Healthcare Disaster

[drscott]

Some really good reporting from WaPo on why the Federal exchange was such an expensive failure here. I haven't written much about it because the press is now on the case and digging into the story.

Administration spinmeisters are trying to plug the leaks when real people report their premiums have increased for less coverage. One of the half-truths is that all the cancelled policies were "junk insurance" - which certainly exists; this is insurance with very low premiums that covers very little, though it may at least get you the negotiated insurance discount at providers. But many people who carefully researched their plans and had excellent insurance covering their needs, often with high deductibles but no limits, are also finding their policies cancelled, with new plans costing 50-100% more with even higher deductibles. The Administration is sending out its spokespeople to call these people liars and stupid for not understanding how much better the new policies are, a winning strategy if you want to really make some of the smartest and most influential people angry.

The situation is especially grim since millions of people who are losing their policies 12/31/13 are going to have to find replacements in less than two months. Many will be unable to act that fast, given the broken exchanges, and many will find the new policies unaffordable and hold off hoping for something better. This means it is now more likely than not that more people will be uninsured as 2014 dawns than before the law was implemented.

Behind all this is elitist central planning bureaucrats who designed a system that can provide subsidized preventative care ("prepaid care") as well as true insurance (against unlikely and expensive medical events) to the unhealthy and poorer underinsured. The cost is partly subsidized by a large number of new taxes, which hit everyone but are most noticeable for the wealthy; and partly subsidized by increases in premiums for everyone who is unsubsidized. Many people just above the subsidy cutoff of 400% of the poverty line will be paying 40-100% more in premiums for less coverage, which is so out of line for their budgets that many of them will have to go without insurance in this new order. This is the "cross subsidy" - forced new revenue to the insurance companies to pay for community rating and must-issue.

Another misleading spin point is that only 4% of the population is effected. The Administration hopes people will buy this new lie, but by delaying employer provisions for a year they hope you won't realize that a wave of changes, cancellations, and price increases will arrive next year for the supposedly unaffected 85% of the population covered by employer plans. Since they lied to get it enacted, why would anyone believe their fallback lies? Those who are involved in HR discussions know the truth.

I have no doubt that most of the politicians supporting the ACA were told it would work well and ultimately save money. It takes awhile for those who declared their support to admit they were wrong and start to work with critics to fashion a better plan - which might look like Switzerland's, which includes compulsory catastrophic insurance for everyone at a low price (subsidized for the very poor), with an accompanying book of medicaid-like reimbursements for those who don't have additional insurance. Democrats need to eat crow and start rewriting the ACA, quickly, or the outcome will be ugly.

Comments

[dr-scott.livejournal.com]

People trying to keep or gain political advantage will be all over this because it is waking up millions of voters who don't want to be bothered, who were anaesthetized to the dangers to them personally of the proposed changes by the President's assurances that for them, nothing would change and they'd *save* money! I'm doing economic and moral analysis, not trying to gain power for myself...

The old system had two main flaws: medical services cost far more than was affordable, and a minority could not get access to good medical care because they could not afford insurance coverage. The moral claim made by the reformers is that the sad cases of people not getting care, which actually were usually about people denying themselves care, since care was always available, but costly and with bankruptcy as the downside in extremis. The voters are sympathetic to calls for assistance for the truly needy, but voter interest in lower costs for *themselves* has always been even stronger.

The new system does nothing to restrain costs or growth in administrative overhead. By giving the existing medical-industrial complex additional revenues, it will increase total spending and cost of medical care. It has been politically impossible to apply antitrust and deregulation to the medical complex, and the government already funds 50% of medical revenues, which has bureaucratized procedures and payment systems to make them even more resistant to productivity improvements.

You're a friend so don't take the following as a slam - but you bring up your own case, so let's take a look...

In your case, Rick benefits financially from the ACA. But it is morally questionable whether he *needed* assistance, since even though his insurance costs were high, it's not clear they were greatly out of line compared to the medical care expenses he will be generating. He was insured and not poverty-stricken by the costs, so he cannot be counted as a truly needy person being denied care because of his income. At some point the cost might have grown to be too high to pay, but it had not happened yet. Your complaint about your insurance costs increasing will not be addressed by the ACA, and it is likely your own bill will rise faster than before to subsidize others. Are there preventative services, substance abuse, or other coverages you don't already have but would use? You personally will be in the "paying more" group and will likely see higher premiums, copays, and deductibles as a result. But your family saves money which can be invested or spent, keeping the economy humming! But wait...

I'll hazard a guess that Rick's premiums are dropping by $8,000 a year. Where is that subsidy coming from?

- Roughly, $1,000 comes from cuts to Medicare Advantage that are even now causing doctors to be dropped from insurer networks; some old ladies in their 80s are just now being informed they'll have to give up their doctors and find new ones. This is just unnecessary pain.

- Assuming younger people sign up for insurance that costs 3x the actuarial costs of services they will get (dubious), $1,000 comes from a young person who has to cut $100/month out of a tight budget for rent and food, whose already-marginal finances suffer further as more regulations have decreased his ability to find a good-paying job. This slows the economy a bit more.

- One high-income professional pays an additional $2,000 in taxes on investment income and salary earnings. This woman barely notices, so this is relatively successful redistribution; though of course she has less to invest and so the economy takes another tiny hit.

- And the worst of it is, the rest of the $4,000 comes from a two families earning $85,000 in the Bay Area with two kids and a tight budget whose premiums have gone from $4,000 a year to $6,000, but it is actually worse than that because their deductibles and copays are much higher. These people are barely middle class and their disposable income is minimal; higher premiums mean either dropping insurance or giving up something important. The economy gets a little bit weaker. And these people have a greater moral claim on their own money than Rick has, and they should not be paying for Rick's insurance.