Thursday, March 09, 2017
Heartland press release: Steele's comments on AHCA
“I’m skeptical of the House Republican plan. It seems to be a modification of the ACA, keeping some of the Obamacare features and replacing the subsidies with tax credits. But the tax credits seem less than the likely premium increases, at least for older purchasers of insurance. It replaces the penalty for being uninsured with a penalty surcharge for the uninsured who eventually take up insurance. This seems like an incentive not to purchase insurance until one needs health care. I’m not sure why this plan would be more sustainable than the ACA.
“In my view, the real problem with all the plans cooked up by Washington D.C. are that they focus almost entirely on the demand side, on how to help people pay for health care. They also impose complex schemes, rather than market-based approaches. While the health insurance market is a mess that needs fixing, the real gains that might be made are on the supply side. These insurance fixes – the ACA and the Republican proposal – do nothing for the supply of health care. At best what they can do is increase demand for health care services while doing little to promote innovation and entrepreneurship in health care, pushing prices up. The entire approach is wrong. What’s called for is a free market in health care.”
I am measured and polite and guarded in the above comments. But come on. The more I hear and read about this plan, the more outrageous it seems. Here is a major problem: it creates an obvious incentive for adverse selection, which will destroy insurance markets. Under the ACA (Obamacare), the exchanges were to provide insurance to people without coverage. Under the "pre-existing conditions" provision, no one can be refused insurance, and there's no limit to how much an insurance company might be compelled to pay out. So, for example, if one asks to buy a policy costing $6,000 and has a health problem that will cost $100,000 to treat, the insurance company must sell it, at a guaranteed loss of $94,000.
Given this, no healthy person has any incentive to buy insurance, only sick people enter the pool, and insurance prices begin soaring to the heavens. To avoid this, Obamacare mandated insurance; everyone was required to buy it. The mandate involved a small fine, errr, "tax," that proved to be ineffective. The Obamacare pools consist of sick people and are collapsing as premiums skyrocket.
The Republican solution is to eliminate the mandate.
Good lord! This reduces the incentive for healthy people to buy insurance. This proposal will accelerate adverse selection. It will accelerate the skyrocketing of premiums. It is not sustainable. It will lead to increasing premiums,higher deductibles, and shrinking networks for everyone.
There's plenty more wrong with it, but this is enough to make AHCA worse than the dreadful Obamacare. It accelerates the wrecking of health insurance and does nothing at all to move us toward a free market, and nothing at all to expand the supply of healthcare. GOP needs to retract this dishonest and destructive plan and repeal Obamacare, not tweak it. They need to get a new Speaker while they are at it.