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How Bad is Doughnut Insurance?

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"How Bad is Doughnut Insurance?"

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Jon Gruber’s contribution to the how should we improve the health care bill says we ought to make the minimum coverage package more generous:

If I could add one thing to the Senate bill in conference committee it would be an improvement in the actuarial values for those individuals and families with incomes in the range of 150% to 300% of the poverty line. The Senate bill provides for relatively limited benefits for those low income individuals — much lower than the House. Given that the Senate bill covers preventive care, and caps out of pocket expenses, this is essentially a “doughnut hole” issue — the Senate bill provides very little coverage (if any) between the preventive care and the out of pocket maximum. Essentially we are putting fairly low income individuals into high deductible plans. Moving towards the House on these actuarial values (even if we don’t get all the way there) would greatly improve the insurance coverage we provide to low income populations.

I have mixed feelings about this. One thing this bill does is transfer resources, on net, from high income people to lower income people. And additional net transfers of resources from high income people to people in the 150%-300% percent of FPL range strikes me as desirable. But I can’t think of any obvious reason why those resources should specifically take the form of non-preventive, non-catastrophic health insurance coverage as opposed to more generous Pell Grants or lower payroll taxes or whatever.

In other words, there’s a general case for having the rich subsidize the poor. And there’s also a specific case for public provision of certain kinds of goods like schools. I think both preventive health care and catastrophic health care fit the specific case. Other health insurance only fits the general case.

But of course my argument hinges in part on how generous bill’s definition of “preventive” is. So how generous is it? Well, since I’m getting this information from the unreliable method of trying to actually read the bill rather than have an expert summarize it for me, I’ll quote the legislative language. I believe the controlling provision is this one:

COORDINATION WITH PREVENTIVE LIMITS.—Nothing in this paragraph shall be construed to allow a plan to have a deductible under the plan apply to benefits described in section 2713 of the Public Health Service Act.

That’s the legislative language that gets glossed as “no cost-sharing for preventive services.” So what does Section 2713 of the Public Health Service Act say? Well, the bill amends it to say:

(a) IN GENERAL.—A group health plan and a health 8 insurance issuer offering group or individual health insurance coverage shall provide coverage for and shall not impose any cost sharing requirements for—

(1) evidence-based items or services that have in effect a rating of ‘A’ or ‘B’ in the current recommendations of the United States Preventive Services Task Force;

(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved; and

(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.

So if these various panels do their jobs right, then I’m not super-concerned about this issue. I wouldn’t have a problem with doing what Gruber wants, but I wouldn’t freak out about it either. The more important issue, I think, is getting the preventive services stuff implemented correctly.

In the long run, it seems to me that insofar as the government is going to make a categorical requirement for insurance companies to provide a government-specified list of services that we might as well cut out the middleman and have the government directly provide coverage for this stuff. The way the bill lays it out seems to me to generate extra paperwork for no real reason.

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