Tag: Rick Foster

‘1099’ Repeal Speaks Volumes About ObamaCare

From my latest Kaiser Health News op-ed:

When 34 Senate Democrats joined all 47 Republicans last week to repeal ObamaCare’s 1099 reporting requirement, their votes confirmed what their talking points still deny: ObamaCare will increase the deficit, no matter what the official cost projections say…

This public-choice dynamic [of concentrated benefits and diffuse costs] is why the Congressional Budget Office, the chief Medicare actuary, and even the International Monetary Fund have discredited the idea that ObamaCare will reduce the deficit. It is one of the principal reasons why, as Thomas Jefferson wrote, “The natural progress of things is for liberty to yield, and government to gain ground.” In other words, the game is rigged in favor of bigger government.

It also explains why the Obama administration is sprinting to implement ObamaCare in spite of a federal court having struck down the law as unconstitutional. The White House needs to get some concentrated interest groups hooked on ObamaCare’s subsidies – fast.

Read the whole thing here.

A Less-Than-Rigorous ObamaCare Fact Check

Kaiser Health News and The Washington Post have posted a piece titled “Campaign Claims: Health Law Myths And Facts,” which examines these common criticisms of ObamaCare:

  1. “The law amounts to a ‘government takeover’ of health insurance and health care.” The article’s conclusion: “it falls far short of a government takeover.”  That conclusion rests largely on the fact that “Medical care will be provided by private hospitals and doctors.”  But as I explain in this study, “it is irrelevant whether we describe medical resources (e.g., hospitals, employees) as ‘public’ or ‘private.’ What matters—what determines real as opposed to nominal ownership—is who controls the resources.”  Obama health official Jeanne Lambrew acknowledges as much: “the government role in socialized medicine systems [can include] public financing of private insurance and providers.”  And as I concluded in this study, “Compulsory ‘private’ health insurance would give government as much control over the nation’s health care sector as a compulsory government program.”  I wonder if the article’s authors spoke to anyone who raised this perspective.
  2. “The law will gut Medicare by cutting more than $500 billion from the program over 10 years; seniors will lose benefits and won’t be able to keep their doctors.” Conclusion: “The gutting of Medicare claim goes too far…What this means for seniors is a bit murkier.”  True enough: even if ObamaCare’s implausible Medicare cuts take effect, they clearly would not “gut” Medicare.  (BTW, click here or here for a politically sustainable way to restrain Medicare spending.)  The authors also note that Medicare Advantage enrollees would lose some benefits.  But when the article claims that ObamaCare will not eliminate any “basic” Medicare benefits, it neglects to mention that Medicare’s chief actuary estimates that the law could cause 15 percent of hospitals, home health agencies, and other providers to stop accepting Medicare patients.  If your hospital no longer accepts your Medicare coverage, is that not a benefit cut?
  3. “The law will cause 87 million Americans to lose their current coverage.” Conclusion: “How true is it?  Partly, at best. But evidence is limited.”  The House Republicans’ Pledge to America claims that ObamaCare “will force some 87 million Americans to drop their current coverage.”  The word drop is a bit strong; it’s more accurate to say that many Americans will have to switch to another plan, even if it’s just a more-expensive version of their current plan.   Indeed, HHS estimates that 69 percent of employer plans will have to do so by 2013.  Yet some people are being dropped from their current health insurance.  When Principal Financial Group leaves the market, its nearly 1 million enrollees will lose their current health plan.  Industry analysts expect more such departures.  Why no mention of that?
  4. “The law is driving up costs and premiums and will continue to do so over the next several years.” Conclusion: “There may be very small increases initially.”  Here the article is kinder to ObamaCare than even ObamaCare’s supporters are.  May be?  Even ObamaCare’s supporters admit the law will increase premiums for some people.  Very small increases?   Even HHS estimates that the requirement that consumers purchase unlimited annual coverage could increase premiums for some by 7 percent.  (There’s no mention of Blue Cross and Blue Shield of Connecticut, which says ObamaCare will increase premiums for some of its customers by nearly 30 percent.)  And why only initially?  Do the authors expect that there will be no premium increases when HHS eventually stops issuing waivers?  Or when HHS sets a minimum level of coverage that Americans must purchase in 2014?  Or that ObamaCare has solved the tragedy of the commons?  For support, the article claims, “the Obama administration, citing [various] estimates…says the law isn’t responsible for any increase greater than 1 to 2 percent.”  Actually, that’s not what the administration says – it’s what they want you to think they’re saying.  Read this letter and other administration utterances carefully.  They say “1-2 percent” when speaking of ObamaCare’s average effect on premiums, and “minimal” when speaking of anything other than the average effect.   (The administration’s threshold for “minimal” is presumably somewhere north of 7 percent.)
  5. “The law’s expansion of Medicaid will put massive pressure on state budgets at a time when many are already in crisis.” Conclusion: “The impact will probably be small, but it’s hard to say for sure.”  The article only cites figures generated by supporters of the law, who say the impact will be small.  Why just mention that there are figures from the other side?  Why not include them?
  6. “The new law uses tax dollars to pay for abortions.” Conclusion: “Open to interpretation.”  This was a missed opportunity to examine two crucial questions.  First, would federal insurance subsidies truly be segregated from the separate premiums that consumers in ObamaCare’s exchanges would have to pay for elective-abortion coverage?  Or would this just be an accounting gimmick?  What would happen, for example, if there were more abortions than an insurer anticipated, and those separate premiums proved insufficient to pay for them?  How would you keep one side of the ledger from spilling over into the other?  Second, would the availability of federal subsidies for health insurance plans that make elective-abortion coverage available as a rider increase enrollment in those plans?  If so, wouldn’t that implicitly subsidize elective abortions?  Rather than examine those questions, the article punted.

On the whole, I’d say this fact check may have been very kind to the new law.

Shifting the Blame for America’s Health Care Woes

I must be losing my touch. I’ve let nearly two months pass without responding to Ezra Klein’s defense of RomneyCare, ObamaCare, and other centrally planned health care systems.  (For those who want to get up to speed: his original post, my reply, and his response.)  So here goes.

Klein notes that he and I had each used flawed measures of RomneyCare’s impact on health insurance premiums in Massachusetts.  Fair enough.  But Klein ignores the study I cited by John Cogan, Glenn Hubbard, and Dan Kessler, which estimates that RomneyCare increased premiums in Massachusetts by 6 percent.  The CHK study has limitations, but it is the best estimate available.  I hope Klein addresses it.

Klein’s fallback position is that even if RomneyCare increases premiums, that’s not an indictment of the law because cost-control was not one of its goals.  Never mind that Mitt Romney boasted, “the costs of health care will be reduced.”  Klein knows political rhetoric when he sees it.  Yet he oddly sees no parallels between the phony-baloney promises of cost-control used to sell RomneyCare and the phony-baloney promises of cost-control used to sell ObamaCare – despite ample assistance from people like Medicare’s chief actuary and Alain Enthoven (“the American people are being deceived”).

Then Klein throws down his trump card:

[E]ven a cursory read of the evidence would show that whatever the drawbacks of central planning, it covers people at an extremely low cost. Romney Care’s cost problem is a result of pasting a coverage-oriented quick fix atop our insane health-care system. Compare its costs to the British system, the French system, the German system, or any other system, and whatever your conclusions, you won’t walk away unimpressed by the ability of centralized systems to cover whole populations for much less money than we spend.

Oy, where to begin?  First, Klein violates Cannon’s First Rule of Economic Literacy: he writes that centrally planned systems cost less, when what he means is that they spend less.

Second, the phrase “whatever the drawbacks of central planning” is some serious hand-waving.  Those “drawbacks” include (among other things): the Medicare program’s suppression of comparative-effectiveness research, error-reduction efforts, care coordination, and other delivery innovations; Canada’s human-rights violating Medicare system; and the suppression of untold innovations in health insurance and medical treatment by government price controls.  Other than a few drawbacks, Mrs. Lincoln…

Third, our “insane health-care system,” as I blogged previously, “is the product of the old raft of government price & exchange controls, mandates, and subsidies.”  Prior to ObamaCare, government already controlled half of all U.S. health care spending directly, granted control over another quarter to employers, and regulated health care more heavily than perhaps any other sector of the economy.  Klein and his fellow central planners can’t deny paternity.  Our “insane health-care system” is the product of central planning.

Finally, only a cursory read of the evidence could lead to the conclusion that central planning contains health care spending.  Klein posts the following charts and concludes that since all those (other) centrally planned systems spend less on health care than the United States, central planning must result in lower health care spending.

Photo credit: By Robert Giroux/Getty Images

But if that were true, then one would expect per-capita spending on elderly Americans – who have universal coverage through the centrally planned Medicare program – would not be far out of line when compared to how much other nations spend per elderly resident.  Yet the United States is just as far out of here as overall.  According to the OECD, the United States spends about twice as much per elderly person as Canada, and more than twice as much as Australia spends.  (Alas, I’m not cherry-picking; these are the only four nations for which the OECD provides recent data.)

Source: OECD, author’s calculations

(One could argue that the reason for this is that Medicare exists alongside the world’s largest (ostensibly) private health care sector, whose evils spill over into Medicare.  If that were the case, then moving all Americans into Medicare should reduce U.S. health care spending, bringing it back into line with other nations.  But consider that Klein and The New Republic’s Jonathan Chait both acknowledge that Congress had to throw $2 at the health care industry for every $1 that ObamaCare cut from future Medicare spending. How exactly could Congress move 250 million Americans into Medicare (which presumably would reduce overall spending), or reduce Medicare spending later, given those constraints?  How, exactly, would an independent rationing board survive the political dynamics that produce such outcomes? Prediction: it won’t.  The narrative that central planning contains health care spending just doesn’t hold water.)

Klein, The New Republic’s Jonathan Cohn, and others have taken a big step by acknowledging that RomneyCare is struggling.  When they shift the blame to “the American health care system,” however, they obscure what’s really happening.  As I closed my previous post: “RomneyCare and its progeny ObamaCare are attempts by the Left’s central planners to clean up their own mess.  If Klein and Cohn want to defend those laws, pointing to the damage already caused by their economic policies won’t do the trick.  They need to explain why government price & exchange controls, mandates, and subsidies will produce something other than what they have always produced.”