Tag: ppaca

ObamaCare: What Trump Should Do Now

With President Donald Trump frustrated all over again with congressional Republicans’ inability to coalesce around a bill repealing and replacing ObamaCare, it seems like a good time to dust off this National Review Online column where I offer 14 ways Trump can pressure Congress and build public support for legislation:

1. End Congress’s illegal ObamaCare exemption.

2. End ObamaCare’s unconstitutional cost-sharing subsidies.

3. End ObamaCare’s illegal “reinsurance” payments.

4. Block Big Insurance’s “risk-corridor” raid on the Treasury.

5. Investigate the Obama administration’s illegal spending.

6. Allow freedom of conscience and choice in contraceptives coverage.

7. Illustrate how Americans can avoid ObamaCare penalties.

8. Illustrate how ObamaCare makes it easier than ever for people to wait until they are sick to purchase coverage.

9. Publish ObamaCare’s vital signs.

10. Release the documents.

11. Praise states that refused to implement ObamaCare.

12. Direct states to prepare for ObamaCare repeal.

13. Renounce IPAB.

14. Let seniors opt out of Medicare without losing Social Security benefits.

To its credit, the Trump administration has been doing some of #9. But not enough. Read here for more.

No ‘Freedom Option’ in the Revised Senate Health Care Bill

The other day, I wrote a piece lauding an amendment Sen. Ted Cruz (R-TX) was proposing to add to the Senate GOP’s health care bill. Cruz called it the Consumer Freedom Amendment. If insurers offered two ObamaCare-compliant plans to all comers, the Cruz amendment would have freed them to sell–and freed consumers to purchase–health-insurance plans that did not comply with those regulations. The legislative language I saw appeared to free consumers, not from all the regulations I would like, but from enough that it would have made the Senate bill a step in the right direction. It also included more restrictions on the use of this “freedom option” than I would like, but same thing. The changes would have dramatically reduced premiums for consumers. Perhaps more important, it would have offered more comprehensive and more secure coverage to people who develop expensive illnesses than ObamaCare does.

Today, Senate GOP leaders released an updated draft of their health care bill. 

This draft imposes ObamaCare’s “single risk pool” price controls on “freedom option” plans. Long story short, that means there is no “freedom option” in this bill. Insurers probably would not even offer non-compliant plans. If they did, ObamaCare’s “single risk pool” price controls would make secure, guaranteed-renewable health insurance impossible by taxing such plans to death. Here’s how.

  • The “single risk pool” price controls would require insurers to increase premiums for both ObamaCare-compliant plans and non-compliant plans by the same percentage. If claims in the compliant market necessitate a 10 percent increase, while claims in the non-compliant market necessitate only a 6 percent increase, the insurer would have to increase premiums in the former market by too little and/or increase premiums in the latter market by too much.
  • Let’s say insurers split the difference by increasing premiums in both markets by 8 percent. In the second year, insurers would be over-charging consumers in the non-compliant market. The problem would only get worse with time. By year five, the insurer would be overcharging consumers in the non-compliant plans by almost 10 percent. That creates an incentive for the insurer or a competitor to issue new, appropriately priced non-compliant plans that lure the healthy people out of the old non-compliant plans.
  • Consumers who developed expensive illnesses in the first year could not switch to the new non-compliant plans, because insurers would underwrite them and charge them an even higher premium. So those folks would stay in the old non-compliant plans until the hidden tax imposed by the “single risk pool” price controls made those plans a worse deal than the heavily subsidized ObamaCare-compliant plans. At that point, those consumers would switch to the ObamaCare-compliant plans. Actually, the effect would be a lot like that of the MacArthur waivers in the House’s health care bill. [Update: Astute reader Doug Badger notes that because the non-compliant plans do not qualify as creditable coverage, people in those plans could not automatically switch to ObamaCare-compliant plans. “They would either have to renew their existing policy, buy another non-ACA-compliant policy, or remain uninsured for a period of six months before enrolling in a policy sold through the Exchange,” he writes. Another option would be for the enrollee (or a parent or spouse) to take a job with health benefits for twelve months and then switch to an ObamaCare-compliant plan. Since employer-sponsored insurance would count as creditable coverage, there would be no waiting period, and while employers may impose waiting periods of up to 90 days for health benefits, the enrollee could keep her non-compliant plan until she is eligible to enroll in the employer plan. To the extent these strategies are feasible, newly sick enrollees in old non-compliant plans would and could migrate to compliant plans. To the extent such strategies are infeasible, the “single risk pool” price controls would create a trifurcated market of (1) healthy people hopping among non-compliant plans and (2) newly sick people stuck in increasingly overpriced non-compliant plans that subsidize (3) people with preexisting conditions in ObamaCare plans. Presumably, however, at a certain point, the costs of remaining in increasingly overpriced non-compliant plans would exceed the costs of those switching strategies.]
  • In other words, secure, long-term, guaranteed-renewable coverage would be impossible, because the “single risk pool” price controls would tax those plans to death.
  • This dynamic would happen even faster if insurers increase both the compliant and noncompliant plan premiums by 10 percent, which they probably would.

I’m not saying there’s no way Senate Republicans can redeem their bill. I have offered ideas that might. But at this point, the Cruz amendment does not redeem or even add to the bill.

I don’t get Republicans’ sudden infatuation with price controls

Are ObamaCare’s Community-Rating Regulations a System of Price Controls?

ObamaCare’s community-rating regulations generally bar insurance companies from using any factor other than age to determine premiums, and prevent insurers from charging 64-year-olds more than three times what they charge 18-year-olds. I have long maintained community rating is nothing more than a system of government price controls, and should meet with the usual scorn economists universally heap on such boneheaded policies.

An esteemed colleague challenges my claim that ObamaCare’s community-rating is a system of price controls, because “the government doesn’t set a price.” Here is how I responded:

Price controls don’t always take the form of a fixed integer. Sometimes government sets prices using ratios.

Premium caps control prices by limiting this year’s premium to a ratio of last year’s premium. Medicaid’s prescription-drug price controls set prices as a ratio of the average wholesale price. Medicare’s price controls involve all sorts of complex ratios.

ObamaCare’s community-rating regulations control prices by (a) setting the ratio of premiums for healthy vs. sick people within each age category to 1:1, and (b) setting the ratio of premiums for young vs. old to 1:3. Insurers would not voluntarily follow those ratios, with good reason. But community rating forces insurers to set prices according to those ratios. Thus it is a price-control scheme.

Is ObamaCare Conservative?

That’s the thesis of a Washington Post opinion piece titled, “Why replacing Obamacare is so hard: It’s fundamentally conservative” by Northwestern University professor Craig Garthwaite. A lot of ObamaCare supporters find this claim appealing. If true, then it makes them look moderate and open to compromise, and makes ObamaCare’s conservative opponents look duplicitous and partisan. But is it true?

No. Not by a long shot.

I’m not a conservative. (I was, once, in my youth, but I’m feeling much better now.) So I will let the editors of National Review explain what a conservative approach to health reform is, as they did in this unsigned 2007 editorial. Spoiler alert: it’s a far cry from ObamaCare.

Against Universal Coverage

By The Editors — June 21, 2007

The Democrats running for president are competing over whose health-care plan gets closest to “universal coverage.” The Republican presidential candidates, meanwhile, have been mostly silent. Their inattention to the issue is a mistake. A great many voters are anxious about health care, and better government policies could alleviate that anxiety. The Republican candidates have an opportunity to present a distinctively conservative set of reforms.

Those reforms should begin with the rejection of the goal of universal coverage. Deregulating health insurance would make it more affordable, and thus increase the number of Americans with coverage. But to achieve universal coverage would require either having the government provide it to everyone or forcing everyone to buy it. The first option, national health insurance in some form or other, would either bust the budget or cripple medical innovation, and possibly have both effects. Mandatory health insurance, meanwhile, would entail a governmental definition of a minimum package of benefits that insurance has to cover. Over time, that minimum package would grow more and more expensive as provider groups lobbied the government to include their services in the mandate.

The health-care debate has centered on the uninsured. That so many people do not have health insurance is a consequence of foolish government policies: regulations that raise the price of insurance, and a tax code that ensures that most people get their insurance through their employer. If you don’t work for a company that provides health insurance, you’re out of luck. People locked out of the insurance system still have access to health care. But they often end up in emergency rooms because they did not receive preventive care.

For most people, however, it is another aspect of our employer-based health-care system that causes the most trouble: the insecurity it creates. People worry that if they switch jobs, they will lose their health insurance. They worry that their company will cut back on health benefits. Universal coverage is not necessary to address these worries. Making it possible for individuals to own their health-insurance policies themselves, rather than getting them through their companies, would solve the problem. It would also reduce the political momentum behind socialized medicine.

Most universal-coverage plans accept the least rational features of our health-care system — its reliance on employer-based coverage and on “insurance” that covers routine expenses — and merely try to expand that system to cover more people. Republicans should go in a different direction, proposing market reforms that make insurance more affordable and portable. If such reforms are implemented, more people will have insurance.

Some people, especially young and healthy people, may choose not to buy health insurance even when it is cheaper. Contrary to popular belief, such people do not cause everyone else to pay much higher premiums. Forcing them to get insurance would, on the other hand, lead to a worse health-care system for everyone because it would necessitate so much more government intervention. So what should the government do about the holdouts? Leave them alone. It’s a free country.

Senate Republicans Offer a Bill to Preserve & Expand ObamaCare

Yesterday, I posted “Five Questions I Will Use to Evaluate the Phantom Senate Health Care Bill.” The phantom bill took corporeal form today when Senate Republicans released the text of the “Better Care Reconciliation Act.”

So how does the Senate bill fare with regard to my five questions?

1. Would it repeal the parts of ObamaCare—specifically, community rating—that preclude secure access to health care by causing coverage to become worse for the sick and the Exchanges to collapse?

No. The Senate bill would preserve ObamaCare’s community-rating price controls. To be fair, it would modify them. ObamaCare forbids premiums for 64-year-olds to be more than three times premiums for 18-year-olds. The Senate bill would allow premiums for the older cohort to be up to five times those for the younger cohort. But these “age rating” restrictions are the least binding part of ObamaCare’s community-rating price controls. Those price controls would therefore continue to wreak havoc in the individual market. The Senate bill would also preserve nearly all of ObamaCare’s other insurance regulations. 

2. Would it make health care more affordable, or just throw subsidies at unaffordable care?

The Senate bill, like ObamaCare, would simply throw taxpayer dollars at unaffordable care, rather than make health care more affordable.

Making health care more affordable means driving down health care prices. Recent experiments have shown that cost-conscious consumers do indeed push providers to cut prices. (See below graph. Source.)  

How Cost-Conscious Consumers Drive Down Health Care Prices

Five Questions I Will Use to Evaluate the Phantom Senate Health Care Bill

Rumor has it that tomorrow is the day Senate Republican leaders will unveil the health care bill they have been busily assembling behind closed doors. So few details have emerged, President Trump could maybe learn something from Senate Majority Leader Mitch McConnell about how to prevent leaks. Even GOP senators are complaining they haven’t been allowed to see the bill.

Here are five questions I will be asking about the Senate health care bill if and when it sees the light of day.

  1. Would it repeal the parts of ObamaCare—specifically, community rating—that preclude secure access to health care for the sick by causing coverage to become worse for the sick and the Exchanges to collapse?
  2. Would it make health care more affordable, or just throw subsidies at unaffordable care?
  3. Would it actually sunset the Medicaid expansion, or keep the expansion alive long enough for a future Democratic Congress to rescue it?
  4. Tax cuts are almost irrelevant—how much of ObamaCare’s spending would it repeal?
  5. If it leaves major elements of ObamaCare in place, would it lead voters to blame the ongoing failure of those provisions on (supposed) free-market reforms?

Depending on how Senate Republicans—or at least, the select few who get to write major legislation—answer those questions, the bill could be a step in the right direction. Or it could be ObamaCare-lite.

Legislative Malpractice: the CBO Scores the American Health Care Act

The Congressional Budget Office’s cost estimate of the American Health Care Act confirms what health-policy scholars have known for months: the AHCA is bad health policy that will come back to haunt its Republican supporters.

Premiums on the individual market have risen an average of 105 percent since ObamaCare took effect. Maryland’s largest insurer has requested rate hikes for 2018 that average 52 percent. Yet the CBO estimates the AHCA would saddle voters with two additional premium increases before the mid-term elections—a further 20 percent increase in 2018, plus another 5 percent just before Election Day. Even worse, the bill’s ham-handed modifications to ObamaCare’s most harmful regulations would accelerate the race to the bottom that ObamaCare has begun. Voters will blame Republicans for their skyrocketing premiums and lousy coverage, deepening what appear to be inevitable GOP losses in 2018.

Free-market reforms would reduce premiums by up to 90 percent, make access to care more secure for people who develop expensive medical conditions, reduce taxes and health care prices, and give states the ability and flexibility to cover preexisting conditions. It might even give the GOP’s base a reason to go to the polls in 2018.

The AHCA is not free-market reform.

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