Cochrane on ObamaCare’s Contraceptive-Coverage Mandate
My Cato colleague John Cochrane – who is way smarter than I am — has a generally excellent op-ed in today’s Wall Street Journal on ObamaCare’s contraception mandate:
Salting mandated health insurance with birth control is exactly the same as a tax—on employers, on Catholics, on gay men and women, on couples trying to have children and on the elderly—to subsidize one form of birth control…
The tax rate and spending debates that occupy the media are a small part of the effective taxes and spending that the government achieves by these regulatory mandates…
The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society…
Sure, churches should be exempt. We should all be exempt.
My only quibble is with his claim, “Insurance is a bad idea for small, regular and predictable expenses.”
That’s generally true. But medicine is an area where, potentially at least, small up-front expenditures (e.g., on hypertension control) could prevent large losses down the road. So it may be economically efficient for health plans to cover some small, regular, and predictable expenses. Both the carrier and the consumer would benefit. In fact, that would be the market’s way of telling otherwise uninformed consumers, “Hey! Controlling your hypertension is a really good for you!” And really, if someone is so risk-averse that they want health insurance with first-dollar coverage of everything – and they’re willing to pay the outrageous premiums that would accompany such coverage — why should we take issue with that?
ObamaCare’s contraceptive-coverage mandate demonstrates that government does a horrible job of picking only those types of “preventive” services for which first-dollar coverage will leave consumers better off. But I also think advocates of free-market health care generally need to let go of the idea that health insurance exists only for catastrophic expenses.
RTD: ‘Insurance Exchange: Just Say No’
Regarding legislation to create an ObamaCare “Exchange” in Virginia, the Richmond Times-Dispatch explains:
Republicans at the General Assembly are falling prey to the fallacy of the false alternative…
[H]ere are the real options facing Virginia: (a) federal bureaucrats determine the form of our exchange, or (b) federal bureaucrats determine the form of our exchange. There is no (c)…
Running a health-insurance exchange would cost a lot of money — money Virginia does not have. Since Washington will dictate how it will be run, Washington should pick up the tab.
But, But…Price Controls Poll Well!
Politico‘s Jason Millman writes:
How much does Rick Santorum hate President Barack Obama’s health care law? So much that he even opposes the parts a lot of Republicans like.
The Republican presidential candidate, talking health care across the street from Minnesota’s Mayo Clinic Monday morning, blasted parts of the Affordable Care Act that poll well even among Republican voters — like guaranteeing coverage for people with pre-existing conditions and making health insurers cover preventive care.
Santorum, who has touted free market health principles like health savings accounts as an alternative to the Affordable Care Act, defended insurance industry practices the law eliminates, like setting premiums based on people’s health status.
Sigh. I refer my right honorable friend to the smack-down I gave such silliness some time ago:
Asking people whether they support the law’s pre-existing conditions provisions is like asking whether they want sick people to pay less for medical care. Of course they will say yes. If anything, it’s amazing that as many as 36 percent of the public are so economically literate as to know that these government price controls will actually harm people with pre-existing conditions. Also amazing is that among people with pre-existing conditions, equal numbers believe these provisions will be useless or harmful as think they will help.
But as the collapse of the CLASS Act and private markets for child-only health insurance have shown, and as the Obama administration has argued in federal court, the pre-existing conditions provisions cannot exist without the wildly unpopular individual mandate because on their own, the pre-existing conditions provisions would cause the entire health insurance market to implode.
If the pre-existing conditions provisions are a (supposed) benefit of the law, then the individual mandate is the cost of those provisions. If voters don’t like the individual mandate–if they aren’t willing to pay the cost of the law’s purported benefits–then the “popular” provisions aren’t popular, either.
Or, as Firedoglake’s Jon Walker puts it, ObamaCare is about as popular as pepperoni and broken glass pizza.
Even among Republican voters? Good grief.
Should New Hampshire Create a Health Insurance Exchange?
The liberty-lovers at New Hampshire’s Josiah Bartlett Center for Public Policy have produced this video of my appearance before the New Hampshire House of Representatives where I argued against creating health insurance “Exchanges”:
(Notice my rapt audience.)
The Real Tragedy of the Komen/Planned Parenthood Flapdoodle
…is that it overshadowed news that the U.S. House of Representatives overwhelmingly voted to repeal one of two new entitlement programs created by Obamacare—the ironically named CLASS Act—with a bipartisan three-fifths majority. (With numbers like that, Congress could even repeal Obamacare’s death panel!)
But really, one private organization pulling funding for another private organization is way more important than Congress voting to repeal an entitlement program … isn’t it?
‘The Problem with CLASS Is That It’s Voluntary.’
As I write, the House is debating a bill that would repeal the CLASS Act, one of two new entitlements created under ObamaCare. It’s hard express just how awful this program is. Here’s my attempt from back in October, when the Obama administration admitted CLASS is a bust:
The idea behind CLASS was that the government would run a voluntary and self-sustaining insurance plan to help the disabled pay for long-term care, including nursing home care…
Congress required CLASS to set each applicant’s premiums according to the average applicant’s risk of needing such long-term care, rather than her individual risk. But averaged premiums are only attractive to people with above-average risks. Since few people with below-average risks would enroll, the average premium would rise. That would encourage more people with below-average risks not to enroll, and the vicious cycle would continue until the program collapsed.
As it turns out, CLASS collapsed even before its 2012 start date. The same thing happened when Obamacare imposed the same sort of price controls on health insurance for children in September 2010: the markets for child-only coverage collapsed in a total of 17 states, and are slowly collapsing in even more.
Everyone with a rudimentary understanding of insurance saw this coming. The government’s non-partisan actuaries warned of “a very serious risk” that CLASS would be “unsustainable.” One wrote, “Thirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue.”
The Democratic chairman of the Senate Budget Committee called CLASS “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.” An Obama administration official wrote, “Seems like a disaster to me.” One of President Obama’s own cabinet secretaries called the program “totally unsustainable” and echoed a presidential commission on fiscal responsibility by recommending it be “reformed or repealed.”
Sen. Tom Harkin (D-IA) has diagnosed the fatal flaw in this most ill-conceived government program. I swear, I am not making this up:
The problem with CLASS is that it’s voluntary.
Harkin isn’t the first person to wistfully lament that CLASS would be such a great program if only we could put non-participants in jail. He’s just the first person I know of who has said so explicitly. Others have said that the collapse of the CLASS Act should inspire confidence in the rest of ObamaCare, which imposes the same type of price controls on health insurance, and then threatens to put people in jail if they don’t buy it. Here’s how I described that strategy back in October:
Obamacare inspires confidence in its supporters, then, because one part of the law throws a Hail Mary pass to prevent another part of the law from stripping Americans of the insurance that currently protects them from illness and impoverishment. Feel safer?
Rather than make the CLASS Act compulsory, Congress should make the rest of ObamaCare voluntary:
[Ezra] Klein writes, “One way of looking at the administration’s [CLASS] decision is that it shows a commitment to fiscal responsibility.” If so, then let’s handle the rest of Obamacare exactly the same way. Congress should require Obamacare’s health insurance provisions to be voluntary and self-sustaining, just like CLASS: no individual mandate, no taxpayer subsidies. Or is fiscal irresponsibility part of the plan?
Harkin and other ObamaCare defenders have a profound lack of respect for other people’s freedom and dignity. The problem with that is that it’s voluntary. If it were a medical condition, it might be excusable.
Cannon’s Second Rule of Economic Literacy
…appears at the end of this a poor, unsuccessful letter I sent to the editor of the Washington Post:
After quoting a scholar who expresses the economic consensus that the rising cost of employer-purchased health benefits “means lower wages and salaries,” “New study shows health insurance premium spikes in every state” [Nov. 17] immediately contradicts that consensus by stating, “employers are attempting to shift health costs onto their workers” by “asking employees to shoulder a larger share of the premium.”
If workers bear the cost of employer-paid health benefits in the form of lower wages and salaries, then increasing the employee-paid portion of the premium is not a cost-shift. Workers would have borne those costs either way.
Employers cannot shift to workers a cost that workers already bear.
Chutzpah in the Bailout Nation
Bloomberg reporter Andrew Frye plays it deadpan here. I don’t think I need to comment, either, except to note that the taxpayers’ commitment to AIG peaked at $182 billion:
American International Group Inc.’s mortgage insurer does more business in Republican-leaning states as it signs up more reliable customers than those in “more liberal” areas, Chief Executive Officer Robert Benmosche said.
“All of the states where we’re a leader, where we’re the No. 1 insurer, are red states, all of the states where we’re at the bottom are blue states,” Benmosche, 66, said yesterday at a conference in Washington. “Part of what we found out is that our model is about culture and it’s about the attitude in the public. And what we find is where there’s more of a tendency for people to be more liberal, more that the government is responsible for what happens to me.”
Benmosche oversees an insurer propped up by more than $40 billion in government capital while competing mortgage guarantors operate without U.S. Treasury Department assistance.
More on chutzpah in the Bailout Nation here and here.
Under Romney/ObamaCare, Even the Scapegoats Scapegoat
In a recent post on how RomneyCare is increasing health insurance costs in Massachusetts (by encouraging healthy residents to purchase coverage only when they need medical care) and how ObamaCare will do the same, I linked to a Boston Globe article where an insurance-company spokeswoman made this odd claim:
We believe…the gaming in the system…is adding as much as $300 million dollars to the health care system in Massachusetts.
It’s hard to know what she meant. Taken literally, this claim is obviously untrue. The gamers aren’t adding revenue to “the system” — they’re withholding revenue. Nor are they adding costs, in the sense of additional medical spending. If anything, overall spending falls because the gamers are less often insured, and therefore consume less medical care.
She might have meant that the premiums the gamers aren’t paying (or the difference between what they pay and the medical care they receive) amounts to $300 million, and that the gamers are imposing that cost on non-gamers in the form of higher premiums. But that doesn’t hold water, either. The gamers have zero power to impose costs on non-gamers; only the government has that power. All the gamers are doing is responding rationally to the incentives RomneyCare creates and avoiding — lawfully, I might add — a $300 million tax.
So if that was her meaning, this spokeswoman should have said:
RomneyCare is imposing a $300 million tax on insured Massachusetts residents by encouraging other residents to game the system.
Instead, she blamed consumers and argued for laws that make it harder for consumers to avoid RomneyCare’s private-insurer bailout individual mandate.
So now we’ve got President Obama, who signed a law requiring health insurers to pay for more stuff, blaming insurers for rising premiums. We’ve got pro-RomneyCare politicians doing the same in Massachusetts. And we’ve got health insurers, who support laws forcing consumers to buy their products, blaming consumers for the cost of those laws.
Remember how RomneyCare and ObamaCare were supposed to promote responsibility?
Obama to Health Insurers: Stop Revealing How Expensive Our “Protections” Are
In the upside-down world of ObamaCare, politicians can force health-insurance companies to spend more yet blame them when premiums increase.
Today, President Obama extolled new “protections” included in the sweeping legislation he signed into law on March 23.
One category of “protections” requires consumers to purchase coverage for more and more expensive medical services (e.g., limitless coverage, requiring insurers to recognize ob-gyns as primary care physicians, coverage for “children” up to age 26). If consumers valued such “protections,” they would have already bought them — and if they’re not in a position to select their own coverage, Congress should have fixed that problem. Instead, Congress and President Obama forced consumers to buy them, and they are pushing health insurance premiums higher.
Another category of “protections” are actually just price controls. Beginning this fall, ObamaCare will force insurers to cover minors with expensive conditions and at the same time charge those families far less than the costs they impose on the insurer. Beginning in 2014, similar price controls will govern the entire market. Insurers will respond by avoiding, mistreating, and dumping sick people, because that’s what these price controls reward. Harvard health economist David Cutler, a sometime-advisor to President Obama, finds that health plans that provide quality care to the sick go out of business in the presence of those price controls. If you think insurers mistreat the sick now, just wait until ObamaCare takes hold. Along the way, ObamaCare’s price controls will increase premiums for young and healthy Americans.
Rather than take responsibility for its own law, the Obama administration is scapegoating insurance companies. According to The New York Times, “The White House is concerned that health insurers will blame the new law for increases in premiums that are intended to maximize profits rather than covering claims.” We’ve seen this before. Massachusetts enacted a nearly identical law, which also caused premiums to rise. State officials responded by imposing premium caps (more price controls!), which will force insurers to ration care. As Massachusetts’ Deputy Commission for Financial Analysis at the Massachusetts Division of Insurance put it, premium caps will be a “train wreck.”
Meanwhile, “The administration worries that escalating premiums will force more people drop their policies before the law is fully implemented,” writes the Associated Press. The administration is right to worry. ObamaCare is already increasing premiums, and in 2014, it will force insurers to cover you at standard rates even if you get sick, which creates an even bigger incentive to drop coverage.
Hmm…there’s gotta be someone the administration can blame for that, too.
Congress to Expand Deposit Insurance
While I never had much hope that this Congress would actually fix the real causes of the financial crisis – loose monetary policy, Fannie/Freddie – I had hoped that they wouldn’t do a lot to make an already bad situation worse. Boy, was that hope naive.
Take the area of federally provided deposit insurance. There is a massive amount of scholarly work, much of it empirical, that demonstrates that expanding the level and scope of deposit insurance results in more frequent and severe financial crises. So what is Congress considering? Yes, you guessed it: expanded deposit insurance.
Recall during the financial crisis Congress raised the coverage limit to $250,000 – forget that there were never any premiums charged ahead of time for this coverage. The FDIC also, without any basis in law, offered unlimited coverage to non-interest bearing accounts, targeted mostly at business customers. While these expansions may have brought the system some short term stability, they come at the cost of considerable long term instability.
Congress is also making the misguided change of basing insurance premiums on total assets rather than total deposits. This will punish banks for relying on sources of funding other than deposits, giving banks an incentive to shift their funding toward deposits, putting the taxpayer ultimately at even greater risk.
So why all these expanded bank guarantees? Smaller banks view these as changes that would give them a competitive advantage relative to larger banks. After all community and regional banks are far more dependent on deposits as a source of funds. And while big banks are damaged politically, the smaller banks, despite their higher failure rates, have managed to maintain their political ability to shift the costs of their risk-taking onto the backs of the taxpayer.
You Say You Want Comparative-Effectiveness Research?
Over at CongressDaily, Julie Rovner has a great piece on the difficulties involved in generating and using comparative-effectiveness research (read: evidence that can improve the quality and reduce the cost of medical care). Rovner cites a recent New England Journal of Medicine article about the obstacles to conducting CER, and a recent article from Health Affairs that finds consumers tend to trust their doctor’s judgment more than evidence-based treatment guidelines.
In a paper titled, “A Better Way to Generate and Use Comparative-Effectiveness Research,” I explain how a string of government interventions — from state licensing of medical professionals and health insurance, to the tax preference for job-based health insurance, to Medicare and Medicaid — have reduced both patients’ demand for evidence about which medical interventions work best, as well as the market’s ability to supply that evidence. In that paper, I predict that efforts like the CER funding in the “stimulus” bill and ObamaCare’s “Patient-Centered Outcomes Research Institute” will fail, just as all such government efforts have failed in the past.
If you want to generate evidence about which medical interventions work best, and have people use that evidence, then you need to liberalize the U.S. health care sector.
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