Boonton defends ACA on Hayekian grounds

by on November 4, 2013 at 3:18 am in Economics, Law, Medicine | Permalink

This one is from the comments:

This illustrates what I think is an advantage the ACA has, it’s remarkably flexible and dynamic. Most people who complain about it being too complicated, or too radical, neglect to consider just how complicated and radical their own pet solutions would be. From the left perspective, a national single payer system entails abolishing all insurance and having gov’t set payment levels for all existing and new medical services. You can argue back and forth whether this is a good idea, but clearly it would radically disrupt how almost every American pays for their health care. Likewise even though such a bill may be ‘less complicated’ as measured by some stupid metric like # of pages, it’s not less complicated in its implementation. Just consider the transition to single payer along would probably entail thousands of pages of regulations and multiple court cases. Now single payer advocates can argue that on net it will eliminate the complexity of having doctors billing multiple insurance companies, navigating numerous payer systems etc. But whatever the merits of that argument the system itself would not be free of complexity.

Now consider right wing proposals. Abolish employer based insurance? You’re talking disrupting how nearly 50%+ of working people have had insurance for generations now. Huge voucher schemes to buy private insurance? Err hello the exchanges are only expected to be covering 7M people, and they want to cover 300M+ with vouchers including the entire Medicare population?!!!!

While both types of ideas seem simpler when reduced to some talking points and powerpoint presentations, they really aren’t. They both consist of risky gambles, betting the entire system on a single model and throwing away all other models the economy has on the assumption that they will not be needed anymore (if you abolish employer insurance and discover you screwed up big time, getting it back is going to be hard, so is pulling back Medicare-Voucher, or a single payer system).

Now consider the idea quoted above. It basically sets a cap on subsidy growth at slightly above GDP over the long run. If that results in people being very price conscious about medical expenses and ‘bending the curve’ downwards, that’s fine. But what if people don’t want the curve bent downwards? What if they find that they are willing to spend a larger share of income on healthcare because health care innovations are more worthy than other types of innovations (i.e. such as ’3-d tvs’ or the next generation of ipads)? Then they can. What if they think gov’t should fund additional subsidies? Well that question can be taken up in the future and debated in light with what our budget situation looks like in the future. In the ACA you have a lot of flexibility for the system to evolve because it essentially let’s the multiple systems we have in the US work and allows the ones that work best to expand and the ones that work less to contract. It may very well be that one set of systems is so great that they come to dominate the market (liberals are betting private insurance can’t work in the long run, conservatives that the single payer-systems like Medicare/caid have to eventually convert to private insurance). The ACA could evolve in either of those extremes but it can also evolve into a mixed system (the elderly are on Medicare, the very poor on Medicaid and everyone else is in a robust private market where employer based coverage competes with individually purchased policies)

You also will find a response there from John Thacker.

Pete November 4, 2013 at 5:45 am

A national single payer system does _not_ entail abolishing all insurance; the UK’s famously centralised National Health Service coexists with private insurance. Private insurance is still common among people who want faster or more personal service for non-urgent treatment.

Roy November 4, 2013 at 6:10 am

I doubt a UK style system with an NHS and Harley Street coexisting would last very long in the US. You want to see class war? Let’s just say “two tier health system” in a political campaign. This would be how to get it.

Notice than Canada doesn’t have this system either, of course many well off Canadians go to the US, but it is interesting how it isn’t actually allowed in Canada. The UK is far more class ridden, and was even less egalitarian when the NHS was set up in the late 40s. I don’t see this as workable in North America yet.

J.V. Dubois November 4, 2013 at 7:02 am

Not true. You have private insurance even in such an egalitarian countries like Austria. Yes, if you have this private insurance you get to select from better food menu or have private room in hospital, but everything essential (like actual operation etc.) is the same as for everybody else. So you may be right that some political party may choose to run the campaign on this scare, but it is by no means some rightist idea on its own merit.

On the contrary, there is a perfectly reasonable question of what amenities should be paid out by government. I can imagine some patients preferring hospital bed with 5 selection food menu, 24×7 personal care by nurse, cable TV etc. being more comfortable then being at home by their lonesome. I would rather see all that money going for these suplementary services going to vital medical services covering more people – and if someone really wants 5 star hotel experience then why the heck not letting him pay for it.

Bob November 4, 2013 at 10:19 am

In countries with universal healthcare coverage, the existence of extra private insurance is extremely common, and it’s not just for rich people.

It’s precisely the fact that truly expensive things will be covered by the state which makes insurance affordable. Those insurance companies don’t have to worry about how unprofitable a cancer patient is: That will be handled by the public care anyway. But they sure can have a hospital with far nicer rooms and somewhat faster care.

In some cases, private practices don’t even care about insurance: I’ve paid full fees in Europe that were comparable to US copayments.

John Thacker November 4, 2013 at 11:36 am

The ACA as written has strong incentives towards a two-tier health system. It combines a deduction, which is worth much more to people at higher incomes with a higher marginal tax rate, for employer insurance, with subsidies for people at lower income for buying in the exchanges. (And some middle income people get caught in the doughnut hole.)

Employers with largely higher income employees will have incentives to keep employer insurance, whereas employers with largely lower income employees will have incentives to drop it. People are not eligible for subsidies if the employer offers health insurance, so a low income employer dropping health insurance can save their employees money. Even if the employer mandate (now delayed) takes effect, it can still be win-win for the employees if income is low enough.

Not that all employees in a lower-income employer will benefit; those who have second jobs in a married family will often be worse enough, if not eligible for subsidies.

I think that’s an argument in favor of a tax credit; it would be less of a two tier situation. I’m not sure that equal treatment would actually eliminate employer insurance. There still may be a reason why people would prefer group coverage– my employer offers group life insurance, some employers have cafeterias or other food, etc. However, I think that the decision would be less driven by income than the ACA system (deductions for some, subsidies for others.)

A system where lower income people are much more likely to be pushed to the exchanges by the tax system, whereas higher income people are much more likely to be pushed to employer insurance, is a recipe for a two tier system.

Boonton November 5, 2013 at 11:13 am

John,

The ACA as written has strong incentives towards a two-tier health system. It combines a deduction, which is worth much more to people at higher incomes with a higher marginal tax rate, for employer insurance, with subsidies for people at lower income for buying in the exchanges. (And some middle income people get caught in the doughnut hole.)

I think this statement is a bit deceptive. The ACA did not establish deductions for employer insurance, those have been there for generations now and those deductions have always been worth more to those in higher marginal tax brackets. So it’s not at all accurate to say the ACA moves ‘towards’ a two-tier system, the two tiers were already well in place.

The change then is those with the best of the best health plans get a little bit less tax favoritism (i.e. the ‘cadillac plans’) and those on the bottom tier get help buying insurance through subsidies. If anything this is a move to bring the bottom tier up and to slightly bring the top of the very top tier down slightly.

Rahul November 4, 2013 at 7:22 am

Out of curiosity, has anyone tried to estimate what the total budget would be to provide a national single payer system?

Also, in the current status quo how does that compare to the sum of Medicare, Medicaid, VA, private premiums, deductibles and employer contributions?

To me, calculating these seven numbers might be an illuminating exercise.

Dan Weber November 4, 2013 at 9:19 am

It’s been a few years since I checked, but Medicare and Medicaid have a budget of about $2500 for every man, woman, and child in America, which is above the median for what advanced countries spend on health care in toto.

One of my dream scenarios is that the conservatives would dare the progressives “oh, you think that single-payer [1] is so much cheaper? Fine, take the current budget you’ve already got and make it work!”

Let HHS or whomever run what it wants, using monoposny purchasing power, but not legislative or executive power, and see how it works. The progressives out to be pretty sure that it will work, and the conservatives ought to be pretty sure that it won’t work and will completely backfire on the progressives, and in the meantime the private market continues to exist.

[1] This is using the above definition of single-payer, which is the government paying for a bunch of stuff but other insurance providers could still exist. So it’s not the literal definition that you would get from the words “single payer.” We can definitely quibble about the definitions but I don’t see much point.

Rahul November 4, 2013 at 9:35 am

And that’s just those two programs? When you add the private premiums people pay plus the spending of the entirely uninsured it ought to add up to a pretty substantial kitty.

I’m not saying single payer is practical or desirable, just that we ought to be thinking more about why we are spending so much and getting so little out of it. Just finessing the who pay and how is unlikely to be a very good answer.

Dan Weber November 4, 2013 at 9:43 am

The 2012 budget for HHS, including Medicare and Medicaid, was $787.8 billion, or $2514 for each of the 313 million people in America.

Checking my facts again, that is below OECD countries, but not far below. http://kff.org/health-costs/issue-brief/snapshots-health-care-spending-in-the-united-states-selected-oecd-countries/

prior_approval November 4, 2013 at 9:59 am

Do keep in mind that Medicare (anyone over 65) is a very high cost group.

Which makes using averages difficult – I am unaware of any breakdowns of how expensive AOK insured members over 65 cost in Germany (AOK being the rough – very, very rough – German equivalent of Medicare/Medicaid). And Germany, while stilll a third cheaper than the U.S. on a per capita basis for health care costs, is a notably expensive country, as is Switzerland.

Yancey Ward November 4, 2013 at 10:05 am

You are missing the point. Progressives constantly claim that the US could spend what other OECD countries spend per capita on health care and have universal single payer. Dan is suggesting that, if this is true, then progressives should be able to accomplish by rearranging the spending of Medicare and Medicaid to accomplish that goal.

Rahul November 4, 2013 at 11:08 am

@Yancey:

So, what is the point? Progressives be damned; let’s assume they are wrong since that’s what you seem to imply.

Personally, I’m not demographics-blind; so I’ll concede that the unique genetic / poverty / lifestyle mix of the US will probably mean we need higher per capita spending to achieve OECD-like outcomes. But the relevant quantitative question is how much more? What’s the additional spend needed for the median American person? 50%? 100%?

Yet, the sum total of current spending seems much much higher. Why begs the question, why?

ThomasH November 4, 2013 at 12:52 pm

I think that the best argument for ACA is that it is better basis from which to begin to reform health care costs than was the status quo ante. Ideally we could have fixed access and cost at the same time, but if we fix access before we tackle cost, so be it.

And of course all tax deductions should be credits, not just for health insurance costs.

Dan Weber November 4, 2013 at 1:07 pm

Looking back, I left off my conclusion: this would establish a national health care system with a limited budget, and so it would force us to evaluate some procedures as Worth It and others as Not Worth It Even If They Would Save Your Life.

The national backstop would always be there for everyone. We wouldn’t try to do things like force everyone into an insurance company so that the sick can get care. Just have the government do it directly instead of a bunch of weird maneuvers to try to pretend we’re having a free market deal with it.

(And while I’m at it, fund it via a VAT instead of a wages tax, tax health care benefits as wages, and let people opt-out of this program by getting a (say) $3000 tax credit towards their own health insurance.)

Floccina November 4, 2013 at 5:06 pm

Medicaid for all?

Boonton November 4, 2013 at 8:59 am

Keep in mind the US has at least three single payer systems. It has Medicare (nice), Medicaid (stingy), and the VA (not sure how good it is). It might even have more if you consider that the incarcerated population is so large that it’s health care is starting to become a serious issue.

I agree you could have single payer with private insurance riding on top. But remember there’s not a single ‘single-payer’ system, there are multiple single-payers that exist indifferent countries as well as a huge set of possible single-payer systems that may not exist anywhere but could, in theory.

My point was that the ACA neither precludes advocates of single-payer from pressing their case, but unlike the charges of some on the right it doesn’t ordain that single payer will be the end point. If it turns out that when the dust settles and most people with health based insurance are resonably ok, people with Medicare/caid are ok and there’s a functioning market for people to buy individual plans (though this may be a minority), then it may very well become more difficult to advocate single-payer.

Options are left open, which I think is a value that is grossly overlooked with the ACA. But nothing comes entirely for free. The price of leaving options open is complexity. People should not forget that reforms that are much more simple are also much more destructive.

John Thacker November 4, 2013 at 12:07 pm

I agree that flexibility is good. But with all due respect, you’re making the same sort of charges against both the single-payer and the tax credit plans actually offered by the left and right that some on the right are making about ACA. (I agree that the charges of a conspiracy of intentional failure of the ACA are highly unlikely.) Political considerations– that most people have been happy with their own insurance– have forced advocates on all sides to tailor plans in ways that don’t formally take away any currently offered insurance.

Due to the same considerations that resulted in the ACA, single-payer advocates continually pushed for a “public option” plan that didn’t actually get rid of all plans, but allowed people who liked their insurance to keep it, but to buy in if they wished.

Too, McCain’s plan did not “abolish employer based insurance” as you claim, but offered a tax credit that could be used for employer insurance or not. (It would be worth more at lower and middle class income levels than the current deduction, but less in the highest tax brackets.)

In both of these basic models, advocates could and would claim that adoption of the government plan, or of individual plans, would be a process of evolution; people would have the choice of keeping their current option. Yes, some employers might drop their current plans to push people onto the public option or the individual plans funded by tax credits– but that’s equally true of the ACA. The employer mandate is delayed, but even with it, it’s a win-win for employers and low income employees for plans to be dropped in order to get subsidies. Employees are only eligible for subsidies of the employer doesn’t offer qualifying insurance at all.

It’s true that the “public option” plan could be tweaked and priced in such a way as to “unfairly” encourage everyone to go to it. It’s also true that the tax credit plan could be manipulated that way. (And look to the recent Medicare Advantage debate for an example of how the arguments would go.) But again that’s equally true of the ACA.

Boonton November 4, 2013 at 2:12 pm

John

Too, McCain’s plan did not “abolish employer based insurance” as you claim, but offered a tax credit that could be used for employer insurance or not. (It would be worth more at lower and middle class income levels than the current deduction, but less in the highest tax brackets.)

Did it preserve the tax deductions employers got for providing insurance? If so then wouldn’t it be doubling down on employer provided insurance as well as be heavy on increasing deficits?

If it abolished it, then yes maybe many employers would keep offering benefits as something employees could ‘buy’ with their tax credit but there’s no doubt you would be attacking employer provided benefits with such a program. Keep in mind that both with the Hillarycare debate and the Obamacare debate the one criticism that really, really, worked against reform was the charge that it would mess with the 90% of people who were currently happy with their healthcare.

Now for employees and self-employed who did not benefit already from employer provided coverage, how did McCain propose to address pre-existing conditions? Did he support a community rating type system where in order to use the tax credit to buy a policy, the insurance companies selling the policies had to agree to keep premiums roughly equal and accept all comers? If so then that sounds very much like the ACA’s exchanges.

Boonton November 4, 2013 at 4:32 pm

Let’s also remember that politically it isn’t at all clear ‘the right’ really wants McCain’s 2008 proposal. I strongly suspect that if in the middle of the ACA debate Democrats proposed McCain’s scheme Republicans would have been just as hostile and just as much inclined to vote against it, offering up trivial excuses for why it wasn’t the ‘real’ McCain proposal. Since then there’s little evidence the right has offered serious proposals besides simply trying to force reductions in Medicare/caid via voucher mechanisms.

Jonfraz November 4, 2013 at 9:13 pm

Boonton,
Employers do not get a tax deduction for employee health insurance. Employers only pay income tax on profits, and that automatically excludes (along with much else) all forms of employee compensation whether wages or benefits. No one was proposing to change that, which would outraged every business from Mom and Pop firms to Walmart and Microsoft.
The McCain plan would have abolished the EMPLOYEE tax break for health insurance– which is a very hefty tax break for the insured even if most people do not realize it. I do, because my domestic partner is on my policy and since we are not married or legally related I am taxed on the full premium– I pay about an extra $240 a months in taxes (federal, state and local) as a result (Note: this is accurate and verified figure; please do not anyone dispute it). Multiply that by as many people who might be in a family and you’ll readily see that would have been financially ruinous for most people, and tax increase like none other we have ever known. People would have been forced out of the workplace group plans in droves, and the healthy would have been able to use McCain’s tax credit. But not the older and unhealthy, since they would have been charged exorbitant premiums or been turned down outright. If we’re going to ever switch from employment based healthcare then we absolutely must have something like the ACA regs establishing guaranteed issue and some sort of community rating. Otherwise it just can’t work.

Boonton November 4, 2013 at 10:26 pm

Employers also pay a tax on overall payroll as well as their individual share of social security and medicare taxes. A company that pays a worker $50,000 and gives him a health policy that costs $5,000 is not paying the same tax as the company that pays a worker a straight $55,000 cash.

mulp November 5, 2013 at 1:17 am

“I agree you could have single payer with private insurance riding on top. But remember there’s not a single ‘single-payer’ system, there are multiple single-payers that exist indifferent countries as well as a huge set of possible single-payer systems that may not exist anywhere but could, in theory.”

US Medicare is single payer plus private insurance riding on top.
Canada Medicare is single payer plus private insurance riding on top.
France’s french for national medical is single payer plus private insurance riding on top

I find the ignorance of Medicare in the US to be astounding from all the people making all sorts of proposals and claims of the ills of US and other nation’s health care systems. Medicare information from the customer/patient is pretty readily available.

Rick Herrick November 5, 2013 at 9:20 am

Just for reference, satisfaction and outcomes for VA-provided health care (which is actually the only truly socialized national health care system in the U.S.) consistently ranks very high, well above any private provider. A Google search will give you plenty of information, but this post on the RAND blog summarizes the basic facts and has links to source studies: http://www.rand.org/blog/2012/08/socialized-or-not-we-can-learn-from-the-va.html. A few bullet points:

“[T]he VA system delivered higher-quality care than the national sample of private hospitals on all measures except acute care (on which the two samples performed comparably). In nearly every other respect, VA patients received consistently better care across the board, including screening, diagnosis, treatment, and access to follow-up… VA patients were more likely to receive recommended care than patients in the national sample. VA patients received about two-thirds of the care recommended by national standards, compared with about half in the national sample. Among chronic care patients, VA patients received about 70 percent of recommended care, compared with about 60 percent in the national sample. For preventive care, the difference was greater: VA patients received 65 percent of recommended care, while patients in the national sample received recommended preventive care roughly 45 percent of the time… VA and non-VA settings generally provided comparable surgical care and achieved similar outcomes. What differences the team did find favored VA care in 3 instances and non-VA care in 5. In 15 comparisons, care was not different.”

Ed November 4, 2013 at 10:52 am

I have to admit that this was the point where I stopped reading the article. I generally conclude I’m wasting my time when the author of an essay makes a central claim that I know is factually incorrect.

The lesson is that authors need to fact check, but then you wouldn’t get the entire article. The fact is that for the pre-ACA US system, single payer WAS the incremental approach. The US government already ran several different single payer type systems, Medicare, Medicaid, the Veterans Administration system, and the various contract insurance systems used to cover government workers. I’ve seen estimates that these covered 40% of the US population. The incremental approach would have been to just expand eligibility for these systems, for example by lowering the eligibility age for Medicare, raising income eligibility for Medicaid, and giving combat veterans complete access to the VA systems. You can pay for this by taxing private insurance plans if you want but there is no need to ban them.

The ACA seems to expand Medicare eligibility, but the complexity of the program and the subsidies for private health insurance companies probably preclude the approach I outlined above.

albatross November 4, 2013 at 2:59 pm

Federal employees get a choice of standard employer-provided insurance policies.

Medicare and Medicaid are single-payer type programs but leave provision of medical services to the market.

If I understand correctly, in the VA system, the providers work for the government, and I don’t know whether there’s a different entity paying the bills.

It seems like any of these three could be the model for expanding access to healthcare. Alternatively, we could simply pass some law that gave everyone catastrophic coverage when their total medical expenses exceeded some big number, which might keep people from being bankrupted by medical bills (but wouldn’t keep them from being bankrupted by missing several months of work while recovering from their stroke in the hospital).

mulp November 5, 2013 at 1:36 am

To a degree, the biggest problem with high deductible insurance is the bankruptcy of doctors and hospitals. Only the middle class with real assets can be bankrupted – the working poor are merely getting official discharge of debt to potentially get debt collectors to stop calling, but its cheaper to simply buy a burner phone and dump the land line.

So few people have the cash on hand to survive a month out of work so handling $5000 in medical bills is catastrophic.

Boonton November 5, 2013 at 11:27 am

What you are talking about is being ‘judgement proof’, it’s not as simple as just dodging calls from angry bill collectors. It means not being able to own a house or property. It means not being able to have a bank account. It also means not being to be able to have a job that is not under the table.

While some very poor people do live this way it’s not an acceptable solution for the ‘working poor’ or lower middle class workers who should be offered a solution better than having to live like economic refugees.

Roy November 4, 2013 at 6:17 am

One thing about Medicare is that it has a particular codependent relationship with private insurance. As much as private insurance uses medicare to decide what to cover, it goes the other way too. If a procedure or medication is available widely medicare will cover it.

It is like the Soviet economist joking that after the triumph of communism they would need to keep one market economy around in order to know what prices should be.

Z November 4, 2013 at 6:26 am

Hayekian my bleep. This is just left-wing cant. The idiocy of ObamaCare is not improved with these straw man arguments. Even if the mythical “right wing” has not come up with an alternative acceptable to the fanatics on the Left, ObamaCare is still an unworkable mess that is causing real harm to real people for no reason other than Left’s hatred of middle America.

ThomasH November 4, 2013 at 6:38 am

To Z: Evdence that the “harm” done by ACA is more than any of the alternatives including the 2008 system? And even if there is a better alternative, TBD, what’s the evidence it was not adopted because of the “Let’s hatred of middle America?”

The remark shows the mistake of the original commenter in referring to most opponents of ACA as “conservatives.”

Chip November 4, 2013 at 7:13 am

“Evdence that the “harm” done by ACA is more than any of the alternatives including the 2008 system?”

So the ACTUAL harm done by ACA is to be compared to the theoretical harm of alternatives and not to, you know, real world insurance before ACA.

There really is no room for critical thinking in a wholly ideological mind. And none for competence in an ideological government.

ThomasH November 4, 2013 at 12:57 pm

The real world before ACA is an alternative. I don’t know which alternative Z has in mind.

Z November 4, 2013 at 12:58 pm

It seems to me the fanatics will try to shift the focus from their very real disaster to some imaginary issue. Given the state of public discourse, they may get away with it. I can easily see the next election being a debate over why the GOP did not stop the Left from immolating the US health care system by offering an alternative.

mulp November 5, 2013 at 1:55 am

So, forcing people to buy private health insurance so their inevitable medical bills (statistically) will be paid is immolation of US healthcare?

In the large set of young and healthy without health insurance because they are working poor, the unpaid medical bills are certainly in the tens of billions per year, because accidents (hit and run biking home from work) and cancer and mental illness do not respect the “young and healthy” status.

But if one group can run up large unpaid medical bills, then why shouldn’t everyone – the employers will save a trillion and the workers will simply get free health care by not paying the bills.

If you advocated treating people’s bodies like cars or pets; the mechanic or tow truck operator takes possession and sells the body for salvage to recover costs; pets are euthanized or fixed up and sold to new owners.

The irony is conservatives who oppose Medicare/Medicaid/single payer because it isn’t private for profit insurance are bitching that Obamacare forces them to buy insurance from private for profit insurers who just want to take all their money and not provide care. And private for profit insurers service nearly all medical care in the US, deciding who can be compensated for providing what care, whether Medicare, Medicaid, or employer self-insured. The only difference is each system has different rules controlling allowed payments and amounts and who gets them.

The biggest change is making sure insurers are paying more of the bills instead of doctors and hospitals sending them to collection agencies.

Boonton November 4, 2013 at 9:03 am

Who are these ‘real people’ being harmed by Obamacare? The last round was the hysteria about people supposedly not being able to ‘keep their plans’ which is now starting to be debunked.

We live in interesting times November 4, 2013 at 9:38 am

There’s a website for that now, Mycancellation. com.

Boonton November 4, 2013 at 8:42 pm

Those ‘harmed’ by Obamacare,

Well let’s begin with the original NBC article itself. It alleges Obama knew the ‘you can keep your coverage’ promise would be broken because it’s ‘normal’ for 40-67% of the individual insurance market to ‘turnover’ each year. In other words, in the individual market it’s normal for nearly half the people to have different coverage next year from what they have this year. Clearly a portion of that is due to individual decisions, people opt to drop coverage, to change coverage, or just stop paying their premiums. Another portion is due to the decisions of companies, maybe too many sick people join a particular policy, a competitor lures away too many healthy people, or they decide to change the policy alterings its premium (usually going up), changing deductibles or what the policy covers and so on.

So I’m not surprised you can collect lots of cancellation notices. Millions go out every year as part of the normal state of affairs. The NBC article, though, takes the ‘keep your policy’ line not simply as a promise not to make your policy illegal but to actually preserve the market in amber. If you had a policy in 2010 and dropped it, you need to be able to come back to it…if it’s no longer available…well you can’t step in the same river twice. Except maybe for Medicaid, though, it’s understood by everyone that health insurance changes every year. If you read “you can keep your policy” as a promise to literally keep all insurance the same then such a promise would require not just rejecting the ACA but imposing economy wide wage and price controls on the health sector…something no one thought or wanted at the time. If you read it as your policy won’t be made illegal, well no policy has been made illegal. But simply because a policy isn’t illegal hardly means the policy is safe from radical change, esp. in the volitile individual market where companies are redoing policies every year.

The second part concerns plans that are grandfathered policies that no longer meet the grandfathered mandate because…”saying that if any part of a policy was significantly changed since that date — the deductible, co-pay, or benefits, for example — the policy would not be grandfathered.” In other words, if Blue Cross had a policy for $500 a month for a 10% deductible and it’s now $550 a month for a 15% deductible it’s no longer the same policy so why would it or should it be grandfathered?

Then we have http://www.slate.com/blogs/weigel/2013/10/31/the_chart_that_could_save_obamacare.html which notes that at least half of the 6% of people who potentially may ‘loose’ a policy will be able to buy a policy of equal coverage for the same amount of money or less. One conservative woman collecting her 15-minutes of Conservative Media Fame can buy essentially the same plan she lost but with a deductible of $2K intest of $5K, unlimited doctors visits and less max. OOP expenses.

I suppose someone might say “I want my Anthem Blue Cross Super Policy with its red and gold card and 16 digit account number and anything else, even for exactly the same cost and benefits isn’t the same policy so I’m harmed!”, but I’ll say I expect something a bit better than that.

Z November 4, 2013 at 1:01 pm

If by “debunked” you mean denied by foaming at the mouth fanatics who are responsible for this disaster, sure. Otherwise, you may want to see someone about those hallucinations.

David N November 4, 2013 at 2:12 pm

Not debunked. Spun. Not hysteria. Anger.

Jay November 4, 2013 at 2:23 pm

It is generally easier to just not respond to Boonton. He cares little for evidence.

JWatts November 4, 2013 at 6:23 pm

The last round was the hysteria about people supposedly not being able to ‘keep their plans’ which is now starting to be debunked.

Now that is a hilarious comment!

Rich Berger November 4, 2013 at 6:44 am

“This illustrates what I think is an advantage the ACA has, it’s remarkably flexible and dynamic. ”

So flexible and dynamic that the failure of the website (storefront) is threatening the entire scheme. So flexible and dynamic that incremental changes in existing policies cause them to be non-compliant and canceled. Back in the bad old days of the Cold War, some of the communist countries thought they could remedy the lack of a real market by simulating one. That didn’t work out.

Obamacare is not “Hayekian”. In fact it is a sad example of the kind of schemes developed by the men of system that Adam Smith warned us about 250 years ago. Some people never learn.

john personna November 4, 2013 at 9:44 am

Kayak and Priceline show that the exchanges will someday work (they just should have shown that this isn’t something you spec and build in 6 months).

Rich Berger November 4, 2013 at 11:13 am

No, Kayak and Priceline show that markets work. For Obamacare, see Skinny Nicks’ quote.

I don’t think Obamacare supporters grasp the fact that the website is the easy part.

john personna November 4, 2013 at 12:37 pm

Isn’t it late for a free market type to claim that the US has no market in health insurance to promote in an online exchange?

Or even more strangely that we had a market until an exchange was built to highlight it?

Z November 4, 2013 at 3:32 pm

But it is never too late to point out that you guys relied on deliberately false premises to justify swinging a wrecking ball through the health care system. You’re like a guy running amok smashing windows claiming it is society’s fault for not guiding his energy into something better.

By the way, Kayak and Priceline show that these crackpot exchanges can never work. Free markets create organically what government can never create, even after spending tens of billions. Kayak can go out of business. Therefore they are responsive to the needs of their customers and prudent in the allocation of their resources. How is it possible that a fully formed adult does not understand this?

john personna November 4, 2013 at 5:00 pm

Well, since you miss me by a mile, I’m too bothered. I definitely saw the ACA as sub-optimal, but the only path for change. And yes, it is an incremental change, built upon an existing market. There was no “wrecking ball” or “complete takeover” or similar falling skies.

john personna November 4, 2013 at 12:42 pm

It is kind of an odd claim that we had a market in health insurance until someone built an exchange to highlight it.

Why didn’t Kayak bankrupt the hotels?

john personna November 4, 2013 at 12:43 pm

Sorry for the near double post, bad connection

Rich Berger November 4, 2013 at 1:22 pm

Doesn’t matter. Neither of them made any sense.

john personna November 4, 2013 at 5:02 pm

You prefer a general claim that since gov’s can’t control every nut and bolt in the markets … governments should not support markets?

I’m afraid you and Skinny have argued yourselves into a reverse position now … that insurance markets are bad, when everyone uses them.

john personna November 4, 2013 at 5:03 pm

BTW, there is a mandate in my state that every driver must be insured. Why didn’t this destroy auto insurance (by death spiral or not)?

JWatts November 4, 2013 at 6:25 pm

Those comments still don’t seem to make much of a point.

Skinny Nick November 4, 2013 at 9:54 am

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess–board. He does not consider that the pieces upon the chess–board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess–board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

ThomasH November 4, 2013 at 1:04 pm

I guess we were never in much “danger” of a new “system” for health insurance; that’s the reason we got about the smalest pertrbation of the status quo that was possible.

Adrian Ratnapala November 4, 2013 at 7:15 am

Now consider right wing proposals. Abolish employer based insurance? You’re talking disrupting how nearly 50%+ of working people have had insurance for generations now

I thought the proposal was to remove the special tax exemption for employer based insurance. The market can then decide whether to abolish it. That sounds incremental to me. Even Hayekian.

mavery November 4, 2013 at 9:22 am

I can’t think of a single Republican candidate for national office who campaigned on taking away the subsidy to employer-provided care. Not. A. One. Even Romney only talked about capping deductions for individuals. (It was easily his strongest proposal for the national economy.)

Skinny Nick November 4, 2013 at 9:53 am

Libertarian solutions =/ Republicans

Yancey Ward November 4, 2013 at 10:11 am

McCain campaigned to eliminate the special tax treatment that employer-based insurance gets. You and Adrian talked right past one another.

Dave Anthony November 4, 2013 at 10:19 am

John McCain did in 2008 and Obama criticized him heavily for it.

Yancey Ward November 4, 2013 at 10:26 am

Dave, you have to be clearer. McCain campaigned not on eliminating the implicit subsidy for buying health insurance- only on equalizing the treatment between employer-linked coverage and the individual.

Dave Anthony November 4, 2013 at 10:33 am

His plan advocated for taxing employer provided insurance as if it were income (i.e. eliminating the tax exemption for employers) but then giving a tax subsidy directly to the employee. This would have had the desired effect of eliminating an employers preference for providing health insurance to employees over paying the employees cash and letting them purchase their own health insurance plans.

John Thacker November 4, 2013 at 11:55 am

The tax credit offered in McCain’s plan would have been worth more than deducting average health insurance costs for people in lower and middle income tax brackets, but worth less than the current deduction for people in the highest tax brackets. The ACA also raises Medicare tax for high tax bracket people on capital gains, dividends, and other unearned income, so it’s a bit difficult to settle out. I think it’s fair to say that the ACA is better for the upper middle class and worse off for the lower middle class (or whatever you want to call right above the subsidy cliff income) than McCain’s plan.

Right, and some employers would choose to drop coverage, but likely not all would. There would be a evolutionary process. Some people think that everyone would go to the individual market, but I think that many people would continue to get group plans. (Just as many employers offer group life insurance, cafeterias, disability and all sorts of other fringe benefits that are not mandated.)

The current ACA also offers incentive for employers to drop coverage, particularly if the employees are mostly low income and would be subsidy eligible. They’re making their employees worse off if they don’t do so; in some cases they can pay the mandate cost (if it goes into effect) and still employer and employee be better off.

The ACA thus is more likely to exacerbate the two-tier situation of employer insurance being offered at higher income jobs than the tax credit plans. Both of them, as well as the “public option” of letting people buy into Medicare, have evolutionary aspects. There are differences in who is impacted the most, and all plans are affected by tweaking the numbers. This inevitably leads to complaints that none of them are actually evolutionary, but that the rules are biased to result in a particular endgame. ACA is no better (or worse) than the other plans in that respect.

Boonton November 4, 2013 at 10:22 pm

John,

I think the two-tier state of ESI (employee sponsored insurance) is more due to the underlying growth of inequality. For any random individual, health insurance is more like a fixed cost. This will mean it will be a more modest portion of income for a highly paid worker but a much larger share of income for a low paid worker. That means lower paid workers would either have to loose much of their cash wages to fund insurance, or make due with low quality coverage from employers.

A tax credit solution in this case sounds not all that different from the subsidies that the exchanges have. In essence other people end up funding the purchase of health insurance rather than it essentially coming from the employee’s own earnings.

This isn’t a problem the ACA created nor even accelerates IMO. Consider what would happen if the trend toward greater inequality reversed itself. Imagine the growth of the top tiered income slowed down and the income growth of the middle and bottom increased (perhaps hyperintelligent computer systems would make the productivity of hyper-educated ‘knowledge workers’ less valuable, who knows?). Middle and lower income jobs would then add health coverage rather than limit it. All the tax benefits would still be there, including savings on taxes for both employee and employer as well as avoiding the penalties for not providing coverage from the ACA.

But while it isn’t economically impossible for the wage rates of McDonald’s burger flippers to grow faster than accountants, lawyers and doctors, I don’t think most economists expect that to happen anytime soon. Therein lies a problem, health care is always going to be an easier expense to manage for the high income worker compared to the low income worker. A refundable tax credit just veils this fact. It’s esssentially a subsidy by another name, which may give some Republicans more psychological comfort but when you strip it down to the bare bones it sounds a lot more like the ACA than one would have been lead to believe.

We live in interesting times November 4, 2013 at 9:23 am

Since the employer mandate has been delayed until next year, I guess we’ll have to wait and see what effect that has on employer-based insurance?

Kitty_T November 4, 2013 at 12:11 pm

We’ll see some effect immediately – employer plans are already being cancelled (sorry – not renewed, Sec’y Sebelius tells me this is entirely different) for non-conformity to the new rules. The “comparable” plans being suggested to replace them are higher in price (I’ve heard increases ranging from 20% (not far off usual annual increases) to 80% in my market) and sometimes have higher copays or deductibles, much like we’re seeing in the individual market.

Bob November 4, 2013 at 10:22 am

It’s market oriented, in the same way that there’s freedom in being able to choose whether or not to get out of the way of a bulldozer.

Morgan Warstler November 4, 2013 at 7:33 am

And again, we see the issue is WHO gets the great PPO care:

http://online.wsj.com/news/articles/SB10001424052702304527504579171710423780446

Healthy upper middle class folks are finding out THEY CANNOT buy the quality medical care, they DESERVE if they join Obamacare.

It is about the networks. You can’t tell people in the top 20% of America, they don’t get to buy a BMW – they will buy it outside Obamacare, and even if they pay the fine, they will save thousands,.

Obamacare BANKS on the top 20% joining Obamacare and paying full freight – I suspect, the less than 2 in 10 of those will do so.

Morgan Warstler November 4, 2013 at 7:43 am
buddyglass November 4, 2013 at 9:02 am

We need to know the specifics of the $300/mo plan she had that got canceled vs. the $623/mo plan she found on healthcare.gov.

We live in interesting times November 4, 2013 at 9:45 am

I’m still trying to figure out why a 60-year old male needs a subsidized or “free” breast pump. Aren’t they part of the package now?

john personna November 4, 2013 at 9:49 am

The number of things in Kaiser’s cupboards that I won’t need is large, I hope.

prior_approval November 4, 2013 at 10:04 am

In the past, as a GMU employee, Kaiser Permanente was the option I used for health insurance. They have a lot of things in their cupboard – it is one of the reasons they were such a good provider. And yet, they were very much a rationing sort of system – various things had to be scheduled/done in Kaiser’s own facilities, and the waiting times, shockingly, could run into weeks or months. Almost as if Kaiser Permanente was a normal style HMO (and what happened to that term, by the way?).

Yancey Ward November 4, 2013 at 10:13 am

Are you hoping you won’t need a breast pump?

john personna November 4, 2013 at 10:28 am

I think my colonoscopy was scheduled a couple months out, but not a big deal, preventative.

albatross November 4, 2013 at 3:03 pm

Isn’t Kaiser more-or-less a private version of a socialized medical system?

john personna November 4, 2013 at 5:04 pm

Kaiser is a non-profit. And yes, a “market” of competing non-profits would probably been pretty good for the consumer, acknowledging agency uses to some degrree.

Boonton November 4, 2013 at 5:07 pm

He doesn’t, and the plan probably doesn’t cover a breast pump for a 60 yr old man. Even though the plan says breast pumps are covered, I’d bet if he tried to submit for one the claim would be flagged for investigation and denied.

Given that fact, would anything be saved if the plan printed up two different books…one for 60 yr old men and another for women or would it make sense to produce a single set of covered items with the clause that even if something is covered only a legitimate claim will be approved. Hence men trying to get pap smears or doctors putting in claims for prostate exames on female patients will get scrutinized and denied.

Should a ‘free’ breast pump be mandated as part of a standard health policy? I’d say no on that.

Ad Nauseum November 4, 2013 at 2:00 pm

Why do we need to know the specifics? Maybe some people would rather have hamburgers, but they’re being forced to buy steaks.

john personna November 4, 2013 at 9:47 am

I got to keep my $400/mo (55yo) Kaiser plan. Does that even up the anecdotes?

prior_approval November 4, 2013 at 10:06 am

Well, Kaiser is not a rip-off, even by international standards. But then, a lot of people in the U.S. these days seem to think that getting ripped off is better than the alternative, when it comes to health care.

We live in interesting times November 4, 2013 at 10:08 am

We get to keep ours for another year, but ours went up.

john personna November 4, 2013 at 10:24 am

My Kaiser has inched up every year, and now I am in that last costly decade before Medicare.

john personna November 4, 2013 at 10:26 am

(Our increasing ages affect insurance costs, but especially in our 50-60′s)

prior_approval November 4, 2013 at 10:55 am

Though a couple of decades ago, my Kaiser Permanente fees always increased at a higher rate than any pay raises the Commonwealth of Virginia deigned necessary to grant its employees. This being the late 80s and early 90s, when I was also a couple of decades younger.

The really funny thing occurred when I was no longer employed by GMU, but continued to use the then version of COBRA – which involved paying GMU as my last employer to continue my health insurance, without the subsidized employer portion (I had already left the U.S. at this point, but there was no reason not to stay insured – obviously, this makes me very different from all those Americans complaining about being forced to have health insurance). After paying GMU to continue my health coverage for more than a year (which is, to my memory, how COBRA worked at that time), Mason informed me that what I had paid was not correct, as for some reason that was less than clear to me, I had not been eligible – and refunded my money as a lump sum. Tax free, it must be noted.

Truly bizarre.

And a perfect example of why trying to explain the American health care to anyone from any other industrial country is simply impossible. Only other Americans have experienced such absurdity.

Bill Champ November 4, 2013 at 8:53 am

“that question can be taken up in the future and debated in light with what our budget situation looks like in the future.”

It’s been my observation that spending proposals are almost never debated in Congress by looking at the budget situation. I believe one of the major flaws in how we conduct government is that spending and revenue are almost completely separated by the process.

derek November 4, 2013 at 9:18 am

I stopped reading when he said single payer would be simple. Vacuous stupidity.

Hint: in Canada’s single payer system, how many people does the largest health care system in the country serve? 13.5 million in Ontario. New York City is 8.3 million for reference.

Dan Weber November 4, 2013 at 9:37 am

Didn’t he say the opposite of that??

mike November 4, 2013 at 9:32 am

There is an important difference between the complexity of Obamacare and the complexity of the current system, or the system after removing the employer-based health insurance tax incentive. The complexity of Obamacare was created by the machinations of technocrats attempting to micromanage the medical care industry by force of law, whereas the complexity of the current system arose organically through willing buyers and willing sellers making voluntary transactions based on their own interests. The human body is unfathomably complex, but it basically works because it evolved naturally for survival. Just imagine trying to redesign something so complex from scratch, and the infinite ways it could be screwed up.

We live in interesting times November 4, 2013 at 10:03 am

If the employer decides to get out of the healthcare business and gives the employee money to buy insurance on the exchange, is that increase treated as a raise or is it separate? If it’s considered a raise, won’t it be subject to state, federal & FICA taxes? Ouch. Does the company $-provided insurance payment still qualify for the tax subsidy?

Boonton November 4, 2013 at 5:01 pm

I think, and I could be wrong but:

1. The pay increase would be treated as a straight salary increase and taxed accordingly. The company would end up paying more in payroll taxes and the individuals would have more withheld for taxes too. On top of that the company would pay a penalty per employee (if they are larger).

1.1 But also keep in mind the ‘cadillac tax’ on very high end health plans. The law would seem to encourage companies with employer based insurance to keep it, but it also discourages companies from providing super high end plans.

2. On the exchanges, though, individuals would qualify for subsidies assuming their pay increases did not happen on already high salaries.

Boonton November 4, 2013 at 4:43 pm

By definition any actual law crafted will be ‘technocratic’ and the status quo will be ‘organic’. Otherwise it’s pretty much absurd to assert that the US healthcare system is a creation of pure market dynamics when in fact nearly half the spending is directly by the gov’t and the remaining spending is heavily regulated.

mgregoire November 4, 2013 at 9:49 am

I don’t understand why healthcare reform is being undertaken at a national level. Let some states try a single payer (HW? CA?), others go for a mandate system (MA), stay with the status quo in some, forced health savings accounts elsewhere (VA?), some system to discourage employment-linked health plans (TX). Some projects would be disastrous, and other states would learn from the errors; some will be more or less successful and would be copied. And of course people will have different preferences, and so they would be able to move to the state that best suits them. Americans are not united on what the main problems of the health care system are, let alone the best solution; let fifty different flowers bloom.

A top-down, technocratic, national plan is the very antithesis of Hayekian.

Dan Weber November 4, 2013 at 1:09 pm

One issue with states trying it themselves is that states cannot control their immigration. If Idaho gives everyone free health care, everyone from Montana can move there and soak it up.

mgregoire November 4, 2013 at 2:42 pm

States could impose residency requirements before newcomers become eligible, e.g., must pay state income taxes for five years before receiving (generous) government health benefits.

Dan Weber November 5, 2013 at 11:22 am

Actually, they can’t. Equal protection clause of the Fourteenth Amendment.

Boonton November 5, 2013 at 11:32 am

Actually I believe one of the NYC mayorial candidates was running on a city-wide single payer proposal. The ACA doesn’t prevent any state or locality from trying to implement a single payer system. I think doing so may be difficult if it’s not on the national level but I believe a state could, if it wanted, scale up Medicaid or implement it’s own system and either go full single-payer or get pretty close to it. Even in very liberal states like CA or NY this isn’t an easy sell politically so don’t confuse this with the ACA telling anyone ‘top down’ that they can’t do it.

Seth November 4, 2013 at 9:50 am

“Abolish employer based insurance?” Ideological Turing Test fail. Likelihood of being able to identify Hayekian system: less than random.

This comment seems to me to be a bit like saying that public education, under a common core curriculum, is Hayekian. But, then we might as well say everything is Hayekian, because, in reality, everything is and bad legislation or overly empowered small groups of people are usually a temporary impediment to the Hayekian world. But, saying everything is Hayekian isn’t all that helpful in the here and now.

Back to public education. Sure, Identify a common core and let all the schools go after that. It is Hayekian in that some schools will do this well and some won’t and some people may be able to correctly identify what is being done well so that can be replicated (though that has proven troublesome). But, what is taken out of the Hayekian realm in that scenario is the common core itself. It’s defined by a small group of people rather than the users of schools. That’s not Hayekian.

Yancey Ward November 4, 2013 at 10:27 am

John Thacker’s comment basically tore the strawman arguments apart.

JJ November 4, 2013 at 12:25 pm

Marginal complexity is a concept that doesn’t get enough play.

magilson November 4, 2013 at 4:11 pm

Most of the article is incredibly unimaginative to the extent that the claim and ideas aren’t that new or interesting. But the author hits on one point that I never see discussed.

“But what if people don’t want the curve bent downwards? What if they find that they are willing to spend a larger share of income on healthcare because health care innovations are more worthy than other types of innovations (i.e. such as ’3-d tvs’ or the next generation of ipads)?”

Exactly. What if, given the shifting age demographic, people just don’t want iPads and 4K TVs and gadgets as much as they want an extra few years (months?) of life. We constantly read claims of unhappiness with life for those who fill it with gadgets. Is it possible we don’t know ourselves quite well enough to believe we’re already acting on this realization? What if trying to bend the cost curve (Can we all admit this has nothing to do with cost and everything to do with spending? The cost of medical tech/procedures does bend down. The list of new things we can spend on just keeps growing!) is fighting a revealed preference?

Maybe the ACA will or won’t “bend the curve”. It’s far more interesting to understand if that’s really what is desired.

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