The Incidental Economist

Here’s a standard debate trick I’ve encountered. I point out some bit of illogical reasoning or falsehood by an Obamacare opponent. Then someone chimes in with, “Well Obama said, ‘If you like your plan you can keep it‘ and ‘The typical family’s premium will fall by $2,500.‘ What foolishness!” The implication here is that because some Obamacare supporter — Obama himself! — said something foolish, that “balances out” foolishness on the other side.

It’s a cheap trick. And it doesn’t work, logically.

The problem is that the situation isn’t Obama debating some fool, it’s me pointing out one foolish thing someone said. Doing so doesn’t negate the foolishness on the other side. Nor does it imply endorsement of Obama’s silly statements. A reasonable person rejects silliness on both sides.

So, for the record, those two things Obama said, approximately quoted above, were foolish things to have said. If either are true in any sense, it’s only in a very tortured, speculative way that almost nobody would understand. In my view, he should not have said them, and nobody should endorse them.

Let’s start with “if you like your plan you can keep it.” This is never, uniformly true. Plans change every year, even in the years before Obamacare was conceived. The truth is, if you like your plan, there’s a good chance it will change. That’s just as true, if not more so, under Obamacare. I do not endorse or defend this statement.

What Obama might have more plausibly have said is that Obamacare makes only minor or modest changes to coverage for the vast majority of Americans. Where it makes the biggest change is for the minority of Americans who cannot obtain affordable coverage today. That I could defend, though I am sure others would still contest it.

Next, what about family premiums falling by $2,500? Sorry, no. OK, maybe — maybe maybe — adjusted for benefits, accounting for subsidies, and relative to the counterfactual trend, it might, possibly be true. But this is not how most reasonable Americans would interpret the statement. What’s true is that, in absolute terms, health care gets more expensive every year. Bending the cost curve is not reducing the absolute level of cost. And it remains to be seen if and how much Obamacare will bend that curve. I do not endorse or defend this statement.

What Obama might have said is that health plans will offer more benefits with fewer loopholes. Though this is not costless, costs will be shared in an equitable manner, with subsidies for low-income individuals and higher taxes for those who can afford them. Meanwhile, the law will attempt to slow the growth of health costs, but more is likely needed on that front. That I could defend, though I am sure others would still contest it.

Obama said some foolish things. That does not mean I, as a supporter of the law (with acknowledgement of its trade-offs and limitations) need to accept them. Nor do you. Let’s debate things we actually disagree about, not waste time arguing over silly things we both should reject. Meanwhile, President Obama and his surrogates, please stop saying these things. They sound foolish because, under reasonable interpretations, they are.

@afrakt

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The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

Late yesterday, the Obama administration released guidance explaining its recently announced move to ease concerns associated with the imposition of the individual mandate. In the guidance, the administration invokes the ACA’s “hardship exemption”—a statutory gambit that Austin and I flagged last week. But where we explored the possibility of using the hardship exemption to waive the mandate for people in states without functioning exchanges, what the administration has done is much more modest. Call it Mini-Bagley/Frakt.

Here’s what the administration is worried about. Under the ACA, an individual doesn’t get slapped with the mandate penalty until she’s gone without health insurance for a full three months. That means she’s got to be covered before April 1 rolls around—which is to say, by midnight on March 31. By regulation, a plan that is purchased in the first half of a month takes effect on the first day of the following month (e.g., a plan bought on February 10 takes effect on March 1). For coverage purchased in the second half of the month, the coverage period starts on the first day of the month after that (e.g., a plan bought on February 20 takes effect on April 1). As a result, to get coverage that kicks in before April 1, an individual has to purchase a health plan by mid-February.

Yet the open-enrollment period lasts all the way through to the end of March 31. That creates a problem, as the administration points out:

[T]he duration of the initial open enrollment period implies that individuals have until the end of the initial open enrollment period to enroll in coverage through the new Marketplaces while avoiding liability for the shared responsibility payment. Yet, unless a hardship exemption is established, individuals who purchase insurance through the Marketplaces towards the end of the initial open enrollment period could be required to make a shared responsibility payment when filing their federal income tax returns in 2015. HHS has determined that it would be unfair to require individuals in this situation to make a payment. Accordingly, HHS is exercising its authority to establish an additional hardship exemption in order to provide relief for individuals in this situation.

In other words, the administration has determined that it counts as a hardship for an individual to get hit with a penalty when she buys a plan anytime in the period from mid-February through the end of March.

Is this legal? Well, under the ACA, the hardship exemption extends to those who “have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.” It’s not immediately obvious that this statutory language can be stretched to cover anyone and everyone who, say, purchases coverage in March. Those people have ample “capability” to get coverage from qualified health plans (assuming the exchanges in their states are up and running) because all plans sold on the exchanges must be qualified health plans. They just won’t be covered in time to avoid the penalty. I’m not sure that’s the kind of hardship the ACA has in mind.

Still, the administration is right that the awkward conjunction of the ACA and the coverage-effective dates has created a trap. Pretty much everyone who purchases insurance in the open-enrollment period will assume—reasonably if wrongly—that they’ve done what the mandate requires of them. That shared assumption provides an eminently plausible basis for invoking the hardship exemption: the assumption, by encouraging delayed enrollment, means that loads of people will face a financial penalty they hadn’t anticipated. That penalty, even if it’s assessed after the fact, will reduce their “capability” to afford the health plan that they purchased. Invoking the hardship exemption to deal with that reduction in capability makes sense, especially because the whole point of the exemption is to alleviate affordability concerns.

This isn’t an unassailable position, to be sure. A tax that’s imposed tomorrow may not create a hardship to buying insurance today. But agencies traditionally have a lot of room to interpret the statutes that they administer. Given the open-ended language of the hardship exemption, I think this passes muster.

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I’m like the millionth person to pile on this Suzanne Sommers editorial (seriously, what was the WSJ thinking?), but I have to get my two cents in. Jonathan Chait has done his usual masterwork, and Josh Barro crushed it as well. I want to focus on some of her claims about Canada:

It went on to say that young Canadian medical students have no incentive to become doctors to humans because they can’t make any money. Instead, there is a great surge of Canadian students becoming veterinarians. That’s where the money is. A Canadian animal can have timely MRIs, surgeries and any number of tests it needs to receive quality health care.

Yeah, cause doctors are homeless in Canada. Here are some actual data:

[R]esearch, led by Jeremy Petch of the Li Ka Shing Institute of St. Michael’s Hospital in Toronto, calculated net payments to physicians in Ontario. To do so, they looked at physician overhead costs, as collected in the National Physicians’ Survey. 

Overhead varies widely by specialty, from 38 per cent for ophthalmologists to 10 per cent for medical oncologists, and, of course, many hospital-based docs have little or no out-of-pocket costs. Overall, overhead for Canadian doctors is 26 per cent of their billings. Because that number is self-reported, it may be a tad overstated, but it’s the best figure available.

Practically, that means Canadian doctors have an average annual income (before taxes) of a little more than $225,000.

But, again, there is a range, from psychiatrists, the specialists who bill the least ($232,000 gross; $186,000 net), to ophthalmologists, who bill the most ($676,000 gross; $418,000 net).

How out of touch do you have to be to think salaries like that equate to “can’t make any money”?

Sommers goes on:

All of my husband’s cousins are doctors. Several have moved to the U.S. because after their years of intensive schooling, they want to reap financial rewards.

Ah, yes. It’s the “everyone knows a doctor who left Canada to move to the US ” meme. I can’t bring myself to try this again, so here’s my old post:

So when emigration “spiked,” 400-500 doctors were leaving Canada for the United States.  There are more than 800,000 physicians in the U.S. right now, so I’m skeptical that every doctor knows one of those emigres. But I’d especially like you to pay attention to the yellow line, which is the net loss of doctors to Canada.

In 2003, net emigration became net immigration. Let me say that again. More doctors were moving into Canada than were moving out.

Then there’s this:

And this:

So spare me the crap about how doctors are miserable in Canada and moving here to be happier. The opposite is true.

She’s not done:

My 75-year-old Canadian girlfriend was denied treatment because she was too old. She died recently, having been given palliative care. That’s all the system would allow.

Does anyone actually believe this crap? There is nothing, and I mean NOTHING, in the Canadian health care system that denies care to people based on age. One of the only relevant studies I’ve ever seen comparing the US to Canada is this one (emphasis mine):

Research from Canada and the United States suggests that not offering dialysis to patients who might benefit still occurs. This study was conducted to investigate nonreferral and nonacceptance to dialysis by primary care physicians (PCPs) and nephrologists in these countries. We surveyed a random sample of Canadian and US PCPs and nephrologists concerning their attitudes toward and experience with withholding dialysis in patients with advanced chronic renal failure. In response to a question about whether the physician believes there should be an age beyond which dialysis should not be offered, 12% of Canadian PCPs, 20% of US PCPs, 4% of Canadian nephrologists, and 9% of US nephrologists answered yes. When asked about their recommendations concerning dialysis initiation in 10 vignettes of patients with impending end-stage renal disease (ESRD), the responses of Canadian and US physicians were similar. PCPs compared with nephrologists were less likely to recommend dialysis in cases with physical illnesses and more likely to recommend it in cases with neuropsychiatric impairments. Over a 3-year period, 13% of Canadian PCPs and 19% of US PCPs reported nonreferral to dialysis at least once. Withholding rates were 25% for Canadian PCPs, 16% for US PCPs, 13% for Canadian nephrologists, and 17% for US nephrologists. We conclude that although nonreferral of patients who might benefit from dialysis still occurs, it does not seem to be common, and the attitudes of Canadian and US physicians toward this issue are similar and could not entirely account for the much greater incidence of treated ESRD in the United States. PCPs and nephrologists should continue to be educated about the modern criteria for patient selection for dialysis.

Look at the first bolded statement. It says that more doctors in the US believed that there should be an age at which we should not offer dialysis. MORE IN THE US. The second bolded statement shows that more primary care doctors in the US reported actually not referring people for dialysis. MORE IN THE US. Withholding rates themselves were somewhat balanced, higher in Canadian PCPs, but lower in Canadian nephrologists.

What is clear, however, is that there is no evidence for Canadian doctors withholding care from people because they are old.

And – ARGH – I can’t believe I have to write this, but she’s attacking the ACA, which is NOT single payer, in defense of Medicare, which is totally a single payer program. Does she really not get that? Does she even know that the Canadian single payer program is also called “Medicare”?

There are many legitimate reasons to dislike the ACA. None of her “Canadian” attacks come even close.

I look forward to more “corrections” in the WSJ about this piece. It’s a classic.

@aaronecarroll

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I think I’ve done my job in expressing my own angst and disappointment with the rollout of Obamacare. But it’s a bit too much to watch those who actively opposed it get so “outraged” at its stumbles. That’s the topic of my latest column at CNN.com.

Go read!

@aaronecarroll

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I’ve enjoyed (more than I should) the excitement around Austin’s posts on Senator Cruz’s health care subsidies. This is partly because we originally made this point more than two years ago. But since you’re all paying attention now, I think it’s worth a brief explanation on why the Cadillac tax matters.

The first thing the Cadillac tax does is apply downward pressure on the cost of health insurance. In other words, it tries to get companies to avoid plans that cost more than $40,000 a year (what do you get with that?) and instead shunt more money into wages instead of benefits. But the second thing it does is limit the “subsidy” that goes to the well-off.

In other words, think of that 40% tax on amounts above the Cadillac tax limits as a means of recouping the ~40% subsidy that people are getting for their insurance. In other words, the Cruz family would get a subsidy only on the first $27,500 of their insurance. The subsidy they would then get is still a LOT ($9900 by my calculation), and would cover a number of people on Medicaid, but at least there would be a limit. Unless you think people who do get $40,000 a year just in health insurance deserve more than $10,000 from the government in subsidies to help pay it.

@aaronecarroll

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In association with the Baker Institute’s Oct 25th conference on health care reform, I have a post up at their site about incentives for employers to offer (or not offer) health insurance before and after ACA implementation. Go read it.

Also, videos of the proceedings of the conference are online here.

@afrakt

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From Tara Culp-Ressler:

The American Academy of Pediatrics (AAP), a leading doctors’ group representing about 60,000 pediatricians across the country, is encouraging schools to make sexual health resources more readily available to teens. In a new policy statement published in the Pediatrics journal, the group points out that condoms should be accessible in high schools so students don’t necessarily have to ask for them.

Why?

While teen births have been steadily declining over the past several years, the U.S. still has the highest rate of sexually transmitted infections of any other country in the developed world. And the AAP pointed out that the nation’s STD epidemic is largely fueled by teens: young people between the ages of 15 and 24 acquire nearly half of all new sexually transmitted infections.

It also turns out that teens are only likely to use condoms if they’re easy to get. You need to make it really, really simple for them. So what’s the problem? There are still people who think that giving kids protection will somehow induce them to have sex. But that’s not the case:

AAP researchers pointed out that there’s still some resistance to making condoms available to teens, largely because people assume that will encourage a greater number of adolescents to become sexually active. That’s not actually the case, though. Research has found that providing youth with contraceptive resources makes it more likely that they will practice safe sex, but doesn’t increase their sexual activity.

Oh, and by the way, condom use is significantly increased if kids are given comprehensive sex education. I’m just saying.

@aaronecarroll

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From John C. Lewin, G. Lawrence Atkins, and Larry McNeely, “The Elusive Path to Health Care Sustainability” in JAMA:

Despite the recent slowdown in health care inflation, particularly in Medicare and Medicaid, increases in health care costs threaten to exceed the nation’s capacity to pay… Even if per-capita health spending slows to the same rate as overall economic growth, increasing numbers of aging beneficiaries will alone double Medicare spending in 10 years while increasing private sector prices increase the burden on businesses and families. [emphasis added]

@Bill_Gardner

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In the past few years I’ve scoffed at those who predicted that a failure of the ACA would somehow lead to single payer. After all, wishing won’t make it 60. But as I’ve watched the private-based exchanges fail so miserably, while Medicaid has quietly done gangbusters comparatively, I wonder:

Some states are signing up tens of thousands of new Medicaid enrollees in the initial weeks of the health law’s rollout, while placing far fewer in private health insurance—a divergence that suggests Medicaid expansion may be a larger part of the law than expected.

In one sense, the Medicaid figures are good news for the Affordable Care Act’s advocates, who hoped the law would reduce the number of Americans without health insurance.

But the predominance of Medicaid enrollees so far could also fuel criticism that the law will lead to a greater government grip on the health-care system, instead of leaving room for private health insurers to grow.

Well, if any conservatives worry about that last statement, they would want to get those exchanges working, no? Instead, I see people rooting for their failure.

The numbers are hard to deny:

In Washington state, one of the states that operates its own exchange, 87% of the 35,528 people who had enrolled in new insurance plans from Oct. 1 to Oct. 21 were joining Medicaid plans, according to state figures. By Thursday, 21,342 Kentuckians had newly enrolled in Medicaid, or 82% of total enrollees. In New York, about 64% of the 37,030 people who have finished enrolling were in Medicaid.

Some states like Maryland, Washington and California are using aggressive outreach to get people into Medicaid, including contacting those who are already on other programs such as food stamps, said Matt Salo, executive director of the National Association of Medicaid Directors.

“When you actively go out and aggressively target people, they sign up,” he said.

Navigators would help people similarly get into the private-insurance exchanges. Opponents of the ACA have tried to all but eliminate them, though.

Getting Medicaid is often simpler than private coverage, especially since many states have cut back on paperwork. Medicaid enrollees can go to state offices to sign up and avoid the federal HealthCare.gov portal, which currently can’t transfer information about Medicaid-eligible people to the states. And Medicaid enrollees typically have fewer decisions to make on deductibles, prescription-drug plans and doctor networks.

“There are no comparisons between those processes,” said Kip Piper, a Washington-based Medicare and Medicaid industry consultant. “It’s not like comparing apples to apples or even apples to oranges. It’s apples to poodles.”

For years, single-payer advocates have argued that Medicare-for-all would be simpler than the ACA. I’m hearing that sentiment from more and more people recently.

@aaronecarroll

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When I posted about Senator Cruz’s health insurance last week, I did not have all the relevant information, something I admitted in the post. Since then, some readers and Adrianna have brought some of the missing information to my attention. This is an update.

• Goldman Sachs, where Mrs. Cruz is a managing director and the source of the family’s health insurance, offers coverage that cost $40,543 in 2009, according to the New York Times.*
• That same figure shows up in this SEC filing for the company.
• According to the Texas Tribune, Senator Cruz had an adjusted gross income of $2 million in 2010. In 2009, the Senator’s taxable income was $659,000. The article documents income for other years.
• Taxable income at that level was associated with a 35% federal marginal tax rate in 2009. (It’s higher today.)
• Income at that level does not incur a Social Security tax. (The 2009 cutoff was $106,800.)
• The Medicare tax rate is 1.45%.
• Texas has no income tax.

Plugging and chugging with these numbers (formula here), I compute that  the “tax price” of Senator Cruz’s health insurance is about 64%. In other words about 36% of his health insurance premium cost would be government tax revenue if employer-sponsored health insurance were taxed like wages. That’s $14,595.*

A typical, able-bodied, adult Medicaid beneficiary costs government $3,000. In other words, Senator Cruz’s health insurance tax subsidy could fund Medicaid coverage for almost five such adults.*

For the record, I also receive a tax subsidy, though a smaller one than Senator Cruz. I earn much less and have a much lower health insurance premium. (I can’t imagine what a $40,543 premium covers.) Neither he nor I are doing anything wrong by receiving this subsidy. We’re both entitled to it under the law. I am in favor of revoking, or phasing out, this tax subsidy for him, me, and everyone. The Cadillac tax is a good start, though crude.

I do not know Senator Cruz’s position on this policy issue. The first step is recognizing the size and scope of this subsidy. Too few Americans, including his spokeswoman, are aware of it.

* It has been raised in the comments that the Cruzes may, in fact, have a $20k, not a $40k policy. The comment is unsubstantiated (no links). However, to be (overly?) fair, let us presume it to be true for a moment. If so, then divide the figures I’ve noted with a “*” by two. The broader point still stands, the employer-sponsored health insurance tax exclusion costs a lot. Such insurance is not free of assistance by taxpayers.

@afrakt

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