Thursday, May 25, 2017

ACA/Obamacare: When Saving $2,500 Per Year Really Means Spending $2,928 Per Year

“The Congressional Budget Office score of the American Health Care Act shows that the bill will reduce deficits by $119 billion over the next decade and result in 23 million more people being uninsured by 2026. This leaves the impression that people would be better off if Obamacare were unchanged. But a new report from the Department of Health and Human Services dispels this myth.

The DHHS report shows that premiums in the individual market exchanges increased by 105 percent in the 39 states using Healthcare.gov from 2013 to 2017. This is equivalent to $244 per month in additional premium payments for people buying insurance through the exchanges, or $2,928 over the course of a year. People not eligible for exchange subsidies are fully exposed to these increases, while taxpayers will bear the brunt in the form of higher outlays for subsidies for enrollees who are eligible.

Despite the promises that Obamacare would “cut the cost of a typical family's premium by up to $2,500 a year,” average premiums on the exchanges more than doubled over this period. In some states, such as Alabama and Alaska, the average premium more than tripled.

The high average increase is not driven by a few outliers, as 23 out of the 39 states included in the analysis experienced premium increases in excess of 105 percent. Only three states, North Dakota, New Hampshire, and New Jersey, had cumulative premium increases below 50 percent.” - Memo to CBO: Obamacare Is Unsustainable, economics21.org, 05/24/2017

Link to the entire article appears below:

https://economics21.org/html/memo-cbo-obamacare-unsustainable-2364.html


Friday, May 12, 2017

ACA/Obamacare: Say Goodbye to Aetna

“Health insurance company Aetna (AET) announced Wednesday it will completely withdraw from the ObamaCare marketplace in 2018, a decision Health and Human Services Secretary Tom Price perceived as a sign of continued instability in the health care sector under the Affordable Care Act.”

‘“At this time [we] have completely exited the exchanges,” Aetna said in a statement to FOX Business.

In April Aetna said it would not participate on the state exchanges in Virginia next year and last week committed to pulling out of Iowa. In 2016 the insurer sold plans across fifteen states. It trimmed that position to just four states at the outset of 2017, citing financial losses.

“Our individual Commercial products lost nearly $700 million between 2014 and 2016, and are projected to lose more than $200 million in 2017 despite a significant reduction in membership. Those losses are the result of marketplace structural issues that have led to co-op failures and carrier exits, and subsequent risk pool deterioration,” the company said Wednesday.’ - Aetna to Completely Pull Out of ObamaCare Exchanges by 2018, fox business.com, 05/10/2017

Link to the entire article appears below:

http://www.foxbusiness.com/markets/2017/05/10/aetna-to-completely-pull-out-obamacare-exchanges-by-2018.html




The Highly Misused Terms of "Health care", "Medical care" and "Medical insurance".

"Media reports say that 20 million Americans will lose their “health care” under the Republican plan to replace ObamaCare, as if health care is like a cellphone, wallet, or item of clothing unintentionally left somewhere or stolen by someone.

Such confusion about “health care” stems from the misuse of the term itself. In common usage, the term “health care” is used as a synonym for “medical care” and “medical insurance,” although these terms have widely different meanings. This is more than an issue of semantics. There are serious policy implications of using the wrong words, and the misuse reflects an entitled attitude among the populace and lazy thinking by the media, academia, and politicians.

Health care means taking care of one’s health. It’s what one does to stay healthy—namely, to have a heathy diet, exercise, not abuse alcohol or drugs, and avoid risky behaviors.

Medical care or treatment is what you seek from medical professionals when you have a medical problem and aren’t in good health.

Medical insurance is what you obtain to protect yourself financially from a catastrophic illness or injury requiring expensive medical treatment. In insurance terms, you pool the risk with others."

Stop Misusing the Term "Health Care", FEE, 03/16/2017

Link to the entire article appears below:

https://fee.org/articles/stop-misusing-the-term-health-care/

Wednesday, May 3, 2017

Certificate-of-Need Laws [CON] and How Restricting Supply Leads to Higher Health-care Prices

“More than four decades ago, Congress passed and President Ford signed the National Health Planning and Resources Development Act of 1974. The act withheld federal funds from states that failed to adopt certificate-of-need (CON) laws regulating healthcare facilities. CON laws require healthcare providers wishing to open or expand a healthcare facility to first prove to a regulatory body that the community needs the planned services.”

“In 1986—as evidence mounted that CON laws were failing to achieve their stated goals—Congress repealed the federal act, eliminating federal incentives for states to maintain their CON programs. Since then, 15 states have done away with their CON regulations. A majority of states still maintain CON programs, however, and vestiges of the National Health Planning and Resources Development Act can be seen in the justifications that state legislatures offer in support of these regulations. Policymakers claim CON regulation is intended to:

ensure an adequate supply of healthcare resources,

ensure access to health care for rural communities,

promote high-quality health care,

ensure charity care for those unable to pay or for otherwise underserved communities,

encourage appropriate levels of hospital substitutes and healthcare alternatives, and
restrain the cost of healthcare services.

Research, however, shows that CON laws fail to achieve these laudable goals. In fact, by limiting supply and undermining competition, CON laws may undercut each of these aims.”

“CON programs limit the introduction and expansion of a wide variety of medical services and equipment, such as rehabilitation centers, nursing home beds, and medical imaging technologies. The process for obtaining a CON can take years and tens or even hundreds of thousands of dollars. By definition, CON programs restrict supply, making them unlikely to ensure an adequate supply of healthcare resources. Research on the supply of dialysis clinics and hospice care facilities finds that CON programs do, indeed, restrict the supply of both.”

“Unlike other regulatory regimes, such as occupational licensure and scope-of-practice rules, CON regulations do not specifically aim to improve quality. That is, CON regulators typically do not attempt to assess whether providers are qualified to do their jobs, focusing instead on whether there is an economic “need” for their services. Nevertheless, CON advocates sometimes claim that because CON regulations reduce the number of institutions providing care, they will cause more procedures to be performed by the institutions that do obtain permission. Thus, the argument goes, practitioners in CON states will tend to see more patients with the same conditions and therefore might become more specialized and proficient. This theory must be weighed against competing theories that suggest that competition tends to increase quality, especially when regulations prevent price competition.”

“As economists Jon Ford and David Kaserman put it, “To the extent that CON regulation is effective in reducing net investment in the industry, the economic effect is to shift the supply curve of the affected service back to the left. . . . The effect of such supply shifts is to raise . . . [the] equilibrium price.” The empirical evidence on how CON regulation affects cost has been consistent with economic theory, showing that CON regulation tends to increase the cost of healthcare services.” Certificate-of-Need Laws, Mercatus Center, 04/17/2017

Link to the entire essay appears below:

https://www.mercatus.org/publications/certificate-of-need-laws-goals






Monday, April 17, 2017

ACA/Obamacare: Before and After the Waiver of Pre-existing Conditions and the Advent of Community Rating

“As Republicans continue to debate the specifics of their plan to repeal and replace the Affordable Care Act (ACA or ObamaCare), two provisions have taken center stage: “Guaranteed Issue,” the requirement that insurers offer policies to all applicants, and “Community Rating,” the requirement that they offer all policies at the same price, regardless of risk factors like health, lifestyle, or even gender.

These rules were obviously designed to allow people with pre-existing conditions to purchase health coverage, and to equalize the premiums paid by everyone. But as nice as that sounds, the experience of different states shows that these rules don’t benefit many consumers and aren’t the best way to foster functional and fair insurance markets.”

“Before the ACA, everyone was guaranteed a policy in every state. First, employer-based or group carriers could not deny you coverage due to a pre-existing condition. Second, if you kept continuous coverage and followed the requirements of the 1996 Health Insurance Portability and Accountability Act (HIPAA), you had the right to buy an individual insurance policy with no exclusions for pre-existing conditions.

HIPAA required that a carrier could not raise your rates nor drop you if you developed a condition after the policy was in place. Sadly, the architects of the ACA misled people about these protections, saying they didn’t exist, and many people still believe that today.”

“While guaranteed issue and community rating may sound nice in theory, in reality, they don’t work out as intended. Unfortunately, these rules can create bad incentives. By raising the cost of insurance for healthy people, these rules can discourage some people from buying insurance until they become sick, when they will still be guaranteed a policy.”

“Before the ACA, 43 states allowed the sale of “true insurance.” Rates were based on your potential of claims, so carriers could inquire about your health conditions, occupation, and lifestyle choices. This provided an incentive to practice a healthy lifestyle because your premium would be lower if you did. Most applicants received very affordable rates since most people are healthy. Unlike the proponents of the ACA claimed, scores of common conditions like mild allergies and even elevated blood pressure and cholesterol were accepted. In fact, 87 percent of applicants received coverage, even with their pre-existing conditions.

Others who had delayed applying until they developed a serious condition or were expecting an expensive claim were offered a guaranteed plan through a carrier or through a high-risk pool. High-risk pools offer a variety of plans from different insurers to high-risk customers at subsidized rates. Those rates were typically up to 150 percent of standard rates and were funded partially through a state tax on carriers, the premiums of enrollees, and an occasional grant from the federal government.


These higher rates were only charged to a few people, and they were similar rates to what everyone is now paying under the ACA. As more people buy private plans before they develop a serious condition, rates will remain low and fewer people will be buying in the subsidized high-risk pools.” - Obamacare’s pre-existing condition rules sound nice but don’t work, 04/10/2017, 

thehill.com


Link to the entire article appears below:

http://origin-nyi.thehill.com/blogs/pundits-blog/healthcare/328174-obamacare-misled-americans-about-pre-existing-conditions-now






Friday, April 7, 2017

ACA/Obamacare: Cross Subsidy as a Hidden and Inefficient Tax

“But the great puzzle of health care policy: Just why is it, to accommodate this worthy goal, must your and my health care and insurance be so deeply regulated and so thoroughly dysfunctional? As one small example, why does a 20 minute skin check with the resident of my dermatologist generate a phoney baloney bill for over $1000, meaning a cash and carry market for such a simple, elastically demanded, and perfectly predictable service is impossible?

Why, in order to provide for the unfortunate, do we not simply levy taxes, and pay for charity care, and leave the rest of us alone? Regular Americans have jobs, buy houses, buy TVs, cars, and smartphones, negotiate the complexities of 401(k) and IRA plans, cell phone contracts, frequent flyer programs; hire the complex professional services of contractors, car mechanics, lawyers and accountants, and deal with the insane complexity of our tax system.”


“I think the answer is relatively simple. Our political system is allergic to the word "tax." Instead of straightforwardly raising taxes in a non-distortionary way (a VAT, say), and providing charity care or subsidies -- on budget, please, where we can see it -- our political system prefers to fund things by forcing cross subsidies.

Medicare and medicaid don't pay what the service costs, because we don't want to admit just how expensive that service is. So, large hospitals make up the difference by overcharging you and me instead. The poster child (though not really a cost driver) is emergency room care. The government passed a law saying hospitals must provide emergency room care for free. But money does not grow on trees, so again you and me (via private insurance) must get overcharged to cross-subsidize. The ACA tried to force young healthy wealthy (not getting subsidies) to vastly overpay for insurance, to cross subsidize the poorer and sicker.

This might seem like a wash. OK, if instead of paying taxes, it makes you feel good to pay business class prices for health insurance, what the heck. Economically, a cross-subsidy works the same as a tax. In fact, we do have Europe-size taxes and subsidies, we just hide them.

But it's not a wash. Cross-subsidies are dramatically less efficient than taxes. Choosing cross-subsidies over taxes is indeed the second original sin of health care and insurance regulation. Cross-subsidies cannot stand competition.

If as now you and I are grossly overpaying for health care and insurance, to cross-subsidize others, a competitive market would come along and peel us off. A local skin-check clinic could offer that service for $50.

Low prices, efficiency, and innovation in the provision of services like health care come centrally from competition, and especially disruptive competition. With no competition -- especially no entry by new doctors, hospitals, clinics, insurance companies -- costs spiral up. As costs spiral up, the cost of the charity care spirals up. As that spirals up, the size of the cross-subsidies spirals up. As that spirals up, the need to restrict competition spirals up.”



“Bottom line: Much of the pathology of health care and health insurance comes from this second original sin, choosing cross-subsidies rather than straightforward taxes. Cross-subsidies require the government to stop competition, so an initially clever way of hiding taxes eventually builds into a monstrously inefficient system. (That's a key point. Initially, it is about the same. But the cross subsidy system gets more and more inefficient over time.)

We would be far better off to admit this; raise explicit taxes enough to provide the charity end of our care, and let health insurers and care givers compete for the rest of us, as airlines, computer makers, and everyone else does. The politician's job is to explain to people that what they pay more in taxes they will more than make up in lower health care and insurance costs.” - The second original sin of healthcare regulation, John Cochrane, 04/05/2017


Link to the entire essay appears below:

http://johnhcochrane.blogspot.com/2017/04/the-second-original-sin-of-healthcare.html