Thursday, July 2, 2015

The Unanticipated Consequences of High Deductible Obamacare

The big takeaway on Obamacare is the mindless ruling-class faith in bureaucracy and regulations. Set up an administrative system, the Obamateers seems to think, and equitable benefits will result.

Of course that is pure fantasy. What really happens when a government sets up an entitlement system is that people learn how to game it. Like welfare. Like Medicare. And the costs spiral out of sight.

You dangle a bunch of free stuff in front of the voters and then hide the costs in Medigaps and do-nut holes. But it still costs an arm and a leg.

That's why I was really surprised by the Bronze-Silver-Gold metallic system for Obamacare. To get the only affordable plans you need to go for the Bronze plan. But the Bronze plan typically has eye-wateringly high deductibles. To get rid of the deductibles you have to go for the Gold. But the Gold plan has eye-wateringly high premiums.

In the high-deductible plans that big corporations have implemented to control costs they typically sweeten the pot with Health Savings Accounts so you can pay for your deductibles. In Obamacare they sweeten the pot with subsidies on your premiums. And reports indicate that Obamacare subsidy customers are getting blown away both by the premiums and the deductibles, so that they don't pay their premiums and don't go to the doctor.

The high-net-worth Jonathan Grubers of the world that designed Obamacare should have taken a look at the mini-med plans that corporations offer to their low-wage workers. These plans typically offer co-pays for routine medical expenses. They don't offer real insurance coverage against big bills.

Hey, Prof. Gruber. The low-wage workers don't need traditional heath insurance policies because they don't have a high net worth to protect from unexpected health care costs. And that probably goes for all the people that qualify for Obamacare subsidies.

People without high net worth can get health care and then declare bankruptcy when the going gets tough.

I don't know how smart the Republicans are. But they might think about exploiting this minor little flaw in Obamacare. Or not.

But the Wall Street Journal has come out with an article about the impact of the high-deductible Obamacare plans. David Goldhill and Paul Howard write:
As millions of Americans move onto high-deductible plans, they will change their behavior—and the incentives of the market. Under these plans, in a typical year consumers will pay most, if not all, of their health-care expenses out of pocket. Since they will be spending their own money, they will compare prices for checkups and procedures. Providers will have to earn their business on the basis of quality, price and service, the way companies do in the other four-fifths of the U.S. economy. Competition has the potential to transform America’s sclerotic, overpriced health-care system into something much more transparent and affordable.
You wonder: did the Obamateers really understand that? They don't seem to like it. That's the point of the current "underinsured" campaign that is starting to hit the media. Many Democratic voters are perplexed at having to pay for any health care out-of-pocket.

But for Goldhill and Howard this unanticipated consequence of Obamacare is an unexpected opportunity. We market fundamentalists understand that the only way that we can get the health care system to respond to consumer needs is to irradiate it with the cleansing rays of market prices. Imagine if the Obamateers accidentally wrote a bill and after we found out what was in it we discovered that it would beat the special health care interests into line and force them to deliver what the customer needs and wants at a price the customer is willing to pay.

Imagine that.

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