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PPACA: United Health Care vs the Public Option

A story that is getting some traction, though mostly lost against the New York primary, is that for profit health insurance company United Health Care is looking to drop its Exchange Plans under PPACA. For example this from Fox: UnitedHealth pulls back on ObamaCare exchanges amid huge losses This is of course presented as some additional proof of the failure of ObamaCare. And given the current structure that has the Exchange 100% reliant on private insurance providers and so vulnerable to insurance provider drop-outs this may be. But from the perspective of supporters of the original version of PPACA, the one that came out of Senate HELP and the House Tri-Committee this was more a feature than a bug.

In 2009 it was abundantly clear that Single Payer/Medicare for All was not a viable option. It wasn’t going to happen. (Please argue the point in comments.) But there was a narrow window open for a backdoor path to Single Payer. And that was the Public Option in both its Strong and Weak forms. The idea was a properly designed Public Option would out-compete any private insurance provider on price. That is with or without some form of the mandated limits on the Medical Loss Ratios that in turn restricted Big Insurance profits, private insurers would find some markets unprofitable and so abandon them. In particular this was projected to happen in rural markets and second and third tier metro areas. Which markets would then be available for scoop up by the (so-called) non-crofts and the Public Option. My own vision was that over time a version of Single Payer would evolve from the outside in as Big Insurance retreated to serving high margin/richer urban markets.

Now of course we don’t have the Public Option. But even so I am not going to shed a tear that for profit insurers like United Health just are not having the success in extracting huge rents from PPACA. Because those rents/profits were not adding value anyway. And while there is theoretically some downside in reduced competition the structure of PPACA doesn’t really allow surviving health care insurers to extract monopoly rents. And to the extent that certain markets begin to be underserved there will be that much pressure to allow entrance to some version of the original Public Option, perhaps by leveraging the presence of existing Public Health, Veterans Administration and even Indian Health Service hospitals and clinics. And Community Health Centers. And Free Clinics. Any of which would benefit by a new pool of actual paying customers with insurance funded by Exchange subsidies.

Now clearly there are some dangers to trying to transition to Single Payer via crowding out for profit insurers. Especially since there is not an existing Public Option in the way the original plans envisioned. Still there is no reason to cry that Wall Street is not extracting what it considers to be its due pound of flesh by providing health care to rural and poor areas. United Health Care had a business plan. Its success required large rent extraction. That the PPACA as designed didn’t end up making it as easy to extract excess rents as the FirePups assumed is a good thing.

The road to Single Payer is certainly rocky. And maybe we will never get there in total. But if we do seeing the corpses of United Health Care and Aetna as squished road kill should not be triggers for pity and sorrow. Unless you are a Free Market fetishist.

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Argument: more health insurance does not lower cost

This morning on Washington Journal was a discussion with Marogt Sanger-Katz of the NYT Upshot blog.    She wrote a post: No, Giving More People Health Insurance Doesn’t Save Money.  It’s a controversial title for sure, but there is some interesting points that I know are often mentioned on a few email lists I’m on for my profession.

Let me just say I’m am a bit cautious of her writing after listening to her answer regarding why the nation did not get a single payer system in her interview this morning.  She was correct there was not the political will, but she suggested that it was do to a lack of interest/drive on the part of the people.  She states most of the people do not want single payer.  My understanding is that is was more the politicians involved namely President Obama and the congressional dem leadership that flat shut down any talk of single payer and then the Medicare option.  Ms. Sanger-Katz did not mention this at all.   Here is the clip:

In her article however, she does mention the issue of “number to treat”.  This is a big issue in health care and has been ignored generally.  When the move was on to control costs, medicine began to promote prevention, only it was not prevention by means of better food, better life environment via a reduction in the risks of life (security of housing, income, aging).  If you think about it, to promote better food requires going up against our industrialized food system.  To promote a better life environment would mean going up against the entire economic model we have been deriving policy from that has lead to the life people are living today.

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The Antidisestablishmentarianism Theory of Obamacare Illegality. (The ACA has a (dis)establishment clause! Who knew?) [Updated.]

A federal judge in the District of Columbia will hear oral arguments on Tuesday in one of several cases brought by states including Indiana and Oklahoma, along with business owners and individual consumers, who say that the law does not grant the Internal Revenue Service authority to provide tax credits or subsidies to people who buy insurance through the federal exchange. …

The subsidy cases, if successful, would strike at the foundation of the law. Subsidies and tax credits, which could be available to millions of low- and middle-income Americans, are central to Mr. Obama’s promise of affordable care. In drafting the law, Congress wrote that such financial help would be available to people enrolled “through an exchange established by the state” under the law.

A New Wave of Challenges to Health Law, Sheryl Gay Stolberg, New York Times, today

Hmm.  Okay, let me take a crack at this.  The law gives each state the option of running its own exchange or instead allowing the federal government to run an exchange for the state–an operation that must be done separately for each state, because each state has its own insurance companies offering different policies than other states, and subject to state insurance laws and state agency oversight.

The law doesn’t say “through an exchange run by the state” under the law; it says “through an exchange established by the state” under the law.  The states know their options.  Fourteen of them chose to establish an exchange by setting one up and running it.  The rest have chosen to establish an exchange by delegating to the federal government the job of setting up and running the exchange for the state.

The law itself, in other words, by requiring that each state choose one of two mechanisms to establish an exchange–directly or instead by delegation to the federal government–required every state to have (i.e., to establish) an exchange.  The tax credit, or subsidy, provision of the statute does not limit tax credits (subsidies) to people who live in states that choose to physically set up and run the state’s exchange itself.  It provides that benefit to people regardless of their state of residence, because by operation of law–specifically, by operation of that law–states can establish their exchanges by delegating to the federal government the physical setting up and running of the exchange.

Depends, in other words, on what the meaning of established is.  Or, more accurately, on what Congress intended the meaning of “established” to be.  And I’ve just told you what that is.  Surely, the federal courts understand the concept of contracting out a tech job.  Thirty-three states have chosen to contract out this job to the federal government.  Except, of course, that the contract was not negotiated but instead compelled by law.

Voila!  The antidisestablishmentarianism theory is disestablished.  The tax credits/subsidies clause in the ACA applies even to you, Red State denizens who qualify financially.  Congratulations.  I mean, my condolences.

But also in the article is this jaw-dropper, a quote from Jonathan Adler, a law professor at Case Western Reserve University and one of the two proud creators of the ACA disestablishment-clause hypothesis:

Among critics of the law there is a feeling that the law doesn’t have the same legitimacy as a law that passed with bipartisan support.

Let me take a crack at this, too.  This will only take a moment: I don’t recall the provision in the Constitution that classifies laws duly enacted without bipartisan support illegitimate.  But I do wish the Dems had remembered that Article or Amendment in 2001 when Congress enacted the first set of tax cuts for the wealthy, without bipartisan support.  Not that it would have mattered, though.  I mean, who knew that when the Supreme Court put George W. Bush in office via an opinion that said its legal reasoning would apply to that case only, the five justices in the majority also meant that the clause in the Constitution that delegitimizes laws enacted without bipartisan support doesn’t apply to laws enacted by only Republicans?   But you can bet it doesn’t.

Adler’s partner in theory development is a Cato Institute “health policy scholar” Michael F. Cannon, and the Times article gets a quote from him too.  Not to be outdone in the outragousness department by his compadre, Mr. Cannon thusly described the Strategic Airwaves Command plan developed immediately after the ACA was signed into illegitimate law:

After the A.C.A. was enacted and after the president signed it, a lot of people — me included — decided that we weren’t going to take this lying down, and we were going to try to block it and ultimately either get the Supreme Court to overturn it or Congress to repeal it.

Mr. Cannon will testify today at a televised House committee hearing about his and Professor Adler’s theory.  The professor must have a scheduling conflict, because he apparently is not on today’s witness list.  But presumably Mr. Cannon, scholar that he is, can cite the legal authority for the proposition that laws aren’t legitimate unless enacted with bipartisan support if it’s a Democratic rather than a Republican majority that voted for the bill.  He’s not a lawyer, but he does work for the Cato Institute.  Which, as the Times article notes, is libertarian-leaning.  As opposed to, say, democratic-leaning.  But not as opposed to fascist-leaning.  Which the current Republican Party, egged on by its corporate-funded puppetmasters, is.

What’s next from the libertarian crowd?  Polling places only in gated communities? Damn! I shouldn’t suggest it, should I?  Oh, well; they’d have thought of it on their own soon enough. That’s why Cato is called a think tank.

UPDATE: Reader Jack writes in the Comments thread:  “The relationship between Cato and the Ayn Rand Institute (ARI) improved with the nomination of Cato’s new president John A. Allison IV in 2012. He is a former ARI board member and is reported to be an “ardent devotee” of Rand who has promoted reading her books to colleges nationwide.” Wiki

Also, “….but so intense is Allison’s devotion to Rand’s work that he has waged a campaign to make college students read it, using the power of the BB&T Charitable Foundation and millions of dollars in donations to schools to achieve his goal.” Jane Mayer, http://www.newyorker.com/online/blogs/newsdesk/2012/07/kochs-cato-john-allison.html.”

It does seem to me that the mainstream media should stop referring to Cato as a libertarian think tank now that that organization is simply an arm of the Koch brothers’ propaganda machine.

ALSO: Here’s a report on the argument yesterday afternoon in the case.

SECOND UPDATE: An exchange between reader EMichael and me in the Comments thread:

  • EMichael
    December 4, 2013 9:28 am

    Hard to figure out whether to laugh or cry.

    Fairly humorous that one half of the GOP’s healthcare reform platform is to stop the ambulance chasers via tort reform while using the same ambulance chasers to stop the Dem healthcare reform.

    The sad part is that there are judges who will not just laugh at these people and throw them out of his courtroom.

  • Beverly Mann
    December 4, 2013 1:37 pm

    Yup, EM. There’s a cadre of lawyers who have made this their specialty: tortious-interference-with-Obamacare. It’s apparently quite lucrative.

 

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The future of YOUR health insurance premiums

by Maggie Mahar

run75441: Maggie Mahar writes on future insurance premium increases something consistently arises in the debate on the PPACA. The complete post can be found at healthinsurance.org

The future of YOUR health insurance premiums

Today, many Americans are asking, “Will my premiums go up in 2014?”

There is no simple answer.

According to Families USA, the Affordable Care Act (ACA) will have a positive effect on the typical family’s budget. Using an economic model that can factor in all provisions of the Act, Family’s USA estimates that by 2019, when the law is fully implemented, “the average household will be $1,571 better off.”
Even high-income families will save: thanks to rules that limit co-pays, and reward providers for becoming more efficient, “those earning $100,000 to $250,000″ will spend $779 less on medical care.”
But these are “averages.” They don’t tell you whether your premiums will rise or fall.

The answer will depend on: your income, your age, your gender, whether a past illness or injury has been labeled a pre-existing condition, who you work for, and what type of insurance you have now:

If you work for a large company:

The ACA will have a “negligible” effect on your premiums says the Congressional Budget Office (CBO).
This doesn’t mean that your costs won’t climb in 2014. As long as medical product-makers and providers continue to raise prices, premiums will edge up each year.

But in 2012 average premiums for employer-based insurance rose by just 3 percent for single coverage and 4 percent for families, a “modest increase” when compared to 8 percent to 12 percent jumps in past years. And on average, employee co-pays and deductibles remained flat.

Granted, a 3 percent to 4 percent increase still outpaces growth in workers’ wages (1.7 percent percent) and general inflation (2.3 percent) percent). But as reform reins in spending, annual increases for large groups could fall to 2 percent – or less.

If you work for a small company with more than 50 employees:

Your boss will be more likely to offer affordable benefits, in part because, if he doesn’t, he will have to pay a penalty.

Moreover, he will find insurance less expensive. Today, small businesses pay 18 percent more than large companies because the administrative costs of hand-selling plans to small groups are sky-high.
But starting in 2014, businesses with fewer than 100 employees will begin buying insurance in exchanges where they will become part of a large group, and eligible for lower rates.

Finally, some companies with fewer than 25 employees will receive subsidies that cover 50 percent of what they lay out for insurance.

If you work for a small firm where many employees are older, female, or suffer from a pre-existing condition:

Your premiums may well fall. Today, most states let insurers charge small firms more if many of their workers are older or are women.  They also can jack up premiums if just a few workers fall ill or are injured.

This post originally appeared on healthinsurance.org. To find out more about the importance of where you live, whether you are a woman, whether you are young (20-something to 30-something) or older (in your 50-65), your income, and your health status please click there.

Or if you like, you can return to HealthBeat to comment. run75411

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Health Care Thoughts: Regulatory Bumbling

by Tom aka Rusty Rustbelt

Health Care Thoughts: Regulatory Bumbling

The people who daily manage health care services (and their advisers) have been shocked at the inability of the Obama administration to manage the administrative regs roll out process. The 2009 stimulus act contained multi-year funding for adopting electronic medical records (EMR/EHR) systems.

The funding required “meaningful use” and the published regulations were and are nearly incomprehensible, especially at the physician practice level. EMR/EHRs are making progress but it is largely due to the integration of physician practices into integrated delivery systems.

 Then there is PPACA. The first major regulatory effort were the SSP accountable care organization (ACO) regulations, and that was a disaster. Even the administration’s allies ran for the hills. The administration has spent the last half of 2011 creating new ACO sub programs and revising regulations, and has finally convinced some providers to jump on board the pioneer ACO program.
(Some of the desired innovation and integration is happening, but it is being pushed by fear of the future economics of health care rather than directly by PPACA.) .

 The C.L.A.S.S. long-term care financing program died in its crib. Early on Secretary Sebelius announced the program was not financially viable, and got into a shouting match with Congressional Democrats when she announced she could change the program without Congress changing the empowering statute. There were attempts at CPR, but the program now appears to be really dead.

 The most recent botch (already mentioned in an earlier post here) are the “essential benefits” regulations. As described in WAPO (12/16) the administration punted the decisions to the states. Depending on your perspective, this could be seen as “flexibility” or seen as “surrender.” We are still digesting these rules (it occurs to me multi state employers are going to freak on this). The 2200 pages of PPACA will be backed by many thousands of pages of administrative law.

At the provider and insurer level these regulations are the real meat of the act. A smooth roll out would certainly make PPACA more valuable. Lawyers specializing in health care administrative law are delighted. Consultants and writers are happy as well (I plead guilty). Tom aka Rusty Rustbelt

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MLR bomb…

There is a amazing piece in Forbes that Tim Worstall (also at Forbes) notes reporting on scary news that is misleading:

I’m very confused by this piece from fellow Forbes contributor Rick Ungar. He tells us that there’s a bomb buried in Obamacare (or more formally, the Patient Protection and Affordable Care Act) and that it’s just gone off. Further, that it will mean the end of private, for profit, health care insurance on any large scale: whatever remains will be just a luxury item for those who like to beat the queues as such insurance is in the UK where we have the NHS.

Angry Bear’s Bruce Webb noted the MLR in the legislation on July 28, 2009 (and here and here), among the first to offer analysis, but hardly a surprise now.

Tim [edited for clarity] quotes Ungar and then refutes:

That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers’ premium dollars they collect—85% for large group insurers—on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.

This is the true ‘bomb’ contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we’ve seen in quite some time. Indeed, it is this aspect of the law that represents the true ‘death panel’ found in Obamacare—but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.

Why? Because there is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid.

What confuses me here is that in a competitive market it’s entirely normal for an insurer to have a loss ratio higher than 80%. There are plenty of entirely profitable and growing insurance companies that have loss ratios over 100%. So I cannot really understand why the law insisting on an MLR of 80% (or 85% in the large group market) is going to cause all for profit insurance companies to fall over.

Now of course one wonders what is important in addition to this scarey announcement of a medical cost bomb? Issues of accounting for expenses, a more recent mlr formula that is more permissive, enforcement issues. And even why the ratios may be central as a part of the legislation. Another post of course.

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Health Care Thoughts: No CLASS Act

Health Care Thoughts: No CLASS Act

The Community Living Assistance Services and Supports, aka CLASS, was to be an integral part of PPACA (Obamacare), providing a funding source for some part of long-term care costs.

When DHHS Secretary Sebelius declared she would have to fix the program because the poor design was not financially viable, the vultures started to circle. Now it appears the Obama administration is likely to abandon the program, due to the poor design.

Liberals will not believe me, but complexity is the enemy of successful implementation, and PPACA is too complicated to work.

Tom aka Rusty Rustbelt

(I don’t agree with Rusty’s notion that ‘liberals’ won’t agree…comments after the jump)

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