ObamaCare's Terrible, Horrible, No Good, Very Bad Week
Over at The Motley Fool, Sean Williams has a lengthy analysis of ObamaCare's many woes, but the meat of the matter comes down to two things -- a lack of money and a lack of healthy paying customers.
Obamacare was expected to enroll 21 million new people by the end of 2016, at least according to projections from the Congressional Budget Office in 2013. Currently, this figure is about 10 million shy of the CBO's projections from three years ago, and it could fall further as attrition due to non-payment continues. Having fewer enrollees than initially expected is certainly not an ideal picture for insurers when the margins associated with Obamacare enrollees are typically much narrower than through other forms of enrollment. The smaller scale will likely only hurt profitability.
Obamacare enrollees have also tended to be a costlier, sicker group of individuals. According to a large analysis conducted by the Blue Cross Blue Shield Association, Obamacare enrollees cost, on average, 22% more per month than persons enrolled in an employer-sponsored health plan. This probably isn't too much of a shock considering that prior to Obamacare there were rules in place that allowed insurers to turn away people with pre-existing conditions. Under Obamacare, insurers can't do this anymore, meaning sicker individuals have been among the first to enroll, leaving insurers with an adverse patient pool.
The risk corridor has also been an utter failure.
You were warned, repeatedly, before ObamaCare was even signed into law, that its perverse incentives would lead to a insurance pool too small and too old and too sick to be sustainable. So other than another "I told you so," there really isn't much to add to the first and second paragraphs.
Now about that "utter failure" of a risk corridor...
We discussed those here a few weeks back, about how they made innovation "punishable by being forced to turn your money over to less efficient competitors." And if there's one thing at which ObamaCare is increasingly successful, it's punishing innovation. For yet another example, we now go to New Mexico:
A New Mexico health insurer is suing the Obama administration, claiming rules implemented under the Affordable Care Act require the insurer to pay millions annually to a competitor, Blue Cross and Blue Shield of New Mexico, whose parent company sits on nearly $10 billion in reserves.
“This regulatory dystopia is the equivalent of forcing the local baker who sells cupcakes to neighborhood coffee shops to pay between 14 percent and 22 percent of his revenue to Nabisco,” says the complaint filed Friday by New Mexico Health Connections.
At issue is a U.S. Department of Health and Human Services risk-adjustment model that requires certain health insurers whose members are healthier to pay competitors whose members who aren’t as healthy — and are thus costlier to cover. The model is supposed to free insurers from being financially penalized for taking on less healthy members, allowing them to lower costs and offer more innovative insurance plans.
New Mexico Health Connections argues that it delivers just the type innovative health insurance coverage envisioned by the Affordable Care Act, also known as “Obamacare.” But the company’s federal lawsuit says the U.S. Department of Health and Human Services risk-adjustment model “brutally penalizes new, innovative, low-cost insurance companies and flouts Congress’s intent” in enacting the Affordable Care Act.
"Congress's intent?" About that...
Three years ago, Blue Cross Blue Shield was described as "an undeclared Obama ally in implementing the health law," according to a Kaiser Health News/Washington Post report, offering coverage "in places other carriers may avoid." Given how ...cozy... the Obama White House can sometimes get with its private sector allies, it isn't much of a stretch to imagine than Blue Cross Blue Shield's multistate, multimillion dollar payout means the risk corridor is functioning exactly as intended -- delivering the goods to those with the pull.
But it isn't just the money -- care is suffering, too. And that's according to one of ObamaCare's architects, Dr Bob Kocher. Here he is from Sunday's Wall Street Journal:
What I got wrong about ObamaCare was how the change in the delivery of health care would, and should, happen. I believed then that the consolidation of doctors into larger physician groups was inevitable and desirable under the ACA. I joined my White House health-care colleagues— Ezekiel Emanuel and Nancy-Ann DeParle—in writing a medical journal article arguing that “these reforms will unleash forces that favor integration across the continuum of care.” We added that “only hospitals or health plans can afford to make the necessary investments” needed to provide the care we will need in a post-ACA world.
Well, the consolidation we predicted has happened: Last year saw 112 hospital mergers (up 18% from 2014). Now I think we were wrong to favor it.
I still believe that organizing medicine into networks that can share information, coordinate care for patients and manage risk is critical for delivering higher-quality care, generating cost savings and improving the experience for patients. What I know now, though, is that having every provider in health care “owned” by a single organization is more likely to be a barrier to better care.
What we have here is a situation not really that much different from the "failure" of the risk corridors.
Small players -- those without pull in Washington -- are getting forced into mergers or forced out of business by ObamaCare's staggering complexities. Unlike the big players, they simply can't afford to comply with the law's 20,000 pages of paperwork and regulatory requirements. Again, this is as predicted, even by ObamaCare's architects. What they didn't predict (although plenty of the law's opponents did) is that, as Dr. Kocher admitted, care would suffer as a result.
But to our would-be central managers in Washington, consolidation is in itself a good of unlimited utility. A story from 2002 about Michael Moore visiting my old stamping grounds in Arcata, California, is a perfect illustration of just that:
Asked about Arcata limiting the number of pattern restaurants to nine, Moore said he didn't think it was a good idea. But what if corporate dominance transforms Arcata into "Anywhere, USA?" "You are in Anywhere, USA," Moore said.
Moore seemed to embrace capitalistic Darwinism. "If the small businesses suck they'll be driven out of business," he said. "If they got a good restaurant, people will go there and eat. You know in my town the small businesses that everyone wanted to protect? They were the people that supported all the right-wing groups. They were the Republicans in the town, they were in the Kiwanas, the Chamber of Commerce - people that kept the town all white. The small hardware salesman, the small clothing store salespersons, Jesse the Barber who signed his name three different times on three different petitions to recall me from the school board. F**k all these small businesses - f**k 'em all! Bring in the chains. The small businesspeople are the rednecks that run the town and suppress the people. F**k 'em all. That's how I feel."
Big business and big government love getting into bed together. Big corporations get regulatory protection from smaller, nimbler, and more innovative competitors. And big government enjoys more money and more power.
And if an industry doesn't have enough big corporations for big government to get into bed with? Then Washington can use the power of law to force them into being -- just like we're witnessing with health insurance and with health care itself.
Or as Caligula is supposed to have said, "Would that the Roman people had but one neck!"