Insurance is Not Healthcare

For a long time, conservatives and libertarians have been pointing out that Obamacare has come at a steep price for the insured. Not only are health insurance premiums rising, but the new plans cover less, demand healthcare within ever-shifting networks of approved providers and foist larger out-of-pocket expenses on patients.

Well, looks like the New York Times finally figured this out:

A study by the Commonwealth Fund this month found that the rise in health insurance premiums in employer-based plans had slowed in 31 states since the passage of the Affordable Care Act (good news, right?). But premiums were still rising faster than median incomes (hmm). More important, perhaps, the researchers found that patients were paying more in health care expenses than ever before, during a time of stagnant wages (not so great). In fact, nearly 10 percent of median household income now goes to pay premiums and deductibles, the study found. And that does not include other kinds of health payments that patients now encounter, such as co-pays and uncovered drugs or services.

A recent New York Times/CBS poll found that 46 percent of Americans said they had trouble affording health care, up 10 percentage points in just one year. Some of the cost problems may ease as patients — now known as health care consumers — learn what to expect and how to choose and navigate their plans.

In other words, premiums slowed down … but only because out-of-pocket expenses increased. On balance, that might not be such a bad thing. I’ve long advocated high-deductible plans as a way to bring the healthcare consumer back into the picture. David Goldhill once pointed out that if we replaced Medicaid with a high-deductible plan, we’d save enough money to give every poor person a voucher to cover their deductible.

But this isn’t the high-deductible idea. This is creating a hyper-regulated marketplace in which insurers are expected to provide “reasonably priced” health insurance to everyone, no matter how sick they may be. So doctors flit in and out of approved networks. Out-of-state clinics come to be preferred over in-state ones. And all of this is enforced with the threats of massive bills if you don’t do the insurance company’s bidding. And if you do their bidding, you’re still facing far larger healthcare bills than you were dealing with before Obamacare.

All of this was predictable of course. You simply can not expand health care coverage to ten million people — many of whom couldn’t get coverage because of expensive medical conditions — and not have it make insurance more expensive. We warned people about this for years. We had concrete examples of this in places like New York and Massachusetts. And yet everyone is acting all surprised when they discover that healthcare isn’t free.

Note one thing the story leaves out: the increasing number of doctors who are refusing to see Medicaid patients. Medicaid expansion is a big reason the Obama Administration can claim that they’ve insured ten million people. Only a couple of million have gotten private insurance thanks to Obamacare; most are in the Medicaid gulag.

Given the media’s lag, I expect we’ll start seeing stories about that in about 2019, at which point it will be blamed on President Walker.

Addendum: You may remember that a big pillar of Obamacare was that it would be paid for, in part by the savings from Electronic Healthcare Records. Yeah, that’s not working out either. Again, this was predicted. The one thing we all knew going into this was that EHRs are very expensive.

The Bill Comes Due

Remember all that talk about how Obamacare was going to save us all this money? Evil uncaring heretics like me pointed out that this was impossible. You can not insure more people and you can not outlaw cheap insurance without increasing healthcare costs. Romneycare saw costs soar after implementation because … funny story … when people have insurance they see the doctor more often. Even the dreaded ER visits went up.

But no, we just didn’t understand. We were letting our hatred of poor people cloud our vision. Why the cost curve bent down in 2009-2013, which was proof that Obamacare was keeping costs down even before it was implemented!

Um … oops:

As I reported earlier this month, there were already signs of growing health care spending in the fourth quarter of 2013, when it jumped 5.6 percent, which had been the fastest clip since 2004.

But the 9.9 percent jump (on an annualized basis) came in the quarter from January through March, which was the first three months in which individuals who gaining coverage through the law were able to use it. That was the fastest rate recorded since health care spending grew at a 10 percent rate in the third quarter of 1980.

The data released on Wednesday, as part of the government’s report on gross domestic product, is preliminary and subject to revision in the coming months.

Note that first quarter GDP growth came in at 0.1%, so the non-healthcare section of the economy shrank by 1% last quarter.

So … are the Obamacare supporters admitting that they were wrong? Uh, not exactly:

But let’s be very clear about what’s happening here: an improving economy is allowing Americans to now spend more on health care, while people who have previously been uninsured are finally getting insurance and are using their care. In the meantime, health care prices are still continuing to grow at low rates, reducing Americans’ health costs.

ThinkRegress goes on to say that, in the long run, healthcare costs will come down because the IPAB will force changes in healthcare reimbursement. Therefore we should be celebrating because the first half of the CBO’s prediction — healthcare costs will rise — has come true!

There are many many problems with this. The biggest is history. IPAB is not the first effort by the government to reign in healthcare spending. There is a whole alphabet soup of programs — RBRVS, GRH, SGR, etc. — that have completely failed in this regard. And that leads to the bigger point. Those of you who have followed the budget debates for the last twenty years know how this plays out: we get spending increases today with the promise of spending cuts tomorrow to balance them out. And those spending cuts never happen. Because tomorrow we are told that spending needs to go up because of the economy, the uninsured, the homeless or Venus being in Taurus.

So what will the Democrats and their apologists say when health care costs continue to rise? Well, besides blaming Republicans, I expect they will claim that this “proves” how much we need single-payer. To prepare for that, read McArdle today. Over the last twenty years, uber-controlled monopsony single-payer healthcare systems have restrained their spending growth to … about what we’ve had in the United States. The big growth in US healthcare spending occurred forty years ago and is now baked into the system. So … no, Virginia, socialized medicine will not cure what ails us.

Buckle your seat belts, friends. The ride’s only going to get bumpier.

We Should Hope This Works

As the insurance exchange debacle drags on into its fourth week, the Democrats and the Obama Administration continue to dodge questions, obfuscate and try to find ways to blame Republicans. Yesterday’s hearing featured Democrat Frank Pallone calling the hearing a “monkey court” because Republicans have the temerity to wonder what the hell is going on with an overhaul of one-fifth of our economy. The Democrats’ media dog-washers are trying to silence liberal critics of the system using the “under no circumstances ever agree with conservatives, especially when they’re right” doctrine.

But they can’t keep up the facade. Conservatives, libertarians and honest liberals are detailing the many flaws this system has and the significant hurdles it faces getting online. Those critics are not passe about this; they are livid. And they should be.

One of the memes that is emerging among the Obamacare defenders is that Republicans and other opponents of Obamacare have no right to criticize the utter complete failure of the federal exchanges because we opposed it reform the first place. Since we opposed Obamacare, how can we complain about it? You’ll remember, of course, how that logic was applied to the Iraq War. Those who opposed the war never complained about how the war was executed or what happened in the aftermath of it.

Ahem.

But as an opponent of Obamacare myself, I am highly critical of the rollout because … I actually want the insurance exchanges to work. Everyone — conservative, liberal, libertarian or monarchist — should want the exchanges to work for three very important reasons.

First, the exchanges are one of the few good ideas that got into Obamacare. One of the things that drives up insurance costs is the lack of competition. The exchanges force open competition between the insurance companies, which is a good thing. They’re not perfect, of course or even particularly good. A better exchange system would have cheaper entry-level insurance, allow insurance to be sold across state lines and have fewer coverage mandates (it would also, you know, work). But compared to subsidies, coverage mandates, purchase mandates, Medicaid expansion and the IPAB, the exchanges are almost smart.

Second and more far more important is that if the insurance exchanges don’t work for a long time or if the purchase mandate is delayed, the result could be the complete destruction of the individual insurance market.

A lot of people don’t appreciate how much Obamacare is like a house of cards. Insurance companies can no longer deny coverage and have priced insurance on the exchanges based on the idea that people will be “taxed” for not buying insurance. This only works, however, if people are actually forced to buy insurance. Otherwise, they will wait until they are sick to insure themselves. If people can’t buy insurance or aren’t made to, the result is a death spiral where insurance gets more and more expensive and more and more people wait until they are sick to buy it.

This isn’t some theoretical possibility. It happened in New York:

New York state’s guaranteed issue and community rating rules—the two regulations that limit how insurers can charge based on health history and require them to sell policies to all comers—took effect in 1994. At the time, there were about 752,000 policyholders in the state’s individual market, or about 4.7 percent of the non-Medicare population. But by 2009, according to a Manhattan Institute report by Stephen Parente and Tarren Bragdon, the state’s individual market had practically disappeared, leaving just 34,000 participants, or about 0.2 percent of the non-elderly population. Individual insurance premiums, meanwhile, were among the highest in the nation—about $388 on average in 2007, compared with just $151 in California, another big Democratic-leaning state. In New York City, the annualized premium cost for individuals was more than $9,300 and more than $26,400 for a family.

The result, in other words, was a combination of sky-high premiums and far fewer insured individuals.

The individual markets only survived at all because insurance companies could make up the losses from less stupid states. But Obamacare is national; there is no other state to make money off of.

If people can’t buy insurance, the result will be the complete meltdown of the individual insurance market and millions of Americans becoming uninsured. In fact, many have already lost their insurance as companies cancel individual policies in anticipation of the Obamacare exchanges.

Now maybe you think that’s acceptable. Obamcare will implode, the Democrats will be blamed and Republicans will sweep back into power (assuming they don’t screw it up). But look beyond the politics. Millions of Americans will be cast into an insurance purgatory that they may never get out of. The individual insurance market works because of people being good citizens — buying insurance when they don’t need it so that the market can support those that do. If that culture is destroyed, if Americans get into the habit of waiting until they are sick to buy insurance, they may never get out of it. A good example of this is the Israeli Daycare Study where daycare centers imposed a fine on people for picking up their kids late. The result? More parents showed up late because they could now buy off their guilt. And when the fine was rescinded, the parents kept showing up late because the social norm of being on time had been effectively destroyed.

Once the individual market collapses, we may never be able to rebuild it. We may be in a situation where your insurance choices are either through your employer or through Medicaid. That is an extremely high price to pay for making Obama look bad and maybe winning an election.

(It has been suggested, here and on other blogs, that this sabotage is deliberate; that Obama is deliberately crippling the individual market to lead us toward single payer. I’m open to the possibility of a subconscious desire to wreck the private market. But I have a hard time believing in any conspiracy with this administration. It’s not that they wouldn’t try. It’s that these guys are so incompetent that if they actually tried to sabotage the exchanges, the result would be a perfectly functioning exchange system.)

Now my second point may cause many liberals — who see Obamacare as a stepping stone to single payer — to quietly rejoice. Already, many are blaming this on the private sector. Who will be the first to say this “proves” we should trash private insurance and go with single payer? Who will be the first to say we should just expand Medicaid to everyone who isn’t insured by an employer?

But this idea is mind-bogglingly stupid. If the Democrats destroy the individual insurance market and increase the number of uninsured, Americans will not thank them for it. We are not going to rise up in a mass and say, “Oh, you great ones who took away our insurance. Tell us what to do next!”

And frankly, if anyone thinks Medicaid is the future of health insurance (oh, wait, here’s Krugtron the Ever-Wrong making the case) they need to spend a few weeks working in a hospital that only takes Medicaid. Medicaid is only marginally preferable to no insurance at all, providing a consistently lousy quality of service. That’s how it keeps costs down. In fact, Krugman’s defense of Medicaid is made entirely in terms of costs. His only acknowledgement of the downside of consigning millions to the Medicaid gulag is this:

But the problems of access, such as they are, would largely go away if most of the health insurance system were run like Medicaid, since doctors wouldn’t have so many patients able and willing to pay more.

Yes. I’m sure those doctors will take massive pay cuts rather than leave the field. Let’s apply Krugman’s logic to academia, another industry afflicted with runaway costs. We could cut those costs by turning the entire shebang to the community college model. And the problem of finding good professors for those colleges would disappear if they no longer had universities like Princeton able and willing to pay more.

(My apologies to community colleges, who are far better at teaching than Medicaid is at insuring.)

Obamacare is a bad law. It ignores everything we’ve learned about healthcare reform over the last decade and applies a model that at least twenty years old. But the situation with Obamacare could get far, far worse and could do permanent damage to the healthcare system if the exchanges don’t start working. Everyone should hope that they do because this isn’t a political game: this is the healthcare of millions of people. We will never be able to truly reform the system if there’s nothing left to reform.

The Debt Ceiling … Again

I think I’ve made my contempt for Obamacare pretty clear. I’ve pointed out its deep flaws, its underestimated expenses, its dubious Constitutionality. In my more cynical moments, I wonder if its flaws aren’t the point: to make the system so much worse that people will demand socialized medicine. We’re already seeing employers shed insurance and rates go up. It’s been hitting me personally as my employer has had to raise insurance rates because of increasing costs.

But you know what? As much as I hate Obamacare, it’s not worth crashing the debt ceiling over.

As you know, we reached out statutory debt limit a few months ago. The Treasury Department has been using various means to avoid exceeding it, but those means will run out within a month. And a significant fraction of the Republican caucus is already contemplating a debt ceiling crash, refusing to raise the debt ceiling unless Obamacare is repealed or defunded.

Let’s take those demands on their own terms. Repeal is not going to happen with a Democratic Senate and White House (and might not happen even if they were in GOP hands). Defunding it sounds good, but as Tom Coburn has reminded us (PDF), this will not actually stop the law from being implemented. The statutory parts will be in place. All that will be denied are funding for insurance exchanges and subsidies. Let me clarify that: people and employers will still be forced to buy insurance, but the mechanisms designed to ease the financial burden will be denied. I don’t see how that’s better.

So this tactic will be ineffective at best and bad at worse. And in return, we would get … the first ever default on American debt. The negative impact of that on the American economy is not imaginary. Look what happened last time:

High-frequency data on consumer confidence from the research company Gallup, based on surveys of 500 Americans daily, provide a good picture of the debt-ceiling debate’s impact (see chart). Confidence began falling right around May 11, when Boehner first announced he would not support increasing the debt limit. It went into freefall as the political stalemate worsened through July. Over the entire episode, confidence declined more than it did following the collapse of Lehman Brothers Holdings Inc. in 2008. After July 31, when the deal to break the impasse was announced, consumer confidence stabilized and began a long, slow climb that brought it back to its starting point almost a year later. (Disclosure: We have a consulting relationship with Gallup.)

Growth in nonfarm payrolls decelerated to an average 88,000 a month during the three months of the debt-ceiling impasse, compared with an average of 176,000 in the first five months of 2011 (see chart). Payroll growth subsequently recovered and has averaged 187,000 jobs a month since. Despite the rebound in job growth, employment is likely still below where it would otherwise have been.

There are also more visible permanent scars. The sense that the U.S. political system could no longer credibly commit to paying its debts led the credit-rating company Standard & Poor’s to remove the U.S. government from its list of risk-free borrowers with gold-standard AAA ratings. Just as a poor credit score raises the interest rate you pay in the long run, so a worse credit rating will probably raise the interest rate on our national debt.

The debt ceiling fight caused 300,000 fewer people to find work that summer, even is we assume no longer-term impact. Real progress was made on the debt in the next two years, but if a debt ceiling crash raises interest rates even 1%, that will mean a spike in federal interest payment that will wipe out almost all of those gains. Is that worth having what amounts to a national temper tantrum over Obamacare?

But there is something more dangerous at play here. When the Republicans threatened to hit the debt ceiling in 2011; when Obama voted against it years earlier; there was at least a strain of thought involved. We couldn’t raise the debt ceiling, the crashers told us, because we were going to default anyway. Our debt was out of control. Would you extend more credit to someone who was already wildly overspending? We couldn’t possibly raise the debt ceiling until our fiscal path was stable.

But this isn’t a fight over debt. If it were, we’d be talking about tax reform or entitlements. This is threatening to crash the economy if the Republicans don’t get their way. If we allow this precedent to be set, where does it stop? Judicial nominations? Union regulation? Are we going to threaten the debt ceiling when Republicans don’t like the table arrangements at White House banquet?

This isn’t a negotiation. This isn’t a tactic. This isn’t politics. This is a hostage situation. The GOP is holding a gun to the country’s head and threatening to blow the brains out of our economy if they don’t get what they want. That I want the same thing — the repeal of Obamacare — is irrelevant. You don’t deal with a termite infestation by burning the house down.

Pause a moment. Put aside your feelings about Obama and Obamacare. Do you want this precedent set? Do you want the Democrats to use it against President Rubio? Do you want them to threaten to hit the debt ceiling if he doesn’t fund abortions? Or pass universal daycare? Or raise taxes on the rich?

This bullshit must stop. It’s gone too far. This isn’t a game; this is our country. It’s bad enough that we’re staring down the barrel of a politically-disastrous government shutdown. But a debt ceiling crash? As much as Obamacare is going to hurt us, it’s peanuts compared to that. Millions of us are still unemployed; others in precarious positions. For a bunch of people with guaranteed jobs to promise to make things worse for no discernible gain (other than making talk-radio yammerheads happy) is the most breath-takingly irresponsible unconservative thing I can imagine. And, unfortunately, it’s about what I’ve come to expect.

The Continued Implosion of Obamacare

Great Scott:

A labor union representing roofers is reversing course and calling for repeal of the federal health law, citing concerns the law will raise its cost for insuring members.

Organized labor was instrumental in getting the Affordable Care Act passed in 2010, but more recently has voiced concerns that the law could lead members to lose their existing health plans. The United Union of Roofers, Waterproofers and Allied Workers is believed to be the first union to initially support the law and later call for its repeal.

The roofers are in a uniquely bad position. As McCardle points out, union shops are facing stiff competition from smaller non-union shops. Those small shops will now be getting a subsidy to buy insurance on the exchanges. Doubtless, had the Democrats not passed a draft bill in the first place, some union subsidy would have accounted for this. But it was a draft bill and it does have these problems. So expect more unions to come out in favor of “repeal and replace”.

Oh, and it’s not just unions:

A senior Democratic senator who helped write President Barack Obama’s health care law stunned administration officials Wednesday, saying openly he thinks it’s headed for a “train wreck” because of bumbling implementation.

“I just see a huge train wreck coming down,” Senate Finance Committee Chairman Max Baucus, D-Mont., told Obama’s health care chief during a routine budget hearing that suddenly turned tense.

Baucus is the first top Democrat to publicly voice fears about the rollout of the new health care law, designed to bring coverage to some 30 million uninsured people through a mix of government programs and tax credits for private insurance.

Baucus is playing politics a bit here since he’s up for re-election. And, to be fair, he’s not calling for Obamacare to be repealed but worrying that the exchanges will not be ready (a concern we talked about last week).

But we’ve now got at least one labor union and one liberal senator publicly acknowledging what everyone has know for several years: this isn’t going to work.