• Read Leonhardt and his links

    Last night David Leonhardt published an interesting column and blog post. Both are worth reading in full, as is much of the content to which they link. The subject is the history of opposition to U.S. social insurance programs, even those that are now very popular like Medicare and Social Security.

    The column ends with a review of the role of the individual mandate in health reform and includes this bit of history worth recalling:

    Just look at Massachusetts. In 1996, it barred insurers from setting rates based on a person’s health but did not mandate that individuals sign up for insurance. Premiums then spiked. Since the state added a mandate in 2006, more people have signed up, and premiums have dropped an average of 40 percent.

    If you’re looking for historical quotes on opposition to progressive legislation, Leonhardt delivers. In his post, he cites:

    There’s more, but I’ll let you discover it for yourself.

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    • Leonhardt’s 40% figure seems dubious. Looks like he used AHIP data and took the difference between the Massachusetts Individual Market premium in 2006 ($8.5K) and 2009 ($5.1K). However, that 2006 figure is questionable. Check the timeline:

      2004: MA premiums at $5.3K according to AHIP )
      2006: Mandate passed
      2006 (later): MA premiums at $8.5K (60% increase over 2004)
      2007: Mandate implemented
      2009: MA premiums at $5.1K (40% drop)

      My hypothesis: MA insurers increased premiums significantly in advance of the mandate’s implementation, worried about what effects it might have, and then lowered rates once they figured out the newly insured were not unhealthy. Consistent with this idea is the fact that MA premiums in 2006 cost $3000 more than the two closest states, NY and NJ (both community rating/guarantee issue states) while in 2004, MA premiums were right between NY and NJ. In other words, the 2006 figure is a fluke byproduct of the mandate.

      If Leonhardt want to quote the 40% figure, he has to offer an alternate explanation of why premiums increased so much between 2004 and 2006 in MA, but not in NY or NJ, and explain why adding 8-9% more people to the insured pool would have such a dramatic effect on rates.

      If I’ve gotten something wrong, please let me know!

    • Note that is arguably still a victory for the mandate – between 2004 and 2009, individual premiums stayed steady in MA, whereas they rose practically everywhere else. It’s just not a 40%-decrease-in-premiums victory.

    • Maxwell, I think your point in the second post is key. The mandate can take credit for rates at the level of 5 years earlier while in other states they went up by somewhere north of 25% higher.

    • Of course people love the programs it is the tax that they would object to is they paid an attention.

      My assumption is that people in the USA would love socialized medical care if we got it here, but that does not make it good policy. Once in existence and it has been adjusted to, people cannot imagine life without a social program.

      I think that they are problems with SS

      1. The FICA tax robs Peter to pay Peter. How does that make sense.
      2. The had to exempt pacifists like Mennonites and Amish.
      3. People take corrupt politicians for their SS checks rather then teh people paying the FICA tax.
      4. The justification is to take care of the poor and unwise people in their old age but most of the money is paid out to the relatively well to do.
      5. Moral Hazard – people save less and have weaker relationships.
      6. It takes money from a less well to do group, young people and gives to the more well to do group, old people.
      7. Encourages a group already more likely to vote making them even to vote meaning government represents their interest even more (thus contributes to the crazy war on drugs).

      and Medicare.

      1. Medical care for old people is the least effective medical care. Why not cover prenatal care first then care for children.
      2. Rampant fraud
      3. Contributes to over treatment of the elderly.
      4. Weakens the incentive to migrate toward life time health insurance rather than employer related insurance.

      IMO the programs suck but they sure are popular.

    • My guess is that the explanation is even simpler than the others above.

      Coincidnetally to Romneycare and individual mandates and all the blah blah (but part of the same bill I think), Massachusetts allowed individuals to buy healthcare insurance at small group rates. It had nothing to do with the individual mandate. And of course very few individuals paid those sorts of premium. The AHIP reports are just averages of premiums. I am self employed in Massachusetts and bought pretty normal healthcare insurance in 2007 in terms of coverage, co-pays, etc. and spent only about $5000.

      That being said, the idea that the insurers jacked up prices in anticipation of Romneycare gets my second vote.

    • Also, to Maxwell, not sure your source vis a vis individual premiums being flat after 2007. The “official” Mass state document on this subject says they increased 40% (see page 22 of quarterly Key Indicators Report from DHCFP web site).. You were right to be dubious in the first place. Beside the numbers being wrong, the premise that this has anything to do with the individual mandate is flawed.

    • On the point about individual premiums decreasing 40% from 2006 to 2008 in Massachusetts (as an indicator of what might happen under the PPACA nationwide), I finally had a chance to email back and forth with the responsible American Healthcare Insurance Plans (AHIP) researchers as well as some folks at the Mass Department of Insurance (DOI) after the holidays. There are some signs the data 2006 data itself may be wrong but it is at least misleading by definition.

      Even if it is correct, your readers need to understand that that 40% change affected only about 25,000 out of the over 6,000,000 people that had/have health insurance in Massachusetts, those in the so-called individual insurance market. I was unaware of this but it turns out that even self-employed people like myself were considered part of small group back before Romneycare.

      As for the data itself
      — First, the AHIP group that did the research depends on input from the insurers themselves. So, they say, it is possible that one year might have reflected mostly “cadillac” plans and the other mostly HSA-type plans. Other states reflected in the AHIP reports that Leonhard referenced (and the 2004 report mentioned by Maxwell above) show equally wide fluctuations to Massachusetts’ numbers. AHIP also depended on the insurers to segregate someone like me that bought my insurance as an individual but was always considered part of group vs. those that were truly individuals prior to the merger of the individual and small group markets. All these apples to oranges problems would skew any comparisons so much that the AHIP in fact tells clients not to do what Leonhardt did: compare one year to another at the state by state level.
      — Second–and more important–there might have been an outright error in the 2006 data. AHIP does not keep the data after it runs its comparisons but I am having a hard time finding individuals that paid over $8000 for insurance in 2006, meaning it would be very hard for $8537 to be the average. Based on discussion with DOI, I think there is a possibility that the Mass non-profit insurers did not participate in the survey and I get some indication from DOI that it is unlikely that very many Massachusetts residents would have bought purely commercial healthcare insurance. It wouldn’t have been the logical thing to do for very many people

      So that’s a lot of blah blah blah to basically say there is almost certainly no relation of Massachusetts healthcare insurance premiums pre and post Romneycare to the individual mandate.