For state GOP officials, a manual for undermining Obamacare

In 2011, the National Association of Insurance Commissioners (NAIC) produced a report cataloging risks of adverse selection in the ACA state insurance exchanges and provisions in the ACA designed to avoid or mitigate those risks. (Adverse selection occurs in plans that chiefly attract less health and more expensive customers, e.g. when younger, healthier customers have other options more attractive to them, including remaining uninsured.)

One key ACA measure to mitigate adverse selection is as follows. Those who offer insurance on the exchanges must treat all their customers in that state as one risk pool and must offer silver and gold plans -- the middle options in a spectrum that runs from bronze to platinum. If "young invincibles" choose bronze plans, their choices won't affect pricing in more expensive plans, which may be more attractive to older and sicker customers.

A continued risk is posed, however, by the ongoing existence of an individual market outside the exchanges, where insurers may still sell cheap high-deductible plans that appeal to healthy young people, albeit subject to many if not all of the same rules governing plans offered in the exchanges. In yesterday's New York Times, Eduardo Porter outlined that risk:

Healthcare consolidation perverted by pricing power

Last week, I noted Eduardo Porter's warning that the ACA was spurring hospital consolidation, which increases the hospitals' pricing power. That's the downside of consolidation. Below, that post is updated with a snapshot of the upside of consolidation, realizable when the power to set prices lies elsewhere.
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Eduardo Porter today spotlights a key factor in healthcare inflation: consolidation among hospitals and other healthcare providers:

What is missing from the stampede of policy innovation is something to tackle one of the best-known causes of high costs in the book: excessive market concentration. 

Two decades ago, there were on average about four rival hospital systems of roughly equal size in each metropolitan area, according to research by Martin S. Gaynor of Carnegie Mellon University and Robert J. Town of the University of Pennsylvania. By 2006, the number of competitors was down to three. 

The share of metropolitan areas with highly concentrated hospital markets, by the standards of antitrust enforcers at the Justice Department and the Federal Trade Commission, rose to 77 percent from 63 percent over the period. 

Healthcare competition is good. Uniform pricing is better

Eduardo Porter today spotlights a key factor in healthcare inflation: consolidation among hospitals and other healthcare providers:

What is missing from the stampede of policy innovation is something to tackle one of the best-known causes of high costs in the book: excessive market concentration. 

Two decades ago, there were on average about four rival hospital systems of roughly equal size in each metropolitan area, according to research by Martin S. Gaynor of Carnegie Mellon University and Robert J. Town of the University of Pennsylvania. By 2006, the number of competitors was down to three. 

The share of metropolitan areas with highly concentrated hospital markets, by the standards of antitrust enforcers at the Justice Department and the Federal Trade Commission, rose to 77 percent from 63 percent over the period. 

If loophole closures are benefit cuts, are benefit cuts tax hikes?

Eduardo Porter suggests that raising new tax revenue by cutting loopholes opens up a semantic loophole:

Though the offer to raise money by closing loopholes has a bipartisan pedigree — based on a plan proposed last year by the Democrat Erskine Bowles and the Republican Alan Simpson, the chairmen of President Obama’s deficit commission — it relies on rhetorical sleight of hand. If tax breaks are equivalent to government spending, eliminating them is equivalent to spending cuts. Mr. Boehner’s offer to do away with tax breaks in exchange for cutting entitlements raises no new revenue. It amounts to cutting spending twice.

Porter goes on to point out that a) Democrats have opened many "loopholes" for the poor and middle class because it's often the only form of social spending that Republicans will allow, but b) on balance, tax deductions disproportionately benefit the wealthy. His main point: we should consider each break on its merits, not make a shibboleth out of closing out as many as possible.

I would add a couple of wrinkles. First, Republicans are conflicted about whether to regard tax breaks for the nonwealthy as spending or tax cuts.  On the one hand, they've not only acceded to Democrat-initiated lower-income tax breaks, but sweetened their own wealthy-tilted tax cut goodies by cutting taxes and expanding loopholes for the nonwealthy as well.  On the other hand, they've come to regret the low-end largess, as all that bitching about the 47%, the lucky duckies who pay no income taxes, demonstrates.

Second, if Republicans are pulling the wool over by treating loophole closures as tax hikes, they've got themselves fooled as well.  When such tax "increases" were being bruited in the debt ceiling negotiations of 2011, Tom Coburn and others struggling to wriggle out of Grover Norquist's embrace experimented with casting  loophole closures (e.g., the ethanol subsidy) as "spending cuts."  It didn't fly; Norquist screamed that any phased out tax break would have to be offset by another tax break, and the GOP fell in line.