Medical Tuesday Blog
Obamacare is experiencing a death spiral to total collapse
Health Economists on the Left and Right are Predicting an Obamacare Death Spiral
DALLAS, TX, AUGUST 26, 2016 – Princeton University health economist, Uwe Reinhardt, is generally viewed as a friend and supporter of the Obama administration’s efforts to reform the health care system. But now he tells Vox.com that the health insurance exchanges have “entered a death spiral and are heading toward total collapse.”
That is the same assessment Obamacare critic John Goodman renders in an editorial at Forbes. “Obamacare is experiencing two kinds of death spirals: the upward spiral of price and the downward spiral of quality,” he says.
Goodman, who heads the Goodman Institute for Public Policy Research in Dallas, says a death spiral exists if there is no premium the insurer can charge that will allow it to cover its costs. If it is experiencing losses, it may try to recover by raising the premium. But eventually there will be no one left in the pool other than the costliest enrollees — who cannot possibly pay the premiums needed to cover the cost of their care. The insurer can avoid this painful process by cutting its losses and leaving the market early on.
A study by Avalere predicts that next year more than one-third of the exchanges will have only one insurer left. More than half the exchanges will have no more than two. “We were promised competition; what we are getting instead is monopoly,” he said.
Both health economists point to a problem on the demand side of the market: too many people are waiting on the sidelines while they are healthy and signing up for insurance only after they get sick.
Reinhardt says that Switzerland and Germany have similar systems, relying on competition among private insurers. But the Swiss and the Germans “brutally enforce the mandate.” They “make young people sign up and pay.” “We are too chicken to do that,” he says and adds, “We give them a mandate penalty that is lower than the premium. And we tell them, if you’re really sick, we’ll take care of you anyhow.”
Goodman says an even bigger source of trouble is on the supply side. “Health plans are being allowed to dump their sickest, most costly enrollees on their rivals with impunity.” As a result, “insurers face perverse incentives to attract the healthy and avoid the sick.”
So what can be done?
Goodman helped draft a proposal by Rep. Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA) that would deter people from gaming the system in a manner similar to what is done in Medicare Part B and Part D. Anyone who does not sign up when first eligible would face financial penalties in the form of higher premiums.
The bill would also insure that health plans always receive actuarially fair premiums. So if a new enrollee has expected costs of, say, $100,000 the plan would get $100,000 in premiums. The enrollee would pay a community rated premium – just like everybody else. The balance would be paid by the previous insurer.
About the Goodman Institute
GOVERNMENT DOES NOT AND CANNOT COMPREHEND ALL THE VARIATIONS IN HEALTHCARE WHICH ALSO INVOLVES AN UNDERSTANDING OF MEDICINE THAT TAKES THE PROFESSIONAL 8-10 YEARS OF MEDICAL SCHOOL AND POSTDOCTORAL TRAINING TO BEGIN TO NAVIGATE AFTER COMPLETING COLLEGE. IT THEN TAKES ANOTHER 15-20 YEARS OF MEDICAL PRACTICE EXPERIENCE TO FULLY UNDERSTAND PATIENT CENTERED CARE. THE CHALLENGE IS THAT GOVERNMENT HAS SO DISTORTED THE SYSTEM THAT IT IS DIFFICULT TO RETURN TO TRUE PATIENT CENTERED CARE.
ACTUALLY THAT CANNOT HAPPEN: FOR IF IT DID, WHAT WOULD POLITICIANS DO? WHAT WOULD BE THE NEXT ISSUE THAT THEY WOULD ATTACK OR DESTROY? ACTUALLY THE ONLY WAY THIS COULD BEGIN TO HAPPEN IS TO REDUCE THE AMOUNT OF TIME THAT LAWMAKERS CAN BE IN SESSION TO TWO MONTHS A YEAR EVERY SPRING AND ONE MONTH EVERY FALL. THEN THEY WOULD BECOME CITIZENS AGAIN FOR NINE MONTHS A YEAR GAINING EXPERIENCE IN THEIR CHOSEN SKILLS OR PROFESSION. WHAT AN EDUCATION THAT WOULD BE FOR THEM. THAT WOULD THEN BE A RETURN TO CITIZEN-BASED LEGISLATION AS OUR FOUNDERS ENVISION.
WE HAVE TO APPRECIATE THE EDUCATIONAL EFFORTS OF HILLSDALE COLLEGE AND THE OTHER ORGANIZATIONS WE REFERENCE BELOW EACH MONTH IN EDUCATING US CONCERNING OUR DECLARATION OF INDEPENDENCE, OUR CONSTITUTION, THE FEDERALIST PAPERS, AMERICAN HISTORY, AND ISSUES THAT OUR ILLIBERAL EDUCATORS NO LONGER TEACH. A GOOD STARTING POINT WOULD BE JOIN THE MILLIONS OF PATRIOTIC AMERICANS WHO HAVE ENROLLED IN HILLSDALE FREE ONLINE COURSES: CONSTITUTION 101, THE GREAT BOOKS SERIES, THE PRESIDENCY AND THE CONSTITUTION.*
*We are often asked — why does Hillsdale offer this course for free? Here are three important reasons: