Category: New Health Care Law

ObamaCare: The Perfect New-Keynesian Policy Prescription?

University of Chicago finance professor John Cochrane believes that slow economic growth “trumps every other economic problem.”

He and a number of macroeconomists believe that the Keynesian model drilled into your head in Econ 1 has a number of shortcomings that make it produce lousy economic policy, even in its New-Keynesian version. Shortcoming number one is that the New-Keynesian models do a very poor job of explaining reality. Just how poor a job is shown in the graph below.


Another Cover-Up? IRS, Social Security Administration Not Co-Operating with Investigation of Fraudulent ObamaCare Enrollment

At the beginning of last month, this blog discussed the fact that over two million (of a total of eight million) ObamaCare applications lacked income, citizenship, or immigration data to verify eligibility for ObamaCare’s tax credits. In the middle of the month, the Administration began contacting “hundreds of thousands of people with subsidized health insurance to resolve questions about their eligibility, as consumer advocates express concern that many will be required to repay some or all of the subsidies.”

Now, the Inspector General (IG) of the U.S. Department of Health & Human Services has confirmed that “The deficiencies in internal controls that we identified may have limited the marketplaces’ ability to prevent the use of inaccurate or fraudulent information when determining eligibility of applicants for enrollment…”

That’s putting it mildly. Far worse is that the IG is unable to investigate eligibility based on income or residency because the IRS and Social Security Administration appear not to be co-operating with his investigation (pp. iv-v):

Will These Two Solutions Fix ObamaCare?

Caduceus with First-aid KitObamaCare apologists continue to insist that things are going swimmingly. However, they are also finding pretty creative ways to fix the problems that continue to plague the enterprise. As this blog has long noted, a major problem is that health insurers offering ObamaCare policies appear to be enrolling significantly sicker beneficiaries than they had anticipated. This is why ObamaCare has a “bailout” so that they don’t lose too much money. This state of affairs is especially painful to insurers because they have designed their ObamaCare policies to attract the healthy and repel the sick — which has not worked. Nor did the insurers succeed in imposing a rule preventing hospitals from enrolling patients in ObamaCare policies. Anecdotes suggest that hospitals invested serious effort in enrolling the sickest uninsured patients in the new policies.

Only 53 Percent of Previously Uninsured ObamaCare Enrollees Have a Favorable Opinion of ObamaCare

Caduceus with First-aid KitThe Kaiser Family Foundation has released a survey of a statistically significant sample of people who buy their own insurance. The headline reported by the media was that 57 percent of enrollees in ObamaCare exchange plans were previously uninsured. To me, that seems underwhelming. But more on that later. We all know that ObamaCare is unpopular. However, it is also unpopular amongst its beneficiaries — the previously uninsured who have bought (highly subsidized) health insurance in ObamaCare exchanges. Only 53 percent of these people have a favorable opinion of ObamaCare (p. 22). If that doesn’t make the law politically vulnerable, I don’t know what does.

If ObamaCare’s Risk Corridor “Bailout” Won’t Cost Much, Let’s Put That in the Law

Apparently, Jonathan Cohn of the New Republic was at the House of Representatives’ Oversight Committee hearing at which I was invited to testify on June 19. Cohn asserts that the hearing “backfired” because the Republican majority reported that health insurers would only claim about one billion dollars from ObamaCare’s risk corridors this year:

In the context of a program with outlays and tax credits of more than $2 trillion over the next ten years, that extra spending is simply not a big deal. (Remember, the risk corridor program expires in 2016.)

Get it? Because ObamaCare is such a huge blowout, a billion dollars is not much money. If ObamaCare cost $20 trillion, or $200 trillion, the estimated risk-corridor payouts would be even more “simply not a big deal”. So, the way to ensure that any individual component of a big-government program is “simply not a big deal” is to make the total as big as possible.

Just What ObamaCare Needs: Two More Bureaucrats in the C-Suite

Sylvia Burwell, freshly appointed U.S. Secretary of Health & Human Services, has decided to create two more highly paid bureaucratic positions to run ObamaCare:

CMS is also recruiting two leaders to fill key roles:

  • A new, permanent Marketplace CEO, who will be the Chief Executive with responsibility and accountability for leading the federal marketplace, managing relationships with state marketplaces, and running the Center for Consumer Information and Insurance Oversight (CCIIO), which regulates health insurance at the federal level.  The Marketplace CEO will report to the CMS Administrator with a dotted line to the Secretary of Health and Human Services.
  • A new, permanent Marketplace CTO who will report to the new Marketplace CEO and work closely with the Deputy Chief Operating Officer and Office of Information Services within CMS in order to ensure proper alignment of project milestones and deliverables.

Because, as we all know, there’s been no chief executive or technological executive function in ObamaCare so far.

Reflections on Risk Adjustment, Reinsurance, and Risk Corridors in ObamaCare

fgdfgOn Wednesday, June 18, 2014, I had the pleasure of testifying at the House of Representatives’ Committee on Oversight and Government Reform’s Subcommittee on Economic Growth, Job Creation, and Regulatory Affairs. The subcommittee held a hearing it called “Poised to Profit: How ObamaCare Helps Insurance Companies Even If It Fails Patients.”

Much of my testimony was drawn from content in this blog. What struck me was the minority’s emphasis that these provisions, which protect insurers from losing money in ObamaCare, are designed to motivate insurers to offer coverage to sick people.

It is a well-worn talking point of ObamaCare’s supporters that insurers can no longer charge higher premiums or deny coverage to applicants who are expected to have higher health costs, or exclude coverage for pre-existing conditions. Obviously, no insurer will seek to cover these people just because the government wants it to. The market has to be structured to achieve that objective.

McKinsey’s Latest Research on ObamaCare Networks: Not So Bad After All?

McKinsey, the consulting firm that first brought the fact that ObamaCare plans have narrow provider networks to public attention, has just released an updated Intelligence Brief that suggests (at first glance) that the situation is not as dire as we thought:

doctor-with-familyIn general, narrowed networks appear to be an important and effective cost-control lever for payors. We found 292 instances in which the same payor is offering two networks of different breadths (ultra-narrow or narrow network versus broad network) in the same rating area, on the same metal tier, and within products of the same type (i.e., HMO, PPO, EPO, POS). In these instances, the median difference in premiums between the narrowed and broad network products ranges from 13 to 17 percent ($29 to $59 per member per month) across tiers. The maximum difference in premiums ranges up to 31 to 53 percent ($84 to $125 per member per month).

ObamaCare Pays Tax Credits to Health Insurers, But Will Claw Them Back From Individuals

Anyone who has bought health insurance on an ObamaCare exchange may be eligible for a refundable tax credit. However, the federal government is already paying out the tax credit based on a guess you made about your household income a year before you’ll file your tax return. If you guessed wrong, you may owe the IRS money. However, you are not receiving the tax credit: Your health insurer is. How will you get the money back from your health insurer when the IRS comes knocking? Don’t ask.

money-burdenA hypothetical example might help illustrate: a health exchange customer selects an ObamaCare exchange plan. The government estimates that this taxpayer will earn $30,000 this year, which makes her eligible for a $2000 tax credit. This $2000 is paid to the taxpayer’s insurance company to help with premiums.

 The next spring, our customer/taxpayer is filling out her tax return. Unfortunately, the government estimated the taxpayer earned too little and paid too large a credit. She actually earned $40,000, and so only had a $1500 credit coming to her.

Depending on the taxpayer’s income level and availability of verified affordable workplace insurance, she will have to pay back much or all of the $500 overage to the IRS. This means skinnier refunds and maybe even liabilities, and it won’t be the taxpayer’s fault — it will be the government’s fault.

(Ryan Ellis, Americans for Tax Reform)

ObamaCare Frees Would Be Entrepreneur to Become Full-Time Labor Organizer

From the Huffington Post:

Late last year, Melissa O’Rourke found out that her employer, Trader Joe’s, would no longer be offering health care coverage to part-time workers like herself. As of 2014, O’Rourke would have to find her own insurance plan under the Affordable Care Act, better known as ObamaCare.

By the end of January, O’Rourke had enrolled in ObamaCare and left the Trader Joe’s crew.

“Honestly, the health insurance was one of the few things keeping me there,” O’Rourke, 37, said.

The idea was central to the president’s sweeping health care reform law: By “decoupling” insurance coverage from employment, you give people more control over their careers and their lives. That could mean switching jobs, working fewer hours or perhaps not working at all. (The latter two choices, laid out in projections by the Congressional Budget Office last year, were widely mischaracterized by Republicans as job losses expected under ObamaCare.)