Shameless self promotion

As of the time of this post's publication, if you type "explain health care reform" on Google, WAG is the number one hit.

The question is, should I view this as cool or terrifying?

On the one hand, kind of neat to know that what I'm writing is actually having an impact.

On the other hand, the first thing many people will read for information on health care reform will be written by "guy on the Internet." An example of how the Internet era is breaking down Experts' mediation between raw facts and the public's consciousness - Google's algorithms don't account for author qualifications.

At least, unlike some sites, this guy on the Internet has critical thinking skills, so even if I'm wrong on some things, you can trust the analysis to be well thought out.

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Companies agree: "health care reform won't cost us jack"

Conservative commentators have been crowing over AT&T's report that health care reform has caused it to take a $1 billion accounting charge. House Majority Leader John Boehner called it another example of "job killing tax increases."

Actual business leaders disagree.

Noted bastion of socialism CFO.com explains that "Health care hit is minimal":

AT&T, Caterpillar, and Deere are among the companies that are reporting large first-quarter accounting charges because of the repeal of a tax deduction by the new health-care law. But the charges will have little effect on company valuations or cash flow, analysts say.

The Patient Protection and Affordable Care Act strips companies of a 28% tax deduction related to retiree drug benefits. The deduction is actually the tax-free treatment of a government subsidy that companies receive for providing retiree drug benefits equivalent to Medicare Part D, says tax expert Robert Willens, who heads a consultancy in New York. Since the deduction can't be claimed until the benefits are paid out, companies make the adjustment by writing down the deferred tax asset balances related to the subsidy, notes Willens.

Under the new law, the subsidy is no longer tax-free and must be included in a company's taxable-income calculation. The law eliminates the "double dipping" possibilities that were part of the tax code since 2003, says Willens. Under the original Medicare prescription-drug law, companies received deductions for making payments into retiree drug plans, as well as getting tax-free treatment for the subsidies they received for paying into the plans.

Last week AT&T announced it plans to take a $1 billion noncash charge related to the new law in the first quarter. Also announcing first-quarter charges were Caterpillar ($100 million), Deere ($150 million), and AK Steel ($31 million). Steelcase and DTE Energy also said they would be subject to similar accounting charges, although they have not yet specified the amounts.

A study of S&P 500 companies by Credit Suisse shows that the new law will cause companies to reduce their deferred tax assets by an aggregate $4.5 billion, with 45 of the companies possibly seeing a charge that is more than 10% of their consensus first-quarter earnings estimates. However, investors should not "overreact" to the potential earnings hit, cautions Credit Suisse's David Zion, because the charge will have very little effect on company valuations.

Indeed, the "eye-popping" numbers being reported are not a good indication of the costs being incurred in the first quarter, notes study co-author Christopher Cornett. That's because a quirk in the accounting rules requires companies to recognize the present value today of future cash costs going out as far as the drug benefits are offered.

...

The Credit Suisse report also points out that corporate cash flows from operations won't suffer much from the loss of the tax deduction, either. Between 2013 and 2019, it's likely that 20 companies will pay more than $5 million per year, on average, of additional taxes as a result of the new law. However, the tax hit amounts to less than 1% of the trailing five-year average cash flow from operations for each of the companies.

This argument is strikingly similar to ones made by liberal commentators.

It's becoming clear that although the GOP claims to be the party of markets and of business, the party's ideology is increasingly disconnected from what's actually good for business. Today's business leaders have recognized that sensible regulation is a prerequisite for the operation of their companies, and politicians have been slow to catch up. 20 years from now, will the GOP have updated its policy positions to account for the new realities of business, or will a new generation of businesspeople abandon the party that has championed their interests for the past century?

How to explain the health care reform bill to your family and friends very very simply

Health care reform has passed. Now it's time to explain what it does.

Why is this so important? Because the public will like the bill once they find out what's in it. Republicans know it, and polling bears it out. It's therefore our job to get the word out to our family and friends - and in a way that's easy to understand.

So how do you explain a 2,000+ page bill in under two minutes? Easy.

First, ask the family member or friend if they think insurance companies should be able to revoke people's coverage when they get sick, or deny people coverage because they've got a preexisting condition.

They'll say "no." (If they say "yes," well, you're never going to persuade them).

Then you explain the bill like this:

"Well that's good, because that's the first thing the health care bill does, is ban those outrageous insurance company practices. In fact, there are really just five basic things the health care bill does:

"First, it bans insurance companies from revoking your coverage when you get sick, or denying you coverage because of preexisting conditions.

"Second, with those regulations in place, you've gotta make sure that people don't just wait around till they get sick before buying insurance - otherwise, insurance companies would all go out of business since only sick people would buy insurance. So the bill requires all Americans to buy health insurance - that's the 'individual mandate.'

"Third, if everyone has to buy insurance, you've gotta make sure people can actually afford it. So the bill provides subsidies to help low and middle income people afford insurance.

"Fourth, if the government is paying for people's insurance, you've gotta keep the insurance companies honest and force them to compete. And the bill does this by establishing 'exchanges' where you can shop around for insurance policies online. Insurance companies must post prices and customer satisfaction data to help you compare policies. Basically, the exchanges would be like the Target of health insurance. (See here for more info on the exchanges)

"Last, you've of course gotta pay for all this. And the bill does this with fees on medical device makers and other corporations that benefit from the bill, taxes on the most expensive "Cadillac" insurance plans, and reductions in Medicare fraud and waste. And the Congressional Budget Office actually found that this would reduce the deficit by over $100 billion over the next ten years.

"So really, the bill starts by preventing outrageous insurance company practices, and the rest is just necessary to make that first part work. It's a pretty moderate, common sense bill."

Framed this way, it's almost impossible to reject the bill. If you reject any piece of this, it means you're implicitly supporting insurance companies' ability to rescind coverage and deny on the basis of preexisting conditions, or you're supporting a system that will bankrupt the insurance industry and the federal government.

So again, the summary is:

1. Insurance regulation: Bans insurance companies from revoking or denying coverage because you get sick.
2. Individual mandate: Requires everyone to buy health insurance in order to prevent people from waiting till they get sick to buy insurance
3. Subsidies: Provides subsidies to make sure everyone can afford to buy insurance
4. Online exchanges: Establishes online exchanges where you can shop for insurance coverage, in order to promote competition and keep companies honest
5. Paying for the bill: Pays for the subsidies with a combination of spending cuts and taxes on companies that benefit from reform

If you're really pressed for time, you can explain it as The Economist does in three sentences:

Under Barack Obama’s plan, which is bogged down in Congress [just passed], the private-insurance market would expand dramatically—but so would regulation. The proposal would require all Americans to buy cover. To make it affordable, the government would regulate products and prices and offer subsidies for the poor.

For a slightly more detailed explanation, see my post "The simplest explanation of health care reform you will ever read." And if you're really wanting more nitty gritty, go read Ezra Klein's blog.

Questions? Suggestions? Leave them in the comments.

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Republican staffer says public will probably like health care reform once they find out what's in it

I ran into a Republican Hill staffer on my way to work today and asked him about last night’s health care vote. His answer was a little surprising:

I gotta hand it to Obama getting it done. It's somewhat of a political gamble with some of the provisions not kicking in until 2012. Democrats will lose seats in November, but when the bill starts kicking in and people find out what the bill does—if it works—Obama will have put himself in a good situation.

I’m torn. I don’t like the cost of the bill, but I also can't stomach people getting turned away from health insurance. That's just wrong.

Slowly the truth starts to come out. Here's what David Axelrod has to say:

“This only worked well for the Republican Party if it failed to pass,” David Axelrod, one of the president’s closest political advisers, said at the White House as he watched the vote count for the final bill reach 219 in favor. “They wanted to run against a caricature of it rather than the real bill. Now let them tell a child with a pre-existing condition, ‘We don’t think you should be covered.’”

Health care reform in three sentences

The Economist explains President Obama's health insurance plan in three sentences:

Under Barack Obama’s plan, which is bogged down in Congress, the private-insurance market would expand dramatically—but so would regulation. The proposal would require all Americans to buy cover. To make it affordable, the government would regulate products and prices and offer subsidies for the poor.

The above quote is from a special report in last week's Economist on health insurance around the world, which situates the President's reform proposals in the context of how other countries treat health insurance. It's the shortest explanation of the reform bill I've yet seen (though I think my own is still the best).

The article also contained this bombshell graphic, which shows that the US health care system is hardly free of the hand of government, even relative to other countries:

Seen in this light, and explained so succinctly, the President's plan sounds like the moderate, common sense approach that it is. In contrast with its reporting on US politics, the Economist's international and business reporting is still quite good.

Since the Economist is now behind a pay wall, here's the full context of the quote:

In countries where state-financed health care is not available to all, some governments are worried that too few of their citizens have sufficient cover. They want private insurance to be expanded to cover everyone. The most prominent effort is under way in America, where about 47m people lack health insurance of any kind. Under Barack Obama’s plan, which is bogged down in Congress, the private-insurance market would expand dramatically—but so would regulation. The proposal would require all Americans to buy cover. To make it affordable, the government would regulate products and prices and offer subsidies for the poor.

This effort is similar to reforms undertaken over the past decade in the Netherlands and Switzerland. The Swiss were keen to expand access to all, and to contain costs; the Dutch saw private insurance as a boon both to consumer choice and to innovation in the delivery of health care. To ensure equitable access, both countries forbid private insurers from discriminating against applicants because they are in poor health or at high risk of falling ill. This practice, known as “lemon dropping”, continues in the American market for individual health coverage.

Inevitably, however, some insurers (say, those offering cheap, bare-bones packages) will attract younger, fitter and cheaper customers while others (with a reputation for quality or gold-plated coverage for chronic diseases) will attract the old, the sick and the costly. In the Netherlands, Switzerland and Germany, which copied some earlier Swiss reforms, regulations force companies that make “excess” profits in this way to hand over that money to those who end up with costly patients. Uwe Reinhardt, a health economist at Princeton University, jokes that Germany has the illusion of 200 private health insurers but because of risk adjustment it in fact has just one. The Dutch are now shifting from risk-smoothing after the fact to doing it even before the fiscal year begins.

Such a tightly regulated expansion of private insurance—in effect, turning health insurance into a utility—can expand coverage. European countries that followed this path now enjoy near-universal access. So does the American state of Massachusetts, which has implemented similar reforms. If Congress eventually accepts Mr Obama’s proposals, the rest of America will also see coverage increase markedly.

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