Sunday, October 27, 2013

"What if Obamacare works?" -- What Ross Douthat leaves out

Ross Douthat "fairly fairly" describes the differences between the cheapest health insurance plans available on the ACA exchanges and the cheapest plans currently available on the individual market, most of which will be phased out because they don't comply with ACA minimum coverage requirements.  But he leaves some important facts out.

Douthat acknowledges that the ACA's premium subsidies will offset the price increase for many who buy on the exchanges, and he fairly if too briefly presents the limitations of a cheap plan currently available on the individual market ("a $5,000 deductible, an annual out-of-pocket limit of $12,500, and all kinds of copays and coverage restrictions"). He then frames the ACA's political prospects like this:
With some grandfathered exceptions, Obamacare makes those kinds of plans illegal. The out-of-pocket limit for individuals is capped at $6,500 a year, preventive services are fully covered, and various “essential benefits” as well. 

If we ever get beyond the follies of, the politics of the rollout will probably be defined by how (and how vocally) middle-class Americans just above the subsidy threshold react to this “pay more, get more, subsidize other people” deal.
True, perhaps -- though the politics will also be defined by the reactions of those eligible for the subsidies, and those shut out of the current market by preexisting conditions or age (the ACA limits age-related price differentials to 3-to-1; currently they're as high as 6-to-1), or, to a lesser extent, by those newly eligible for Medicaid (who are less likely to be politically vocal and perhaps less likely to recognize that their new benefits are a product of the ACA).

It's Douthat's presentation of the likely long-term consequences of a successful ACA rollout that tilts our view of past and future playing fields:

Where the underlying policy debate is concerned, meanwhile, what you think about the three “mores” basically determines whether you belong on the left or on the right. To liberals, more is simply better, and the disappearing low-cost plans deserve to vanish, because they left purchasers potentially exposed to way too much financial risk. (Even the new bronze plans are really too stingy in this view — which is probably why, if you qualify for subsidies, the Connecticut Web site deliberately nudges you toward the pricier silver plans.) 

Conservatives agree that these cheaper plans create more risk. But they also create a sensitivity to price — and with it, a curb on cost growth — that’s rare in a system where third-party payment has made prices opaque, arbitrary and inflated. And for a society that pretty clearly spends far too much on health care, sticking with catastrophic coverage frees up money — thousands for individuals and families, billions for the government — to spend on something other than the insurance-medical complex. 

Yes, for some that money would ultimately get eaten up, and then some, by unexpected bills. But for others it might be money saved for retirement, money that pays for child care, money used to hire a contractor or buy a house. And for the public sector, it would be money for all the priorities — liberal as well as conservative — that are being undercut by rising health care costs.
A few points elided here:
  • Those cheap 2013 plans have already been improved by the ACA. The law bans lifetime coverage caps and has already severely constrained annual coverage caps, which are completely banned as of Jan. 1, 2014. In 2013, they could not be lower than $2 million for the year.  Pre-ACA, many plans on the individual market did not even offer real catastrophic coverage, which Douthat suggests might be a preferable alternative for many.  Also, the ACA has banned the wanton use of policy rescissions imposed on the flimsiest of pretexts, a notorious industry practice pre-ACA.

  • The ACA does offer bare-bones catastrophic plans to adults under 30 and others exempt from the individual mandate, e.g., those who can show that buying plans on the exchanges would impose financial hardship. Such plans are not eligible for coverage subsidies, however. Conservatives could plausibly argue that that's a mistake and, in a sane political environment, attempt to fix it.

  • Granting in full that prices for medical treatment are "opaque, arbitrary and inflated," Douthat, like most conservatives, would happily delegate the burden of imposing consumer discipline to less wealthy Americans, who are likely to "reduce healthcare costs" by denying themselves essential or preventive care.  Nor does he address the impossibility of individuals doing effective comparison shopping or cost-benefit analyses in the current insanely opaque market, where you can't get price estimates if you try. It's true that insurers can in some instances create conditions in which plan members have the information they need to comparison shop, and reasonable incentives to choose reasonably priced providers. But the kind of unregulated insurance market that conservatives favor won't encourage such arrangements.  Moreover, the ACA lowest-level "bronze" plans only cover an estimated 60% of members' likely medical costs and can have deductibles as high as $6350 for an individual. Coverage at that level (or the silver plans' 70% coverage, for that matter) hardly encourages frivolous use of medical services.

  • With regard to public sector priorities "undercut by rising health care costs": the ACA pays for itself, with an array of taxes on industry providers and the wealthiest Americans and Medicare payment cuts and reforms. The CBO projects that it will reduce the federal budget deficit, modestly in the first ten years, far more dramatically in the next ten.  The package of pilot payment reforms, including performance incentives for hospitals and accountable care organizations, represents the most serious government attempt to date to contain healthcare inflation. If enough of those pilot programs prove successful, or if any are successful enough, they will do more to secure the nation's long-term fiscal health and free up money for other priorities than all the Republicans' favored entitlement cuts combined.
This is not to say that none of Douthat's reservations about the law have merit. It's possible that the cost control incentives will do more harm than good, by accelerating the rapid consolidation now taking place in the healthcare industry and so increasing the pricing power of local and national giants.  Perhaps, too, more barebones insurance options should be more widely available -- e.g., catastrophic plans available to everyone and included in the subsidized options.  In a sane political environment, a law like the ACA would be subject to continual refinement on the basis of accumulating experience. As of now, Republicans have instead dedicated themselves to sabotaging the law, exaggerating its failures and blocking legislative fixes to the drafting errors and design flaws unavoidable in such a massive reform.

Update, 10/28: Austin Frakt, responding to Douthat, suggests that our attention should refocus no so much on whether Obamacare will succeed or fail as on how it will evolve over time to control costs. Key point: "Ironically, many conservative reforms could easily fit within the framework of Obamacare, and likely would appeal to moderate Democrats." Ezra Klein made the same point to Avik Roy: Roy rhetorically casts the law as a disaster, while he's really demanding only incremental changes.  


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