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You are here: Home / Anderson On Health Insurance / Cost Control Constituency and California’s Props 8 and 61

Cost Control Constituency and California’s Props 8 and 61

by David Anderson|  November 13, 20187:16 am| 21 Comments

This post is in: Anderson On Health Insurance, Election 2016, Election 2018

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Healthcare cost control is tough politics. Every dollar saved is a dollar out of someone’s wallet. The benefits are far more diffused in either incrementally lower premiums or slightly lower taxes than the counterfactual projection. Our political system is optimized to emphasized the loud screams of concentrated minorities who are losing something while the vast majority of the potentially and incrementally better off won’t base their vote on a single issue. And when faced with a simple yes or no vote, our socio-political system on healthcare costs are split between insurers, academics and politicians versus hospitals, doctors and nurses or at least the public face will be hospitals, doctors, and nurses talking about the cute kids they heal or how they help Grandma.

California has had two major cost control ballot propositions in the past two cycles. In 2016, Proposition 61 attempted to tie the effective purchase price of drugs bought by the state of California to a price ceiling set by the Veterans Administration. It lost in 2016 by seven points.

In 2018, Proposition 8 would have limited what dialysis clinics could charge their non-governmental payers. It failed miserably.

In both cases, the industry segment that was targeted for cost controls (Pharma and dialysis) dumped an incredible amount of money into the campaigns. In both years, well over $100 million was spent by the industry segment at risk. It worked. It also shows how valuable the current payment system can be. And it previews the scope of fights that could occur if/when proposals to cap provider payments to 120% or 150% of Medicare are advanced.

Loss aversion among well organized, well funded, strategically competent actors is a powerful political force in American politics. It will quite frequently defeat proposals that promise diffuse, incremental and hard to detect broadly distributed benefits. California’s cost ceiling propositions are object lessons to this nostrum.

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21Comments

  1. 1.

    Another Scott

    November 13, 2018 at 7:25 am

    s /listens/lessons

    Excellent points.

    Cheers,
    Scott.

  2. 2.

    Jerry

    November 13, 2018 at 7:35 am

    Can we add this to the blog tagline rotation?

    Loss aversion among well organized, well funded, strategically competent actors is a powerful political force in American politics. It will quite frequently defeat proposals that promise diffuse, incremental and hard to detect broadly distributed benefits.

  3. 3.

    Matt

    November 13, 2018 at 8:46 am

    In both years, well over $100 million was spent by the industry segment at risk. It worked.

    I’d like to congratulate the medical industry for making a vastly better argument for their own outright nationalization than anyone else ever could.

  4. 4.

    Amir Khalid

    November 13, 2018 at 9:22 am

    @Jerry:
    It’s an excellent thought but kind of wordy. It could do with some tightening up

  5. 5.

    Barbara

    November 13, 2018 at 9:41 am

    The losers can easily identify themselves and their losses are huge. The winners are diffused throughout millions of people, whose average “gain” tends to be so small they rarely recognize it as a win.

  6. 6.

    meander

    November 13, 2018 at 10:02 am

    I wonder how much of each loss was related to the nature of California ballot initiatives. 1) These were both written by interest groups — not the legislature, which can put initiatives on the ballot — and therefore could have been sloppy or too narrow. 2) Californians (like me) are becoming more and more cynical about the ballot initiative process, seeing it as a game for narrow interests, with most items containing poison pills in otherwise good ideas. Therefore, we are inclined to vote no on everything, so initiatives need to offer major benefits. 3) Were these too narrow? Dialysis affects many, but still a small fraction of the population.

    I forget how I voted on the drug pricing plan, but I voted no on the dialysis initiative because it was targeting a single sector and the proponents seemed to have some ulterior motives.

    I hope the Dems in the House can pass a bill allowing Medicare to negotiate prescription drug prices — now that’s an area with a huge consistency. Lots of people on one side looking for price relief, and lots of Pharma lobbyists and executives worried about profits.

  7. 7.

    SS

    November 13, 2018 at 10:51 am

    Most of the state’s newspapers recommended a No on 8. This wasn’t an election outcome determined by large advertising buys, it was a flawed proposition.

  8. 8.

    MobiusKlein

    November 13, 2018 at 10:53 am

    @meander: Exactly.
    The rule of thumb in CA for me is “No unless it is something crucial and can only be done by initiative”
    Don’t over read how CA votes on the more general attitude.

  9. 9.

    Roger Moore

    November 13, 2018 at 10:58 am

    @meander:
    A big part of the problem with California ballot initiatives, at least IMO, is that there’s no give and take. One of the most common approaches to countering them is to nitpick them to death. Opponents find minor problems- the kinds of things that would get ironed out in committee if it were being approached as regular legislation- and blow them up into irredeemable flaws. Because the initiative can’t be changed once it’s on the ballot and it can’t be fixed without another ballot measure, even minor problems are really serious. Opponents just have to find a few, and they’re often enough to convince people who are undecided.

  10. 10.

    The Moar You Know

    November 13, 2018 at 11:00 am

    I vote no on all CA initiatives, and have voted as such for decades with very few exceptions. As meander above notes, they almost always tend to be end runs by the GOP around the legislative process (Prop 6 was one of those this cycle) or written entire by special interest groups.

    I voted no on 8 and would do it again. It was never explained to me, even in the ballot language (which I actually read, perhaps one in a hundred do) what exactly it would do and who it was supposed to help. And frankly struck me as one of those not-infrequent initiatives that come about when the state legislature is too chickenshit to do the rough work of voting on something even mildly controversial, which is also becoming a thing with initiatives recently.

  11. 11.

    Barbara

    November 13, 2018 at 11:27 am

    @The Moar You Know: Given the well-known abuses of the California referendum process, voting no as a default rule seems like a reasoned approach, although one that risks having referendums worded in such a way that “no” is more consequential than “yes” so you do need to be careful!

  12. 12.

    KithKanan

    November 13, 2018 at 11:37 am

    @Barbara: I could be wrong, but while I’ve heard about that in other states I don’t believe that’s possible in the California initiative process, at least for ballot initiatives and constitutional amendments. Every one I’ve seen “no” leaves the status quo – which may be that a bill already passed by the legislature remains in effect, as is the case with the attempt to repeal the gas tax increase.

  13. 13.

    Arclite

    November 13, 2018 at 11:55 am

    I’d like to see states taxing the shit out of sugar to pay for diabetes treatment.

  14. 14.

    dlwchico

    November 13, 2018 at 12:10 pm

    I live in California. The voting guide that the local Democratic party put out had Yes for both Prop 8 and Prop 10 (the rent control prop). But I received at least 3 voting guide mailers from organizations I had never heard of that seemed to be liberal, they matched the Democrat’s voting guide exactly except for those two propositions, which they had down as No.

  15. 15.

    Roger Moore

    November 13, 2018 at 1:08 pm

    @KithKanan:

    Every one I’ve seen “no” leaves the status quo – which may be that a bill already passed by the legislature remains in effect, as is the case with the attempt to repeal the gas tax increase.

    Note that this was because of overreach by the proponents of Prop 6. The normal practice is that an initiative (a ballot measure that creates a new law or changes the constitution) requires a yes vote to become active, while a referendum (an attempt to overturn a law passed by the legislature) requires a yes vote to uphold the law the legislature passed. Prop 6 didn’t work out that way because the proponents wanted to not just overturn the gas tax but to make it harder to pass future gas taxes, which required an initiative rather than a referendum. If the proponents had limited themselves to overturning the tax through a referendum, the built-in “no” vote that people have discussed here probably would have resulted in the tax being repealed.

    @dlwchico:
    I hate those stupid voter guides. They’re thinly disguised campaign literature. The people who put them out generally copy somebody else’s list, except that they offer to change any endorsement for a fee*. Then they decorate them with patriotic pictures and drivel about what unobjectionable cause they supposedly stand for. Obviously, nobody is going to believe that the Democrats have endorsed the Republican candidate for governor, so they don’t bother with things like that, but people may actually pay attention to them on the down ballot races that nobody pays attention to. If it isn’t an official position from some organization you trust, the best place for them is the recycling bin.

    *And they mark the candidates who paid for their position with an asterisk and put in small print that the whole thing is unofficial and paid for.

  16. 16.

    Brachiator

    November 13, 2018 at 1:53 pm

    I forget how I voted on the drug pricing plan, but I voted no on the dialysis initiative because it was targeting a single sector and the proponents seemed to have some ulterior motives.

    Yep. Proposition 8 seemed to be backed and opposed by special interest groups. But Prop 8 was also opposed by “thousands of nurses, doctors, patients, the American Nurses Association\California, California Medical Association, American College of Emergency Physicians of CA.” Now, if these were not legitimate medical organizations, no newspaper or other journalism entity reported on this.

    @Roger Moore:

    A big part of the problem with California ballot initiatives, at least IMO, is that there’s no give and take.

    I think the larger problem is that the initiative process has been hijacked by special interests who pretend that voters or grassroot groups are behind ballot propositions.

    Also, talking about give and take… Prop 11, which had to do with having ambulance employees on call during breaks, was originally legislation that was being hammered out in Sacramento. But one side pulled out of negotiations and figured that they would be able to get their way if they put the matter before the voters. I listened to a number of discussions about this proposition, but even the most neutral commentator could not say whether a yes or no vote would be best for consumers, even though a vote in a certain direction would directly benefit one of the largest private providers of ambulance services.

    This has happened a couple of times before, where a group tries to get around the state legislature. There may be more of this now that the Democrats have a super majority. The only way that right wing laws can get enacted will be through misleading ballot propositions that bypass Sacramento.

  17. 17.

    Martin

    November 13, 2018 at 3:10 pm

    I voted no on Prop 8, but not because of the merits of the proposition. I routinely vote no on propositions because most of these are issues that the legislature should be able to handle. I do have a few exceptions:

    1) Any initiative that must be handled via the initiative process.
    2) Any initiative that addresses how government is run. For instance, the redistricting amendment should be handled by voters because it’s a conflict of interest for legislators.

    The problem that Prop 8 presents is that the number of people qualified to understand the health and economic tradeoffs in that proposition are probably in the low thousands, yet 10 million will vote on it. That’s a pretty good sign that you’re going to get bad results. That’s why we have a representative democracy in the first place.

  18. 18.

    meander

    November 13, 2018 at 3:20 pm

    @Roger Moore: The give and take is something that other states and nations have figured out. A few years ago KQED (San Francisco public radio) devoted a 1-hour segment of their public affairs program (“Forum”) to initiative/referendum reform. There are a lot of simple changes that could improve the process.

    For example, give and take: I recall that there is a nation (Switzerland?) that has an iterative process where ballot initiative can be modified by the legislature to deal with drafting error. OR, it might have been that the legislature will write their own version of every citizen led ballot initiative, thus giving the public two choices: the one written by legislators, and the one written by citizens (or lobbyists, labor unions, NGOs, etc.). The idea is that legislators and their staff better understand the ins and outs of legislation, and can avoid unexpected problems.

    Unfortunately, I deleted it from my archive and haven’t been able to find it to confirm the details. I should try again with alternative search tools.

  19. 19.

    Brachiator

    November 13, 2018 at 3:33 pm

    @meander:

    OR, it might have been that the legislature will write their own version of every citizen led ballot initiative, thus giving the public two choices: the one written by legislators, and the one written by citizens (or lobbyists, labor unions, NGOs, etc.). The idea is that legislators and their staff better understand the ins and outs of legislation, and can avoid unexpected problems.

    This happens sometimes in California. Sometimes the version drafted by the legislature is actually authored by special interest groups and designed to neutralize an initiative that comes from the public.

  20. 20.

    terry chay

    November 13, 2018 at 6:20 pm

    @The Moar You Know: I hope one of those “exceptions” is a vote for a proposition that undoes or mitigates the damage caused by a previous proposition.

    I used to have your viewpoint until I realized how shortsighted and playing into the hands of the radical right that attitude is. For instance, a lot of funding measures are because Prop 13 means that it takes only 1/3 of congress to prevent any regular order revenue increases. If that part of Prop 13 was removed, I’d vote no because I’d expect our state government to be responsible for passing these increases, as it is, that’s not going to happen so bond measures and such have to resort to direct democracy and a “no” is basically voting for enshrining the 1970’s-1990’s California right wing tax revolt.

  21. 21.

    terry chay

    November 13, 2018 at 6:50 pm

    @dlwchico: Most likely those flyers were from astroturfing fronts funded by dialysis clinics. The California Democratic Party as well as a lot of prominent Democratic politicians came out in favor of Prop 8. The only political entity endorsing the No side was the California Republican Party. About $110+ million was spent on No vs. about $13 million was spent on Yes, so it stands to reason that that flyer was funded by the No side and designed to deceive a typical liberal (you and other posters) here on voting No, which worked well.

    The ostensible reasoning behind “Yes” was that by limiting profits to a function of costs, it would cause the clinics to plow the lionshare of their revenue back into the clinics (right now, ever since the Medicare expansion, companies like Fresenius and Davita just pocket profits). The quality of these clinics is just abysmal and actually worse than when dialysis first appeared over half a century ago because there is no incentive to improve the process or help the patient other than checking the dialysis box. This proposition was created by a group trying to force unionization of these clinics because the clinics have no incentive to raise salaries when they can pocket the difference and this labor, unlike most health care labor, is low-skill, easily substitutable (which explains why liberal groups were for it).

    I voted for it, but I’m okay with it going down. My vote was sealed as soon as I saw who was funding all the ads I was seeing against it. Just watching companies like Davita sink $100M into it is satisfaction enough, win or lose. Wanting it to pass, IMO, is to close to why I dislike Bernie-or-busters — being too focused on making rich people pay that you ignore the fact that you don’t give a shit that poor people are worse off because it. (Not that anyone would be worse off with Prop 8. Do you honestly believe that Fresenius would close a single clinic that is making 15% profit on top of costs?)

    I voted for Prop 72, which also lost. I found it offensive that the argument against was that apparently all of California would suddenly drive to Nevada to eat at restaurants and shop at Walmart (the biggest proponents of “No” claimed that they would move out of state). In the end, we eventually got Obamacare. So it will be with this.

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