When The Penalty For Not Buying Insurance Is So Low Compared To The Cost Of Coverage: Fill & Download for Free

There is one recent study showing that the Obamacare insurance mandate saves lives.BackgroundWhen the US Congress was still debating the Affordable Healthcare Act some conservatives argued that providing health insurance to low-income people may not improve their health. Maybe, for example, low-income people couldn’t afford the sizable co-pays or maybe they aren’t diligent in taking prescriptions.Some of these conservatives might raised these arguments insincerely but the claim isn’t entirely crazy. Many people won’t make the best use of modern medicine if it’s costly.[1] The least expensive family plans under Obamacare have an average out-of-pocket maximum of $15,800.[2] Even with the new law, many Americans skip prescriptions on account of cost, especially low-income people that Obamacare was intended to help.[3] So, there’s a real possibility that Obamacare might not be as effective as it’s advocates wished.There isn’t much hard data showing that giving people health insurance or encouraging them to buy it, enhances health. The Oregon Health insurance study couldn’t detect an effect:[4]We did not detect significant changes in measures of physical health including blood pressure (systolic or diastolic), cholesterol (HDL or total), glycated hemoglobin, or a measure of 10-year cardiovascular risk that combined several of these risk factors. Nor did we detect changes in populations thought to have greater likelihood of changes, such as those with prior diagnoses of high blood pressure of the portion of our population over age 50.A review of the literature on health insurance coverage for prescription drugs concluded that “evidence is insufficient to draw conclusions about the effect of policy interventions on clinical and economic outcomes…”[5]The ideal way to test the effectiveness of a policy is to do an experiment. The US IRS recently conducted an experiment in which people were encouraged to get health insurance.The studyIn 2017, the IRS sent an informational letter to a sample of households telling them about the penalty for not having insurance and providing information about getting insurance. The total population had 4.5 million households (8,897,821 people). These households were randomly assigned to either receive a letter (86%) or not (14%).The experiment was done by mistake. The original intent was to send the letter to all households in the sample but the IRS ran out of money so the control group consists of people the IRS couldn’t send the letters to.ResultsThe effect on insurance coverage was modest. People who got a letter were 1.2% more likely to get insurance coverage in that year compared to the control group mean of 69%. Expressed differently, the letter reduced the share of the sample without any insurance coverage by 2.7%.The investigators looked at cumulative mortality in people 45−64 years old. The effect looks small but that’s because the treatment only increased insurance coverage slightly.If you plot the data as a difference, it’s easy to see that the effect is statistically significant by the end of the study.The authors compared the change in insurance rate to the mortality rate and concluded that “each month of coverage induced by the intervention reduced mortality by approximately 11.9% during our sample period.” That’s a sizable effect.ConclusionsThe authors of the study reached strong conclusions:We found positive effects of the intervention on subsequent coverage enrollment decisions, particularly for taxpayers who were uninsured in the year prior to the intervention. We also found that the intervention reduced mortality among middle-aged adults in the subsequent two years, which we attribute to the additional coverage the intervention induced. Our findings thus provide strong empirical support, and the first experimental evidence, for the hypothesis that health insurance coverage reduces mortality.LimitationsThe study did not show statistically significant effects for people younger than 45 or older than 54. That’s probably because it lacked statistical power to detect effects in other age groups.The problem of deductiblesStill, Obamacare may be inadequate. Deductibles are high in many Obamacare insurance policies. That probably discourages people from getting the care they need. That may be especially true for taking prescription drugs for chronic conditions. More than a third of Americans making less than 40,000 a year report that they find it difficult to afford their prescriptions.[6] Many Americans report postponing needed health care on account of cost.This chart suggests that Obamacare’s passage in 2010 may have stopped the growth in people delaying/going without but the problem is still large.[7]Medicare-for-all is a popular solution but it has large deductibles and only provides very limited prescription drug coverage unless one buys supplemental insurance.[8]CommentPresident Trump signed into law, in 2017, a repeal of the Obamacare mandate, so people who do not get insurance coverage do not pay a penalty. If the results of this study are valid, that repeal increased mortality in the US.More to readHere’s a good overview of the study:The I.R.S. Sent a Letter to 3.9 Million People. It Saved Some of Their Lives.The official report is here but behind a paywall:Health Insurance and Mortality: Experimental Evidence from Taxpayer OutreachThere is a free copy here:http://www.academia.edu/download/61534589/w2653320191216-98809-rnbuum.pdfHere’s some data on the affordability of health care in the US:How does cost affect access to care? - Peterson-Kaiser Health System Trackerhttps://ldi.upenn.edu/sites/default/files/pdf/Penn%20LDI%20and%20USofC%20Affordability%20Issue%20Brief_Final.pdfHere’s some good discussions of prescription coverage:The Cost of Not Taking Your MedicineInterventions to Improve Adherence to Self-administered Medications for Chronic Diseases in the United StatesFootnotes[1] Interventions to Improve Adherence to Self-administered Medications for Chronic Diseases in the United States[2] Out-of-pocket maximum/limit - HealthCare.gov Glossary [3] Poll: Nearly 1 in 4 Americans Taking Prescription Drugs Say It’s Difficult to Afford Their Medicines, including Larger Shares Among Those with Health Issues, with Low Incomes and Nearing Medicare Age[4] Oregon Health Study - Results[5] Oregon Health Study - Results[6] Poll: Nearly 1 in 4 Americans Taking Prescription Drugs Say It’s Difficult to Afford Their Medicines, including Larger Shares Among Those with Health Issues, with Low Incomes and Nearing Medicare Age[7] How does cost affect access to care? - Peterson-Kaiser Health System Tracker[8] Prescription Drug Coverage

The US government required insurance companies to spend more to earn more when it passed the Patient Protection and Affordable Care Act.The 85% minimum medical loss ratio on large group plans and 80% otherwise made it illegal for insurance executives to increase profit by reducing costs.Now they can only serve their fiduciary duty by spending more and retaining the same fraction of the higher premiums that permits.Large insurer market capitalization is 12X what it was in 2009 compared to 3X for the S&P 500 as a whole, and United Health Group trades at 1400% of its 2009 share price.They initially backed ACA, but withdrew when the penalty for not buying insurance was so low they feared adverse selection would reduce profit. Obviously they were wrong.AARP is also making billions on health insurance due to the bill because their support came in exchange for eliminating government Medicare Advantage subsidies that made AARP Medigap coverage non-competitive.

It’s not just about healthcare.The pro-universal healthcare team often overlooks this. The left tends to argue along these lines: “We spend a higher percentage of GDP on healthcare than other industrialized nations that have universal coverage, and we have worse health outcomes than they do. Therefore, a single-payer/Medicare-for-all system would save money and produce superior outcomes.”That’s a reasonable argument.But for many American conservatives, the question of universal government-sponsored healthcare is less about the cost of an MRI and more about the proper relationship between the citizen and the state.What role should the government play in people’s lives?Where does the responsibility of government end, and the responsibility of the citizen begin?Is it the government’s job to take care of people, or is it the people’s job to take care of themselves and each other with minimal interference?Of course, the federal government already plays a massive role in the American healthcare system. Between Medicare, Medicaid, Tricare, the VA hospitals and Obamacare premium subsidies (not even counting various healthcare-related tax breaks), the federal government is actually the biggest payer in the healthcare system. Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdfVery few people pay for all their healthcare in cash anymore. Only a small percentage buy health insurance on the individual market, which is now heavily regulated anyways thanks to the ACA. Almost everyone who buys insurance is subsidized, either through an employer or through the government. If you’re on your own to bear the full cost of health insurance, say because you’re self-employed and your income is too high to qualify for government subsidies, it really sucks. (I’ve been there.) But at least our current system feels vaguely free market-ish. Middle-class working-age people usually get insurance through their employers, which feels like an earned benefit more than an entitlement.Universal healthcare would change the relationship between Americans and their government. People might come to see the federal government as a provider of essential services and ultimately responsible for their health and welfare. The government’s role in citizens’ lives, and its control and influence over them, would expand if the government became the sole provider of health care.Keep in mind, too, that entitlement programs tend to grow in scope and cost over time. Both Medicare and Medicaid have grown faster than they were originally projected to. Medicaid cost about 900 million dollars in 1966, and 574.2 billion dollars in 2016. This program, originally created to provide basic health insurance for the very poor, now pays for almost half of all births in the US, 40 percent of long-term care, substance abuse treatment, and numerous expensive services for disabled public school students. That’s not necessarily a bad thing—it’s great for the individuals and families who benefit from this spending. But a universal healthcare scheme is likely to follow a similar trajectory of increasing scope and costs. The definition of necessary health care will keep broadening. Meanwhile, healthcare spending will continue to grow faster than our GDP, and the national debt will grow with it.The healthcare debate is usually framed in terms of healthcare spending as a percentage of GDP. But many of the rich industrialized countries that have universal healthcare also have far more generous higher education funding and social safety nets than the US. Medicaid (and, to a lesser extent, Medicare) pays doctors very low reimbursement rates. So if we switched to a Medicaid-for-all or even a Medicare-for-all system, in which doctors would almost certainly get paid less, we’d have to do something to address medical school costs. We already have a shortage of primary care doctors as it is. Few people would sign up to go $300,000 in med school debt to become a GP with a $50,000 salary. So the government would need to invest heavily in subsidies for American med schools and/or financial aid for med school students.Then there’s the issue of non-healthcare social welfare spending. Health is connected to other aspects of well-being. If you don’t have decent housing, quality food, and enough income to not be constantly stressed, you’re likely to have more health issues. If the government is responsible for paying to treat these health issues, it has an incentive to spend more on welfare to try and bring costs down. That means that federal spending on food aid, subsidized housing, and cash assistance would probably increase. Liberals love this because they support a more robust and comprehensive safety net anyways. But for conservatives, who would prefer for people to receive help from their families, neighbors, communities, religious institutions and charities, this creates unhealthy dependence on a powerful “nanny state”. It could lead to Americans demanding ever more generous benefits from the government—hey, paid vacation time improves health too—and becoming less self-sufficient. Then you might end up with a growing dependency class, with multiple generations of poor families on government aid from cradle to grave.So when you take into account increased educational and social spending, universal healthcare might not save that much money at all. Government spending would increase as a percentage of GDP, and we’d need to increase taxes or borrow more (probably both) to pay the bill. For Americans who already fret about our 19 trillion dollar national debt, that’s a big problem.With government-sponsored healthcare, the government also has an incentive to intrude into people’s private lives in order to improve health outcomes and “save taxpayer dollars”. From home health visits to stricter nutritional standards to trans-fat bans to penalties for smoking and obesity, the government would increasingly try to change people’s behavior. That might sound innocuous enough, and in fact the government already does some of these things. But for those who prefer limited government and maximum personal freedom, it is both intrusive and inappropriate for the government to dictate what they do with their bodies.Oh, and speaking of which. Liberals would undoubtedly push for the universal healthcare system to cover abortion, contraception, voluntary euthanasia and gender reassignment surgery. Religious conservatives wouldn’t be happy about that. Remember the legal challenges mounted by religious organizations against the Obamacare contraception mandate? The US is much more ideologically and culturally divided than most of our European counterparts. Healthcare spending inevitably opens moral and ethical questions on which we’d find it difficult to reach a consensus.Add to these concerns the fact that many opponents of single-payer healthcare have generous health insurance plans that are heavily subsidized by their employers. Under a universal coverage scheme, this group could expect to pay more and have longer waits for possibly less comprehensive medical care. This is starting to change, as more and more employers are shifting healthcare costs to employees through higher premiums and bigger copays and deductibles. But for the moment, if you work for a large company like Microsoft or Google, you can access some of the best healthcare in the world and pay very little out of pocket.Personally, I think universal healthcare is inevitable in the US. Hosting bake sales and GoFundMe campaigns to pay for treatment feels very American, and it can work for small-scale emergencies. But that’s just not practical for the parents of a child with cancer who are facing a million-dollar hospital bill. Very few churches or charities have that kind of budget. Private insurance companies struggle to stay in the black while paying these kinds of hospital bills. It just makes sense for the government to step in. It’s the least worst option.I think a modified Singaporean system could be a fair compromise. It’s basically mandatory health savings accounts with government top-ups for the poor, universal government-sponsored catastrophic insurance, and significant price regulation of the healthcare market to hold costs down. It isn’t a free market system, but it’s a decent alternative to the public-private third-party payer mishmash we’ve got in the US. Singaporean patients do cover the costs of routine medical care themselves, prices are low and transparent, and Singapore spends only 4% of GDP on healthcare compared to the 18% of GDP that the US spends. It’s a system that could be managed at the state level with federal support, and which could cover everyone while encouraging personal responsibility.