Repeal Or Invalidation Of Obamacare: Beyond The Crowing, Where Are The Better Ideas?

I don't know that I have much to add to the commentary regarding the recent decision by a Federal judge in Florida which ruled last year's PPACA unconstitutional...Except this:

I think the crowing among other stakeholders regarding the court decision is a little unseemly. It takes some effort to separate the majority of comments...which seem to emanate from partisan haters...from substantive criticisms of the law's constitutionality.

There are plenty of flaws in the legislation, beginning with the partisan arrogance which characterized much of the debate leading up to the law's passage. But I don't recall much credible debate from the then-minority Republicans regarding the merits or demerits of the bill, beyond a lot of posturing about liberty.

I've already written about the mandate issue. I think it's politically foolish for both proponents and opponents to state and restate positions which cannot be substantiated with real numbers. I think the proponents' argument that the mandate is a lynchpin of the entire strategy, and that without a mandate the entire house of cards falls apart, is a recipe for political disaster. Most of the substantive information regarding the effect of mandates on health insurance coverage seems to support the assertion that mandates lead to increased costs and negligible effects on quality.

But the opponents have not made this argument. They'd prefer to harp about individual freedom and liberty, which scores points with their base but doesn't advance the discussion. It's much easier to say "no" over and over than to advance a constructive counter-argument...ask any 2-year-old.

Here's a better counterargument: aside from the obvious effect that mandating coverage creates...making cost containment irrelevant...it's based on the notion that people are dumb and, given the opportunity, will not act in their self-interest.

I'm sure there are rugged individualists out there who simply do not believe in health insurance, and probably even some who are unprincipled enough to avoid purchasing coverage till they get sick and need it. But it's been my experience over many years that most people recognize the value of health care coverage, and want to buy it, voluntarily, if they can afford the cost.

The problem is that marketplace factors, especially the aggressive and exclusionary underwriting practices in the individual health insurance market, preclude people with even minor health conditions from finding affordable coverage.

Last time I applied for individual health coverage as an experiment, the underwritten rate for the coverage I was seeking tripled from the original age-adjusted rate I was quoted. The reason? I have three very minor health conditions. I've had no trouble from any of them in the last ten years, and my monthly medication tab for all three is less than $20 per month.

For folks with any sort of serious health concern, coverage outside the group market is impossible to get at any price. And even in the group environment. older workers, or those with health conditions, are often the objects of unstated discrimination if their employment might raise their (usually small) employer's health insurance bill substantially.

I don't see how invalidating PPACA takes any steps toward addressing those issues. Just takes us back to the status quo ante, which for too many people is an impossible situation.

It seems to me that before we get all exercised about mandates, we could agree to take steps necessary to assure that everyone who'd like to purchase health coverage in the voluntary marketplace is able to do so. And certainly the Republicans had more than a decade of political majority in which to take some steps to reform the market. Don't recall any more than half-hearted measures to do it, though...

Beyond the individual mandate, opponents may have a good argument that Obamacare foists a huge mandate upon taxpayers at the state level with its significant expansion of Medicaid eligibility. With state governments across the country facing budgetary crises, the prospect of seeing their Medicaid matching fund requirements raised 25-30% in a few years is a frightening prospect..especially as many states are wrestling with how to maintain Medicaid at today's levels in the face of multi-billion dollar deficits.

It's one thing to provide states with an incentive, in the form of additional federal matching funds, to states which want to expand their Medicaid plans. It's quite another to require that states expand their Medicaid eligibility standards, and leave the problem of how to raise matching funds to them.

It's also another gesture of political arrogance and disingenuousness to "handle" that issue by providing a short-term subsidy to states (out of Federal taxpayer dollars), and push the actual day of reckoning off into the future...when the current crop of elected officials is long gone.

I'm not a Barack Obama fan; I think he's a charismatic and articulate empty suit. I certainly didn't vote for him.

I do believe that PPACA is a political document first. The law is maddeningly complex...and it's my experience that complex initiatives are generally complex for a reason...usually because someone has something to hide.

It did not address the health care cost part of the equation, by political calculation; The White House made deals with hospitals, physicians, pharmaceuticals manufacturers, and others to keep that from happening.

The law did seek to address some of the more egregious behavior of insurers in the private markets...changes that the industry could have made voluntarily, but chose not to.

But a finding that the law is unconstitutional, while it might satisfy ideological opponents, does nothing to address the problems existing in the marketplace which led to the enactment of the law in the first place.

And we have yet to hear what the counterproposal is.

I'm not sure that trying to make an admittedly imperfect law work is worse that maintaining an environment of continuing uncertainty which leaves all stakeholders wondering what's going to happen next.

If I were a smart insurer, or a brilliant broker, I'd be using the time to develop more effective means to compete in the marketplace, to make health coverage more efficient and less expensive for everyone who wants to buy it.

Instead, my fear for many millions of small employers, and the self-employed, is that they will continue to face dramatically escalating costs and difficulties in obtaining coverage, from insurers who are perfectly comfortable...and making a lot of money...hiding behind that status quo.

Because absent any outside political pressure to change their behavior, that's just what they're going to do. And I don't see how that helps the people who pay...or would like to pay...the bill.

What Difference Does A Mandate Make, Really? The Numbers Don't Add Up...

Opponents of "Obamacare" were popping champagne corks just before Christmas, when a federal judge in Virginia rules that the individual mandate, a central element of the legislation, exceeded the regulatory authority granted to Congress under the Commerce Clause.

Supporters of the plan were predictably dismissive, though they warned that, absent a mandate, an insufficient number of new, young, healthy people would be brought into the insurance system, there could be little prospect for keeping insurance costs under control in the Brave New World.

I have preached against the imposition of mandates for many years, but not out of any cockeyed notion of individual liberty. I believe that a mandate would not achieve the stated policy goal of the plan's advocates, and would, in the long run, have the opposite effect, leading to acceleration of health insurance costs and even less emphasis on quality than is the case in the current morass we call a system.

Because I don't think the numbers add up. I'm not an actuary, so maybe somebody out there smarter than I am will correct my mere layman's understanding.

Let's assume for a moment that the total number of Americans lacking health care coverage is about 50 million (an increase of about 30% from the "37 million uninsured" which led to the enactment of HIPAA, which was supposed to "fix" the markets for small group and individual insurance...And how did THAT work out?...).

For about half that group, "uninsuredness" is not a permanent state. For about 25 million uninsured Americans, the condition is transitory, lasting six months or less, because they're between jobs. So they have some short-term exposure, but the market will take care of them.

That leaves 25 million.

It's estimated that a third of that group consists of "young invincibles," workers under age 30 who have not purchased coverage, either because they think they don't need it or because they can't afford coverage; often they can't afford coverage because pre-existing health conditions have made coverage for them very expensive, if they can get it at all. Theoretically, these are the people whom policymakers want in the system, on the notion that, in general, they'll use less in medical services that they'll pay for in premiums.

Getting them into the health insurance system might easily be accomplished through health insurance exchanges, with subsidies to make coverage more affordable (Note: community rating has a big effect on these young folks' premiums. In Ohio, a healthy 25-year old can purchase coverage for about $150 per month, because of age-based underwriting. In New York the cost is about triple that).


That leaves 16-17 million people.

About half that number represents working families who currently earn too much to qualify for coverage under Medicaid, but not enough to afford insurance premiums. I think that expansion of children's health coverage, and the institution of premium subsidies, help these families get into the system.

That leaves 8-9 million people who currently can't obtain coverage at any price because of pre-existing health conditions. They've had a helluva time finding coverage, but it's not as if they're not trying. A study by the Commonwealth Fund concluded that only about nine percent of those applying for health coverage in the individual market are able to obtain it, because their health conditions either render them uninsurable, or because they rates they're offered are out of reach.

Aren't we making pre-existing conditions go away, and extending premium subsidies to these individuals through exchanges, as well?

Most of the folks I know in this category are either desperate to acquire coverage, or struggling to obtain it.

So who's left? Where are the millions of slackers who refuse to purchase coverage, even when it's available to them at a relatively affordable price?

Is it reasonable to expect that premiums generated by bringing in the "young invincibles" will come anywhere near offsetting the cost of bringing in the 7-8 million older, sicker people who now can't purchase coverage at any price?

Then there's the matter of price...or more precisely, the contention that mandating participation by everyone has the long-term effect of bringing costs down for everyone. I think this contention is nonsense. There's no evidence to support it, and in the few instances where evidence exists, it would seem to support the contrary position.

Many years ago, I had the chance to debate The Lion Of The Senate, Ted Kennedy, on the subject of making health coverage mandatory. As we discussed the issue, I asked him, "Pretend for a moment that everyone in America was required to purchase a Cadillac Sedan DeVille? Not just a car, but a big old Cadillac with all the options. What do you think would happen to the price of Cadillacs?"

The Senator answered that he thought the price would go down, because there would be so many more of them.

I suggested the contrary: not only would the price not go down, but there'd be no limit on the price of Cadillacs, because regardless of price, the government said you had to have one. And it wouldn't matter how well your Cadillac worked; the government didn't say your Cadillac had to work great, only that you had to buy one. Oh, and by the way, other carmakers? Competition in the car market? It would cease to exist.

That's the last time we spoke personally.

There is one state, Hawaii, which mandates that all citizens have health coverage. It's essentially a holdover from Hawaii's plantation days. In the early '70's, state government required that all health plans offer chiropractic services. In the ten years following enactment of the mandate, the number of chiropractors in Hawaii doubled, and the cost of chiropractic services tripled.

Think heath care costs are accelerating in hyper-drive now?...Wait till you have no choice but to buy a standard health plan, courtesy of Our Friends In Government.

I'm perfectly happy to be proved wrong. It just ain't happened yet...

Health Insurance Reform: God (Or The Devil) Is In The Details II

Health Care Co-operatives: The Senate Finance Committee's reform plan allocates $6 billion ($300 million per state) to establish statewide non-profit health insurance purchasing co-operatives by 2013. To qualify for federal start-up funds, the co-operatives must meet fairly stringent criteria. The organizations applying for the funds cannot be in the insurance business, or be related to insurance companies (this will be a disappointment to mutual insurance companies). They also must not be organizations currently offering insurance, though it's not clear whether that would include Chambers of Commerce or trade or professional associations currently offering health insurance coverage to members. Co-ops must be in the primary business of providing access to health care services to their members, and any excess revenue generated by the co-ops would have to be returned to its members, or invested in other health care-related activity. The would also be self-insured, and would be expected to stand on their own within one year of being established.

The co-op idea is meant to be a more politically palatable alternative to a "public option" health plan. It's certainly a less disruptive concept than a public health plan, and so much more palatable to the insurance industry. But as one who's had a good deal of experience in the health insurance co-operative business, I'm not sure that's the best idea.

Even with a compelling value proposition (substantial savings for participating companies and individuals), it takes considerable time to build sufficient critical mass within a co-op to enable it to be competitive with private insurers already in the marketplace. And co-ops will have to expend a lot of resources on marketing, sales and underwriting, just like their commercial brethren. Nonetheless, a well-run co-op could produce some economies of administrative scale, and if run solely for the benefit of their members, could be a player in the marketplace over time.

Both co-ops and exchanges will also be encouraged to enter into interstate "compacts" for the purposes of purchasing services more efficiently. This is a back-door entryway into a national market for health care coverage, a necessary innovation to enable true competition to develop in the health insurance market, where large insurers have the ability to use their economies of scale nationwide.

Elements of this part of the bill are bound to change significantly. I'd certainly expect to see some sort of "trigger" introduced to the bill providing that, after a substantial time had occurred to permit insurance reforms to work and co-ops and exchanges to be established, a public health plan could still be introduced if all these reforms had NOT resulted in better access and more controllable costs for group and individual consumers.

Legislators will be counting on the threat of the introduction of a public plan to be sufficient motivation to persuade insurers to play fair.

Don't panic just yet; should such a "trigger" be pulled, it wouldn't be till 2018 at the earliest.

Mandates: Beginning in 2013, every American would be required to have health insurance coverage, whether through an employer or through an exchange. Tax credits would be available to individuals who might need help in obtaining coverage, up to 300% of the federal poverty line.

Companies with 200 or more employees would be required to enroll all their qualified employees in a health plan. Companies with more than 50 employees would have to enroll their employees or pay a fairly modest penalty for those employees who must purchase coverage on the individual market. Companies with fewer than 50 employees would be exempt from any mandate.

Seems to me that, no matter what you call it, the bill imposes mandates on employers and individuals to provide or purchase health coverage under most circumstances. As I've written before, if the voluntary market can be demonstrated to be working as well as it can, and everyone who wishes to purchase coverage can do so at a reasonable cost, it might make sense to enact a mandate to cover thee outliers who have refused to purchase coverage, even when it's available.

We're by no means there yet. And I fear that, in the face of a looming mandate, insurers will merely bide their time and do fairly little, because the clock will be ticking toward a date when everyone will be required to buy their product, no matter what the price.