“Death spiral” is an actual technical term in the insurance industry, used by actuaries to describe a rare sequence of events that leave a once profitable insurance product a heap of smoldering metal. Whenever I heard it brought up, it was done so in a hushed voice, because once a product went into a real death spiral, all that was left was to lead it out into the woods, tie it to a tree, and shoot it in the head.
Paul Ryan likes to talk about death spirals when he talks about Obamacare, not because he is actually describing one but because “death spiral” sounds real scary, maybe even to him. Death spirals are very rare insurance events that require something to happen that causes relatively well people to withdraw from an insurance plan, leaving most of the truly sick behind. The spiral comes when the insurance company raises prices in order to pay for this greater proportion of sick people, and this price pressure causes even more of the healthier people to leave the plan, which then causes another sharp price increase, followed by more attrition, and on and on until it’s time to lead old Rover out into the woods for that last walk.
This is simply not happening with Obamacare. There is no attrition of healthier people going someplace else. There is no increase in the proportion of the sick in the covered population as a whole. Obamacare has been expensive, but then what would one expect if one starts to suddenly insure millions of people who had not had insurance (and treatment) for years or decades? And while the price of Obamacare policies did increase, a lot, over the course of several years for a number of reasons, the main one was that the original policies were not priced high enough to begin with, because no one had any way of knowing how sick these people would prove to be. That anyone would still be breathless in astonishment about any of this, that sick people used doctors and hospitals and this turned out not to be free, is rather astonishing behavior for adults.
So the technical requirements of a death spiral are not there for the ACA. But the current Republican plan to defund Obamacare will definitely lead to one. And when it does, we can then blame Ryan and his pals for making it happen.
If you have read this far, you already know the details about how the rich Obamacare subsidy will be replaced by a very poor “tax credit.” Young healthy people will get a minimum of $2,000 a year and older, sicker people will get a maximum of $4,000 a year. The maximum subsidy is about a third of what the current subsidy is for older people, but in the meantime they will see their premiums rise to a massive degree, since the multiplier for their premiums (the ratio of what older people can be charged relative to younger people) will shoot up from 3:1 to 5:1. The much higher premiums, coupled with the much lower subsidy, will chase most people from the market, unless they are already so sick that it still makes sense for them to buy insurance at any cost.
As for younger people, the mandate requiring them to buy insurance in the first place will be eliminated and replaced with a pretend penalty that will require them to pay a 30 percent surcharge to any insurance premium should they become ill and suddenly decide that they need insurance. Since they would have to be quite ill for this to happen, this 30 percent is going to be a drop in the bucket of the expenses they will incur. So between pushing out the relatively healthy and keeping the relatively sick, Ryan and his buddies will be creating a death spiral where there isn’t one now.
Ryan has been pushing all sorts of fantasies about how the “market” is going to somehow create new, much cheaper products that will replace the Obamacare that people have now, but frankly, he’s simply lying. There may be more “choice” in the sense that rotten coverage will again be available as it was before the ACA. But the choice of being able to buy something like Obamacare will be lost for most of the people who have it now. This is how the middle class is going to be screwed. For the poor on Medicaid, there isn’t even the need for Ryan to lie, since the poor by definition have to take what they can get. And the Republicans are going to cap Medicaid in such a way that it is going to roll back current enrollments or cut current levels of benefits. Things are going to get worse for the poor, just when we saw some things starting to get better for them.