Tag Archives: Obamacare

Remember President Obama’s assurances that Obamacare would make medical care less expensive, saving the average family $2,500 a year. He either lied or was wrong, and the former is the betting favorite. From Daniel Mitchell at the Foundation for Economic Education, fee.org:

Way back in 2009, some folks on the left shared a chart showing that national expenditures on healthcare compared to life expectancy.

This comparison was not favorable to the United States, which easily spent the most money but didn’t have concomitantly impressive life expectancy.

At the very least, people looking at the chart were supposed to conclude that other nations had better healthcare systems.

And since the chart circulated while Obamacare was being debated, supporters of that initiative clearly wanted people to believe that the U.S. somehow could get better results at lower cost if the government played a bigger role in the healthcare sector.

There were all sorts of reasons to think that chart was misleading (higher average incomes in the United States, more obesity in the United States, different demographics in the United States, etc), but my main gripe was that the chart was being used to advance the cause of bigger government when it actually showed – at least in part – the consequences of government intervention.

The real problem, I argued, was third-party payer. Thanks to programs such as Medicare and Medicaid, government already was paying for nearly 50 percent of all heath spending in the United States (indeed, the U.S. has more government spending for health programs than some nations with single-payer systems!).

But that’s just part of the story. Thanks to a loophole in the tax code for fringe benefits (a.k.a., the healthcare exclusion), there’s a huge incentive for both employers and employees to provide compensation in the form of very generous health insurance policies. And this means a big chunk of health spending is paid by insurance companies.

The combination of these direct and indirect government policies is that consumers pay very little for their healthcare. Or, to be more precise, they may pay a lot in terms of taxes and foregone cash compensation, but their direct out-of-pocket expenditures are relatively modest.

And this is why I said the national health spending vs life expectancy chart was far less important than a chart I put together showing the relentless expansion of third-party payer. And the reason this chart is so important is that it helps to explain why healthcare costs are so high and why there’s so much inefficiency in the health sector.

Simply stated, doctors, hospitals, and other providers have very little market-based incentive to control costs and be efficient because they know that the overwhelming majority of consumers won’t care because they are buying care with other people’s money.

To get this point across, I sometimes ask audiences how their behavior would change if I told them I would pay 89 percent of their dinner bill on Friday night. Would they be more likely to eat at McDonald’s or a fancy steakhouse? The answer is obvious (or should be obvious) since they are in box 2 of Milton Friedman’s matrix.

To continue reading: Another Grim Reminder that Obamacare Has Made Healthcare More Expensive

Obamacare, as many, including SLL, noted before it even became law, will never work because it cannot work. You cannot get water to run uphill and you cannot violate elementary economic principles with impugnity. From Edward Morrissey at thefiscaltimes.com:

Insurers helped cheerlead the creation of Obamacare, with plenty of encouragement – and pressure – from Democrats and the Obama administration. As long as the Affordable Care Act included an individual mandate that forced Americans to buy its product, insurers offered political cover for the government takeover of the individual-plan marketplaces. With the prospect of tens of millions of new customers forced into the market for comprehensive health-insurance plans, whether they needed that coverage or not, underwriters saw potential for a massive windfall of profits.

Six years later, those dreams have failed to materialize. Now some insurers want taxpayers to provide them the profits to which they feel entitled — not through superior products and services, but through lawsuits.

Earlier this month, Blue Cross Blue Shield of North Carolina joined a growing list of insurers suing the Department of Health and Human Services for more subsidies from the risk-corridor program. Congress set up the program to indemnify insurers who took losses in the first three years of Obamacare with funds generated from taxes on “excess profits” from some insurers. The point of the program was to allow insurers to use the first few years to grasp the utilization cycle and to scale premiums accordingly.

As with most of the ACA’s plans, this soon went awry. Utilization rates went off the charts, in large part because younger and healthier consumers balked at buying comprehensive coverage with deductibles so high as to guarantee that they would see no benefit from them. The predicted large windfall from “excess profit” taxes never materialized, but the losses requiring indemnification went far beyond expectations.

In response, HHS started shifting funds appropriated by Congress to the risk-corridor program, which would have resulted in an almost-unlimited bailout of the insurers. Senator Marco Rubio led a fight in Congress to bar use of any appropriated funds for risk-corridor subsidies, which the White House was forced to accept as part of a budget deal. As a result, HHS can only divvy up the revenues from taxes received through the ACA, and that leaves insurers holding the bag.

They now are suing HHS to recoup the promised subsidies, but HHS has its hands tied, and courts are highly unlikely to have authority to force Congress to appropriate more funds. In fact, the Centers for Medicare and Medicaid Services formally responded by telling insurers that they have no requirement to offer payment until the fall of 2017, at the end of the risk-corridor program.

That response highlights the existential issue for both insurers and Obamacare. The volatility and risk was supposed to have receded by now. After three full years of utilization and risk-pool management, ACA advocates insisted that the markets would stabilize, and premiums would come under control. Instead, premiums look set for another round of big hikes for the fourth year of the program.

Consumers seeking to comply with the individual mandate will see premiums increase on some plans from large insurers by as much as 30 percent in Oregon, 32 percent in New Mexico, 38 percent in Pennsylvania, and 65 percent in Georgia.

Thus far, insurers still claim to have confidence in the ACA model – at least, those who have not pulled out of their markets altogether. However, massive annual premium increases four years into the program demonstrate the instability and unpredictability of the Obamacare model, and a new study from Mercatus explains why.

To continue reading: Obamacare Insurers Are Looking for a Taxpayer Bailout