Will the American Health Care Act be a victim of its own pre-existing conditions?
David Hogberg takes issue with a piece I wrote last week titled, “Obamacare Repeal: The Dangers of Unrealistic Expectations.” He begins by questioning my charge that AHCA’s critics have made the perfect the enemy of the good:
As much as I admire Catron, I think he’s wrong here.
Consider an analogy where the health care system is a patient and congressional Republicans are a physician. The patient has headaches, back pain and abdominal pains all of which are side effects of having cancer. The physician tells the patient that he will only treat the pain. When the patient complains, the physician replies, “You are making the perfect the enemy of the good.” The patient replies, “No, you are treating the symptoms, not the disease.”
David Hogberg is an extremely intelligent man with an excellent grasp of health care policy. Indeed, I almost invariably agree with him. However, this analogy doesn’t accurately describe my point.
A more accurate cancer metaphor for my position would be that I favor a multi-phase treatment: Surgery (using AHCA to remove the tumors like the mandates and taxes), plus chemotherapy (action by HHS secretary Price to stop regulator metastasis), plus radiation therapy (a final package of legislation to eradicate the vestiges of the disease).
What most AHCA critics seem to believe is that there is an alternative treatment analogous to taking a single pill — full repeal. Even if Senate Majority Leader McConnell went nuclear on the filibuster and, by some miracle, managed to get such a bill to the floor for a vote, he would never get 51 Republican votes. He’s having enough trouble with “moderates” on AHCA.
Hogberg then moves on to his main point:
In the case of AHCA, the problem isn’t that it forces insurers to take people with pre-existing conditions as long as they pay a surcharge. It’s that, like Obamacare, it forces insurers to take people with pre-existing conditions, period.” He accurately describes the havoc this requirement has caused under Obamacare, but inaccurately claims the AHCA version of this requirement would be even worse.
What Hogberg has overlooked in the GOP repeal bill is the plan to remove chronically ill people and those with pre-existing conditions from the general insurance pool. As Paul Ryan explained in last Thursday’s press conference, the idea is to incentivize states to set up separate risk pools and reinsurance mechanisms to handle these patients. He offered successful examples of such programs in Wisconsin and Utah (both repealed by Obamacare).
This would remove the “older and sicker” patients to whom Hogberg refers from the individual market. Under the current system, 1 percent of the patients consume about 23 percent of the available health care resources, and this is why they distort the insurance pool so dramatically. With these patients out of the general risk pool, premiums will stabilize, then decline, whereupon the financial disincentive to buy health insurance will eventually evaporate.
After elaborating at considerable length on the horrors of an insurance death spiral, which will be largely curtailed by the changes in the risk pool described above combined with other features of the plan, Hogberg discusses the most pernicious of Obamacare’s provisions — the individual mandate:
The AHCA replaces the short-term incentive to purchase an insurance policy with a long-term incentive to not buy one. If you don’t purchase insurance under Obamacare, then the Internal Revenue Service deducts a penalty from any tax rebate you might receive. The AHCA replaces that penalty with a 30 percent surcharge that insurers can charge anyone who has allowed their coverage to lapse for more than 63 days.
It appears that younger people didn’t care much about the individual mandate. Thus, if younger people don’t care about a tax penalty that occurs annually, why will they care about a 30 percent surcharge that they likely won’t face for decades?
The issue with the individual mandate is much larger than its effectiveness as an incentive versus the effectiveness of the 30 percent surcharge. The individual mandate is a crime against democracy. It requires you to buy a product from a private corporation whether you want or need it, simply because you exist. It is utterly incompatible with individual liberty in a free society.
I would favor repeal of this abomination, even if AHCA contained no incentive at all for individuals to buy coverage.
I agree that the 30 percent surcharge is not the best feature of AHCA, but it is nonetheless a financial incentive to make personal decisions rather than an assault on individual liberty. And it isn’t quite as outlandish as Hogberg makes it sound. If you buy life insurance at age 21, your premiums will be far lower than they will be if you wait until 40 to buy the same coverage. Likewise, your premiums will be exponentially higher if you wait until you are 60.
That’s just the way insurance works.
Hogberg wraps his column thus:
For insurance markets to work, people need to purchase insurance before they develop a serious illness, and the only way to make that work is to allow insurers to deny coverage to those with pre-existing conditions. Certainly, any bill that replaces Obamacare will need to provide assistance to people with pre-existing conditions, especially those who have bought insurance on the exchanges.
That said, before the unveiling of the AHCA it had been difficult to see how the individual insurance market could be made any worse than it is under Obamacare. Speaker Ryan may have just done it.
It simply isn’t accurate to say that Speaker Ryan’s bill will render the individual insurance market worse off than it is at present. Obamacare is imploding. It will soon collapse and leave tens of millions uninsured or, even worse, on some version of government health care. It is an emergency. I agree that AHCA is far from perfect. But I know that it constitutes the last best hope for repeal of the outrageous fraud whose authors named, with no apparent sense of irony, the “Affordable Care Act.”
David Hogberg is an exemplar of that all too rare breed — the intelligent and honest analyst of health care policy. In the case of AHCA, however, I think he is… well… making the perfect the enemy of the good.
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