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Healthcare Chaos

from Peter Radford

Here we are one day before the ascension of Trump to the White House and already the policy chaos has begun. To be fair to Trump this particular chaos is not necessarily of his own doing entirely. The Republicans in Congress are also responsible. So hell bent are they in expunging all things Obama from the record that they have charged into the valley of death known as health care reform. Or, in this case, un-reform.

Having spent vast amounts of hours and taxpayer money in pointless votes to eliminate the Affordable Health Care act, and its eradication having become a totem of party loyalty, the Republicans jumped for joy when they finally gained enough control of Congress to make this wish come true. This is the moment their extremists have been waiting for.

And it’s terrifying the entire party except for those so clueless that they imagine getting rid of Obamacare is easy.

The source of this terror is the realization that they are now responsible for the consequences of their quixotic crusade. They will be accountable. It was all well and good to tilt at windmills when everyone knew that their efforts would be foiled, but now the public is looking at them as the legislative power. What happens over the next few years in our health care marketplace is entirely the doing of the Republican party.  Gulp.

The problem is that they are caught in an exquisite political vice. They can, if they wish, simply repudiate the wishes of the public and say that America, despite its status as the world’s richest nation, cannot afford to provide healthcare to its citizens and so abandon the notion of extending insurance to the poorest of people or those with uninsurable conditions — prior to Obamacare that was a group some 59 million strong. Or they can swallow their pride and admit that Obamacare is the way in which to meet that goal.

They cannot have it both ways.

The issue is that the basic arithmetic of insurance is stacked up against the Republicans. They are only now realizing that elementary fact. Quite what took so long is beyond me. Perhaps it was their anti-Obama zealotry and determination to keep America divided on what ought to be a unifying objective. Perhaps it was simply ignorance. Or, and this is my bet, it was a little of both.

Anyway, they are now stuck.

Here’s why:

In order to provide healthcare to people who otherwise could not afford it, either because they are too poor to afford insurance or they are afflicted with some uninsurable condition, we need to do several things.

First, we need to force insurance companies to provide insurance in circumstances where they would prefer not to. Privately owned businesses are not going to provide insurance to people they already know are sick — it’s a sure loss. So they need to be coerced into doing so.

Second, and because of that first point, we need to make sure the insurance pool includes lots of healthy people who will pay premiums and yet not make claims. All private insurance sits in this principle. That means making sure healthy people don’t avoid paying for insurance until they think they are sick and/or need it. This was the purpose of the dreaded “mandate” in Obamacare that roiled those libertarian sensitivities so much. It wasn’t an instance of socialism, it was an instance of actuarial mathematics.

Thirdly, since the above may still produce premium prices too high for some people to afford, we need an element of subsidy for the poorest of our fellow citizens.

These are the infamous three legs of the Affordable Healthcare Act, and here’s the rub: you need all three. Kick away one and the entire plan collapses.

So any replacement of Obamacare has to have these three features in order to be viable. Hence the feelings of terror as the Republicans struggle to defy gravity and invent a plan that doesn’t include a mandate or the redistribution of incomes implied in the subsidies.

Of course, as I said above, they can simply walk away from the notion of providing coverage for all. That means undoing Obamacare and not replacing it.

Fortunately this week we learned the consequences of such an alternative: the Congressional Budget Office, right on cue, produced a report outlining the costs of abandoning and not replacing Obamacare: 18 million people would lose coverage immediately. That figure would rise through time so that we would be back to about 60 million uncovered in a few years. Also: the cost of insurance would climb dramatically, with increases of 25% along the way, and even more for those unfortunate enough to have pre-existing conditions.

This would be a political train wreck, and the GOP leadership knows it. Apparently, though, many of their extremist colleagues are blissfully unaware of this. Hence the added terror now gripping the Republicans.

Rumors are swirling that they are reaching out to Democrats to help do their dirty work. Fortunately the Democrats are holding the line: this is something the Republicans own.

Meanwhile Trump has promised that his own plan will provide complete coverage at lower costs than presently available. It will, in his own words, be a beautiful plan. This magical plan has yet to see the light of day, and is unlikely to since it cannot do what he says it will. Even Trump cannot defy gravity.

All this is chaos and sudden scurrying for cover will dominate the first few weeks of the Trump presidency. Trump seems to have no idea how the legislative process works — he imagines repeal and replace is a matter of a few weeks work. The GOP has no idea how healthcare works. And the zealots are baying for blood.

These will be good times to sit and watch as the Republicans get their comeuppance.

Enjoy the show. And let’s all wait for the slow realization to set in: single payer healthcare is the only solution to our healthcare crisis.

But that’s for another day.

  1. Paul Davidson
    January 20, 2017 at 5:52 pm

    the obvious way to meet the three points raised is MEDICARE for all American citizens. Then the health as well as the sick must be covered — and anyone who earns any income must pay a Medicare tax sufficient to pay for all Medicare services required each year. And the administrative costs of the health care is a mere small fraction of what it will be if we leave it to private insurance companies to provide health insurance!

    But this is too easy for the politicians in Washington — especially Paul Ryan — to understand.–and I fear many professional economists as well.

  2. Grayce
    January 20, 2017 at 11:34 pm

    Can you comment on the ramifications of the handoff of Medicare into the hands of insurance companies under the banner of “Medicare Advantage Plans”? In this third party administrative scheme, ordinary insurance companies sign a contract with Medicare to administer the claims, and they make a deal on an annual amount they will get from the government, and they manage it.

    The Advantage plan works like an HMO, and all the utilization and review, downcoding and bundling tactics are applied. Some senior citizens are unaware of the appeals process and think they can’t have many of the services their contemporaries have under plain Medicare. Plans often require that that participants use in-network providers, or pay an upcharge.

    Advertising for Medicare SUPPLEMENTS and Medicare ADVANTAGE plans confound some seniors, yet the one

    Extending to the single payer version of the Affordable Care Act, would all the administrative parties be civil servants, or would this just map over to the for-profit sector who would add a layer as TPAs or ACOs? Then, since Advantage Plans are provided by private insurance providers, they will not offer the same benefits and terms. This means oversight of them, for having equivalent value to Medicare, is extremely difficult. Is there already a model on successfully scaling up the single payer version, without turning it over to for-profits? Is there a precedent or a good rationale for allowing only not-for-profit TPAs?

    BlueCross and BlueShield began as not-for-profit insurers. Amica was set up as a mutual, and ownership was shared. Demutualization (in the 1960s?) was a bad time for ordinary mutual shareholders, as a group of super shareholders materialized and obtained more shares than ordinary shareholders. So, insurance as an industry, has its dark spots. How can these pitfalls be avoided so they do not become unintended consequences?

  3. January 23, 2017 at 3:55 am

    This is my sense of the path the Republicans in the House will follow. Don’t know about Senate Republicans. House Republicans will put up a health care plan much like that offered by Representative Price. In summary his plan is,
    1) Fixed tax credits – pegged to a person’s age rather than their income — so that they can buy their insurance policies in the private market. Assuming one has income sufficient to tax.
    2) People with pre-existing medical conditions or chronic illnesses couldn’t be denied coverage under Price’s approach — provided they had continuous insurance for 18 months before choosing a new policy. Which, of course they did not since with pre-existing conditions they could not obtain insurance.
    3) If someone allows their policy to lapse (Republicans’ mandate), the next time they return to the market they could be charged up to 150 percent of the standard premiums for the next two years.
    4) Expanded use of health savings accounts to allow people to save income before taxes to pay for future health care needs. Assuming one has income to save.
    5) As a way of addressing the insurance industry’s challenge in covering older and sicker Americans, Price would provide grants to states to insure the “high risk” population. Grants that even under the best of circumstances would be wholly inadequate.
    6) Impose a cap on the amount of money that companies could deduct from their taxes to defray the cost of providing health insurance to their workers. Hurting small businesses.
    7) Allow health insurers licensed to sell policies in one state to offer them to residents of other states, so customers can “shop around.” Which they can do with ACA markets now.
    8) Price’s proposals would foster an insurance market very welcoming to young, healthy and financially self-sufficient people but hostile to sicker, older, and poorer people. Again the two tiered system that’s not worked ever.

    And when this fails, as it must as it kicks out all three legs of the stool, the House Republicans will blame it on Trump and being impeachment proceedings immediately. Whether this works or not depends on how gullible the American people are.

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