Topic: Health Care & Welfare

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.

Zoning Debate Hosted by Cato and the Urban Institute

Today through Monday, July 24th, Cato and the Urban Institute are hosting a joint online debate contemplating costs, benefits, and possible reforms to zoning regulation. Participant opinions will run the gamut, from anti-zoning to pro-zoning, which should make the conversation lively. Participants will include the following:

  • Emily Talen, professor of urbanism, University of Chicago
  • Robert Dietz, chief economist and senior vice president, National Association of Homebuilders
  • Dana Berliner, senior vice president and litigation director, Institute for Justice
  • Lance Freeman, professor of urban planning, Columbia University
  • Richard Rothstein, research associate, Economic Policy Institute; fellow of the Thurgood Marshall Institute, the NAACP Legal Defense Fund, and the Haas Institute at the University of California (Berkeley)
  • Craig Anthony Arnold, professor of law and affiliated professor of urban planning in the Department of Urban and Public Affairs, and chair of the interdisciplinary Center for Land Use and Environmental Responsibility, at the University of Louisville
  • Derek Hyra, associate professor in the School of Public Affairs, American University

I will moderate the debate alongside Rolf Pendall, co-director of the Metropolitan Housing and Communities Policy Center at the Urban Institute.

On the anti-zoning side, participants are expected to argue that zoning increases housing costs and segregation, while reducing property rights, individual liberty, and economic growth. On the pro-zoning side, participants are expected to contend that zoning is a boon to environmental justice, growth management, and community preservation.

The debate will conclude by contemplating possible reforms to zoning regulation. This portion is particularly important because there is often substantial local pressure to zone restrictively. Overcoming it often requires ingenuity.

Join us for the full conversation here.

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.

An All-Too-Common Misunderstanding of How Health Insurance Markets Work

I receive lots of daily health-policy newsletters. This morning, one of them exhibited an all-too-common misunderstanding and bias about how health-insurance markets work.

The setting is the “Consumer Freedom Amendment” Sen. Ted Cruz (R-TX) has offered to the Senate GOP’s bill to rewrite ObamaCare. Contrary to what the Republican Party has pledged for seven yearsa pledge that presidential candidate Donald Trump even put in writingthe Senate bill would not repeal the health-insurance regulations that are behind ObamaCare’s rising premiums, race-to-the-bottom coverage, and collapsing insurance markets. The Cruz amendment would keep those regulations on the books, but allow consumers to purchase insurance that does not include all of ObamaCare’s hidden taxes and coverage mandates. In effect, it would separate the market. Currently healthy enrollees would opt for the lower-cost “Freedom Option” coverage, which would stay with them once they developed expensive illnesses. Currently sick enrollees would opt for ObamaCare-compliant plans. Premiums for ObamaCare-compliant plans would rise even more than they already have, essentially turning ObamaCare’s Exchanges into high-risk pools that would require lots of government subsidies to keep afloat.

Enter one of my daily newsletters, which matter-of-factly reported:

Of course, everyone paying into the system for those who most need care is the way insurance is fundamentally supposed to work.

Of course! I hear this sort of thing all the time. Now, there is a charitable interpretation that would render this particular phrasing just barely true, but I am fairly sure that interpretation is not what the author intended to convey. Instead, the sentence glosses over a distinction so crucial that entire insurance markets hang in the balance. And it does so in a way that presents the (legitimately disputed and controversial) pro-ObamaCare ideology as an of-course-this-is-fundamentally-true fact.

Fundamentally, insurance markets are a system of subsidies. People with the same ex ante (i.e., before-the-fact) risk of needing medical care pay into the system to subsidize the few in that group who will develop expensive medical needs. We know insurance is supposed to work this way, because of what happens when you try to pool together people with different ex ante health risks at the same premium: the system of subsidies collapses. (See: state-level experiments with community rating, ObamaCare’s CLASS Act, the child-only market under ObamaCare, U.S. territories under ObamaCare, and Exchanges in dozens of counties). Risk-based premiums, exclusions for preexisting conditions, and other measures that ObamaCare supporters hate are actually consumer protections. They exist to keep that system of subsidies stable, so it can keep doing the most good possible by subsidizing people who become sick.

The idea that everyone should pay the same premium regardless of risk arises because left-of-center folks want to cram additional, hidden subsidies into the insurance system. They want to do this rather than create explicit taxes and transfers because, as Jonathan Gruber taught us, there is not sufficient political support for explicit taxes and transfers. But again, when you force insurers to cover unlike risks at the same premium, insurance markets collapse. So ObamaCare throws tons of money at insurers—with everything from the individual mandate to risk-adjustment—in the hope of preventing a collapse. Sometimes it prevents a collapse. Sometimes, not so much.

The above sentence therefore amounts to saying, “Insurance is fundamentally supposed to work exactly like ObamaCare supporters want, with mandates and lots of government subsidies, not like its opponents say.”

That’s what the news tells me, anyway.

Does Preventive Care Reduce Health Costs?

One anecdote does not constitute evidence; and I cannot vouch for the accuracy of the story below.  But the information in the email, reprinted with the sender’s permission, is nevertheless suggestive:

Dear Professor:

I wasn’t sure to whom I should write, so please pass this along to an economics colleague who specializes in health care costs.

My husband, a man with a BMI of over 40 (a lifelong—since babyhood—“issue”), is currently working as a limousine driver for a commercial carrier regulated by FMCSA [the Federal Motor Carrier Safety Administration]. In October FMCSA’s Medical Review Board developed new regulations for drivers’ medical evaluations which occur every two years. They are that anyone with a BMI of 40 or more or a BMI of 33–39 with 3 of 11 risk factors (of which 2 are being male and over age 42) be referred for screening for obstructive sleep apnea regardless of whether they show any symptoms of it other than sleepiness while driving. (As my husband pointed out to one of the approved medical examiners at his exam a couple of years back, anyone who answers the question, “Have you ever driven while tired?” with a ‘No’ is lying—there isn’t anyone over the age of 18 who hasn’t driven late at night, in the wee hours of the morning, on a long road trip or to and from work/study after a long day or pulling an all-nighter without feeling tired; since he gets to sleep during the March–October busy season for 1–4 hours at a time, yes, he is tired.)

The salient statistics and facts: According to one organization, 53.2% of FMCSA’s approximately 4 million drivers have a BMI which will fit into the damned-near instant referral for screening. Here in Rhode Island screening costs between $190-$500 we have discovered over the last 2 years. The Medical Review Board’s recommendations note that a negative result is meaningless (essentially), so theoretically, around 2 million people will be referred for a $200 test every 2 years. That’s a “preventive health care” cost of $200 million per year!

Isn’t the point of “preventive health care” to save money? … [T]his “prevention” is penalizing a sizeable (no pun intended) minority … and wasting a lot of health care dollars on testing and treatments which do nothing to make anyone healthier.

For more systematic evidence on whether preventive care is cost-effective, see here.

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