Friday, August 16, 2013

A Very Weak Argument About the ACA

This post from Ezra Klein exemplifies the type of argumentation that will be used by the administration to encourage the young to make bad financial decisions around health insurance, a decision on which the entire ACA edifice appears to rest.

Let me just offer a few observations (from the comment I left in response to the post).

Clancy is wrong: The subsidies are funded by taxes on rich people and by cuts to Medicare spending, not by the premiums paid by young people. In fact, young people are likely to be the biggest beneficiaries of the subsidies because they’re more likely than any other age group to be poor and uninsured.

Right and so wonderfully deceptive at exactly the same time.  Yes, in point of fact, the young will disproportionately receive subsidies because, of those not covered by Medicare, they are disproportionately poor.  But that fact misses the larger point.

Even with subsidies, many of the young will wind up paying far more for insurance than the insurance is worth to them on an actuarial basis.  This is because the ACA has set a community rating cap at 3:1, far below the 5:1 that was prevalent before and even further below the real actuarial values.

The trick to making any health-insurance system work is to attract enough healthy and young people into the insurance pool.

Same fallacy again.  This is only true with community rating, at least to the degree that is required under the ACA.  Without community rating, this isn't true at all.  In other individual insurance markets, cars and life for example, this is not true.  It is the provision of the ACA that drives this not a necessary condition of insurance.

The number of young people who make too much money to qualify for subsidies but don’t receive health insurance through their jobs is pretty small (and also not easy to pinpoint).

Deceptive again. The statement is true but irrelevant.  Qualifying for (any) subsidy does not make insurance a good financial decision.  That's the implicit logic in this point and the logic is false.

And Obamacare is intentionally structured to prevent people who go without insurance from acquiring it only after they need it. You can only sign up for health insurance during an annual open-enrollment period

One more deception.  The statement is true but not relative.  Today, if one gets a "pre-existing condition," one may not be eligible for insurance ever (in the individual market).  The ACA dramatically reduces this risk (and therefore the amount a rational person should pay to avoid it).  Guaranteed issue makes insurance less valuable not more.  In other words, this is exactly the opposite of what is claimed.

Young people grow old. Healthy people get sick. Rich people become poor. The people overpaying to keep costs low today are the people underpaying 10 or 20 years from now. It’s a terrible mistake to believe your health-care needs won’t change over time.

Continuing exactly the same line of fallacious argument.  The ACA allows those people to buy the coverage 10 or 20 years from now no matter what at a better actuarial value than they will received today.

The only question is whether you’ll have insurance when it comes.

The short story here is that the ACA eliminates the things that allow for cost control in insurance and pays for them by imposing a hidden tax on the young.  That's quite disingenuous as an approach and Mr. Klein's defense is quite weak.  And yet, having young people buy this argument is exactly what the ACA depends on.  Isn't it a bit sad that the government is dependent on encouraging people to behave in financially irresponsible ways in order to implement policy.

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