Friday, February 1, 2013

Catch of the Day

A great one, from Kevin Drum. It seems that conservatives have found their smoking gun against the Affordable Care Act: coverage under the ACA will be really expensive!

Which, as Drum points out, seems to overlook the point that coverage before the ACA was really expensive.

And that subsidies, which phase out as income rises, mean that for a whole lot of people coverage will cost less. Also, that plans through the exchanges will have regulated benefits, so that generally people are getting more for their money. And that there's a pretty large group of people who want but can't get any coverage on the individual market now, but will be guaranteed the ability to buy insurance under the ACA.

But mainly just that coverage without reform was already very expensive, and it's not clear at all that it will be worse with reform.

Now, I haven't read through all of the conservative follow-ups to the original story Drum cites, but yeah: it's as if conservative critics have no sense of the substance of public policy at all. Which, you know, probably makes it difficult to formulate, enact, and implement viable policy when they get a chance.

None of which proves anything one way or another about whether the ACA will work as advertised, or will be good policy even if it does. But, yes, the hallmark of much of the opposition to health care reform has been a lot of people who don't appear to have any idea what they're talking about.

So: nice catch!


  1. Which, as Drum points out, seems to overlook the point that coverage before the ACA was really expensive.

    Drum indeed points out exactly that, noting that the average cost of HC for a family in 2015 will be in the ballpark (i.e. ~18,000) of the $20,000 that same family will have to cough up in 2016. So what's the big deal, asks Drum?

    This is at the heart of the liberal myopia about the dangers of the ACA. Frame that article for when the Great Liberal Experiment implodes. That Tea Party Patriot screaming about the tyranny of the ACA? Sure, his HC will 'cost' $18,000 in 2015.

    But he ain't paying that out of pocket. Well, he sort of is, I guess in some vague, wonky way that his salary is $12,000 or so lower for the part of his family's HC his employer subsidizes. But he doesn't think he's paying out of pocket. A small difference, I guess. Says here it very well might end up looming large.

    All due respect to Drum for believing that it makes no difference to the average citizen whether the large sum of money to pay for their family's care comes out of their own, or their employer's, pocket. Sake of argument, let's say Drum's wrong, and it actually matters quite a bit to Joe Ambulatory Hamburger whether he, or his employer, is picking up the tab for the lion's share of his healthcare.

    So the IRS tells us that Joe A. Hamburger can begin shouldering the burden of up to $20,000 of incremental HC cost, or he can choose to pay a $200 monthly penalty for the priviledge of receiving no health care at all for him or his family.

    Wow, liberals. Just wow.

    1. You completely miss the fact that the vast majority of people who have employer-paid health coverage will STILL have employer-paid health coverage in 2016. The ACA won't cause any change in out-of-pocket premiums.

      Further, most economists believe that benefits and salary are completely interchangeable. That is, if employers weren't paying $18,000 for healthcare coverage, they would be paying salaries that were $18,000 higher.

  2. I also find this conversation astonishing in the context of what we went through with the fiscal cliff, all full of sound and fury, signifying nothing. In particular, the pittance of new revenues, defended by appeal to Keynesian stimulus; that is, you can't ask the middle class to go back to Clinton-era rates because ECONOMY.SO.FRAGILE!

    We don't really know how many people currently in large group plans are going to get dumped to the exchanges in the ACA; maybe it will be a lot (per McKinsey) or a little (per the CBO). I think we all realize that the answer will mostly depend on how cultural norms shake out among large group providers.

    Suppose you make $80,000/year in 2015, and you end up paying $5,000 out of pocket for your family's $18,000 HC bill, the rest covered by your employer's gold-plated plan. In 2016, you're unceremoniously dumped, and your out-of-pocket soars to $20,000 from $5,000 the year previous.

    You're pretty pissed, and you try to avoid Kevin Drum, cause he's sighing about 'well didn't you KNOW hc was expensive'? About that increase from $5,000 to $20,0000 from 2015 to 2016, guys?

    That's a tax hike. A nearly 20% tax hike, to be exact. So we can't ask the middle class to pay a couple percent more in 2013 because -EGAD, man, THE ECONOMY! - but we're willing to leave an unknowably large subset at the mercy of a potential 20% tax hike a little over two years hence? Really?

    That makes no sense at all.

    1. Obviously if employers go for paying for $12K of health care to dumping that all on the employees and that's that, then those employees are going to be very upset and blame ACA.

      But if employers have the market power to do that, they would do it now. That they don't suggests that they don't have the market power to do it.

      Which means that if it will now make sense for them to give that $12K in salary rather than in health care, salaries will go up by $12K.

      So employees are will only suffer financially if the individual market remains far more expensive. Which may be the case, or may not. Even if it isn't those who fall into the subsidy range are going to break even or do better, so we're really only talking about above-average income employees who are at risk for taking a hit...but they're also the ones most likely to have significant market power.

      And, yes, employees might feel it's a hassle to have to do it (I think I linked earlier today or yesterday to a good article about whether the exchanges will actually be user-friendly or not; the answer seems to be a solid "maybe"). If dealing with the exchanges is worse than dealing with their company's HR, yeah, that's a reason people might not like ACA. Even if it's slightly better, there's still a transition cost that's real (although only, of course, for those who do get dumped into the exchanges).

      But on your point: employers aren't giving out health care as a gift; they're doing it because they feel they have to in order to attract workers. There's nothing about ACA that would allow them to slash worker compensation, which is what you're saying they will do.

    2. Jonathan, thanks for the lengthy reply. As I mentioned above, the level of dumping (and new out-of-pocket costs) for the landed HC gentry is a moot point; I'm less optimistic than you (and David above) for several reasons, here are three of the big ones:

      1) The most ominous aspect of that McKinsey report. Recall in the McKinsey report that ACA-naive firms forecast fairly small levels of dumping; as firms knew more about what was in dumping for them (i.e. profit increases) the forecasted dumping skyrocketed. Surely that result did not arise from firms looking forward to a) dumping and b) making their employees whole. A survey is not real life, yes, but that data point doesn't augur well.

      2) The Applebee's labor market dimishes the transaction power of well-heeled workers. Even if a well-off worker is in position to fight against BigCo's planned dumping, she has to worry about the two other people in her MSA who are just as qualified as she, but find themselves in jobs way below their qualifications.

      3) In spite of the Applebee's economy, those well-off workers never complain about such things. If you've ever worked for BigCo, you know that the Director of Marketing is never standing around the water cooler bitching about company policies, unless its some inert thing like finishing 5th at the corporate Olympics. Those employees may bitch at home to their families, but there's always more money to be made in towing the company line and getting promoted to VP. If employees even actually have that power, the ones who might do so will be self-motivated to avoid such complaining.

      In any event, you (and David, above) might be right in your reasons for low-levels of dumping. Note, though, that even the sanguine CBO sees dumping at (IIRC) 7%, let's say that's dumping without compensation, does even 7% feel a bit nervously high to those in the landed US HC gentry?

      Your arguments are effective ones. Drum's (well, duh, hc costs a lot) against the demagoguery that individuals might get burned en masse - yeah, that's not a particularly persuasive argument, it seems to me.

    3. CSH, I know you'll appreciate this rare correction: It's "toeing the line," not "towing." In other words, like keeping your toe on the line. One of those English words that is used only in a particular idiomatic phrase and never any other time.

      Also, on your argument, which of course we've discussed before: Doesn't it amount to giving the "HC landed gentry" a veto on who gets health care in the US? I mean, what's your alternative -- repeal ACA and go back to the status quo, because the gentry might make a fuss otherwise? Why not wait and see if they actually do make a fuss, and deal with it then?

    4. Ha, Jeff, thanks for the correction, I think I may have known that, but I'm sure I suppress it. Not sure if you or anyone else has a comparable example, but in my weird opinion the phrase should be "tow the line". "Toe the line" means "to adhere to rules"; we often use the phrase in the sense of "carry the water for some organization" - for which "towing" the line (imho) works better, like the middle manager in the example "towing" the garbage barge of stupid policy to advance her own career.

      On the ACA, I think you're right about the veto, I was primarily focused on whether the IRS cost projections give the Republicans a rational basis to demagogue (it does, imho). Since you asked my personal opinion, I have to say the more I think about it, the more I'm warming to the idea of the ACA.

      I've said way too many times that I fear the low barrier to dumping may be a hideous mistake in the ACA, and there's other stuff I don't like about it too. In the final analysis, though, the Applebee's labor force is an increasingly dangerous phenomenon - the ACA by no means solves it, but at least it (hopefully) removes health care availability as a logical final nail in the coffin of American little-guy enfranchisement.

      So I really hope the ACA works as advertised, since I think it would be a pretty good thing, at several levels, if it did. But I can't deny it terrifies me too.

    5. Ah, but if we're talking barges, then we should be "tote"-ing them, apparently, whatever the heck that means. ("Tote that barge! Lift that bale! Git a little drunk, An' you lands in jail!" Words to live by.) I agree, though, that the imagery of burden, as opposed to obedience, is appropriate here.

      Yeah, we just have to hope at this point that ACA basically works -- it's cleared all its other hurdles, so we're not going back now unless it's a disaster. And then we're just back in the soup. You've raised obviously legitimate worries, and I don't know how they're going to play out. Good times, huh?

  3. There's also the factor of the high-deductible plans that are now enabled by ACA. Essentially, these plans cover catastrophic care. Per family member, there's a big deductible (like $2500) and then you pay a percentage of care up to another cap, and after that everything's covered. These plans run about $6-10K. The kicker is that although drugs aren't covered, if your doctor puts down that a drug is crucial for life, then you get it at cost.

    These plans are part of the method for getting the healthy insured.


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