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Saturday, March 23, 2013

The single payer gambit

The ACA had dropped off the news radar for a little while. There were a number of other news items which took center stage; the fiscal cliff, sequester, etc. However, as the time lines for the various provisions of the ACA become relevant, this will again come back into the news. It is already happening.

Private insurers are planning for premium prices under the provisions of the ACA. Like any insurer, their actuaries use historical data to make estimates of costs and what premiums should be in order to avoid taking a bath. The problem is they have scant actual data to make such predictions. How much will it cost to provide insurance with expanded mandated care near universally with lifetime caps  removed, and they must insure those with pre-existing conditions, lumping such individuals in with young healthy people?  To believe that rates will not need to be increased defies common sense, given that absolutely nothing else is changing in the care delivery system in the short run.

According to the original time line of the ACA, health insurance exchanges , administered by states, should be open for business by 2014, offering a place for individuals to purchase moderately priced policies. The problem is that many states are basically taking a bye on this and the states who are able to open their exchanges will still need to depend upon private insurers to offer products at affordable prices. Given the challenges facing the private insurers in terms of solving the actuarial puzzles required to offer such products and not take a bath, I have a hunch this is not going to happen in any major way. In states where they are defaulting to the Feds to run their exchanges, I cannot imagine this happening any time soon.

I read my share of blogs and banter on the internet and associated with the NYT and WSJ. What I find interesting about what I read is there is amazing agreement between liberal and conservative voices regarding one thing relating to the ACA. They both appear to want it to fail miserably, albeit for different reasons. For conservatives, there is a desire to see this law fail to get to "I told you so moment". However, for liberals, failure is desirable because it will facilitate movement to where they wanted to end up all along; a single payer system. The functional details in the ACA were never particularly important since if they turned out to be dysfunctional the failure could easily be exploited to push the country to a single payer system.

As the events of 2013 unroll, it does not take a genius to see higher insurance rates and failures of the exchanges will be blamed on markets and insurance companies. That these "market based" entities are anything but market driven is a nuance which will be lost in the nanosecond attention span of the political class. The portions of the ACA that depend upon private insurance are going to fail miserably and we are moving toward a single payer system, sooner rather than later. When the exchanges fail to materialize the political right will claim government failure and the political left with claim market failure. The latter message, coupled with rhetoric about other market failures such as the housing industry, will hold sway.  

One can view problems in health care finances as being a political vs an economic problem. For the most part, liberals have viewed it as a political problem to be solved within the political sphere. For conservatives (and here I mean economic conservatives), this is essentially an economic problem solved with the economic (meaning market) sphere. For all of the limits which face politicians, they hold an inherent advantage in their abilities to appear to be directly solving problems. Even if taking legal and legislative action has no actual benefit upon a problem, the act of passing a law creates the appearance of action and caring. Relying on market based approaches sends a message of disinterest at best, even if markets create the most functional solutions in the short term.

In my estimation, the progressive statists are going to prevail. It is inevitable that we will end up with a single payer system. They hold all of the cards to win in the political realm, even with near term failure of the ACA. The problem is once they have achieved their political goals, where does that leave us in terms of fixing our health care mess? Having nominal coverage for an additional 10% of the population still leaves most of the structural problems of the current system in place.  Who will set the prices for every health care service? Who will define what services are on the menu? Who will define how prices will change? What will be the provisions which will allow for change and disruptive innovation? Perhaps we can hire bureaucrats who have retired from Goskomtsen. They had plenty and experience in failure in administrative pricing and they have been unemployed since the Soviet Union fell.   

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