A THCB reader in New York writes in with this timely observation:
“If you want everyone to be able to get insurance, everyone has to actually have insurance.
Most people agree that one shouldn’t be denied insurance because of illness and pre-existing conditions. This is probably the least controversial aspect of healthcare reform. The problem is, you can’t insist that insurance companies sell to all comers at reasonable rates unless you also guarantee a sufficiently large risk pool that includes the healthy as well as the sick.
If you don’t see to it that the healthy sign up, people will go without insurance until they get sick, and the pool of the insured will become so costly that premiums will quickly spiral out of control.
So, to make sure everyone CAN get insurance, everyone MUST get insurance.
This isn’t a moral or political stance, it’s not something you can choose to believe in, it’s basic economics.
The problem with the ACA’s approach to ensuring universal coverage is that the incentives for the healthy to sign up are too weak.
The healthy who decide not to purchase insurance will have to pay a penalty, but that penalty will usually be substantially lower than the price of insurance. Perversely, this weakened approach to ensuring universal coverage could make things worse than they are today. How?
Today, if I’m healthy and uninsured, I know that if I develop a serious illness, I won’t be able to get coverage. At all. This is an incentive for me to go out and spend the money on insurance. Once the ACA is in full force, if I decide that I would rather pay the (cheaper) penalty than buy insurance, I have the security that should I become sick, assuming it’s not a super emergency, I will be able to get insurance to cover future costs, since policies will have to be offered to all. This security blanket for those who choose to remain uninsured is a major problem.”
Continue reading “Sorry. If You Want The ACA to Work, You’re Going to Have To Actually Make People Buy Insurance”
Filed Under: THCB, The Business of Health Care
Tagged: Health Insurance Exchanges, Individual mandate, THCBist, The Affordable Care Act
Nov 10, 2013
Social security numbers allegedly passed around in clear sight. Page after page of unworkable code. And no clarity on when it will all be fixed.
Just another day of trying to log in to healthcare.gov.
Two weeks after its launch, the federal health insurance exchange is a “failure,” says the Washington Post‘s Ezra Klein. Some officials deserve to be fired, according to Robert Gibbs, who until February 2011 was one of President Obama’s closest advisers.
And those are the Affordable Care Act’s supporters.
Even the president conceded on Tuesday that healthcare.gov had “way more glitches than I think are acceptable.”
Those glitches could take months — or even years — to fix, according to reports. But there’s a key deadline looming: Jan. 1, 2014, when the ACA’s individual mandate takes effect.
Under the mandate, millions of Americans who were expected to use the exchanges to obtain health insurance will face fines if they haven’t purchased coverage by Feb. 15, raising the question of whether the mandate or other Obamacare provisions should be postponed — an uncomfortable position for an administration already trying to implement a politically divisive law.
But at this late date, what parts of the ACA can legally be delayed?
“In a sense, all of it,” Timothy Jost, a Washington & Lee law professor, told me. But “there’d be a high political price to pay. And delay could result in litigation.”
Jost was among several experts who spoke with me about the health insurance exchanges’ bumpy rollout, the ripple effects for the mandate and other provisions, and what it could all mean for implementing the ACA.
What Agencies Can and Can’t Do
When considering a delay to Obamacare, it’s important to understand the difference between statutory and discretionary deadlines.
For example, the ACA’s language directly calls for many mandatory deadlines — like rolling out the individual mandate or implementing a slew of insurance market reforms on Jan. 1, 2014.
But the agencies also have had considerable leeway on how they’ve chosen to apply the law — like choosing an Oct. 1 launch date for the exchanges, a deadline that retrospectively seems ambitious.
Continue reading “The Federal Shutdown is Over. The Health Care Fight is Just Getting Started. Here’s What May Happen Next…”
Filed Under: THCB
Tagged: ACA Implementation, Dan Diamond, GOP Repeal, government shutdown, Health Insurance Exchanges, Healthcare.gov, Individual mandate, The Affordable Care Act
Oct 17, 2013
This post highlights the findings of a paper released today by the Clayton Christensen Institute, “Seize the ACA: The Innovator’s Guide to the Affordable Care Act.”
Since its passage in 2010, the Patient Protection and Affordable Care Act (ACA) has been analyzed by experts from nearly every political, economic, and health policy angle possible. Yet in the noisy debate about whether the legislation is good or bad and whether to implement or repeal it, we think there’s something missing: a rigorous but practical discussion of the innovation opportunities created by the legislation and the barriers to innovation it imposes.
To facilitate that goal, we analyzed the ACA through the lens of the theory of disruptive innovation. First articulated by Harvard professor Clayton M. Christensen, disruptive innovation theory explains how innovations that decrease cost and increase accessibility transform entire industries.
As existing products increase in performance and begin to exceed customer needs (think of next year’s biggest Cadillac model), low-cost, lower-performance alternatives created by new entrants take root in the low end of the market (think of next year’s smallest Kia model).
These new products are initially inferior in comparison to established products, but they become better and better until they “disrupt” and eventually topple larger incumbent competitors.
So how does the ACA affect the pace of disruptive innovation in health care? What opportunities does it create for innovators? What barriers does it inadvertently erect? Here are a few thoughts from our recent paper.
Continue reading “Disruptive Innovation and the Affordable Care Act”
Filed Under: Tech, THCB
Tagged: Ben Wanamaker, Clayton Christensen, disruptive innovation, Employer Mandate, Essential health benefits, Health Insurance Exchanges, Individual mandate, The Christensen Institute
Sep 26, 2013
In his “The Great American Health Care Divide,” Brad DeLong laments the great ideological divide that has so long prevented this great country from developing a coherent national health policy.
I am glad to have Brad’s company, because I have whined about the same divide for several decades now, as evidenced by my “Turning Our Gaze from Bread and Circus Games,” penned in 1995 and “Is there hope for the uninsured?”
Finally, after a nice visit with my friends at the Cato Institute and reading the often amazing commentary on John Goodman’s NCPA blog , I was moved to pen a post on The New York Times blog Economix entitled “Social Solidarity vs. Rugged Individualism.” It was inspired by the often hysterical description of the Affordable Care Act (ACA) as a government takeover of U.S. health care or a trampling on the freedom of Americans, as in mandating individuals to have minimally adequate health insurance, lest they become freeloaders on the system.
The basic idea of my proposal is simple.
In 2009, Paul Starr had warned Democrats of a potential voter backlash against the individual mandate and proposed instead a nudging arrangement. Uninsured Americans would be auto-enrolled into health plan, if they chose not to select one, but could opt out of it with the proviso that for the next five years they could then not buy insurance through the insurance exchanges established by the ACA at community-rated premiums, and potentially with federal subsidies.
My proposal is to make that a lifetime exclusion. An individual would have to choose one or the other system by age 25. Should individuals opting out fall seriously ill and not have the means to pay for their care, we would not let them die, of course, but to the extent possible we would cover their full bill – possibly at charges — by expropriating any assets they might have and garnishing any income above the federal poverty level they subsequently might earn. Something like that.
As Jay Gaskill’s somewhat opaque reaction in “RUGGED INDIVIDUALLISM is NOT the Essential Value of Freedom” suggests, people who oppose the ACA as trampling on their freedom are not comfortable with my prescription, which does not at all surprise me.
Continue reading “A Health Plan for Rugged Individualists”
Filed Under: Health Plans, OP-ED, THCB
Tagged: Economics, Individual mandate, Insurance, The Affordable Care Act, the business of healthcare, the uninsured, Universal coverage, Uwe Reinhardt
Aug 5, 2013
If the devil is in the details, we got the motherlode this past week as to how the most incendiary part of President Obama’s health reform will actually work when it launches next January.
The Department of Health and Human Services issued lengthy rules on the controversial individual mandate requiring uninsured Americans to purchase a health plan. The IRS followed with nearly as lengthy a set of rules specifying who is eligible for subsidies for those purchases and who pays penalties when they refuse. In what critics will consider an Orwellian flourish, both federal agencies refer to these penalties as “shared responsibility payments” — even though the Supreme Court, in its upholding of the mandate, plainly referred to them as what they are: a tax.
The two sets of rulings represent a sort of good cop, bad cop routine from the Obama administration. The bulk of the HHS rules defines individual outs for the mandate, identifying 11 different types of uninsured Americans who will be exempt from the de facto tax, ranging from sudden financial impairment to genuine religious objection to medical care. The IRS rules are all bright hard lines about who has to pay, when, and how.
The major media, echoing criticism by Obamacare’s agitators from the Left, seized on the stinginess of the IRS rules regarding subsidies and penalties for family members of people covered by their employers, or what they call the “family glitch.” The glitch is technically real, but statistically remote, and will affect almost no one in the real world, but it does make for good inflammatory headlines.
Continue reading “Life Support and Taxes”
Filed Under: THCB
Tagged: Emergency Medical Treatment and Active Labor Act, family glitch, Health Care Reform, Health insurance, HHS, Individual mandate, IRS, J.D. Kleinke, Obama administration, Taxes, The IRS rules
Feb 7, 2013
In the aftermath of the recent election, virtually all commentators were quick to conclude that ObamaCare has been saved. The health reform law can now go forward and Republicans are powerless to stop it.
The trouble is: ObamaCare is a deeply flawed piece of legislation. Its defects are so huge that Democrats are going to want to perform major surgery on it in the near future, even if the Republicans stand by and twiddle their thumbs.
That raises this question: What changes need to be made in the legislation to turn it into a health reform that solves existing problems without creating even more serious new problems? Here are six essential short term fixes:
Subsidize all insurance the same way. The way the government subsidizes health insurance under the current system is arbitrary and unfair. Employees with employer-provided insurance get that benefit tax free — a subsidy that is worth almost half the cost of the insurance for middle-income families. However, there is almost no subsidy available for people who must purchase insurance on their own. They must pay taxes on their income and then buy the insurance with what’s left over.
Under ObamaCare the subsidies become even more arbitrary. Although the new law creates generous tax credits for low and moderate income families who must buy their own insurance in newly created health insurance exchanges, the subsidy in an exchange can be as much as $12,000 higher than the same family will get if the same insurance is obtained through an employer!
Continue reading “Repairing ObamaCare”
Filed Under: Health Plans
Tagged: Health Care Reform, Health Insurance Exchanges, health insurance subsidies, Individual mandate, John Goodman, Medicare, Obamacare, Penalties, the uninsured
Dec 12, 2012
The morning after Tuesday’s vote, there is one thing every commentator agreed on. The election of Barack Obama guaranteed that his signature piece of legislation — health reform — can now go forward. Republicans are powerless to stop it.
Yet there is something all these commentators are overlooking. There are six major flaws in ObamaCare. They are so serious that the Democrats are going to have to perform major surgery on the legislation in the next few years, even if all the Republicans do is stand by and twiddle their thumbs.
Here is a brief overview.
ObamaCare is not paid for. At least it’s not paid for in any politically realistic way. As is by now well known, the legislation will lower Medicare spending over the next 10 years by $716 billion in order to fund health insurance for young people. This reduction will primarily consist of lower payments to physicians, hospitals and other providers — reductions that are so severe that they will seriously impair access to care for senior citizens.
Continue reading “Did the Election Save ObamaCare?”
Filed Under: Commentology, OP-ED, THCB
Tagged: 2012 Election, Health Insurance Exchanges, Individual mandate, IRS, John Goodman, Medicare, Obamacare, Preventive care, The Affordable Care Act
Nov 12, 2012
While all eyes focused on the presidential race, the ultimate fate of the Affordable Care Act (ACA) could depend on the Senate contests in the states.
Even if Mitt Romney were elected, he alone could not overturn major provisions of healthcare reform. Only Congress can pass the legislation needed to change the ACA.
Republicans are expected to maintain control of the House, but if Democrats hold the Senate, they will be able to block House bills aimed at eviscerating “Obamacare.”
What is at stake
If Republicans take the Senate, the two chambers could pass legislation that would:
· eliminate the premium subsidies designed to make health insurance affordable for middle-income and low-income families
· bring an end to Medicaid expansion, and
· rescind the individual mandate that everyone buy insurance or pay a tax.
Under “budget reconciliation,” Republicans would need only a simple majority to pass such legislation. In the Senate, 51 votes would do it. Today, Republicans hold 47 seats.
Razor-sharp margins in many states make it impossible to predict outcomes. Polls only give us a blurry snapshot of one moment in time – and in states like Arizona, candidates have been trading leads from week to week.
Continue reading “The Future of Health Reform May Turn on Senate Races”
Filed Under: THCB
Tagged: 2012 Election, Barack Obama, Health Care Reform, Individual mandate, Jennifer Duffy, Maggie Mahar, Medicaid Expansion, Mitt Romney, Obamacare, Senate Races, The Affordable Care Act
Nov 5, 2012
Now that the Supreme Court has decided that ObamaCare’s mandate to buy health insurance is a tax, will the IRS be able to collect it?
Generally speaking, if you owe the IRS, it will get the money from you—with the possible exception of the ObamaCare tax. Though ObamaCare’s individual mandate imposes a tax on people who do not purchase government-approved health insurance, the law explicitly neuters the IRS’s ability to collect the tax.
Bizarre? Yes. And it matters. If policymakers expect uninsured young people to buy health insurance when it is even more expensive than it is today, the threat of serious consequences for not doing so must be real. Yes, the threat that the IRS might come after you if you do not do what you are told looks real at first glance. But Democratic politicians, fearing public backlash for making the mandate too intrusive, pulled its teeth.
First, the tax (nee penalty) is too small to matter to the people who are its target. In 2014, the tax will be the larger of $95 or 1 percent of taxable income for an individual. By 2016 it rises to $695 or 2.5 percent of income. Young people would not want to pay a dollar if they could avoid it, but avoiding the tax means signing up for insurance that many do not think they need. That insurance is not free. Even with subsidies, they will pay at least 3 percent of their incomes for premiums and up to 6 percent of the cost of the insurance in deductibles and copayments. That adds up to a lot more than 95 bucks.
Continue reading “Health Care’s New Rules: If You Don’t Buy Insurance, Will You Really Pay the Tax?”
Filed Under: THCB, The Business of Health Care
Tagged: Health insurance, Individual mandate, IRS, Obamacare, teeth
Jul 27, 2012
Since the Supreme Court upheld the ACA/Obamacare, there has been a renewed interest in the Massachusetts healthcare law. I have blogged many times before to caution readers and the media not to assume the two laws will lead to the same results, because they won’t, mostly as Massachusetts is not the same patient with the same ailments as New Mexico, or Michigan, or even Florida.
I know I am fighting against the conventional wisdom, but this issue warrants discussion as Congress passed a national program and modeled the behavior and cost estimates (incorrectly in my opinion) partially on our experience here in the Bay State.
As a result of the national interest, I assume we will see more local reports on Romneycare. On cue, WBUR’s CommonHealth Blog put up:
5 Quick Facts About Mass. Health Reform You Now Need To Know
One of the facts cited is the decrease in the number of Massachusetts residents paying the individual mandate penalty.
Continue reading “Are Fewer People in MA Paying the Individual Mandate Penalty?”
Filed Under: Health Plans
Tagged: 2012 Election, Individual mandate, Josh Archambault, Massachusetts, Obamacare, Romneycare, The States, The Supreme Court Challenge
Jul 11, 2012