Health care policy, like K-12 education and college sports handicapping, is an abyss I try my best to avoid, because energy and environment are so much more fun! Almost 25 years ago I wrote a cover story for Reason magazine about “The Medicare Monster,” and resolved never again to go through the torture of investigating health care policy, despite the fact that the great Richard Epstein still talks today about how great he thinks the article is.
But the slow-motion train wreck of the GOP effort to “repeal and replace” Obamacare now compels me to step out of retirement and wonder whether the GOP is up to the challenge. The GOP Obamacare reform bill released yesterday is getting almost universal raspberries from conservative health care wonks. Knowledgeable health care analysts are calling it “Obamacare lite.” Avik Roy thinks it’s a political loser:
The CBO is likely to score the AHCA as covering around 20 million fewer Americans than Obamacare. There are flaws in the way the CBO models health reform legislation, but the AHCA itself contains enough flaws that there can be little doubt that the plan will price millions out of the health insurance market.
Expanding subsidies for high earners, and cutting health coverage off from the working poor: it sounds like a left-wing caricature of mustache-twirling, top-hatted Republican fat cats.
Philip Klein in the Washington Examiner says that the GOP bill effectively means that “liberalism has won“:
Barring radical changes, Republicans will not be passing a bill that ushers in a new era of market-based healthcare. In reality, the GOP will either be passing legislation that rests on the same philosophical premise as Obamacare, or will pass nothing at all, and thus keep Obamacare itself in place. . .
The GOP bill preserves much of the regulatory structure of Obamacare; leaves the bias in favor of employer healthcare largely intact, replaces Obamacare’s subsidies with a different subsidy scheme, and still supports higher spending for Medicaid relative to what was the case before Obamacare.
National Review‘s Jim Geraghty finds his mordant joke about what was coming vindicated:
For the past few weeks, I’ve been joking, “Republicans are set to replace Obamacare’s system of subsidies, where the government gives you money to help pay for health insurance, with a system of refundable tax credits, where instead, the government will give you money to help pay for health insurance.”
The real problem is that the GOP bill really doesn’t reform our government-dominated health care marketplace because it does very little to get at the fundamental problem of how we made health care, willy-nilly, a third-party payment system a long time ago.
The best explanation of this comes from Chicago portfolio manager (and Power Line reader) Boyd Klinger in his morning newsletter for clients:
Instead I want to point something out that seems to be missing from the discussion of health care. And that is the fact that politicians don’t seem to understand just what insurance is. Insurance is a financial service that pools money (premiums) from a cohort of individuals in order to provide protection from rare, but financially devastating, contingencies.
For instance, In the U.S. there were 99,500 non-residential building fires in 2014 (the latest data available). In 2012, the latest data I could find on short notice this morning, there were 5.6 million commercial buildings in the U.S. So, assuming no new buildings were built between 2012 and the end of 2014, a total of 1.8% of the commercial building stock was hit by fire in 2014. The vast majority of buildings are left unscathed annually. Fires are vanishingly rare. The costs of a fire, however, are extraordinary, so commercial lenders, investors and every sentient being, believes, correctly, that a business must pay premiums for fire insurance, though the odds are that it will never in its corporate life suffer a fire.
The same ought to be true of health insurance. Paying for a visit to your doctor to get a flu shot, for the vast majority of Americans, will not lead to bankruptcy. A cancer diagnosis, on the other hand, might mean that for a large portion of the middle class, as cancer treatment is expensive and long-term. The National Cancer Institute estimated that 1.685 million new cancer cases would be diagnosed in 2016. The U.S. population is 325.7 million. So that is a diagnosis rate of 0.5%. Extremely rare. Extremely costly. Health insurance ought to cover rare, but costly, contingencies.
But ever since our tin pot solons decided to get involved, accelerating from the 1960s to now, “insurance,” like everything else politics touches, has become corrupted. Now insurance has morphed into a third-party pre-payment plan, wherein simple visits to your internist are covered by the third party payer. It is one of the many reasons health care is so expensive. It is also the reason you have no idea what an average visit to a primary care physician costs. It removes competitive market forces from the cost equation and allows for an opaque pricing system decided by institutional vendors and remote payers.
This particular problem is what the Republicans’ plan should have addressed as the centerpiece of its health care “reform” – returning to an insurance based-system, rather than the opaque, pre-payment plan, reinforced by the PPACA and burdened with many expensive mandates.
The current PPACA-lite proposal is going to do little to lower health care costs, and is going to make it more difficult for many people just below and just above the poverty line to afford insurance. Great. Oh well, I guess we get the government we deserve.
Looks like we’re back to the old days when the “Conservative Republican Alternative Program” is best understood by the obvious acronym CRAP.