Friday, May 18, 2012

The Unacceptable Result

So here I am, procrastinating on my term paper, when I come across a statement released by Speaker John Boehner's office yesterday that was entitled: "Anything Short of Full Obamacare Repeal is Unacceptable." Basically the statement is a list of talking points that ACA opponents consistently list off when they're asked why they want to repeal the law. I'm not going to run down the list of talking points and tell you why they're misleading or wrong, since I've already done that at great length.

Instead, I'd prefer to point out a few issues with the current Republican health care platform. Some Republicans, like Boehner, want to repeal the law in its entirety and replace it with something else. They haven't exactly been clear on the matter, from what I can tell. Mitt Romney's plan would basically just give block grants to states and let them make their own health care plans. I've said before, though, that Obamacare basically has a provision in it that allows states to do this, provided that their plans cover at least as many people and cost the same or less money to implement.

Among Congressional Republicans, some semblance of a plan has begun to take form. The two main things Republicans want to rely on for reform are to allow people to purchase insurance across state lines (i.e. to "shop around") and to rein in medical malpractice costs. Well, reining in malpractice costs is all well and good, but that's hardly a solution. As for allowing shopping across state lines, health-care economist Uwe Reinhardt of Princeton explains why this wouldn't work at all:
Reinhardt says the places where purchasing out-of-state insurance is most tempting—New York for example, where the market is heavily regulated and plans are community rated—are places where the cost of care itself is also expensive. A New Yorker might choose to purchase a plan from Texas, where the insurance market is less regulated and cheaper. But the New Yorker with a Texan plan still has to pay for New York–based health care. Allowing insurers to cover people in other states does nothing to bring down the cost of care itself. Texan insurers, unused to paying such high costs, have little incentive to cover expensive New York procedures, except if they can cherry-pick the young healthy people. That leaves an older, sicker, more expensive pool in the already pricey New York market.  "The bargains just won't be there. The profit margin on top of what providers charge is not that great. Insurers can't afford it," says Reinhardt. "Republicans claim to have all these solutions, but they're nonsolutions." 
Along those same lines, the Congressional Budget Office ran a study on what a plan like this would actually do for health care costs and the results are depressing, to say the least:
"[The plan] would reduce the price of individual health-insurance coverage for people expected to have relatively low health-care costs, while increasing the price of coverage for those expected to have relatively high health-care costs," CBO said. "Therefore, CBO expects that there would be an increase in the number of relatively healthy individuals, and a decrease in the number of individuals expected to have relatively high cost, who buy individual coverage." 
So basically, allowing shopping across state lines would lower costs for healthier people and increase health care costs for people who are sicker. Color me unimpressed. Needless to say, I'm still waiting to hear an actual Republican alternative to this health care plan, because what they've presented thus far is not a solution. Don't get me wrong, though, it's a great plan if you don't ever plan to be sick or poor. Reality often intervenes, though.

The other plan that some Republicans have put forth is that they want to repeal the individual mandate, but retain many of the law's more popular provisions, like forcing insurers to cover people with pre-existing conditions and allowing children to stay on their parents' health care plans until they're 26. They want to do this without maintaining the individual mandate. Now, there are a few ways you can try to get universal coverage without a mandate, like offering tax incentives imposing penalties for late enrollment, but they're all a lot more cumbersome and probably less effective than just using a mandate, which, again, was initially supported by Republicans. But back to my main point: there's no way to force insurers to cover pre-existing conditions without expanding the risk pool greatly. To do that, you need something like a mandate. If you don't have this expansion of the risk pool, you end up doing a charming little number called an insurance death spiral, which in this case would lead to premium increases of anywhere from 2.4 to 40 percent, depending on the estimate. Aren't market failures just peaches and cream?

Anyways, my ultimate point is that as of now, none of the Republican plans I've heard of would work as well as Obamacare. Some of them, like shopping across state lines, would probably be worse than the status quo. Obamacare isn't a perfect law by anyone's measure, but few laws ever are. However, it looks a great deal better than any of the alleged "plans" I've seen put forth by Republicans. Fully repealing it and replacing it with a demonstrably ineffective plan, then, would be an unacceptable result.