Fixed-Dollar Tax Credits Would Reduce Individual Health Insurance Premiums

Sonia Jaffe and Mark Shepard of the National Bureau of Economic Research (NBER) have written a new paper, which compares the effects of fixed-dollar subsidies for health insurance to subsidies that are linked to premiums. They conclude fixed-dollar subsidies reduce taxpayers’ costs and improve access. Unfortunately, the structure of subsidies in U.S. health insurance has moved in the other direction.

Tax credits that subsidize health insurance offered in Obamacare’s exchanges are based on the second-lower cost Silver-level plan in a region. Intuitively, this implies insurers will not compete too much because that would drive down subsidies. As long as subsidies chase insurance premiums, premiums will be higher than otherwise.

Jaffe and Shepard examine evidence from Massachusetts’ health reform (“Romneycare”), which dates to 2006. Its costs are still spiraling, and Jaffe estimates one factor is its design of subsidies, which is similar to Obamacare’s:

Massachusetts Governor Hiking Taxes To Rescue Failed Health Reform

(A version of this column was published by Forbes.)

Governor Charlie Baker of Massachusetts has proposed a tax of $2,000 per worker on businesses which do not offer health coverage to employees who become dependent on Medicaid. This makes him the second Republican governor of Massachusetts to buy into the notion that imposing taxes (or fines or penalties or fees) on individuals and businesses can force them to accept responsibility for government failure at getting health spending under control.

Evidence from Massachusetts and the nation shows the opposite is true. Yesterday, I testified on the effect of Obamacare’s individual mandate before the Oversight Subcommittee of the U.S. House of Representatives’ Ways and Means Committee. (The video is at this link, and my written testimony is at this link.)

If the Supreme Court Kills Obamacare, Should We Thank Mitt Romney?

There is no doubt that the campaign to “repeal and replace” ObamaCare will have its weakest standard bearer if Mitt Romney becomes the Republican candidate for President. His embrace of an “individual mandate” to buy health insurance or pay a penalty, as legislated in his 2006 Massachusetts health reform, is anathema to those faithful to the ideal of limited government.

But maybe we should look at it another way: If Mitt Romney had never signed his 2006 law, those of us committed to defeating ObamaCare would never be in the fortunate position we are today – the whole, ungodly mess hanging by a thin thread after a brutal hazing in the Supreme Court.

Read the entire article here.

What's Next? Mitt Romney As A Space Lizard Commanding An Alien Fleet?

If your ears can handle the explosions, please have a look at Rick Perry's latest ad opposing Romneycare.  By the end of it, I half expected Mitt Romney to peel off his human skin and stand revealed as a space lizard commanding the alien invasion of our mother planet.  Let's hope that this ear-splitting ad motivates some people to investigate substantive criticism of Romneycare.

Rick Perry's Texas: It's Better to Create More Jobs Than More Medicaid Dependents

As Texas governor Rick Perry makes a splash in the Republican presidential primaries, one place where people are looking for evidence of poor executive leadership is his record on health care. Fellow conservatives have focused on his 2007 executive order that girls entering grade 6 should receive a vaccine, Gardasil™, which protects against the Human Papilloma Virus (HPV).

A criticism that will likely carry more weight as the campaign develops is Perry’s record on Medicaid and the uninsured. We see this in an article written by Noam N. Levey in the Los Angeles Times, which declared that Texans’ access to health care is “withering” under Perry. As Levey notes, Texas has the highest rate of uninsured in the nation, over one quarter of the population. This is important, but not in the way Levey believes.

Read the entire article in this month's Health Policy Prescription here.

Massachusetts: Consequences of Political Control of Health Premiums

My column in the Worcester Telegram is here.

Massachusetts En Route to Single-Payer Health Care

Mitt Romney has thorwn himself in front of a buzzsaw with his continuing defense of his 2006 health reform in Massachusetts.  The other day, the Wall Street Journal editorial board sharply criticized Mr. Romney's approach.  In a letter by yours truly that the WSJ published today, I noted another problem with the Massachusetts reform: It amplified political incentives that have put the solvency of Bay State health plans at risk.  Read the letter here.

For non-subscribers, the text is copied below:

Romneycare's Popularity Plummets

Grace-Marie Turner speaks for many in expressing frustration with Mitt Romney’s inability to let go of his failed Massachusetts health-care “reform.” President Obama himself has frequently asserted that Obamacare is partly based on the so-called conservative ideas encompassed in Romneycare. New polling results from the Bay State might make the president rethink this approach, and give Romney more confidence to admit his error.

A recent poll from Suffolk University and WHDH-TV reports that 49 percent of respondents do not believe Romneycare has helped, while only 38 percent believe that it is working. Fifty-four percent said that Romney’s signing the law likely hurt his presidential chances, while only 22 percent believed that it helped.

How Massachusetts' Commonwealth Connector is Better Than Utah's Health Exchange

The range of current libertarian-conservative expert opinion on ObamaCare’s Health Benefits Exchanges has well-defined boundaries. On the one hand, there are those who believe that states are obliged to establish some sort of barebones exchange along the lines of the Utah Health Exchange in order to prevent the federal government from coming into a state and imposing a bloated contraption like Massachusetts’ Commonwealth Connector. (For an example of this approach, see here.) Others (especially myself) believe that the Utah Health Exchange is unimpressive, that no “exchange” can overcome certain bureaucratic necessities, and that states should therefore refuse to collaborate with ObamaCare, while waiting for it to be overturned by the Supreme Court or a future Congress and President. (The Cato Institute’s Michael Cannon has also arrived at this conclusion.)

None of us has anything positive to say about Massachusetts’ Commonwealth Connector — until now! In one respect, the Commonwealth Connector is an extremely well-run government program, while the Utah Health Exchange is not. The issue is transparency.

Myth of the Massachusetts Mandate

Remember the Massachusetts health reform, signed by Gov. Mitt Romney in April 2006? Some Obamacare cheerleaders (including the President) insist that it was the forerunner of Obamacare (and Gov. Romney is having a heck of a time distancing himself from it).

There is a media myth that the individual mandate (that you must pay a fine if you don't buy government-approved health insurance) is critical to the law's so-called "success".  Well, it's not true.

Should Your State Establish An ObamaCare Health Insurance "Exchange"?

In a few words: Amost certainly not.  It will cost tens of millions of dollars to operate for no benefit whatsoever.  And states with the best intentions will be led astray by Secretary Sebelius and her ObamaCrats.

ObamaCare is President Obama's problem: Don't make it your state's.  This month's Health Policy Prescription.

Massachusetts' 2nd Largest Carrier Drops Medicare Advantage

Harvard Pilgrim Health Care will bail out of Medicare Advantage, causing 22,000 seniors in Massachusetts to lose their Medicare benefits, according to the Boston Globe (hat tip to Avik Roy).

This is a direct consequence of ObamaCare - and one that I anticipated last December in a study of Medicare Advantage.

Adverse Selection in ObamaCare and RomneyCare

Will ObamaCare suffer the same problem of adverse selection that RomneyCare does? An exchange of views in the Wall Street Journal prompts my latest blog entry at John Goodman's Health Policy Blog.

Mainstream-Media Spin on Brown Victory & Health Care - John R. Graham - Critical Condition on National Review Online

Mainstream-Media Spin on Brown Victory & Health Care - John R. Graham - Critical Condition on National Review Online

Make No Mistake: Folks Don't Need An Individual Mandate

In the spirit of the age, paraphrasing president Obama, I argue for voluntary participation in health insurance, over at National Review Online's Critical Condition (7/22 7:04 P.M. on the scroll).

Health Plan CEO for Governor of Massachusetts?

With an announcement that will certainly have implications for the national debate on health reform, Charlie Baker, the CEO of Harvard Pilgrim HealthCare, has announced that he is a candidate for the Republican nomination for governor of Massachusetts.

Gutsy move: He's a leader in the industry (health insurance) that 4 of 10 people believe is most responsible for increasing health costs, and "enjoys" a reputation as low as tobacco and oil companies.

More importantly, he was a key player in Governor Romney's reform that mandated universal health coverage, about which he was skeptical (as described very forthrightly in his blog, and about which I recently scribbled.) The media and voters are going to expect him to have some solutions to the health crisis.

Because of the likelihood of a national coverage mandate, and Mitt Romney's continuing presence as a presidential candidate, Baker the politician's views on health reform will be at least as interesting as Baker the health-plan CEO's.

"Universal" Care=More ER Use: An Old Lesson Relearned

Tomorrow is Independence Day, when we look back to the successful Revolution of 1776. I suppose we can't quite "celebrate" July 4, because we've surrendered much of that hard-won independence back to our home-grown political class.

Speaking of our political class, if I had a dime for every time President Obama or another of our betters announced that increasing coverage through more government programs would result in better access to primary care and less ER use, I'd be able to pay my taxes many times over.
There is no evidence of such an effect, as recent analyzes of the Massachusetts "reform" that introduced "universal" coverage have discussed (here and here). In a previous analysis of hospital ER use in California, I found the same effect. Indeed, ERs were far more likely to be jammed with people who had coverage, and whose symptoms could have been better handled in a primary-care physician's office, than the uninsured.

Will our rulers, who want to impose their vision of health "reform" on us, learn from this evidence? Fat chance!

Overcome by a wave of nostalgia for lost liberties, I decided to have a quick look at evidence of the effect of "universal" health care in the scholarly literature:

Exhibit A: an article from 1973 reporting a survey of Montreal households conducted over 12 months in 1969 and 1970, just before "universal" coverage was imposed by the provincial government of Quebec in 1971. The survey did conclude that higher-income households used more medical services than lower-income households did. Furthermore, 4/5ths of ER visits were for non-urgent reasons.

Sounds like those folks needed "universal" coverage, right? Wrong.

Exhibit B: the same authors published a subsequent article in 1978, which reported that ER visits increased by 14% annually in the five years after "universal" coverage versus 7% in the five years prior. Before "universal" coverage, 33% of patients surveyed had attempted to contact a physician before going to the ER and 63% were successful. After "universal" coverage, 39% of patients had attempted to contact a physician but only 38% were successful. Most of the increase in coverage happened through the ER, not primary-care doctors.

Three decades later, Massachusetts is learning the same lesson - or not.

Gaming State-Run Health Insurance in Massachusetts

I hope you don't mind if I'm a little lazy this morning and simply point you to a post by the CEO of Harvard Pilgrim Healthcare, which addresses an issue which I do not believe we have covered in our analyzes of Massachusetts. (I was directed to it by Bob Laszewski's blog.)

Critical examination of Massachusetts' experience with a government-run health-care "market" (e.g. Connector) are prevalent in this blog. Recent analyzes from the consumer-directed reform camp, by Grace-Marie Turner & Tara Persico, as well as Michael Tanner have focused on the budget-busting increases in costs and the absence of incentives for patients to use medical services appropriately (although Mr. Tanner does allude to adverse selection, the topic of this post).

Mr. Baker of Harvard Pilgrim points out that merging the small-group and individual markets, as the Connector does, creates an incentive for individuals to game the system by only buying health insurance when they become sick. Before the "reform", Massachusetts imposed guaranteed issue and community rating on the individual market, so people were already motivated to wait until they became sick to buy health insurance. (This is a key reason why the Bay State ranks so poorly in the U.S. Index of Health Ownership.)

However, this adverse selection was minimized because state law allowed insurers to exclude pre-existing conditions for up to six months. Under the Connector, which merges the small-group and individual markets, it would have to do the same for the much larger small-group market alongside the individual market.

Follow me so far?

Insurers were unwilling to do this in the small-group market, so they had to remove the exclusion in the individual market. The tax for not obeying the mandate to have health insurance is about $900 annually, or $75 monthly), which people are content to pay if they know they can wait until they get sick and get individual coverage through the Connector with no exclusion for pre-existing conditions.

Result? Death spiral! Mr. Baker reports that Harvard Pilgrim's individual policies written since the "reform" only last five months, and the premiums are ramping up fast.
What will the state do? Well, I suspect it will do what all government's do when their policies fail: impose more government.

Expanded Coverage = Less Access to Care

I've always said that the closer the state gets to "guaranteeing" "universal" coverage, actual access to care decreases. This has been the case in Massachusetts, since the 2006 reform that mandated health insurance for all.


A recent white paper by the New England Healthcare Institute suggests that access to primary care in Massachusetts is actually worse than in other states, where health insurance is voluntary. Remaking Primary Care: From Crisis to Opportunity, reports data from the Massachusetts Medical Society. The share of primary-care practices accepting new patients dropped significantly from 2006 to 2008: 90% to 78% in pediatrics, 69% to 52% in internal medicine, and 75% to 65% in family medicine (p. 13, figure 3).


However, the same page cites a national survey with data from 2003-2004, that 94% of primary-care practices were accepting new patients. However, only 74% were accepting new Medicare patients, and only 64% were accepting new Medicaid patients (footnote 20).


The message is pretty clear: more government coverage equals less access to care.

Massachusetts Health Reform: Hospital Profits Cut in Half

I'm going to miss the Boston Globe, if the New York Times decides to shut it down. Its coverage of the consequences of the 2006 state law mandating "universal" coverage has been excellent. (Indeed, that might be one reason that the New York Pravda wants to shut it down: "universal" health care is a mantra of its editorial page.)

Reading this blog's coverage of the Massachusetts reform has been like Chinese water torture - drip, drip, drip. Well here's more: According to the BoGlo, the state hospital association claims that hospitals' profit margins have dropped from 0.7% to 0.3% in the last year. Patients are deferring surgeries, and hospitals are delaying capital investments.

Hospitals were big supporters of the 2006 reform. Will they change their mind and support reforms that empower patients and not government? Perhaps not: patients interviewed in the story are unhappy about taking financial responsibility for any part of their hospitalization - perhaps a result of decades of government-led infantilization.

Increasing government control is quickly turning into a lose-lose-lose situation: bad for patients, providers, and taxpayers.