Wednesday, March 24, 2010

The Top Ten ‘Benefits’ of Obamacare, Seven of Which Aren’t

Cross-posted from Critical Condition on National Review Online.

Democrats, such as Sen. Dick Durbin (D., Ill.), say they are eager to campaign against Republicans who seek to repeal their health-care legislation. "The Republicans will have to stand up and say we want to repeal those things and I think that will be hard, because people will begin to realize these are commonsense changes," said Durbin.

Indeed, as Grace-Marie Turner mentioned in National Review, Democrats have posted a list of the "Top Ten Immediate Benefits" that they argue that individuals will gain from the legislation.

But there is no such thing as a free lunch, and many of these "benefits" are accompanied by unmentioned costs. If you require that every restaurant serve Kobe beef instead of USDA Choice, diners might see that as a "benefit" — until their waiter gives them the check.

Let's go through the Democrats' top ten, point-by-point:
  1. Prohibit pre-existing condition exclusions for children in all new plans. This will increase the cost of insurance for everyone else. Net negative.
  2. Provide immediate access to insurance for uninsured Americans who are uninsured because of a pre-existing condition through a temporary high-risk pool. High-risk pools are a good way to improve coverage of those with pre-existing conditions, which is why John McCain advocated them in the 2008 Presidential campaign. Unfortunately, the Democratic bill doesn't do enough to make them feasible. Net neutral to positive.
  3. Prohibit dropping people from coverage when they get sick in all individual plans. Insurers shouldn't drop people when they get sick, unless they have an extremely good reason, such as misrepresentation of a pre-existing condition. The onus should be on insurance companies, therefore, to investigate these things up front before taking consumers' money. This mandate will have the side effect of making applications for insurance more onerous. Net positive.
  4. Lower seniors' prescription-drug prices by beginning to close the donut hole. As a flat-out subsidy, yes, this will appear to seniors to be a straightforward benefit. But it is accompanied by a far larger cut: the obliteration of Medicare Advantage. Net negative.
  5. Offer tax credits to small businesses to purchase coverage. The tax credits will not be enough to compensate for two things: (1) an Obamacare-driven acceleration in the rise of the cost of health insurance; (2) the employer mandate, which requires that any small business with more than 50 employees provide health insurance to every employee or pay a fine equal to $2,000 multiplied by the entire number of employees in that company. Net negative.
  6. Eliminate lifetime limits and restrictive annual limits on benefits in all plans. Yet another mandated "benefit" that will drive up the cost of health insurance. Net negative.
  7. Require plans to cover an enrollee's dependent children until age 26. See #6, though if this provision increases the number of young people with health insurance, it could improve the risk pool and have a salutary effect on insurance costs. Net neutral to positive.
  8. Require new plans to cover preventive services and immunizations without cost-sharing. See #6. Another clumsy mandate that will drive up the cost of insurance. Most plans already encourage prevention — but prevention has no impact on long-term health care costs, since we all have to eventually die of something. Net negative.
  9. Ensure consumers have access to an effective internal and external appeals process to appeal new insurance plan decisions. Yeah, except that a new government agency, the Independent Medicare Advisory Board, is now empowered to bar reimbursement for any insurance claims it deems fit. And its decisions, enacted by unelected bureaucrats, can't even be appealed by Congress, let alone consumers. We know from experience that once Medicare stops reimbursing for something, private insurers usually follow. Net negative.
  10. Require premium rebates to enrollees from insurers with high administrative expenditures and require public disclosure of the percent of premiums applied to overhead costs. Once again, this is a mandate that will only drive up insurance costs. If an insurer is required to spend 85 percent (say $850 of every $1,000) of premiums on patient care (hence $150 in "overhead"), but the company needs to spend $200 on administrative costs to ensure that its plans run effectively, they will simply raise premiums by $333 in order to ensure that the percentage of premiums spent on overhead remains the same. Net negative.
So, of the Democrats' top ten "benefits," seven have direct, opposing costs of an even greater magnitude. The remaining three provisions, if we're lucky, might work out. But we haven't even gotten started with all of the other mandates and tax increases in the law for which there are no upsides. The Democrats' list demonstrates that we have a long way to go before our political class understands the very basics of how insurance works.

11 comments:

  1. You list some of these as negative, but that inaccurate. Examples: #5 - its only negative if the company doesnt provide health care. If they dont, they damn well should be paying a fine! #1: It will increase the cost? So what! It costs MORE to have people go into emergency when they dont have health insurance. The hospital *has* to treat them, and then everyone else gets stuck with the costs.#6: how exactly is that going to 'drive up' costs?
    C'mon.. health care reform was a victory for this country. Its not perfect, but health care costs have been going up for the past decade and a half. Obamacare hopefully will address some of the core reasons this has been happening.

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  2. Hi Anonymous,

    Why will Obamacare address the costs when every other step-change in government involvement in healthcare did the opposite? How do you explain the fact that U.S. health costs haven't risen as quickly as they have in many socialized European countries?

    What you're misunderstanding about #5 is that we still live in a somewhat free society. If employers have to pay more for labor, they will employ less people to make up the difference. It's simple math. Money doesn't grow on trees.

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  3. Not to mention the taxes and cost of implementing it. And the taxes to pay the salaries and pensions of all the new federal employees it will take to run it, and the IRS people that oversee the payments, it just goes on and on like a bad dream. Also, the rich stand to benefit the most as the poor will only get a low grade policy that covers a bandaid or an aspirin and whatever else cost will come out of their pocket, and the payment comes out of their check whether they can afford it or not.

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  4. So if I get what is being said,3 provisions should have already been voted on and passed. 7 provision need to go back to the drawing board. It's pretty simple if you look at it, but our politicians have decided that winning has nothing to do with improving the country. Winning is denying the other side any say completely. Having different parties should benefit the people by forcing compromise not stagnation. No one wants to go too far to either side. Far right is Fascism or an insane religious theocracy and far left is Anarchy (the rape and pillage kind, not the Hippy commune, free love kind). We should all be striving to empathize with and understand other people's point of views. After all, when Dread Cthulhu returns we will all learn to suffer and worship as one.

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  5. Sorry, but your explanation of #10 makes no sense. They can't just arbitrarily raise the rates because they spent more on marketing and administration of the plan. The extra $333 dollars would have to go to paying for care.

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  6. Ya, need some clarification on #10. Wouldn't the administrative costs be determined by the collective amount of services provided, not on a case by case basis? I also can't see where rates would be raised to meet the %20 percent ratio, considering the administrative costs now, probably far exceed the %20.

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  7. This article needs to be renamed. It came up in a search engine when I was trying to find information about the benefits of obamacare. This article is AGAINST obamacare so the title is misleading

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  8. Your description of why #8 (among many others) is "net negative" is just simple-minded and uneducated. You know nothing of healthcare! Prevention is THE most important factor in long-term health costs! If you prevent illnesses, you have NO healthcare costs. Especially if you are under the care of a Naturopathic Physician and stay away from the pharmaceuticals. What the people who "eventually die of something" die from, then, is old age. You need not write anymore misleading articles. Thanks.

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  9. Access to health care varies across countries, groups and individuals, largely influenced by social and economic conditions as well as the health policies in place. Countries and jurisdictions have different policies and plans in relation to the personal and population based health care goals within their societies. Thanks.

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