The Hot Accounting Take on AHCA

A friend asked me yesterday if I’d done my hot accounting take on the American Health Care Act, or the AHCA (or possibly Trumpcare. Not sure if that’s gonna stick yet). I liked the phrase “hot accounting take” enough that I thought I’d give it a try.

There’s a reason I didn’t do one right away, and that’s because I’m super biased. The ACA, or Obamacare, has been terrible for me and my family. I wrote about it over on my sister site here, but the moral of the story is that my premiums have increased 66% since 2012 (as far back as I could find recorded), I’ve had to change jobs once to keep one of my son’s therapists, and this year I hit my max out of pocket around March, which is more out of pocket than I ever would have paid on my old pre-Obamacare plan.

In other words, my first reaction to those defending Obamacare against the changes in the AHCA is, “You’ve got to be kidding me!” It doesn’t help that most of the ‘analysis’ is little more than ridiculous rhetoric and emotional whiplash. Pre-Obamacare was not The Walking Dead or the Handmaiden’s Tale or whatever else is the popular dystopia of the day. People with pre-existing condition were not left on the streets to die. Most people managed without Uncle Sam babysitting us just 5 years ago.

Before anyone loses their mind at my initial reaction, I know that my experience isn’t everyone’s experience. Some people won big with Obamacare. Just like some people lost big. Let me try to take a deep breath and do a more dispassionate analysis. Obamacare has been bad for me. I have to constantly remind myself that just because the ACHA is different doesn’t mean it’s better.

A Brief History of Health Insurance

Franklin D. Roosevelt, to quote one of the few good things Oliver Wendell Holmes Jr. said, had a “second-class intellect, but a first-class temperament.” FDR spent way too long in office, overseeing a lot of changes in the US with that second-class intellect, not all of them good. One of those not-good changes is the way we interact with health insurance.

We could have had Swiss insurance if it wasn’t for him

During World War II, the Roosevelt Administration believed that setting wage limits would somehow punch the Nazis in the face. To try to circumvent this government planning, employers started offering fringe benefits, most popularly health insurance. To make this mistake a bipartisan affair, the Eisenhower administration codified tax deductions for businesses offering health insurance. They did not, however, afford individuals the same deduction. So now our companies choose what insurance we want rather than us.

That wasn’t the end of the US government’s intervention in the health insurance market, but it’s the first big example (that I know of, at least. Feel free to tell me of any earlier ones).

Today, when our politicians debate government control vs. a free market approach to health insurance, nobody is actually talking about a true free market approach. We’re discussing degrees of government intervention. The ACA represented more government control. The ACHA represents less. Barely.

Currently, the Health Insurance market is about a step away from full government control. The Feds sets the things you have to cover, what price differences you have to use, and who you have to insure. They don’t directly set prices, and they don’t say which doctors are in their network. So it’s not everything, but it is a lot of the big things.

The health insurance companies today are barely insurance companies. Insurance is where people pool their money to offset future risk. Actuaries with big tables figure out each person’s chances of getting cancer or epilepsy or a cold, and charge each person accordingly.

With the requirement to cover those with pre-existing conditions, you can now jump in at any time. So the actuary can do nothing to plan for people to develop a problem. If you’re like my son, the chances of getting autism and epilepsy are 100%. That makes health insurance companies more akin to an arm of the government, collecting from Peter to pay Paul, as the old saying goes, rather than collecting from a pool and setting it aside for the actuarially predicted rainy day. The main difference between insurance companies and the government is that people with guns still won’t show up at your house if you opt out of making the payment (though the fee for skipping out on insurance coverage–collected by the IRS, who do have guns–is a half-hearted attempted to change that).

People can debate the pros and cons of the current system, but there’s one item that can’t (or at least shouldn’t) be debated. I’m talking about scarcity.

A Brief History of Scarcity

Do they still teach basic economics in schools?

Economics is that pesky thing that politicians like to ignore. It harshes on their vibe.

Here’s the reality: we have unlimited wants. We have limited resources. No law will change that.

This is true in health care. There’s a limited number of doctors, especially ones that can perform the specific procedure you want (the wait list for Pediatric OT for Autism in Denver is about 6 months). There’s a limited number of hours in the day. There’s a limited number of medical devices, drugs, resources to make those items, researchers to come up with new ideas, and every other item that goes into the business of making people healthy. Technology helps us be more efficient, and we’ve made fantastic strides forward. But scarcity still exists.

Scarcity, in a free market, is communicated through prices. Scarcity in a less than free market is communicated through other means, often lower quality, longer wait times, and and worse care.

Think of it this way: if Person A can’t afford the medical care he wants, and Person B can’t afford the medical care she wants, and Person C can’t afford the medical care he wants, Person A, B, and C together still won’t be able to afford their medical care. No amount of government laws are going to change that.

We try to work around this. Force Person D to pay, whether that is some rich person in San Francisco or the doctor performing the medical procedure. It sounds nice, but it’s not going to make there be more doctors and more hospitals and more therapists and more natural resources.

If you need a brief review of how scarcity is resolved, here’s a good high school summary. Notice that none of the options are “magically make more by the government saying it’s so.”

The Main Failure of Obamacare

Obamacare was all about good feelings. We’re going to force insurance to cover all these wonderful things, damn the scarcity! And you get free birth control, and you get free doctor visits, and you get free IVF, and you get to be insured even though you chose to go 5o years without insurance and are only picking it up now that you’re sick, and you at 70 who goes to the doctor every day pays nearly as much as that 20 year old who hasn’t gone to the doctor in 5 years based on what some politician thought sounded nice rather than an actuarial chart. Etc.

The promise was offering more care to more people for less cost.

Let’s combine that with scarcity. Is that promise possible? No, no it is not. Higher premiums, lower benefits, and multitude of failing insurance companies are testament to that impossibility.

The fight against Obamacare became a rallying cry for so many Republicans for so many years because the law denied reality. It became especially effective around election time, which conveniently occurred right around when insurance companies released their annual double digit premium increases.

Looking Towards Trumpcare

That’s around a thousand word throat clearing to get to the crux of the matter.

Republicans are quickly discovering that pointing out failings is a lot easier than coming up with a bill of their own. The issue is that when the ball is in their court, Republicans don’t like to campaign on reality anymore than Democrats. It just doesn’t sound nice, especially when that reality includes telling a sick person ‘no.’

Tell me about it

So they’ve come up with the American Health Care Act, which changes. . .well, not a whole lot.

Mandating someone to get insurance or face a tax penalty doesn’t sound very good to a party that claims to be about individual liberty. So instead they mandate that you get insurance or you face a. . .premiums penalty when you re-enroll.

And yes, pre-existing conditions will still be covered. Anyone who says otherwise (*cough* Jimmy Kimmel *cough*) is reading rhetoric rather than the actual bill.

Fewer people will be insured according to the CBO (scored before the latest amendments). Sort of. That 24 million fewer people getting insurance is hypothetical people rather than real people, since we’re talking about a decade in the future vs a still unpopular law that will definitely be changed by then whether or not this particular law goes through. Plus there’s this gem from the CBO analysis:

In 2019, the number of uninsured would grow to 16 million people because of further reductions in Medicaid and nongroup coverage. Most of the reductions in coverage in 2018 and 2019 would stem from repealing the penalties associated with the individual mandate. (emphasis mine)

So of the reductions, a significant portion of the initial 16 million would rather choose no insurance over free Medicaid. They enrolled solely to avoid the Obamacare penalty.

Keep that in mind next time you’re considering single payer.

The bulk of the AHCA is not that different from Obamacare. Which is why the so called “Freedom Caucus” wing of the Republican House nearly killed the bill.

Where people are really losing their mind is over the Meadows-MacArthur Amendment, which is what got that Freedom Caucus back on board. It’s a half step towards economic reality, and economic reality suuuuccks. States will be able to request waivers for certain items that have previously been mandated under Obamacare to try to come up with a few new options rather than the current one-size-fits-all.

If you believe people are incapable of figuring out what they need, this is a terrible amendment. If you believe people are so incompetent that they don’t know what insurance would be better for their family, this amendment must be seen as tantamount to murder.

For everyone else, it’s more of a “huh.”

The amendment is admittedly a wildcard, whereas the rest of the bill is simply playing at the fringes of a bad law. This has the potential of putting actual insurance back on the table, specifically catastrophic coverage.

Here’s the thing: this wouldn’t be a good insurance plan for me. But I’m not arrogant enough to believe that it would be worse for everyone.

What’s super important to remember is just because we don’t REQUIRE insurance to offer services, doesn’t mean they WON’T. Again, I had insurance before Obamacare. Better, cheaper insurance. It covered every item listed in the “10 Essential Benefits” required by Obamacare. This quarter-step back from Obamacare is NOT going to make that coverage unavailable. A full repeal of Obamacare wouldn’t make it unavailable. Those options WILL still be on the table because there’s DEMAND for them. However, other people (if they’re allowed to) will chose other insurance options, some of which won’t have those 10 so called essential benefits because those people will not see them as essential to them.

Let’s Summarize

Okay, so to take a deep breath from the crazy news running around. The American Health Care Act, or AHCA, or Trumpcare, or however it ends up being known, probably isn’t going to change a whole lot, assuming it passes as is. We might get a few more options on our health insurance plan in some of the states. Maybe. A few more people who want insurance might not be able to afford it. Perhaps. The first one sounds good, the second one sounds bad.

Outside of campaign world where poopless pigs fly onto your plate as perfectly cooked pulled pork and mosquitoes only add to the ambiance of the outdoors, somebody is going to lose out no matter what. There’s scarcity of health care, Obamacare just moved the needle a little more towards a government controlled allocation. Trumpcare is ever so slightly nudging it back towards teh market approach. Right now, under Obamacare, I’m a loser. Under Trumpcare, who knows?

But I’m not holding my breath.