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So, you get your economists who are saying, “competition will always reduce costs!”. Yet that is quite clearly incorrect for at least two places where the United States has more competition than in any other nation on the planet — healthcare, and higher education. WTF is going on here?!

The deal is that old criticism of economists — that they know the price of everything, and the value of nothing. If you have a life-threatening illness, the value of a cure for that illness is practically infinite to you. You’re not looking for the cheapest doctor. You’re looking for the doctor that can cure you — that has the latest certifications, the latest equipment, prescribes the latest medications, you’re going to pay for the best you can get. Because if you’re not cured, you’re *dead*. What good is saving money if you’re dead? So hospitals and doctors compete for your business not by being cheap. They compete by getting the latest certifications, the latest equipment, prescribing the latest medications. The fact that this results in an oversupply of doctors with that certification and equipment, and results in demand for that medication that allows its manufacturer to hike its price, is irrelevant to the doctors because they’re not paying the bill — patients (and their insurers) are, through higher prices and through overprescribing diagnostic tests.

The same is true of higher education, to a certain extent. Economists know the cost of higher education. But they don’t know the value of higher education. Education is your future. So you’re going to try to get the best education you can get, regardless of cost, because the better your education, the better your future will get. So colleges compete with each other based on how many high-priced “big name” scientists they have on staff, how much equipment they have in their labs, the plushness of their dormitories, the gleam of their shiny bright new classroom buildings and football stadiums, rather than competing with each other based on price.

Now: you and I both know that shiny isn’t always best. I graduated from a somewhat shabby state university with minimal college debt. I get paid the same as the people who graduated from Stanford or Cal-Berkeley that same year who will still be paying off their college debt a decade from now. Unfortunately, outcomes information is almost impossible to come by. So people use proxies such as the labs having the latest and greatest equipment, even if cheaper equipment would be just as good for their purposes. Which brings up another point that the “competition will always reduce costs!” guys just don’t get: they assume a world in which everybody has perfect information, where it actually is possible to tell that doctors A and B have equal results but doctor A is cheaper. But we don’t have perfect information. Hell, for a lot of things, we don’t have any information — we don’t have the outcomes information needed to know that doctors A and B have equal results, and it’s absolutely impossible to get pricing information out of doctors, they shrug and refer you to their back end billing people who then ask who your insurer is and tell you that it’d require submitting a claim etc. to know, literally nobody in that whole entire office knows how much your treatment will cost.

But the question of information is a topic for a post in and of itself, so I’ll leave you with the final takeaway: Competition does not always result in lower costs. In fact, we’ve proven with both healthcare and higher education that it can increase costs.

So take that and stick it up your ass crack and light it, neoliberal economists. Because reality simply *is* — and your “reality”, laughably, isn’t.

– Badtux the Economics Penguin

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There’s mumblings and grumblings now in the Republican caucus as they realize that anything they do that simply repeals Obamacare rather than replacing it would result in horrifying electoral losses in the House in two years. Thing is, nobody can agree on what a replacement would look like. So there’s been some mutterings about maybe just fixing the problems of Obamacare and calling it Trumpcare, rather than just outright repealing it.

So how could Obamacare be fixed?

1) Bigger risk pools. The problem is that Obamacare is issued on a per-county basis to county-wide risk pools. Thing is, some of your rural counties only have 500 people on Obamacare. One of those people gets leukemia — which only happens to one out of every 5,000 people ordinarily and costs $1,000,000 to cure — and suddenly each of those people is going to see their rates go up by $2,000. Whereas if you had a risk pool of 5,000 people, which on average will have one person come down with leukemia, their rates would only go up by $200 to pay for that patient.

So:

a) Allow insurers to lump multiple counties into the same risk pool in order to keep rare but expensive illnesses from blowing rates out the top of the water.

b) Create a reinsurance pool for those ultra-rare events like the illness that ends up using $10,000,000 worth of care. The reinsurance pool would be nationwide and each insurer would contribute to the reinsurance pool according to how many insured they have. That means, on average, expensive but rare illnesses happening in one county but not nationwide would make all rates nationwide bump up by a few cents, rather than rates in one county bump up by thousands of dollars per year.

Now, what about insurance companies being able to sell nationwide? Doesn’t fix anything in larger states, but for the ten least populated states and territories, each of which has under 1,000,000 total inhabitants, it could allow increasing the size of the risk pool to something more reasonable. However: that would be devilish to regulate. I would say that the only way to make it work would be that the insurance commissioners of the states involved would have to come together into a joint commission to regulate the insurers that are issuing multi-state policies (that is, ones whose risk pool spans multiple states). Otherwise you’ll get situations where insurers are ripping off policyholders and no insurance commissioner does anything about it because none of them have a full view of the insurance company’s operations in that multi-state pool.

Easier to just create a reinsurance pool, IMHO. Getting insurance commissioners to cooperate with each other is worse than herding cats.

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2) States not increasing their Medicaid funding to meet the 133% Medicaid cut-off, resulting in too many uninsured:

Change Medicaid to a lump sum granted on a per-qualified-resident basis. For those who are qualified under the law but not granted Medicaid by the state, instead enroll them in Medicare using the Medicaid money that would have otherwise gone to the state. Note that the various taxes that were raised for Obamacare already have sufficient money for 100% of the costs of caring for those patients, so this would not require raising taxes by any more than they’ve already been raised. It would just reallocate the existing Medicaid monies to go with the people who need insurance rather than just giving it to states as a block of money.

3) Narrow networks are causing insured people to lose access to their doctors or to specialists they need: Get rid of the narrow networks. Seriously. Narrow networks are currently being used to cherry-pick patients — the well patients go to the cheapest insurance companies, which have the narrowest provider networks but they don’t care because they’re well. Sick people who need access to better doctors get squeezed out of those plans because those plans don’t cover the doctors they need. Easiest solution: All plans are required to add doctors to their networks upon the doctor’s request and upon the doctor agreeing to take the negotiated rate which must be at or above the Medicare rate, and are not allowed to drop doctors from their network unless they’ve documented fraud on the part of the doctor and dropping a doctor from their network is appealable to an insurance oversight board, either a state-one one or, for those states that don’t operate their own exchanges, a nation-wide one.

4) The 400% poverty rate cut-off for subsidized coverage is too low in some locations where housing costs are really high or healthcare expenses are really high. Especially for older people whose health insurance is already 4x as expensive as for younger people. Answer: Make the cutoff a percentage of income rather than a percentage of poverty level. That is, if you spend more than 33% of your disposable income on healthcare, the excess gets subsidized away. So if you’re in Santa Clara, California, a very expensive place to live, you make $100,000 per year, and your rent is the average of $2,900 per month or $34800/year, and your effective tax rate is 22% meaning your after-tax income is $78,000 /year, your disposable income is $39,600. 33% of that is $13,068. If your family of four is actually paying $18,142 /year for health insurance, which was the average last year for a family plan, you would then get a subsidy of $5,074 to reduce your cost of health insurance to something more reasonable, i.e. you’d be paying $1089/month rather than $1512/month. That $422/month buys a lot of food and clothing for your family.

5) The coverage that you get does not pay for the healthcare that you need due to high deductibles and exclusions:
a) Your out of pocket must be capped at 33% of disposable income, period. Any additional must be covered by the subsidy.
b) Exclusions need to be severely limited to only non-life-threatening things. If for example you are diabetic and need insulin and syringes in order to live, they must be covered under that 33% cap.
c) Healthcare Savings Accounts need to be radically overhauled so that they actually work for people with high-deductible plans. In particular, contributions towards an HSA must count towards that 33% cap, and cannot exceed the cost of the deductible.

6) Some people just don’t have acceptable insurance plans available where they live, period, because insurers don’t feel like selling there, or there’s only one insurer that treats people badly, or whatever:

Medicare buy-in. The caps on out-of-pocket are the same as for private insurance. Medicare buy-in should be allowed across the board, with a requirement that the rates charged must be actuarially sound (that is, the cost of the premiums must cover the cost of providing healthcare plus overhead and reserves).

7) And finally: only sick people are buying insurance, and well people aren’t, which is making the risk pools too small: Levy a fine equivalent to what it would have cost them to buy into Medicare for the time that they were uncovered. Allow wage garnishment (up to 33% of disposable income). Fines go into the reimbursement pool. Suspend the fines if they purchase health insurance and hold it for a year. Yes, there’s a lot of people who would let it slide for a year. After that? If given a choice of spending 33% of their disposable income on Medicare or 33% getting sent to the IRS, most will choose the Medicare.

So that’s my seven step plan to fix Obamacare. Will it get implemented by the Republicans? Of course not. I haven’t the slightest damn idea what they’re going to do, but I do know that when Republicans talk about “fix”, they’re not talking about repairing something, they’re talking about what my vet did to my cat’s balls. So it goes.

– Badtux the Healthcare Penguin

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canada-healthcare

From a Facebook discussion:

MV: Some even call that being Christian.

Me: Oh puh-leeze. Everybody knows that when people came to Jesus to be healed, Jesus asked them, “how much money do you make?” and if they replied “I’m poor, Jesus,” said “get out of here, I don’t heal poor people.” It’s right there in the Bible, in Republican 5:13.

DA: It’s not in any Bible I have so I had to go online to Liberty University…This is the new King Donald version…. Book of the Republicans

Chap. 5 cont. 9And lo, did Jesus greet the masses to heal the sick and injured. 10“Verily, come forth and receive the healing grace of our Father’s love. Bring thine purse and gift your coin to my apostles.” 11“But, my Lord, there are many that do not have coin nor jewels to give.” said John, the Apostle. 12And Jesus did say “Do they not know that the Lord, thy God has expenses? Do they not know the cost of travel from Nazareth or of lodging for all the Apostles?” 13“Send them away. If thine wishes to receive the healing and grace of our Father, only gold will provide the means.”

Yep, that seems to pretty much be our nation’s conception of healthcare…

– Badtux the Healthcare Penguin

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The black community? Uh, no. Macho white males who’ve lost their manufacturing or mining jobs.

So the new jobs in rural America are mostly caregiver jobs, since the population of white Americans is aging and Medicare is one of the few sources of money in those communities today. You’d think that the white men unemployed with the collapse of mining and factory work would be flocking to these new occupations, which, while they’re not the best paying jobs on the planet, are at least reliable and easy to enter.

Uhm… not so much. Appears that these misogynist assholes think that “women’s work” is beneath them.

– Badtux the “These people are sick” Penguin

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As we all know, Donald Trump’s best buddy and pal is Vladimir Putin, who, as documented by the CIA, hacked the election to help Donald Trump win the presidency. So now Trump is going to be addressing Social Security and Medicare and keeping them going in the future. How? Well, that’s simple: He’s going to use the Russian solution.

See, in Russia, they don’t have a problem with oldies 65 and older using up all their health care and sucking all their rubles for pensions. ‘Cause the average age that white men die in Russia is 65, and the women aren’t far behind. Vodka and drugs, drugs and vodka, and a lack of health insurance for dealing with the effects of vodka and drugs… man, oldies are croaking left and right in Russia.

So all Trump has to do is replicate the Russian experiment. Congress has already started, by wiping out a critical part of the Obamacare program by failing to budget money owed to insurers under Obamacare and thus forcing insurers to hike rates by an enormous amount in 2016. This has caused most insurers to drop out of the exchange markets for 2016. And easy access to opioids has led to massive declines in lifespan for white males in red states. Now all we have to do is fund easy access to vodka. Vodka trucks on every street corner! Vodka served to children with their school lunches! Vodka for breakfast! Vodka for lunch! Vodka for dinner! Free vodka! And at the same time, cut off food stamps for nutritious food and make sure that more and more people’s lives are miserable with only vodka and opioids to make it bearable.

And within a decade, we, too, shall achieve a Russian solution to our Medicare and Social Security issues. When our average lifespan hits 65 like in Russia in the early 1990’s, we can get Dim Son to find his old Mission Accomplished banner, string it up over an aircraft carrier again, and fly Donald Trump in on a gold-plated F-35 fighter jet. Oh wait, they’re single-seat fighters. Hey, maybe we could gold-plate a C-130 and land that on a carrier again

– Badtux the Snarkhy Penguin

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The Kaiser Family Foundation has the scoop.

For most, the second-lowest Silver plan comes in at around $300 per month +/- $50. Alaska is the biggest outlier but that is unsurprising given how few people in Alaska and the generally higher cost of living there. Significantly below that comes North Carolina. Then Arizona is the only other state where the average is over $500/month. There’s a cluster of mostly smaller states around $450/month +/- $50, then suddenly a huge cliff and the majority at around $300/month +/- $50.

Why the huge disparity in rates? In some cases it’s obvious why — it’s in states with a small risk pool and few insurers. But then there are states like Arizona and North Carolina, where I have no reasonable explanation why they’re so expensive because both states have a fairly large population and thus a fairly large risk pool. All I can guess is that the risk pool is older and sicker there. But why is Arizona twice as expensive as Nevada, which is right next door and has a similar Republican government and similar population and access to health care issues? It makes no sense. Unless it’s because Arizona and North Carolina happened to have a lot of people with expensive medical conditions suddenly need care — I just found out that the reinsurance provision of the ACA, which allowed health insurers to put certain people into a nationwide high-risk pool, expires for 2017. Which could, I suppose, explain it if a few hundred people came down with condition that cost more than $1M to treat in a county that has only 120,000 rate-payers on the exchange like Maricopa County, AZ.

Something is clearly wrong with the whole marketplace concept in those states with premiums above $500 or which have only a single insurer participating in the Healthcare Marketplace. What happens if that one insurer decides to stop issuing policies? Nobody knows, because the ACA never envisioned such a thing, since it was written by the Heritage Foundation back in the early 1990’s and the Heritage Foundation is devoted to the notion that magic marketplace fairy dust fixes all problems. Luckily there *is* one provision in the ACA that states can fall back upon, if they have a state government willing to do so: they can apply for an ACA exemption and either create their own insurance company and enroll it into the ACA marketplace, or simply go statewide single payer using the subsidy money plus Medicaid money plus health insurance premium money.

But if a state isn’t willing to go the exemption route? Well. Nobody knows. I guess people in those states who can’t get insurance through their employer simply can’t get insurance. Which is hardly what was envisioned.

As for fixes? First, we need to get that reinsurance pool back. As I’ve repeatedly explained, you need a *large* risk pool in order to get the average risk of a pool down to near what the incidence rate is of illnesses. If your pool isn’t large enough, you can blow the top off your pool and go into an adverse selection death spiral quite easily. We need a nationwide reinsurance pool for very expensive illnesses like leukemia or end-stage kidney or liver disease. Secondly, we need to do something about the deadbeats. Nearly half of the people who qualify for insurance on the Marketplace and have the income to afford insurance on the Marketplace are still uninsured. Doubling the size of the pools would help drastically.

But in the end, none of that’s going to fix health care costs, and health care costs, not any of these other factors, are what is driving rate hikes in *most* states (I say *most* because clearly there are outliers like Arizona where something else is happening). And given the way that the U.S. Constitution works, which prohibits us from just setting provider profit caps by decree the way the Ministry of Health does it in France, the only way to do it is via a national single-payer insurance company which has the oligopsony power to say “this is how much money you will get above your costs from us this year, period.” That’s the only way to pass Constitutional muster while getting the required savings. Will it happen? Not this year. Not next year even. But eventually, this HeritageRomneyBamacare system is going to collapse under its own weight, because it simply lacks the tools to get provider costs under control.

– Badtux the Healthcare Penguin

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ACA individual health insurance marketplace prices are increasing significantly in many cities and states.

So what’s the cause of this? Well, first of all, let’s talk about what’s not the cause:

  1. Greedy health insurance companies: Yes, health insurance companies are there to make money. But the ACA sets a MLR of 80%. That is, 80% of ratepayer money must be spent on patient care, and only 20% is allowed for overhead and profit. If health insurance companies raise rates so that, say, only 72% of the collected money is spent on patient care, they must rebate 8% back to the ratepayers at the end of the year. In short, no, this is not the reason for the rate hikes.

So what is causing the rate hikes? Well, there’s basically two reasons:

  1. Not enough healthy people are signing up in the marketplace. Extending parents’ health insurance to 21-25 year olds removed large numbers of healthy people from the individual insurance market, but that means they’re not in the risk pools for the marketplace policies. Furthermore, healthy people are deciding to take the fines rather than buy the insurance. The end result is that the risk pools have too many sick people and not enough healthy people. Remember, sick people are 2% of the population but spend 18% of GDP for health care. That means that to work, the risk pools need to have roughly 50 healthy people for each sick person in them. This isn’t happening, too many healthy people are saying “I won’t sign up”, meaning that the rates for the remaining healthy people go up to subsidize the care of the sick people, causing yet *more* healthy people to leave, wash, rinse, repeat. It’s the adverse selection death spiral.
  2. The risk pools aren’t big enough in the first place. 5% of the U.S. population buys health insurance on the marketplaces. In small states, this means that the pool isn’t big enough for more than one or two insurers, and if several people get a very expensive illness all at the same time, it blows the top off of rates because there’s not enough people in the pool to spread that around without raising rates significantly for everybody in the pool.

So what’s the solution? Well:

  1. Medicare For All would solve it. Duh.
  2. Or if that’s unpalatable: Raise the penalty to be 20% higher than the cost of buying health insurance in the marketplace, and give the IRS the power to enforce it with wage garnishments. That will get healthy people back into the risk pools.
  3. And for those states that have too-small risk pools that are causing the high rates because a few people got really sick: A real public option with a nationwide risk pool. This would allow sharing the risk across a much larger pool, meaning that some unusual but very expensive condition happening to one person would result in a much lower rate hike across the pool.

But of course none of this solves the final problem that the rate hikes are happening because the cost of healthcare is going up. Medicare For All would have the oligopsony power to fix that by imposing income caps upon providers — i.e., you must agree to the caps in order to accept Medicare For All, and if you don’t, you can remain a doctor or you can sell your drug, but you won’t get any Medicare money for it. Quite clearly private insurers do not have this power, and cannot have this power due to antitrust laws that prohibit them from conspiring with each other to do something like that. And it would not be constitutional for a Ministry of Health to do this in the United States either, because that would be an unconstitutional taking.

In short, I don’t think we can fix the ACA. We’re going to be forced to go to Medicare For All sooner or later, because the ACA simply does not and cannot work in the long run because it doesn’t control provider profit, which is the primary driver of health care costs. I’ve been mentioning this for years now. But as usual, I’m talking to a brick wall.

– Badtux the Healthcare Penguin

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