healthier workers will rationally choose to avoid paying high premiums now to subsidize insurance for someone else. After all, they can always get a policy if they get sick.

To avoid this outcome, most congressional Democrats and some Republicans would combine guaranteed issue and community rating with the requirement that all workers buy health insurance—that is, an "individual mandate." This solves the incentive problem, and guarantees that both the healthy poor 25-year-old and the sick higher-income 55-year-old have heath insurance.

But the combination of a guaranteed issue, community rating and an individual mandate means that younger, healthier, lower-income earners would be forced to subsidize older, sicker, higher-income earners. And because these subsidies are buried within health-insurance premiums, the massive income redistribution is hidden from public view and not debated.

18 Comments:

At 10/01/2009 1:02 PM, Blogger ExtremeHobo said...

Its things like this that really make me question democracy. This is yet more proof that wisdom isn't cumulative.

 
At 10/01/2009 1:49 PM, Blogger Michael said...

Things like this wouldn't occur if our county was run like a republic and not a democracy and the federal government operated as designed. The house represents the people, the senate represents the states, and the president executes the laws passed by the house and senate.

 
At 10/01/2009 1:52 PM, Anonymous gettingrational said...

Yes, the young subsidise the old in most health insurance (not sure about catostrophic). What about mental health care, is this part of the national health care debate? I think the older will subsidise the younger in this area. Mental health issues seem to arise in the teens and twenties.

I know Ted Kennedy's influence looms large in the health debate and mental health is an area he keyed in on.

 
At 10/01/2009 3:06 PM, Blogger 1 said...

I'm glad someone reminded me of Ted Kennedy...

Well R. I. H. Ted Kennedy...

 
At 10/01/2009 3:10 PM, Blogger Steve said...

Headline = FAIL.

The linked articles don't even focus on the public option.

Both articles make the point that an 'individual mandate' coupled with 'community pooling' means that healthy workers subsidize workers with health care costs.

And when those young, healthy workers get older and less-healthy, then they are subsidized by the new younger healthy workers.

You might disagree with that structure, and say that everyone should pay their own personal risk-adjusted rates, but that topic is not covered in the articles or MP's headline-slam, so I'll set it aside.

Other than claims about unfair competition, I'm not sure what this has to do with the public option at all.

MP - can you elaborate on your apparently-misleading headline?

 
At 10/01/2009 3:43 PM, Blogger 1 said...

Misleading headline?!?!

Hardly...

Consider doing a bit of homework...

From Investors Business Daily: 45% Of Doctors Would Consider Quitting If Congress Passes Health Care Overhaul

 
At 10/01/2009 3:45 PM, Blogger OA said...

Steve said...
Headline = FAIL.


You're kidding right? The entire basis of the public option is income redistribution. It certainly isn't going to be funded just by the premiums it charges as private insurers have to do.

Do it really take a focused article by a news source to make that so?

 
At 10/01/2009 4:40 PM, Blogger Steve said...

1 and OA:

A public option might very well be considered to redistribute income.

And Mark Perry might want to post an entry to that effect.

But neither of the 2 articles, that were linked to as support for MP's post, make that point. (WaPo 9/16; WSJ 9/27)

The articles say that mandated coverage will increase younger worker's participation in all insurance plans (Private, Employer-sponsored, Co-Op), and that the forced participation by younger workers in ALL plans winds up subsidizing unhealthy (often older) participants in those plans that have community-ratings.

That idea, as presented in those two referenced articles, has nothing in particular to do with the public option. That idea applies to ALL plans.

That is why the headline is misleading, at least as it applies to mischaracterizing the articles that are linked to by MP.

(1: another article says 70% of doctors support the availability of a public option. Which is why the conservative AMA backed down from opposing a public option.)

 
At 10/01/2009 4:49 PM, Anonymous Anonymous said...

Actually to take the point a bit further the whole point of insurance is income redistribution. All policy holders pay in and a few get something back. (Or in the case of Life insurance you pay now because if you keep paying you will get something back eventually).
Insurance is about spreading risk, and I believe that the computer by allowing detailed slicing and dicing of claims makes the whole concept of insurance much more dicey.
If my house burns down in the sense of this article I have income that came from the policyholders.
If my whole area is hit by a hurricane I get income from the taxpayers (A low interest loan is income to due to the lower than market interest rate).(Gov as the insurer of last resort)
So insurance has policyholders pay in so that a few can be made whole.
The larger the pool the lower the costs can be.
For example if I live on the coast I pay less than the actuarial rate for wind and flood insurance.
So subsidy is built into the concept insurance at the bottom rung.
(Another way of looking at insurance is a as a Casino, but then the prinicipal is the same since a lot more loose than come out ahead. In both cases the house wins else it would not be in business)

 
At 10/01/2009 5:26 PM, Anonymous Anonymous said...

The existing system transfers income to those who do not purchase insurance who shift the costs to those who do. You can take care of a 22 year old quadraplegic without insurance if you want. Can I send you the bill? Oh, you've already paid it in your premiums and taxes. Never mind. You must prefer that outcome.

Bill

 
At 10/01/2009 6:14 PM, Blogger OA said...

Mark may be a bit slow in responding as he's on CNBC right now on Larry Kudlow's show.

 
At 10/01/2009 6:47 PM, Blogger 1 said...

Well personally Steve you sourcing from the liberal Robert Wood Johnson Foundation is no source at all...

The Washington Post is also seriously flawed...

BTW when did the AMA become conservative?

 
At 10/02/2009 10:11 AM, Blogger Steve said...

1: I agree, the Washington Post is no bastion of greatness - it's editorial positions are beltway-consensus, not really liberal, neither Goldwater- or theocratic-conservative. They are conservative in that they revere the status quo. (see David Broder)

---

re: polls. I'm not a pollster, nor a journalist with access to data. I don't know what polls are correct or not. Do you? So I counter the IBD poll (and THAT'S not partisan?) with a poll half-run by the New England Journal of Medicine and covered by a legitimate, MSM newspaper of centrist establishmentarianism. Are they in on the conspiracy, too?

---

The AMA has been generally 'conservative' in that it tends to lobby to minimize governmental involvement, and protect the current status quo in providing health care. Changes around the edges. To me, that is conservative.

Although that has changed in recent years. see: http://www.opensecrets.org/orgs/summary.php?ID=D000000068&Name=American+Medical+Assn

 
At 10/02/2009 10:57 AM, Blogger John Thacker said...

And when those young, healthy workers get older and less-healthy, then they are subsidized by the new younger healthy workers.

Bzzt. You're assuming that they all get to be older and less-healthy. What about those that die young from accidents or homicide?

All old people were once young; almost all were once healthy.

Not all young healthy people live to be old and unhealthy. The unlucky ones don't.

So even if the average young, healthy person gets subsidized later, on net the public option asks the unfortunate people who die in their prime to subside the fortunate ones who enjoyed a long life. Is that fair?

Considering the homicide rate for young, black men, if Republicans proposed this people would call it racist.

 
At 10/02/2009 11:04 AM, Blogger QT said...

Steve,

One also needs to consider that only a small percentage of doctors are members of AMA.

I believe that most doctors recognize that there are major problems not the least of which is the projected bankrupcty of the Medicare Trust by 2017. This present legislation seems to be largely carved out in committees with no input from the medical profession. That doesn't even look at the budgetary implications.

The fact that the latest bill will not even be made available to the public is disturbing. How can any physician approve of a major piece of legislation without the opportunity to read the contents? Ironically, even Communist China is making legislation available for public comment 30 days.

Members of the house will have 72 hours to consider over 1,000 pages of a major piece of legislation which will likely have hundreds of pages of revisions released just hours prior to the vote.

Is it credible that a piece of leglistation that few members will either will read or understand which has 0 input from the medical profession will actually solve the problems of health care in America?

 
At 10/02/2009 4:39 PM, Anonymous Anonymous said...

So how did we do legislation before the web? The smoke filled back room and it did not work so badly in toto.
Note that the final bill will be in language that says amend this piece of law thusly etc, so that it will not stand alone. This is why the finance committee dealt with a version not the legislative language so that senators could understand it. Most bills are this way, and need to be so that the courts don't strike them down.

 
At 10/02/2009 6:21 PM, Anonymous Anonymous said...

Any news on the Swiss Health Care System?

 
At 10/04/2009 6:30 PM, Blogger randian said...

You might disagree with that structure, and say that everyone should pay their own personal risk-adjusted rates

If you're paying individual rates, it's not insurance, it's pre-paid medical care.

If you want to see what Obamacare will do, go to New York or Maine. Community rating, mandatory low deductibles, and expansive coverage mandates makes insurance monstrously expensive. Obama's elimination of annual and lifetime caps will make it even worse. I assume that's the point, institute rules that make insurance unaffordable, then blame the insurance companies for the result.

Mandatory low deductibles, not coincidentally, makes you ineligible for a Health Saving Account. That will piss off a whole bunch of people.

 

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