Feeds:
Posts
Comments

Posts Tagged ‘Health Reform’

The title of this post may be a slight exaggeration. I actually recommend you read the entire two-page paper by Devon Herrick of the National Center for Policy Analysis. But this chart from that study is an excellent visual display of what’s wrong with the health care system.

You can see that the price of medical care is rising twice as fast as inflation, but you can also see that prices for cosmetic services are rising only half as fast as the general price level. Why are general health care prices soaring, yet prices in one segment of the health care world are very stable (and actually falling relative to all other prices)? The answer is simple. As Devon writes:

A primary reason why health care costs are soaring is that most of the time when people enter the medical marketplace, they are spending someone else’s money. When patients pay their own medical bills, they are conservative consumers. Economic studies and common sense confirm that people are less likely to be prudent, careful shoppers if someone else is picking up the tab. Thus, the increase in spending has occurred because third parties – employers, insurance companies or government – pay almost all the bills.

Study this image for two minutes and contemplate the implications. After that, you’ll know more about healthcare economics than 98 percent of all politicians (though that’s not exactly a huge accomplishment).

Advertisements

Read Full Post »

I don’t want to give anyone indigestion, but The Hill is reporting that GOPers on Capitol Hill want to require insurance companies to cover pre-existing conditions, which is one of the key provisions of Obamacare.

Speaking to more than 100 students at American University, Cantor said, “What you will see us do is to push for repeal of the healthcare bill, and at the same time, contemporaneously, submit our replacement bill, that has in it the provisions [barring discrimination due to pre-existing conditions and offering young people affordable care options].” Cantor stressed that while he supports full repeal of the current law, Republicans share some of the same goals as Democrats, although they propose different ways of achieving them. “We too don’t want to accept any insurance company’s denial of someone and coverage for that person because he or she may have pre-existing condition,” Cantor said, addressing a young woman in the audience who noted that she had a pre-existing health condition.

This story initially was seen as a sign that House Republicans were planning to keep certain provisions of Obamacare, but Cantor’s office claims he was misquoted and the story now includes a correction indicating that “House Republicans are pursuing a full repeal of healthcare reform while addressing issues in the law, such as pre-existing conditions.”

It doesn’t matter to me, though, whether Republicans violate free markets and ignore the laws of economics by keeping an Obamacare provision or by doing the same thing in a different way with a brand new provision. The bottom line is that private insurance markets will be seriously damaged if the government imposes a mandate requiring companies to provide policies (with no price adjustment) that cover pre-existing conditions.

Such an approach leads to a couple of problems. First, such a mandate will create a bad incentive structure since consumers will be tempted to wait until they’re sick before purchasing insurance. Second, regardless of when they obtain insurance, the mandate would result in higher premiums for everybody else, contributing to what is sometimes referred to as adverse selection, which occurs when relatively healthy people decide to leave the system because government rules push up prices by forcing them to subsidize other consumers. Insurance companies are then left with consumers that are more expensive to cover, which leads to even higher rates, which leads even more consumers to opt out of insurance (which is why this process sometimes is referred to as the health insurance death spiral).

Ironically, the Democrats supposedly solved this problem in Obamacare by imposing the insurance mandate, which helps explain why the big companies were supportive of the legislation.

So what’s the answer? I’ve been around the political system long enough that I actually can sympathize with GOPers who don’t want to appear heartless when dealing with tough issues such as pre-existing conditions, but they better figure out an approach that doesn’t lead to an especially destructive version of “Mitchell’s Law,” which is when one bad government policy (such as a mandate to cover pre-existing conditions) leads to even worse government policy (a health insurance mandate or a single-payer system).

Read Full Post »

This blog already has noted that Obamacare crippled the market for “kids only” health insurance policies. Unsurprisingly, that is just the beginning of the bad news. The latest development is that health policies designed to provide insurance to low-income workers may no longer be economically feasible. The Wall Street Journal comments.

Among President Obama’s core health-care promises was that Americans can keep their current coverage if they like it. Among the reasons that a new ObamaCare squall blows in every other day is that this claim simply is not true, as people are discovering.

The latest fracas was incited by Janet Adamy’s scoop in the Journal this week that McDonald’s Corp. may be forced to cancel its current coverage for 29,500 employees as a result of ObamaCare. McDonald’s told Health and Human Services regulators that new mandates will make its plans “economically prohibitive” and cause “a huge disruption” unless it gets a waiver.

…The entire philosophical and policy architecture of ObamaCare is explicitly designed to standardize health benefits and how those benefits should be paid for. Those choices and tradeoffs will be made for everyone by Ms. Sebelius’s regulators.

…Around 2.5 million consumers are covered by “mini-med” policies, most of them concentrated in low-wage industries like fast food, hospitality and retail that have large numbers of part-time or temporary workers. In the case of the restaurants, 75% of the workforce turns over every year and nearly half are under age 25. Mini-med plans are a temporary stopgap for businesses that have low margins and face high labor and health costs.

But Democrats hate mini-med and other skinny-benefit plans, calling them “underinsurance.” ObamaCare is meant to run them out of the market by mandating benefits, eliminating coverage caps and certain technical rules about how premiums must be spent.

…In other words, the choice is between relatively affordable coverage that isn’t as generous as Democrats think it should be and dumping coverage entirely. McDonald’s may eventually offer the high-cost plans that Ms. Sebelius favors, or get its waiver, but many of its less profitable or smaller competitors won’t. While subsidized ObamaCare options will be available in 2014, those costs will merely be transferred to taxpayers.

Read Full Post »

%d bloggers like this: