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Just Dropped In (To See What Condition My Pre-existing Condition Was In)

Obamacare has passed the Constitution sniff test and we now live in a socialist Worker's Paradise. What about all those dead-beats who chose not to have insurance because of their pre-existing conditions? If it is bad for people to only buy insurance when they are sick, won't Obamacare come tumbling down in 2014 when most of the uninsured sick people in America belly up to the trough at their local insurance exchanges to enroll? Is this going to bankrupt all ofus responsible Americans who chose not to have pre-existing conditions? Are we as doomed as the Right claims we are?Let's take a little peek inside the black box of Obamacare, shall we?

The principle (and yes, it is a principle) of the pre-existing condition is that no insurance system could survive if people only bought insurance when they were sick. Insurance is about spreading risk to a wider population. The larger that population the better it is. Risk can be spread effectively if the actuaries (professional risk analysts)have a good knowledge of what overall risk they are facing. Then they can predict (fairly well) future costs and what each person in the pool will have to contribute. This all falls apart if unaccounted for risky people enter the pool. And there is no one who is at a greater risk of being sick than someone who is already sick or was sick recently. It's not the case that there should be a few sick or risky people in a pool as possible. It's that the actuaries need to know what percentage of the pool is sick or in high risk of becoming sick and ending up with a lot of claims.Since our private insurance system had people cut up into different risk pools (one per company), the maintenance of predictability meant that many millions of people found themselves uninsurable. The solution to the problem of pre-existing conditions is to have a single pool with everyone in it and most advanced countries have done this via a "single payer" system. (One payer, one pool). We are now going to do what a few countries do, which is one pool, lots of payers. (The best example of this method is that other socialist Worker's Paradise Switzerland) How are we going to manage that?We think we have it licked with something in the ACA called "The Three R's". The Three R's are a means to have one big insurance pool with lots of separate insurance companies selling insurance in it. We don't really know what this one big pool is going to look like in terms of its riskiness, for the simple reason that we don't keep claims of people who don't use insurance. But we do know how things can go wrong and the Three R's address the three main possibilities and in a manner that does not require that a lot of taxes be thrown at the problem. It is a capitalist solution and if you want to impress your geeky friends with your inside knowledge of the ACA, by all means, read on.I am going to try to use the language the suspense novel to inject a bit of blood into this intrinsically dry subject. For the fact is, it's not that the Obamacare statutes are hard to understand. It's that they are a dry as a mummy's toes and even people in the business like me have to flog ourselves to pay attention. So I will lay out the Three R's in terms of the (insurance company executive's) horrors they are meant to address.Horror ONE - What if my company sells insurance on the exchange and all the sick people in the state buy only my product!?The first R is called "Risk Adjustment". Remember, right now each insurance company is its own little (or big) pool of well people and sick people. When the insurance exchanges are created, there will be lots of companies (we hope) selling on them; some large and some small. The large ones, having larger pools, are better able to dilute their risk. The small ones not so much. It is possible that some companies just by the luck of the draw will get a disproportionate amount of sick people and they may fail, while other companies get a disproportionate amount of healthy people and they make lots of money and have a stock split. How do we even this out?On the exchange, each person who buys insurance will be assigned a "risk score". If you are very healthy, your score will be low. If you are very sick, your score will be high. All of the scores for each company will be averaged. Those whose risk scores in aggregate are higher than average will receive compensating funds from those companies who aggregate risk score are lower than average. Is this socialism? Yes, if by socialism you mean that everyone in the race starts on the same starting line. What this does (and the Swiss have been doing this well for years) is transform the exchange into one big homogenous risk pool. No one is advantaged and no one is disadvantaged. And this is revenue neutral, in that it merely transfers funds to equal out all the insurance plans.Horror TWO- All those sick people coming aboard the exchanges in 2014-2016 have accumulated years of conditions that are now going to have to be treated, swamping us in claims and destroying America as we know it.The second R is called "Reinsurance". It is true that we expect that 2014 especially will be a big year for lots of sick people who could not get insurance before to get it now. I am not talking Zombie Apolcolypse here, but claims are expected to be higher than normal. Now it turns out that insurance companies are not so worried about the real big claims that, say, top $100 thousand or more. Insurance companies insure themselves (this kind of insurance is called "reinsurance") against the real big stuff, which tends to be rarer than you think. What insurance companies are more concerned about are mid-sized large claims, say between $30 thousand and $100 thousand. So for three years (2014-2016) the insurance companies and the government are going to set up the Second R - a reinsurance fund that kicks in at about $30 thousand or so in claims. This reinsurance fund will cover the gap between $30 thousand and the point where regular reinsurance kicks in. If you think about yourself or your friends with pre-existing conditions, something less than $100 thousand a year is probably more like their situation. This piece will be half tax and have assessment on all insured in the country (thus turning the entire population of the US into one big reinsurance pool for three years). This is the only one of the Three R's that has a tax component.Horror THREE - Even with the first Two R's, the picture is very unpredictable. There might be a guy in a ski mask hiding around the corner. He might have an axe. Or he might have a big bag of cash. What if through no fault of my own I run into the guy with the axe while my competitor runs into the guy with the bag of cash. In other words, what can I do about my unforeseen downside risk in this brand new market?The third R is "Risk Corridors". In a brand new market, even with safeguards like risk adjustment and reinsurance, there still could be a lot of downside risk. Risk Corridors will cap profits and put a floor under losses. Profits are to be had in the exchange market, but if profits go above a cap, the company profiting has to remit these to a fund that will be used to cover (that is, provide a floor) forinsurance companies that sustain a certain level of losses. This will continue for three years until everyone figures out how the market works.Interestingly, this last R is probably the only remotely socialist thing about Obamacare. Profit caps in America? How Bolshevik! But the capitalist companies know that if they want downside protection (and you don't want to pay for it with your taxes; after all, these are insurance companies, not banks) then there has to be an upside ceiling. We are tolerating this because the upside even with the caps is still pretty generous and we are more worried about the downside than the upside at this point. As we do our forecasting for the exchanges, the words "conservative", "cautious", and "prudent" come up a lot while the word "KA CHING!" never appears at all.The point is, we know that there is going to be (and should be) a rush of people with pre-existing conditions getting insurance and that there is pent up demand. We know that it is going to be a rocky ride for us insurance companies for a few years and we think that the Three R's is a conservative, cautious, and prudent way to make things more predictable and we finally find a way to cover most of the people in the United States (in a cost effective way).

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Horror 2 could also be handled by easing into the new system, for example by letting people in gradually: first the people in their fifties, then the ones in their forties, then those in their thirties, then everyone. Couldn't it?

This is truly an outstanding explanation - the kind of thing that deserves to be abundantly linked to. Thank you.I see that the 2nd and 3rd Rs are temporary measures. What about the 1st?I agree that this scheme isn't socialism, but it does sound kinda like a corporate means-tested entitlement - corporate Medicaid for sickly, uncompetitive insurance carriers.Virtually all markets, left to their own devices, evolve oligopolistically. The weak suppliers either die off or are devoured by their more vigorous competitors. (The oligopolistic tendency is mitigated if barriers to entry are low enough that new firms can also enter the marketplace). An argument could be made that this tendency toward oligopoly benefits consumers (and, in this case, taxpayers), because it ensures that the strong competitors are competing in the given marketplace. It does seem to me that the three Rs put an artificial brake on the movement toward oligopoly; relatively weak competitors are propped up rather than suffer the consequences of their ineptitude or bad luck or whatever it is that made them relatively weaker. And the more successful firms are artificially constrained from maximizing their profit. Possibly there will be some grumbling in the corporate suite at bonus time. I'm just analyzing - not really critiquing. I suppose we have to trade some diminished bonuses for a few years in order to insure the previously uninsured. That sounds like a preferential option, or something.

No doubt it could, Claire, if you think it will be possible next year to rewrite a law that half the people in Congress are intent on repealing. But surely it will be better to get everyone covered as soon as possible. Some illnesses are not willing to wait.

Link to NPR on Swiss Health Plan - could it work in USA?http://www.npr.org/templates/story/story.php?storyId=92106731

Republicans would have us believe Obamacare is bad for America. Is there any doubt that a Romney administration would favor the rich and increase the income gap in our country while leaving millions of our citizens uninsured and unprotected? Mitt is a pariah in Mormon Clothing and will stop at nothing to expand an empire of greed for the rich in this country. Can his sacred Mormon underwear gain him enough donations to buy this election? See for yourself as Mitt dons his tighty-whities sent from the Good Lord Himself at http://dregstudiosart.blogspot.com/2012/05/mitt-romneys-magic-mormon-und...

Thank you for the explanation, and thank you Bill deHaas for the story on Switzerland, which is often cited as the country whose mix of public and private insurance is most like ours. I gather that while the US is way out front of all the rest in terms of the percentage of GDP it spends on health care, Norway ranks a distant second, and Switzerland runs closely behind it. Canada is right up there too.I have another question, not so much for discussion as for a link that someone might provide me. We often hear that despite the masses of money we spend on health care in the US, our outcomes are nowhere near so good as those of other industrialized countries. Is this true (I imagine it is), but where's the evidence? (link appreciated).Now a couple of political points. a) why don't the Demos straighten out those who fear the interposition of a government bureaucrat between patient and doctor, deciding what treatments you can and can't have? Why is that any different from the interposition of a health insurance bureaucrat doing the same thing? Aren't they both in the rationing business?b) If it's true (as I suppose it is) that those of us who are insured pay roughly $1,000 more than we should each year to cover the costs of the uninsured who go to hospital ERs, and so forth, why is that $1,000 not simply a tax under another name? Or a charitable contribution under another name, for which we can't take a deduction? Why don't the Demos play that one up too?I have a daughter, married to an Italian, living near Florence, who has had two experiences in Italian hospitals, one when she got banged up in a motorcycle accident, and the second when she had a child (my Italian grandson). She tells me that everything about the Italian bureaucracy is hopeless, EXCEPT for medical care, which works like a charm (and Italy, incidentally, spends much less of its GDP on health care than Norway, Switzerland, or indeed most other European countries. Now that Italy has cleaned up Germany in Euro2012, she probably thinks that the Azzuri work pretty well too. We'll see if they can handle Spain on Sunday. But of course they're not bureaucrats.

I have spent 30 + years in the health insurance and benefits consulting industries. Below are my concerns, as well as the opinions of many experts.Before I begin, I want to address single payer systems. During the healthcare debates under Clinton (e.g., HillaryCare), I participated in a study of 10 country's Healthcare systems compared to the US system. If the Federal Government would have adobted any version of these single-payer plans, including the Swiss system, the US public would have rejected the restrictions versus the so-called benefits. The US public wants reform but not serious restrictions, long waiting times for procedures or the rationing of care which is common among single-payer systems. The other consideration is the tax system and the net take home pay of people under these single payer systems. They pay a significant percent of their income for social services, like healthcare etc. Single payer systems and statistics are often used to point to the need to reform the US system. I agree that the US Healthcare system needs reform. However, before you decide if ObamaCare is the answer, consider the following.1. The "doc fix" has not been resolved yet; it was simply postponed. This amounts to a staggering $276 Billion over 10 years. Where is this money going to come from? It was not part of the CBO's cost/savings estimates for ObamaCare.2. The CBO report says ObamaCare will reduce the deficit. In other words by new reimbursement schemas and taxes and fees (e.g., cuts in Medicare provider fees and increased taxes on dividends). This was estimated to cover the higher costs for insuring the uninsured. However, the CBO report assumes that the reduced payment rates to Medicare providers will have no effect on Medicare beneficaries or Medicare provider services. This is simply absurd. The projected 2019 Medicare payment rates (to providers) are estimated to be LESS than the payment rates in 2013!!! Does anyone really believe this will have 'no effect' on provider services or participation, or that access to care for Medicare beneficaries will not be impacted? Does anyone with a brain believe that these Medicare cuts will really work?3. There are 11 million uninsured that are eligble for Medicaid but are not enrolled. Starting in 2014, these individuals will automatically get covered but the cost for these individuals will not be covered by the special 100% subsidies that the government will offer for "expanding Medicaid". These 11 million will be subsidized at the current 50/50 cost sharing ratio. Given the dire financial condition of most states today, this will not be possible unless state revenues are increased...like increasing state taxes...something that state governors, legislators and citizens will consider unworkable.4. A big part of ObamaCare savings will come from new unproven cost management programs. Some of these programs are "capping payments on a treatment basis". Capping fees has always resulted in provider manipulation especially if the fees are consider unreasonable (significantly less than a provider's cost). Other methods include what amounts to rationing of care based on cost/benefit analysis. Can you envision what this would be like with aggressive cancer treatments? As I said, I am all for reforming healthcare. However, I am not convinced that ObamaCare is the answer.

DIGRESSIONNicholas C. ==I have a question whose answer I couldn't find on the net. Do you know the answer? I saw a sign on somebody's lawn this week that said 'HONK IF YOU'RE FOR BERLIN'. Was that about the playoff? If so -- and this is my question --. does each nation have only one team or do cities have teams that compete?

Michael J. Barberi, wouldn't the "doc fix" problem exist even if ObamaCare didn't exist?

The requirements for Doctor of Medicine have varied widely historically. See the Wikipedia article on the degree "Doctor of Medicine". "According to Douglas Guthrie,[4] . . . the Emperor Frederick II [Aquinas' cousin] decreed in 1221 that no one should practice medicine until he had been publicly examined and approved by the masters of Salerno. The course lasted 5 years, and to start one had to be 21 years old and show proof of legitimacy and of three years study of logic. The course was followed by a year of supervised practice. After the laureation ceremony the practitioners could call themselves "magister" or "doctor.""In the U. S. it used to be that you didn't need a B.S. or B.A. to be admitted to medical cshool, thus shortening preparation in half. It also seems to me that the introduction of advanced nursing degrees is helping to lift some of the burden of routine care from M. D.s. Also, the introduction of neighborhood clinics also seems to be an effort to lessen the need for full=fledged hospitals staffed by highly trained specialists. But it's for the doctors to tell us how these innovations might work best. (I would recommend a year of logic, though :-)

Unagidon, Thanks. (Thanks, too, for the Irish coffee suggestion, but my wife shot that down before the "co.") The remaining question is why the party of the brain dead has not been able to explain that, in simplified form, to the public during the almost three years in which it has not exactly been an undiscussable topic on talk TV and radio. Yea, verily, even with the Supremes on board, sort of, most of the Ds are talking as if the ACA just turned up on their doorsteps one morning.

Claire said:

Horror 2 could also be handled by easing into the new system, for example by letting people in gradually: first the people in their fifties, then the ones in their forties, then those in their thirties, then everyone. Couldnt it?

It could. There are lots of way to "leg" into the ACA. But I don't think that something like this would pass politically. Also, even though I am speaking as a businessman, it is better sometimes to just pull the tooth with a good yank.

Jim said:

I see that the 2nd and 3rd Rs are temporary measures. What about the 1st?

The first is permanent. But again, the principle is to create one risk pool for multiple players.

I agree that this scheme isnt socialism, but it does sound kinda like a corporate means-tested entitlement corporate Medicaid for sickly, uncompetitive insurance carriers.

When the possibility of exchanges was first discussed, even before ACA had a hope of passing, we in the business expected that there would be only one or two companies in each state exchange; the very largest ones in the market. As you can imagine, what with reserve rules and such the entry costs for health insurance are very large.But I think that the idea is to encourage small insurance companies and even new insurance companies to also enter the exchanges and compete. There has been a great deal of consolidation with insurance companies and this is an opportunity to promote some competition. Also (in the case of risk corridors) the mechanism may neutralize the advantage that the largest players intrinsically have with the kinds of discounts they have with the providers. In general, of course, the larger the company, the deeper the discount. This should have a leveling affect on the field.

Brandt, not nice. In the Third Order (Secular) Franciscans, our dead are allowed to be buried (if they choose) in a Franciscan monk's habit. Shall we call this clothing magic too? Hindu Brahmans wear a sacred thread or string to indicate their status. Is this magic too.I am no fan of Romney's. But a man's underwear is his own concern in my opinion.

Unagidon- So are you going to opt for the habit on the big day?

Nicholas said:

a) why dont the Demos straighten out those who fear the interposition of a government bureaucrat between patient and doctor, deciding what treatments you can and cant have? Why is that any different from the interposition of a health insurance bureaucrat doing the same thing? Arent they both in the rationing business?

Good question. I think that part of the answer is that people think that government bureaucrats are politicized and that private sector bureaucrats are not. We don't as a nation trust the civil service any more. There is also the question of "rationing". What the public calls rationing the public (Medicare) and private bureaucrats call "promoting cost effective successful outcomes". The principle here is that we see the claims, so we know what tends to work in most cases (and what doesn't). It looks like rationing, but it's not, in the sense that gasoline was rationed during the War.

b) If its true (as I suppose it is) that those of us who are insured pay roughly $1,000 more than we should each year to cover the costs of the uninsured who go to hospital ERs, and so forth, why is that $1,000 not simply a tax under another name? Or a charitable contribution under another name, for which we cant take a deduction? Why dont the Demos play that one up too?

They don't play it up because although this charge will go away, it won't go away instantly. And you know how politics is. If it doesn't happen like yesterday, it isn't happening at all.

Michael said:

1. The doc fix has not been resolved yet; it was simply postponed. This amounts to a staggering $276 Billion over 10 years. Where is this money going to come from? It was not part of the CBOs cost/savings estimates for ObamaCare.

Please elaborate. I'm afraid that I have heard "doc fix" used in two contexts. First, referring to doctors and second referring to documents.

2. The CBO report says ObamaCare will reduce the deficit. In other words by new reimbursement schemas and taxes and fees (e.g., cuts in Medicare provider fees and increased taxes on dividends). This was estimated to cover the higher costs for insuring the uninsured. However, the CBO report assumes that the reduced payment rates to Medicare providers will have no effect on Medicare beneficiaries or Medicare provider services. This is simply absurd. The projected 2019 Medicare payment rates (to providers) are estimated to be LESS than the payment rates in 2013!!! Does anyone really believe this will have no effect on provider services or participation, or that access to care for Medicare beneficiaries will not be impacted? Does anyone with a brain believe that these Medicare cuts will really work?

This is complicated plus I am an insurance guy so I'm biased. Medicare reimbursements even now are less than 100 percent (probably by one or two percent). Why? Because this is how the government creates incentives for providers to cut their own costs. It's a rough way to do it, but it (sort of) works. So it all depends on whether one thinks that costs will be cut to a measurable degree by 2019 or not (via this and other methods). The movement to pay everything by case rates (take the (getting geeky here) APC case rates for outpatient surgery) should have the effect of lowering costs in the long run. But we'll see, won't we.

3. There are 11 million uninsured that are eligible for Medicaid but are not enrolled. Starting in 2014, these individuals will automatically get covered but the cost for these individuals will not be covered by the special 100% subsidies that the government will offer for expanding Medicaid. These 11 million will be subsidized at the current 50/50 cost sharing ratio. Given the dire financial condition of most states today, this will not be possible unless state revenues are increasedlike increasing state taxessomething that state governors, legislators and citizens will consider unworkable.

This is true. And it is quite possible that Obamacare will end up screwing the most needy people in the country because of it. On the other hand, the states have been knocking people off the Medicaid rolls for years. So this is going to be a problem anyway in any situation that tries to create universal coverage.

4. A big part of ObamaCare savings will come from new unproven cost management programs. Some of these programs are capping payments on a treatment basis. Capping fees has always resulted in provider manipulation especially if the fees are consider unreasonable (significantly less than a providers cost). Other methods include what amounts to rationing of care based on cost/benefit analysis. Can you envision what this would be like with aggressive cancer treatments?

We already have a good idea of what a provider's costs are and we have a good idea of what is and is not a cost effective treatment. (You can look up the former for hospitals at http://www.ahd.com/ which posts hospital's own reported costs/charges for treatments, for example). The insurance companies are not interested in rationing; they are interested in outcomes. They want good outcomes because bad outcomes are more expensive than good outcomes. We don't mind aggressive cancer treatments as long as they have a good chance of working. The criteria for telling whether they work is scientific (i.e. are they already working in other cases). Denying experimental treatments and such looks like "rationing" to people who want to try them, but these sorts of things are going to be "rationed" in any health care system single payer or not.Regarding provider manipulation of claims (things like "un-bundling" where they take charges that should be part of a total case rate and bill for them separately at a higher rate) is already an issue and both the private sector and Medicare knows how to deal with it.

Irene asked:

Unagidon- So are you going to opt for the habit on the big day?

My wife has already told me that she would rather wake me naked than in a habit, so the answer is probably "no". You're just going to have to stand in the back and watch the reaction of the first person who approaches the coffin.

Tom said:

Unagidon, Thanks. (Thanks, too, for the Irish coffee suggestion, but my wife shot that down before the co.)

Ah, God Bless the people who love us who are always trying to watch out for our own good.

The remaining question is why the party of the brain dead has not been able to explain that, in simplified form, to the public during the almost three years in which it has not exactly been an undiscussable topic on talk TV and radio. Yea, verily, even with the Supremes on board, sort of, most of the Ds are talking as if the ACA just turned up on their doorsteps one morning.

I don't know the answer to this. Obamacare seem clear to me (but I'm in the business). Much of what is going to happen when push comes to shove is unknown. I work on the corporate team that is planning for Obamacare, putting together forecasts through 2017 and we fight like cats and dogs (friendly cats and dogs) about what the likely results of each action will be. I can tell you how it's supposed to work and even how I think it will work, but if you look at the good questions that have been posted here so far, the ACA will by its nature generate a lot of controversy and maybe it's controversy as such that the pols are trying to avoid.

Can you clarify:1. ACA mandates a "marketplace" where individuals can purchase insurance. One of the problems in the current system is that individuals are limited to those companies that can sell in their particular state. Will this still be the case under ACA? Or will there be a national marketplace?2. Recently my employer offered a limited medical plan for contract employees. These plans typically pay a portion of your annual check-up and give you a rake-off on your drugs, but do not pay hospitalization, diagnostics, catastrophic care, etc. These plans are probably good for healthy young people (though my own cost analysis showed that the premiums cost more than paying out of pocket; moreover, few doctors participate in these plans, so you have to find a doc who'll accept it). Will these types of policies be sufficient to avoid the penalty/tax for not having insurance?

The solution to the problem of pre-existing conditions is to have a single poolNot at all. A single pool is at best a solution (I would even argue that) but it is certainly not the solution. Much more effective, in my opinion, is to de-link the tax benefit to employers who purchase health insurance on behalf of their employees. Give the tax benefit directly to the consumer, so that heath insurance is not dependent upon employment. The market will be happy to offer non-cancellable policies, if theres a profit to be made. Wed still have the sunk cost of those currently with pre-existing conditions and no health insurance, but we can deal with that separately, and it will eventually run off.

Jean said:

1. ACA mandates a marketplace where individuals can purchase insurance. One of the problems in the current system is that individuals are limited to those companies that can sell in their particular state. Will this still be the case under ACA? Or will there be a national marketplace?

The reason that there is not really a national market is that insurance companies are in the business of (among other things) selling provider discounts to the insured. These discounts are contractual and are almost always local. This business of being able to sell across state lines is (in the absence of an insurer having these contracts in a particular state) is like saying that real estate prices would go down in NYC if we could buy from Arkansas realtors.As for the state exchanges, the exchange will set the parameters for the insurance (the benefit levels). These are called "metal levels" by the way, in the sense that there will be a bronze, silver, gold, etc. Each company will be selling basically the same product with only minor differences. They will be allowed to compete in the exchange based on their ability to offer a standard product at the right price.

2. Recently my employer offered a limited medical plan for contract employees. These plans typically pay a portion of your annual check-up and give you a rake-off on your drugs, but do not pay hospitalization, diagnostics, catastrophic care, etc. These plans are probably good for healthy young people (though my own cost analysis showed that the premiums cost more than paying out of pocket; moreover, few doctors participate in these plans, so you have to find a doc wholl accept it). Will these types of policies be sufficient to avoid the penalty/tax for not having insurance?

No, these will not be sufficient. One of the things about ACA is that it sets minimum standards specifically to keep people from gaming things by offering crappy "insurance" to get around the mandate.

"de-link the tax benefit to employers who purchase health insurance on behalf of their employees. Give the tax benefit directly to the consumer, so that heath insurance is not dependent upon employment."I don't think this would have been a bad idea 10 or 15 years ago as part of an incremental plan that could have lead to health insurance relief for many Americans. In addition, after the debacle of HillaryCare, there was some bi-partisan support for a measure that would give some or all Americans a dollar-for-dollar tax rebate on out-of-pocket health care expenses. But congressional conservatives did not have the will to push forward and pass modest health insurance reform measures. And now they'll have to live with ACA like the rest of us. Typical reactionary m.o.: Do nothing to help anybody, and then gripe about what DOES get passed and promise to save everyone from it by going back to doing nothing.

@Mark: How will shifting the tax subsidy from employers to individuals help those who are currently uninsured? Will the tax subsidy be sufficient to allow those who cannot afford insurance to buy a decent policy? I assume the tax subsidy will have to be a refundable credit, meaning that even if you don't pay Federal Income tax you still get the money? And why would an an individual have more leverage to negotiate a policy than a corporation negotiating a large group?I don't think making modeling medical insurance after the available individual dental insurance is necessarily a good way to go, but that's what it sounds like.

Mark said:

Not at all. A single pool is at best a solution (I would even argue that) but it is certainly not the solution. Much more effective, in my opinion, is to de-link the tax benefit to employers who purchase health insurance on behalf of their employees. Give the tax benefit directly to the consumer, so that heath insurance is not dependent upon employment. The market will be happy to offer non-cancellable policies, if theres a profit to be made. Wed still have the sunk cost of those currently with pre-existing conditions and no health insurance, but we can deal with that separately, and it will eventually run off.

I disagree. The tax benefit would not come close to offsetting the costs that business would be passing on to the worker. Don't get me wrong, I think that business should get out of the insurance business for good business reasons. The current system is a serious drag on our competitiveness (as foreign businessmen never fail to rib me about over drinks). But insurance benefits are part of compensation. It's the ever rising costs that business wants to get out from under and this tax break business is a fake carrot. We need either single payer where both business and the user pay into the system (let them both get the tax break) or we need to control costs so that business can give workers some sort of COLA to cover this part of their compensation.

(Digressions)Ann Olivier: little as I understand Euro2012, these are national teams, not city teams. The Italo Spanish final is on ESPN Sunday at 2.45 PM, I think. HONK if you like Berlin is thus a bit confusing. It's either pro-the German team in its match against Italy; or perhaps it's a Republican financier egging Angela Merkel to hang tough on her austerity measures and not give into Greece, Italy, and Spain. (Max Weber at work). Anyway, the Italians defeated Germany, and Mario Monti and his merry men sound as if they've defeated Merkel, at least for the nonce.

"One of the things about ACA is that it sets minimum standards specifically to keep people from gaming things by offering crappy 'insurance' to get around the mandate."una, many thanks for this thread and your explanations! (As someone who has been trying to get insured for the last several years, I don't find them geeky at all; many of us have been forced to become geeky about Medicaid, and the ins and outs of health insurance.)I found this site helpful in understanding what essential coverage might look like and generally how ACA works: http://101.communitycatalyst.org/aca_provisions/essential_benefit_package

The ACA is far from perfect. It would have been less imperfect, however, if the Republicans had actually participated in an effort to craft a bi-partisan bill. There were some, particularly in the Senate, who would have worked with the Democrats to fashion a Bill with Republican support, but the Republican leadership thwarted that effort. Instead we have the very flawed Bill that has not garnered the support of the American people. The Republican alternative is a mix of helpful, but inadequate solutions (tort reform), and trojans -- selling cut-rate insurance policies across state lines. I credit the Democrats for at least getting something passed (and remember that Pres. Obama was willing to give up on it). I fully understand the limits of our system, but lament that the richest and arguably the most advanced country in the world cannot come up with a better plan.So we are left to try to build on and amend what we have, or throw it all out and go back to the 'every man for himself' libertarian solution.

jbruns"How will shifting the tax subsidy from employers to individuals help those who are currently uninsured?"It won't. That will need to be dealt with separately, but that's the case with any true reform. What it will do is ensure that no more people are added to the ranks of those unable to purchase insurance because they a pre-existing condition--and that's no mean accomplishment!"Will the tax subsidy be sufficient to allow those who cannot afford insurance to buy a decent policy?" If someone cannot afford a decent policy, that's not a healthcare problem, that's a welfare problem, and should be treated as such."And why would an an individual have more leverage to negotiate a policy than a corporation negotiating a large group?"In 2012, with the efficient distribution systems available through the internet, affinity groups, social media, etc., there are numerous forms of buyer leverage outside the traditional employer leverage.

Holy Cowas a state insurance regulator who has responsibility for implementing the Three R's, I have to wonder what on earth is this level of earnestness on such a dry topic doing in a magazine of Catholic Commentary - good show by all. una's comments and concersns are dead on. The Three R's draw heavily from the experience of some European Countries with heavily regulated but private health isnurance markets on what has to be in place for a well functioning market. And what does "well functioning mean"? - one where insurers compete for customers REGARDLESS OF THEIR HEALTH STATUS. Absent these sorts of provisions, the way to succeed in health insuranced is find healthy people and avoid sick peopel. (Pricing sick people more is a distant second). As an implementer, I have the following concerns- making this work in a 50 state federalist system. Every state has the option to do this themselves are default to feds. That means lots of rules and lostof potential for variation or messing up. As a state guy with a state based market, I want to these levers and tools myself - we are close to the consumers, the employers, the brokers and the providers. And as we insurance poeple like to remind banking types - 50 sets of eyes are better than one. But this comes at the cossts of duplication. The three R-'s- thier technical detail, thieir iomportance - underscore the fundamental reality of the ACA. It is built on our current pluralistic, choice- obsessed, disintgerated system of financing and care. This reform is complicated and technical but at least imaginable politically in a way that even more sweeping reform is not. Finally a word on individual purchase of insurance. I think in any privately financved sustem it must be a policy goal. Employer based insurance creates moral hazard (playing with house money - "I got it, I might as well use it"). You can create market oversight to prevent consumers from making dumb decisions or getting ripped off. but there are significant tax barriers to implementing it. European insurance markets with individual purchase and well-administered risk sharing programs have insurers that specialize in attracting people with chronic conditions. Just imagine that in the US.

Unagidon--The falsity of your assertion that "The tax benefit would not come close to offsetting the costs that business would be passing on to the worker."Is seen in your keen observation that "insurance benefits are part of compensation."The employee's salary/benefits are determined by the supply and demand for labor. Any benefits that the employer Is currently providing to the employee, through subsidization or absorption of health care costs, will simply be passed on to the employee. There are no net costs that business passes on to the worker.

Mark, if what you say is true (and it's not) then business wouldn't care if they provide benefits or if the whole thing is passed on to the worker. But business cares very much indeed and the reason is that they want to get out of the cycle of paying double digit increases each year for insurance benefits. They even have a built in excuse for not paying these increases once the workers become totally responsible for the costs. "The employee's salary/benefits are determined by supply and demand for labor." Sorry, labor, but supply and demand requires us to cut your benefits.

unagedon,1. The doc-fix refers to the money needed to make up for the required cuts in Medicare provider reimbursement rates that has not gone into effect because the Congress keeps "kicking the problem down the road". Congress keeps extending it one year at a time. The cuts amount to about 27% of current Medicare reimbursement fees and cost about $300 Billion over 10 years to eliminate. These costs are not part of ObamaCare cost projections and the costs will have to come from somewhere....like reducing entitlement program spending. Republicans will not allow Democrats to play budget games but demand that any cost be offset by spending cuts.Medicare reimbursement rates under ObamaCare are already to be reduced significantly (on top of the cuts that have been postponed). This will cause provider participation rates and access to care to significantly decrease.2. Rationing of care is what the government will be doing, not the insurance companies under ObamaCare. In order to cuts costs, improve quality of care and eliminate fraud and abuse, a "best practices" system will have to be established. This means that the entire healthcare system will have to be electronically linked (wired up). Procedures and treatment plans will have to be approved preferably a priori. If retrospectively, the appeals system will get overloaded like nothing anyone has seen to date. This does not mean that such a system is not feasible, but at the moment the 'capped rates per treatment' approach will get manipulated just like case rates. Thus, it is questionable if this new reimbursement schema will work without causing costs to increase from projected.Medicare has NOT solved the bundling unbundling problem. It has not solved the extra tests and extra visits problem either. Organizations sell the government software to detect unbundling, while other organizations sell the hospitals software to get around it. If the current system was working, there would be no reason to change to ObamaCare. There are good ideas in ObamaCare, but the problems I have listed, and there are more of them, will cause costs to skyrocket and the hoped for savings will not be realized. In my 30+ years of experience, most government programs have under-estimated costs and overestimated savings. I hope I am wrong about ObamaCare.

Unagidon--Rather than just saying you are wrong, let me explain why I think that. You are confusing 2 separate, but related concepts. Yes, business would like to relieve itself of the impact of medical cost inflation and its impact on future costs--who wouldn't? But that doesn't mean the employee would have a net increase in costs if the buying decision were transferred to him. If healthcare costs increase, ultimately the employee bears the freight in any system, either in reduced benefits or reduced salary. Many employers are using high deductible programs (and associated HSA) accounts, to reduce overall costs (importantly, for both employer and employee). With these programs, the employee has more skin in the game, so the price mechanism is allowed to works its waste-eliminating magic. Transferring the buying decision to the employee is simply a better way to do this, as it does not increase the net costs to the employee, and the efficiencies that come with it will serve to reduce the inflationary impact. It's a win-win.

Michael said:

Medicare reimbursement rates under ObamaCare are already to be reduced significantly (on top of the cuts that have been postponed). This will cause provider participation rates and access to care to significantly decrease.

Fair enough. But this mode of cost cutting (which has indeed been kicked down the road over and over again) has failed and will continue to fail whether Obamacare survives or not. I agree that insofar as this has been priced into the equation in the future it will not materialize. But would it have ever?

Rationing of care is what the government will be doing, not the insurance companies under ObamaCare. In order to cuts costs, improve quality of care and eliminate fraud and abuse, a best practices system will have to be established.

But this is what commercial insurers are doing now. Why don't you call it rationing when we do it?

Medicare has NOT solved the bundling unbundling problem. It has not solved the extra tests and extra visits problem either. Organizations sell the government software to detect unbundling, while other organizations sell the hospitals software to get around it. If the current system was working, there would be no reason to change to ObamaCare.

Well. welcome to my world. I think that we (the commercial sector) is getting more sophisticated in dealing with this. But it is true that this will be a problem no matter what. It's part of the business.

There are good ideas in ObamaCare, but the problems I have listed, and there are more of them, will cause costs to skyrocket and the hoped for savings will not be realized. In my 30+ years of experience, most government programs have under-estimated costs and overestimated savings. I hope I am wrong about ObamaCare.

Costs are already skyrocketing. What interests me is what will happen when providers can't require commercial insurers/insured to subsidize the system as they do now. I am not seeing that addressed in the ACA. If I were on the hospital side of things, I would be very optimistic about the near future.

Mark, I agree with you that a system in which the consumer is spending his own money will yield a more engaged consumer, but not necessarily a wiser or healthier consumer. But you grant too much efficiency to the market. The whole point of transferring the health care insurance to the consumer is to cause the consumer financial pain -- "skin in the game." There really is no such thing as a free lunch. If you want efficiency, go single payer.

Mark said:

But that doesnt mean the employee would have a net increase in costs if the buying decision were transferred to him. If healthcare costs increase, ultimately the employee bears the freight in any system, either in reduced benefits or reduced salary.

Why won't it mean this? Companies are rather locked in to the need to provide health benefits. They do all kinds of things to pass costs on to the consumer, certainly. But in the end the provision of health care benefits by business in the United States is basically an all or nothing thing. They would love to get out of this.If they did get out of this, and the "market" ruled, it would be the power of business against the power of the individual worker. I think that you could completely bet that net average health reimbursements would fall for everyone.

Many employers are using high deductible programs (and associated HSA) accounts, to reduce overall costs (importantly, for both employer and employee). With these programs, the employee has more skin in the game, so the price mechanism is allowed to works its waste-eliminating magic. Transferring the buying decision to the employee is simply a better way to do this, as it does not increase the net costs to the employee, and the efficiencies that come with it will serve to reduce the inflationary impact. Its a win-win.

You talk about skin in the game. There is still no market transparency for medical costs in this country (even though we are seeing the very beginnings of this now). No market transparency, no market. Skin in the game means that people will curtail seeing health care (as they have these past three years since the Depression put all this skin in the game). If business, which is relatively strong, can't control costs in the way that you say, how are consumers who, individually, are relatively weak going to do it?

"But in the end the provision of health care benefits by business in the United States is basically an all or nothing thing."I think my previous comment, that is, the move towards high deductible policies, already showed that this is not the case."If they did get out of this, and the market ruled, it would be the power of business against the power of the individual worker."What I think you are missing is that there are, what, 100 million of these individual workers? That's an awesome amount of power."There is still no market transparency for medical costs in this country (even though we are seeing the very beginnings of this now). No market transparency, no market."Eureka! You are making my point now! We are seeing the very beginnings of it, as consumers get some skin in the game. As the buying decisions are transferred more and more to the individual employee/consumer, the market has a chance to work its magic. The reason we are in this mess now is that it's take so long to see this. I don't see Obamacare doing anything but thwarting this felicitous transformation.

"Every state has the option to do this themselves are default to feds. That means lots of rules and lots of potential for variation or messing up."Christopher, do you mean every state has the option to do this OR default to the feds? Perhaps you or unagidon would care to comment on the points below.1. My sense is that the ACA is going to very quite a lot by state because:a) Each state has the right to administer Medicaid funding with many variations.b) Insurance premium rates will be determined by the health of the pool as determined by the actuaries. E.g., residents in "fat" states or states with higher morbidity rates will pay higher for premiums (though a new thing with some insurance companies is to give discounts to policy holders who lose weight or address other medical concerns; last year my doctor's office is cluttered with people who have to have their weight verfied by the nurse to report to the insurance company in order to get premium reductions, which strikes me as an extremely poor use of her time).2. I also assume that ACA (assuming it withstands GOP promises to make overturning it their very first priority) is going to spark periodic wrangles over the years because HHS determines what "essential care" is. Catholics arguing that contraception is not "essential care" or that they should have to pay it on religious grounds might be only the first of many wrangles over the definition of "essential care"--or who is exempt from paying for certain elements of "essential care."

Sorry, I'm not sure I was clear. In #2 above, I mean that if HHS determines the definition of "essential care," won't it be possible for this definition to be tweaked and changed, depending on which party is running HHS and as new medical advancements prove efficacious--or not?

"If you want efficiency, go single payer."Jbruns--Given the time of year, I will quote the inimitable John McEnroe: You can NOT be serious!

I think my previous comment, that is, the move towards high deductible policies, already showed that this is not the case.

Yes, it is the case. What would prove your case is if there was a significant increase and development in the individual market, which there has not been.

What I think you are missing is that there are, what, 100 million of these individual workers? Thats an awesome amount of power.

It would be if they were organized. Now let's look at who is organized and what they are getting done. The insurance companies are organized yet they have been unable to keep costs down. The businesses are far more organized than the consumers are (they are, after all, the current consumers of insurance) and with their massive and organized economic power they can't keep costs down. One hundred million unorganized consumers are one hundred million individuals. They have a chance to be organized with the ACA. That's part of what it's about.

The reason we are in this mess now is that its take so long to see this. I dont see Obamacare doing anything but thwarting this felicitous transformation.

The market has up to now failed and will fail by itself to insure millions of people. These people nonetheless need medical services and constitute a massive drag on our economic system. There is no miraculous transformation going on right now.

Unagidon--"It would be if they were organized."I think you have a stunningly fundamental misconception as to how the market works. Take any good or service for which there is a competitive market, say the purchase of an automobile. Are the consumers "organized"? Of course not. Does that mean GM, Honda, Toyota, Fordetc control the market, can charge what they want? Of course not.

Unagidon@ 3:42 pm"There is still no market transparency for medical costs in this country (even though we are seeing the very beginnings of this now). No market transparency, no market."Unagidon@ 4:23pm"The market has up to now failed and will fail by itself to insure millions of people."Ok, so if the market has never been tried, how can it have failed?

Unagidon,I think you are not grasping the real issues. You seem to be agreeing with me on many of my points, so I don't understand your point. 1. The doc-fix issue is a major problem and ObamaCare does not address it. Thus, we have $300 billion of costs unaccounted for and no solution.2. Medicare provider rates will fail as proposed under ObamaCare. Yes, the current rates are a problem as well, as my point #1 addresses. Therefore, ObamaCare provides not real solution to cost control without sacrificing provider participation and access to care.3. Commercial insurers are NOT rationing care. If you are referring to fully insured plans, then raising the premium or cutting benefits is not rationing care. For self-funded plans, that cover the majority of US citizens, the insurance company is only the "administrator" of the plan. They don't make coverage decisions that are not part of the plan document which is the legal instrument that governs the benefits. An example of rationing of care is: people over age 65 or 70 cannot get a hip replacement or a heart transplant because the cost/benefit analysis does not measure up to a government imposed standard. Rationing occurs as part of a government mandated control mechanism (by law...like in the UK or Canadian system). Rationing is caused by providers that are not accepting new patients or don't participate in Medicare anymore....this causes a certain type of rationing of care because other providers cannot offer immediate care because they are over-burdened with patients and you have to wait a year or two for an appointment for a special procedure. 4. I fail to understand your last comments. Yes, costs are skyrocketing and employers and the government have a big problem. What else is new? My point is that ObamaCare is serious flawed for the reasons I stated, and some that I have not, and ObamaCare is far from the solution. Yes, we have to do something. However, given the state of our economy and the world, we cannot afford to implement a huge, complicated and costly experiment. The good news is that because of ObamaCare, this country has started on a road to fix the problem because if the Republicans control the White House and Senate next year, then they will be forced to replace ObamaCare with something with teeth, even if it is not a full set. If Obama wins the election, we are in big trouble. When things get out of hand, something will be done, but we may be paying a big price to unravel the mess.

I think you have a stunningly fundamental misconception as to how the market works. Take any good or service for which there is a competitive market, say the purchase of an automobile. Are the consumers organized? Of course not. Does that mean GM, Honda, Toyota, Fordetc control the market, can charge what they want? Of course not.

Can you value shop to have your appendix out? Find out who the best "dealers" (doctors) are? Of course not. Why do you suppose that is?

Ok, so if the market has never been tried, how can it have failed?

The market has already failed. Who on earth is ever going to supply medical benefits to people with pre-existing conditions. Where would the profit be in this?

Mark, are you talking about a market for health insurance or a market for medical services...just asking because they are two different things.

1. The doc-fix issue is a major problem and ObamaCare does not address it. Thus, we have $300 billion of costs unaccounted for and no solution.

As we will without Obamacare. I agree with you that Obamacare doesn't address this. In fact, it is weak altogether on the question of costs.

2. Medicare provider rates will fail as proposed under ObamaCare. Yes, the current rates are a problem as well, as my point #1 addresses. Therefore, ObamaCare provides not real solution to cost control without sacrificing provider participation and access to care.

Not exactly. It means that costs will not be as low as the government forecasts, a point you already made. But if you think that at some point the government (even a Republican one) will play catch up and drop reimbursement rates by double digits, well, that's never going to happen.

3. Commercial insurers are NOT rationing care. If you are referring to fully insured plans, then raising the premium or cutting benefits is not rationing care. For self-funded plans, that cover the majority of US citizens, the insurance company is only the administrator of the plan. They dont make coverage decisions that are not part of the plan document which is the legal instrument that governs the benefits. An example of rationing of care is: people over age 65 or 70 cannot get a hip replacement or a heart transplant because the cost/benefit analysis does not measure up to a government imposed standard. Rationing occurs as part of a government mandated control mechanism (by lawlike in the UK or Canadian system). Rationing is caused by providers that are not accepting new patients or dont participate in Medicare anymore.this causes a certain type of rationing of care because other providers cannot offer immediate care because they are over-burdened with patients and you have to wait a year or two for an appointment for a special procedure.

But you referred, I think, a best practices system. Some types of care are denied as not conforming to best practice. This is at the heart of how HMO care is delivered. Regarding the outright rationing of medical care to the elderly, this isn't happening now. Why especially should it happen in the future?

4. I fail to understand your last comments. Yes, costs are skyrocketing and employers and the government have a big problem. What else is new? My point is that ObamaCare is serious flawed for the reasons I stated, and some that I have not, and ObamaCare is far from the solution. Yes, we have to do something. However, given the state of our economy and the world, we cannot afford to implement a huge, complicated and costly experiment. The good news is that because of ObamaCare, this country has started on a road to fix the problem because if the Republicans control the White House and Senate next year, then they will be forced to replace ObamaCare with something with teeth, even if it is not a full set. If Obama wins the election, we are in big trouble. When things get out of hand, something will be done, but we may be paying a big price to unravel the mess.

Here we have to agree to disagree. The Three R's above is a reasonable start of a solution. I don't know what you mean about Republican solutions with teeth, unless you are talking about curtailments of current benefits, which would be rationing indeed. I can't imagine that you are talking about price controls.What Obamacare does is consolidate individual and small business populations. The pure redistribution of actuarial risk is alone a good idea. And while we insurance companies were originally very worried about Obamacare, we now believe that we can work with it. (I don't think I'd want to be a small business broker in two years, however. Or a small business underwriter for that matter.) Obamacare is a start. It leaves the commercial market for insurance, including much of the current market mechanisms that my friend Mark Proska believes in so much, relatively intact.When you say it woudl be expensive to unwind, I am assuming that you mean that should Obamacare be eliminated at some point in the more distanct future, it would be politically hard to bring back pre-existing condition policies and to cancel insurance for the millions who will now be insured. I agree that it would be hard. But the richest country in history has to ask itself why it can't seem to do what other countries can do. Maybe we are putting many of our resources in the wrong place?

1. My sense is that the ACA is going to very quite a lot by state because:

a) Each state has the right to administer Medicaid funding with many variationsb) Insurance premium rates will be determined by the health of the pool as determined by the actuaries. E.g., residents in fat states or states with higher morbidity rates will pay higher for premiums (though a new thing with some insurance companies is to give discounts to policy holders who lose weight or address other medical concerns; last year my doctors office is cluttered with people who have to have their weight verified by the nurse to report to the insurance company in order to get premium reductions, which strikes me as an extremely poor use of her time).

Sort of true. There will be differences between states. The states, for example, can determine the ultimate reinsurance levels ("R number two"). And you would think that states with more fat people would have higher premiums. But this will also depend on the relative cost of living in the state. A more rural state will have a lower cost of living even if it has more sick people.Regarding the nurse taking the weights, she has to do it so it's "official".

2. I also assume that ACA (assuming it withstands GOP promises to make overturning it their very first priority) is going to spark periodic wrangles over the years because HHS determines what essential care is. Catholics arguing that contraception is not essential care or that they should have to pay it on religious grounds might be only the first of many wrangles over the definition of essential careor who is exempt from paying for certain elements of essential care.

True. But essential care will probably boil down to a minimum of preventative care although everyone and his mother will be trying to load it all down with fashionable mandates like contraception.

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