The Courier Press has an editorial on the health care decision. (An aside: I wonder if perception of the decision will be altered because it doesn’t have a snappy name like “Bush v. Gore” or “Brown v. Board of Education.” – National Federation of Independent Businesses v. Sebelius (pdf) doesn’t exactly roll off the tongue.)
The editorial noted a Rasmussen poll (a polling outfit that generally has its thumb on the right side of the scale) that said 54% of likely voters favored a ruling that the act was unconstitutional. But then it correctly noted that rulings on constitutionality shouldn’t be popularity contests. (Reminds me of the Onion piece: “Area Man Passionate Defender of What He Imagines the Constitution to Be” — “Mortensen told reporters that he’ll fight until the bitter end for what he roughly supposes the Constitution to be.”)
The Courier Press editorial says that upholding the mandate requirement will result in 30 million people being obligated to buy health insurance; of which maybe 4 million will opt to pay the penalty instead.
My understanding is that the impact on the uninsured is roughly as follows:
#No need to buy insurance if your income is below the tax reporting threshold. ($9,500 single; $19,000 married filing jointly).
#No need to buy insurance if the premium exceeds 8% of your household income.
#Option to pay the penalty instead of buying insurance. The penalty will start lower but will reach $695 or 2.5% of income. So, if you go with the penalty-as-tax rationale, it’s a 2.5% tax increase offset by a tax credit for those who buy health insurance.
The mandate is a necessary trade off for limiting or eliminating an insurer’s ability to deny coverage. Health insurance only works when there is uncertainty about who is going to get sick – we might be able to estimate the total incidence of sickness and the total cost of managing that sickness. That cost is manageable over the group as a whole but potentially unmanageable to any given individual. Each individual in the group is willing to kick-in to cover the costs in order guard against the possibility that particular individual might be the one who gets sick. It’s a way of managing risk. Once you have certainty as to who is sick, you are no longer managing risk.
If insurers can no longer deny coverage for pre-existing conditions, the incentive is gone to pay up front to manage risk. You just wait until you get sick before spending your money on insurance. That’s why they need to mandate purchase of insurance – or come up with some other way to make sure you’re kicking into the pool. Insurance only works when the healthy are subsidizing the sick.
In any case, I think we all need to do a better job of learning about and explaining to others the details of this health care bill. That 54% opposed number goes way down when the people are asked about the specifics of the plan. It’s only when it’s this vague abstraction called “Obamacare” that people really dig in their heels. And as a corollary to that, opponents of Obamacare should really be pressed on their alternate plans. The status quo is unsustainable and pretty much no one will go on record as being in favor of the status quo. But plans to repeal Obamacare immediately with only vague hand waving about an alternate system is nothing more than a plan to continue with the broken, expensive system we have now.
Excellent analysis of both the economic and political implications of repealing “Obamacare,” Doug. Those who favor repeal would send us back to the disfuctional status quo and assure that our exorbitant health care costs would continue as a huge drag on this nation’s ability to compete in the global economy, not to mention that it would leave over 30 million of our people uninsured, a result I hope even the most vocal opponents find unacceptable.
Yes, good analysis.
It is an interesting dynamic that people support the pieces of the APA but oppose the word. I would imagine that 80% of people support the elimination of pre – x exclusions (although they don’t understand why pre-x ‘s must be excluded in the individual and small group market without a mandate.) Keeping 26 yos on parent’s policies is popular, gets premiums for young and often healthy individuals into the premium pool, and eases their transition into employer-based coverage when they get jobs.
Opposition to this law is more a result of opposition framing than voter consideration of the merits of legislation.
I predict that the ACA will move into second tier status of political issues. “Anger” may return in 2014 when it becomes more operational.
Bill – sadly, I know too many people who have no problem whatsoever with the status quo. Without exception, they all have insurance. Much like the people with jobs who are sure that the unemployed just “aren’t trying” these people are convinced that the health care system isn’t that bad as it stands. Oh, health care may be a drain, but they don’t see it as a drain on them. That having been said I, among the uninsured, agree with you whole-heartedly.
Good column, Doug, and thanks – my feeling about this decision is that I need to read a lot more about it and i knew I could count on you for some places in which to start.
“The Courier Press editorial says that upholding the mandate requirement will result in 30 million people being obligated to buy health insurance; of which maybe 4 million will opt to pay the penalty instead.
Option to pay the penalty instead of buying insurance. The penalty will start lower but will reach $695 or 2.5% of income. So, if you go with the penalty-as-tax rationale, it’s a 2.5% tax increase offset by a tax credit for those who buy health insurance.”
I found this about the taxes:
Beginning in 2014, the federal government will impose new fines on citizens and legal residents who do not obtain government-approved insurance. Those without insurance will pay a tax that is the greater of a flat fee, or a percentage of family income. The flat fee will be phased in over several years. In 2014, the penalty will be $95 per adult in an uninsured household, increasing to $325 in 2015, then to $695 in 2016, after which it will increase annually in line with consumer inflation. For uninsured children, the fine will be half the amount applied to uninsured adults. If greater, households pay 1 percent of their income in 2014, 2 percent in 2015, and 2.5 percent in 2016 and thereafter in lieu of the flat per person fee.
Say your combined income is $75,000/year and it is 2016. Under the above, we would be paying the 2.5% or $1,875 because it would be higher than the $1,390, the penalty of $695/per adult. Now, are two married adults with no insurance going to decide to pay $1,875 once a year in taxes, or $6,000/year for insurance (this would be $500/month for full coverage/two adults). The only way this works out is if the adults can get full coverage insurance for $156.25/month. I don’t care what Obamacare is or isn’t, there is no way in hell it is going to be able to get private companies to offer full-coverage plans for $156.25/month. There is no way that is going to happen.
Unless the person(s) who wrote that editorial are clairvoyant, how can they, or anyone, claim 26,000,000 people are going to choose to pay more when they are given an option to pay less? If out-of-control healthcare costs are all related to the greed of humans, what in Obamacare changes the greed in humans to where they willingly choose to pay thousands more when they can just pay a tax and use the ER as their PCP? Not only that, once you start taking people’s money, they are going to demand this and that.
We are on the road to single payer. Maybe a system like Canada, but more likely a single payer system. It is about time. Make every nurse, doctor, hospital, etc. part of the federal government US HealthCare system. Also nationalize big pharma as well, or pass laws restricting private healthcare companies from paying millions to CEOs and the like. The last thing we need are private companies raking in millions doing contract work for US HealthCare System. Give us the juggernaut of national, single payer healthcare.
I think the difference is that, if you pay the penalty, that doesn’t mean you’re insured. Assuming insurance has some value beyond getting out of the mandate, that would presumably motivate people to buy it.
Well, until we know exactly how much cheaper insurance will be, we will never know. I don’t see how insurance will be any cheaper though. Companies will now be required to cover the sick. The IU study found that something around 8% of the covered folks used 66% of the amount spend on healthcare. So all it takes is a handful of folks to consume 2/3rds of the benefits of the group. Plus, once people feel they are being forced to pay, they are more than likely to use the service more. So I doubt we will have thousands of recent college grads who don’t go to the doctor with a sneeze still do the same thing once they are now “forced” to buy insurance. If I’m forced to buy something, you had best be sure I’m going to use it. That mentality will drive up demand for office visits.
I know a big goal is to get all the younger folks to buy in, since they are healthy. However, the younger folks have massive student loan debt. I don’t see prices going down that much, and the question will be: Do I pay less than $1,000, or pay $3,500 (assuming that would buy you full coverage for the year).
It is going to be very interesting for sure.
Sorry to tell you this Tim, but even ACA’s supporters recognize that it will do nothing to decrease the cost of health care, and at best, will only slow down the double-digit increases in health costs. I can’t speak for any other conservative, but my main issue with ACA is that its goal is to transfer costs from health care system users to taxpayers, with very little attempt at reducing costs (tort reform, opening up the insurance market across state lines, etc.)
What’s encompassed by that “etc.” Paul? Those are really the only two things I’ve seen emphasized in conservative proposals. And, I just saw reference to a study of Texas’ decade or so of “tort reform” showing that it hasn’t decreased costs; it didn’t even reduce the number of tests performed by doctors.
The issue with cross-state insurance offerings is that it will create a race to the bottom like we saw with, for example, the credit industry.
Anyway, I know you disagree with my take on those two issues; I was just wondering if there was something significant in conservative health care thought that might be buried in the “etc.”
Doug: I’ll read the study, but can you explain more your concern with the “race towards the bottom” for cross-state insurance? I don’t think I understand it.
Your question regarding what else encompasses the “etc.” is a good one. I fully admit to not being an expert in this area, and don’t really know what else really does belong. Reducing doctor compensation somehow? Change reimbursements to make it easier for doctors to “see people” via telephone/webcam so they can be more efficient? I personally don’t like seeing commercials from Big Pharma with the sole purpose of creating a demand for prescriptions and increase (subsidized) health care costs. Let’s also acknowledge that the American obesity issue is not helping the cost of health care. I’d like to see something done about that, but I really have no idea what.
My personal take is that we spend a god-awful amount of money on health care for a person’s last 90 days or something like that. We need to find a way to reduce that number, as we just can’t afford it. I know a bunch of people might start screaming “death panels” at me for suggesting the above, but the cost-benefit analysis is just not there.
Yes, race to the bottom means everyone has a social safety net like Mississippi’s. While Mississippi is warily eying Bangladesh and Somalia, in case they need to lower their standards further for the holy “job creators.”
You know, like Indiana treats workers compensation, Medicaid, and other social programs…the bottom
I tend to agree with you about a single-payorbor payors emerging at some point in the future. In fact, the ACA as likely extended the life of the private health insurance system.
I would not nationalize pharma bunt I would allow Medicare and the government to negotiate prices. And ban Rx drug advertising.
Carlito,
Do derive some personal financial benefit from big pharma? The Drs. and Nurses aren’t going to be for nationalization, it will likely mean less take home pay after the large tax hikes are implemented. Folks tied to private business never want privatization. They are either employed by these businesses, or are shareholders. It’s hypocrisy at the highest level.
I can’t stand the concept of Freddi Mac and Fannie Mae. Any “private business” that is backed by taxpayer income, or derives 50% of their income by tax money should be nationalized. I’m one of the biggest fiscal conservatives around. After Obamacare, I’m all for Hugo Chavez style of government. I don’t make all that much, but do OK. For that reason, it is time for me to go from radical right in terms of finances and taxation, to radical left. I can’t stand “public-private” partnerships and those mentioned above. Therefore, I will likely start voting for those candidates that lean far left and support full nationalization of many industries.
How come this works in EVERY other country on Earth?
What countries does it work in? The problem with such a statement is it takes hundreds of years for issues to possibly develop. It is like the “Greatest Generation” and baby boomers saying they could careless about Social Security. They will be gone and dead in the future. Maybe that is the attitude I need to take…screw the future generations, saddle them with debt, saddle them with an economic collapse of epic proportions?
How are things going in Greece, Spain, and Portugal? How are they going up in Canada where there isn’t enough money for higher education and the students are trashing the place?
Responding to Paul C’s question about why I regard cross-state insurance offerings as a “race to the bottom.” Each state regulates insurance offerings in its state. Insurers have to meet certain standards. Policies have to include certain minimum offerings. Certain consumer protections have to be complied with. If the insurer doesn’t meet your state’s regulatory requirements, it’s not allowed to do business in your state.
As I understand the cross-state proposal as generally advocated by conservatives as an alternative to Obama’s health care reform law, it says that if an insurer meets the regulatory requirements of any state, it can do business in your state. The good part of the equation is theoretically making any policy in the nation available to consumers and making the health insurance market more competitive, theoretically lowering prices and increasing quality through the magic of the market.
The bad part is that there is a real likelihood that, with no or lax federal standards, the market would consolidate into the hands of a few insurers, located in the state with the fewest consumer protections, resulting in (particularly low-information, low income) consumers having insurance that’s maybe the cheapest in terms of dollar amount but, when the shit hits the fan, little in the way of actual coverage when the hospital bills come due.
Here is an analysis from Kaiser health. A couple of paragraphs:
Unless you are Georgia and don’t hold out-of-state insurers to the same criteria as in-state.
Race to the bottom.
See credit card/usury rates re: South Dakota, and business incorporation re: Delaware.
The surest way to have a ton of health insurance companies in your state is to have like no requirements for the insurance.
Cross-state insurance policy sales would likely be a race to the bottom, but would certainly be a run to states with few mandates and lax solvency standards.
I understand the problems that sellers of individual and small group insurers face. Massive adverse selection, high adminstrative and marketing costs, and fraud in the application process. These are endemic to the market. My solution would be to drive them from the insurance market and combine these purchasers into large alliances, allowing them to gain market share and help remedy the issues that make these markets inefficient.
I cannot see how the savings could be substantial for policyholders because the purchasers would be individual market and small-group purchasers, buyers with no market power and subject to individual underwriting standards. And without the ACA, subject to pre-x’s in the individual market. How much could be saved per policy? Fifty per month? Seventy-five? Meaningful but not substantial when paying $800 per month.
And even if cross-state purchasing alliances would gain legislative traction, they would run up against the powerful National Association of Insurance Commissioners.
High US healthcare costs result from several reasons. Unchecked use of a surfeit of technology, lack of pricing information, but most importantly, lack of market power for purchasers. Until purchasers can develop substantial market power, providers will never reign in their costs. The must be beaten into cost savings by lower reimbursement.
In response to Bill Groth, above, I generally oppose the ACA, but not because I think that the status quo is all that great. In fact, it sucks. Our small business (law firm) is getting buried with the cost of health care insurance, and it goes up staggering amounts every year. And I have every reason to suspect that when the insurance companies are keeping more people on and are less free to decline coverage, it will be the rest of us who bear that additional cost. I also expect the market to whittle down to a few providers, so you won’t really have much in the way of market forces driving anything.
I abhor quasi-socialist, quasi-free market bastardizations, like Freddie Mac and Fannie Mae. That’s exactly what this seems like. I don’t like socialist philosophy, but I would greatly prefer straight-up socialized medicine to this.
Nate said:
I abhor quasi-socialist, quasi-free market bastardizations, like Freddie Mac and Fannie Mae. That’s exactly what this seems like. I don’t like socialist philosophy, but I would greatly prefer straight-up socialized medicine to this.
As James Grant of Grant’s Interest Rate Observor has often noted (as have others) that in this country, despite all our free market orientations, government is good at, on behalf of powerful interest groups, privatizing profits and socializing losses.