Schwarznegger's Health Care Plan

Ok, I've gone over it(pdf) in detail, and I've read the commentary by many others and here's the deal.

It's partially funded by a 4% payroll tax on companies that don't provide healthcare for it's own employees. Everyone must have insurance and must buy it. Those below the Federal Poverty Level (FPL) will be given insurance, those earning 101% to 250% of the FPL will be given a subsidy for it. (The FPL for one person is $9,800. The FPL for a family of 5 is $23,400.(PDF))

A 4% tax on employers is too little - even Walmart pays 7% of payroll, and their health care sucks rocks.

More After the Jump

There appear to be some measures to encourage employers to not drop their insurance, but frankly, that's what a lot of employers will do. Because 4% is less than 7% or 10% and it gets the companies off the hook. Guaranteed, if this plan goes through, within two years, Walmart, for example, won't offer healthcare. (I know, but remind yourself - 7% buys more than 4%.)

The difference will be made up by the government, and it will increase over time as more and more companies shed their insurance and as new companies shrug and say "we'll pay our 4%, thanks."

The individual mandate, while it will pay for insurance for people below the Federal Poverty Level and subsidize those below 250%, will amount to a significant new market for insurers.

The plan isn't awful. But it's actually a significant subsidy for insurers that expands their market and adds even more State funds to the market. It will lead to worse insurance for many people currently covered and will force a lot of people to buy insurance that isn't very good (a $5,000 deductible is pretty high). A hundred dollars a month doesn't sound like much, but a lot of Americans are really maxed out on their credit - they really don't have it. So they'll get the very minimum and it'll be effectively worthless to them.

The so-called cost savings that come from getting the uninsured insured won't be as large as they suggest, either, since the people who are the real problem are indigent drunks, drug users and so on, who will continue needing emergency room care and will coninue racking up bills in the hundreds of thousands and millions.

There are some smart things about this proposal - especially creating a pool of uninsured and making insurers underwrite only based on age and geographic location (which is fine, as long as distribution is random, that's fair to the companies).

Mandating that private insurers must spend 85% of premiums on care is also good, but one should remember that Medicare spends 98% - that's a lot of money being left on the table in order to keep private insurers in the game; money that could be used to provide much better care, or subsidies.

For a fundamentally flawed plan (one that requires individuals to buy insurance and that keeps private insurance companies in the loop) it's pretty well done. But I doubt the finances will work out as well as the team estimates - it's going to be more expensive; it's a subsidy for insurance companies; it'll add an extra expense to a lot of employees and it'll actually reduce the quality of insurance that a lot of employees have when their employers ditch the old plan so they only have to pay 4%.

Schwarznegger vetoed a real single payor plan, and has come back with this. Perhaps it's the best California can get, and perhaps it's better than nothing. But it does have significant flaws, and those flaws will lead to higher costs for the State, worse insurance for many in the middle and working class, and amount to a subsidy for private insurance firms. It's a smart Republican way of providing health care - it'll sort of work, and it'll run deficits higher, and it'll pump a lot of money into private industry that wouldn't be spent if the plan was rational. Whether all that is worth the rather bad coverage it will give to people who would have gotten emergency care if they had any condition that went over a $5,000 deductible, and who are too poor to use insurance with a $5,000 deductible, is an open question.

Ian Welsh January 9, 2007 - 8:28am

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Whether all that is worth

Whether all that is worth the rather bad coverage it will give to people who would have gotten emergency care if they had any condition that went over a $5,000 deductible, and who are too poor to use insurance with a $5,000 deductible, is an open question.

Let's close the question with the answer "No". This is what bothers me about health care discussions. The issue addressed isn't really health care; it's who pays for health care, along with the corollary of who profits. It has little to do with whether you get the health care you need and everything to do with how the medical services you do get are paid for. The bill you described is absolutely terrible for all the reasons you point out, but it's framed as extending health care to everybody.

nihil obstet January 9, 2007 - 10:29am

Heheheheh.

The difference will be made up by the government, and it will increase over time as more and more companies shed their insurance and as new companies shrug and say "we'll pay our 4%, thanks."

So let them.

Hell - encourage them. Let them figure how much money they'll save, drop their healthcare infrastructure, opt in.

Then in a couple of years - start increasing that 4% until it's just under what they'd be paying privately. Just enough of a deal so that the costs to rejig won't justify any savings.

Let the corporate accountants convince them to stick their own heads in the noose.

Escher Sketch January 9, 2007 - 11:22am

watch it ian, your class is showing

The so-called cost savings that come from getting the uninsured insured won't be as large as they suggest, either, since the people who are the real problem are indigent drunks, drug users and so on, who will continue needing emergency room care and will coninue racking up bills in the hundreds of thousands and millions.

so which am I? drunk, drug user, or "so on?" the conditions i'm describing in this essay applied when i had a "phat" scholarship and a part time job, and was pulling down 75hr work weeks. it's not just that some of us are currently "uninsured drunks," some of us are the working poor, who are rarely these days offered good jobs with health benefits.

chicago dyke January 9, 2007 - 1:59pm

It is simply a FACT that

It is simply a FACT that health care expenses for the poor are a long tail phenomenon. A very small number of indigent people take up a vastly disproportionate amount of care and money. This plan will do nothing to deal with that issue - the money will still be spent. This has nothing to do with my "class", I have been on welfare, and I have lived on minimum wage with no assistance from family (no assistance was available, and I would not have accepted it if it were). I have been working poor and been working poor enough years to know the life in my bones.

I have either been, or been around, all of the classes - from the very rich, to street people. And I've lived the life of the working poor, the welfare poor, the middle class and the lower upper class.

Ian Welsh January 9, 2007 - 3:23pm

this is where i have an issue:

i see your point is to attack the specifics of the plan. i was speaking of the framing of this post.

your response seems a crafty way of describing the phenom- "long tail" on what, and measured by whom? what the idigent "cost" depends on how many health care variables are measured; i get upset that people don't factor in all the ways in which pricing and "cost" are skewed by, for example, the "cost" and profit in treating heart disease. which of course, is the top killer of older, well insured men.

with insurance, i "cost" somebody a set fee for a medical service. without it the bill for that same service could be 100x greater than i'd pay (or indeed, even my insurer would pay) in a negotiated fee arrangement. that's why the poor "cost" so much. taken as a whole, i think we need to have a comprehensive examination on what costs how much and why, and which populations pay in the most, vs who has the greatest need. the only cost i'm interested in is the one we all share, including corporations and other entities who benefit from a healthy society, for equal access to equal services. there's no reason to change our common (or not so) high standards in quality of care.

currently, the pricing structures of health care in this country are so artificial, so not tied to the actual operational expense of the service, it's almost impossible to evaluate them fairly.

sorry for the knee jerk, this is a sensitive topic for me and i reacted badly to the wording.

chicago dyke January 9, 2007 - 6:19pm

It's true that someone

It's true that someone without insurance is charge the nominal rate and not the normal rate and that medical costs are set by what the market (and I use "market" very loosely and not in the sense of a properly function market) will bear. And so the bill is artificially inflated. But it's also true that the hard core homeless with drug, alcohol and mental problems (and long term physicial problems) use up much more care than the average working poor. They're in and out and in and out of the system, as I'm sure you're well aware. And since their care is usually emergency care, they will still have to be taken care of. One way or the other, their care will be paid for and it is simply shuffling deck chairs on the titanic to think that Schwarznegger's plan will make any difference in the cost of caring for them, however you want to measure that cost.

Ian Welsh January 9, 2007 - 6:55pm

you seem to have less scorn

you seem to have less scorn for this plan, than the wyden plan. is that because it is coming from a conservative republican, rather than a supposedly liberal democrat?

colorless green... January 9, 2007 - 8:45pm

Essentially. This is about

Essentially. This is about the best plan you could expect from a Republican, I think.

Wyden's plan is better than this one, actually, from what I've seen (I haven't gone over it in as much detail.) I should probably have stated that.

But I do expect better from a liberal democrat - cut the companies out of basic insurance, at least as your starting position.

I don't believe the financial assumptions of either plan.

Ian Welsh January 9, 2007 - 8:57pm

So Arnie has been

So Arnie has been investing some money in the Health Insurance funds??

rMatey January 9, 2007 - 10:30pm

The medicare number

"Mandating that private insurers must spend 85% of premiums on care is also good, but one should remember that Medicare spends 98%"

where does it come from?

http://mauberly.blogspot.com/

mauberly January 10, 2007 - 9:42am

Here:

Here: (pdf)

"The Medicare program covers 95 percent of our nation’s aged population, as well as many people who are on Social Security because of disability. In 2004, Part A covered about 41 million enrollees with benefit payments of $167.6 billion, and Part B covered about 39 million enrollees with benefit payments of $135.4 billion. Administrative costs in 2004 were under 1.8 percent of disbursements for HI and under 2.1 percent of disbursements for SMI. Total disbursements for Medicare in 2004 were $308.9 billion."

Ian Welsh January 10, 2007 - 4:17pm

grazi

http://mauberly.blogspot.com/

mauberly January 10, 2007 - 8:28pm

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Schwarznegger's Health Care Plan

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