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An issue, guaranteed

I don’t mean this in a partisan way, but it is really distressing to read this New York Times article about Republican plans to dismantle parts of the recent health care bill by using the appropriation powers of the House of Representatives. I say this because of the unintended consequences that will result if they are successful in this approach. Let me give an example.

I think one of the most important aspects of the law is “guaranteed issue” of health insurance: Insurance companies will no longer be permitted to use pre-existing medical conditions as a bar to coverage. A concomitant of guaranteed issue is the individual mandate, the requirement that all people purchase health insurance. Why?

Left to their own, insurers will impose pre-exisiting conditions types of restrictions because they understand the moral hazard aspect of insurance. Healthy people provide an actuarial balance to sick people. If people only buy insurance when they need care, the risk profile of the insured population rapidly swings, upsetting the actuarial calculations used to establish premiums. So, if these restrictions are outlawed, everybody needs to be in the risk pool. Accordingly, you have to ban optional insurance.

But look at this quote from the article cited above:

Republican lawmakers said, for example, that they would propose limiting the money and personnel available to the Internal Revenue Service, so the agency could not aggressively enforce provisions that require people to obtain health insurance and employers to help pay for it.

I think the Republicans know that guaranteed issue is popular with Americans, and so they do not directly want to repeal that provision of the new law. But what will happen if healthy people start to opt out of getting insurance, only to return when they get sick? The system will quickly get out of balance. Ironically, this will only cause premiums to rise. I don’t understand why the Republicans would want that to happen, and I fail to see a strategic political advantage arising from that result.

This makes me wonder if they have thought this through completely and whether they understand the unintended consequences of their proposed actions.

Paul Levy is the President and CEO of Beth Israel Deconess Medical Center in Boston. Paul recently became the focus of much media attention when he decided to publish infection rates at his hospital, despite the fact that under Massachusetts law he is not yet required to do so. For the past three years he has blogged about his experiences in an online journal, Running a Hospital, one of the few blogs we know of maintained by a senior hospital executive.

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Cashmere R.PeterOrionPaoloDeterminedMD Recent comment authors
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Peter
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Peter

“Kaiser is relying on the data from MA, which was shown to be incorrect” By who? Just trying to discredit information by making making your own assumptions is not credible. “Simply ascribing an increase in premiums to someone not purchasing health insurance represents an incredibly superficial understanding of insurance” Having guarantee issue with no mandate doesn’t take much understanding to see insured premiums will rise. It also doesn’t take much to understand that having a higher percentage of well people contributing to insurance lowers the risk and cost for insurance or any healthcare system. “Cutting taxes, whether it is for… Read more »

DeterminedMD
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DeterminedMD

Yeah, but you don’t get fined if you don’t buy the “right” car. What is going to happen to McDonalds if they don’t comply? And who the hell is the government to tell them how to run their business if it is not outwardly hurting the public? Last I checked, didn’t see any muzzle prints on the foreheads of customers in fast food restaurants! They will regret making it a daily dining experience, but, isn’t that what this country is supposed to be about? Choice, and freedom to make it? All this rationalizing and minimizing of what this monstrosity called… Read more »

Nate
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Nate

if goverment taxes everyone then only returns a portion to people that buy the car they want you to, i.e. the volt, i think they already tell us what car to buy. The mileage requirements do the same thing.

DeterminedMD
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DeterminedMD

Hmm, yesterday it was everyone has to buy health care insurance, now today we read how the government is telling businesses what foods they can serve and what is deemed vegetables or not.
What is tomorrow, you lemmings? What car you can drive? What beverages you can drink?
Start thinking about these intrusions people. All these movies that show the future, you think they are all so outlandish? Think again!

PharmerJoshua
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PharmerJoshua

Peter, we can disagree about whether the decline in insurance coverage for citizens was significant. Taking into consideration the amount of increased spending and costs, I do not find that a decrease from about 15% uninsured to 5%. Kaiser is relying on the data from MA, which was shown to be incorrect because they calculated uninsured rates by assuming insurance coverage of non-responders. Once the law was enacted and there was a penalty for not purchasing insurance, reporting rates went down at a significant rate, which the Kaiser handout does not address. You also assume a relationship between someone not… Read more »

Orion
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Orion

Joshua, You and I are in agreement about the basics of the HCR law. I agree it does little to reduce costs and I think it is an incredibly flawed law. It has good things in it, however it is watered down and doesn’t affect the true structural things which are at the core of health care expenses rising at the high level they have been (too many unnecessary tests, incentives for the health care industry to be paid for the process rather than the outcome and more). I wasn’t arguing that point, simply the observation that the Republican party… Read more »

Cashmere R.
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Cashmere R.

The health industry is a business like any other. Its sad that in our country which is so great that we have these issues with people not being able to have health care. We live in the most abundant nation in the world this is sad. The American dream for the average and middle class people are really dreams.

Peter
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Peter

“The healthcare legislation that was passed will not greatly increase access, just as the bill passed in Massachusetts did not greatly bring down the numbers of uninsured.” Uh? Bill does increase access through subsidies. MA “reform” did increase access(insured), just did not lower costs. http://www.kff.org/uninsured/upload/7777-02.pdf “The only things hurting the economy now are wasteful government spending and an unpredictable market for business. There will be no change in unemployment as long as the status of the expiring tax cuts and healthcare legislation remain in the balance.” Yup, all that demand out there and business is not fulfilling it because of… Read more »

PharmerJoshua
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PharmerJoshua

Orion, your reasoning is incredibly flawed. The Republicans are not able to make any measurable impact upon the US economy without control of the Senate and the Presidency. The healthcare legislation that was passed will not greatly increase access, just as the bill passed in Massachusetts did not greatly bring down the numbers of uninsured. And besides, some people want to be uninsured because it doesn’t make sense economically for them to pay for health insurance. The legislation, if you read it, does absolutely nothing to help reduce the cost of healthcare in the the US. It strictly deals with… Read more »

Orion
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Orion

“I don’t understand why the Republicans would want that to happen, and I fail to see a strategic political advantage arising from that result.” Paul, you were just given an example of the Republican political mindset which gives us a clue as to why they would want this to happen. I make a distinction from the Republican political machine and a private citizen Republican, they often have very different long term goals. Right now and until Nov. 2012, the Republican political machine is interested in destroying the economy, keeping as many people unemployed as long as possible and making sure… Read more »

Paolo
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Paolo

“I don’t understand why the Republicans would want that to happen, and I fail to see a strategic political advantage arising from that result.”
Paul – I agree with this assessment. Making health care inaccessible to large numbers of people is not going to favor GOP prospects in the long run. Not only will the newly uninsured be less likely to vote Republican, they will be less likely to support market-friendly solutions.

DeterminedMD
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DeterminedMD

What is wrong with the people here who just espouse a principle without looking at the overall consequences? Making everybody buy health care insurance is not a good decision. Because it opens the door to other universal expectations that just stomps on what this country is about, freedom of choice and independence. Maybe there are those of you, who do not directly benefit from this really dumbass legislative intrusion, who are just hopelessly naive and wishful, but, in the end, one has the right to not get health insurance. And, you run the sizeable risk for regretting it later. What… Read more »

Nate
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Nate

“This makes me wonder if they have thought this through completely and whether they understand the unintended consequences of their proposed actions.” Very disappointing Paul, someone that runs a hospital should be able to do basic math. Or can you just hire accountants for that? How does a $700 fine to not buy a $3000 to $10,000+ service equal a meaningful mandate? Common sense would tell you guarantee issue with a bogus mandate is no better then guarantee issue with no mandate. Your post is nothing but partisan smoke and mirror. Have a real discussion about the facts and lets… Read more »

Doug
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Doug

I couldn’t agree with you more Paul. While the cost of health care treatment can be attributed to many issues, all but a few (rich) Americans need insurance to afford any serious medical issue. While media focuses on the emotionally and intellectually(read seniors wanting the Government out of their healthcare)challenged, they ignore the opportunity to explain even the simplest principle of insurance. That your yearly rate will be their total expenses including the cost of care for the insured, plus the cost of administering the claims, plus a risk assessment for the cost outlook over the next year, plus 25%… Read more »

PharmerJoshua
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PharmerJoshua

If you fail to even question the given reasons why the lack of an unconstitutional mandate to punish economic inactivity would lead to increased premiums, then you fail to understand the reasons behind our broken healthcare system. Glen, you may look at it as a “tactic”, but you will most likely see the unconstitutional mandate on punishing economic inactivity struck down by the US Supreme Court in a 5-4 decision. You may think it is “common sense” that the healthcare system is unique, but this thinking requires again, a failure to consider the regulatory interference that has caused the costs… Read more »