Mar. 10th, 2017

hudebnik: (teacher-mode)
Paul Ryan actually said this yesterday (link with video):


The fatal conceit of Obamacare is that we’re just gonna make everybody buy our health insurance at the Federal government level. Young and healthy people are gonna pay for older, sicker people. So the young, healthy person is gonna be made to buy health care, and they’re gonna pay for the person, you know, who gets breast cancer in her forties, or gets heart disease in his fifties.

So take a look at this chart. The red slice here are what I would call “people with pre-existing conditions” — people who have real health care problems. The blue is the rest of the people in the individual market — that’s the market where people don’t get health insurance with their jobs, or they buy it themselves. The whole idea of Obamacare is the people in the blue side pay for the people in the red side. The people who are healthy pay for the people who are sick. It’s not working and that’s why it’s in a death spiral.

Here’s how we propose to tackle this problem. We want to have a system where we encourage states, with Federal funding, to set up risk pools and reinsurance mechanisms. For example, in Wisconsin, we had a great risk pool that actually worked, so that people with real high health costs and diseases, and pre-existing conditions, could still get affordable health care. Well, Obamacare repealed that. They had a great risk pool reinsurance system in Utah, a good one in Washington State… all those are gone under Obamacare.

Here’s how they work, and here’s how our system would work. We would directly support the people with pre-existing conditions. [Red slice removed from pie graph] Let me give you a sense of this. 1% of the people in these insurance markets drive 23% of the costs. 1% of the people in the individual insurance market drive 23% of the costs. So a reinsurance program is to cover more than just the 1%, to cover the people who have high health care costs. So by having state innovation funds to go to the states to set up these reinsurance programs, we would directly subsidize the people who have pre-existing conditions. Direct support for the people with pre-existing conditions so that everybody else has cheaper health insurance.

What you do when you do this is, the individual market, the people who don’t have pre-existing conditions, they have much more stable prices.


Oh. My. Gawd. As lots of people on Twitter have pointed out, "the people who are healthy pay for the people who are sick" is literally the definition of health insurance. More generally, "the people who are lucky pay for the people who are unlucky" is the definition of insurance -- fire, flood, burglary, health, life, etc. We've been discussing Obamacare and alternatives for eight years now, and the Republican Party's anointed policy wonk doesn't pretends not to know how insurance works.

Anyway, let's consider his alternative. We'll take the high-risk people out of the pool, leaving the low-risk majority of people buying their own cheaper health insurance -- and that's probably true. So what do we do with the rest? The Federal government gives the states money to set up "high-risk pools" and "reinsurance programs" that subsidize insurance companies to get them to cover those high-risk people without astronomical premiums. In other words, the money to cover the high-risk people, which was coming from low-risk people in the market, will now come from... Federal taxpayers! The leader of the anti-Federal-government, anti-tax Republicans in the House of Representatives is proposing that instead of paying for something through the free market, we pay for it with Federal taxes.

Mind you, nobody expects Ryan to raise Federal taxes to pay for this added expense -- indeed, the bill in the House cuts Federal taxes. Which leaves several alternatives:

(a) the Federal budget deficit goes through the roof (which is OK when Republicans do it), or

(b) high-risk people will get much less health care, die, and decrease the surplus population, or

(c) total costs will magically drop sharply because the money goes from Federal government to State governments to insurance companies to providers, rather than from Federal government to individuals to insurance companies to providers, or

(d) the Federal government will provide less money than it does now, and State governments will be expected to make up the difference by substantially raising their own taxes. Which California, New York, and Massachusetts might be willing and able to do, while high-risk people in Kansas and Utah (and pretty much any state that voted for Trump) are back to option (b).

I'm betting on (a) and (d).
hudebnik: (teacher-mode)
Conservative Republicans on Capitol Hill, Breitbart, the Kochs, etc. are outraged by Ryancare because it doesn't completely repeal Obamacare and it provides Federal subsidies (albeit age-based rather than income-based) to help people pay for health insurance.

What would they prefer? What's the ideologically-pure, conservative answer?

No Federal mandates about what needs to be in a health insurance plan, about who needs to buy health insurance, about who needs to offer health insurance, about who needs to be offered health insurance. Health insurance is strictly a matter between consumers and insurance companies, in a free and competitive market. (With some State regulation -- for some mysterious reason, many conservatives are willing to accept regulation at the State level that they wouldn't accept at the Federal or local level.)

Are insurance companies required to insure anybody who comes along? Certainly not at the Federal level; some states might enact such a requirement, but many won't, which means people with pre-existing, expensive medical conditions in red states simply won't be able to get insurance. They have several choices: (a) get all their care from emergency rooms without paying for it; (b) get lots of money from friends and family to pay for health care; (c) go bankrupt paying for health care; (d) die without health care. Competition won't solve this, because insurers don't want the business of people with pre-existing, expensive medical conditions; if anything, they'll compete for who can lock those people out the fastest.

So, young and healthy people can buy cheap, high-deductible insurance, or no insurance at all. Rich people can self-insure with HSA's, buying cheap, high-deductible insurance or no insurance at all. Old and sick people can buy no insurance at all. Since anybody who actually wants health insurance is unable to get it, the result is dismantling the health insurance industry.

What if conservatives compromised on the popular "pre-existing conditions" clause, but not the rest? Without an individual mandate and without government subsidies, young, healthy, and/or poor people won't buy insurance, leaving only old, sick people in the pool, so their premiums will go through the roof, so they won't be able to buy insurance either, again dismantling the health insurance industry.

Which is ironic, because "dismantling the health insurance industry" is also the result of the ideologically-pure liberal solutions (either single-payer or socialized medicine). The difference is that in the liberal solutions, everybody gets preventive care, rich and poor get the same health care, and nobody dies for inability to pay, while in the conservative solutions, poor people don't get preventive care and end up either in inefficient, expensive emergency rooms, or dying for inability to afford health care. Oh, and taxes are higher under the liberal solutions, but total spending on health care is higher under the conservative solutions.

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