ACA/Obamacare: The Independent Payment Advisory Board

“The Independent Payment Advisory Board, or IPAB, is one of the more notorious provisions of the Affordable Care Act because it is the perfect embodiment of belief in technocratic expertise. The IPAB’s 15 “expert” members would have great power and little accountability.”


“The IPAB is fundamentally flawed concept for two reasons:

It tramples on Congress’ power to write laws. The IPAB would have the authority to rewrite any aspect of Medicare’s payment policies -- everything from hospital payments, to physician fees, and even how Part D prescription drug plans pay for covered medications -- to achieve additional savings. Congress has the constitutional power to write new legislation for a reason; voters can hold their elected representatives accountable for the kinds of laws they pass. Not so with the IPAB. IPAB members will get six-year terms and will be allowed to be reappointed once. Removing them from their positions will be extremely difficult.

It emphasizes payment reductions at the expense of real Medicare reform. The constraints placed on what the IPAB can recommend were not accidental. The authors of the ACA support restraining Medicare spending, but only with government-imposed payment restrictions, not financial incentives. So the IPAB can impose blunt payment cuts on physicians and hospitals -- and for the HMOs serving Medicare Advantage patients -- but it cannot recommend structural changes, like giving participants in the program incentives for selecting low-cost, high-value care. If payments are reduced too much, the network of willing providers of medical services becomes very constrained, and the participants in the program begin to have trouble securing access to the care they need. Congress could easily find itself undoing payment cuts it previously approved, much like it did for years with the “doc fixes” aimed at undoing the Sustainable Growth Rate formula for physician fees.” - Don't Forget about the IPAB, Real Clear Health, James Capretta, 03/08/2016

Link to the entire article appears below:

http://mercatus.org/expert_commentary/dont-forget-about-ipab?utm_source=Email&utm_medium=twam&utm_campaign=HC


　

　


　

ACA/Obamacare: California Proposition 45

"Californians are split over a high-profile voter initiative that opponents say could complicate the future of President Barack Obama ’s health-care law in one of the states that has gone furthest to embrace it.

Proposition 45 would grant California’s insurance commissioner new powers to veto health-insurance premium increases for individual and small-group policies, a popular sentiment in a state that has seen large rate jumps in the past, though they have recently moderated.

Some prominent Democrats, including Sens. Dianne Feinstein and Barbara Boxer, have endorsed the measure, which would also grant citizens and outside groups the power to delay health-insurance rate increases by requesting a government review.

The measure is strongly opposed by health insurers, who have donated tens of millions of dollars to defeat it. Opponents say the measure could hamper efforts to further implement the health-care law in California, which spent more time and money than any other state building its insurance exchange, Covered California. They say Covered California’s power to negotiate with insurers on behalf of consumers would be weakened, and that federal subsidies could be hard to price for many of the low-income people who dominate the exchange.

“It starts to raise very serious questions about the certainty of what Covered California will be able to negotiate with the insurance companies…and even whether some plans will be available,” said Rep. George Miller (D., Calif.), one of the Affordable Care Act’s co-authors. “The problem is Prop 45 was written before we got to the final stages here” of the ACA.

Prop 45 was originally drafted for the 2012 election, but the measure failed to qualify for the ballot in time. Since then, Covered California has become the most robust exchange in the country, signing up 1.4 million people during the last enrollment period.

The new powers under Prop 45 would broadly enhance the influence of Dave Jones, the Democratic state insurance commissioner. Since taking office in 2011, he has said that a missing piece of the health law was the lack of authority to reject insurance rate increases."

- Californians Split Over Letting Official Veto Insurers’ Rate Boosts, WSJ, 10/09/2014
Link to the entire article appears below:

http://online.wsj.com/articles/californians-split-over-letting-official-veto-insurers-rate-boosts-1412803775?KEYWORDS=california+health


　

　


　

Toothpicks, Tinker Toys and Health-Care: the Non-Price Phenomena

One can not help but read media reports handicapping the Supreme Court’s decision regarding the individual mandate. Will it stay or will it go? Moreover, many of the reports describe a situation of ripple effects within the health insurance sector if only the mandate is struck down -or- if the mandate and certain sections are struck down such as state expansion of Medicaid (which was argued the third day) -or- the entire legislation of ObamaCare being struck down.

“After three days of historic Supreme Court debate, the political world and health-care companies confronted the prospect of President Barack Obama's health law being wiped away, a decision that would upend years of planning by businesses and roil the November elections.

Among those set to implement the law, insurers would have to ditch changes to their businesses designed to bring in millions of new customers. Provisions that have already gone into effect, including letting children stay on their parents' insurance plans until they turn 26, would no longer be required.

Companies facing the law's requirements would be reprieved, including health firms set to pay new taxes and businesses that would have been required to insure their employees or pay a fee.” - Health Care Ripples Outward, The Wall Street Journal, 03/29/2012 (1)

　

The point the media seems to miss is the underlying delivery system of health-care is the problem. That is, the underlying model is broken. The ripple effects in health insurance due to striking down ObamaCare is not the basic problem. That is, ObamaCare missed the target to begin with as it was a quasi-insurance plan based on coercion and a price fixing scheme that was supposedly going to “fix” the underlying model. Health insurance or quasi-health insurance, the changing of the insurance system thereof, does not change the underlying health-care system in any meaningful way. Thinking that a health insurance system based on coercion and price fixing is going to “fix” the underlying model is confused thinking.

Health-care has become the giant Barking Cat. Health-care is a decades in the making patch work of legislation directing health-care delivery, processes, and requirements that with each piece of government intrusion has merely created a health-care system that suits the sponsor and supporters of the each new piece of particular legislation. That is, each piece of legislation basically boils down to Milton Friedman’s famous quote of: "I would like to have a cat, provided it barked". (2)

The counter argument is the tried and true: it’s a complex issue, and experts say….. Uh huh. Right! Somehow, someway simple solutions can not occur in today’s world as everything from toothpicks to tinker toys are so extremely complex that only extremely complex answers are suitable.

One very simple solution, among several simple first step solutions, is to give the consumer of health-care a price signal. Are prices marked at the grocery store? At the discount store? At the department store? Does the auto body repair shop give you an estimate? Roofing estimates? Would you go shopping at the grocery store where prices are unmarked, then check out at the register with no sales slip, then have the unknown value of your purchase shipped off to a third party to pay because you pay a very high monthly premium to cover those unknown price items you purchase? Rather insane is it not?

　

The above scenario seems rather silly. Nay, nay! Think about it for a moment. Exactly where does the consumer go shopping where prices are not clearly marked or marked at all? Its called health-care purchases. The public has been duped into purchasing health-care with no price signal. Brilliant! The consumer would never go shopping at a store with no prices marked yet do it everyday in the health-care sector! Dupery at its best!

　

If one wants to know the price the general rebuff is “..can you put a price on your health?” -Or- you get the “complicated/expert” answer that knowing the price is too complicated as who knows what has to be done regarding tests, screenings, scans, etc.. Yes, you can’t get them to answer the price question as they don’t want you to know the answer to the price question. Why don’t they want you to know price? Because they don’t want to compete on price. More succinctly, the health-care industry doesn’t want to compete, period. It’s a special case where dupery through nitwitery reins supreme regarding “price”.


Notes:

(1) http://online.wsj.com/article/SB10001424052702304177104577310050863533554.html

(2) Barking Cats, Milton Friedman, Newsweek, 02/19/1973

http://www.johnlatour.com/barking_cats.htm

ObamaCare: The Ultimate Premium Increase, $940 billion becomes $1.76 trillion.

Many headlines appeared 03/14/2012 such as the following:


CBO: ObamaCare Price Tag Shifts from $940 Billion to $1.76 Trillion, YahooNews. (1)

What does the $1.76 trillion price tag mean vs. the old price tag of $940 billion? It means your premium came due, again, and….. ouch! What an increase!



By The Numbers


First off, the $1.76 trillion is a ten year cost period hence $176 billion per year. The $940 billion figure is the ten year comparison period number generated at inception of ObamaCare -or- $94 billion per year.

The most recent total expenditure on health-care in the US is 2.6 trillion (2010 stats):“U.S. health care spending grew 3.9 percent in 2010 following record slow growth of 3.8 percent in 2009; the two slowest rates of growth in the fifty-one year history of the National Health Expenditure Accounts. Total health expenditures reached $2.6 trillion, which translates to $8,402 per person or 17.9 percent of the nation’s Gross Domestic Product (GDP).” (2)

Moreover, as of 2010, total annual private health insurance premiums written were $378 billion, Medicare cost was $446 billion and Medicaid was $380 billion. Hence private and public equals $1.204 trillion premium/quasi-premium volume. (3)

With ObamaCare you have a new total consisting of: $1.204 trillion plus $176 billion = $1.38 trillion of premium.

Note: the $1.76 trillion would appear in private subsidized premium and Medicaid costs as many will merely end up on Medicaid and part of the $176 billion goes to that quasi-premium portion.

Hence, by-the-numbers, you have a social insurance scheme of some sort, that has an old premium of $90 billion, and in two annual renewal cycles since inception, the social insurance scheme premium changed to a $176 billion annual premium. A 95% premium increase since inception, two short pricing cycles ago. According to research, and stand to be corrected, a $86 billion dollar increase in premium over two years might be considered the ultimate premium increase.


What Does Your $176 Billion Per Year Insurance Premium Buy?

The $1.76 trillion (over the next decade) regarding the cost of ObamaCare is made up of the following:

(a) the cost to provide coverage to the current uninsured (should fall from 16% to 6% uninsured i.e. not all will be insured),

(b) cost of expanded coverage,

(c) administration cost.


The cost to provide coverage to the current uninsured:

(1) many of the uninsured will be placed in Medicaid and hence the annual cost of Medicaid increases,

(2) those purchasing coverage that have means, but not total means to buy, will be subsidized (up to 133% of poverty level qualify for subsidy),

(3) those firms ending coverage due to cost, those subsequent uninsured employees will then purchase individually and some will fall into #2 above (subsidy).


The cost of "expanded coverage" (scope of coverage) e.g. first dollars coverage for annual physical, colonoscopy, etc. means the premium is driven up, hence the cost for subsidies increases with the underlying premium cost increase to cover expanded benefits. Also, the scope of coverage will include no pre-existing condition exclusion yet charge the impaired risk nothing extra, hence driving all premiums higher, hence driving the subsidy higher.


The administration of ObamCare by a federal bureaucracy speaks for itself.


The Other Side of the Coin

　

What about the payment of the annual cost of $176 billion vs. the old annual cost of $90 billion per year?

That is, the myriad of ObamaCare associated taxes, the penalty fines for not buying, the penalty fines for not providing (firms), etc. had to equal $90 billion. Now it has to equal $176 billion hence the tax and fines have to increase -or- you decided to deficit spend -or- you cut the program benefits -or- all of the above.

And About That Base Economic Model that is Broken?


What about this $176 billion regarding changing the base model of health-care (a $2.4 trillion dollar per year broken model)? It does nothing about fixing the model. If anything it exacerbates the broken model through mandated coverage under ObamaCare which is a basically a low deductible major medical plan which causes over utilization......meaning the coverage itself is a cost driver and hence you are subsidizing an ever increasing cost driver. Ops!


Cost Containment and Price Fixing Schemes


The "cost containment" within ObamaCare is a price fixing scheme. That is, they intend to contain cost ala Richard Nixon. There is not one price fixing scheme in all of economic history that was ever successful. Why? If one doesn't use price as a rationing agent, then some other rationing agent must replace price. That is, price fixing merely affects supply quantitatively and qualitatively. Or, alternatively, supply merely deteriorates in quality and the new lower quality supply is rationed over time.



Notes:

(1) CBO: ObamaCare Price Tag Shifts from $940 Billion to $1.76 Trillion, YahooNews.http://news.yahoo.com/cbo-obamacare-price-tag-shifts-940-billion-1-163500655.html

(2) https://www.cms.gov/NationalHealthExpendData/downloads/highlights.pdf

(3) Insurance Industry Overview, http://www.plunkettresearch.com/insurance-risk-management-market-research/industry-statistics

ObamaCare: governments fail too

Governments fail too

Many times you read articles or see news reports regarding "market failure". That some how the market has failed. What you intuitively know but is rairly reported is that "governments fail too". Both markets and governments fail basically because they are both made up of human beings that make errors. Some errors are unfortunately by design.

In a recent Kudlow Report segment Don Luskin, chief investment officer of Trend Macro made this instant- classic statement: "Government is the only enterprise in the world that when it fails, it does the exact same thing over again except bigger". (1)

Luskin is not alone. Milton Friedman also observed: "The government solution to a problem is usually as bad as the problem". (2)

Do we know of government failures?

We do in fact know governments fail. John and Jane Goodfellow have first hand experience from a simple trip to your local Department of Motor Vehicles that takes hours, to the out of body experience of trying to read and fill out you annual federal tax return. We also know government failure in a more complex proposition of unfunded future entitlements of Medicaid, Medicare, and Social Security that are now in excess of 100 trillion dollars.


Why are market failures reported yet government failures are under reported?

It boils down to the "painting" of the subject matter. What exactly is the difference between politicos through the mechanism of government creating a cheap money bubble while simultaneously promoting purchases of single family housing units by low income marginal buyers and a financial advisor promoting a novice, part-time retail stock investor, with very modest means, into making risky trades using a margin account? (3)

The point being that both are highly risky practices especially for the type/kind of participants involved. One risky practice is promoted by the government while the other risky practice is promoted by the private sector.

If the outcome for both situations end in disaster, the government promoted activity is painted as merely public policy failure experiment albeit in-your-best-interest, helping the little guy, and social justice didn't work in this particular isolated incident. The other disastrous outcome from the private sector is painted in exact opposite terms where "greed", getting over on the little guy, and the-system-is-rigged are the overarching themes of the incident as well as the incident not being isolated but portrayed wide spread within the entire economic system.

In the larger picture, cases of government promoted failure and private sector promoted failure, yield only one report: "markets fail". The "governments fail too" proposition plays second fiddle and is only pointed out by a handful of people. Hence the public at large are feed the "markets fail" concept and the "governments fail too" proposition remains widely under reported.

ObamaCare and governments fail too

F.A. Hayek wrote extensively that centralized command and control programs only worked in the hunter/gatherer stage of economic evolution. When small groups of forty or so controlled a hunting/gathering region, centralized authority might have worked. Harold Demsetz has also written extensively regarding the subject. (4) (5)

However, both Hayek and Demsetz point out that when economies evolved into millions of people, the market became based on the individual, individuals in number that are far removed from the forty or so hunter/gather stage. That millions of unique individuals, through no master centralized plan, began to base information on "price" through no particular grand design. That an economy based on price, price being reflective of scarce resources with alternative uses, allowed the unique millions of individuals, within a vast economy, to communicate, economically speaking, in the universal language of "price".

Hayek went further and postulated that the summation of mundane knowledge of individuals was greater than the knowledge of any centralized authority. In effect, no centralized authority could mimic the knowledge of millions of unique individuals with specific mundane knowledge of their unique abilities, needs, wants, and desires. Thomas Sowell has also dispelled the myth that the knowledge of a centralized authority can supplant the billions of mundane knowledge decisions made everyday by individuals with specific mundane knowledge particular to each and every price decision. (6)

History repeats itself but market failure receives a front page headline

A quote by Ronald Reagan has been widely disseminated within the United States over the past half century: "....government is not the solution to our problem, government is the problem". Actually Reagan went on in his statement to basically summarize Hayek's position of centralized authority being unable to organize an economy. You can hear those remarks in the link below:

http://www.youtube.com/watch?v=cEuiI2PbSWQ


When ObamaCare, the first major entitlement introduced since LBJ'S Great Society programs, and with Social Security, Medicaid, and Medicare all basically bankrupt, many, many individuals in US society immediately recalled Reagan's remarks. That yet another entitlement stacked atop a bundle of bankrupt entitlements smacked of "..government is the problem".

Upon review, ObamaCare is merely a centralized authority trying to mimic billions of mundane decisions by unique individuals. ObamaCare attempts to manipulate price which would simply cause individuals to receive the wrong price signals regarding the allocation of scarce resources with alternate uses. Moreover, ObamaCare is a price fixing scheme that ends, as do all price fixing schemes, with a qualitative and quantitative reduction in supply aka rationing. (7)

Oddly enough, "Governments fail too", regarding the introduction of yet another vast entitlement, was elevated, through the voices of millions, to the forefront. Millions upon millions of citizens want to investigate "government failure" before it becomes government failure. Upon further review and investigation, the failure of ObamaCare has become daily reports. That the plan is unravelling daily and possibly for the first time "governments fail" may be stopped before it happens.

Notes


(1) http://www.cnbc.com/id/15838446/

(2) http://thinkexist.com/quotes/milton_friedman/

(3) Getting Off Track, John B. Taylor

(4) Hayek: His Contributions to the Political and Economic Thought of out Time, Butler and Riggenbach

(5) From Economic Man to Economic System, Harold Demsetz

(6) Applied Economic, Thomas Sowell

(7) Basic Economics, Thomas Sowell

ObamaCare: behind the price fixing scheme

ObamaCare is widely understood to be based on a price fixing scheme. Price fixing schemes merely result in quantitative and qualitative reductions in supply. Further, every and all price fixing schemes in all of recorded economic history have failed.

Then "why" choose a public policy response of a price fixing scheme which is bound to fail?

The choice of a price fixing scheme by politicos is related to the immediate consequences of public policy. That is, the immediate consequences of public policy many times create the illusion of economic success in the very short run whereas the long term cascading unintended economic consequences of public policy generate dismal results e.g. Social Security, Medicare, Medicade, etc.. However, the short run results of public policy match the time horizon of politicos. That is, the politico's time horizon is the next election which is always just-around-the-corner.

Price is generally considered an economic phenomena. However, looking at price through a political lens, price is generally associated with and/or attached to the immediate provider of a good or service. Hence if a price is considered too high in a political sense, the price is not analysed in regards to all the economic components making up the perceived high price. Perceived high price is merely attached to the immediate provider of the good or service. For example, if a gallon of gasoline is $4.00, in a political sense the perceived high price is associated with the oil company. However, in fact the price is made up of demand and supply and the associated components that make the demand and supply curves intersecting at a $4.00 price per gallon.

Politicos realize price is associated with the immediate provider of the good or service, and if price is perceived to be high, politicos merely play politics with price and vilify the immediate associated provider, and disregard the economic components that make up price. The politics, which one must remember are associated with a sort term time horizon of politicos which is the next election cycle, is merely to offer a short term public policy solution to match the politicos election time horizon and not a long term economics based policy solution.

If product X is perceived to be expensive, and product X is associated with firm Y, then the immediate politico policy response is to vilify firm Y and declare the price must be reduced which means a price fixing scheme. The politico then publicizes the price has been reduced through his/her efforts and gains short term political capital. Then a certain section of the electorate see the immediate price reduction and perceive the problem of the high price has been solved.

Hence price fixing schemes, ObamaCare included, is merely a known failure scheme, based on politics not economics, directly related to the politicos election time horizons. The electorate later realizes, as the public policy of the price fixing scheme unfolds, that quantitative and qualitative supply reductions are something they are left to deal with on a daily basis. However, the politico in the long run is long gone. The politico leaves the electorate/tax payer with the long term costs associated with short term public policy results, that in fact, were based on the reelection needs of the politico's short term election time horizon.