Posted on 11/09/2013 7:21:03 AM PST by Kaslin
If you are inclined to believe Barack Obama's claim that people losing their insurance are giving up skimpy coverage for much better benefits, read the editorial in Monday's Wall Street Journal. Then read it again, and again, and again.
Edie Sunby has a rare form of cancer that is almost always fatal. Yet she is alive, thanks to the efforts of doctors in San Diego, at Stanford University and in Texas. Over the past year, UnitedHealthcare has spent $1.2 million on her medical expenses. But she has just been informed that her insurance is being cancelled.
Worse, in the new California exchange, the only plan that will allow her to continue seeing her San Diego doctors will not pay for the doctors at Stanford or in Texas. There is no reimbursement for out-of-network services.
For Edie Sunby, ObamaCare is a potential death sentence. She is not alone.
Here is my prediction: the kind of coverage Edie Sunby had will never again be seen in the individual market in this country.
You don't need to be an economist to understand why. Think of a game of musical chairs. The health insurers are the chairs. And not a single one of them wants a patient who will spend $1.2 million of their money.
The circumstance under which insurance companies will find it in their self-interest to offer the kind of coverage UnitedHealthcare offered is a market that is free to price risk. Only if people are free to pay actuarially fair premiums can insurers offer the kind of coverage that will pay enormous sums of money to deal with illnesses that have a very low probability of occurring. In a community rated system, plans that are appealing to the sick will attract the sick, who will inevitably be paying premiums that are far below the cost of their care.
In the ObamaCare exchanges, health plans are free to select any premium they choose. But they must charge every entrant the same (community rated) premium, regardless of health status and they must accept all comers. Under these conditions, the plans will make a profit on the relatively healthy and incur losses on the relatively sick. Accordingly, they have an incentive to attract the healthy and avoid the sick.
As noted in a previous post, most insurers believe that the young and the healthy tend to buy on price, while older and sicker prospects tend to look more closely at which doctors and hospitals are included in the health plan's network. Accordingly, competitors in the newly created health insurance exchanges are choosing to keep their premiums down by offering very narrow networks. The result is a race to the bottom. The price of a lower premium is less access to care.
After enrollment, these perverse incentives do not go away. The health plans have an incentive to overprovide to the healthy (to keep the ones they have and attract more of them) and underprovide to the sick (to encourage the exodus of the ones they have and discouraged the enrollment of any more of them).
I don't know why this isn't obvious to other health economists. Nothing involved here is more complicated than Economics 101. Here is a very clear presentation.
In competitive markets competition tends to cause the price to change until it equals average cost. Thus, to the extent that price is a measure of the value consumers place on a good or service, the marginal benefit people receive tends to equal the cost of producing that benefit.
The same tendencies exist under managed competition. Because of community rating, premiums are not allowed to adjust to reflect each enrollee's expected health care costs, the way they would in a normal insurance market. As a result, community rating is similar to a price control. At the community rated premium, some enrollees will be overcharged and some will be undercharged. And since price cannot vary to match expected costs, competition will cause costs to change until they tend to equal the premium.
Take those patients who have above-average health care costs and who are therefore "unprofitable." If premiums are free to rise for those people, insurers will compete them up to the level of the cost of their care. But if the premiums are artificially constrained at a lower level, insurers will tend to compete the cost of their care down to the level of the artificial premium. The reverse pressures exist for those people who have below-average health care costs and who are therefore "profitable." If the artificial premiums cannot be competed down to the level of average cost, the tendency will be to compete cost up to the level of the artificial premium.
Bottom line: if you give producers in a market perverse incentives, you will get perverse outcomes.
Unfortunately no one told Edie Sunby about it. Or anyone else, for that matter.
bump
Did anyone ask if they voted for Obama?
The Liar in Chief lied about his mother losing insurance coverage during her fatal cancer, as we now know, but he will cause the death of thousands of women who are losing their health care because of ObamaCare.
Every one of their families ought to be in front of the White House with large signs saying, “Obama’s War on Women with Cancer!” or “Obama lied! My wife/mother/sister died!” That’s the least these family can do to protest this useless killing of their loved ones.
Some sooner some later.
Many people will have to op out of their "new" plans because they cannot afford them...
*rme*
It would be more accurate to say, "Tens of thousands of women will die because of Obamacare."
Obamacare was supposed to HELP people like her with pre-existing conditions. Of course we knew all along that it would not, and Obama knew it, too.
the war on women.
I remember that and I agree
Excellent point
Yes and many die even before they are born!
His first thought wasn't a pain pill, it was a pain killer (kill her).
Check out the tape.
It boils down to choice.....
Which is more valuable? The old white lady or an unaborted black crack baby
What happens when cures are too expensive to bear? Do only the well-to-do get cures that involve treatments the public paid for directly or indirectly, like because cheaper ways to stay healthy weren't being developed? What happens to well-being when people get too dependent on being taken care of?
What's my point? We see what happens. Of course insurance with pooled resources can't cover such expensive solutions. The answer would involve a time machine, going back and developing simple and inexpensive cures for things. Another facet would be doing a better job figuring out what environmental and other issues cause cancers, autism, other things society cannot afford.
For this situation which is going to be more than an anecdote? From where we are now, darned if I can guess what the solution is.
Gosh, I'm feeling philosophical.
In the short term, I think many thousands will die. And it only gets worse after that. I mean, how long does it take for the average cancer patient to die after his chemo is cut off? Weeks. A few months tops. Many of those people are already in that death queue, because they’ve already been notified their coverage is no more.
Just ask Barok! He brags that he is good at killing people!
Obama lied, people will die.
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