John Goodman, Author at ��ϳԹ�� News

Is Medicaid Real Insurance?

John Goodman — Fri, 25 Mar 2011 00:30:00 +0000

As governors across the land struggle with fiscal pressures and pepper the federal government with requests to scale back Medicaid many people are losing sight of the fact that health care reform (what some call ObamaCare) requires a huge expansion of Medicaid.

In fact, in just three years the nation is expected to start insuring about 32 million uninsured people. About half will enroll in Medicaid directly. If the is repeated, most of the remainder will be in heavily subsidized private plans .

That raises an important question: How good is Medicaid? Will the people who enroll in it or in private plans that function like Medicaid get more care, or better care, than they would have gotten without health reform? The answer to that question is not obvious. In fact it’s probably fair to say that we are about to spend close to $1 trillion over the next 10 years insuring the uninsured and we really don’t know what we expect to accomplish by spending all that money.

Here’s a stab at an answer. The 32 million newly insured may not get more health care. They may even get less care because of difficulties getting a doctor. And even if they do get more, odds are that than if there had never been a health reform law in the first place. The reason: the same measure that insures 32 million new people also will force middle- and upper-middle-income families to have more generous coverage than they now have. As these more generously insured people attempt to acquire more medical services they will almost certainly outbid people paying Medicaid rates for doctor services and hospital beds. To make matters worse, the health reform law (following the Massachusetts precedent) did nothing to increase the supply side of the market to meet the increased demand.

Both anecdotal and scholarly reports from Massachusetts are consistent with this prediction. The in Boston is now longer than in any other U.S. city. for their care in the state than before its health reform became law. A Boston cab driver went through a list of twenty doctors (a list the state’s Medicaid program gave her!) before she found a doctor who would see her. A preliminary on the state as a whole found that nearly a quarter of adults who were in fair or poor health reported being unable to see a doctor because of cost during the implementation of the reforms. Further, state residents earning less than $25,000 per year were much less likely than higher earners to receive screening for cardiovascular disease and cancer.

That brings us back to the initial question: Is Medicaid real insurance? Or is there little practical difference between being on Medicaid and being uninsured? It would appear at the margin that there’s not much difference.

Currently there are roughly in the U.S. who are eligible for Medicaid and CHIP but have not bothered to enroll. That implies that for about one in every six eligibles, Medicaid insurance is not worth the effort it would take them to fill out the enrollment papers!

At Parkland Memorial Hospital both uninsured and Medicaid patients enter the same emergency room door and see the same doctors. The hospital rooms are the same, the beds are the same and the care is the same. As a result, patients have no reason to fill out the lengthy forms and answer the intrusive questions that Medicaid enrollment so often requires. At Children’s Medical Center, next door to Parkland, a similar exercise takes place. Medicaid, CHIP and uninsured children all enter the same emergency room door; they all see the same doctors and receive the same care.

Interestingly, at both institutions, paid staffers make a heroic effort to enroll people in public programs — working patient by patient, family by family right there in the emergency room. Yet they apparently fail more than half the time! After patients are admitted, staffers go from room to room, continuing with this bureaucratic exercise. But even among those in hospital beds, the failure-to-enroll rate is significant.

Clearly, Medicaid enrollment is important to hospital administrators. It determines how they get paid. Enrollment may also be important to different sets of taxpayers. It means federal taxpayers pay more and Dallas County taxpayers pay less. But aside from the administrative, accounting and financial issues, is there any social reason we should care?

Economics teaches that people reveal these preferences through their actions. If people act as though they are indifferent between being uninsured and being on Medicaid, we may infer — based on this behavior — they are equally well off in both states of the world from their own point of view.

Against this conclusion, there are two counter arguments worth considering. First, some claim that transactions costs (administrative difficulties) are the real reason why so many eligibles don’t enroll. At Parkland and Children’s Hospital those costs are close to zero, however. Second, there is the argument from paternalism: that people will be better off if we push them into Medicaid, whether they prefer it or not. But even on that score, the evidence is weak. A very comprehensive found that the type of insurance people have — or whether they are insured at all — does not affect the quality of care they receive. With respect to cancer care, it is unclear that . Health blogger Avik Roy has written about other studies that find that Medicaid patients do . Additional evidence is supplied by . If you’re trying to , it appears your chances are better if you say you are uninsured.

Health economist takes issue with these studies, claiming that Medicaid and non-Medicaid populations are fundamentally different, even after adjustment for race, income and other socio-economic factors. That claim seems improbable, however, in light of the heavy ping-pong migration of people . Frakt points to some finding that Medicaid makes a positive difference over being uninsured. But the results would probably have been just as good or better if we spent the money giving free care to vulnerable populations. Moreover, even with their Medicaid cards, enrollees turn to emergency rooms for their care as the privately insured and the uninsured.

Bottom line: after we get through 10 years of spending our $1 trillion under ObamaCare, there is no convincing reason to believe that the bottom half of the income distribution will have more care, better care, or better access to care than they have today.

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What Will President Obama Say About Medicare?

John Goodman — Tue, 25 Jan 2011 00:30:00 +0000

When President Barack Obama addresses the nation in his State of the Union message, the big topic on the minds of many in the public policy community will be out of control entitlement spending. Will the president follow the lead of , the former head of his Council for Economic Advisors, and endorse the of his own bipartisan deficit commission, chaired by former Sen. Alan Simpson, R-Wyo., and former Clinton White House aide Erskine Bowles? Or will he punt?

To just about everyone who has looked at the question, reining in entitlement spending means reining in health care spending, and that means slowing the growth of Medicare. When Bowles and Simpson proposed to do just that, there were howls of protest on the left, including New York Times columnist , and . Yet here is something few people know. The Affordable Care Act, signed into law last spring, cuts future Medicare spending by much more than what Bowles and Simpson have proposed. In fact, if the law remains as is, future Medicare spending per capita will grow no faster than the economy as a whole. The problem is that no one — not the Medicare’s chief actuary, not the Congressional Budget Office, not anyone who has looked at the numbers — thinks this is realistic.

One way to consider what’s about to happen is in terms and dollars and cents. If you turned 65 and enrolled in Medicare this year, the lifetime value of your Medicare benefits decreased by about $35,000 on the day President Obama signed the health reform bill, at least on paper. That’s the present value of average expected benefits for a 65-year-old, based on forecasts by the Medicare Trustees. For younger people, the loss will be even greater.

What does that mean in terms of seniors’ potential out-of-pocket spending or their access to care? Strangely, no one really knows.

But here are some basic facts — as objectively as we can report them, from the and the :

– More than half the cost of health reform will be paid for by reduced spending on Medicare beneficiaries — about $523 billion over the next 10 years.

– This spending reduction consists of a slowdown in the growth rate of core Medicare reimbursements as well as actual cuts in subsidies to Medicare Advantage plans and other programs.

– While the law creates new benefits for Medicare beneficiaries — such as a free annual checkups and other preventive medicine for seniors — for every $1 in new benefits they face $10 in costs.

The cuts in Medicare Advantage subsidies will be especially harsh for seniors in some areas. By 2017, thousands of people in Dallas, Houston and San Antonio will see reductions of more than $5,000 a year, according to a by the Heritage Foundation’s Robert Book and the Ethics and Public Policy Center’s James Capretta.

How will the growth in Medicare spending be controlled? To achieve the necessary targets, the new law gives an Independent Payment Advisory Board the power to recommend spending cuts. Congress must either accept these cuts or propose its own plan to cut costs as much or more than the panel’s proposal. If Congress fails to substitute its own plan, the board’s cuts will become effective. In this way, the growth rate for Medicare spending is officially capped. Moreover, the advisory board is barred from considering just about any cost control idea other than cutting fees to doctors, hospitals and other suppliers.

What exactly does it mean to slow the growth of Medicare spending to a rate that may be only half the rate of growth of health care spending for everyone else? We can only speculate.

The Office of the Medicare Actuaries is projecting that, by the end of this decade, Medicare payments to doctors and hospitals will be below the . Writing in , Harvard health economist Joe Newhouse notes that many Medicaid enrollees currently are forced to seek care at community health centers and safety net hospitals, and speculates that senior citizens may face the same plight in the not-too-distant future.

The Medicare actuaries have also projected what these low payment rates mean for the financial health of the . Overall, the that:

– By 2019, one in seven facilities will become unprofitable and will probably be forced to leave the Medicare program.

– That number will grow to 25 percent of all facilities by 2030 and to 40 percent by 2050.

Basically, hospitals will not be able to provide seniors with the same kind of services they provide younger patients. To survive, we may see hospitals specialize in Medicare patients and provide far fewer amenities, and, in some cases, reduced access to expensive technology such as PET scans.

Newhouse surmises that seniors who can — those with money — will turn to concierge doctors, paying out-of-pocket for services that Medicare won’t pay for. The current law stipulates that seniors cannot pay amounts in addition to Medicare fees when Medicare is paying the bill; and doctors who accept higher fees can do so only if they leave the program.

Enormous pressure will build to ease these restrictions. Providers can only cost-shift to other patients so much. If seniors are to get the same services other patients are getting, ultimately they are going to have to add on to Medicare’s fee with out-of-pocket payments of their own.

We can argue about whether all this is good public policy. But the time has come to face the reality of what health reform is going to mean for some of our most vulnerable citizens. If we judge a scenario like this one to be unrealistic or intolerable, then we need to find a better way.

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What if Republicans Win?

John Goodman — Mon, 25 Oct 2010 00:30:13 +0000

Quite a few Democrats and almost every Republican are running against ObamaCare in this fall’s elections. What if they win?

The new Congress will have an opportunity to substantially change the course of health care reform. Outright repeal would undoubtedly face President Obama’s veto pen. But that’s not even what the public is asking for. Polls show that voters want health reform. They just don’t like the current version of it.

To understand the reasons why, it’s helpful to review who won and lost under the measure that became law last spring. The big winners are most (but certainly not all) of the 32 million who will eventually become insured plus some people with high health care costs. Let’s generously peg that combined total at 50 million. The other 250 million Americans are going to lose more than they gain. That’s right. For every winner, there are five losers.

So, the second round of reform will have to tackle some of the most important problems of ordinary Americans. In my opinion, that means making health insurance portable, affordable and fair.

Portable Insurance. If you took a poll, I believe you would find that the single biggest problem most nonelderly Americans have with their health insurance is a lack of portability. If they get laid off, quit their jobs or just retire, they lose their coverage.

For those who think the problem is solved with a health insurance exchange coupled with government subsidies and community-rated premiums, take a look at Massachusetts. There, if you lose your group plan coverage and buy subsidized insurance from the state’s exchange, you will have insurance that pays doctors little more than Medicaid rates. You’ll move from the head of the waiting lines to the rear. Here’s a better solution.

Employers should be able to buy individual policies for their employees with untaxed dollars a change that would require amending federal law. But right now, that is . Employers can buy group insurance, but not individual insurance – even though the insurance may be just as good and has the added advantage for employees of being portable. (See my own suggestion for steps to portability at the state level.) Note: This proposal would not require employers to buy portable insurance for their employees; it would only allow them to do so.

Affordable Health Insurance. The individual mandate to buy insurance, starting in 2014, and the requirement that employers provide coverage for workers should be dropped. Instead, the government should offer reasonable tax relief to help consumers buy reasonable coverage. But for this approach to work, we must (a) live within our means and (b) deal with everyone fairly.

Did you notice that McDonald’s was questioning whether to continue offering the “mini-med” insurance plans it currently makes available to its estimated 30,000 low-wage employees because of the health law’s minimum benefit requirements and the fines that result if the plan falls short? (These types of generally cost about a $100 a month, cover some routine medical expenses but have annual deductibles or benefit caps and no catastrophic coverage.) I suspect many more large employers will find themselves in a similar fix.

This example drives home a key problem that stems from the health law’s minimum plan requirements. Ten-dollar-an-hour employees and their employers cannot afford insurance that costs more than $5,000 for individuals and more than $12,000 for families. Surprisingly, the health reform bill does nothing to help them.

The law’s minimum-benefit-mandates also will affect baby boomers who retire before they become eligible for Medicare, making their insurance more expensive than it would have been. Further, above-average-income retirees will get little help from government if they buy the required insurance in a health insurance exchange and they will face a hefty fine if they don’t.

Even employees who think they have post-retirement benefits from an employer may face an unpleasant surprise. The just announced it will be ending its coverage for its retirees and sending them instead to the health insurance exchange.

Fair Health Insurance. What we have to do is take the tax subsidies already in the system and add to them whatever taxpayers are willing to pay.

For instance, instead of the arbitrary, unfair and regressive tax subsidies that pervade the current system as well as the new health reform law, every single adult should get a refundable health insurance tax credit of $3,000. Every family should get $7,500. And that’s that. Taxpayers would be able to use their credits to pay for the first $3,000/$7,500 of their private health insurance premiums. (See my original with Mark Pauly and my summary of the .) People would pay additional costs from their own resources, but I suspect individual choice and market competition will allow many to make do with those limited subsidies.

What about pre-existing conditions? President Obama and the Democratic leadership in Congress have blurred the distinction between people who are uninsured through no fault of their own and people who are willfully so. We can have a workable system in which people who are continuously insured do not lose access to the system merely because they retire or lose their jobs. For example, one idea is to let everyone purchase regular insurance as well as change-of-health-status insurance. The latter would protect against illnesses that create new pre-existing conditions.

However, we cannot allow people to game the system by opting not to be insured while healthy and then getting insurance at the rates everyone else pays when they get sick. Such gaming is already .

Here is what is most interesting about all of this. In solving the problems of ordinary Americans we can go a long way toward cleaning up and fixing ObamaCare. In helping middle-class voters we can, at the same time, help everybody else.

John C. Goodman is the president and CEO of the
National Center for Policy Analysis President and the Kellye Wright Fellow.

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Empty Promises

John Goodman — Mon, 27 Sep 2010 00:30:12 +0000

Let us suppose that Congress did something really silly. Say it passed a law promising everyone a free annual trip to visit the moon. Surely even the densest reporter would have the presence of mind to ask, “How are you going to get 300 million people to the moon and back?”

Yet Congress did something almost that silly last spring. It promised almost everyone in the country access to a whole slew of preventive services with no copay or deductible. (See .) Yet I cannot recall a single reporter asking how all these extra services are going to be provided.

An even more important question is: How will the attempt by millions of American to obtain more preventive care services which can’t possibly be provided — affect the triple problems of cost, quality and access to care? Answer: It will probably make all three problems worse.

I don’t know about your experiences, but the last time I was at a primary care facility, I didn’t see a lot of doctors and nurses standing around with nothing to do. My observation is consistent with national statistics. One out of every five Americans is currently in an underserved area. And all the predictions have the doctor shortage growing worse at the same time that the need for doctors will rise to meet the increased demand for preventive care.

Let’s start with Health and Human Services Secretary Kathleen Sebelius’ announcement that all new health plans, as a result of the health law provision that took effect Sept. 23, will have to cover without any copay or deductible the services recommended by the U.S. Preventive Care Task Force. (Though the rule has now kicked in, the requirement actually applies to plans at the beginning of the plan year.)
Besides the task force list, Congress added other items, including mammograms for women in their 40s and additional services for Medicare enrollees – such as a free yearly checkup and prostate cancer (PSA) tests for men.

So what would it take to provide these services, if all the beneficiaries opted to take full advantage of them? In a 2003 study, researchers at Duke University Medical Center estimated that it would require 1,773 hours a year of the average doctor’s time – or 7.4 hours every working day – for the average doctor to counsel and facilitate patients for every procedure recommended by the task force. And remember, every so often a screening test turns up something that requires more testing and more doctor time.

Overall, it’s probably fair to say that if everyone took full advantage of all of the services the task force recommends, we would need every family doctor in America working full-time on the task – leaving no time left over for any other medical services.

In addition, there will be collateral damage when patients try to get these services. For one thing, health care costs will rise. Numerous studies have shown that screening tests and similar services , rather than reduce them. For the individual whose cancer is caught in its early stages, say, treatment costs are lowered because of early detection. But the savings are more than offset by the cost of screening thousands of healthy people who do not have cancer.

Another consequence: As millions of healthy people try to get free preventive services they will crowd out care for sick patients whose need for care is greater. This will especially be true if patients are in insurance pools that pay doctors different rates. Patients in higher-paying plans seeking preventive services will tend to displace the more urgent needs of patients in lower-paying plans.

The Obama administration has a dilemma. On the one hand, it wants to be seen as the champion of preventive care – because these are the only tangible services that touch the lives of the 80 percent of the population that is basically healthy. On the other hand, a vast increase in insurance coverage for such services will only increase health care costs and crowd out access to care for those who have more serious medical needs.

John C. Goodman is the president and CEO of the
National Center for Policy Analysis President and the Kellye Wright Fellow.

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Medicaid Rescissions Worse than Private Insurers

John Goodman — Thu, 12 Aug 2010 15:10:00 +0000

On Tuesday, members of the House of Representatives interrupted their August vacation and returned to Washington to vote on a bill to send money to the states. The issue that dominated the news was saving the jobs of teachers, police officers and other public employees. But most of the money allocated will prevent the states from cutting off health benefits for millions of people. If that doesn’t strike you as strange, perhaps you weren’t paying attention to last year’s health care debate.

During the year leading up to the final passage of the new health law, the Patient Protection and Affordable Care Act, the White House set up a and invited all Americans to post their own personal stories about insurance company abuses. During the days leading up to the final vote on the bill, the president and congressional supporters used almost every television opportunity to trot out these cases – sometimes in graphic detail.

Yet, in all the episodes of abuse, do you recall even a single instance where an insurer:

Arbitrarily dropped coverage for tens of thousands of enrollees with the stroke of a pen – just to save money.
Dropped entire categories of care – such as dental care or home health care – because it decided these services were too costly?
Arbitrarily reduced the fees it paid to doctors and hospitals, pushing many out of its network, and leaving its enrollees with serious access to care problems?

Probably not. For a private insurer, each of these activities would be a serious violation of contract. Yet there is one insurer that does these things routinely. It’s called Medicaid. About half of all the newly insured people under the new health law will be enrolling in it.

Private insurers whose commitments are enforced by contract law have to raise premiums when costs rise; but when state legislative bodies say “no” to Medicaid’s need for funding, Medicaid revokes its commitments to the insured instead.

Here are a few tug-at-the-heart-strings examples I hope we hear more about in future political speeches:

A nine-year-old boy died because Medicaid quit paying (in error, it turns out) for his asthma medications.
An elderly woman died of a severe dental infection after Medicaid cut off her dental benefits.
A 64-year-old man lost his Medicaid coverage right in the middle of his treatment for colon cancer because of income eligibility changes.
Medicaid refused to pay for life-saving liver transplants for two children – arguing that while the procedure was medically necessary, it was not appropriate.

Not only were these abuses not addressed in the health overhaul, states across the country are currently considering more Medicaid rescissions – eliminating insurance for tens of thousands of people by redefining eligibility, reverifying eligibility more frequently, eliminating entire categories of care, and making access to care more difficult by reducing payments to providers and delaying payments.

Further, there is a history of such “abuses”:

In 2002, eliminated Medicaid coverage for about 36,000 low-income parents primarily by lowering the eligibility limit from 100 percent of the poverty line to 77 percent.
In 2003, dropped 44,000 long-term unemployed adults. Michigan cut 52,000 Medicaid patients; Missouri 20,000 and Nebraska 22,000.
In 2005, adopted sweeping Medicaid cutbacks, in which more than 100,000 people lost coverage.
Also in 2005, Governor Phil Bredesen of instituted the single largest Medicaid cut in history: Approximately 200,000 of the program’s costliest patients lost their coverage over a four-month period.
By requiring children to reapply for Medi-Cal every six months rather than annually, estimated that more than 260,000 children will lose coverage by the end of 2011.

Of course, some of these abuses are the result of more rigorous enforcement of the letter of the law. But during last year’s health care debate, private insurers were repeatedly chastised for cutting people off on the basis of “technicalities.”

So why have we not heard more about Medicaid rescissions and Medicaid abuses in the debate over health reform? Perhaps the reason is that the health overhaul is designed to enroll 16 million new people in Medicaid and many of them will be giving up their private insurance in the process. In fact, people who acquire health insurance on their own will be required to enroll in Medicaid and will not be allowed access to the new, state-based health insurance exchanges if their income is below 133% of the poverty level.

If Congress ever revisits the new health law–as it surely will–one of the most helpful amendments would be to give people options. Let those who qualify for Medicaid at least have the option of entering an exchange, paying the (heavily subsidized) premium out-of-pocket, and enrolling in a private health plan instead.

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Where Are the Innovators in Health Care Delivery?

John Goodman — Mon, 26 Jul 2010 00:30:10 +0000

Almost everyone believes there is an enormous amount of waste and inefficiency in health care. But why is that? In a normal market, wherever there is waste, entrepreneurs are likely to be in hot pursuit – figuring out ways to profit from its elimination by cost-reducing, quality-enhancing innovations. Why isn’t this happening in health care?

As it turns out, there is a lot of innovation here. But all too often, it’s the wrong kind.

There has been an enormous amount of innovation in the medical marketplace regarding the organization and financing of care. And wherever health insurers are paying the bills (almost 90 percent of the market) it has been of two forms: (1) helping the supply side of the market maximize against third-party reimbursement formulas, or (2) helping the third-party payers minimize what they pay out. Of course, these developments have only a tangential relationship to the quality of care patients receive or its efficient delivery.

The tiny sliver of the market (less than 10 percent) where patients pay out of pocket has also been teeming with entrepreneurial activity. In this area, however, the entrepreneurs have been lowering cost and raising quality – what most of us wish would happen everywhere else. For example:

There are more than 1,000 spread across the country today – posting transparent prices and delivering high-quality, low-cost services;
Whole businesses have been created to provide people with because third-party payers wouldn’t pay for them;
are a huge and growing market – one which emerged to offer price competition to consumers who buy their drugs out-of-pocket;
Wal-Mart didn’t introduce the for generic drugs in order to do a favor for Blue Cross. It is catering to customers who pay their own way;
are also providing patients with innovative services – services that health insurers don’t cover.

With respect to medical care itself, the technological response has been much the same. Wherever there is third-party payment, the goal of innovation is to produce more products that qualify for reimbursement, even if the effects on patient outcomes are only marginal. Wherever there is no third-party reimbursement, innovators are focused on ways to lower cost and raise quality.

Take cosmetic surgery. Over the past two decades there has been an enormous amount of innovation in the field – all of the cost-lowering, quality-raising variety. That explains why the volume of cosmetic surgeries grew six-fold over the past 20 years, while the . Similarly, there has been remarkable innovation in LASIK surgery – another area where third-party payers are not. Yet the real price of LASIK surgery has .

The same principle can be seen at work in the international marketplace. For example, India has a potentially huge market for medical care. But 80 percent of health care spending in that country is private and there is very little health insurance. So some of the companies that make expensive technology for the developed world are now finding ways to produce the same services for a fraction of the price.

GE Healthcare, for example, has introduced a into the Indian market that will perform the heart exam for 20 cents (compared to a normal price of $50). Siemens (another maker of high-end, expensive equipment) has built mobile diagnostics units for the Indian market with X-ray, ultrasound and pathology systems.

As Sujay Shetty, leader of the pharmaceuticals practice at PricewaterhouseCoopers in India, explained, “In India we want first-world technology at third-world pricesIndia can also be a springboard for Africa and Latin America, which have similar needs.”

The bottom line: If we want more of the right kind of innovation in the United States, we must encourage arrangements (like Health Savings Accounts) that will give patients more control of their health care dollars.

John C. Goodman is the president and CEO of the
National Center for Policy Analysis President and the Kellye Wright Fellow.

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Rescissions: Much Ado About Nothing

John Goodman — Thu, 13 May 2010 00:30:00 +0000

How many times have you heard President Obama say, “Health insurers won’t be able to drop your coverage just because you get sick?” Or Kathleen Sebelius? Or the Democratic leadership in Congress? Or the mainstream news media?

You would think that the private health insurance industry was being revolutionized.

In fact, it has been illegal since 1997, under the Health Insurance Portability and Accountability Act, for insurers to drop coverage because someone gets sick. And even before then, the practice almost never happened.

Think of it this way: Do you think there would be a vibrant, active, ongoing life insurance industry if insurers could renege on their part of the contract after someone dies? How many of us would buy fire insurance if the insurers could change their minds and refuse to pay after our house burns down? Would you buy auto insurance from Allstate if the “good hands” could disappear after a collision occurs?

These things do not happen because

1. Insurers are contractually obligated to keep their side of the bargain and courts enforce these obligations just like any other contract;

2. Regulatory agencies enforce good behavior, quite apart from any lawsuit, and;

3. An insurer that routinely refused to pay claims would lose customers and go out of business.

So what’s the fuss all about?

It’s about rescissions. This occurs when an insurer cancels a policy and returns the premiums to the policyholder, thus voiding the original contract. It almost always happens because the insurance application form is discovered to have fraudulent, misleading or simply wrong information on it.

Rescissions are very rare. They apply only to the individual market (less than 10% of private health insurance) and even then they occur less than . Even when it does happen, there is almost always an appeals process where the decision is reviewed by an internal committee and often submitted to outside reviewers. Further, when insurers are wrong as they may sometimes be it is the job of state regulators to correct this injustice.

This has not stopped the Obama administration from demagoguing the issue, however. Based on a Reuters story, Secretary Sebelius of targeting thousands of female policyholders for rescission after they were diagnosed with breast cancer, and President Obama repeated the charge in his weekend radio address. WellPoint’s response: The insurer paid for 200,000 cases of breast cancer last year and for fraudulent or misleading statements.

Even though such instances are rare, they can provoke differences of opinion on the proper response. Some cases are fairly straightforward. Suppose on my insurance application I say I am in good health when in fact I have chronic renal failure. Should the insurance company have to pay for my kidney dialysis? Obviously not.

Other cases get murky. Most life insurers will not sell to someone who is obese (girth measurement is often the test). Suppose I lie about this information, then get hit by a truck and killed. Should the insurance have to pay off?

On the one hand, you could argue that the lie I told about my obesity was irrelevant. Yes, I lied. But the lie had no material impact on the cause of my death. On the other hand, my lie was not innocuous. It allowed my family to reap a cash benefit it otherwise would not have been entitled to. It caused the insurer, and therefore the policyholders, to incur a cost they otherwise could have avoided.

Regardless of how you come down on this case, if you find the discussion to be one worth having it is probably because you believe there is economic value in a market for risk in which competition tends to price risk accurately.

Yet this White House does not believe in a market for health care risks. It certainly does not believe in pricing risk accurately. Indeed, they tend to think that the only legitimate function of health insurance companies is to pay medical bills. The reason they think ideal health insurance is a single-payer public plan is because they think government can write checks with less administrative hassle than private companies.

And if the truth were known, I suspect that these views are not confined to health care. I suspect they don’t really believe in a market for any kind of risk.

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Who Really Understands ObamaCare?

John Goodman — Thu, 21 Jan 2010 00:00:05 +0000

From the very moment public opinion started going south on the president’s health plan, the White House and Democrat leaders in Congress began sounding a familiar refrain: The public does not understand the bill; they’ve been lied to, deceived and misled by the opponents; and once they learn how it really works, familiarity will breed…well, something other than contempt.

I have four problems with this point of view:

1. If it is sincere, you would think the Obama Administration would have made a major effort to educate the public about how the bill really works; in fact, they have made no effort whatsoever.

2. Since ObamaCare is modeled after the Massachusetts health plan, voters in that state should be better informed than even Obama himself about how it “really works”; yet Massachusetts voters resoundingly rejected the president’s plan in Tuesday’s U.S. Senate election.

3. There was a lot of misleading information flying in all directions at last summer’s town hall meetings; but on balance, the average protestor appeared to be better informed than the average member of Congress.

4. Among the chattering class – who are paid to express informed opinion – the proponents of ObamaCare are far less knowledgeable than the opponents.

Cognoscenti are in the Dark. Let’s take the last point first. How many editorials have you seen where the writer rattles off a laundry list of health care problems and then concludes with “that’s why we need health reform”? Each of these editorials makes the same two mistakes: (1) They assume that ObamaCare will solve the problems they are writing about and (2) they assume it’s either ObamaCare or nothing. This second mistake is called the fallacy of the excluded middle.

As we have pointed out many times, ObamaCare is not going to solve our most serious problems. It will . It will lower, rather than raise, the . It will “solve” the problems of pre-existing conditions by . And it may not even increase .

Then there are the writers who bypass the details altogether and jump straight to wild claims. Here are two:

[“ObamaCare] will give Americans what citizens in every other advanced nation already have – guaranteed access to essential care. ” (Paul Krugman in )

For the first time, we will enshrine the principle that all Americans deserve access to medical care, regardless of their ability to pay.” (Eugene Robinson in )

Now you would think that anyone who hasn’t been living in a cave in some remote spot would know that access to the care they need is exactly what many do not have. And if they do not have the money to buy that care in the private sector or in another country, they are forced to go without because of lack of “ability to pay.”

Bay State Folks Know What’s Happening in Their State. We don’t have to go all the way to Britain or Canada to see where Krugman, Robinson and others have missed the boat, however. Massachusetts will do just fine. Bay Staters are not clamoring to repeal what they have. But they are acutely aware of the problems that haven’t been solved. And one of them is lack of access to care for people who lack the ability to pay market prices. As previously noted, the is more than twice as long as in any other U.S. city. Further, the number of people going to in Massachusetts is as great today as it was before health reform was enacted.

The White House is Doing Nothing to Educate the Public. It’s not just the general public that is being kept in the dark. Obama is the same way with his base. Since June, the president has been sending a weekly e-mail to an estimated 19 million faithful about health care. Strangely, these letters are never truly educational. Instead they are cheerleading messages – the sort of thing you would expect at a pep rally. (By contrast, the NCPA’s weekly messages to 1.3 million petition signers tend to be very informative.)

Voters on the Whole are Very Informed. There has probably never been a major piece of legislation before Congress about which voters were better informed. I continue to believe that the average “activist” who opposes the bill knows more about it than his/her congressional representative. that after an initial poll question, people were just as negative – if not more so – when pollsters described ObamaCare in some detail.

As Lanny Davis said the other day, “.”

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The Worst Bill Ever

John Goodman — Mon, 09 Nov 2009 17:21:41 +0000

House Vote: Reviews Are In

View other reactions to the House health overhaul bill vote from:

Prior to last Saturday’s vote, The Wall Street Journal aptly called the House bill “the worst bill ever.” The bill is enormously expensive, but it is full of perverse incentives an issue already plaguing our health care systems.

For individuals, the government will tell you what minimum insurance coverage you have to buy, where you must get it and what premium you will have to pay. Refusing to buy this insurance will result in a fine (tax) equal to 2.5 percent of your income. If you don’t pay the fine, you could go to jail.

The government will also tell your employer what type of insurance coverage the company must provide; and companies failing to provide it will face a tax equal to 8% of your wage income. Nominally, employers will be required to pay two-thirds or more of the cost. However, economic theory teaches – and empirical evidence confirms – that employee benefits and labor taxes are completely borne by workers themselves in the form of less take home pay. Thus, the combined penalty workers face for failure to insure is 10.5 percent of income.

During last year’s presidential primary, Senator Obama criticized Senator Clinton’s proposal to mandate coverage by asserting she would try to force people to buy something they cannot afford and then tax them when they don’t buy it – leaving them worse off than they were. Exactly the same criticism applies to Pelosi’s play-or-pay mandates.

As an unintended consequence, the bill encourages employers to drop health insurance coverage, forcing workers to buy coverage in a government-regulated health insurance exchange. Depending on their income, workers will receive subsidies when they purchase in the exchange. Many employers will find it more lucrative to drop coverage and pay taxable wages instead. The insurance subsidy means the employee can be thousands of dollars ahead. And the lower the employee’s income, the more profitable this decision becomes. However, workers will not be able to make this decision as an individual. If your employer decides that dropping coverage is good for the group as a whole, you will be swept up in the change.

This is why millions of people will lose their current employer coverage, despite President Obama’s promise that you can keep your current plan if you like it. (Lewin estimates 19 million would lose coverage under the Senate bill.) These people will be forced into Medicaid where there is already rationing by waiting or into a health insurance exchange, if they obtain new insurance at all.

Another unintended consequence is encouraging healthy people to be uninsured. Why pay expensive premiums for health insurance right now if you do not have any health problems? Under the House bill, there would be no reason to do so. People would be able to wait until after they get sick to insure and they would be able to do so without any additional financial penalty. The penalty for not entering the exchange and buying insurance is 2.5 percent of pay far less then the cost of premiums for costly insurance.

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