Tag Archives: PelosiCare

Memoirs of the Addams Administration 9.

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A calmer, more coherent, and less confrontational Donald Trump offered his first address to Congress.[1]  “Everything that is broken in our country can be fixed.  Every problem can be solved.”  He didn’t have Theodore Sorenson as his speech-writer, but that’s still a pretty up-beat statement.  Everyone noted the new tone.  Over half (57 percent) of Americans felt a “very positive reaction” to the new-and-improved Trump, while 21 percent felt “somewhat favorably.”  That’s better than three-quarters (78 percent) of Americans.  On the other hand, 22 percent took a dim view (or no view) of the speech.  That suggests that the majority of Americans are at least open to Trump’s ideas, provided he doesn’t act like a moron in presenting them.  It also suggests that the die-hard opposition to Trump is restricted to a MoveOn ghetto.  Could this Donald Trump have been elected president?  What if he had given this speech on inauguration day?

What are Donald Trump’s policies exactly?  That is hard to tell and the speech did little to clear up this question.  He wants a big infrastructure plan, and a border wall, a lot more money for defense and a lot less money for the snail darter, tax cuts for someone, and a replacement for the Affordable Care Act (ACA).  Republicans have been desperately trying to fill in the gaps with regard to the ACA.[2]  In the current version, “subsidies” to low income people to help them buy health insurance will be replaced with “tax credits” (worth more than those people pay in taxes) to purchase health insurance; it would replace the ACA’s federal subsidies to states that expand Medicaid with federal subsidies to states that create “risk-pools” to insure those with pre-existing conditions.[3]  Some of the problems of Republicans arise from the self-repeal of those covered by the ACA.  Many young people have not purchased insurance, regardless of the make-believe mandate.  This has distorted the financial model of the exchanges.  Many thinly-populated areas—red states—pay higher premiums and have less choice of provider than do densely-populated—blue state—areas.  The ACA sought to entice states to expand Medicaid by offering a temporary increase of federal cost-sharing from 60 percent to 100 percent, but down-played the subsequent reduction that would leave these states freighted with additional costs.  The ACA sought to eliminate product differentiation by requiring all the insurance plans to offer the same set of liberal mandated benefits.[4]  In short, is the current ACA an inadequately-financed effort to by-pass the market economy?  And all that implies.

At least for the moment, Trump’s astonishing victory has lifted the dead hand of Ronald Reagan off the Republican Party. For decades, Republicans have tried to our-Reagan Reagan.  Now they have to think anew an act anew.  Then, if Democrats don’t believe in the Trump administration, investors do believe.[5]  At least for now.  The much-delayed recovery of the economy from the financial crisis slump of 2008-2009 provides an underlying force.  President Trump’s endorsement of tax cuts, infrastructure projects, and deregulation have all poured fuel on the underlying fire.  However, trade war and tariff protection are implicit in “America First.”  With 44 percent of the goods and services sold by Standard and Poor 500 companies going abroad, people are skittish.  It’s still early days, so they aren’t alone.

[1] “A sunnier Trump lays out his policy goals,” The Week, 10 March 2017, p. 4.

[2] While the mainstream media (MSM) have been lambasting Republicans for trying to repeal and replace the ACA, the exchanges have been failing and premiums soaring.

[3] Just as the Obama administration found itself compelled by reality to follow some main lines of the Bush II foreign policy, the Trump administration finds itself compelled by reality to follow some main lines of the Obama domestic policy.  Anyway, that’s what I think at the moment.  Probably I’m wrong on both counts.

[4] “GOP divided over Obamacare repeal plan,” The Week, 10 March 2017, p. 5.

[5] “Conservatism: The Party of Reagan embraces Trump” and “Stocks: will the Trump rally last?” The Week, 10 March 2017, pp. 6, 33.

The ACA in September 2016.

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There seem to be several major challenges facing the Affordable Care Act (ACA).[1]

First of all, the ACA sought to provide health insurance to low-income people.  On the one hand, the problem the Obama administration did not want to address directly is that American doctors make about 50 percent more than European or Japanese doctors with comparable skills.  The same goes for hospitals.  Cutting the incomes of doctors and of hospitals to reduce health care costs to manageable levels would set off a storm of opposition from the American Medical Association and whoever fronts for the hospitals.  On the other hand, there are a bunch of insurance companies—notably Blue Cross plans–that are used to dealing with low-income populations.  However, these insurers keep prices down by offering a narrow range of service providers who agree to accept low payments in return for a steady stream of customers.  Most doctors would refuse to participate in such arrangements.  Assuming that poor consumers were like richer consumers, the authors of the ACA sought to provide a greater range of choice.  The government mandate on the health services provided cuts across the desires of some consumers.  Then, the government lured a bunch of major insurers into the market in the belief that that competition would hold down costs for a broader range of services.  However, the major insurers lost a lot of money and they have begun to bail.  Basically, markets are often more rational than any government “ukase.”  Perhaps 17 percent of people who use the insurance “marketplace” will find that there is only one seller.

Second, the ACA rests on the belief that healthy, young, poor people can be compelled to buy insurance to subsidize sick, old, richer people.  In fact, less than half the 24 million people who were expected to buy insurance through the marketplace have signed up.  A lot of younger people just don’t want to join.  A lot of sick people do want to join only for  long enough to get their illnesses treated,  As a result, the insurance premiums are already so much higher than the government subsides that many people are opting out.  One solution would be to follow the path of the low cost insurers by narrowing networks and forcing down remuneration to doctors and hospitals.  Democrats favor either raising taxes on Republicans to pay for more generous subsidies to health care providers or coercing the un-insured to get insurance.

Third, apparently believing that much of the high cost of American health care came from profiteering by the insurance companies, the ACA included limits on profits and inadequate guarantees against losses.  Faced with large and mounting losses, the major insurance companies have begun to abandon the market place.

So, what are the policy options?  First, President Obama and President-in-Waiting Clinton have floated the idea of going back to the “public option” that Obama once cavalierly abandoned.  The public option would—undoubtedly with the aid of subsidies from the tax payers—“compete” with the private companies in order to drive down prices.  (See: TVA.)  Second, Blue Cross plans—low cost insurers with a lot of experience—argue for further reforms like blocking customers from signing up for short-term coverage in order to deal with accumulated health problems, the drooping coverage; higher premiums for older patients who cost more; and enhancing government subsidies for th care of very sick patients.  “Experts” and “advocates” are in some disagreement about what course to pursue.  Apparently, the Obama Administration is reluctant to consult or listen to business people.

[1] Reed Abelson and Margot Sanger-Katz, “ObamaCare Obstacles, and Some Possible Solutions,” NYT, 30 August 2016.

The ACA in August 2016 2.

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One means to control costs included in the Affordable Care Act (ACA) took the form of a mechanism for publicly reviewing requests for rate increases by insurance companies.[1]  In Summer 2016, health insurance companies began requesting large increases in premiums.[2]

A witness for one Pennsylvania health insurer observed that his company had about 250 clients who had signed up for coverage under the ACA, then received treatment worth about $100,000 each, and then had cancelled their policies immediately after receiving treatment.[3]  The cost of the care then had to be passed on to other clients.  In Montana, ten individual customers consumed more than $4 million in care in the first six months of 2016, for an average of about $70,000 a month each.  In this case, 1 percent of customers accounted for 30 percent of pharmacy bills.  Making matters worse, in the first years of the ACA, a federal program helped insurers pay the cost of some of the most expensive claims.  Now, according to a Department of Health and Human Services economist, that program is winding down.

What has been happening in Pennsylvania is not unique to the Keystone State.  In Montana in 2015, one insurer reported that it had paid out $1.26 in claims for every $1.00 in premiums.  Unable to sustain such losses, major insurance companies have had to choose between seeking much higher premiums and abandoning the health-insurance market places.  In 20 states, insurers have asked to raise their premiums by at least 25 percent.  In some other states, insurers seem to be abandoning the market places to more efficient or competitive insurers.

 

Who are the uninsured?[4]

More than half of the uninsured live in the 20 states that refused to expand Medicaid, many of them populous Southern states like Texas and Florida.  As a result, 39 percent of the uninsured have incomes below the federal poverty level.

In 2013, 28 percent of people between 19 and 34 years old were uninsured; today 18 percent are such “Millennials.”  Still, that 18 percent accounts for almost half of the total uninsured.

In 2013, 50 percent of the uninsured were white; now 41 percent are white.

In 2013, 36 percent of the uninsured were American citizens of Hispanic descent; today 29 percent of the uninsured are American citizens of Hispanic descent.[5]

In 2013, 13 percent of the uninsured were black; now 12 percent are black.

More than half (57 percent) of the working Americans without insurance work for small companies that were exempted from the requirement to provide insurance.

[1] It speaks volumes to the intellectual world inhabited by Democratic legislators that the NYT reporter Robert Pear can describe the process as intended to “shame” companies that requested increases.  Apparently, Democrats believe that immense profits by health insurers and exorbitant pay for executives explain high health costs.

[2] Robert Pear, “Health Insurers Use Reviews, Intended to Constrain Rate Jumps, to Justify Them,” NYT, 15 August 2016.

[3] The chief executive of the federal insurance market-place optimistically portrayed the join-spend-quit pattern as a one-time “decline in pent-up demand for services.”  In all likelihood, uninsured people will continue to pen-up their use of services, then join-spend-quit again.  Robert Pear and Reed Abelson, “As Insurers Balk, U.S. Makes New Push for Health Care Law,” NYT, 18 August 2016.

[4] Abby Goodnough, “Still Uninsured, Even With the Health Law,” NYT, 18 August 2016.

[5] However, the ineligibility of illegal immigrants for coverage means that the total Hispanic share without insurance has risen from 29 percent to 40 percent.

The ACA in August 2016.

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Prior to passage of the Affordable Care Act (ACA), many Americans received their health insurance through their employers; many others bought individual insurance; and a relatively small percentage had no insurance at all.  As one part of the effort to extend health insurance to the uninsured, the ACA required everyone to have insurance, created a system of subsidies to make that insurance affordable for lower-income people, and encouraged the creation of market-places where individuals could purchase standard plans offered by insurance companies.[1]  (In essence, lots of younger, healthier, lower-income people would be constrained to buy insurance to pay for the care of older, sicker, and often higher-income people.)  Broad participation in the health-exchanges by the major insurance companies would create a competitive environment that would help hold down prices while providing a broad array of choices to customers.

In spite of the unfortunate early mishaps of the ACA (the botched roll-out of the web-site, the president’s terminological inexactitude about keeping one’s insurance, the Supreme Court’s invalidation of the portion of the ACA that tried to coerce states into expanding Medicaid), far more serious problems have begun to emerge.

In what seems to have come as a surprise to Democrats and the New York Times (“but I repeat myself” as Mark Twain once said), it turns out that people really are economic animals.  First, for many potential customers, the price of health insurance is too high for what it would buy.  While it had been projected that about 21 million people would be enrolled in health exchanges by 2016, only about 10 million have enrolled.  That’s a lot of premiums that never get paid to insurers.  In 2015, half of the people who did buy insurance in the market-places bought the cheapest possible plan.[2]  Those who buy the more expensive plans tend to be people with serious medical conditions.  Furthermore, many of these customers don’t care about choice of physician or the size of the network of providers. They have opted for plans offered by smaller insurance companies.  Some of these companies already had deep experience dealing with Medicaid payments.  They knew low income customers and they knew how to keep down costs.  Part of this involved limiting choice of care to doctors and hospitals that were willing to accept a low level of payment.

Second, private enterprise runs on a profit and loss basis.  Having run health insurance policies for employer-provided health insurance, the major insurance companies assumed that their new customers would want the same range of choice of physicians and hospitals.  They didn’t.  Anticipating large numbers of customers, many without serious health needs, the insurance companies priced many of their policies too low.  Getting half as many customers, many with serious health issues, the insurance companies suffered heavy early losses.  Facing continuing huge losses in this sector of their business, major insurers like United Health Group, Humana, and Aetna have either decided to pull out of the health-exchange market or limit their participation.  The insurers who remain in the health exchange market place plan to steeply raise premiums for 2017.  This may well drive even more price-sensitive customers out of the market place.  A health care expert at the Urban Institute rationalized that “you can’t lower costs without breaking some eggs.”  In this case, the “eggs” are companies owned by stock-holders as an investment of their assets.  The big insurers need to learn the market or to get out.

One solution would be to let the experienced low-cost providers take over this market.

[1] Reed Abelson, “Health Insurers Lose as Clients Focus on Costs,” NYT, 13 August 2016.

[2] “Bronze,” like coffin handles.

Campaign Issues 2016 3.

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Hind-sight is 20/20; foresight is not.  The basis of the Affordable Care Act (ACA) lay in a plan to require many younger, healthier, and lower income people to pay premiums that would subsidize the health-care costs of older, sicker, and wealthier people.[1]  Even so, support for the ACA has grown with the passage of time.  In 2013, less than a third (32 percent) approved of the ACA, while 61 percent disapproved.    By July 2015, 47 percent approved, 44 percent disapproved, and only 9 percent “didn’t know.”  Opponents of the ACA have been the big losers here, bleeding away almost a third of their numbers to either supporters or to “don’t know.”[2]

Before the Affordable Care Act (ACA) went into effect, 17.1 percent of Americans had no health insurance.  By 2013, the share without health insurance had fallen to 13.3 percent; in 2014, 10.4 percent of Americans had no health insurance.[3]  By Spring 2015, that number had fallen to 11.9 percent, a reduction of 5.2 percent.[4]  (This seems like a lot of hassle just to reduce the number of uninsured by one-third. )  In March 2015, the Congressional Budget Office (CBO) predicted that 21 million people would have signed up for coverage by state exchanges under the ACA by late 2015. This would be a pretty extraordinary jump: only 9 million people were registered in late 2014.  By late October 2015, only an additional million people had enrolled.

The great thing about a market economy is that it forces sellers of any good to find a price that is high enough for them to make a profit and low enough to attract customers.  The first years of the ACA have seen insurers searching for that sweet spot.[5]  One big problem is that many people remain outside the insurance market, regardless of the individual mandate.  The newly-insured have turned out to be sick people, rather than a broad range of the population.  Costs for insurance companies have gone up more than have income from premiums.  As a result, health insurance premiums rose by 5 percent for 2016.  Now, major insurance companies are seeking an average 10 percent increase in premiums for 2017.[6]  (The desired rates for Washington, DC and New York City are 16 percent.)  At some point, the insurance companies will find the right price.  Where is that price?  Will premiums continue to rise after 2017?  It’s difficult to say.  Why do uninsured people not enroll?  Young, healthy, and less-well-off people seem to be staging a libertarian revolt against the mandate that everyone have health insurance.

The ACA is a substantial extension of the entitlements safety-net for the benefit of poor people at the expense of not-so-poor people.  The federal government subsidizes to varying degrees many of the insurance premiums.  This means that higher premiums will increase federal spending on health care.  At some point, even in America, taxes are going to have to go up to pay for spending or spending is going to have to come down to what the country is willing to pay.[7]  However, people with higher incomes who buy insurance on the market-place lose the subsidies, so they are going to feel the sticker shock.  If it comes to higher taxes, Democrats are going to favor preserving the entitlement by taxing the one-percent, while Republicans are going to favor sending the ACA in front of a “death-panel.”

[1] This sounds like a Republican plot, but Republicans had no voice in the ACA.  This is all Democrats.

[2] “Poll Watch,” The Week, 10 July 2015, p. 17.

[3] “Noted,” The Week, misplaced the exact reference.  Sorry.

[4] “Noted,” The Week, 24 April, 2015, p. 16.

[5] Reed Abelson and Margot Sanger-Katz, “Obamacare Premiums Are Rising, Not a Little,” NYT, 16 June 2016.

[6] These sorts of developments have been predicted by Republican critics from the beginning.  Some of them have predicted that it will end in a “death spiral” as rising premiums force people out of the market.   Democrats derided this as partisan fear-mongering.

[7] I realize that this is a disturbing new way of looking at things.