The Logic Defying CBO Obamacare Replacement Score Breaks Its Own Rules, Among Other Problems
(A version of this Health Alert was published by Forbes.)
Dr. Tom Price, the U.S. Secretary of Health & Human Services has said the Congressional Budget Office’s recent “score” of the Republican Obamacare replacement bill defies logic. Even worse, it defies the very rules which govern the CBO.
The 2016 Budget Resolution, agreed by both the House and Senate in May 2015 directed the CBO to do so-called dynamic scoring of major legislation. Dynamic scoring includes proposed laws’ macroeconomic effects. It is especially important when new laws cut taxes, as the American Health Care Act would do. Old fashioned, static analysis does not result in accurate estimates.
For example, say a 10 percent tax on a base of $100 million raises $10 million. Cutting that tax to five percent would cut revenue by $5 million, under static analysis. This ignores the economic growth that would occur as a result of the tax cut.
The AHCA eliminates almost all of Obamacare’s taxes. Even according to the CBO’s static analysis, the bill will reduce the federal deficit by $337 billion over 10 years. This combines a spending cut of $1.2 trillion and a cut in tax revenue of $0.9 trillion.
This effect on the federal government disguises the reform’s benefits to real people. The CBO claims it did not have enough time to prepare a dynamic analysis. Fortunately, the National Center for Policy Analysis has just done so. The analysis concludes the AHCA would increase real Gross Domestic Product by $426 billion, or 1.5 percent; increase private sector employment by 940,000, or 0.49 percent; and increase personal income by $185 billion, or 0.76 percent.
Critics of the bill focus on the increase in the number of uninsured Americans who will lose coverage under the AHCA. The media tried to instill panic by highlighting the estimate of 24 million losing coverage by 2024. This is inaccurate because only 10 million will lose actual health insurance. The other 14 million will lose access to the welfare program called Medicaid, which provides poor access to care and results in surges of visits to hospitals’ emergency departments.
The CBO’s crude numbers ignore the fundamental change in how Congress will finance Medicaid. Instead of just handing money over to states according to a formula that promotes fiscal insolvency, states will receive fixed funding and be freer to innovate how they deliver health care. Medicaid reform is on a path to replicate the success of other welfare reform passed in 1996, which put millions back to work.
The estimate of 10 million losing actual insurance is also off-base, because it includes seven million estimated to lose employer-based coverage, versus under Obamacare. This is unrealistic because the AHCA will promote economic growth, while Obamacare has stifled it. The GOP reform will lead to more jobs with health benefits.
One way Obamacare stifles growth is the structure of its tax credits, which impose high marginal income tax rates at certain income levels up to 400 percent of the Federal Poverty Level. The CBO itself estimates this will cost two million jobs in 2025. Avik Roy explains this drawback is also a feature of the AHCA’s tax credits, which are adjusted for age. However, the tax credits are not adjusted for income for people whose incomes are higher than the Medicaid cut-off and up to $75,000 for an individual or $150,000 for a family.
According to Dr. Roy’s analysis, a 40-year old with an income up to about $12,500 would be on Medicaid, which is “free.” Once he earns $12,501, he gets kicked off Medicaid and has to buy individual health insurance for just under $2,000 annually, after having been helped by the AHCA’s tax credit.
For anyone around that income level, this provides a huge disincentive to work. However, the effect does not impact anyone already earning more than $12,500. Nobody else earning higher incomes would suffer this disincentive under the AHCA. Under Obamacare, catastrophically high marginal income taxes attack individuals all the way up the income scale to just under $50,000 for a single person or $100,000 for a family of four.
For any working person who wants to be free of worrying whether working an extra shift or getting a promotion will cause a drop in her income after paying for health insurance, the GOP Obamacare replacement bill offers meaningful relief.
The federal deficit has been about $500 annually for several years. The excess cost of our nation’s healthcare, as estimated by its comparison to the other developed nation’s cost of healthcare defined by its portion of their nation’s economy, has has created an excess cost for the Federal government of $300 Billion annually. This represents 60% of the annual Federal deficit. So, a savings with AHCA 2017 of $377 Billion over 10 years represents maybe $38 Billion annually and a reduction of the annual Federal Deficit by 8%, maybe.
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As I have said before, our efforts to achieve meaningful universal health insurance will be neither justly efficient nor reliably effective without a nationally sanctioned and locally initiated process to achieve justly available ‘enhanced’ Primary Healthcare for each citizen. The improvement of Primary Healthcare should be locally coordinated with a collective action process to improve the community’s “social capital” as a means to ameliorate the unique adversities that affect the HEALTH of the community’s citizens. There is really is no centralized, coercive and bureaucratic strategy that will produce the change that will be required at the “front lines” of healthcare.
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I am aware that the CBO analysis probably “figured in” the growth in the GDP by the reduction of taxes related to eliminating ACA 2010. So, the main result would possibly represent an unfunded mandate to the States who implemented Medicaid expansion because now the citizens of these States will continue their healthcare with an expectation that the healthcare systems will “give it away.” Its likely that our nation’s commitment to universal health insurance beginning in 2010 will result in an even greater resistance in the healthcare industry to national healthcare reform. The rule of unintended results applies.
CORRECTION: The annual deficit has been $500 Billion annually. paul
Paul, your uninformed Socialist opinion is really showing through with this comment that you spew. YOU can read the Obamacare Replacement over lunch it is so short. The age-based tax credits may be used to purchase any insurance in the Individual Market. In Omaha a 30-year-old couple and 2 children can purchase a Individual PPO product for $455 a month in the 68101 zip code with a $2,500 deductible then 100% coverage with the national Aetna Open Choice PPO Network with 800,000 participating docs and 6,900 hospitals. This is $$5,460 a year for this Corn Husker family. The age-based tax credits are $9,000 for this family so this means the unused credit of $3,540 will be deposited into the family’s HSA TAX FREE for 1st dollar coverage of medical, vision or dental expenses.
This is an IQ Test Paul. YOU are suggesting that this Corn Husker family won’t take the HSA Qualifying insurance that is 100% paid for by President Trump even though President Trump will give them $3,540 in their HSA if they take the FREE insurance. This is a perfect example why Americans should NEVER listen to doctors about insurance because YOU are so uninformed and too lazy to read such a short bill as President Trump’s Obamacare Replacement.
Paul, if you are as bad at being a doctor as you are at understanding insurance I know EXACTLY who not to see when my child has a medical problem – YOU!
YOU should leave insurance to people who know what they are talking about Paul. This is the NCPA blog and we expose Socialists like YOU as easy as breathing air.
I appreciate your assessment of the details. It is clear to me that the excess cost of our nation’s healthcare will not be solved by our current efforts to arrange universal health insurance. The Altarum Institute estimates that the cost of our nation’s healthcare for 2016 will be $3.46 Trillion, 18.2% of the national economy, with an increase of spending for 2016 of 5.7%. The AHCA 2017 intends to decrease the total funds allocated to expanded State Medicaid coveage with an effect to decrease in the covered lives, especially without the mandate. I am in favor of the AHCA 2017 but also favor a process to encourage the healthcare industry to improve its quality and efficiency.
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There is no reason to anticipate that the current efforts for healthcare reform by the industry will reduce our nation’s maternal mortality level OR reduce the over-all cost of healthcare per citizen. “All” of the other developed nation’s spend 13.1% or less of their nation’s economy on healthcare. Its now 18.1% for our nation. For our nation, the excess cost POSSIBLY represents nearly $948 Billion of which the Federal Government pays nearly 40% (…$379 Billion).
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Our long term options, 1) increase the growth of the economy so that it is faster than the current growth of healthcare spending, 2) institute rationing, 3) continue as we are and wait until the next recession to decide what to do OR 4) look for alternate processes to improve the means for renewal from within the healthcare industry itself. Meanwhile, the quality of our nation’s healthcare is inadequate, and its cost is bankrupting our nation’s autonomy within the world-wide marketplaces of RESOURCES, KNOWLEDGE, and HUMAN DIGNITY.
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So, the politics of change are complex. It is especially complicated now by a history of a recession occurring every 8 years. The last was 9 years ago. What is fundamentally lacking is a need to generate healthcare reform in collaboration with the healthcare industry itself, community by community. This represents the current strategy for reducing homelessness by HUD and the long-term strategy for the agriculture industry to enhance its efficiency and quality (the Cooperative Extension Service enacted by Congress in 1914). The models for change already exist and the KNOWLEDGE for their use has already been fully evaluated. We only lack the focus and courage to make it happen.
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Martin Luther King, Jr. said: “The ultimate measure of a man is not where he stands in moments of convenience and comfort, but where he stands at times of challenge and controversy.” Along with Universal Health Insurance, we should use this time of change to reform the means by which we offer the health care for the Basic Healthcare Needs of each citizen. This level of health care should also coordinate these Basic Healthcare Needs with any health care required for a citizen’s Complex Healthcare Needs, community by community. When combined with each community’s effort to reduce the adversities affecting their local health, we will have the best means to improve the over-all HEALTH of our citizens, as well as the efficiency of the healthcare industry. We already have good evidence that HOUSING FIRST will reduce the cost of healthcare for certain homeless persons from @ $70,000 annually to $6,000 annually just by arranging supportive housing.
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Former Senator Benjamin Barber has said: “The language of citizenship suggests that self-interests are always embedded in communities of action and that, in serving neighbors, one also serves one-self.” I suggest that this view of community has been a tradition of our nation since the Mayflower voyage almost 500 years ago. Now is the time to renew the importance of the community for our current time of change and controversy.
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See ALTARUM INSTITUTE Spending Brief #17-03: January 2017 data
Ron, why don’t you tell us what the same plan in the same zip code would cost a 60 year old couple with two kids and how much they will get in age-based tax credits. Of course, they will presumably have to pass underwriting to get this plan which many will not be able to do at that age but that doesn’t matter to you. By the way, Trump is not paying for their tax credits. TAXPAYERS are.
Underwriting? Where is that being allowed?
Presumably, guaranteed issue only applies to exchange plans. With no mandate to buy coverage, people should be able to buy an underwritten plan if they want to and buy another one each year for as long as they can pass underwriting. Whether it qualifies for age-based tax credits in the final bill or not remains to be seen. The exchange plans will then morph into de facto high risk pools and cost a fortune. People who have to buy those plans will presumably need both age-based tax credits and a subsidy on top of that to ensure that they pay no more than 10% of pretax income in out-of-pocket health insurance premiums.
I wasn’t aware that underwriting was being allowed for off-exchange plans (STM and grandfathered plans being the exception).
If that were the case, I can’t imagine the exchanges lasting as long as they have.
I think STM will probably still be allowed in the final bill and insurers may even offer an enhanced STM plan with fewer exclusions at a higher premium for those who want that. Couple that with many of the young and healthy choosing to remain uninsured and the exchanges will become de facto high risk pools with extremely high premiums that are unaffordable for most people without significant subsidies.
We already see “unaffordability” (in quotes because it is a debateable term) under the PPACA exchanges and the “unaffordability” will get worse.
Though the plan being suggested is not my cup of tea we must recognize that the comparison is not with perfection as you seem to suggest, barry. We have to compare the plan to the PPACA and the fact that the “unaffordability” rate will drastically climb.
Interestingly, if you replace “the plan being suggested” in the previous comment with “the status quo,” the result is essentially my past comments to Allan and others.
Bart, you lost me.
not sure how it relates to the math or the proposed law but how many 60 year olds have two kids that would come under their insurance policies? When I was 60 my kids had two kids
Maybe college age, born when the parents were late 30’s.
Kids can be on till 26-years-old. HECK people, President Trump is 70-years-old and he has a 14-year-old.
Besides Barry asked me for the rates for this family.
Actually, Trump’s youngest son, Barron, is only 10 at least as of two months ago.
People are marrying later and having kids later. Also, second marriages often result in a second family. Plenty of women give birth into their 40’s these days and many husbands are considerably older than their wives.
Plenty of adoptions as well.
Barry, a 60-year-old couple with 2 children can get United Health Care HSA Qualifying STM in the 68101 Omaha zip code with a $2,500 deductible then 100% coverage for $544.01 per month or $6,528 per year. Their tax credits are $12,000 per year so this old couple would get their insurance paid 100% then President Trump would deposit $5,472 in their HSA, TAX FREE!
See Barry you are always wrong. FREEDOM finds a way!
Stop the ban on Ron Greiner
PS: If this old couple pays quarterly the premium drops to $1,264 or $5,056 per year so the HSA deposit grows to $6,944, TAX FREE!
The NCPA censorship and PROPAGANDA is SLIME!
https://www.youtube.com/watch?v=RWoxUvWHtB4
Z Woof, how do you know this was not just a computer glitch since you are posting now with apparently no known problems?
Do you feel guilty or something like that?
Allan, NO, I don’t feel guilty. I don’t know what happened but I don’t get any follow up comments anymore either. By accident I saw Barry’s question about the 60-year-old family and it really opened my eyes. It isn’t everywhere in America but there are pockets where UHC STM comes in pretty handy. Like here in Omaha with a 60-year-old family.
But, check this out, in IOWA zip code 50010, AMES, IOWA, a 30-year-old couple and 2 children can get UHC STM with a $2,500 deductible that pays 100% for just $447.97 quarterly. That is $1,791.88 per year AND this is HSA Qualifying! That makes the unused tax credit which is deposited into the family’s HSA jump up to $7,208.12!
Then if this family saves $13,100 in their tax-free HSA they save $2,620 in Federal and State income tax which is much more than the cost of their already FREE health insurance!
Allan, this is affordable health insurance. The CBO was wrong about 24 million more being uninsured. It was Barry’s question that made me figure this out. So good things can happen when we don’t ban the Socialists here at the NCPA blog.
You don’t get follow-ups on the net or in your email box.
One need not be signed into anything to see the complete blog.
Barry is an intelligent guy who has a different viewpoint than you. Maybe it would be better if you toned down the insults and used logic instead.
Thanks Ron for pointing out how ridiculously generous the AHCA is with regard to tax credits.
If there is a justification for a non-means-tested tax credit that pays more than half of a guaranteed-issue plan premium, I’d like to see it.
The CBO puts the 10-year cost of the tax credit at $361 billion. About half of that could go toward reducing the budget deficit, if not needed for z anything more worthwhile. That would put 10-year deficit reduction at more than half a trillion.
Although the AHCA tax credits are technically means-tested. They are reduced by 10 percent of any income over $75,000 for an individual or $150,000 for a couple.
So the AHCA effectively creates a tax-rate bubble in the upper-mid incomes. Quite a few engineering and other professionals will be paying a 10-percent surtax (unless they stick with ESI).
Aren’t you describing the United States’ 60-year-old Community Health Center program, of which there are about 8000 locations providing “a nationally sanctioned and locally initiated process to achieve justly available ‘enhanced’ Primary Healthcare for each citizen.”
Barry, taxpayers paid for your employer-based health insurance all of your life with your tax dodge exclusion. When poorer Americans are paying with AFTER TAX DOLLARS you just grin ear to ear and say over and over we can’t afford to give them what I and my wife have always had. YOU are so stingy Barry.
OK, in the 34691 zip code of Tampa Bay a 60-year-old couple and 2 children can get a $5,000 deductible then 100% coverage for $673 a month or $8,076 per year. The age-based tax credits are $12,000 from President Trump.
For $23 a month the deductible for accidents drops to $250 then 100% coverage and everybody and their dog does that.
President Trump is a hero, right Barry?
Ron, if I’m not mistaken, wage compensation is also tax-deductible for employers. Are you suggesting that means Barry’s wage compensation was also “taxpayer paid”?
If so, would that mean your wage compensation is also taxpayer paid?
Just askin.
Thanks for asking John. I’m self employed. If I could go back in time to when I wrote the 1st HSA in 1996 I would become a butcher. An employee butcher and rake in all of those benefits.
I just didn’t like the way Barry said, “Trump is not paying for their tax credits. TAXPAYERS are.”
Ron, if I may, some people don’t like the way you say things.
Just sayin.
No problem John. I’m an insurance agent and nobody really cares that we have been run out of business. Except my wife, she didn’t like thousands of our clients being terminated by Obamacare and her having to go on what she calls the gerbil-wheel.
https://www.youtube.com/watch?v=56q7MV8mkjA
Not the worst possible fate for a gerbil.
My beautiful wife works for a stupid multi-millionaire who called the police on me because I said I would post this video. When the police came they said, “Well that is legal.” Trust me, it’s not fun there.
https://www.youtube.com/watch?v=-mKi_CyGiOk
I wonder what happens to the employees with ALS?
I doubt this is news to anyone here, but for the benefit of anyone stumbling onto this site:
Wage compensation is tax-deductible for employers, but taxable for employees.
Health benefits are tax-deductible for employers and NOT taxable for employees.
But that’s not the entire story. Employers are not allowed to discriminate by health status. This means healthy employees are generally paying (or having their wages reduced) more than they would if they purchased pre-ACA insurance on the open market. The tax break does little more than compensate them for this fact. Most of the tax break goes to high-cost employees, who have their net costs reduced to that of a healthy employee.
That is right, Bart. But older employees are generally paid more as well. In fact some of the oldest employees might be the partners that earn the most money.
There is no way to make these types of things fair. We can only cause them to be polical and that is a very big problem.
The answer is to end the tax deduction and that is why I suggest that the tax credits not be increased with inflation.
Hopefully the tax credits will push towards an end to third party payer. If not permit the tax deduction for ESI to go to the emloyee which will effectively end a significant portion of third pary payer. Finally start to tax healthcare benefits provided by the employer. Eventually that will lead to ending the tax subsidy for healthcare and move the feds out of the picture.
My comment wasn’t intended as a defense of ESI, it was merely to describe what the tax preference does in the broadest terms.
That is fine. I just wanted to demonstrate that ESI is a redistribution scheme where money is transferred from those with lesser incomes to those with greater incomes.
If the claim is that highly-paid older employees have higher costs, therefore younger lower-paid employees must be subsidizing them, that may be true to a limited extent but not very provable. Small company plans have age-based premiums, at least the ones where I’ve worked, so there’s not much age-based transfer.
Large companies don’t adjust by age, but it would be hard to prove wages aren’t adjusted to compensate. The fact that older employees are generally paid for doesn’t mean anything; they might be paid still more were it not for benefits. Unless you think that older employees being paid more is in itself unfair.
You’ll notice I didn’t mention age in my original paragraph above. I may have in the past, but I’m avoiding it because it’s not as clear as with actual health status.
Where things really blow up is with large-company COBRA pricing. The company-wide average benefit is no longer just a fictitious entry on a W2 form; it’s the actual price ex-employees have to pay. An older early retiree may be getting a great deal on COBRA, while a younger RIF candidate (especially from one of the government employers Ron likes to cite) gets screwed in pricing.
Should have been “The fact that older employees are generally paid MORE doesn’t mean anything…”
“that may be true to a limited extent but not very provable.”
Only rarities are absolutely proven and I am not even sure about them. But, studies have shown that wages plus benefits equalize throughout industries. Therefore, if the benefit of healthcare insurance doesn’t exist in one company employee salaries are higher than the salaries of another company that provides such benefits. In large companies there are no age-based premiums so if one were to run an equation one would be forced to conclude that younger healthy lower paid employees are subsidizing older better paid employees. This relationship might not be as secure in smaller companies with age-based premiums, but exists because employers are competing in the marketplace and have to match the wage + benefits of other companies. Because of this problem older workers that have the same skills as a younger worker have a harder time finding a job.
“Unless you think that older employees being paid more is in itself unfair.”
As far as I am concerned, the word fair generally doesn’t belong in this type of economic discussion..
COBRA proves my case. If I am correct COBRA is the exact amount that is paid per employee plus a couple of percentage points for administration. The older sick individual finds COBRA relatively inexpensive while the younger healthy individual is getting scr-wed.
What studies, and how do they calculate benefits? Are they using the average per-employee benefit for a given company, or are they looking into age and health status of individuals?
Forced to conclude how? At gunpoint?
A younger employee earns a cash salary of $50K and untaxed benefits worth $5K for a total pay package of $58K pretax equivalent. The executive earns $150K plus benefits worth $15K for a pretax package of $175K. How is one subsidizing the other?
I think where older workers are at a disadvantage is when competing for the same job at the same cash wage as the younger worker. Then it’s obvious that cost of benefits impacts cost of hiring that worker.
COBRA proves nothing in the previous discussion. There is no wage compensation in COBRA.
Although now that I think about it, the prospect of future COBRA could factor into wage negotiation. I could see an older worker accepting a less-than desirable job with the prospect of retiring at 63-1/2 under cheap COBRA.
1) I think Rand may have done a good study on this, but I am not sure. The one thing it seems economists generally agree upon is that benefits substantially come from a reduction in the employees salary. I think it makes empirical sense. Everything else being equal a company that suddenly increases its costs because of added benefits will not be as competitive as a company without benefits where the total wage packages otherwise are equal. You ought to look this point up for yourself.
2) “Forced to conclude how? At gunpoint?” No using logic. Of course we do see some people, perhaps due to a lack of intellect and logic that rob banks and sometimes they are stopped at gunpoint.
3) Look at it this way. A business has $120,000 to pay on 2 new employees excluding all taxes and other benefits other than health benefits. Without insurance the wage on each can be $60,000. If however he decides to offer health insurance and one is substantially older than the other the premiums might be $5,000 for the younger and $15,000 for the older. That means he splits $100,000 in two paying each $50,000 a piece. The younger employee could have been paid $60,000 less $5,000 for his insurance and earned $55,000.
Once again you can observe this dilemma when you ask yourself why employers don’t want to hire older and sicker people.
Why don’t you try telling me logically why benefits don’t have an impact on salary? If benfits are not taken out of salary where does the extra money comes from in this fictitious business? Do you think that money comes from the consumer who you beleive is willing to pay more, the owner who is trying to maximize his income, the government (which is the taxpayer), or a tree that grows free dollar bills?
4)“COBRA proves nothing in the previous discussion. There is no wage compensation in COBRA.
There is no wage compensation for COBRA, but the young healthy person can generally privately pay less for the same insurance that he carries with him while the older sicker person might have to pay more for the private policy than COBRA costs. When the employer was paying these costs where do you think the money to pay the premium (pre COBRA) came from?
I have never said benefits don’t have an impact on salary.
What I said was benefits are part of the overall compensation package. What businessman (or employee) would set salary levels without considering the value of other benefits?
In your example, the employer made a (hopefully) conscious choice to allocate the $120K among the two employees by paying the older one more $65K and the younger one $55K including benefits. If so, the fact that the cash wage happens to be $50K for each is coincidence.
Of course it’s possible that a union contract would require the cash wage to be the same for both employees. But I don’t think it’s reasonable to bend an analysis to fit a particular union rule.
“I have never said benefits don’t have an impact on salary.”
Bart, the questions you raised along with your commentary makes one (at least myself) believe otherwise at least within the context of my replies. Reread your own dialogue. I wouldn’t have gone through such length, but for the fact that you appeared to be bouncing back and forth between different ideas. No matter. If you agree with my replies that is fine. If not you can quote what I said that you think is wrong. I quoted a few of your comments to provide context.
Allan, I wouldn’t know where to look for a statement of mine that would suggest benefits don’t impact salary. The only think I can think of is the case of a union shop that fixes cash wages.
I have trouble reconciling these two statements of yours:
and
Isn’t this example contrary to the first statement?
“I have trouble reconciling these two statements of yours:”
I’ve asked you some questions to better understand where you are coming from, but you don’t seem to reply.
Why don’t you first tell me your problem so I can make sure we are not talking past one another. The fact that you can’t reconcile the statements is near meaningless.
Sure. First you said “wages plus benefits equalize.” Then you gave an example where an employer chose a common wage for two employees ignoring differences in their benefit costs, so that the wages plus the benefits didn’t equalize.
I take it this goes back to your claim about younger employees subsidizing older ones, but I still don’t follow it.
“Sure. First you said”
Bart, firstly the comment has to do with an industry as a whole where the wages plus benefits will tend toward the mean. If everything between two companies is equal and one company adds employee benefits to his employees then a)the price of the goods or services will rise making the company less competitive or b) there will be lower profits or c)the wages will fall so that costs tend to equalize.
In the accounting procedure what is allocated for the total package is divided equally among equal employees both sick and well, older and younger. Therefore, the wage for the young healthy would fall more than necessary than if only their status were used to determine insurance costs.
I see, in the first statement you are using average benefit cost to determine reduction in salary. Then for the specific example you use individual benefit cost to derive total compensation.
It sounds a bit like fallacy of equivocation to use the same term twice with two different meanings within a single argument, but so long as you qualify them I guess I see your reasoning.
It’s not an inference I would make, but suit yourself.
“In your example, the employer”
Bart, take note of the phrase used once, but apparently has to be repeated over and over again for you to understand… “Everything else being equal” It is not a “coincidence” that I used identical salaries for two new employees. It is a method of comparison to make things easier for one having problems discussing even a semi complex problem. (By the way, it is quite common for new employees at the same position to start with the same salary.)
Why don’t you answer some of the questions asked rather than nit picking where even nit picking isn’t in order? Those answers would provide clarity, but apparently clarity is not what you want. You want your personal ESI benefits at the expense of lousy public policy.
“I see, in the first statement you…”
Bart, do you need things spelled out in large print? The end product is that the young and healthy are paid less salary to compensate for some of the benefits of the older and sick. That is not a hard concept to understand and yes it can be demonstrated in numerous ways. Having numerous ways to demonstrate why a conclusion is valid is not a reason one should think the conclusion is not true, which seems to be your reasoning. Rather, numerous ways are further evidence of truth.
How you can call that a ‘fallacy of equivocation’ (deceptive, deceitful, misleading) is beyond being reasonable and is insulting as well.
Bart, don’t give up yet doing everything you can to defend the evil employer-based health insurance system that is dangerous to American workers. As long as you make a buck or two is all you care about.
Well, your days defending employer-based health insurance will soon be gone because soon ESI will just be a bad memory of the pea-picking-past.
Allan, watch RT TV tonight at 8 PM and you will see my smiling face attacking employer-based health insurance and that traitor to the Republican Party, Rand Paul.
Ron, we agree on ESI and we agree some of the provisions of the new bill might diminish ESI, but I am really not satisfied with the bill being presented on a political economic level. It certainly doesn’t agree with my underlying beliefs.
I haven’t seen any reliable comprehensive reviews that detail why this bill’s benefits will do the job and the problems the bill creates or doesn’t solve. The PPACA has made an impossible job of healthcare reform so, whether this bill passes or not, I see big pain in the future involving more than healthcare. Perhaps that was in the minds of those wanting to pass Obamacare.
Allan, knowledge is coming to a critical mass. I think President Trump is wrong when he says he can’t get one Democratic Senator’s vote. I believe Phase 3 will be bipartisan and the Nation will come together and the healing will finally begin.
I could be wrong but Joe Manchin and Claire McCaskill will both vote for Obamacare Replacement. Others too.
Allan, you should have googled “fallacy of equivocation” so that you knew what you were talking about before you posted this.
“Allan, you should have googled “fallacy of equivocation” so that you knew what you were talking about before you posted this.”
You were basing your use of the fallacy on two different arguments not on an ambiguous term (playing with words). It is my understanding that the fallacy can be intentional or unintentional. Based upon your former behavior I chose the former which is most likely more common than the latter. I listed a bunch of reasons that made me believe ESI was bad. I can understand the counter argument, but you just repeated yourself and refused there and elsewhere to say which statements were wrong or to agree with them and state your alternative case.
Fallacious arguments are frequently intentionally deceptive. We see this on the news, from politicians and even on this blog. I decided to look this up for your sake and will quote from http://utminers.utep.edu/omwilliamson/ENGL1311/fallacies.htm (#42)
“Equivocation: The fallacy of deliberately failing to define one’s terms, or knowingly and deliberately using words in a different sense than the one the audience will understand. (E.g., President Bill Clinton stating that he did not have sexual relations with “that woman,” meaning no sexual penetration, knowing full well that the audience will understand his statement as “I had no sexual contact of any sort with that woman.”)”
Do you now have a better grasp of the fallacy of equivocation?
Anyway, yeah there’s plenty wrong with ESI. But there’s plenty wrong elsewhere. We seem to disagree on priorities more than anything.
There may be plenty wrong elsewhere, but I am hard pressed to think of any singular action of government, in its attempt to control consumer prices, that has had such a devastating effect on our healthcare system.
And the devastating impact is not to current workers, but to ex-employees and to a lesser extent others who are outside of ESI.
It’s fine to plan for an ideal solution for everyone, but time is also important, at least to the people being impacted now.
There are 150 million people under ESI. The remaining segment of the non-government market for people who could conceivably pay for a substantial portion of their own coverage is not much more than 20 million or so. Throwing the 150 million off of ESI doesn’t help the remaining 20 million, it only creates more chaos to navigate.
It’s fine to worry about people being treated unfairly or money being wasted. But for now I’m more worried about people of maintained coverage for years being locked out because their job status changed or some other event. Time is important to these people. It should be far more expedient to address this smaller segment.
Even if the solution is temporary, and as sloppy and inefficient as what is done for ESI, the cost would only be a fraction of ESI’s cost because it only needs to serve 15% as many people. But hopefully it will be closer to what is eventually desirable for everyone.
1)“And the devastating impact is not to current workers”
Really?
Did you ever note how much more difficult it is to get a job when you are sick or old even if one has slightly better qualifications than the young guy?
Do you really believe that some companies aren’t trying to get rid of their sicker and older employees to increase their profit margin?
Don’t you think the younger employee would be better off financially if his salary wasn’t reduced because of the benefits provided to older and sicker employees?
Don’t you think this third party payer caused inflation in healthcare?
Don’t you think all employees would rather be insured by a company that offered the insurance they personally needed?
Doesn’t this cause a major problem for all those that aren’t insured by their business?
2)”Throwing the 150 million off of ESI doesn’t help the remaining 20 million”
Nowhere did I say that everyone should immediately be off ESI without any consideration of the need for time. You are throwing red herrings into the argument. I understand your fears of losing your ESI, but do you understand what that does to the sick under ESI and those not covered by ESI? Do you understand how inflationary ESI has been and how it has distorted the marketplace making it an employer’s marketplace that buys insurance for millions of employees. What happened to your libertarian streak? The employers only have this type of control because of government action.
3)”I’m more worried about people of maintained coverage for years being locked out”
What is insurance for? A) to protect assets and B)to leverage one’s purchasing power should they have very expensive healthcare needs.
Where is your worry for those that are actually sick after being covered for years when suddenly they lose their job and then their insurance?
4)The solution should not be a mix of a whole bunch of solutions. That creates market distortions. What we need is private, non mandated insurance that is owned by each individual where different insurers compete for price, quality and access. We need some type of safety net along with a way that permits and perhaps incentivizes people to leave Medicaid and purchase private insurance. This doesn’t mean a lack of reasonable regulation (there is such a thing as contract law), charity or even government subsidies.
You indicated you were more of a libertarian, but it seems that you put your libertarianism in the closet when you are faced with a personal decision that might impact you.
Allan, I was on the edge wondering if employer-based insurance might be a good idea but NOW I can see that Employer-based insurance has distorted the American economy and should be put down like the rabid dog that it is.
Thanks for opening my eyes Allan. YOU are really hitting a bunch of nails right on the head here at the NCPA blog.
Where? I said I was conservative, at least in the dictionary sense of the word.
Back to my statement about priority. If you don’t throw everyone off ESI immediately, what do you do in the meantime? Do you hold up all reform until ESI is phased out, or do you go ahead and implement what should be implemented for the non-ESI population?
If the latter, then the non-ESI population is the prioriy.
Quoting myself “You indicated you were more of a libertarian” and you responded “Where? I said I was conservative” I know that, but you seemed to indicate some libertarian feelings towards individualism. OK you are not libertarian, that is obvious. Understand libertarianism is a very wide spectrum, Buckley conservatism is wide as well.
Again quoting myself “Nowhere did I say that everyone should immediately be off ESI” to which you responded “If you don’t throw everyone off ESI immediately, what do you do in the meantime?”
I don’t expect the changes to immediately end ESI and said so in at least one other posting. I also remarked that I didn’t expect that all insurers would drop ESI as there are large companies that are self insured. They might offer a better deal. I did say that eventually (the word eventually indicates not immediate) the tax deduction should go to the employee. In that way everyone could decide for themselves what is best for them.
Allan, I acknowledge that you didn’t say everyone would be immediately thrown off ESI. That was intended to be a hypothetical.
The point was if we’re not going to end it immediately, then what do we do? Wait until it gradually phases out before doing anything else, or give immediate priority the non-ESI segment?
“That was intended to be a hypothetical.” In other words I state my belief that the change will and should be gradual so you throw out the hypothetical that is interpreted as sudden and catastrophic. That sounds a bit crazy, but I have heard worse.
Yes, Bart, I believe under the appropriate circumstances ESI will gradually phase out and be replaced based upon the desire of people that are on ESI. I wouldn’t deny people the ability to have their employer buy insurance for them, but I would not suggest we maintain a system that favors ESI. Why should those that have ESI be treated better than those that don’t have it?
Why should I defend ESI? All I want is something better to take its place. It’s irrelevant what you or I or anyone else thinks about ESI. Without an alternative it’s never going away.
This started out with me making a fairly neutral statement about the impact of tax preferences. As I already stated, I had no intention of defending ESI. But that doesn’t mean every negative thing anyone says about it is correct.
“All I want is something better to take its place.”
I want to be a professional basketball player, but I am too short. The system and that includes corporations that provide ESI is falling apart. Healthcare costs are helping to make our industry non-competitive so what you are looking at is potentially losing your job and your healthcare.
Thus your desire is a bit silly. What we want is a functioning healthcare system that is sustainable and doesn’t cost us jobs. With any changes there will be winners and losers. Since you have had ESI you have potentially been a winner. Those not getting tax deductions have been the losers. I asked your approximate age so I would have an idea of where you stood in the winner loser category, but you never answered that question either.
“I had no intention of defending ESI. But that doesn’t mean every negative thing anyone says about it is correct.”
I am waiting for you to tell me what I said about ESI is not correct and why. To date you have only run around the gramatical edges with generalizations.
I don’t know why you need my age, except to set up for an ad-homininem argument. But you’ve already insinuated that my motivation for my belief is a fear of losing ESI, and that I’m crazy (which is presumably a pre-existing condition), so you presumably don’t need additional information.
We can agree to disagree (or not). This discussion is becoming a bit emotional and personal, and it’s kind of gone down the rabbit hole as far as my original comment was concerned.
“I don’t know why you need my age, except to set up for an ad-homininem argument”
Not at all. Why would I want to do something so crude when I have spent so much time answering your questions in depth? I don’t have bad feelings towards you, rather I want to know why you can’t grasp the essentials of the arguments against ESI. That doesn’t mean there aren’t positive reasons for ESI, but one has to know both sides before they can debate which side is better.
You could be young and then you should certainly feel some of the personal pain of ESI. You could be old and personally thankful for it. Or you could be in the middle with eyes in either direction. If you were older I would ask you how you feel about your children or grandchildren paying for part of your premium along with their own?
“But you’ve already insinuated…, and that I’m crazy”
Unfortunately, that wasn’t done. Based upon you changing the context of my words and then using the wrong context in argument the following words wereI said:
Bart: ““That was intended to be a hypothetical.”
To which I replied: “In other words I state my belief that the change will and should be gradual so you throw out the hypothetical that is interpreted as sudden and catastrophic. That sounds a bit crazy”
No one called you crazy, but the idea sounded crazy.
Bart, finally you said: “it’s kind of gone down the rabbit hole as far as my original comment was concerned.” What was that original comment that I responded to? “there’s plenty wrong elsewhere.”
That is true, but “I am hard pressed to think of any singular action of government, in its attempt to control consumer prices, that has had such a devastating effect on our healthcare system” to which you went down the wrong path.
PPACA.
The mortgage interest deduction is a big one also, if you consider its impact on prices as well as on energy and land use.
AT one time the government thought the mortgage deduction was beneficial. It was, to those that carried mortgages, but not to renters. People can argue whether it was beneficial to society, but today people no longer stay as long at the same job so for all too many renting is a better idea, but they are penalized because they don’t have mortgage deduction and have to pay higher rates.
IMO we should never have marred the taxation system used to raise revenues (to permit government to function and maintain an army) with taxes involving social considerations unless that type of tax would protect the nation from its enemies.
Ron, the cheapest PPO plan on healthcare.gov in Tampa for this family is $1,725 a month with a $7,150 deductible.
I suspect you may be quoting short term insurance to get to a monthly premium of $673 a month. After April 1 this type of policy will be limited to less than 90 days’ coverage.
I realize that if we go back to full underwriting, then this family could possibly get a premium of $673 a month, but two 60 year olds often do not pass underwriting.
Keep in mind that this is with 3:1 age banding. What will the quote be under the new rules? Hopefully reduced minimum coverage requirements will mitigate this.
I don’t see this stated elsewhere in the comments or in the article itself, but 24 million people are not “losing” health insurance. Only about 12,000 might lose it. The rest don’t want it according to CBO (including millions on ESI and on Medicaid) and will not take it because there is no longer a mandate. They are not losing it.
12 million I mean, not 12,000
That’s Phase 1 CBO score. At the final score after Phase 3 the uninsured rate will drop.
You are absolutely correct Byron, but the left leaning media like to report opinion as if they were facts. Even the WSJ gets confused.
Rand Paul is STEALING Trump’s HSA Deposits to Kentucky Families
Like a thief in the night Rand Paul is stealing President Trump’s HSA deposits from hard working Kentucky families. President Trump’s Obamacare Replacement includes age-based tax-credits and enhanced tax-free Health Savings Accounts (HSA). The tax credits may be used to purchase any Individual Medical (IM) insurance available in the State and any unused credit is deposited into the family’s tax-free HSA. A 30-year-old couple with 2 children will receive $9,000 in age-based tax credits in the United States. Because Kentucky has some of the lowest health insurance rates in America the Kentucky HSA deposits from President Trump’s Obamacare replacement are among the highest in the Nation. This is a great asset for Kentucky that other States will be competing against in the future.
In Bowling Green, Kentucky (zip code 42101) the above family can purchase an Individual Medical insurance product called Short Term Medical (STM). STM will last for up to 1 year in most States and will insure the family until 1/1/2018 and the next Open Enrollment for Obamacare in the United States. STM is very inexpensive because it has a pre-existing clause and sick people with cancer cannot enroll and get their medical bills paid. For many healthy families they can save enough money to purchase a new Cadillac if they switch to STM. In Bowling Green, Kentucky the above family can purchase STM insurance with a $2,500 deductible then 100% coverage for $348 per month or $4,176 a year. The unused amount of this family’s $9,000 tax credit would be $4,824 that would be deposited into this Kentucky family’s tax-free HSA for 1st dollar coverage of medical, vision and dental expenses.
Obamacare is a nightmare and has unleashed a MONSTER MONOPOLY that is terrorizing the good citizens of Kentucky. In Bowling Green, Kentucky there is only one insurance company on the Obamacare Exchange, Anthem Blue Cross, the Nation’s 2nd largest health insurance company. With no competition Anthem Blue Cross’s prices are high and the Out-Of-Pocket is sky-high of up to $14,300 per family per year. The quality is low and Kentucky families are only offered HMOs from Anthem Blue Cross. Many HMOs pay NOTHING when a sick child goes out-of-network with a serious illness like cancer. Competition is critical to keep prices low and quality high in free and open markets.
Rand Paul has lost his mind. Tax credits for the purchase of Individual Medical (IM) insurance coupled with tax-free HSAs have been the Republican position for over 2 decades. I first learned of this from Senator Phil Gramm (R-TX) in 1994 when Hillary had her unsuccessful attempt to shove all of America into HMOs in the 1990s. I was ready and waiting and enrolled America’s 1st tax-free HSA in October of 1996 when they were called tax-free Medical Savings Accounts (MSA). President Trump’s Obamacare replacement also increases the amount that may be deposited each year into tax-free HSAs to $6,550 for singles and $13,100 for families.
Rand Paul is a traitor to the Republican Party. Why would Rand Paul ride shotgun and protect Obamacare and the giant monopoly of Anthem Blue Cross to take advantage of Kentucky citizens? Has Rand Paul been bought off to fight President Trump’s Obamacare replacement? It might be that Rand Paul is confused because he keeps saying that group insurance is less expensive than Individual Medical (IM) which has never been the case. I do know that if the good people of Kentucky where aware that Rand Paul was trying to steal their tax-free HSA deposits from President Trump the people of Kentucky would be marching in the streets demanding that Rand Paul resign.
https://www.donaldtrumphsa.com/2017/03/19/rand-paul-is-stealing-trumps-hsa-deposits-to-kentucky-families/
Even the very rigid Rand Paul will bend if his vote is the deciding vote. He wants to be President and I don’t think he is crazy.
The ACA exchanges are failing because of adverse selection. The main reason for adverse selection is because the penalty for not buying insurance is too weak. The republicans plan to make it even weaker by eliminating the mandate to purchase and imposing a puny 30% penalty for only ONE YEAR so anyone can just wait until they get sick to sign up for coverage under the guaranteed issue rules.
Most insurers were already losing their shirts on this business. UNH went from participating in 34 state exchanges last year to only three this year. I would be surprised if Anthem is making any money on its exchange plans despite high prices and less than stellar HMO coverage. Under Trump the exchanges will become de facto high risk pools that almost nobody will be able to afford without subsidies on top of the age-based tax credits.
Meanwhile those healthy 30 year old couples that that Ron keeps talking about can buy their STM plans and plump up their health savings accounts. Bully for them. Then when they get sick even they probably won’t be able to afford an exchange plan either after their STM plan got them to the next open enrollment period because the only applicants will all be sick people.
“main reason for adverse selection is because the penalty for not buying insurance is too weak.”
According to the Supreme Court it is not a penalty it is a tax.
Chief Justice Roberts’ decision intentionally forgot that Congress said the mandate would be a penalty, not a tax. The law should have been declared unconstitutional at that point, but Judge Roberts decided it could be a tax despite all the previous Congressional discussion on the issue. Then he placed vague limits on the tax so the tax would not be heinous and therefore not be a penalty. Now you want to overrule what the Cheif Justice said? How much more extra-Contitutional action are you willing to permit? What you want is what Roberts felt was unconstitutional, a penalty.
I agree with you. Raise the cost of disobeying the mandate all the way up so it can become a penalty. Then the ACA can be declared unconstitutional and we can all go home.
Whether it’s a tax or a penalty or whether the law is constitutional or not are separate issues.
The point of my comment is to simply reassert that any insurance executive will tell you that you can’t have guaranteed issue without a mandate to purchase coverage. Otherwise you will wind up with a death spiral which is what we’re seeing with the ACA exchanges and which accounts for why most insurers have dropped out of participating in them.
A continuous coverage requirement would help some but unless there is a stiff penalty associated with not maintaining it, it will be grossly inadequate. The 30% penalty for one year as proposed in the ACA replacement bill is grossly inadequate. It probably should be closer to a 50% penalty for five years to be at least somewhat effective.
Barry, years ago I was a bartender at Busch Stadium in St. Louis. Because the worksite was unionized, I had a choice – join the union, or not. The shop steward helpfully advised me that if I did not join the union, the full dues would still be deducted from my pay. It was Hobson’s choice. I chose it.
Point is – Wouldn’t it be simpler to calculate the mandate for each individual or family as equal to their premium for a apecific benchmark plan? Seems to me that would not only simplify the process but immensely clarify the nature of the “choice” for the insured. It’s Hobson’s choice.
If a big-government medical welfare scheme is what the people think they want, that is exactly what we’re gonna get, with all the logic and flexibility that accompanies big-government schemes.
John — It would be simpler to do as you suggest. Specifically, I would have been fine with a penalty / tax costing in the vicinity of the cost of the least expensive Bronze level plan in the market for a younger person since most people who choose not to buy insurance because they’re healthy are between 18 and 34 anyway. There can be exemptions from the mandate related to affordability issues and other criteria but the rules have to be pretty stiff to be effective, in my opinion. The ACA penalty was way too lenient especially in the first year. The result is skyrocketing premiums due to adverse selection.
Barry, the High Risk Pool will always cost more and should be avoided if you can. My daughter with MS will be on the High Risk Pool in the future. Young people should get medical history on the 1st date because the last thing you want to do is fall in love with my daughter and be burdened by paying DOUBLE premiums in the 21st Century.
MANDATE enough, don’t you think Barry?
“Whether it’s a tax or a penalty or whether the law is constitutional or not are separate issues.”
We have a Constitution, Barry, that must be dealt with. You are advocating higher penalties and the Supreme Court already said that is not permitted. Though a bit of magic the SC made the penalty into a tax and limited the tax. You have to work within the guidelines of the law.
“The point of my comment is to simply reassert that any insurance executive will tell you that you can’t have guaranteed issue without a mandate to purchase coverage. ”
The point is that this was known prior to the passage of the ACA and therefore the ACA law used the word penalty. Apparently, in this case that was not considered Constitutional, but you continued to support the ACA saying it would work if unconstitutional penalties were imposed. Is your point that we should negate the Constitution?
Regarding the replacement bill, there should be no penalty and no mandate. If the bill isn’t affecting premiums then let everyone choose whether insurance is worth it or not. It won’t affect the price. Let the states decide how Medicaid should work to handle those unable or unwilling to afford insurance.
It is not a lead pipe certainty that tax credits will just go to people by age and/income, and then people can buy cheap short term insurance and keep the difference if any. Nor is it certain that tax credits can be used by an employee who dislikes his overpriced workplace coverage, or an employee whose spouse is uncovered due to an outrageous premium being charged by the employer, (i.e. the family glitch) The tax credits are going to bargained back and forth a lot in the next two months.
If Sec Price and/or the new law permits underwritten plans like short term medical to flourish, that could lead to a big crisis for the old line Blue Cross type plans. They will have all the sick people, and as Barry said they might need to charge $15,000 per person per year just to survive.
At that point they will probably just leave the individual business. Other carriers will do the same, because they are afraid of inheriting Blue Cross’s sickest customers.
Republican governors may have to turn to Washington after all. We might need to expand Medicare or Medicaid or both.
Remember, almost all the single payer systems abroad did not created by liberal social engineers. They were created because the private sector had no money after World War II.
It was government care or none at all.
Bob, you say, “a big crisis for the old line Blue Cross type plans.” YES, that is true. Exactly like Lee and I have been saying their days are over.
It would be easier for you and me to start an insurance company and compete than these old losers trying to survive. We require medical underwriting for that to happen and High Risk Pools for the sick. High Risk Pools are in Phase 1 of the AHCA so it is being set up.
We are not going to single payer because the government is not prepared to take care of the American consumer like they will demand. This isn’t Cuba you know.
Bob, this is what happens when one tries to dictate from above. You can continue on and on making changes that waste more and more money until eventual failure or one can turn towards the free marketplace and let it do its work. That doesn’t prevent charity or government subsidies judiciously being used. The longer this garbage goes on the harder and more painful to reverse.
Ron
HSAs are cash based accounts and depend on interest or capital gains to increase their balances
Health Matching Accounts are 213(d) medical dollar based and grow according to decades of actuarial claims statistics
Even if the rigged stock market grows 10 percent, the Health Matching Account will have double the medical dollars available
And after claims,even more due to the increased monthly crediting