Posts Tagged ‘PPACA’

I predicted Oklahoma would win its case against federal exchange subsidies. The D.C. Circuit Court of Appeals has now ruled against the government on this issue. For more on this breaking news story, check out Jonathan Adler at Volokh.

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The debate over pre-PPACA (Obamacare) nongroup health insurance has heated up again recently, particularly on the issue of rescissions (cancellations of policies). John Goodman claims that before the PPACA, rescissions almost never happened except in cases of fraud.

Nevertheless, one problem with the nongroup market in many states was denial of applications for coverage from those who had prior health problems. Denial of coverage happened frequently even in states without onerous community rating provisions that gave health insurers a clear incentive to deny coverage to high risks. Why did health insurers choose to deny coverage altogether to these applicants rather than charge them a higher rate or offer more restricted coverage?

In some cases, government regulation was to blame. The “managed care” revolution of the 1990s introduced certain innovations designed to control health care costs, such as “elimination riders,” which would remove coverage from pre-existing conditions, and requirements to obtain referrals from primary-care physicians for access to specialist care. Managed care apparently worked to control health care costs, up to about 1-1.5% of U.S. GDP had it been allowed to take its long-run course. But it was unpopular, as constraints always are, and many states passed laws banning elimination riders and mandating direct specialist access.

Even without government regulation, however, social pressure caused the disappearance of some of these practices. On this point, there are two fascinating, complementary pieces of research: “The Death of Managed Care: A Regulatory Autopsy” by Mark Hall of Wake Forest University and “Risk Pooling and Regulation: Policy and Reality in Today’s Individual Health Insurance Market” by Mark Pauly of the Wharton School at the University of Pennsylvania and Bradley Herring of Emory University.

Hall investigates (more…)

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Not just my brother. From SFGate:

They have been paying $7,200 a year for a bare-bones Kaiser Permanente health plan with a $5,000 per person annual deductible. “Kaiser told us the plan does not comply with Obamacare and the substitute will cost more than twice as much,” about $15,000 per year, she says.

This new plan, Kaiser’s cheapest offering for 2014, would consume about 25 percent of their after-tax income. The new plan still has a $5,000 deductible but provides coverage for things her current policy does not, such as maternity care, healthy child visits and coverage for dependents up to age 26. Proctor has no use for such coverage, since her son is 30.

So the Kaiser Family Foundation is recommending people try to reduce their incomes in order to qualify for subsidies:

“If they can adjust (their income), they should,” says Karen Pollitz, a senior fellow with the Kaiser Family Foundation. “It’s not cheating, it’s allowed.”

The PPACA apparently sets a marginal tax rate well in excess of 100% on incomes above 400% of the federal poverty line for those insured in the nongroup market, especially those who are older:

To get a subsidy, the couple’s modified adjusted gross income for 2014 income would need to fall below $62,040, which is 400 percent of poverty for a family of two. . . Proctor estimates that her 2014 household income will be $64,000, about $2,000 over the limit. If she and her husband could reduce their income to $62,000, they could get a tax subsidy of $1,207 per month to offset the purchase of health care on Covered California.

That would reduce the price of a Kaiser Permanente bronze-level plan, similar to the replacement policy she was quoted, to $94 per month from $1,302 per month. Instead of paying more than $15,000 per year, the couple would pay about $1,100.

Instead of a poverty trap, a lower-middle-income trap?

HT: Chris B.

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My brother is individually insured in California. Here’s what’s he says about what will happen to his insurance plan:

More details on my forced insurance changes for 2014 (this is the complete summary provided by my insurer – I’m not cherry picking details):
Premiums: same.
Deductible: $3K -> 5K.
Doctor copay: $40->60.
Specialist copay: $40->70.
Urgent care: $40->120.
Lab: 100% coverage->70%.
Xray: 100% coverage -> 70%.
Emergency outpatient: $100->300
Outpatient surgery: 100% -> 70%
Inpatient hospitalization: 100% -> 70%
Generic drugs: $10->$19
Preferred brand drugs: N/A ->$50
Non-preferred brand drugs: N/A->$75
Acupuncture: N/A -> $60.

So basically, I get brand-name drug option and cheaper acupuncture in exchange for an extra $2k+ out of pocket when I lose my current plan and am forced to switch to this one. So much for “bending the cost curve” “your premiums will go down” and “if you like your plan, you can keep it” and other wild fantasies from the Organizer-In-Chief of the “reality-based community”.

Of course, some people lose and some people gain from Obamacare: that’s the whole idea. Dueling anecdotes about the law’s consequences don’t really tell us much about how much “society” will gain or lose. But the redistribution of wealth from the healthy to the sick that the law accomplishes also takes away many people’s freedom, and if you care about the freedom of the individual, every anecdote matters.

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Apparently, if anyone can make Americans love Obamacare, it’s Ted Cruz.


Just look at the polls. There are brutal numbers for the GOP in a new Fox News poll, confirming numbers from an earlier Quinnipiac poll. Obama’s job approval is up, support for Obamacare is up (opposition running at just 47-45 in the Q poll), approval of Republicans in Congress has fallen yet further, and the generic ballot has tilted sharply in favor of Dems (9-point lead in the Q poll). Meanwhile, Americans blame Republicans more than Democrats for the shutdown (although the median voter opts for “both”).

The shutdown would never have happened without Ted Cruz’s quixotic campaign to defund Obamacare. “He pushed House Republicans into traffic and wandered away,” says Grover Norquist. By wasting time on that doomed quest due to his influence, House Republicans had no backup plan when the continuing budget resolution fell due. At this point, for reasons I discussed in a previous post, it is more likely that the Dems will get concessions from the GOP than the other way around.

How did we get here? Matt Welch accuses the Republican “wacko birds” of bad deadline management, and it’s hard to disagree. But there’s a reason for that bad deadline management, and it’s not actually incompetence so much as ideological intransigence. The new litmus test for conservatism became willingness to defund Obamacare. Tactical disagreements became ideological disagreements. If you didn’t want to waste time trying to defund Obamacare, you were at best a coward and more likely a “RINO,” according to hardline websites like RedState. As Avik Roy has noted,

The common view of Obamacare among conservatives goes something like this. Prior to 2010, America’s free-market health-care system was the envy of the world. Obamacare changed all that; it is a government takeover of our health-care system, of one-sixth of our economy, one that will turn America into a European-style welfare state. That is to say, Obamacare is an existential threat to the American way of life.

If this is your view of Obamacare, then of course it makes sense to shut down the government in order to attempt to defund the law. What’s the point of maintaining a Republican majority in the House in 2014, let alone seeking a majority in the Senate, if the end result is the destruction of the American way of life?

That view of Obamacare is, of course, dead wrong. It’s a mistaken law that moves the country in the wrong direction, but the regulatory framework for health care and health insurance in this country was already badly broken and in need of reform. But damn the facts and fix bayonets!

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When Obamacare Really Kicks In

Most of the PPACA’s most controversial provisions were backloaded until after this election. Unless Romney wins the presidency and Republicans at least make it close enough in the Senate that they can pick off a moderate Democrat or two on a roll-call, these provisions will start to kick in next year. Avik Roy explains:

In [2013], a number of Obamacare’s tax increases will come into effect. The law will, among other things, raise taxes on investment income, itemized medical expenses, privately-sponsored retiree prescription-drug coverage, medical devices, and flexible spending accounts.


2014 is the critical year for Obamacare. It’s the year that the bulk of the law’s provisions go into effect. Notably, it’s the year that the law’s controversial individual mandate goes into effect, requiring most Americans to buy a government-sanctioned health insurance product…

In addition, 2014 is the year that Obamacare’s employer mandate begins to be enforced. That mandate requires all businesses with 50 or more workers to provide government-approved health insurance to all of their workers, or face steep fines…

2014 is also the year that Obamacare’s gusher of new spending kicks in, through its expansion of the Medicaid program and the institution of federally subsidized health insurance exchanges. Once these two programs are in place, it will become impossible to repeal Obamacare.

In 2014, Obamacare guts the laws related to consumer-driven health plans, by capping deductibles in the small-group market at $2,000 for individuals and $4,000 for families, down from $6,050 and $12,100 today…

Also, in 2014, Obamacare will force insurers covering small businesses and individuals to cover a set of “essential health benefits” defined by the Secretary of Health and Human Services…

In addition, the law will impose a tax on health insurance premiums, though labor unions and government-sponsored plans are exempted from the tax.

More here.

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Even though I disagree with much of its interpretation, I admire Jonathan Gruber’s pre-PPACA research on health insurance markets. He’s one of the most forthright and clear-headed advocates of government takeover of health insurance that I know. However, his recent defense of the law in The New Republic indulges some pretty blatant economic fallacies:

But what few realize is that, by expanding insurance coverage, the law will also increase economic activity. These newly insured individuals will demand more medical care than when they were uninsured. And while it takes many years to train a family physician or nurse practitioner, it doesn’t take much time to train the assistants and technicians (and related support staff) who can fill much of this need. In many cases, these are precisely the sort of medium-skill jobs that our economy desperately needs—and that the health care sector has already been providing, even during the recession.

Gruber surely knows better than to attribute economic growth over the long term to “demand.” All increase in wealth ultimately comes from growth in productivity and exchange, not “demand.” Whether increasing demand for health care will increase aggregate demand and short-run return to equilibrium — as opposed to redistributing spending from other sectors — is another question, but Gruber doesn’t even attempt to answer it. And the amount of jobs in the economy is a function of cyclical and structural factors. Redistributing jobs from other parts of the economy to health care does not mean more wealth or a higher standard of living for Americans. These are basic, 101-level errors.

When attacking critics of the PPACA, Gruber switches to supply-side arguments. Thus:

There is now a large body of literature examining the impact of tax changes on the highest income taxpayers. This literature finds that those taxpayers will avoid some of those taxes by re-categorizing their incomes in ways that minimize taxes. But there is no evidence that they will actually work less hard, invest less, or do anything which reduces their “real contribution” to the economy.

All of a sudden the fiscal contractionary effect of the tax increase doesn’t matter. Can we just call it even on the demand-side claims – as the PPACA will probably neither increase nor decrease the deficit very significantly – and focus on the supply side? The real justification for the PPACA, if there is one, is that it makes health insurance markets more efficient. There’s simply no denying that it imposes some distortions on the rest of the economy to achieve this goal, and Gruber himself seems to acknowledge this toward the end, although he insists the cost will be small.

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