Douthat is Right, Health Care Debate Will Never End, But He Misdiagnoses Some Underlying Causes, Part 1: Other People’s Money

Ross Douthat predicts that despite Obamacare’s comeback from Healthcare.gov’s disastrous rollout, its failure to unravel and the failure of Republicans to repeal it, health care debate will never end: “What we should expect for years, decades, a generation: a grinding, exhausting argument over how to pay for healthcare.“ Health care policy experts tweeted their agreement.

Douthat is totally right that this debate will never end. And all his facts and analyses are correct too. But he mistakes “a society that’s growing older, consuming more care, and (especially if current secularizing trends persist) becoming more and more invested in postponing death,” a relatively small effect, for a big one. It’s not aging that is the big driver of health care spending growth but new and improved health care technologies driving up costs per person.

More importantly, Douthat fails to identify the underlying, inescapable reasons that, like the proverbial poor, a health care crisis will always be with us. Thus he fails to distinguish problems we can (eventually) avoid from those we can’t. And he conflates causes that affect all rich countries with those specific to the US. To avoid over-reacting to Obamacare’s problems and rushing into the arms of a snake-oil salesman promising the unobtainable…. to spot the Obamacare reforms which will help, we need to understand the reasons and distinguish the cases.

To help you do that, I offer, over four blog posts, a guide to why no rich country can avoid permanent health care crisis and why it is so hard to fix the US-only problems. Continue reading

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Ted Cruz got Obamacare right—massive transfers from the healthy; His contempt shows Republicans’ health care bind

Last week’s CPAC conference’s discussion of health care was dominated by (yet more) calls for Obamacare’s repeal, along with preeminent mocker, Sarah Palin’s memorable I do not like this Uncle Sam. I do not like his health care scam.” More measured Republicans worried that CPAC offered no constructive health care suggestions and ignored the new Republican alternative to Obamacare.

No one seems to have noticed that Ted Cruz fairly accurately characterized Obamacare as “a massive wealth transfer from young healthy people to everyone else.”  That’s a pity. That sentence and Cruz’s contempt for such transfers are revealing. They show that Republican rhetoric conflicts with the economics of health insurance, in particular with the fact that only government interfering in the market can solve our health insurance problems. Republicans can only produce good health care policy when they build it on a base of reality.

Here is the economic reality that Cruz misses: health insurance consists of transfers from the healthy to the sick. It’s just like fire insurance. Everyone pays premiums. Those who have fires get massive transfers of wealth, paid for by those who don’t have fires. All insurance is about transfers from the lucky to the unlucky.

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Single Payer Wouldn’t Be Simple Either: A Fractal Story

A two-page bill could have extended Medicare and provided universal coverage,” writes Franklin Foer in The New Republic, contrasting Progressives’ preferred single-payer system with modern liberals’ 20,202 page Obamacare legislation. Unfortunately, it’s not true.

Here is one of a zillion reasons why. Say that Grandma Mildred goes to the hospital with pneumonia. Medicare will pay the hospital based on her Diagnostic Related Group (DRG): one fixed payment for Grandma’s stay based on her diagnosis of pneumonia, no matter how long or short her stay, no matter how many tests she gets. This is so the hospital won’t give Grandma an extra X-ray to collect more taxpayer money.

Okay. So why not just extend that payment system to the under-65s? The problem is figuring out how much the DRG payment should be for them. Right now, MedPAC figures out how much to pay for each DRG, using cost and care data for Medicare (over-65 or disabled) patients they have been collecting for years. They would need the same data (and much analysis) for the under-65s for the expansion. And we would need to decide whether DRG payments vary by age and if so, how.  Continue reading

Talking about the Emperor’s Clothes: Causes and Consequences of Healthcare.gov’s Problems

Healthcare.gov’s disastrous launch has left me, as an Obamacare supporter, feeling dismayed and even betrayed. Sure I expected problems at the start. What new IT system doesn’t have problems? And the task involved—coordinating data from the IRS, a slew of private insurers, state Medicaid programs, and so on—was known to be no small feat, much more than private e-exchanges have to do.

But after last Thursday’s Congressional testimony, we know that it’s much worse. The main contractor for the back-end said, “our portion of the contract worked as designed.” All the contractors said their job started and finished with contract specs. Whether it works with the other parts was someone else’s problem. The government, the Center for Medicare and Medicaid Services, ostensibly in charge of putting the whole thing together, did not test the whole system until two weeks before the Oct. 1 launch. Anyone (or at least anyone who ever tried to get their iTunes purchases onto a non-Apple device or vice versa) could have seen the need for that test much earlier. Such seemingly willful incompetence shocked me, because it was so unlike my own knowledge and experience of the competence of the legislation and its implementation. As I taught about the legislation last Spring, I kept being impressed that various fixes and features dealt with potential problems.

What explains the chasm between the IT and the reform design? Much alludes me, but it is clear that Obamacare’s IT had nothing like the time or talent that that the reform design had. That is bad news for the website—long term as well as short term. But it is good news for the consequences of the disastrous web site launch. As Adriana McIntyre explained, various features will protect us from death spirals and other potential disasters.

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Republicans for Government Subsidized Insurance

Congressman Steven Palazzo, Republican of Mississippi, has proposed an amendment supporting Federal government subsidies to insurance: “We have one common goal—to make sure that insurance remains available and affordable to everyone.

No, the ardent Obamacare opponent has not been bewitched by a Democratic spell. I left out of his statement one key word: “flood.” It is flood insurance that Palazzo considers essential and worthy of government subsidies, not health insurance. In fact, he finds it so essential that neither likely-to-balloon expenditures nor damaging distortions to insurance and real estate markets dissuade him.

Flood insurance subsidies are now being reduced—sharp premium increases began on Oct. 1. Palazzo’s and other Republicans’ opposition shows that they are not the anti-government ideologues they claim—and perhaps aspire—to be. And if they only cared to look, their support for flood insurance could provide a window of understanding into the reasons for Obamacare. Continue reading

If My Health Plan Died, Did Obama Lie? Sort Of, But It Died For a Good Cause

Right-wing pundit Michelle Malkin’s insurer has canceled her health insurance plan, due, they say, to the Affordable Care Act (aka Obamacare). She quotes Obama, “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.” Malkin concludes, “Obama lied. My health plan died.”

Did Obama lie? Yes—and no—and yes. But Malkin fails to admit that her plan died so that people like her could be protected for life. Period. No matter what medical tragedy might occur.

In some sense, what Obama promised was obviously impossible. Millions of Americans have experienced the end of their health plan—or major changes in it—even without health care reform. Insurers (and employers) change their plans because of recessions, rising medical care costs, hospital mergers, and such. In a market, companies react to market forces. Continue reading

You can’t have it both ways: Taking from the rich to buy health care

Three and a half years after Obamacare passed, three weeks before the Exchanges go live, and coinciding with their 42nd attempt to destroy the law, House Republicans have an official alternative to Obamacare. In fact, Republican Congressman Tom Price, already had a proposal. But a key change from that proposal—eliminating tax credits in favor of only tax deductions—is revealing. It shows that House Republicans are unwilling to take from the rich and therefore unwilling to ensure that all Americans get modern healthcare.

Our biggest problems with health insurance come from something really good—the great stuff health care can do. Continue reading