Monday, February 22, 2010

Different author, same story

Nearly a year after letting the House and the Senate do his heavy lifting with respect to crafting health care legislation, the President is putting forth his own plan. From the AP:

President Barack Obama is putting forward a nearly $1 trillion, 10-year health care plan that would allow the government to deny or roll back egregious insurance premium increases that infuriated consumers.

Posted Monday morning on the White House Web site, the plan would provide coverage to more than 31 million Americans now uninsured without adding to the federal deficit.

It conspicuously omits a government insurance plan sought by liberals.

(italics ours)

You know you are going to get a balanced analysis when the piece kicks off with that paragraph.

And the absence the public option? We’ll get to that later.

The premium increase referenced was Anthem Blue Cross in California that jacked up its rates by 39%. This gives the President the fodder he needs to claim the system is broken and that Obamacare is the cure in front of the much ballyhooed bi-partisan healthcare summit with Republicans on Thursday.

There’s one problem, though, with the President’s claim of budget neutrality. The CBO says it won’t be anywhere near being able to provide a score to Obamacare (we can now use that term in full veracity) by the end of the week.

Moreover, preparing a cost estimate requires very detailed specifications of numerous provisions, and the materials that were released this morning do not provide sufficient detail on all of the provisions. Therefore, CBO cannot provide a cost estimate for the proposal without additional detail, and, even if such detail were provided, analyzing the proposal would be a time-consuming process that could not be completed this week.

But back to the government being able to deny or roll back "egregious" premium increases. This is a defacto price control and economics 101 teaches us what happens when price controls are put into place: the goods and/or services that are being regulated in this manner go away. They go away because those providing the capped goods and services will not be compensated at market value and since it won’t make any financial sense to do business with those price controls, health insurance providers will a) either be forced to cut services (rationing) or b) simply go out of business altogether.

It makes sense then not to add the public option into the initial language of the legislation as that is something that people will be clamoring for once the price controls effectively drive the health insurance providers out of business.

Also, define “egregious”. Perhaps there will be a number or some sort of sliding scale that will be used as the threshold for kicking in the roll back but no matter – at the end of the day it will be decided upon by legislation (that may or may not be influenced by the headquarters address of the health insurance provider. Pickin’ winners and losers!) or by bureaucratic fiat. Either way, we lose.

Congrats to the President for finally getting off his backside and taking the lead on his legislative crown jewel, though, it doesn’t appear it’s going to be much different than the pieces of crap generated by the House and Senate.

Addendum #1: Anthem Blue Cross has agreed to a request by the California Department of Insurance to postpone their premium adjustment by two months to allow the Department additional time to review it. The new rates were filed with the appropriate regulators in November of 2009 and the news release suggests there were no problems raised by the regulators during the 3 months in the interim.

Anthem claims the steady increase in medical costs, which are not sustainable, as the reason for the rate increase. Exacerbating the situation is the increasing number of healthy young people who choose not to be covered leaving an insured pool that require more services. All current versions of health care reform legislation mandate that everyone buy health insurance from private insurers so that everyone is, you know, “paying their fair share”.


Harrison said...

When the government tightened credit card rules rates shot up, people had their credit reduced, and many had their cards cancelled. Wonder what healthcare will be like?

Dean said...

Harrison, that's a great point I had not thought of. It would appear that Anthem is merely responding to the government's price signaling.

Harrison said...

Call it the law of unintended consquences.

Anonymous said...

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