WSJ Debate: Should the Government Require You to Purchase Health Insurance?
In today’s Wall Street Journal, I debate ObamaCare‘s individual mandate. Here’s the teaser:
Should Everyone Be Required to Have Health Insurance?
Yes, says Karen Davenport of George Washington University, because it’s the key to making health care more affordable and accessible. No, says Michael F. Cannon from the Cato Institute, because it will make health care more costly and scarce.
I did not write that unfortunate title, which uses the passive voice to conceal who’s doing the requiring. Hint: we ain’t talking about your conscience. I like to say that if we banned the passive voice–e.g., doctors are paid on a fee-for-service basis–it would take two minutes to realize that government creates most of our health care problems, and we would repeal all subsidies, mandates, and regulations within two hours.
Davenport’s article makes one claim to which I was not able to respond: that under ObamaCare, “global payment approaches and other payment changes are designed [gaa! passive voice!] to improve care for patients with chronic illnesses.” Fortunately for humanity, I already dispatched that claim last week in a blog post titled, “Oops, Maybe ObamaCare’s Cost Controls Won’t Work after All.”
So here are your assignments for today. Read both articles. Don’t forget to take the quiz. Then, watch the related 2008 video I posted under the title, “Does Karen Davenport Owe Me $40?“, and decide for yourself whether Karen Davenport does indeed owe me $40. If you think yes, be sure to tell her so in an email to the address provided at the end of her article.
Federal Court Declares ObamaCare’s Individual Mandate Unconstitutional
ObamaCare has always hung by an absurdity. ObamaCare supporters claim that the Constitution’s words “Congress shall have the Power…To regulate Commerce…among the several States” somehow give Congress the power to compel Americans to engage in commerce. This ruling exposes that absurdity, and exposes as desperate political spin the Obama administration’s claims that these lawsuits are frivolous.
This ruling’s shortcoming is that it did not overturn the entire law. Anyone familiar with ObamaCare knows that Congress would not have approved any of its major provisions absent the individual mandate. The compulsion contained in the individual mandate was the main reason that most Democrats voted in favor of the law. Yet the law still passed Congress by the narrowest of all margins — by one vote, in the dead of night, on Christmas Eve — and required Herculean legislative maneuvering to overcome nine months of solid public opposition. The fact that Congress did not provide for a “severability clause” indicates that lawmakers viewed the law as one measure.
Despite that shortcoming, this ruling threatens not just the individual mandate, but the entire edifice of ObamaCare. The centerpiece of ObamaCare is a three-legged stool, comprised of the individual mandate, the government price controls that compress health insurance premiums, and the massive new subsidies to help Americans comply with the mandate. Knock out any of those three legs, and whole endeavor falls.
Moreover, the individual mandate is not the law’s only unconstitutional provision.
These lawsuits and the continuing legislative debate over ObamaCare are about more than health care. They are about whether the United States has a government of specifically enumerated powers, or whether the Constitution grants the federal government the power to do whatever the politicians please, subject only to a few specifically enumerated restraints. This ruling has pulled America back from that precipice.
Filed under: Cato Publications; General; Government and Politics; Health Care
NPR Story Was Hardly Biased, but the Headline?
Today’s NPR story, “Health Law Hardly At Fault For Rising Premiums,” was much fairer than its headline (and the sub-heads, if that’s what we call them). ObamaCare is “hardly at fault for rising premiums?” Really? The story quotes an insurance-industry flack who well establishes what the Obama administration’s own regulations confirm: ObamaCare will be a major driver of premium increases for some health plans. A sub-head calls such claims “misinformation.” Oh? The article does more to bolster those claims than the administration’s flack does to knock them down. A more accurate headline would have been, “Health Law at Fault for Rising Premiums? In Some Cases, Yes.”
One wonders whether, in some posh Versailles salon, there’s an editor who already knows what the headline should be — never mind what the article says.
Filed under: Cato Publications; General; Government and Politics; Health Care
The Cognitive Dissonance of ObamaCare Supporters
“The Affordable Care Act offers new benefits like preventive care with no out-of-pocket cost and tools to help fight unreasonable premium increases that will save money for consumers.” — Jessica Santillo, a spokeswoman at the Department of Health and Human Services
ObamaCare Prods Yet Another Insurer to Flee the Market
First, a dozen insurers said they would stop writing child-only health insurance policies. Now, according to the Wall Street Journal:
By forcing the exit of Principal Financial Group — which ran a profitable, $1.6 billion health insurance business — ObamaCare has now left 840,000 Americans to find another source of coverage.
According to The New York Times, other insurers may soon follow:
More insurers are likely to follow Principal’s lead, especially as they try to meet the new rules that require plans to spend at least 80 cents of every dollar they collect in premiums on the welfare of their customers…
“It’s just going to drive the little guys out,” said Robert Laszewski, a health policy consultant in Alexandria, Va. Smaller players like Principal in states like Iowa, Missouri and elsewhere will not be able to compete because they do not have the resources and economies of scale of players like UnitedHealth, which is among the nation’s largest health insurers.
Mr. Laszewski is worried that the ensuing concentration is likely to lead to higher prices because large players will no longer face the competition from the smaller plans. “It’s just the UnitedHealthcare full employment act,” he said.
Let’s remember what President Obama told a joint session of Congress just one year ago:
So let me set the record straight here. My guiding principle is, and always has been, that consumers do better when there is choice and competition. That’s how the market works… And without competition, the price of insurance goes up and quality goes down. And it makes it easier for insurance companies to treat their customers badly — by cherry-picking the healthiest individuals and trying to drop the sickest, by overcharging small businesses who have no leverage, and by jacking up rates.
Everybody got that?
ObamaCare Leads Minnesota Insurers to Suspend Sales
From the Minneapolis Star-Tribune:
Two of Minnesota’s biggest health plans said Thursday they have temporarily suspended sales of individual health insurance policies because of uncertainty related to the new federal health reform law.
The moves by Blue Cross and Blue Shield of Minnesota and HealthPartners came on the same day some of the federal government’s most-heralded consumer protections came into effect…
The insurers that have suspended individual sales say they are awaiting guidance on new rules, including those around coverage of kids with pre-existing conditions…
Pam Lux, a spokeswoman for Eagan-based Blue Cross, said she expects the suspension of individual sales to be brief but could not say if it would be days or weeks.
Many Supporters Not Willing to Trumpet ObamaCare’s Achievements
An interesting update on the politics of ObamaCare appears in CongressDailyPM (subscription required):
The marking of six months since the signing of the healthcare law should be a moment of celebration by Democrats, especially as several popular provisions go into effect today. But the political realities of the midterm elections have made trumpeting the law, which remains unpopular with large swaths of the electorate, a delicate balancing act for Democrats…
House leaders tell their members to address the healthcare law in a way that best suits their districts…
some Democratic members in the House and Senate instruct staff not to write talking points on the law’s six-month provisions…
a former administration official questions if Democrats’ efforts to sell the bill are making any significant headway…
It’s little wonder, really.
But still. Wow.
Filed under: Cato Publications; General; Government and Politics; Health Care
ObamaCare’s Premium Refunds: Bad News for the Sick
USA Today and Politico Pulse report that ObamaCare has prompted BlueCross BlueShield of North Carolina to rebate $156 million to its customers in the individual market. This may seem like good news. It’s actually bad news, particularly for BCBS’s sickest customers.
Pre-ObamaCare, BCBS’s customers – whether healthy or sick – had coverage with an insurer that had already pre-funded their future medical needs. Competition protected them from BCBS skimping on care: if BCBS got a reputation for skimping, it would have a hard time enrolling new customers.
Post-ObamaCare, BCBS no longer needs that pile of cash, so they’re returning it to their customers. That hurts sick enrollees because BCBS is doling it out to all enrollees – not just the sick enrollees whom that money is supposed to serve. This cash-out is actually a transfer from the sick to the healthy.
Also, every BCBS customer who is sick or becomes sick in the future will have less protection against their insurer skimping on care. Competition used to discourage insurers from providing lousy access to care, but under ObamaCare competition will reward skimping. Under ObamaCare’s price controls, insurers that gain a reputation for providing quality coverage to the sick will attract sick people and go out of business. Insurers that gain a reputation for providing lousy access to care will drive away sick people and thrive.
ObamaCare & Health Insurance Premiums: Out of the Frying Pan, into the Fire
During the (initial) congressional debate over ObamaCare, President Obama vilified Anthem Blue Cross of California for a 39 percent rate increase. On Wednesday, the Hartford Courant reported that ObamaCare itself may increase premiums by similar amounts:
Health insurers are asking for immediate rate hikes of more than 20 percent in Connecticut for some plans, citing rising medical costs and federal health reform laws as reasons…
In what might appear to be an oddity, companies are citing a huge range of effects that the health care reform mandates will have on plan prices — from near zero to well over 20 percent. The reason is that among all the plans, some already deliver the provisions required by health reform, while others do not…
Anthem Blue Cross and Blue Shield in Connecticut, by far the largest insurer of Connecticut residents, said in a letter that it expects the federal health reform law to increase rates by as much as 22.9 percent for just a single provision — removing annual spending caps. The mandate to provide benefits to children regardless of pre-existing conditions will raise premiums by 4.8 percent, Anthem said in the letter. Mandated preventive care with no deductibles would raise rates by as much as 8.5 percent, Anthem said.
It was unclear how those separate factors would add up for Anthem’s plans, but those potential increases were all on top of rising medical costs.
ObamaCare Regs’ Effect on Uncompensated Care Overblown
An Obama administration “fact sheet,” released alongside the interim final rules for several of ObamaCare’s cost-increasing mandates, claims those mandates will reduce the “hidden tax” imposed by uncompensated care:
By making sure insurance covers people who are most at risk, there will be less uncompensated care and the amount of cost shifting among those who have coverage today will be reduced by up to $1 billion in 2013.
According to research by the Urban Institute, that “hidden tax” isn’t very large:
Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurers in the form of higher charges.
As the Congressional Budget Office repeatedly lectures Congress, “Uncompensated care is less significant than many people assume.”
Likewise, these mandates’ effect on uncompensated care will be less significant than the Obama administration would like you to think. Using data from the Centers for Medicare & Medicaid Services and a reasonable assumption of 6-percent annual growth, total private health insurance premiums in 2013 will be in the neighborhood of $1.1 trillion. So the administration is boasting that these mandates will reduce the 1.7-percent “hidden tax” imposed by uncompensated care to 1.61 percent.
Indeed, the whole of ObamaCare may not do much to reduce the “hidden tax” of uncompensated care. After Massachusetts enacted a nearly identical law, the Urban Institute reports, “high levels of emergency department (ED) use have persisted in Massachusetts. Specifically, ED use was high in Massachusetts prior to health reform and has stayed high under health reform.” A lot of uncompensated care comes in through the ED.
Finally, notice how a 1.7-percentage-point premium surcharge is a bad thing if President Obama is ostensibly rescuing you from it, but a good thing if he’s imposing it on you.
SEC vs. Goldman Sachs: Legislation by Demonization
The Obama administration thinks it has discovered the perfect formula to cram legislation through in a hurry: Demonize some prominent firm within an industry you plan to redesign, and then pass a law that has nothing to do with the accusation against the demonized firm. They did this with health insurance and now they’re trying it with finance.
With health insurance, the demon was Anthem Blue Cross Blue Shield of California, which Obama accused of raising premiums by “anywhere from 35 to 39 percent.” Why didn’t some curious reporter interview a single person who actually paid 39% more, or quote from a letter announcing such an increase? Because it didn’t happen. Insurance premiums are regulated by the states, and California wouldn’t approve such a boost. Yet the media’s uncritical outrage over that 39% rumor helped to enact an intrusive, redistributive health bill that has nothing to do with health insurance premiums (which remain regulated by the states).
Today, the new demon de jour is Goldman Sachs, a handy scapegoat to promote hasty financial rejiggering schemes The SEC’s suspiciously-timed civil suit against Goldman looks as flimsy as the last month’s health insurance story. It also looks unlikely to win in court.
As Washington Post columnist Sebastian Mallaby explains, “This is a non-scandal. The securities in question, so-called synthetic collateralized debt obligations, cannot exist unless somebody is betting that they will lose value.” In such a zero-sum contest, big investors who went long knew perfectly well that other investors had to be taking the other side of the bet. Goldman lost $90 million by betting this CDO would go up; John Paulson went short.
Columnists have moralized about the unfairness of the short investor (Paulson) negotiating the terms of this deal with a long investor, ACA Management, which had the last word. This too, notes Mallaby, “is another non-scandal. An investor who wants to bet against a bundle of mortgages is entitled to suggest what should go into the bundle. The buyer is equally entitled to make counter-suggestions. As the SEC’s complaint states clearly, the lead buyer in this deal, a boutique called ACA that specialized in mortgage securities, did precisely that.”
Like the earlier fuming about Anthem California, this new SEC publicity stunt is likewise irrelevant to the pending legislation. Congress hopes to get standardized derivatives traded on an exchange. But synthetic collateralized debt obligations dealing with a customized bundle of securities could not possibly be traded on an exchange, and would therefore be untouched by reform.
Losses sustained by a few financial speculators on one exotic derivative had nothing to do with starting a global recession in December 2007 or the related financial crisis of September 2008. The core of the latter crisis was mortgage-backed securities per se, yet Goldman was only the 12th largest private MBS issuer in 2007. Fannie Mae and Freddie Mac were and are the biggest risk; any reform that excludes them is a fraud.
The SEC’s dubious civil suit against Goldman is a wasteful diversion at best. It has nothing to do with the Obama administration’s suicidal impulse to impose more tough regulations and taxes on banks to encourage them to lend more.
Monday Links
- Alan Reynolds: The truth about health insurance premiums and profits.
- An overview of the many hurdles the health care bill still faces in the House.
- Study: Public schools dishonest about the true cost of education. This video explains it all in less than three minutes.
- Will conservatives ultimately oppose the war in Afghanistan? Join us for a lively discussion this Thursday at Cato featuring Joe Scarborough, Grover Norquist, Rep. Tom McClintock (R-CA) and more. Registration free. Will be broadcast online live Thursday at the link.
- Podcast: “Documenting Human Rights Abuses in Venezuela” featuring Ian Vásquez. (Don’t tell Sean Penn.)
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