Friday, July 17, 2015

It's Another Policy Fail From Ed Morrissey of Hot Air

     In several recent articles, Ed Morrissey of Hot Air has argued against the ACA in quite vociferous terms.  Unfortunately, his articles not only misdiagnose the basic problems that led to passage of the ACA, but offer completely unworkable solutions.

     Let’s begin with his mis-diagnosis, beginning with this:

Before we get to ObamaCare, let’s recall the rationales for government imposing top-down control over one-sixth of the nation’s economy. First, we had to end the issue of the uninsured, which had spiked as a percentage of the population after the Great Recession, mainly from unemployment.

Yes, Ed, it did spike after the recession.  But the rate of uninsured was a 20+ year problem in the making:

During 1968–1980, the percentage of persons under age 65 years who had private coverage remained stable at about 79%, while the number with private coverage increased from 140.5 million to 154.1 million persons (Tables 1 and 2). During 1980–2007, the percentage with private coverage declined steadily, except during 1996–1999. From 1999 to 2007, the percentage of persons under age 65 with any private coverage declined at an average rate of more than 1% per year, to 67% in 2007; the number of persons with private coverage remained at about 174 million during this period. The downward trend in private coverage was driven in large part by a decline in employer-sponsored coverage. In 2007, 62% of persons reported employer-sponsored coverage, down from 71% in 1980.

From The National Health Statistics Reports of July 1, 2009:

Here’s a chart of the data:

In short, Ed, the uninsured was a growing problem for decades.

And the quality of the insurance was decreasing.  Most of the people who previously filed for bankruptcy did due to medical costs, and a majority of those individuals had insurance:

Bankruptcies resulting from unpaid medical bills will affect nearly 2 million people this year—making health care the No. 1 cause of such filings, and outpacing bankruptcies due to credit-card bills or unpaid mortgages, according to new data. And even having health insurance doesn't buffer consumers against financial hardship. 

The findings are from NerdWallet Health, a division of the price-comparison website. It analyzed data from the U.S. Census, Centers for Disease Control, the federal court system and the Commonwealth Fund, a private foundation that promotes access, quality and efficiency in the health-care system.
Even outside of bankruptcy, about 56 million adults—more than 20 percent of the population between the ages of 19 and 64—will still struggle with health-care-related bills this year, according to NerdWallet Health.

And then there’s the fact that insurance companies continued to whittle down the risks they covered, largely by denying coverage to people with pre-existing conditions.  So, the only people that were covered were those who really didn’t need it.

So, to sum up, the health insurance marketplace didn’t cover an increasing number of people for an extended period of time.  Insurers were legally allowed to discriminate against people with pre-existing conditions.  These two factors meant a large number of people didn’t get medical care they needed.  So, when they were finally able to get that care, they had a lot of problems that built-up over a period of time.  This is called pent-up demand, which isexactly how an insurance executive describes the current situation:

By contrast, Marinan R. Williams, chief executive of the Scott & White Health Plan in Texas, which is seeking a 32 percent rate increase, said the requests showed that “there was a real need for the Affordable Care Act.”

“People are getting services they needed for a very long time,” Ms. Williams said. “There was a pent-up demand. Over the next three years, I hope, rates will start to stabilize.”

Now, let’s look at Ed’s proposal for health care:

The only option is to repeal it and introduce market-based reforms that eliminate price-signal opacity, especially in routine care.

I love this option.  For non-emergency care, consumers are going to start calling around to doctors to compare prices.  Really Ed?  Let me use a routine physical as an example.  First of all, what is supposed to happen at a routine physical?  What tests should be done?  What types of analysis should occur?  I honestly don’t know.  And, neither do most people.  This alone gives dishonest doctors and advantage: they can advertise the lowest price, do minimal work, and tell the consumer that, “you don’t need all that other stuff.”  Unless the consumer also happens to be a doctor, he’ll most likely listen to the “learned professional” on this matter, pay little money and receive sub-standard service.  And, what about the idea of having a doctor who actually knows you and your family history?  Doesn’t that provide an asset to the patient that Ed’s system would completely obliterate?  And just how will be learn about prices, Ed?  Wouldn't an exchange (like what we currently have and that was originally proposed by Republicans in response to Hillarycare in the mid-1990s) be the best place to accomplish that?

     And then there’s the huge glaring problem of when most people access medical care: when they need it, and so are therefore at an extreme negotiating disadvantage.  Let’s say you break your arm.  Under Ed’s scenario, this might not be considered a catastrophe, and so would fall out of coverage.  Are you going to call around to every doctor to get a price quote on that?

    Dear Ed: take it from someone who not only knows economics but also designs insurance programs for a living: you don't know what you're talking about.