Defending the Indefensible

Posted by Deepish Thinker on November 13, 2013
Current Events, Economics, US Politics

Alan Blinder has put forward a defense of the Affordable Care Act in today’s WSJ (gated).  It’s not terribly convincing.  Considering some of his points:

“But a badly designed website doesn’t signify a badly designed policy.”

True.  But bad execution will kill a good idea just as effectively as a bad one.  Also, the people who keep telling us that the ACA is good policy are the same ones who assured us that the website would be ready.  Then that it would be fixed by December 1st.

“While Americans either read about or experience the website’s failures firsthand, the enemies of health-care reform are telling them that ObamaCare is a failure. And since virtually no one actually understands how the new law works, the verdict sounds plausible.”

This is a pretty telling admission.  The ACA passed 3 ½ years ago and we still don’t know what’s in it?  What has the administration been doing all this time?  Is a program that’s too complicated to explain too complicated to execute?  Was it even a good idea?

“Thus tech “glitches” make the law’s critics look better and make the administration look like the gang that couldn’t shoot straight.”

“It undermines trust in health-care reform and, more generally, in the government’s ability to solve problems.”

Yup.  Kind of a problem if your basic philosophy is that Washington needs to exercise more control over the economy.

“And it’s not just website problems. Americans are also hearing more and more about a second snafu. (Remember what those five letters stand for.) The president assured people over and over again that “if you like your [health insurance] plan, you can keep it.” Well, it turns out that maybe you can’t; your current insurance might get canceled.”

SNAFU might be an overly polite characterization.  The President is vulnerable here.  Either he didn’t actually understand the implications of his own signature legislative achievement.  Or he deliberately and repeatedly lied in order to sell it.

“Regarding coverage, while the health-exchange website’s problems are causing delays, they will be fixed—though I’m not sure I’d bet on Nov. 30. (If the administration makes that deadline, someone deserves a medal.) The initial enrollment period might have to be extended a bit, which would require some other adjustments. But even with delays, most of the uninsured will be able to get covered.”

I wouldn’t bet on November 30th either.  Nor December 30th for that matter.

Mostly this seems like soft peddling a pretty big problem.  If the initial enrolment period could easily be extended the Administration would have done it already.  Unfortunately the calendar isn’t infinitely flexible.  Changes have consequences.

From a perception perspective the situation is horrible.  On Jan 1 more people will have lost private health insurance due to the ACA than gained it.  A situation that may or may not be resolved by the end of open enrollment.

“Nor are the central elements of insurance reform affected by the technology glitches. Millions of people under the age of 26 are already benefiting by being kept on their parents’ policies. Pre-existing conditions will no longer prevent people from getting health insurance. Annual and lifetime limits will go the way of the dodo. Americans will like all that.”

I’m sure they will, until they get the bill.  All of these innovations will make health insurance more expensive.  Free lunches are difficult to legislate.

“Regarding cost containment, some of the law’s planned demonstration and pilot programs, designed to test various cost-reducing ideas, might be delayed. But they won’t be abandoned. Delays will hurt a bit because these experiments were destined to take years to complete in any case, and our political system is not known for patience.”

Has there been any positive news whatsoever about any of these pilot programs?  Negative news has been abundant.

“But there is at least some reason to think that the “affordable care” part of the act may be working already. The rate of inflation of medical costs has tumbled in recent years.”

We sacrificed the virgin, the volcano didn’t erupt, therefore……..

“All that said, no big social policy ever goes exactly as planned. Two additional hazards that have garnered relatively little attention to date worry me.

The first is the behavior of the “invincibles”—young people who, statistically speaking, are at little risk for high medical bills. To make universal coverage work, the government needs to bring them into the insurance pool as counterweights to the high-risk people.”

Not sure why we keep referring to young healthy people as “invincibles”.  Given what the legislation expects them to do “suckers” seems more appropriate.

“If many low-risk people stay out of the pool, we have a problem: The insured pool will be less healthy than the total population.”

Notice the subtle avoidance of the technical term for this possibility, which would be “death spiral”.

It’s too early to know what young healthy people will choose to do.  Many people place a very high value on having health insurance.  Young people may choose sign up for this reason, to avoid ‘wasting’ money on the penalty, or simply because it’s the law.

Of course if the website can’t be made to work they aren’t getting on board and the ACA will become a case study in adverse selection.

“Second, there’s the behavior of businesses with more than 50 employees. Some companies that now cover their workers with costly health-care plans might decide to drop that coverage once the exchanges are up and running.”

At this point businesses with lots of low wage employees resemble a group of penguins on the edge of the ice.  Nobody wants to be the first to jump.  But that doesn’t mean they aren’t considering taking the plunge.

Best guess is that businesses with a lot of high turnover/low wage employees initially manage costs through restricting as many employees as possible to less than 30 hours per week.  If the exchanges ever get unkinked, wholesale dumping of lower level employees onto the exchanges will begin shortly after.

“Considering all these problems, is the game worth the candle? Absolutely—because the status quo ante was so unacceptable. America cannot be a humane society if we leave 15% of our population uninsured.”

To be clear, even under the most optimistic assessments the ACA is going to solve maybe half of this problem – at enormous expense.

“America cannot be an efficient society if we spend 50% to 100% more of our incomes on health care than other countries, and yet don’t get better health outcomes.”

The second part of this statement is dubious at best.  Once you control for lifestyle differences (i.e. things like driving mileage, gun ownership etc.) that impact health but aren’t healthcare related the US healthcare system stacks up pretty well.

The first part is more interesting.   Something like 17% of US GDP is healthcare.  In other words 17% of the total economic output of the US is healthcare goods and services.  That’s a much higher percentage than other advanced countries, but is it the wrong percentage?  Don’t know, but then neither do any of the people who drafted the ACA.

“We can’t let a botched website get in the way of goals that big.”

No.  The poorly conceived, economically asinine, Rube Goldberg nature of the ACA is the reason we should start over.  The botched website really is incidental.