Saturday, November 2, 2013

Obamacare at the Cusp

I can see the following outcomes from the current crisis in the Affordable Care Act, aka Obamacare:
  1. The exchange starts working, the brouhaha over the baldfaced "if you like your policy you can keep it" lie dies down, and ACA settles into a system that, with a few tweaks, actually works.  (This doesn't mean that it's better than the legacy system; it merely means that it becomes the new normal.)  I'll put the odds of this occurring at about 45%.
  2. The outrage builds and ACA collapses quickly and cleanly, with the legacy system remaining in place.  30% probability.
  3. ACA collapses slowly and messily, taking the legacy system with it, and we wind up with a single payer system.  15% probability.
  4. ACA collapses, takes the legacy system with it, and something new emerges from the rubble.  10% probability.
I support the idea that we don't wheel the gurney out of the ER and dump you in the hospital parking lot if you can't pay, so the most obvious solution to getting near-universal insurance enrollment is excluded.  After that, you can use a single-payer system (Medicaid and Medicare), but that will only work for the genuinely poor and won't cover the young invincibles who've had bad luck.  For them, you can either put a mandate in place (which is what ACA did), or you can do something only slightly more humane than dumping them in the parking lot, namely make medical debts undischargeable through bankruptcy.

Long story short, I think there's nothing wrong in principle with the ACA tripod of mandates, guaranteed issue/community rating, and subsidies.  As for the details, ACA has clearly screwed the pooch.

The pain in the individual insurance market is just the beginning, as Megan McArdle has pointed out:
A lot of folks with employer-sponsored insurance are also going to see their insurance changed, though not quite as quickly. And not “The benefits will get so much more awesome!” but “The Cadillac tax kicked in and we had to drop most of our plans except for the ones with high deductibles.” A friend who sits on the benefits committees of two organizations says that their experts predict that pretty much all plans will end up being of the “consumer-driven” (read: high-deductible) model once the so-called Cadillac tax kicks in.
Let's not kid ourselves:  The ultimate point of this little exercise was to change the incentives in health care enough to put downward pressure on prices, so anybody who thinks this was going to happen without significant pain is an idiot.  The question is whether we're going to get the maximum amount of efficiency for the minimum amount of pain out of this system.  I think the answer to that is going to be a resounding 'no".

Would a single payer system have a lower pain-to-efficiency ratio?  Yes.  But that's not saying much, and the total amount of efficiency generated would still be quite low.  The idea of US single-payer health care scares the shit out of me;  there are too many interest groups and too many providers bellying-up to the public trough to make single-payer anything other than a disaster that simultaneously damages public health while destroying medical innovation, one of the US's core competencies.

Would the legacy system have a lower pain-to-efficiency ratio than ACA?  I honestly don't know.  Certainly not for the poor.  We also have a lot of evidence that the legacy system sucks at controlling costs.  Ultimately, I think that ACA would wind up being a modest improvement, it's so complex that there's no telling what unintended consequence will ooze out of the woodwork next.

And it's possible to do this simply, fairly, and honestly--three adverbs that will never be applied to ACA.  Here are the main principles:
  1. You can't dump most of the cost on the individually insured alone, and you have to be honest with the majority who get their insurance from their employers.  The simplest thing to do is to eliminate group insurance and throw everybody into the individual market.  They won't get as good a deal as they do from a group, but they'll be significantly less screwed than the people in the individual market are right now under ACA.  Let the employers put the money they spend on insurance into a health savings account--that ought to keep the tax incentives about the same.
  2. Keep the mandate.  Keep the subsidies.  But just pay them out of the general fund, with a reasonable income tax increase to cover them.  All this revenue sleight-of-hand is ridiculous.
  3. Keep the exchanges, but get the government out of the business of specifying acceptable insurance plans.  They're not smart enough, or adaptable enough, to understand the market and how it will change in the future.
  4. Stop transferring wealth from the young, who have low incomes and low net worths, to the not-quite-old-enough-to-retire, who have high incomes and high net worths.  For that matter, stop transferring wealth to retirees that have a large enough net worth to fend for themselves.  I'm fine with community rating, as long as you rate in age cohorts.  This is the single most immoral thing in ACA.
  5. Whatever you wind up doing, fold Medicaid and Medicare into it.  Yes, lots of poor people are ignorant and lots of old people are stupid--that's just a fact of life.  If you want to produce a menu of government-approved plans for people who are being 100% subsidized, fine.  If you want to set things up so that they can't use their subsidies for anything other than premiums, also fine.  But this maintenance of five huge health programs (Medicare, Medicaid, individual insurance, group insurance, and price increases caused by the poor defaulting on their medical debts) is just stupid.
  6. Never, ever, ever, allow the government to set prices for medical reimbursement.
You could tweak ACA to do all of this, but the opportunity for new and exotic rent-seeking is much higher doing these kinds of tweaks.  It'd be easier to repeal and replace if Obama's fragile ego would allow it.  But it won't.

As usual, the result will be even messier than what we have now.  Eventually, the incredibly stupid parts of the law will atrophy and we'll hopefully be left with a system something like what I outlined above.  Of course, there will be fifteen completely intolerable sacred cows left over, lovingly maintained by the groups that milk them.  So what else is new?

No comments: