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Checking The Price Tag On Clintoncare

Hillary Clinton will make you buy health insurance you can't afford! You may recall hearing arguments along these lines, from Barack Obama, among others. And, although the polling on this question is a little hard to read, I know from inteviews that a lot of people find that argument compelling.

But, as readers of this space know, I've always thought the argument suspect. Putting aside the fact that Clinton, a longtime champion of making health care affordable to the poor and middle class, would never sign onto such a scheme, her proposal also called for creating a public insurance plan into which anybody could enroll.

This idea, which comes from Yale political scientist/occasional TNR contributor Jacob Hacker and has been championed by the Campaign for America's Future, is an implicit guarantee of affordability, since the government would have direct control of the premium pricing. Once government set the price for its product, private insurers would have to offer competitive rates or simply get out of the business (an option, to be sure, that might not be so bad).*

Still, that obviously wasn't convincing enough--which is why today's health care story from the New York Times is important. In it, Clinton fleshes out the details of her proposal for a "premium cap." Clinton had previously stated that, under her plan, she would make sure nobody had to pay more than a certain percentage of his or her income on insurance premiums. But she had never speicfied what that percentage might be--until now. In the interview, with the Times' Kevin Sack, she indicated she proposed to set the cap between 5 and 10 percent (depending, among other things, on how the exact funding worked out). 

The statement raises two immediate questions. First, how would this impact the typical family? As the article notes, insurance industry figures suggest that the average family policy costs about $5,800--or roughly 10 percent of median income (which is around $58,000).  Of course, many less affluent Americans would actually end up paying even less, because they would benefit from subsidies. (The poor, in fact, would basically pay nothing.)

The other question is whether Clinton's plan could actually finance such benefits. I haven't had time to do my own reporting on this, but the Times quotes MIT's Jonathan Gruber--a reputable source on these things--is quoted as saying 10 percent sounds realistic, given budgetary considerations, but 5 percent might not be.

*Update: Hmmmm. Via Don McCane of Physicians for a National Health Plan, I just saw the actual transcript of Clinton's interview. And one word in there troubles me: "bare-bones." In the interview, she refers to her public plan alternative as being "bare-bones," as Medicare is. Now, Medicare actually covers quite a lot of services--but it also has a lot of cost-sharing. Is that what Clinton has in mind for her public plan? If not, then what? I'm going to spend some time looking into this, because it's an important question. If the public plan is too skimpy, it won't be a viable alternative to the private plans. And while the newly detailed premium caps should still protect people from having to pay too much for their insurance premiums, it makes me wonder whether her plan is as much like the Hacker plan as I've been supposing.

**Update 2. OK, I need more sleep. The average cost of a family policy (i.e., for the whole family) in the U.S. is most definitely not $5,800.  It's around twice that, according to the Kaiser Family Foundation, at around $12,000. But the limits Clinton's proposing are as I described. (The Times for some reason used the cost of a "family policy bought by an individual.") Thanks to reader "tnmats" for reminding me.

***Update 3: Yes, my third and -- hopefully -- last clarification. A friend writes to clarify the insurance cost issue. That $5,800, he says, is the average cost of somebody buying family plan in the non-group market. (See Table 2 on page 7 of this report from America's Health Insurance Plans.) Those plans tend to be cheaper than employer plans, in large part because they frequently have skimpy benefits and are subject to medical underwriting. In other words, the companies try to avoid really sick people; without those people in the pool, the insurance gets cheaper. If a plan like Clinton's were to pass, all plans would have to provide a relatively high level of benefits--and insure everybody, not just the healthy. 

Jonathan Cohn