Repeal + Replace

Repealing the Right to Redistribute ‘Other Peoples’ Money’

Republicans are having a hard time agreeing on how and when to repeal Obamacare. The Patient Protection and Affordable Care Act (ACA) is difficult to unravel because it was designed to alleviate a problem too costly for the government alone to fix. The health care law was passed to make medical care more accessible for low-income Americans and those with pre-existing conditions. This was to be done largely by socializing the costs and spreading the burden among a much broader segment of the healthy population. This is not unlike a pyramid scheme, where a broad base of people at the bottom get ripped so a few at the top can benefit.

Republicans have it within their power to use a process known as budget reconciliation to repeal Obamacare provisions that involve the budget, with a simple majority vote. For example, Republicans can repeal the taxes, fees and appropriations that fund the ACA. The individual and employer mandates, with associated penalties, can also be repealed. What Republicans cannot do is repeal the costly insurance regulations that drive up premiums for most people. That would require the help of perhaps a dozen skeptical Democrats.

Dismantling the ACA using budget reconciliation alone would get messy. Repealing both the sliding-scale exchange subsidies and the cost-sharing reductions for low-income enrollees would likely cause more than three-quarters of Obamacare enrollees to drop their plans. If Republicans scaled back the enhanced Medicaid matching rates to that of non-expansion beneficiaries, many states would withdraw from Medicaid expansion. Within a couple years following repeal (without replace) the individual market would implode under the weight of adverse selection, since only the sick would benefit despite paying sky high premiums.

President Trump issued an executive order on January 20 directing his administration to “waive, defer, grant exemptions from, or delay…” whenever possible to the “maximum extent of the law.” It is hard to know what this will really achieve. Many believe this move was intended to destabilize the ACA and hasten its demise without Republicans getting blamed, while others believe it was symbolic gesture with no other purpose.

The best known provisions of the ACA include an individual mandate, an employer mandate, subsidies to help moderate-income people afford coverage and Medicaid eligibility expanded to include working-poor single adults. Young adults could also stay on their parents’ employer plans until age 26. Other prominent provisions include changes in insurance regulations for coverage purchased in the individual market. For instance, medical underwriting was replaced with the regulations known as guaranteed issue and community rating. This meant individuals could not be charged more or turned away due to pre-existing conditions; premiums could only vary by geographic location and age. In addition, maternity coverage was mandated in the individual market and women’s premiums could not differ from men’s. The ACA also did away with limited benefit plans and plans that do not include an essential benefit package. In the process the ACA banned plans with annual and lifetime caps on benefits.

These provisions have a sinister purpose. They were designed to socialize medical care using backhanded regulations. Obamacare intentionally makes most people much worse off to benefit a few selected individuals. At its core the Affordable Care Act is an income redistribution scheme based on health status and wealth. The goal of the ACA is to force healthy (non-poor) individuals to shoulder most of the care for the least healthy 20 percent of the population (who consume 80 percent of medical care). The ACA is also designed to make taxpayers subsidize much of the care for those with modest incomes. Granted, actuaries will tell you all forms of insurance are designed to pool risk but the re-distributive intent of the ACA seems more deliberate. The provisions collectively have the effect of maximizing the transfer of wealth from younger, healthier enrollees to mostly older, sicker individuals.

Who are the biggest losers? Healthy people and women age 55 to 64. According to analysis by Mark Pauly at the University of Pennsylvania, women in this age group can expect to pay about 50 percent more for health insurance and care out-of-pocket than prior to Obamacare. These women get stuck with cross-subsidizing younger women of childbearing age and subsidizing late middle-age men who didn’t take care of themselves.

Of course, nobody really wins the health insurance lottery by getting sick. Unfortunately, premiums are too high because ACA proponents specifically wanted society to be especially generous with other peoples’ money. The process of repealing & replacing Obamacare is difficult because it involves deciding how much of your money should go towards your own medical needs; and how much should subsidize others whose health is more precarious than yours.

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concerned2017Steven FindlayHealthLawyerPeterphochfeld Recent comment authors
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concerned2017
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concerned2017

Mr. Herrick conveniently ignores the fact that NOT insuring poor people would NOT stop money from be redistributed. I assume he is smart enough to know better so this must have been a purposeful omission to make his argument stronger. Those who don’t have insurance still end up in hospitals. In fact, those who don’t have insurance are more likely to postpone medical care until they need emergency care. By delaying care, their disease has often progressed and now the treatment becomes much more expensive. Those costs end up being passed on to everyone who does have insurance. In other… Read more »

Steven Findlay
Member
Steven Findlay

The broad social insurance model as applied to healthcare works for every other industrialized country. The US is the only nation that does not base all its health insurance on that model. We do so, of course, in Medicare…and to lesser extent in Medicaid. This is not the only reason, but it’s one of the main reasons that the healthcare system in the US is, according to numerous analyses over the years, the most dysfunctional and least efficient.

BobHertz5
Member
BobHertz5

Let’s say that the cost of a decent high risk pool is $50 billion a year. It does matter how this is funded. In the ACA, this cost has been funded primarily by charging higher premiums to those who are in the ACA. A young person pays $300 a month instead of $75 a month. A 55 year old pays $700 a month instead of $400 a month, etc etc. Now let’s say that the high risk persons are put in a separate pool and must be funded by higher income taxes. :Let’s say that this requires a 1% increase… Read more »

HealthLawyer
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HealthLawyer

I’m always a little baffled by the apparent moral outrage at any funding mechanism that relies upon a redistribution of resources. That is, of course, the whole point of insurance, which redistributes money from those who are lucky to those who are not. Of course, misfortune undoubtedly befalls those who take greater risks at a higher rate than those who are cautious, but when it comes to human health, there is certainly a component of luck (or at least inevitability). Even the healthiest of people eventually get old and die, during which process they incur large medical expenses. Finally, it… Read more »

Allan
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Allan

Traditional insurance is risk based and voluntary so despite the pooling I don’t think that it should be called redistribution. “If only we could get the sick (and therefore expensive) people out of the risk pool” There are two types of sick people, the known and the unknown. The unknown are far more populous and while the knowns might be getting an advantage today it is at the disadvantage of the unknowns. “ control the cost of health care, i.e., what the insurance companies must pay to providers ” By providers you certainly must not mean primarily physicians if you… Read more »

BobHertz5
Member
BobHertz5

We seem to be stuck with two unappetizing choices: a. allow medical underwriting, which results in low premiums for 60-70 per cent of applicants….but the rest face higher premiums, exclusions, or total decline. The declines then depend on the generosity of the voters in their state. In MN, NY, CA, IL, this is OK; but in some states the uninsured frankly become medical beggars. or: b. mandate guarantee issue and community rating….but. if this is not accompanied by mandates and substantial subsidies, the entire market may implode and everyone pays high premiums, or even cannot find a carrier in their… Read more »

Peter
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Peter

“Granted, actuaries will tell you all forms of insurance are designed to pool risk” OK I guess if it’s not government. The whole economic system is designed to “redistribute” someone else’s money. We are all one event away from being the receiver of an “unfair redistribution” of other peoples money. You can argue that the young take more life threatening risks which put them at greater risk of needing long term health care. Those who ride motorcycles should pay more in premiums, those who play football should pay more, those who use skateboards should pay more, those who drive sports… Read more »

phochfeld
Member
phochfeld

When it comes to health care, we are already all paying for everybody and that is likely to continue. Over 60% of our total health care “budget” is already provided by taxpayer. Dividing the country into sundry risk pools with sundry payers adds about 20% to our total health care bill. Get over for delusion that the “free market” works in health care financing. It doesn’t. It just adds to total cost. Put everybody in the same risk pool, finance it publicly, and use the power of the monopsony to find ways to cut better deals for the taxpayer. It’s… Read more »

BobHertz5
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BobHertz5

Devon, I think that you under-estimate the number of persons who change from healthy to unhealthy right in the course of their own lives. I never entered a hospital from age 3 to age 60. Since then I have had heart trouble and a curable form of cancer. I changed from one of those healthy persons overpaying for my insurance, to one of the beneficiaries of subsidies and ‘redistribution.’ If we had a system where everyone paid only their own correct actuarial cost, which is what you seem to recommend here, we would have a vast number of 60 year… Read more »

Allan
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Allan

Bob you seem to assume that actuarial rating means there cannot be pooling or subsidies. That is not true.

Barry Carol
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Barry Carol

Bob, your “correct” actuarial premium might be $30-$40K per month if you have cystic fibrosis or Gaucher’s disease or some other rare and expensive to treat disease or condition. Your actuarial premium would be $10-!2K per month if you need long term custodial care including help with all or most of the normal activities of daily living. Even if you didn’t get sick until your 60’s, it would take one heck of a Health Savings Account balance to cover those bills or pay a correct actuarial insurance premium.

Allan
Member
Allan

Barry, if you live in a house that costs $400,000 to build and it is insured the day after it burns down the actuarial rate will be $400,000+.

That means the person will have to rely upon his own funds, plus some form of charity governmental or otherwise. Mandate such coverage into all homeowners that buy insurance after the fact and the market will be destroyed.

Barry Carol
Member
Barry Carol

I didn’t hear anything about a viable alternative to the ACA that will take care of the unhealthy and already sick. The free market folks want them taken care of outside of and separate from the health insurance marketplace. The most talked about alternative is high risk pools which would be expensive if they are to actually work for the people who need them. That money has to come from all of those “other people” who would be compelled to pay taxes in addition to a lower health insurance premium that more adequately reflects (only) their own personal health risk.… Read more »

Allan
Member
Allan

Barry, you continuously want to design a healthcare program for over 320 million people to benefit a very small percentage causing great harm to many that will need healthcare in the future and to the population as a whole. You blame it on free market folks while mischaracterizing what they say. Your ideas are a smoke screen for socialized medicine. In other words you believe certain free market ideas are good as long as they agree and support government care.

Barry Carol
Member
Barry Carol

Not so, Allan. You want to take care of the unhealthy away from the marketplace. What the heck does that mean. I say it means high risk pools. You’ve suggested in the past giving them Medicaid. Either one would cost a lot of money that has to come from somewhere. We could be honest and raise the taxes necessary to cover that cost or we could just try to put it on the credit card to ultimately be paid by our children and grandchildren. I’m willing to give you your marketplace for the majority of the 320 million but I… Read more »

Steve2
Member
Steve2

There is no known market solution to health care. No one has made it work. Please note that Devon and co have long been advocates of CDH plans. In short, plans with large deductibles. Of course one of the major complaints about Obamacare is…. the high deductibles. When Mark Pauly made his case on high risk pools I think he was mostly right on the economics. However, in practice they totally fail, as noted by Barry. Finally, as Bob notes, if you have insurance, then by definition you have most people paying and not benefitting, with a few benefitting from… Read more »

Allan
Member
Allan

“You want to take care of the unhealthy away from the marketplace. What the heck does that mean. I say it means high risk pools.” You think wrong. I haven’t chosen a method of subsidy, but I have chosen that the subsidy should have the least effect on the free market that is possible. You have many different criteria that conflict with one another, but you rectify that situation by having big government socialism take over care. Medicaid is an option as well and as I told you more than once Medicaid was not what I considered the best choice.… Read more »