Obamacare’s Complexity is Not Designed to Fool People

Obamacare’s complexity is really driven by the complexity of our present health care system—and the preferences of the American people

In a fantastic piece Megan McArdle exhorted journalists, who need both expert knowledge and insider connections to do their job, to nonetheless represent their non-expert, outsider readers. Taking Grubergate as her ostensible peg,  she listed various Affordable Care Act complexities that are meant to hide what’s really going on. For example, we have the Cadillac tax, rather than just limits on the tax subsidy to employer-provided insurance.

But McArdle goes wrong when she claims that deliberate attempts to obscure are the main drivers of Obamacare’s complexity:

“Obamacare was designed—as many laws now are—to exploit [ordinary people’s] lack of understanding.  It is huge and complex for a reason, and that reason is that this complexity is an effective thicket in which to hide what you are doing.”

The desire to obscure, though real, is only responsible for a tiny share of Obamacare’s complexity. The dominant cause is the complexity of our pre-ACA health care system. The second main cause is giving Americans what they want from health care—like the lowest possible cost to government. That’s really the opposite of what McArdle claims.

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Avik Roy on Health Care: Faith in Markets, Prejudice Against Government Hurt Otherwise Good Proposal

Avik Roy is on to something with his call to conservatives: focus on health care costs. The Affordable Care Act isn’t really about controlling costs and has just thrown in a grab bag of miscellaneous stuff to address it. (Some of those ACA bits and pieces may be working, though.) But Roy’s supposed evidence for the cost control of “market oriented systems” left me confused: Copy Switzerland, because its “results are remarkable.”

Huh?

The last time I checked, Switzerland was way up there on the health care expenditure charts. Nowhere close to the US but above most everyone else. In fact, Switzerland, with its ‘more private than most countries’ health care system fits a pattern. Empirically, tight government control systems (like the UK’s) are cheapest—not a result that fits neatly into Roy’s belief system. Continue reading

Casey Mulligan Worships Market Icons and Denounces Apostate Health Economists

Casey Mulligan kept repeating “market analysis” and “compensating differential” like an Evangelical minister invoking Jesus, though with less charisma and more of an Aspy affect. Mulligan, a University of Chicago economist, was speaking about the Affordable Care Act at the opening plenary of the American Society of Health Economists conference last week. Despite his audience’s knowledge of both economics and the ACA, Mulligan made few substantive points. In fact, Mulligan behaved like a religious zealot, denouncing many health economists as apostates who ignore “market analysis” and demonstrating his own devotion to Platonic ideals of economics.

Mulligan seemed like a religious zealot first and foremost because he did not bother to engage in real analysis or provide evidence. Obviously, Mulligan is a very smart, highly trained economist, who is more than capable of analyzing the complexities of anything he wants. But at least at this event, he did not do so.

(Caveat: This post is based on my memory, my notes and conversations with others. I will check my memory once ASHEcon posts the video.)

Leaving the plenary furious, I wondered if I was seeing Mulligan through partisan eyes. Although I see the flaws of Obamacare—the avoidable, the unavoidable, and the tradeoffs—I am a supporter. I decided to ask conservative health economists, over the course of the three-day conference, what they thought of Mulligan’s performance. I sought out those who I knew to be or suspected might be Obamacare critics. (Since I did not ask to quote anyone and had not even planned to write this post when I asked, I will not name anyone.) My survey is obviously not representative of audience members, biased towards those I know and happened to run in to—and had a sample size in the single digits.

The consensus was overwhelming: “same stuff over and over again” and “not a lot of content.” The most complimentary responses were: “he didn’t explain very well” and “there was a lot to be conveyed, but it didn’t happen.”

Mulligan was not utterly without substance nor was his substance without merit. In the interest of fairness and to give you a flavor of what he did and did not say, below are all of Mulligan’s points with more explanation and context than he provided: Continue reading

Never-Ending Health Care Crisis, Part 2: Struggling to Pay for Stuff That’s Worth It—and a Possible Reprieve

Ross Douthat predicted that we are in for a never-ending health care crisis. He’s right, partly because health care is paid for by health insurance, which means spending other people’s money, as I said in Part 1.

But another factor drives the endless health care cost crisis even more: ever new and better medical technology—and the ever-increasing amounts we must find to pay for it. Those who follow health care policy (like Douthat) understand this. But to help inoculate the public against health care policy snake oil salesmen, everyone needs to understand it. To make things more complicated, but possibly a bit better, the US might, just might, get reprieve from the endless cost-growth.

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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

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