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  February 8, 2017

Cruz's Plan to End State Regulation of Health Insurers Would Nationalize Worst Market Practices

Responding to the Sanders-Cruz debate, CEPR's Dean Baker says the Republican's plan would deprive sick people of their ability to afford healthcare care
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Dean Baker is senior economist at The Center for Economic and Policy Research (CEPR). He is the author of several books including, The United States Since 1980; Social Security: The Phony Crisis (with Mark Weisbrot); and The Benefits of Full Employment (with Jared Bernstein). He appears frequently on TV and radio programs, including CNN, CBS News, PBS NewsHour, and National Public Radio.


DHARNA NOOR: Welcome to The Real News Network. I'm Dharna Noor, joining you from Baltimore.

Tuesday night, Senator Bernie Sanders and Senator Ted Cruz faced off in a CNN debate on the merits of the Affordable Care Act, also known as Obamacare. The nearly two-hour debate was perhaps one of the most comprehensive discussions about Obamacare on a major television channel. The senators covered issues such as problems small businesses face under the law, rising insurance premiums and deductibles, the power of the pharmaceutical industry itself, healthcare alternatives to Obamacare and whether healthcare is a human right.

Let's take a look at a brief CNN summary of the debate.

MAN: Insurance company profits have doubled under Obamacare. That was the result...

MAN: Senator...

MAN: ...this thing isn't working.

MAN: Senator, senator, sen...

BERNIE SANDERS: You know, here I find myself in agreement in agreement with Ted. He's right. Let's work together on a Medicare for all, single-payer program. So we're finally going to get insurance companies, private insurance companies, out of our lives.

TED CRUZ: When government takes over healthcare, every example on earth, the result is rationing and waiting periods and you, the citizens, being told no, you can't have the healthcare you want and deserve.

BERNIE SANDERS: And, in America, we do rationing in a different way, Ted. The way we do rationing is if you are very rich you can get the best healthcare in the world I believe, but if you are working class, you are going to be having a very difficult time affording the outrageous costs.

TED CRUZ: So maybe you can could agree on a commonsense reform of allowing Laronda(?) to purchase health insurance in any of the 50 states. That creates a 50-state national marketplace, it drives down costs, it increases choices...

BERNIE SANDERS: Ted... let me ask you a question.


BERNIE SANDERS: Is every American entitled – and I underline that word – to healthcare as a right?

TED CRUZ: So, what is a right? Is access to healthcare. What is a right is choosing your own doctor.

BERNIE SANDERS: Access for what? You want to buy... one of Donald Trump's mansions? You have access to do that, as well. Access doesn't mean a damn thing.

DHARNA NOOR: Well, now joining us to explore some of the issues that were raised, and some that were not raised, in this debate is Dean Baker. Dean is the co-director of the Center for Economic and Policy Research in Washington, D.C. His most recent book is Rigged: How Globalization and the Rules of Modern Economy were Structured to make the Rich Richer. Thanks so much for joining us today, Dean.

DEAN BAKER: Thanks for having me on.

DHARNA NOOR: As we just saw in the beginning of the debate, Sanders said that a single-payer system would cut the cost of healthcare premiums, and Senator Ted Cruz said that such a system would be prohibitively expensive. He said it would cost actually 2.5 to 3 trillion dollars per year. Sanders never actually responded to this claim. What's your response?

DEAN BAKER: Well, single-payer systems do cost less. I mean, we can look other countries, Canada is in many ways seen as a model. I believe Senator Sanders actually looks to Canada as a model, and their healthcare costs are about 40% lower per person than they are in the United States. There are others you could look to, as well. You could look to countries like Sweden, the United Kingdom, Denmark, a number of other countries have single-payer-type systems. You could also look at our own Medicare system and the administrative costs of Medicare are considerably lower than private insurers, so the administrative cost of Medicare are less than 2% as compared to on the order of 15% for private insurers. So you could certainly save a lot of money with the universal Medicare-type system.

Now a problem – and I gather this is what Senator Cruz was alluding to – a problem is that it means everything is run through the government in the sense that you have to raise the money through the governments, so the money that people are now paying to private insurers would instead go to the government. In principle, that's doable, but that is a lift. It's a big lift, so he's certainly not wrong in pointing that out. But you certainly could save a lot of money based on a lot of evidence we've seen from around the world.

DHARNA NOOR: Senator Ted Cruz also said that a single-payer system would make wait times longer. This is something that we hear often from Republicans who are arguing against the single-payer system. What's your response to this? Will wait times be longer if we have a single payer?

DEAN BAKER: Well, there's been, again, considerable analysis of this, and the answer is for the most part no. Countries like Canada, other countries that have single-payer-type systems, on average they don't have longer waits than the United States. That doesn't mean in all cases they don't have longer waits. Certainly in some instances there'll be longer waits in those countries. Of course, in some instances there are longer waits in the US. There's been a big propaganda for it. I remember when Obamacare was being debated back in 2009-2010, the Republicans were circulating a story about this young woman who had brain cancer and was on some wait list for supposedly two years and couldn't get treated in Canada. She eventually had to come to the United States. It was basically a fabrication. But you get things like that. So, you know, there'll be bad incidents in any healthcare system. Unfortunately, that's the world. But in terms of average wait times, they're very comparable to the US, again, better in some cases, worse in others, and the average is very comparable.

DHARNA NOOR: Sanders also advocated a bit later in the debate for a public insurance option, and you, like Sanders, have advocated for this option as a way of increasing competition and thereby lowering insurance premiums. Cruz and Trump agree with the idea that there should be more competition, but their solution is to create a national insurance market instead of regional or state-based ones. So what does all this mean? How would regional markets differ from a national one?

DEAN BAKER: Well, the story that Senator Sanders and I and, for that matter, now, President Obama's been pushing and he had a piece in the last month of his presidency arguing that we should have a public option, you have a lot of areas where you don't have much competition that exchanges and having Medicare, Medicaid, one of those two programs, offer an option, would guarantee people that you had presumably a well-working option that you could turn to and presumably would have lower costs than many of the private insurers. They don't have to pay shareholders dividends. They don't have to have profits, they don't have CEOs that get paid millions of dollars.

So I think that's a very good route to go. Now, we should be clear what the Republicans are talking about, they're making it sound like this big boon to competition. What you would have is a situation where basically states would lose their authority to regulate insurers, and states have very different qualities of regulators, so some states – I believe California, I believe New York – they have reasonably good regulation of their insurers. Other states – I won't pick on any, but you could think of some in your mind that might not have very good regulators – they would be able to regulate an insurer which then could incorporate let's say in Mississippi and then sell insurance in California, sell in New York, sell in Illinois, and the regulators in those states would have no ability to say that, you know, you're doing improper practices. You're not having an adequate network of doctors. You're not paying claims in a timely manner. Things that insurance companies have been known to do.

So even the best regulated markets I think people have many complaints about, basically what you would see as a nationalization of the worst markets.

DHARNA NOOR: Would then a national insurance market in any way help lower premiums?

DEAN BAKER: It's very hard to see what advantage they would expect to get. I mean, what we want to ensure is that you have some amount of competition in each state market, and having a national market can increase is, but there's certainly no guarantee of it. I mean, one of the issues that's come up is we continue to see efforts of insurers, the major insurance companies, to merge, which does reduce competition, so good place to start if we want to ensure that we have competition in these markets is to prevent the mergers of these large insurance companies whittling down the size of the number of actors in the market.

DHARNA NOOR: Another issue that came up during the debate was that the ACA requires insurance companies to cover certain basic things, such as childbirth, even if the person covered does not need it because they're too old. Sanders sort of brushed off the criticism by saying that he thinks that it's wrong, too, but isn't that the point of insurance? To cover people for eventualities whether they need the coverage or not in order to distribute the costs more evenly?

DEAN BAKER: That's exactly the point. We could sit down and go, okay, you know, I'm a man, I'm not going to ever get pregnant. You know, women aren't going to have prostate cancer. We could do that and I could also look back at my family history and say I have a very low risk of certain conditions. Other people could do it with theirs. The whole point of insurance is to create a common pool, understanding that we're going to share the risk. Again, this gets to one of the things that... one aspect that many of the Republican proposals you hear about weeding out high risk people, and this is it's... well, I shouldn't say it's silly, it's cruel. But, you know, look, we could all reduce our insurance if we could find out who's really sick among us, because the reality is most of us are thankfully relatively healthy, which means we have low healthcare bills. So if we could take the 10% of the least health segment of the population, their average bills are $54,000 a year. For the rest of us, the other 90%, the average is $6,000 a year. So if we could just figure out... okay, let's figure out how we can get rid of that 10%, well, we'll all save a lot of money. Of course, those 10% won't get care. So what the Republicans are trying to do is figuring out some clever way where they could throw the expensive 10% out of the pool, tell the rest of us they'll save us money, and then try to ignore the fact that we're basically telling those 10%, well, you're out of luck. You can't afford your insurance, you can't afford your healthcare, too bad for you.

DHARNA NOOR: Further on this, during the debate, Senator Ted Cruz implied that the Republican replacement plan would address issues like pre-existing conditions and coverage under the expansion of Medicaid. His solution here is to increase competition, portability of insurance plans from employer to employer and expand healthcare savings plans. What do you make of these proposals?

DEAN BAKER: Well, the healthcare savings plan is exactly the sort of changing of the pool. So, again, let's say you're relatively healthy first as most people are, and you have relatively low bills. You could say, okay, I'm going to get an insurance policy that has a large deductible, you know, $6,000, maybe $10,000 deductible. I'll put every year $3,000, $4,000, $5,000 into my health savings plan. It's going to be tax-preferred, so I could accumulate money in that, pay no taxes on it. And then if something bad happens to me, you know, I have this insurance that kicks in. Now, people who can count on having five, six, eight thousand a year in bills because they have chronic conditions, a heart condition, a cancer survivor or whatever it might be, they're not going to be able to take advantage of that. They'll be in a different pool, and they're going to have to pay a lot more for their insurance. And, you know, this is kind of like a kid's game, like, really, Senator Cruz? Like, are we idiots? You know, we... this is what he's trying to do. And, yeah, that will save me money. I'm a relatively healthy person, most of us are, we would save money. So the idea is if we could somehow get those less-healthy people in a separate pool and tell them they're on their own, you know, you're gonna have to pay real high premiums, you know, yeah, if the rest of us will save money, but, again, the whole point of having insurance, of having the Affordable Care Act, Obamacare, we're saying, no, we're going to be in the same pool. We want people to be covered when they're sick. That was the point. He wants to go the other way.

DHARNA NOOR: Republicans seem to be determined to get rid of Obamacare, even if they have no clear replacement. Obamacare has benefited the insurance companies. Senator Ted Cruz mentioned that their profits are higher now than ever. So won't insurance companies be opposed to a repeal?

DEAN BAKER: Well, insurance companies put effort into preparing for a new market, so I suspect they will. I think the that idea the insurance companies – I'm not one to speak for the insurance companies – but the idea that they're making out like bandits from this I don’t think is particularly true. I mean, they have left the exchanges in many cases, and I think usually it is because they aren't making money. They don't walk away from money. So it's not as though this has been a big bonanza for them, but on the other hand, you know, the ones that are in the exchanges just spend a lot of money preparing for that, even the ones not in exchanges you have a different market because the exchanges are there, you have rules about how you can't turn down people now because of pre-existing conditions. So they've adjusted to the Obamacare market, the ACA market, so I have to imagine most insurers would not be anxious to see that go away.

DHARNA NOOR: Okay. Thank you so much for joining us today, Dean Baker.

DEAN BAKER: Thanks for having me on.

DHARNA NOOR: And thank you for joining us on The Real News Network.




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