GOING, GOING, GONE: JUSTIFING OBMACARE
The technological architecture of the exchanges appears to be behind schedule and below expectations and concerns about fraud and identity theft are especially grave. Too difficult to implement the employer mandate have been put off. Class long-term care insurance scheme have been found unworkable and abandoned altogether. Some major insurers have opted out of offering coverage in some states as a result of excessive regulatory burdens or price controls, premium data, huge price spikes for key portions of the population and the economic incentives created by the law may be undermining hiring and growth. Shifts in the underlying argument for obamacare one about how to build risk pools and the other abut what insurance is for that could prove as significant over time. Concessions on the part of some of obamacare defenders as they struggle to respond to unwelcome news.
COST AND VALUE—talk about premium costs in the exchanges, young will see major price increase in the individual market next year. The average price for the lowest cost bronze plan in 8 states is 122% higher than the cheapest plan currently available in those states. This kind of price shock could make it very difficult to attract the sorts of young and healthy buyers the new system will need to sustain itself. Obama on 8/9 said people who are now uninsured are” going to be able to go ON a website or call up a call center and sign up for affordable quality Health insurance at a significantly cheaper rate that what they can get right now on the individual market—HA
Some will qualify for subsidies in the new exchanges, provided on a means tested sliding scale. Many young and healthy Americans the subsidies will not be enough to make up for next years increases.80% of Americans below the age of 30 will find themselves with higher premiums next year. In CA. if you’re healthy, non-smoking 25 year old and you make more that $18,558 your insurance will cost more under OBC. While the new system would surely reduce cost for older and sicker Americans especially those with preexisting conditions who now find it difficult to obtain coverage, at its core, Health ins. What we’re doing here is redistributing from the healthy to the sick and form the young to the old and we are putting in big subsidies to help people who are poor. OBC is designed to do is to make it cheaper and easier for sicker and older people to get coverage.
THE SOLUTION—redistributing form the healthy to the sick and from the young to the old happens for the most part not through government taxing and spending or through the sorts of subsidized high risk pool arrangements that conservative propose but through a redesigned insurance system in which the cost of risk is massively redistributed, the young are expected to enable that system to function in 2 ways—they will pay higher rates than now, and more of them will buy coverage. OBC doesn’t just increase the cost of coverage for the young and healthy, it also reduces the value of insurance for them. If they become sick or injured outside the enrollment period they will have to wait a few months until the next enrollment.
Part of the appeal to the healthy has always been that waiting to buy coverage means running the risk that poor health will make such coverage unaffordable later. Coverage rules that t dramatically reduce that risk for people who are healthy therefore make insurance less valuable for them. If they stay out, older and sicker Americans will face higher costs and less access to coverage and the system will fail by its defenders own standards. Its mistreatment of the your and healthy is therefore actually a huge problems for the law and points to the core of the new systems economic irrationality or rather it its failure to contend with how people understand their economic options a great many young people have nonetheless opted against it. That is a major part of the reason why 2/3 of the uninsured are under the age of 40.
Krugman wrote in June that such catastrophic plans can be cheap “because they don’t provide much insurance.”
Sebelius “some of these folks have very high catastrophic plans that don’t pay for anything unless you get hit by a bus. They’re really mortgage protection, not health insurance.” some defenders of OBC in recent months have been driven to acknowledge that the new system which depends on getting young uninsured people to buy coverage depends in turn on the value and appeal of particularly comprehensive coverage.
REAL INSURANCE: the story begins a few years ago when Oregon officials decided to expand their Medicaid program but did not have the funds for a simple expansion of income eligibility and so set up a lottery by which some eligible could gain access to the program. they found that having Medicaid coverage yielded major financial benefits but could not be shown to have yielded major medical benefits. Medicaid is expected to surpass $7 trillion in the coming decade. Ion 2005 economist Amy Finkelstein and Robin McKnight studied the effects of the introduction of Medicare on the elderly in America and concluded that “in its first 10 years the establishment of universal health insurance for the elderly had no discernible impact on their mortality. However we find that the introduction of Medicare was associated with a substantial reduction in the elderly exposure to out of pocket medical expenditure risk”. Why should coverage for medical services that do not involve extreme costs add significant value to an insurance policy?
Protection from financial disaster in case of medical disaster is what insurance is for. For the young the model of health insurance that could best balance cost and use would probably look like most other kinds of insurance: coverage for unusual and particularly expensive needs and a range of options and prices for more routine and cheaper services.
REAL REFORM: a functional health reform might therefore begin with universal catastrophic coverage and build from there. Employer provided coverage turned into universal credit that would cover the premium for a least a catastrophic plan for all and allow individuals to purchase more coverage or care on their own or through their employers.
Shorn of the short term fiscal fig leaf of the CLASS Act absent the revenue and insurance market stabilization of the employer mandate, stripped of eligibility verification for subsidies costing billions of taxpayer dollars, saddled with an assault on religious liberty all of which has been done by the laws own champions and defender the bill would never have had the votes to becomes law even in the heavily demo 111th congress.
Sources—weekly standard, demoyuval Levin, investors business daily, American academy of actuaries, manhattan institute, Washington post, nyt,