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25 February 2017


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Eric Newhill

If our host permits it, here is something written about why the ACA is failing by a guy who has worked in medical departments for many years in healthcare insurance and currently works on the ACA for one of the big carriers, me. I fail to see how big insurance companies are the problem. I always hear that it is that they take profits. Does no one listen when it is stated that they are *losing* money on the ACA? How else is it imagined that big insurance (or even big pharma) is destroying the ACA? I see no validity to such so called "analyses".

Death Spiral: Raising premiums on the ACA (Obamacare) will only serve to increase the adverse selection that has plagued the program from inception. The more premiums increase the more the people willing to pay the higher premium will be those who know they will be utilizing expensive services *that cost in excess of what they are paying in premium*. So the risk and cost increases; ergo, next year, if the ACA is still with us, premiums will have to increase yet again. Damned if you raise the premiums/damned if you don't.

The program was ill conceived in its incentive structure. We, economists working in health care insurance, knew this all along. The idea that healthy young people would join the risk pool to offset the cost of those with pre-existing chronic expensive conditions had no basis in reality; at least not any reality populated with rational actors. It can only be described as ivory tower elitist magical thinking. Why? Because, obviously, the young and healthy are both the least likely to be able to afford health care insurance and the least likely to reap any benefit from it, if they could afford it. Furthermore, the penalty for not having insurance is far less than the cost of insurance. A rational actor asks, "Why should I pay $7,000 a year (or more) when the penalty is only a few hundred $s?". A rational actor also realizes that if she comes down with a minor illness, the cost of paying out-of-pocket will be far less than the cost of being insured. Worse, a rational actor can easily figure out that, with pre-existing conditions not barring one from obtaining insurance, there is no need to maintain coverage. One can simply sign up for insurance if and when one becomes ill enough that the cost of coverage is less than the cost of the medical services that will rendered.

At the end of the day, people that are paying to be covered are those who know they will be very expensive. In actuarial/economic circles this is known as both "moral hazard" and "adverse selection". Both are cryptonite to insurance carriers. We work hard to avoid both and now the federal government has foisted it upon us. Private companies are not - and cannot be - ATM machines for people needing expensive healthcare. So we raise premiums. We are still losing money on the ACA and the company I work for is the last big carrier to include ACA products in its line.

One way to fix the ACA would be to get the young and healthy into it. I don't know how, though. Where would they get the money? Perhaps the federal government could subsidize them. Where would the feds get the money? Maybe the feds could stop funding Al Qaeda groups, nation building for Muslims that hate us regardless and drop other similarly wasteful programs that are also based on magical ivory tower thinking. Another remedy is to have citizens employed in good paying jobs. Then they can have traditional employment based insurance and, the self employed, could purchase an affordable ACA product with high deductibles/low premium. They'd be able to afford the deductible amounts because the economy is doing well. The remaining few poor would be on Medicaid. People born with serious chronic conditions could be on Medicare.

I believe that when Trump drains the swamp and brings a more reality based/less idiological, more business-like focus to DC, that it may be possible to get a few of these items worked out. Here's to hope and change. Cheers.



Its all about nightcore style tunes now. Like I tell the guys at the work gym: If you wanna look like you belong in a gay nightclub, you gotta listen to gay disco music.

different clue


If you are an American College Graduate, then why so many mis-spelled words?


Health insurance is not a typical 'market commodity'.
If you buy a new watch, I don't automatically get a new watch.
In contrast, if you get the flu, and I am in the waiting room near you, my odds of getting the flu just went up markedly.

Given the infectious, communicable, nature of many illnesses, it's smart to cover everyone -- the more people who can stop flu before they infect 10 other people, the better.

Meanwhile, please stop conflating auto insurance with medical insurance; you are not making a coherent argument. Your sister's ovaries have zilch to do with the way your auto insurance premiums are calculated. Nada.


Opinions? Aye yai yai, polls are supposed to be scientific and at least somewhat accurate. I believe someone said, "lies repeated often enough become facts", Goebbels maybe? My eyesight isn't what it used to be but I don't need all CAPS, thank you.



A little humor from Lionel Nation before tonight


different clue

Pacifica Advocate,

Senator SecState Clinton lost a lot of votes here in Great Lakestan when she said that "when" elected, she would put her husband in charge of the Economic Recovery Plan. That brought back bitter memories of NAFTA, WTO Membership, MFN for China, etc. She was clearly signalling that she supported Forced Trade and would support more Forced Trade Agreements full of hidden favors for the anti-national Corporate Globalonial Plantationlords.

I perhaps could have tolerated the thought of Mister Bill as First Golfer . . . but not First Economy Czar. She lost any hope of my vote right there with that statement.

different clue

Eric Newhill,

I don't get out much and I haven't met any real live Sanderistas out here.
I am disappointed to hear that the ones you met there are into the Pink Kitty Cap level of things.

And yet . . . just as I voted for Trump despite some Republican beliefs and goals I don't like, if a Newer Deal Wing (or whole Party) emerges separate and apart from the mainstream Democrats, I will vote for it despite the Pink Kittystuff in order to get the Newer Dealery.

I hope that the Sanderists and the Tantrummers are at least partially two different groups of people with only some overlap but not total congruence. I think an acid test political science experiment may be forming up in your State of New York. I am reading here and there that the Clinton Restorations are plotting to run Chelsea for the Senate Seat currently occupied by Gilibrand when she retires. The Pink Kitty Cap "happy Sanderses" may end up voting for Chelsea. The Never Clinton "bitter berners" will not vote for Chelsea. If Chelsea ends up running for Senate from New York, you will see if there are any bitter berners who are not happy tantrummers.



Completely agree that: "The program was ill conceived in its incentive structure. We, economists working in health care insurance, knew this all along." Everyone that I have talked with about this agrees. But then, the people that I talk with also agree that everyone, including young people, need to be covered, and that if we got out of expensive wars, a whole lot of things could be paid for.

'The best laid plans,' and etc.
However, at least after decades, someone had a plan.
Not a good enough plan, and not going after Pharma's ability to astronomically raise prices after buying out patents, but still... progress.

I think this person makes some absolutely legitimate points, and I've heard every one of them more times than I can count.

Seamus Padraig

"Something that I find troubling is that there is no Islamic majority country in the world that offers protections to religious minorities."

There's at least one: Syria.

Eric Newhill

Good. I'm glad you think I make sense. You still didn't answer my question about how big insurance companies are destroying the ACA.

Now, I said that ceasing to invest in nation building other countries would free up some money that could be used on healthcare, but not to provide it for free to everyone. I meant it could be used to provide care for a few that can't afford it; not everyone. The US spends about $1.2 trillion a year on healthcare (about 17% of GDP). We do not spend that much on nation building - even during the 2001 - 2012 period. We did, however, spend enough to cover the young people that were supposed to enter into the ACA but didn't. Maybe. The tweak would have to be much more complicated and would have to be based on actuarial science; not politics.

Also, the problem is not people getting the flu or other public health concerns that raise. That is a specious argument. My team in the data all day every day and my work is concerned with what is driving cost. Once identified it goes to the appropriate department. Demographic/epidemiological issues go Pricing, provider issues go to contracting, fraud and abuse goes to the unit that handles that, medically inappropriate treatment goes to utilization management and the Medical Directors, emerging issues in treatment practices. My team touches it all.

The ACA introduced something we'd never seen before, which was people signing up, getting treatment, then dropping insurance and repeating as necessary. That's the killer. IMO, the ACA was either designed by idiots or by people that are so deeply against the insurance model that they somehow wanted to create a political crisis around it. I think it was the more latter with a smattering of the former. They failed. They failed because most people don't care about the ACA. People have jobs, they have insurance through their employer. they don't have a job, they have insurance through Medicaid or, if 65+ or with certain chronic conditions, Medicare. The ACA is a tempest in a teapot that is, as Tyler says, of concern to a small group of very loud people.

What the loud people want is free healthcare. they don't want insurance. Insurance means you agree to pay into a pool in case you ever experience a prohibitively expensive situation. Your car insurance doesn't pay for new tires or washer blades. That's on you. And healthcare insurance shouldn't pay for your check ups and sore throats. But people walking around with expensive smart phones think that saving a few hundred bucks to pay for the little health related things is unfair.

If you want universal socialized healthcare provision - and I'm sure you do - then you are asking that everyone accept a mediocre version of what they currently receive in the US. Why? Because that's is how the Europeans and others do it for less and for all. You don't get the Cadillac. You get the Ford Taurus. For the few people that are walking or driving a Ford Pinto (the old exploding one), that's an improvement, for the majority that are driving the Cadillac, it's a big step down. Personally, I think the Taurus is fine and probably where we need to go, but that is because I am much better informed than most. I think there is a lot of waste in the US around items where the marginal benefit does not = the marginal cost. But try explaining that to all the Cadillac drivers. And try to explain it while fighting the Doctors and purveyors of Cadillacs.

The problem with socialism is that it assumes humans will forgo acting in their own self interest.

The insurance companies have nothing to do with any of this. That is just your knee jerk anti-capitalism talking.

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