Thursday, June 28, 2012

ACA Myths, Always

So my initial reaction to the Supremes on ACA is up at Plum Line. Short version: reform lives to fight another day, but there's still plenty of fights ahead.

Meanwhile, the Plain Blog offices are still in disrepair this week, which meant that I had to drive around a bit between that and now, and naturally I was interested in what Rush Limbaugh had to say, which right away had to do with the 16K IRS agents that the law hires (did hire? will hire?). Of course, regular readers here will know that those IRS agents are entirely mythical, but it does make for good propaganda.

Meanwhile, apparently the entire thing is a plot to (1) force employers to dump health insurance, thus (2) forcing people out of the private sector for insurance and into the exchanges, which will then produce (3) single payer! Alas, I didn't stay in the car enough to get clarification on very much of this, other than apparently it's obvious that employers will dump health insurance because, well, they want to save money, don't they? No, that doesn't make any sense at's amazing how often people talk about employee wages and benefits as if they're some sort of voluntary benevolent choice by employers, or how people talk about various bits of stuff that consumers purchase in the same way. Oh, Rush also pointed out that now (!) that the Supremes have said that Congress can tax things, they could use the tax code to limit people to one child per family. Which I thought was pretty funny, not only because it's another thing that no actual real-life Congress would want to do, but also because Republicans in Congress over the last couple of decades, at least, have in fact been pretty intensely into using the tax code to give incentives for how many children they have.

Anyway, I did get to watch Mitt Romney's statement earlier, which was pretty amazing as these things go. He's still on about the Medicare cuts, which I continue to think are a vastly underappreciated reason for why ACA polls badly. But generally, his statement was: Obamacare is entirely evil because it has costs (Medicare cuts, taxes, mandate); he'll get rid of it (magically, I guess) on day one, and then put in place something that will deliver all the benefits of health care reform -- pre-existing conditions, access to insurance -- without any of the costs. Now there's an honest plan!
But back to Rush: it really is amazing the extent to which the opposition to ACA is wrapped up in purely mythical stuff. I mean, the opposition is never all that careful to stick to the facts, but this does seem unusually divorced from the truth to me.

More later, I"m sure.

UPDATE: Well, blessed, cool, air conditioning has been restored to the Plain Blog offices, so normal blogging will soon resume. Meanwhile, on the way home, I got to listen to another Rush segment; this time, he was busy speculating about whether there were "threats and intimidation" that got Roberts to "change" his vote, although he hastened to add several times that he was just speculating. Bottom line for Rush -- it is so obviously clear that ACA is unconstitutional, and the decision (which, as he said, he hasn't read yet, what with being on air and everything) is so obviously not based on the Constitution, that people are naturally in shock and grasping around for any logical reason that it should have come out this way.


  1. Since all these mandate/tax slopes are so very slippery, I await the first state to pass the broccoli/balanced diet mandate since they aren't limited by the enumerated powers.

    1. That'll most likely be Mayor Bloomberg.

      And just because the federal government can't pass a broccoli mandate doesn't mean the states can't. That was never the question at issue....

  2. So, a post about myths may partly be a shot across my bow, if so I deserve it, I did go overboard on the last thread, who after all knows what will happen?

    If you're interested, here is a summary of the soon-to-be infamous McKinsey report. The key takeaway: when employers discover the economic incentives encouraging dumping employees on the exchanges, upward of 60% said they would (a smaller percentage who didn't understand the economic implications said they would). The authors remind us that the CBO's forecast is 7%.

    The McKinsey folks do add, helpfully, that Congress can certainly increase the penalties if an unplanned-for mass exodus for the exchanges occurs. That's true; Congress definitely has the power to increase a tax on big companies sixfold in order to stem that tide. That's the same Congress that set the initial penalty sixfold too low, and of course knew that, but - yes a penalty increase might happen.

    Monkeys might also fly out of my butt.

    You never know.

    1. ...and you expect employees who have just been given a giant cut in benefits nothing? Grin and bear it?

    2. Interesting question purusha, and one that the McKinsey summary addresses: the authors found that 85% of employees would not leave their jobs if dumped on the exchanges (though 60% would expect the company to share some of its increased profits through higher compensation).

      There's evidence in Massachusetts that exchange-dumping companies share virtually none of that additional profit with their employees. I suppose Massachusetts is a small isolated example, it could be different nationally.

    3. No, I actually have only glanced so far at the other thread (I do read all comments still, but not always in a timely way).

      The real myth here isn't that insurance through the exchange isn't part of the private market.

      I'm I guess agnostic about whether employers would stop offering insurance, but in general most policy people believe that breaking the employment/insurance link would be a very good idea for everybody. It would conflict with Obama's rhetoric about everyone getting to keep the insurance they have, but no one really is going to care if the exchanges give people cheaper, better options.

    4. I think this gets at the heart of the universal health care debate: any polity, no matter how small and poor, can provide affordable universal health care for its people. Its not the "Affordable" in the ACA that gets the Tea Party types grabbing their pitchforks; its the "Care".

      If the Federal Government is committed to subsidizing the state exchanges at the 7% levels forecast by the CBO, but economic incentives tell us the real number is going to be more like 60%, who is going to make up the difference? Is John Boehner going to write a huge check? Are states going to dip into their massive reserves? Where will that money come from?

      It is certainly possible that the stupidity of the ACA's non-penalty for dumping is such that 10 years out, while those of us with our SPY shares will see ourselves a little bit richer, the quality of HC in the USA will go down dramatically for Joe Average. To whom should Joe Average write a letter of complaint? Jeff Immelt? Nancy Pelosi?

      There's an assumption that wouldn't come to pass because there's no way so many deaf ears can (not) react to that problem - but upon whom in particular should we pin our hopes?

    5. @CSH, you are a reasonable, thoughtful person, but you have an overblown fear of losing employer-paid health insurance. That makes you like a lot of people, and it's a fear that stands in the way of the kind of reforms we should be making if we don't what healthcare to keep eating so much of our economy and tax revenue.

      Instead of worrying about one small corner of the issue (your personal employer-supplied health insurance), look at the bigger picture, like trying to figure out how to provide basic healthcare that doesn't break our budgets.

      If you're scared of ending up in an inadequate public healthcare system, doesn't that indicate that you should do something to improve the delivery of healthcare, and not just try to insulate yourself?

    6. MP,

      I do not think CSH is motivated primarily by selfish reasons, but by true concerns about unintended consequences. In this he is a classic conservative, whose watchword is first do no harm.

      Now, I tend to agree that the fears he puts forth are overblown. I am not as respectful as he is with regard to the intelligence of the kind of people who end up at places like McKinsey. Also, I think that a lot of times in life a classic conservative attitude just won't do. Big dangerous problems sometimes only yield to big dangerous solutions. But that is a temperament issue. I also agree with Mr. Bernstein that the destruction of the employer-based system would not be a self-evident tragedy, but that is a matter of judgment.

      There is plenty about the ACA and the SCOTUS ruling to raise a tempest. Lord knows all the most infuriating tendencies of liberals have been on display all afternoon (when handed a victory whine, bellyache, wring your hands, cry in frustration and do every other spoiled child behavior short of loosening your body sphincters - do these people have no idea how much they make everybody want to vote for Romney just so they would have to go away and shut up). Compared to much that is being said, and has been said, and will be said, CSH's concern over the fate of employer-based care is entirely rational, albeit in my mind not as big a danger as he believes.

    7. Oh, Anastasios, I'm not endorsing the McKinsey report because Really Smart People work there. As I mentioned earlier, those are the guys that were the ghost in the machine for much of the Enron madness. When Jeff Skilling wistfully looked across the boardroom table and thought about the great moral burden of his being the smartest person in the room, and thus Enron should make its next billion in, (ahem), "weather futures", McKinsey was on the other side of that boardroom table, nodding their heads and preparing copious invoices. Its not that they're smart, necessarily, but rather that their conclusions pass the sniff test.

      I thought of this comparison today: suppose your city has recently had a rash of break-ins at convenience stores, perpetrated by teen thugs. Let's say these crimes net the thugs on average $100 per incident.

      Suppose the city fathers came up with a plan to have law enforcement stake out the convenience stores in town, and when a teen was caught stealing his $100, he would be given a stern talking-to, and be made to pay a $16 fine, but otherwise walk away scot-free with the remaining $84 in his pocket.

      Would you expect that policy to deter the crime spree, or would you rather expect it to invite whole new groups of thugs into the criminal activity?

      In don't need a Skilling-weather-scheme to know which way the wind blows! :)

  3. So, how many companies in Massachusetts dropped their health plans? Does anyone happen to know?

  4. Yeah the myths out there are kind of ridiculous. I don't mind it that much when folks on the right veer off into bizarro world and rampant paranoia, I suppose the left can do that to. What I do mind is how these myths always vanish as time goes forward and the ridiculous outcomes predicted never come to pass. That's what I find frustrating, but it is really important I think to understand the debate. These conspiracy theories do tell us something about all the anti-ACA stuff we've seen in the past few years. They fill a vital function for a lot of people; the assumption that the world will always be filled with winners and losers and once you are a winner- that is a 70 year old tea partier with free government healthcare screaming about the need to keep government out of my healthcare-any attempt to fix social problems and help out the losers-people who have the poor fortune of losing their jobs and say getting into a car accident-somehow must involve taking what you have away from you. And so you need silly reasons like death panels to make sense of opposition to solving problems like the thousands, yup that's right, of Americans who die every year because they don't have health insurance. If we are going to go back to the dark ages or turn into Stalin's Soviet Union it diverts the conversation from why we aren't solving pressing problems.

  5. First, to Scott Monje: I don't know, and I'm sort of glad to see that ModeratePoli also had trouble finding the data. We want to know not only how many folks got dumped but also what percentage of Mass employers really could dump (i.e. Mass domiciled but not actually national) and also the penalty. Not an easy comparison, as MP found.

    Next, MP: thank you for taking up my argument, and also for the compliment, but I believe you flatter me unnecessarily: I'm pretty much a hothead. That said, I may have erroneously given the impression that my opposition to the exchange/non-penalty was due to some vague hatred of governmenty things - I'm actually quite frightened of the particulars. Perhaps an example would make the illustration easier. I'll take that up in the next post.

  6. So, suppose that GE has 20,000 people working in its corporate offices in the US. Because GE corporate offers Cadillac hc plans, those individuals receive a benefit from the company of $12 K/year to cover their health care cost. The first thing to note is that most of those 20,000, in spite of working for GE, won't make huge salaries: $12 K/year to cover health care is going to be far beyond their individual reach.

    Paying $12 K/year for those 20,000 employees is a $240 Million annual hit to GE's income statement, which - even for such a large company - is a staggering sum. Along comes the ACA, and the state exchanges, and toothless penalty of $2 K per dumped employee. If Immelt and co get rid of those 20,000 employees' hc, GE pays a $40 million penalty and saves $240 million. That's a net gain of $200 Million, great for GE.

    But here's the rub: GE's $200 Million gain is the US government's $200 Million loss. That's because those 20,000 folks kicked out into the exchange will be mostly secretaries and low-level tech folks; they will not have the means to cover the $10,000 (beyond the GE penalty) needed to keep their health coverage whole. Not only will they not have the means, the states on which they will have been dumped won't have the means, as subsidy levels will be based on the ridiculous CBO forecast of 7% dumping.

    This is a ginormous problem, ModeratePoli, and its not an ideological problem or a flaw in Democrats - its $200 Million that had been contributing to the health care of 20,000 Americans that is now gone, because GE is no longer paying it and the CBO never budgeted for it and no states can afford it. Where will the $200 million come from to cover the health care needs of those 20,000 people?

    So when McKinsey finds that 60% of employees will get dumped on the exchanges, while the CBO projected 7%, that means that potentially more than half the US workforce will be hitting the exchanges in 2014 with

    a) An expectation of sponsorship of $12 K per year of health cost, but

    b) No ability to cover that cost themselves, and

    c) No government entity with either the budget, or really, the capacity, to cover that cost.

    This is quite terrifying: where will the money come from to keep that half of the American workforce whole? The companies? The Democrats had a chance to ensure that with the original ACA, giving dumping some teeth, making it cost something for the companies close to the savings. But they totally chickened out. Why - especially when they're now facing Republicans eager to hoist them with their own petard - will it be any easier after this blows up?

    Part of my frustration on this matter is that the blogosphere is readily designed for ideological stone-throwing: this Democrat idea sucks, that Republican person is an idiot. The issue here is not ideological: because the penalty for dumping is so weak, there literally may be many billions "missing" from the American health care universe (well, popping up in corporate profits), with no realistic way to get it back - with the losses having a tremendous adverse impact on the dumpees and the country's health care as a whole.

    1. You had explained your fears clearly enough earlier that I understood what you were talking about. However, I don't think it rises to a disqualification of Obamacare. If anything, maybe it will speed up some realistic changes in how we finance our healthcare system to make it more fair, and not just a lottery when the winners got the jobs at the good companies.

      If you're interested in what the healthcare on a exchange is like, here's a link to part of Massachusetts' exchange.

      As for not letting the businesses profit from dumping, I can't see a penalty of $12K per employee, but Romneycare assessed fees on businesses that don't have healthcare plans (per Forbes).

      But, frankly, I'd like to see us drive down some of these costs so that $12K policies aren't the norm because that's a hell of a lot of money that could be used in ways other than the MRI you don't really need.

    2. You know, the "spurring change" argument sounds suspiciously similar to the justification for the Bush tax cuts in the face of the exploding deficit counterargument. Remember? Stripping money from federal coffers was going to "starve the beast"? Force tough choices about spending? How did that work out?

      The upshot of the non-penalty is the frightening likelihood of a massive transfer of wealth from the American health care system into the BT profit line of large corporate America. That'll force choices alright.

      Its just that the forced choices will be the kind we typically associate with life in a place like North Korea.

    3. I think this whole discussion illustrates quite well the points that Paul Starr has been making over the last several years. The true genius of the American health care system over at least two generations has been to enrich a lot people, satisfy most, deliver excellent care to a fraction, all while hiding the cost from just about everybody. The only way to truly come to grips with the problems of the system is to, in some way and at some point, expose the true costs to the light of day. The problem is to accomplish such exposure without creating all sorts of opportunities for cost dumping and shifting, and without creating the kind of panic that set in after only very mild discussions of costs in Medicare.

      How will we get through this? I honestly don't know -- as yesterday's decision illustrated, my oracular talents are decidedly minimal. I do rather doubt we will get to the North Korea level. If people sense that we are headed in that direction through corporate dumping, the speed with which the political landscape will change will be be remarkable. Starve the beast doesn't work because the American middle and upper-middle class wouldn't let it work. People may not be able to control how their companies mess with them, but they can and will react to the government not funding their healthcare subsidies adequately.

      Of course that means a change in attitude about taxation and progressivity and spending priorities and lots of other things people won't like, it's true. We will just have to get through that. And if we can't ... well, it was only a matter of time before the constitutional and political order foundered on something or another. The founders gave it about two hundred years, so maybe we are due for a profound reshaping. But, seriously, I don't think it will come to such a pass -- everybody just has too much to lose.

    4. Anastasios, I caught a quote from Rand Paul in the immediate aftermath of the SCOTUS decision, where he cited the irrelevance of the $2,000 penalty, and the bad things arising from it, and that caused me to freak out - but the rest of the day, both Rand and his merry band of Republican pranksters toned down the rhetoric about the non-penalty, returning to their more bland "ACA is bad" meme, without specifying why. It had the feel as if Rand Paul and the rest got the memo from their paymasters to temper their criticism of corporate exploitation.

      You obviously can't trust the Republicans to stand athwart corporate exploitation. You obviously can't trust the Democrats. I agree with your post above - completely - at a 30,000 level. Where the rubber meets the road, you're asking some political entity to go to GE, in 2014, and say, "We're sorry, we didn't mean to give you this $200 million gift, now we need to tax it back in the form of penalties we should have imposed in the first place".

      That's what we hope happens.

      That's what has to happen.

      Whom do we expect will make it happen?

    5. @CSH, you were right to question my "spurring change" argument, but lucky for me that Anastasios explained the need for change better than I did.

      Maybe I should add that this reform is immensely hard to do. It's even harder if we have to choose all our numbers perfectly at the beginning. A penalty that's large enough to deter GE might be a deathblow to a smallish business that can't afford a decent plan anymore. I'm not sure how the legislators decided on $2000, but I imagine they considered a number of factors.

      I hope that there will be changes in the law if popular demand is high enough. There will also be mess and pain. But we're kidding ourselves if we think we can continue with the status quo. The status quo was already failing for 27 million uninsured, or some number like that.

      So what GE might do is not the most important issue to me. If the reform has have to satisfy you on the GE problem before you support it (or any healthcare reform), maybe the reform should just go ahead without your support.

      Excuse me if this is too blunt, but deciding what are the most important issues is something decision-makers have to do. Nonetheless, I'm happy to hear your opinion because this is a matter of great importance.

    6. MP, for the most part I try to keep my own ideological preferences out of these discussions, on the rationale that no one would care what my preferences were. I've stated several times in these rants that my arguments/freakouts are not ideological; they're pragmatic, directed at a bad flaw in the specific ACA legislation that may soon have hugely negative consequences for millions of Americans.

      You know what I've come to realize in the past 24 hours? For all the hoopla about the information revolution, the internet/blogosphere is essentially a vehicle to caucus with likeminded folks and shred the non-like-minded others that we hate. 'People' understand the dangerous impact of the $2,000 penalty+the McKinsey report findings (linked @2:35 PM yesterday). We know this because Rand Paul mentioned it, before he realized he wasn't supposed to. 'People' know this, but they seem not to care, even though the upshot is:

      - If you currently receive your hc from a large group plan from a big employer (public or private), the following is apparently true:

      1) There's a greater than 50% chance your employer will dump you on the exchange in 18 months, with a pitiful parting gift, if any,

      2) The exchange has no hope of covering the cost of your hc after you've been dumped, and

      3) Your best bet for succor is Congress doing something (taking on large corporations) it has shown itself universally incapable of doing.

      The following metaphor is not quite apt, MP, but its close:

      Its always interesting to have a discussion about the appropriate funding sources and headcount levels in your city's various public works departments, but perhaps less so when the roof is on fire.

    7. @CSH, I don't know what other point you're trying to make. Is it there is going to be huge disruptions for large numbers of employees? Well, Congress tends to respond to huge disruptions. But if you don't want to wait, make sure you start lobbying the next Congress as soon as they're elected.

      You clearly have a complaint, but your plan is not clear at all. So what should happen? If your plan is to overturn Obamacare, you may need a different plan after the election or you may not.

      For me, I'm just not so worried. If I have to go onto an exchange for my insurance, I'll deal with it, just like I have dealt with other problems that crop up, including job losses and stock market tumbles.

      I'm certainly not going to denounce this reform just because it could happen. Maybe it's because I live in Massachusetts and I already benefit from this kind of health reform--I have a daughter who gets her insurance through an exchange, instead of having **nothing**. If I have to do what she did, I'm fine with that. It beats having nothing, which is what too many people have.

  7. If Scalia, Alito and Thomas stated partial dissent on the Arizona immigration case, that would mean Kennedy and Roberts were the 4th and 5th vote for the decision?

  8. MP, its probably best that this is disappearing under the fold, since I'm sure everyone in this community is sick of me by now. I know I am. Once more: let's forget about politics. Forget ideology. Forget demographics. Forget whether health reform is good or necessary or stupid or whatever adjective one prefers. Here's that McKinsey survey, once more with feeling, and there's only two data points worth noticing:

    1) Among employers with high awareness of reform, 60% are planning to dump their employees on exchanges in 2014 (second bullet point, near the top)

    2) The CBO thinks that number is 7% (about a third of the way down, under the headline "A Bigger Effect than Expected")

    (Still keeping ideology aside) - All of us in America, in 2012, have our health care paid for by some source. Some its Medicare, others Medicaid. Some pay out-of-pocket. Others by ER cost overruns. Many are covered by employer-sponsored insurance (ESI). In 2014 there will be a new avenue for paying for health care, the exchanges.

    The CBO thinks 7% of the people currently enjoying heavily-subsidized ESI will end up in the exchanges; McKinsey's poll says the number is more like 60%. Leaving us with a very simple, non-ideological question:

    Where's the money going to come from to pay for the health care costs of the 53% of folks in the 2012 subsidized ESI pool who will a) be dumped on the exchanges in 2014 and b) whose needs are beyond what the CBO/ACA has budgeted? Not: how do you feel about health care reform. Not: do you like the ACA. Not: do you think this process was a good idea. Specifically: where will we get that money.

    Anastasios says we will get that money because we have to. I think I feel the same way. It has to happen. Though whenever I try to imagine particular avenues by which it will happen, I get the shivers, and I think about how its better just to hope for the best.

    There are a lot of bad ways that 2014 can play out, and some of them are really really really bad. But there's nothing we can do about that now. So let's just hope for a good outcome.

    1. Popping in here a little late in the game, but...

      CSH: I'd be very careful about taking the McKinsey numbers at face value. Not because they necessarily did it wrong, but because asking people what they're going to do given a set of circumstances is always pretty dicey.

      Then the second part of it, which I'll plunge into at the risk of exceeding my expertise: I'm not sure exactly what the federal budget effect is of people being dumped into the exchanges, but I suspect the answer is "it depends." Remember, the employer-provided insurance costs the Feds, too. Remember, if employers pull out of providing insurance that means compensation is shifting from tax-avoiding insurance to tax-obligated wages. So how it plays out if there's more of it is non-obvious to me without a CBO study to look at...I'm not aware of such a study for the scenario that employer-provided insurance just breaks down.

      (Note that it's not all good; the tax on expensive insurance plans is a big part of paying for ACA once it kicks in, and presumably if no one has a "Cadillac" plan any more it would presumably be bad for the federal budget, although very possibly good for the country as a whole. Or maybe it would be OK for the budget; if pricey insurance is a big part of health care inflation, then anything that reduces health care inflation might save enough in Medicare and Medicaid to make it a good deal even without the revenues. The point -- there are a ton of moving parts here, and you need proper economic studies to know how any particular change would affect the whole thing).

    2. Jonathan, thanks for the comment. I agree with what you say: 1) lot of moving parts, 2) surveys are notoriously unreliable, and 3) the additional tax from dumping mitigates somewhat against the feared effects. For point 3, in particular, I've been somewhat misleading: even if your corporation takes $10 K/employee to the BT profit line via dumping, the Feds get back thirtysomething percent of that from a higher tax bill. So even the worst-case scenario is going to be somewhat less bad than what I said.

      I'm also not aware that these impacts have been modeled or studied; if they have I haven't found them in my humble corner of the universe. Which I find odd, since someone might have been compelled by the basic narrative (big corporate America currently subsidizes a large share of their employees' total hc cost; ACA makes it relatively easy for corporations to avoid that cost; no other entity is - AFAICT - accounting for picking up those costs, unless the total dumping amounts to less than the 7% of the total workforce the CBO is forecasting).

      So while I wholeheartedly agree about the moving parts, it still strikes me curious (at best, dismally frightening at worst) that no one has apparently taken a cut at quantifying said moving parts - if dumping should vastly exceed the CBO forecast.


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