Friday, July 09, 2004

Columnist Watch: Krugman on Kerry's Healthcare Plan

In response to a previous post of mine, regarding how Medicaid is getting cut in various states around the country, a reader referred me to Krugman's July 09 NYT column praising Kerry's healthcare plan.

First, the Kerry plan raises the maximum incomes under which both children and parents are eligible to receive benefits from Medicaid and the State Children's Health Insurance Program. This would extend coverage to many working-class families, who often fall into a painful gap: they earn too much money to qualify for government help, but not enough to pay for health insurance. As a result, the Kerry plan would probably end a national scandal, the large number of uninsured American children.

It is true that employer paid healthcare plans are becoming a thing of the past. The oldman has written about it previously. But money "doesn't grow on trees". What is Kerry's plan to pay for this? Dean's plan was to have retroactively not invaded Iraq and spent the $87 billion there. And that would have covered the cost. Even though I supported him I hesitated to agree to the idea that reversing the flow of time was the proper response to a fiscal shortfall in the present. "We'll spend the money differently we already spent." While that sentiment may be called "buyer's remorse" and have appealed to many people, it was a little short on logic since time machines aren't widely available to perform such a feat.

Fundamentally my objection to this is that it would radically increase the costs of Medicaid. This would have to be funded somehow, somewhere. It would also move toward a system of nationalizing healthcare and that nationalized healthcare plan's name would be Medicaid. But the important part is how are we going to pay for that? Medicaid benefit plans are already being cut or eligibility restricted at the state level in order to limit costs. Can we afford to expand it?
Second, the Kerry plan would provide "reinsurance" for private health plans, picking up 75 percent of the medical bills exceeding $50,000 a year. Although catastrophic medical expenses strike only a tiny fraction of Americans each year, they account for a sizeable fraction of health care costs.

By relieving insurance companies and H.M.O.'s of this risk, the government would drive down premiums by 10 percent or more.

This is a truly good idea. Our society tries to protect its members from the consequences of random misfortune; that's why we aid the victims of hurricanes, earthquakes and terrorist attacks. Catastrophic health expenses, which can easily drive a family into bankruptcy, fall into the same category. Yet private insurers try hard, and often successfully, to avoid covering such expenses. (That's not a moral condemnation; they are, after all, in business.)

All this does is pass the buck: in the end, the Americans who can't afford to pay huge medical bills usually get treatment anyway, through a mixture of private and public charity. But this happens only after treatments are delayed, families are driven into bankruptcy and insurers spend billions trying not to provide care.

By directly assuming much of the risk of catastrophic illness, the government can avoid all of this waste, and it can eliminate a lot of suffering while actually reducing the amount that the nation spends on health care.

Well the oldman has come out against this idea before, calling it a hidden government subsidy. If things work as Krugman writes about it, I would whole heartedly support such a program. However the question is will healtcare providers really extend coverage to people with pre-existing conditions if the government offers to pick up the tab on 75% of costs above a certain ceiling? Or will it take the money and run? I believe the latter, and Krugman believes the former.

We already have significant problems with Medicare and Medicaid fraud.
The FBI conservatively estimates that 10 cents of each dollar spent on Medicaid each year is lost to fraud and abuse. In fiscal year 1994, the U.S. spent $107 billion on Medicaid, so that means more than $10 billion was lost to fraud and deceit.

I think without some serious thinking and structuring of that policy, that HMO's and Healthcare organizations would just rip off the government and taxpayer. As proposed it practically cries out sucker to those prone to corporate looting of the public domain. This is the problem with liberal ideas. They're usually good. It's just that they often don't put as much effort into what it would take to make them work.


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