
White House Office of Management and Budget Director Peter Orszag said today the penalty for not having health insurance will be plenty motivational for the uninsured to purchase coverage.
Speaking with reporters at an event sponsored by Health Affairs at the National Press Club, Orszag dismissed critics who say the fine that essentially mandates coverage will work because he believes it is more of an issue of being socially acceptable.
As an example, Orszag cited seatbelt use, saying that there is more adherence to seatbelt laws than speeding laws because of social norms.
Orszag argued that if someone got in a car and driver was a bit over the speed limit they wouldn't complain, but a person would say something if the driver weren't wearing a seatbelt.
He said reporters should remember the implementation of mandating coverage is more important than the amount of the penalty for not having it.
He said he disagrees with the "econ 101 approach to life" and cited the $750 fine in Massachusetts where coverage had a more "dramatic" increase than expected.
Orszag said advertising at Fenway Park was more important than the fine since it "created a social norm" and "everyone knew about it and you were expected to have insurance."
Some lawmakers in the House have argued for a stiffer fine. As a candidate, President Obama argued the fine wasn't the best approach since most people wanted health care coverage.
As we reported earlier, Orszag indicated talks about various public option compromises were still ongoing.
Orszag said it would have been easier to push for a deficit neutral bill "that would perpetuate a system where [there is] inadequate attention to quality."
He said the cost savings in the Senate measure in particular are real and dismissed critics who say they aren't enough.
"The bottom line is the bill that is currently on the senate floor contains more cost containment and deliver system reforms ... than any bill that has ever been on the Senate floor. Period," he said.
Orszag was asked several times about the public option, and even why single-payer wasn't considered from the get-go.
He said people aren't paying attention to the bigger picture: "There are more than 30 million who will have health insurance because of this legislation."
Reporters pressed Orszag on the House bill, and he stressed the Senate measure that's currently being debated.
"Let's let this play out," he said when asked about the commission to evaluate Medicare cuts.
Orszag did not want to get into specifics as to which elements the administration most prefers in the health care plans. Instead, he focused on broad principles and history.
"We stand on the verge of a dramatic accomplishment," Orszag said, adding later, "We are on the verge of a substantial accomplishment" and "we are further along in getting comprehensive health reform than we have ever been before."
rscherm
December 2, 2009 12:15 PM
So the big problem here that needs fixing is those uninsured need to buy more insurance company products.
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Indie Pro
December 2, 2009 12:20 PM
I see no difference between seatbelt laws and mandating people buy insurance products.
History is being made, and that is the most important thing afterall.
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Jim Pharo
December 2, 2009 12:30 PM
I see another big difference: seat belt wearing is free, while health insurance costs families making more than $88k/year $12,000 after-tax dollars. Seems like a big difference.
If health insurance were priced so that it was affordable -- say, something like a car payment every month -- I think there'd be plenty of social "norm." But as long as it's something like a house payment -- $1200-$1500 a month, plus dental, plus eyecare/glasses -- no sale.
It's not like it's a mystery as to where all the premium money is going. If we wanted to recapture part of it in the form of lower premiums, we could do it tomorrow. It's just that we're so afraid to do it, having bought into the rich guys' story about not being able to get needed care unless they are very, very rich.
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Economides
December 2, 2009 2:08 PM in reply to Jim Pharo
Where is all the premium money going?
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NitPicker1
December 2, 2009 12:43 PM
It costs nothing to buckle a seat belt.
So while I appreciate the "social norm" argument, it seems to me that a comparison to the mandate to purchase auto insurance would be more apt - except, of course, that so many drivers do in fact choose to let their insurance lapse and risk the fine. There's no social cost for violating that law, unless you happen to have a passenger in your car when you get caught.
While any three year old can tell if everyone in the car is buckled up (and can make a big deal if grandma "forgets"), who goes around checking their friends' wallets for health insurance cards?
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Economides
December 2, 2009 2:02 PM in reply to NitPicker1
So you are unconvinced that a relatively low fine seemed to be adequate in MA? Or are you arguing that a bigger fine is needed to ensure compliance?
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NitPicker1
December 2, 2009 2:51 PM in reply to Economides
I'm arguing neither - I'm simply pointing out that this seatbelt analogy doesn't make a lot of sense to me.
How great can "the power social norms" be without some sort of visible indication of whether or not individuals are complying with those social norms?
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Economides
December 2, 2009 3:00 PM in reply to NitPicker1
So you are saying you personally haven't read or don't understand the evidence for the power of social norms relative to financial incentives? For certain, you are ignoring Orzag's example of compliance in Massachusetts.
It's OK to be skeptical, but it is not OK to be an uninformed skeptic. Orzag isn't just making analogies up and pretending that is sufficient. There is a whole field of people studying what they call behavioral economics which is perhaps more properly a form of psychology than economics.
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NitPicker1
December 2, 2009 4:13 PM in reply to Economides
I don't get where you think I'm saying anything of the kind. I have no problem with the validity of the behavioral economics.
My skepticism is with the persuasiveness of making an analogy between using seatbelts, where compliance is obvious, and the cost is zero, and buying health insurance, which is expensive and where compliance (or not) is invisible to other individuals.
You pointed out elsewhere in this thread:
That kid in the back seat can see whether or not you are wearing your seatbelt. Now I don't know about the folks in Massachusetts, but here in Texas, those of us lucky enough to have health insurance cards tend to keep them in our wallets, not pasted to our foreheads.
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Economides
December 2, 2009 4:40 PM in reply to NitPicker1
I think the mistake you are making is that you think the compliance based on social norms works in the same ways as the punishment of a potential fine. You are stuck on the idea that a person can't get caught if no one sees them.
The norm makes it the right thing to do, the fine works on the fear of being caught. My kid in the backseat isn't punishing me, but I sure as heck want him to do the right thing and I want to model that for him. And oh yeah, I 'll wear my belt even when he's not in the car because if I get in an accident I don't want him to grow up without a father. Y
So in Massachusetts it is a fact that despite the relatively low fine that compliance is pretty high. The behaviorists are saying that is (in some large part) because having coverage is seen as the right thing to do and we don't have to punish people to get them there. Maybe people think, if I don;t get insurance then I am much more likely to impose costs on my neighbors and that is a bad thing. I'm not totally sure. But it is clear that all sorts of social norms are powerful influences on behavior whether they are observed or not. Do you really need more examples to understand that?
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JillSH
December 2, 2009 1:03 PM
I think there's a point to be made that people at any income level want the security of health care coverage. If it's an amount they (or their employer) could afford, they'd get it.
The single most unasked/unanswered question in this whole debate is: What should any one person, family, or small business pay for health care as a percentage of income?
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westwave
December 2, 2009 1:57 PM
Adding 30 million under low-benefits coverage is not remotely similar to considering Single-payer. The "Big Picture" must be system cost reforms with meaningful universal coverage and not gilded tiers of "gold-silver-bronze" coverage holes that leave some families fronting 40% of costs.
A "big picture" maybe -- but also a heavily subsidized sad ending lacking administrative tools (like single-payer) to leverage cost reforms.
rand dawson Oregon
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Economides
December 2, 2009 2:01 PM
He is not saying that mandating seat belt use is like mandating health insurance.
The comparison Orzag is making is between two possible means by which people will be *motivated* to by insurance: (1) a fine (also known as the Econ 101 approach) and (2) the power of social norms (also known as the behavior economics approach or more possible the Pysch 101 approach).
In other words, social conformity is a powerful motivator and you don't have to rely so much on penalties to get people to do something (and therefore the penalties do not have to be higher).
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Indie Pro
December 2, 2009 2:54 PM in reply to Economides
there is a fine behind the seatbelt laws.
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Indie Pro
December 2, 2009 3:07 PM in reply to Indie Pro
there are also campaigns of "Click It or Ticket" on television and billboards.
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Economides
December 2, 2009 3:09 PM in reply to Indie Pro
But which is more important, the possibility that a cop catches you, or your kid in the back seat reminding you that you are a total hypocrite if you don't put on your belt?
I am not sure why people are trying to be so obtuse here. In many other contexts the crowd here is perfectly willing to argue that the market is not always right. Orzag is making a similar argument based on the insights of behavioral economics: sometimes there are more powerful forces than prices. He is arguing that we don;t need large fines to motivate compliance. If you disagree, just say so.
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Indie Pro
December 2, 2009 3:41 PM in reply to Economides
I'm saying it is a stupid argument.
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Economides
December 2, 2009 3:54 PM in reply to Indie Pro
That's a cop out. There is going to be a mandate and there is going to be mechanism to get compliance as close to 100% as possible. The policy questions are how large do subsides have to be to make it affordable, and how large do fines have to be to stop people from not applying for insurance--which cannot be turned down- until they are sick. Addressing both requires making assumptions about behavior, about responses to policy to laws. Sorry you find this stupid, but this is what grown-ups have to do.
Do you think somehow if your preferred reform plan were on the table that issues similar to this would simply disappear?
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Indie Pro
December 2, 2009 4:59 PM in reply to Economides
you say he's not making the comparison, but he is, and it is a stupid argument.
Sorry you find this stupid, but this is what grown-ups have to do.
and screw you, you condescending jackass.
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condew
December 2, 2009 6:11 PM in reply to Economides
The "social norm" argument is BS. I'd liken it to Warren Buffet's use of underwear sales as an indicator of economic stress. Just like underwear, insurance is not visible; so just like not replacing your underwear, not being covered is a way to save a little money with no immediate social cost.
Unless we issue a trendy gold badge with every policy, I don't see social pressure to get covered.
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Chris Weagel
December 2, 2009 2:31 PM
>>Orszag was asked several times about the public option, and even why single-payer wasn't considered from the get-go.
It wasn't considered because the entire effort is horseshit. This idiotic reasoning about social norms is horseshit. They're going to force people to buy products from a despicable horseshit "industry" that shouldn't exist in the first place. The fact that Insurance is considered an Industry despite producing nothing of value tells you everything you need to know about late-empire America. The only thing that would deliver true reform would be the creation of single-payer system and the abolition of private health insurance companies.
The Obama administration is just another cog in the great steamroller.
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ottis
December 2, 2009 3:01 PM in reply to Chris Weagel
You nailed it friend.
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Economides
December 2, 2009 3:17 PM in reply to Chris Weagel
You have no idea what you are talking about. The government already pays for a greater percentage of health care than do private insurers (and a large fraction of the newly insured under these bills would be covered by the public not private systems of MEdicaid and SCHIP) and costs are growing unsustainably fast in both systems.
In other words, if you really understood the problem then you'd know that the source of rapid cost growth in health care is not what insurers are charging but what the actual health care providers are charging us (or what we as taxpayers and patients and employees are willing to pay for it).
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Tanjaoui
December 2, 2009 3:36 PM in reply to Economides
"In other words, if you really understood the problem then you'd know that the source of rapid cost growth in health care is not what insurers are charging but what the actual health care providers are charging us (or what we as taxpayers and patients and employees are willing to pay for it)."
Which is why every other developed country has a single negotiator to work out prices with providers. We have hundreds of middlemen negotiating deals in secret with providers. It's nuts. And Orzag (and this administration)are fiddling around the edges of a broken system. How can they justify not overturning McCarran-Ferguson? How can they justify not allowing states that pass single payer legislation an ERISA waiver? This isn't change I can believe in, this is a former junior Senator and his handlers not wanting to rock the boat.
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Economides
December 2, 2009 4:27 PM
The president never campaigned on single payer, so please do pretend like that's what anyone was expecting.
The solution to our coverage problem is providing everyone with coverage. The solution to our cost problem is reducing the cost, or more likely the cost growth to sustainable levels.
I would argue this legislation makes a big advance on the coverage issue, primarily by Federal regulation of insurance the McCarran-Ferguson act notwithstanding. It would be much much better to have one single insurance exchange for everyone in the country under federal regulation. Maybe if progressives would stop hyperventilating over the "public option" these points could have been made more forcefully in the debate. As you well know it is more important to have a single negotiator than a single payer. Again the PO debate has distracted us from making that important argument.
I don't happen to think price controls is the answer to containing costs. I think the issue is primarily with over-utilization and the massive incentives (and social pressure) to pay for more care, not the right care. We know for a fact that places like Intermountain HealthCare know how to do this right. Unfortunately they are fighting against our current single payer system that has asinine payment rules. The PO and single payer crowd have never focused on how to pay for health care correctly, and so the junior senator and his handlers, who understand this inside and out have no one out there in the public watching their back. And that just the way the doctors want it.
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Tanjaoui
December 2, 2009 5:02 PM
There's enormous waste in claim filing, billing, disputing claims, etc. That's mostly due to the multitude of negotiators/insurers. And the bigger the pool, the greater your bargaining power.
Barak 'Don't rock the boat' Obama and his handlers are afraid to take the medical establishment on, full stop. If he were interested in real reform, he would've called on Marcia Angell, Uwe Reinhardt or Kip Sullivan, not Tom (Alston & Bird) Daschle to frame the debate.
Over-utilization is a problem. So is fee for service.
What we're getting as a nation is a shitty version of what they have in Massachusetts, where health care costs are higher than anywhere else in the world.
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Indie Pro
December 2, 2009 5:07 PM in reply to Tanjaoui
hear, hear
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condew
December 2, 2009 6:08 PM
The biggest savings was in substituting the ~3% overhead of a Medicare-for-all approach for the ~30% overhead of insurance companies. That savings would pay to cover all the uninsured and reduce premiums for everybody else; but that's single-payer, and the proponents of single-payer were never given a chance to make their case.
I thought the exchange+public option approach was to save the jobs of people who work for the insurance companies; but we've lost more jobs in a month than the entire insurance industry employs. Many of the insurance workers would have the skills that a single-payer program would immediately hire. Many of the other jobs have been lost because the cost of insurance in the U.S. makes us less competative in world markets.
The more I look at the bloated bill being created by Congress, the more I'd prefer it was abandoned to just lower the age on Medicare about 5 years every year until the top age for SCHIP met the lowest age for Medicare.
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