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First Do No Harm

from The Wall Street Journal, How Democrats Learned to Love Insurance Companies by Ellysia Finley  (paywall)

The cost for the most popular ObamaCare silver plans will increase 37% on average next year. Democrats and insurers are both blaming soaring premiums on the Trump administration, which is purportedly trying to sabotage the law. They complain that loosening the individual mandate and slashing ObamaCare’s advertising budget reduces enrollment among the healthy youngsters who keep premiums in check. They say the White House’s move to end cost-sharing payments to insurers will drive up premiums and repel “young invincibles.”

These arguments are dubious, not least because premiums were rising even before Mr. Trump took office. Since 2013, the average premium on the ObamaCare exchanges has doubled. The real ObamaCare saboteurs were the Democrats who designed and passed such a haphazard law.

Democrats and insurers argue Washington should spend more on marketing ObamaCare to young people. But Texas, which spent little on marketing, has a younger risk pool on the exchanges than California, which spent heavily. One real difference is that Texas didn’t expand Medicaid, and California did. Advertising alone won’t impel people to buy an over-priced product they don’t want.

HKO

The article explains how the design of the ACA pulled the young from the risk pool and thus dramatically increased the insurance costs on individual plans.

1.  Allowing kids to stay on their parents coverage up to age 26 removed 2.3 million of the young.

2. The young who got on cheaper employer plans with enough employees to be allowed to circumvent requirements on ACA mandated individual plans.

3.  “Young people are also flocking to Medicaid, bringing states billions more in federal cash while depriving private insurers of healthy customers.”

The partisan haphazard way such a broad complicated system was designed and implemented was always likely to fail.  They managed to take a deeply flawed system and make it worse. The violated the first rule of health care.

 

Gilded Age Health Care

from my article in American Thinker a few weeks ago, The fatal attraction of single-payer

Reform is seductive.  It is like the curvy woman with the soft voice you met at the bar.  The next thing you know, you have a boiled bunny in your kitchen.  The faults of the status quo are always clear, even when the causes of these faults are not.  The successes of reform are promising but unconfirmed.  It is the choice between the chemo that has been used for decades with a 30% chance of success and the new discovery with great hype but little empirical data.

It is a stunning irony that to justify single-payer and other market restrictions, such as certificate of need for new hospitals, the progressives use the same justification as the robber barons of the Gilded Age, when they created vast trusts and monopolies to better serve their customers.

Progressivism, developed to protect us from the commercial special interests, has become the special interest that threatens us.  The single payer decides which health care administrator, new life-saving product, or treatment facility lives or dies.  J.P Morgan and John Rockefeller would be envious.

Politics as Performance Art

From National Review Kevin Williamson writes McHealthcare Deluxe- The Affordable Care Act is a failed political product.

There are better and worse ways to fail, and it pays to be conservative when trying out new products, most of which fail, or investing in a new business, most of which fail. Learning to do that well is what makes a wise venture capitalist successful and an innovative executive effective. It’s also why conservatives like federalism, using the states as 50 “laboratories of democracy,” as Louis Brandeis put it. Trying it out in Utah and failing costs less than trying it out coast to coast and failing — and what works in Utah may not work in New Jersey. The more robust and immediate feedback mechanism of local democracy is also why conservatives like subsidiarity, mitigating problems at the lowest effective level of government rather than treating everything as a national question.

Feedback matters. One of the reasons the private sector often is so much more effective than government is that market competition forces firms and entrepreneurs to admit error or suffer dire financial consequences. Capitalism will slap you upside the head if you do something dumb — ask President Trump’s bankruptcy lawyers about that. In the marketplace as in nature, the instrument of evolution is death: Bad products and bad ideas don’t make it, and capital eventually flees bad firms and bad investors. A good company doesn’t punish an executive for trying something new and failing — it punishes him for refusal to admit failure when that failure is obvious and for continuing to shovel precious resources into the bonfire of his vanity.

Politics should be more like that, but it’s getting less like that. Because our political identities are shaped by tribalism rather than by reason, creating a political culture that embraces healthy experimentation and iterative, incremental reform is difficult for us to do. What we do instead is put together unwieldy bundles of legislation that promise to solve a particular problem for now and for all time — and then accuse the other side of being evil for opposing it. That isn’t government — it’s performance art.

HKO

The health care debates is so contentious because it focuses the differences in political and economic philosophies into a single issue. Does this require a central government solution or is it better served  by solving it locally in the 50 laboratories we call states?

One of the greatest advantages of market solutions is not that it always picks better solutions, but that it recognizes failures quicker and better. The opposite happens in government. Self serving bureaucracies institutionalize failures.  Instead of admitting failure and redeploying assets into better and different solutions we institutionalize failures and increase their funding.

Trying to agree on component solutions is so arduous that we think that systemic solutions is the preferred path. But these solutions are so plagued with compromise that it has become impossible to make them effective. One side wants to build a bridge, the other side does not. We compromise by building half a bridge, spending 90% of the money and failing to provide the perceived need to cross the river.

The unwillingness to admit failure and implement corrective action is a big reason to be skeptical of expensive central solutions.

Tax Bloated Insurance

from Scott Atlas at The Wall Street Journal, The Health Reform That Hasn’t Been Tried

Third, introduce the right incentives into the tax code. Today employees aren’t taxed on the value of their health benefits—and there is no limit to that exclusion. This creates harmful, counterproductive incentives. It encourages higher demand for care and minimizes concerns about cost.

Similarly, ObamaCare’s premium subsidies and the tax credits proposed by Republicans artificially prop up high insurance premiums for bloated coverage that minimizes out-of-pocket payments. This prevents patients from caring about the bill, which reduces the incentives for doctors and hospitals to compete on price. If health-care deductions are maintained, the tax code should cap them and limit eligibility to HSA contributions and catastrophic premiums.

In other countries, governments hold down costs mainly by limiting access to care, drugs and technology. The results are long waits and worse medical outcomes, particularly for the poor and middle class, who are unable to circumvent those single-payer systems. If Republicans want to avoid going down that road, they need to educate the public on the benefits of a different approach: leveraging incentives and deregulation to reduce prices so that quality health care is affordable for all Americans.

How HSAs Cut Costs

from Scott Atlas at The Wall Street Journal, The Health Reform That Hasn’t Been Tried

A second tool for motivating patients to consider price is large, liberalized health savings accounts. These tax-sheltered accounts are generally used to pay for the noncatastrophic expenses that form the bulk of medical care. Better than tax deductions, HSAs introduce something unique—an incentive to save.

When people have savings to protect in HSAs, the cost of care drops without harmful effects on health. A study two years ago that analyzed data from 2003-07 showed that the spending of patients with HSAs and high-deductible plans decreased by 15% a year. If even half of Americans with employer-sponsored insurance enrolled in this kind of coverage, U.S. health expenditures would fall by an estimated $57 billion a year, according to a 2012 study in Health Affairs.

HSAs should be available to all Americans, including seniors on Medicare. Given that seniors use the most health care, motivating them to seek value is crucial to driving prices lower. Life expectancy from age 65 has increased by 25% since 1972, meaning Americans need to save for decades of future health care. Raising maximum HSA contributions, now $3,400 a year for an individual, to at least match the limit on individual retirement accounts of $5,500 a year, is one important step. When a person with an HSA dies, the funds should be allowed to roll over tax-free to surviving family members. HSA payments should also be permitted for the expenses of the account holder’s elderly parents.

The information that patients require to assess value must be made radically more visible. A 2014 study on magnetic resonance imaging showed that price-transparency programs reduced costs by 18.7%. The most compelling motivation for doctors and hospitals to post rates would be knowing that they are competing for price-conscious patients empowered with control of their own money.