Coping with Obamacare

The implementation of Obamacare is running into predictable problems, especially with data collection and processing. Some states, including Arizona, have agreed to participate chiefly for the Medicaid subsidy.

Brewer has said her decision was dictated by math, not ideology. The federal dollars gained through Obamacare will cover more than 300,000 Arizonans, including many elderly in nursing homes.The result of Brewer’s victory is not just more federal money for Arizona;

The Daily Beast, of course, is in favor of Republicans “learning reality” as they see it. In fact, the Medicaid subsidy stops in a few years and will leave the state at risk for all the new spending. Brewer, however, will have moved on. Many states, 24 in all, have decided not to participate. Why ? Well, It will cost a fortune.

“The National Association of State Budget Officers says Medicaid now comprises nearly one quarter of states’ entire budgets. Each one of us has served as governor in our state and knows that increased costs in one area means less money in another. America’s families know this as well since they can’t just print and borrow money when their spending goes up like the federal government does. Yet, astonishingly, more than half of ObamaCare’s newly promised health-insurance coverage was accomplished by assigning nearly 26 million more people to an already broken Medicaid program and telling governors, “Now, you find a way to help pay for it.” This will leave states with two choices, or a combination of both: either cut funding in areas such as K-12 education, public universities and colleges, veterans affairs programs, and other much-needed services; or raise sales, income or property taxes. “

For a Democrat’s opinion : Tennessee’s previous governor, Democrat Gov. Phil Bredesen, has called ObamaCare “the mother of all unfunded mandates,” estimating that it would cost Tennessee an additional $1.1 billion from 2014 to 2019, even with the federal government covering the Medicaid expansion for the first three years.

So, Arizona will get three years’ subsidy and then will have to cut benefits or raise taxes. Well done, Governor Brewer.

What are the alternatives ?

The Obama administration has decided to delay implementation of the penalty for employers. For an optimistic view, see this piece in the Huffington Post.

But the most important provisions in the ACA for small business owners, such as health insurance exchanges, are still moving full-steam ahead. The exchanges haven’t gotten nearly the same play as the employer responsibility requirement, but they impact small businesses much more significantly. These marketplaces, coming online in January 2014, will allow small businesses to pool their buying power to help drive down coverage costs. Those larger businesses I mentioned earlier that are more likely to offer insurance because it’s more affordable? The exchanges will give small businesses that same kind of buying power, so they can better afford to offer benefits and compete with their larger counterparts for talented employees.

This is an unlikely reaction but consider the source. The problem with exchanges is that they require the “gold plated” insurance mandates that will drive up costs severely. In California, the rates are soaring.

It took Avik Roy to explain the real story in his column, also at Forbes. He examined health insurance policies currently offered on the unofficial, private sector, non-political ehealthinsurance exchange and concluded, “Obamacare, in fact, will increase individual-market premiums by as much as 146 percent.”

“[F]or the typical 25 year old male non-smoking Californian,” Roy added, “Obamacare will drive premiums up by between 100 and 123 percent.” For a 40 year old male non-smoker” Obamacare will increase individual-market premiums by an average of 116 percent.” Roy summarized, “For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.” That is a conservative understatement of his actual results.

This, of course, is disputed by the Obamacare advocates. They say that web sites like eHealthinsurance post unrealistic “teaser” rates that few qualify for. Is this true? I pay $255/ month for my healthy 23 year old daughter. Could she get cheaper insurance ? Sure. I choose to pay more so she has more choice of provider.

The real data is provided in a more serious response from another “progressive” warrior, Ezra Klein. He shows more of an intellectual grasp in trying to argue that the real data is actually irrelevant, but that argument reveals the actual progressive economic fallacy at the root of the argument.

Klein searches on eHealthinsurance for policies offered in his hometown of Irvine, California, finding a bestseller policy listed for $109 a month. He at first starts off with similar fablistic fantasy, saying that rate is dependent on such questions as whether you have ever had a headache, “Do you feel sad when it rains? When it doesn’t rain? Is there a history of cardiovascular disease in your family? Have you ever known anyone who had the flu?” For the record, no health insurance company adjusts rates for the disease history of anyone but the applicant.

But then Klein gets more serious, and reveals the truth. “According to, 14 percent of people who try to buy that plan are turned away outright. Another 12 percent are told they have to pay more than $109.” That means three-fourths of people get the health insurance for the $109 quoted! Mathematically, that is universes apart from Rick Ungar’s “one person in a thousand.”

But Klein tries to argue that the one fourth who don’t get the coverage for $109 “are the people who need health insurance the most—they are sick, or were sick, or are likely to get sick.” Klein concludes that to judge Obamacare “from a baseline that leaves them out—a baseline that asks only what the wealthy and healthy would pay and ignores the benefits to the poor, the sick, the old, and women—well, that is a bit shocking.”

The trouble is that the young healthy person pays the same rates as the chronically ill ! This very inefficient.

In other words, as others have argued more simply, you pay more for Obamacare health insurance, but you get more. You get a Cadillac instead of a Chevy. But if that is unambiguously a good thing, why doesn’t everyone buy a Cadillac? The modern economic understanding that Progressives miss is that only an individual consumer can decide if it is worth it to devote the extra money to buying a Cadillac instead of a Chevy, or to devote the extra money that would cost to something else. But being true “Progressives,” they are certain they know how to spend your money better than you do. So they will decide whether it is desirable for you to spend the extra funds on Obamacare Cadillac health insurance.

Just so.

Now here is an alternative that qualifies as reality.

“Health Care for All Without the Affordable Care Act,” NCPA Policy Brief No. 116, is better. Our reform plan provides for health care for all with no individual mandate and no employer mandate, at a savings of $2 trillion over the next 10 years alone, as compared to current law. Sounds too good to be true? Read the paper, and tell us where we are wrong. I expect that plan to be formally introduced in Congress shortly, and to provide the foundation for ultimately repealing Obamacare, helping in the process to return the Che Guevara Democrats to the private sector fever swamps.

Read the paper linked above. It includes changes in tax treatment of health insurance, block grants to states for Medicaid similar to those for welfare under the 1996 welfare reform. Risk pools could be set up for those uninsurable for chronic diseases.

“Based on enrollment in Obamacare’s high-risk pool program, the number of people in America who are truly uninsurable is closer to 150,000. That’s a pretty small number in a nation of 300 million.”

This reform would require legislation, unlikely in the present atmosphere in the US. What about if Obamacare fails but Democrats continue to deny it ?

There are alternatives that may resemble a black market. Obamacare has restrictions on physician owned hospitals. Many of these are “Specialty Hospitals” like the one that performed my coronary bypass in 2011.

Big, monolithic community hospitals have been trying for years to quash these upstart physician-owned hospitals that provide better, more-efficient care with higher-rated outcomes. The main reasons: The big hospitals don’t like the competition from the efficient, quality innovators. Unfortunately, they have succeeded in using the power of big government to try to thwart them.

John W. Dietz Jr. with Indiana Orthopaedic Hospital says holding back physician-owned hospitals is unwarranted, given the massive number of people expected to gain health insurance in the years after the ACA is fully enacted in 2014. The hospitals often specialize in orthopedic, cardiac, and other care that allows them to fine-tune their expertise.

The French health care system, which I support as the best system in the world, includes such specialty hospitals. Obamacare which was written by lobbyists, has no such provision and bans new facilities on this model. How do they enforce the ban?

Nine of the ten top-performing U.S. hospitals listed last December by the government’s Centers for Medicare & Medicaid Services were physician-owned hospitals. Yet the ACA forbids these facilities from expanding and bans new ones from opening.

What they will do is exclude the new hospitals from Obamacare. That may be less significant as the Obama program fails. What other alternatives are there ?

Many physicians are dropping out of Medicare and all insurance. What about hospital costs ? Patients may still carry insurance for hospital costs which are still inflated by insurance discounting policy. The cash patient is at a disadvantage because doctors and hospitals are banned from offering a lower price to cash patients than that charged the insurance company. Some of these insurance discounts may approach 80% ! If you have a high deductible policy with a 20% co-pay, you may be paying the hospital more than your insurance company does !

A new innovation may offer another option. Some life insurance policies offer “critical illness” components for the young and healthy.

Along with life insurance coverage the policy includes what’s called a “critical illness” component. If the policyholder needs, say, surgery, the insurer writes the policyholder a check based on a schedule. Let’s say, for example, it’s $10,000.

The policyholder has $10,000 in hand to pay for the medical care — or, frankly, anything else since the money belongs to the insured — but the value of his life insurance benefit is reduced by the same amount, to $240,000. Thus the critical illness component simply accelerates the benefit payout.

One existing policy pays 100 percent for heart attack, stroke, life-threatening cancer, major organ transplant, kidney failure, Alzheimer’s and paralysis, among other medical conditions.

What is the significance of these policies ?

And if the demand were large enough, other insurance companies would begin offering a range of similar policies in an effort to meet consumer demand — something health insurers operating under ObamaCare won’t be able to do because of the heavy hand of federal regulation.

See, that’s the amazing thing about markets. They try to meet the needs of consumers rather than the wants and political aspirations of politicians. And sometimes they can even undermine those political aspirations.

Of course the government could try to ban such innovation but the worse Obamacare looks the more resistance there would be to these regressive instincts of the left. Such a policy would fit well with cash practices of physicians and specialty hospitals. This is one option that could become a trend. Watch what happens.

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