Tuesday, December 1, 2015

Is ObamaCare Really Falling Apart?

Many people complained about higher premiums during the first Patient Protection and Affordable Care Act or PPACA (hereafter referred to as ObamaCare) enrollment period. With impressive celerity some media analysts and other ObamaCare supporters haughtily declared that all of those people were liars, frauds or Republican stooges. They were just too stupid to understand the good deal they were getting. Well you may have noticed that we are in the middle of a new ObamaCare enrollment period. And this time the profusion of complaints about sky-high premiums, high deductibles and co-pays, high drug prices, narrow networks or limited coverage simply can't be ignored or dismissed any longer. There's simply too much data available from the public, HHS, the various state insurance commissioners and the insurance companies themselves. Too many people are discovering that caveat emptor remains excellent advice when it comes to ObamaCare. Roughly half of the health co-ops have gone out of business while many insurers are requesting and obtaining double digit percentage increases in premium prices. If you, like most workers, are not receiving double digit raises at your workplace, an 11% increase in your monthly or bimonthly insurance premium presents a problem. Other insurers are hinting that they may leave the exchanges all together. The idea is to make money, not lose money. United Health is estimating an exchange loss of as much as $500 million. The best that supporters of ObamaCare can claim in response to this parade of horribles is that well things always cost more; this is probably the Republicans' fault somehow, and dammit we need single payer now. With the exception of a long shot funding question case argued by liberal apostate law professor Jonathan Turley and another frivolous dispute over who must sign a note saying they disagree with birth control coverage, all of the legal avenues to repeal or destroy ObamaCare have failed. Legally, anyway, ObamaCare is here to stay. The Supreme Court has twice declined to invalidate ObamaCare. Liberals met these Supreme Court decisions with transcendent joy, a Bronx cheer to conservatives, and internalization of the idea that legal victories meant that ObamaCare was a good thing. After all the Supreme Court said so. Anyone who questioned ObamaCare obviously hated people without insurance and wanted them to die. That is what many of the smart compassionate humane people told themselves. 
This is something of a deflection. In the C.S. Lewis Narnia book, The Magician's Nephew, Queen Jadis (The White Witch) tells the story of how, when faced with defeat in a civil war, she used a Deplorable Word which destroyed all other life on the planet besides herself. When questioned about the morality of this act Jadis responded that she won and winning is the only thing that counted. Fortunately there are no Deplorable Words for anyone to use. Still, like Jadis, ObamaCare supporters seem to have forgotten that a project's success can't be measured by just one variable. The only metric which they want to discuss is the number of people covered. What good is it to have people "covered" if they can't afford to use their "coverage"? Just because ObamaCare has been upheld in the the courts doesn't mean it will succeed. The problem with ObamaCare is (besides what I think of as an intolerable diktat to purchase a private good) is that the economics don't make sense. I said before that this ObamaCare program wouldn't work as designed. And it hasn't. ObamaCare framers attempted to ignore reality. Whether we like it or not, all else equal the population of older people costs more to insure than the population of young people. The population of women costs more to insure than the population of men. It's not possible to increase the coverage that insurance companies must provide, prevent them from charging gender and age based actuarially accurate rates, force them to cover pre-existing conditions, and think that consumer costs will decline. Costs won't decline! It's not politics. It's just math. 

BlueCross BlueShield of Tennessee said the 36 percent rate increase was necessary because it had lost money on its marketplace business after underestimating the use of health care by its new customers. In Minnesota, officials approved increases averaging 49 percent for Blue Cross and Blue Shield of Minnesota, the largest insurer in the market. Even with the increases, the company said, “Blue Cross is likely to experience continued significant financial losses through 2016.” Gov. Mark Dayton of Minnesota, a Democrat, said he was “extremely unhappy” with the high rate increases.

The Iowa insurance commissioner, Nick Gerhart, approved rate increases averaging 29 percent for Wellmark Blue Cross and Blue Shield, the state’s dominant health insurer, and 20 percent for Coventry Health Care. The higher rates, he said, were justified based on the plans’ experience. Rates will rise next year by an average of 4 percent in California, one of the few states that actively negotiate prices, state officials said. In New York, state officials said rates would rise by an average of 7 percent. In Florida, consumers will see increases averaging 9.5 percent, the state said. But in Hawaii, the insurance commissioner this month approved rate increases averaging 27 percent for the Hawaii Medical Service Association and 34 percent for Kaiser Permanente health plans.

Premiums, deductibles and co-pays have risen and will continue to rise. Younger and healthier people, faced with premiums and deductibles that don't reflect their risks, will be less likely to buy costly health insurance simply to subsidize someone else. The people who will purchase this insurance are also the people most likely to use it. That's adverse selection. Well that's great for the customer. But it's bad for the insurance companies who will raise premiums to offset their exchange losses which will drive more young and healthy people away which will make companies raise their premiums to offset their losses and hello Mr. Death Spiral. The entire program starts to unravel. The company can't afford to sell insurance and the customer can't afford to buy it. It's incredibly important to emphasize that if this happens it will not be because of Republican malfeasance. No Republican voted for ObamaCare. Any death spiral will occur because of ObamaCare's internal contradictions.

What should have taken place was an expansion of Medicare and Medicaid for the impoverished/aged population who wanted health care coverage and couldn't get it. Then there should have been tax changes to provide greater funding for people with chronic or pre-existing conditions who could not otherwise obtain coverage. And obviously there were other moves the country could have taken. What we did instead was to implement tax increases and other social changes thru the marketplace and thus cause greater distortions than a general tax increase would have done. Politically the Obama Administration didn't want to own a middle class tax increase, thus the imprudent claims that average premiums would drop by as much as $2500 per family per year. Well that didn't happen did it. Tax increases would have been painful and unpopular but they also would have been more transparent and honest. When I purchase a product I am seeking to get the best deal for me and mine. When I pay my taxes I understand that I am helping the larger society, including people in situations I may never experience or those in situations I am not old enough or poor enough to experience yet. Paying taxes and buying insurance are completely different transactions. Trying to pretend that they are the same doesn't work. If I am in the individual marketplace I do not want to purchase an insurance product priced for someone much older that includes maternity/pediatric coverage, birth control coverage, or other useless add-ons. And I won't buy it--especially if you're charging me 30% more than you did last year. I don't have the money to pay for 10% premium increases let alone three times that amount. Multiply that decision by a few million people and that's where we are today. For too many people it makes more sense to forgo coverage and theoretically pay a penalty.

ObamaCare isn't going anywhere just yet. ObamaCare (or at least the most critical portions) can still be saved. But saving it would require a Republican House and Senate that was interested in doing work instead of hurling invective and a Democratic White House that could admit, however obliquely, that it got some very basic assumptions completely wrong. Neither of these things will happen now. But with more and more union leaders complaining about the implementation of the Cadillac Tax and more insurers worried about losing money on the exchanges the next President likely will have both the opportunity and the political space to make some much needed changes. Hopefully the next time someone builds a new program, he will pay closer attention to economic incentives.  There are some worthy things contained within ObamaCare. There are also things which make no sense. Again, it's not about politics. I'm not on the Right. I would support a program that helped people to get coverage who needed it and couldn't pay for it. But I wouldn't support a program that did this at the cost of messing up everyone else's coverage. 
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