Health Care Reform

Well, the bill is passed and signed into law. I've read a lot about the content of the bill in the press just to see what is getting reported and what is not. I wrote previously on some of the problems I see with the bill, but it was pretty brief. So now I'll give you a litany of reasons, but I'll start with a positive of the bill.

The bill definitely expands coverage to a number of people. Whether we will be able to afford to subsidize that coverage for long is another questions, as is whether people will be able to find a provider and what level of quality we will be able to provide. Of the may problems in the bill, which I'll get into below, I think the biggest one that has gone undiscussed is the lunacy of many of th CBO assumptions. CBOs scoring of the bill is allowing the President and the Democrats to declare that the bill will actually reduce the deficit. It won't and everybody at CBO and among the Democratic leadership knows this for a fact. I'll get into that below.

Medicaid expansion. Many providers don't take Medicaid right now due to the low reimbursement rates and because Medicaid patients are notorious for no-showing (a result, IMHO, of contribtuing nothing to the cost of their care). The bill includes a massive expansion of Medicaid. Now we can give everyone a piece of paper that says they have coverage, but that doesn't make it so. The final package also includes a bump in Medicaid provider rates to Medicare levels, but only for a short period of time after which the states get to pick up the tab.

Individual mandate. It's weak. So weak that it will not accomplish anything close to what Democrats are claiming it will. The math just doesn't make sense. If you have a choice between spending thousands of dollars on health insurance premiums or paying a small fine, the choice is pretty clear. This is especially true when you take into account the requirements that insurers not underwrite for pre-exisiting conditions and must sell policies at artifically low rates. People will be making a wise choice to put off purchasing coverage until they get sick.

Adverse selection. A corollary of the weakness of the individual mandate. Individual premiums will go up, and not by a little, despite the CBO estimates (more on that below).

Medicare. No SGR fix. This was removed from the bill only to improve scoring. The assumption that Medicare will go forward without a problem as providers face massive cuts in reimbursement rates is a fallacy.

The accounting tricks. See here for just a few.

CBO Assumptions. Where to begin?

• For starters, CBO makes a number of predictions about individual and employer behavior in response to the law. They have to in order to score the bill. But it's a complete and total guess and they basically just make it up. Don't believe me, well believe Uwe.
• CBO assumes individual rates will go up by around 10%. But this is how they get there. They assume the cost of policies will go up 30% based on new benefit levels, then they assume that changes to insurance regulation and an increase in those with coverage would offset that by 20% resulting in a net 10% increase. Here's the problem, there is plenty of info to support the changes of the bill causing individual rates to go up by 30%, but the assumptions offsetting that by 20% are guesses.
• The CBO assumes the individual mandate will be effective. I don't know why as the math makes it a pretty simple decision to forego coverage.
• The CBO ignores the impact of substantial new taxes on GDP.
• The CBO assumes that the independent Medicare commission will effectively control costs. Again, this is just made up, literally. They have zero evidence to support this conclusion.
• The CBO assumes Medicare costs will drop significantly but notes that it may be due to greater efficiencies or lower quality....they aren't sure. This is kind of like the SGR problem. They assume lower costs for scoring purposes and then threaten to make the reductions, but they don't follow through. If the reductions don't materialize there is no repercussion. Congress will just spend anyway. This is how government accounting works.
• The CBO bases the premium subsidies necessary on projected cost increases in health insurance. This is just another case of them assuming costs will be lower, despite the lack of cost controls actually in the bill. The result will be that ever higher tax support will be needed to fund premium subsidies, or the subsidies will by less coverage. But since there is a required floor in coverage, there is only so far you can buy down benefits before subsidies have to be increased.

Cost controls. There isn't really too much in the bill to control costs. Ezra Klein talks about the most important ones, but it's a pretty weak list. The exchanges have some promise, but I don't think of them as a real cost control measure, especially when you take into account the required benefit levels whcih is going to drive how much a premium costs. The Medicare Commission? Time will tell, but put me down as skeptical. I won't discount it, but I think we have seen efforts like this before and Congress can basically override them. The excise tax is actually a good idea, but it is set so far out and so high that it will be a while before we know. I'd also bet that it never actually happens. Medicare bundling has some promise, but it's not a cost control in and of itself. It's good policy though and we need to move in that direction, but I'd count this as equal parts quality and cost control right now. Changing the politics of reform. This one is just pathetic. I know he's grasping, but come on.

This is a short list. There is a lot more in there which is problematic, especially on the insurance reform side, but this will do for now.