Posts

The ACA War: Truths and Myths

The Problem Is You Only Get Partial Address of Issues. Except Here.

The reasons you get only a partial list? There are actually many, but these are the most annoying.

  • Person has another agenda which doesn’t acknowledge that there are valid counter-arguments that fundamentally destroy the entire argument being made
  • Person is under-qualified or not fully informed

Unfortunately, the result is that the reader (that is you) is left with only partial truths, and extreme views (Obamacare is a disaster, Obamacare repeal will kill thousands). This list doesn’t care what you politics are, it doesn’t care where you live, it doesn’t care how much money you have, it doesn’t care if you are sick. Personally, I am disgusted at the distortions being presented to you, defenseless against the cross-fire. Let’s move on.

The ACA is a tax. 100% true.
Let’s be clear: the ACA is a tax. If you have been led to believe otherwise, and believed otherwise, then you are entirely mistaken. When the Supreme Court affirmed the legality of the ACA, it said so in a very elegant way. Basically, the Supreme Court majority opinion boiled down to “The ACA is a tax, and the government has the Constitutional right to tax. Repealing taxes is not a court’s issue, it is an issue for elections.”
Does the tax have a rationale? Yes, in much the same way that the requirement to purchase auto insurance has a rationale, the requirement to purchase health insurance has a rationale. The difference, however, is that the cost of the financlal downside to not having health insurance is MUCH larger, on average, than the cost of not having auto insurance. Simply ask a person with an incurable disease that has health insurance, “What would’ve occurred if you had not had health insurance?”
Eliminating the Individual Mandate Will Cause Insurance Premiums to Rise. Uncertain.
This is what is keeping insurance companies awake at night. The risk here is if If you eliminate the requirement to purchase health insurance, who is going to cancel? The healthy. That leaves ONLY the unhealthy as the remaining policyholders. That means that the cost of claims will exceed the premiums by an enormous degree. Given that insurance premiums are calculations based on predictions by the carrier who is responsible to pay for claims, the price of health insurance can ONLY go higher in the future.
There is an important caveat here. If unhealthy are forced to enter into “high-risk” pools, as described below, then that could be a counterbalance against the healthy, who will most certainly cancel their insurance.
ACA Repeal Would Allow Insurance Companies to Run Amok. Untrue.
The problem with the hysteria is the fact that people are taking an inch and stretching it a mile. The idea that insurance companies would get fatter is untrue.
  • Simply keep the Medical Loss Ratio intact, to limit the profit margin and require a rebate of premiums that was not used for claims. That is the system currently in place.
  • Ever hear of competition? By the way, the prospect of repealing or substantially modifying the ACA (and Medicare) probably makes the mega-mergers among health insurance carriers unlikely, because that would potentially reduce competition, precisely at the wrong time (that is a new opinion by me).
A tax credit can fix this. Uncertain.
The question is whether or not the proposed tax credit will create an incentive enough for people to purchase health insurance. For those who have severe medical conditions, the answer will be yes, because they are a buyer at almost any price. For those that are healthy, however, the answer is entirely uncertain, and it will depend on the rest of the tax code, the person’s understanding of the financial downside, and his/her financial situation.
No “pre-existing condition” clause has made health insurance more expensive: 100% true.
Sellers (health insurance carriers) had to establish a price, stick to it, and it didn’t matter how sick someone was, the seller had no choice but to accept every new policyholder. For those with astronomic medical expenses, this is a guaranteed loss for the seller. Even if 64.5 years old, a premium of $1500 a month would pale in comparison to the amount of benefits that the health insurance company would have to pay to doctors and/or hospitals. The problem here is that there were not enough healthy buyers to offset this loss. Whoever wrote the ACA didn’t properly incentivize the healthy enough, so that they would buy health insurance, i.e. if anything, the tax penalty for not purchasing health insurance was too low.
We can fix this with “high-risk pools” or “reinsurance.” Maybe, and 100% False, in that order.
This illustrates the inconsistency of logic. A “high-risk” pool would be created so that those with pre-existing conditions could still purchase health insurance. Really? If sellers are withdrawing from exchanges because they don’t want to sell to those that “may be” sick, then why would they want to sell to those that are certainly sick, i.e. the people applying under the high-risk pool? A tax credit will not be high enough for these people.
The same complaints about the ACA (high cost, narrow networks) will occur. The exact same complaints that “prove” the opponents’ points. The fact is that high-risk pools have existed in the past, and the problem with them was that the networks were narrow, and the cost high. That said, will that allow the healthy to purchase health insurance at lower premiums? Yes. Since the answers vary here, the answer is maybe.
Reinsurance cannot work.
To review, reinsurance is “insurance on insurance.” A health insurance company would itself buy insurance, to limit the downside to itself. The reason this cannot work is that if it could’ve worked, then it would’ve already existed. Why do we know this? The reason is that Wall Street would’ve created an investment (an asset-backed security), where the asset is the reinsurance. There are no natural buyers of this risk, because if there were, then Wall Street would’ve found them, re-packaged the risk, and would’ve already sold it to them. The mere fact that it doesn’t already exist is all the evidence required.
Update: there are proposals that the government will provide the reinsurance. If that is that case, then that will leave US taxpayers holding the risk. So, the most sophisticated investors in the world will not touch this risk, the answer is to leave the risk with the least-informed, the public. The problem with this is that the Medicaid problem (“open-ended check”) will have a new partner, reinsurance of high-risk pools.
Allowing Carriers to Sell Across State Lines Will Fix This. False.
This has been tried in the past, and didn’t work, in Maine and Georgia. Why?
Building networks is not child’s play. You have to get doctors, hospitals, and other healthcare providers to all agree to “sign up” to a network. Let’s say you are a health insurance company in Texas. You don’t have the resources to sign up and reach agreements with doctors and hospitals in neighboring Oklahoma, much less in Alabama. They have to agree to a way of being compensated for their services, while the cost of living will vary across regions. Let’s say “they could calculate this.” Really? They would also need to be able to correctly predict the number of policyholders, per location. Almost impossible. This alone is a death bell to this idea.
The only conceivable exception would be for the largest national carriers to execute this, because they already have people in place to reach out to healthcare providers. Even then, it isn’t clear that the healthcare providers would agree in a scale large enough to create competition among multiple carriers.
The Number of Uninsured is Lower. True.
Does this matter? To hospitals, no doubt. They are required to serve patients, and fewer uninsured means a greater chance of being compensated. We can debate about the trees, but this is the forest.
The unanswered question is: has the lower number of uninsured meant that the costs to the system are lower?
The problem that the supporters of the ACA have is that they cannot answer this question, which is an important one, because since the ACA is a tax, the question a taxpayer should rightfully ask, “what did I get for paying the tax?” The idea is that few uninsured will “bend the cost curve” so that overall, systematic healthcare costs will decline. Here is a question that the supporters have not answered.
Medicaid Expansion Has Been Helpful for Many. True.
This cannot be a debate. For those that live in states that implemented Medicaid expansion, the ACA has, in certain cases, made health insurance affordable to those that would not have been able to purchase it. For those who live in states that have not implemented Medicaid expansion, they have not reaped the obvious benefits.
Medicaid expansion recipients have received a) lower premiums, and sometimes, b) lower cost-sharing responsibilities (deductibles and out of pocket maximums). Point b) here is under immediate threat, with an answer coming in February (as of this writing).
(Update) Eliminating Medicaid expansion, which is how people paid lower premiums, and had reduced cost-sharing, will mean that many people will cancel their insurance. Who are those people? The people that believe “I’m not getting my money’s worth.” Who are those people? The healthy. That leaves the unhealthy or the very risk-averse as policyholders. This is the feedback loop involved, because if the Individual Mandate is eliminated (see above), then the healthy, whether they receive Medicaid expansion or not, will predictably leave. The question is whether or not the tax credit is enough to incentivize people to stay with their insurance, because if it is not, then the population of policyholders will be the unhealthy, leading to much, much higher costs, and much higher premiums in the future.
Repealing the ACA Will Threaten Medicare. Uncertain.
Read the clip in the Medicare Section.

Socrates Is Right: This War is Political  
The logic runs that “The ACA is making Medicare go broke, so we need to look at everything together.” That presumes that the solution will be better, and as you can read from this article, it is entirely unclear that a simple repeal of the ACA will make things better.

HERE IS THE PROBLEM. WE CANNOT GET AROUND THIS DIFFERENCE.
“People Should Individually Decide” Presumes This

  • People understand the risk they face
  • People understand the effect their choice has on othersThe question is whether the general population is qualified to understand these, to make the proper determination? What is entirely rational for the healthy (to not buy, at almost any price), hurts the systematic healthcare costs.
The problem here is that an unqualified decision here has costs to the overall system, the effect is NOT ONLY on the individual him/herself. The result is the vicious cycle we have at the moment. There is NO WAY to isolate these sides. NO WAY. The healthy go to the same physicians as the ill. The healthy go to the same hospitals as the terminally ill.Those who cannot afford to pay, those who rely on government assistance go to the same hospitals. So the end result is that those that cannot pay, but require assistance, receive Medicaid. Medicaid is severely restrained, and therefore hospitals and doctors do not receive full payment for their services. Who do they charge? The ones that can afford it. And around and around we go.For those that believe that government exists to protect those that cannot decide correct for themselves, the ACA, warts and all, is necessary. For those that believe that people should be left alone to decide, the ACA must go. Both supporters and opponents are unlikely to convince the other. The result? War.