Thursday, March 18, 2010

A few last-minute health care "reform" observations 

Barack Obama and Nancy Pelosi have declared it health care "reform" crunch time, so now's the time for some last minute links, thoughts, observations, musings, and ventings. In no particular order:

  • I have decided that health care "reform" is in the best interest of some of my family members over the short-term, because it will guarantee insurance coverage to a couple of people who may need that guarantee.

  • At least one of those potential beneficiaries has a condition that has benefited from a surge in new drugs over the past fifteen years, which innovation was only possible because pharmaceuticals have a high rate of return. One of the supposed objectives of health care "reform" is to lower the returns for various of the actors (although, see below, it is not clear whether the law will actually have that impact). If you lower the return of something, you get less of it because capital goes elsewhere. Therefore, had this program been put in place 20 years ago more likely than not that my family member would be more secure financially but less well physically. I suspect that there are millions of Americans who have similarly benefited from health care innovation even while suffering more financial insecurity than they would in most other rich countries.

  • Health care "reform" will hurt me financially, without regard to its impact on my company, because I am physically healthy, stand to benefit from innovations yet to come (and which may not occur, at the margin, because rates of return will not be so high), and because I am one of the happy few who will be called upon to pay much higher taxes to pay for the hundreds of billions in new subsidies.

  • Whether this hurts or helps my children depends entirely on the arc of their health and wealth, which remains to be seen. If they turn out to be healthy or confront only conventional health problems and are financially unsuccessful, this is a good deal for them. If the opposite, then it is not.

  • It remains the case that nobody knows how the current bill will affect individual drug and device companies or those industries. And when I say "nobody," I mean nobody. The people who make a living investing in such companies do not have a clue what the impact of the legislation will actually be. That, to my mind, is the number one warning sign that "reform" still is not adequately understood to enact.

  • The general consensus in the health care investment world is that hospitals will benefit, and insurance companies will suffer. I have no expertise that would support or refute that consensus.

  • Ezra makes the liberal case for the current bill here. He does not address the impact of the law on innovation.

  • Obama's FDA is making it much more expensive to get clearances and other approvals for new medical devices. My own suspicion is that this shift at the FDA is strategic and has more to do with the progressive view that new medical technology is a big driver of costs than anybody in the government will admit.

  • Today's message, that Democrats need to vote for this to "save Obama's presidency," strikes me as terrifically stupid. First, it invites the question: How did the success or failure of Obama's presidency come to this? Second, it makes all the people who vote for health care "reform" also responsible for Obama's presidency. What if his poll numbers fall to Bushesque levels? Then the people who voted for health care "reform" might not be so delighted to have been responsible for, well, the condition of Obama's presidency.

  • The Republican complaint that people will be forced to buy health insurance is analytically silly, even if it fools the boobery. If you are going to exclude pre-existing conditions as a reason for higher rates or denial of coverage, then you must force everybody in to the system. Otherwise, few people will pay for insurance until after they actually get cancer or whatever other condition will break their personal bank, knowing that they can sign up as needs require. That would destroy the private insurance industry, because it would pay claims for everybody and collect premiums from only a few. So any Republican who claims he or she supports eliminating pre-existing conditions but opposes the personal mandate is, well, not only an idiot but essentially advocating the destruction of the private insurance industry.

  • You'd think that last point would be so obvious that Republicans would not even make the argument, but apparently most people, including most reporters, cannot even think one step ahead.

  • Of course, your results may vary.


    By Anonymous Anonymous, at Thu Mar 18, 04:12:00 PM:

    Perhaps you've covered this elsewhere, but Mark Steyn's warning regarding this healthcare issue is, I believe, one that bears serious consideration:


    By Anonymous Hawkeye in Oklahoma, at Thu Mar 18, 04:27:00 PM:

    Regarding your last comment: It is "community rating" that ultimately makes mandatory purchase of insurance essential.
    There is also the issue of the constitutionality of a law requiring a private individual to buy a product, insurance, from a private company. It is here that
    Democrats such as Dennis Kucinich are on constitutionally sound grounds when they advocate the government as the single payer. So my conclusion is to scrap this bill and take the steps that can be done without spending billions of dollars, like save those 500 billion dollars from waste.  

    By Anonymous Mad as Hell, at Thu Mar 18, 04:47:00 PM:

    Healthcare isn't a standalone, although the CBO scored it as such. It includes a tax hike on high earners including new taxes on their investment income. These increased taxes could be used for any purpose -- including to reduce our trillion dollar per year annual structural deficit. They have no necessary connection to healthcare, except that they were included in Healthcare legislation to balance the new spending. If the CBO weren't required to credit these taxes to Healthcare, Obama wouldn't be able to claim that the CBO says that Healthcare will save us money.

    Healthcare was structured to game CBO scoring in other ways too. But I haven't seen "tax hikes on the rich" talked about much. High earners don't get much sympathy.

    Here's the rub though. To the extent that the rich are paying for Healthcare instead of to reduce the deficit, the non-rich will have to make up the difference in coming years. High earners alone don't make enough to close the gap. Not only will rates go up ... expect THE BRACKETS TO COME DOWN.

    Healthcare would also start to have us apply payroll taxes to what used to be capital gains. Obama & Co don't understand the risk-reward dynamic behind this. High taxes on capital push investors to less risky "bunt single" investing. Also, the truly rich own things and can avoid taxes by not realizing their gains.

    Like Obama once said, job creation is priority one.  

    By Anonymous The Truth is Out There, at Thu Mar 18, 04:56:00 PM:

    "then you must force everybody in to the system."

    I don't disagree with your logic, but you still have the question of how they join. Many of us will be forced into GenPop insurance pools -- and so will subsidize the pre-conditions of others -- while the lucky favored will literally get their own ClubFed risk pool -- like members of Congress.

    Wait until the young figure out that Obama is going to take all their beer money to cover hip replacements for other people's grandparents.  

    By Blogger Buku, at Thu Mar 18, 05:27:00 PM:

    Will congress use the same system as the rest of us? Their past conduct sayeth no.  

    By Blogger TigerHawk, at Thu Mar 18, 05:31:00 PM:

    @Hawkeye in Oklahoma re "community rating": Agreed, but eliminating pre-existing conditions as a basis for rate or coverage differences is the essence of community rating. I was just trying to avoid the jargon.  

    By Anonymous MGCC, at Thu Mar 18, 05:31:00 PM:

    This morning on the radio I heard something I didn't know and which is very germane to the debate: those health insurance customers who pay extra for, or cannot get, health insurance due to pre-existing conditions are purchasing insurance individually.

    Employer-provided insurance typically doesn't exclude or charge premia for pre-existing conditions. Same for life time limits - that's a characteristic of individually purchased health insurance.

    The news report (I'll confess, it was NPR) further said that the number of individuals purchasing insurance individually is 14M, or about 5% of the US population.

    The reforms focused on regulating insurance risk pool management, then, will affect only a small portion of the population, and their needs can be met by the Republican proposal for creating high-risk pools of individuals who then buy group insurance.

    That's basically, the report went on to say, how the not-for-profit Blue Cross organizations got started, except they were insurance providers rather than group purchasers. Later they converted to for-profits in order to have access to higher return methods of cash management, although typically for NPR the announcer wasn't able to articulate that private sector concept clearly.

    So at minimal cost to the taxpayer, those 14M individuals not eligible for existing government health coverage (Medicare and Medicaid, VA, etc.) or covered by employer-provided insurance can be enrolled into 50 or more state or sub-state wide pools.

    Their rates would be lower because of risk sharing than if purchased directly or, same thing, might not have pre-existing condition disqualifiers or lifetime coverage caps. Small companies could have access to the plan or to similar plans.

    Federal or State subsidies could make up any shortfalls, which would be a lot cheaper than providing the insurance up front.

    TH - next time you're in Seattle, let me buy you a beer to go with your airport hamburger. And do you have any pull with Princeton admissions? We're checking the mailbox every day...  

    By Blogger Tanstaafl, at Thu Mar 18, 05:52:00 PM:

    You are wrong about the last point you make. Well, actually, you are right, but not fully accurate. It is true that without a preexisting condition clause, no one will buy insurance till they need it. The next point is that the fines for not buying it is magnitudes less than the cost of the insurance. Therefore, you will pay the fine till you need insurance. De facto, it becomes another tax on the healthy, and has a good chance of bankrupting the insurance companies, who STILL don't get the moeny till you get sick and need expensive care.  

    By Blogger JPMcT, at Thu Mar 18, 06:03:00 PM:

    So...here we are debating the details of our health care..as though THAT were the purpose of this legislation.

    As Obama's interview with Fox news painfully demonstrated...neither Mr. Obama nor Mrs. Pelosi have a clear idea of what the hell is actually in the bill.

    Why do you think that is the case?

    Because this is NOT about healthcare...it is about the ASSUMPTION of the industry by government and, along with it, the extension of government control into our diet, our health and our very survival.

    Ladies and Gentlemen...we can debate the alleged details all day...but the sad fact is that NOBODY has any IDEA of what is actually in this bill.

    Why? Because it is irrelevant.

    What is certain, as I have said before, is that it will be, for myself as a surgeon, a clear imperative to gey myself and my money the hell out of circulation as quickly as possible.

    Beware, folks...doctors are not stupid people...and least not yet.  

    By Blogger TigerHawk, at Thu Mar 18, 06:42:00 PM:

    @Tanstaafl - I was responding to a raft of Republican "talking point" interviews over the last couple of days, including this morning on CNBC. From everything I have read you are correct, that we will need much stiffer fines to make the system work, but the fines are low in part because the Republicans complained about them so loudly. That was a gamble clearly calculated to kill the bill; if it passes, though, the gamble will backfire horribly, because the poor enforcement mechanism could well irreparably damage the private insurance industry.  

    By Anonymous Just Because, at Thu Mar 18, 07:27:00 PM:

    Dumb question. One of the popular features of Healthcare is the elimination of pre-existing conditions. Insurance companies can't not let you into their risk pool. But won't this lead to them reducing the care they give for those pre-existing conditions? If they don't, they'll go broke -- won't they? If so, these reductions will be felt by all.

    What am I missing?  

    By Anonymous Gandalf, at Thu Mar 18, 07:43:00 PM:

    I'm Galt, a blessing of being retired and able to select investment options. I am also a concerned citizen, father, and grandfather. It seems to me the easiest way to deal with 14 million uninsured, if there is a wish to have them covered, is to buy them insurance policies at say $5k each. If my math is correct that is $70 billion per year and it doesn't screw up the rest of us.  

    By Blogger The Window Manager, at Thu Mar 18, 07:56:00 PM:

    > (if my children) turn out to be
    > healthy or confront only
    > conventional health problems and
    > are financially unsuccessful,
    > this is a good deal for them.

    What?! This bill hurts the unsuccessful, healthy the most by sucking money out of the economy (less GDP, less jobs, less growth) and diverts tax dollars and government resources away from programs that can help the healthy underclass. Every dollar on Obamacare is a dollar not spent on education, infrastructure, parks, etc. Of if you do it all, you destroy the economy anyway.

    Life is a terminal event - everyone is going to die. The government providing "health" is an illusion. The vast majory of "health care" is "treating" the normal againg process or people not taking care of themselves. If we had a program that only took care of car accidents and people with accidental illnesses or herditary conditions, what would that really cost us?  

    By Anonymous Anonymous, at Thu Mar 18, 09:05:00 PM:

    The vast bulk of the legislation is in aid of increasing, consolidating more power in the executive branch. If it passes, Obama will be able to mandate without having to seek approval of congress. Given Dodd's so called financial regulatory reform, the president will be able to give out aid to whomever, whenever at his whim.

    This is an end run in perpetuity around the constitution. that's why Clyburn's so "giddy"  

    By Anonymous Robert Arvanitis, at Thu Mar 18, 10:01:00 PM:

    Regret we still lack clarity on the meaning of "insurance."

    Insurance means you have a one in a hundred risk of losing 100,000. You are willing to pay something more than fair odds, like $1,200, to avoid that catastrophe. You can make the 1,200 payment, but the 100,000 loss is so disastrous you must avoid it. THAT is insurance.

    All the rest is about mere dollar swapping. Your homeowners insurance does NOT cover groceries. You car insurance does NOT cover oil changes.

    And IF we DO choose to help the poorest pay for health from some really low level, then let's say so, means-test it, and include it in comprehensive welfare.

    What we must NOT do is fall for the same scam as Social Security.

    You remember that crime. We have 10 guys, one of whom is deserving poor. We might well tax each of the nine other guys like 10¢. and give the one guy 90¢. But no. FDR instead taxed the nine guys a full dollar each, and gave EVERYONE 90¢.

    This has multiple bad effects. First it hides the welfare bit, buries it in the bigger wealth shuffle.
    Second, it creates a huge new bureaucracy to adminster the $9 dollar shuffle.
    Finally, and worst of all, it creates the vile perception that government can give you something for nothing.

    Government produces nothing. It can only transfer, inefficiently, and with great moral destruction.  

    By Blogger Kinuachdrach, at Thu Mar 18, 10:07:00 PM:

    "That, to my mind, is the number one warning sign that "reform" still is not adequately understood to enact."

    And is that not the acid test that Obama has failed, Democrats in Congress have failed, the lamestream media have failed?

    Obama's signature legislation - what he has focused on while the economy has gone south, jobs have vanished, and the world has become a more dangerous place. Yet even those with an incentive to pay attention don't know what it means.

    If that is not a demonstration of Obama's failure, what is?  

    By Blogger JPMcT, at Thu Mar 18, 11:42:00 PM:

    "the fines are low in part because the Republicans complained about them so loudly"

    Do I infer from this that you are in favor of high fines for those who choose, in this allegedly free country, not to have health insurance???  

    By Blogger TigerHawk, at Fri Mar 19, 06:17:00 AM:

    JPMcT -- If you are going to have community rating (the euphamism for prohibiting insurance companies from charging different rates for different risks), you can choose between single-payer and compulsory private insurance. Community rating and voluntary private insurance is not an option. Therefore, if you support eliminating pre-existing conditions as a barrier to coverage (which you pretty much have to do if you want to extend coverage to many more people), and if you support the continuation of a private insurance industry, then you have to support some mechanism for compelling healthy people to buy insurance. My sense from watching these guys on television (I admit, I did not dig through Congressional position papers) is that there are Republican politicians who say that they want (i) community rating (in effect), and (ii) voluntary participation. The combination of those two preferences would destroy the private insurance industry and make single-payer inevitable. So, yes, since there is community rating in the bill, I am worried that the enforcement mechanism is too weak, that private insurance will go down the drain, and that single-payer is therefore inevitable.  

    By Anonymous Just Because I'm Paranoid, at Fri Mar 19, 07:46:00 AM:

    "I am worried that the enforcement mechanism is too weak, that private insurance will go down the drain,"

    Might private insurance also cut care?  

    By Blogger Unknown, at Fri Mar 19, 08:14:00 AM:

    This is a real fact and we should take care of certain things while making an insurance deal, here is one more site related to auto insurance, i have personally used it, its good. just take a look and tell me whether it is really what i think or not http://www.austin-car-insurance.info/  

    By Blogger JPMcT, at Fri Mar 19, 10:37:00 PM:

    "since there is community rating in the bill, I am worried that the enforcement mechanism is too weak"

    TH...What is being proposed is NOT insurance. It is welfare for the middle class.

    Insurance is based on risk adjustment. It is a SERVICE to those who purchase it...not a "necessity". It is structured to make a profit for the vendor.

    Once the US government redefines insurance as a "right" to all...it ceases to become insurance and becomes an entitlement.

    A VERY, VERY, VERY expensive entitlement.

    Like ALL of our existing entitlements...it will expand exponentially until it bursts.

    Unless it is contained by a British or Canadian system of rationing and denial of care.

    In other words...a disaster.

    ...and the Democrats will own it.

    Sadly, by the time we all wake up and smell the bacon...it will be irrelevant who "owns" it.  

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