Must-Read: Mark Thoma et al.: The Republican American Health Care Act


Mark Thoma: Why the Republican Health Care Plan Is Destined to Fail: "Healthcare often involves large, unexpected expenses...

...An individual may not have saved enough or be able to borrow enough.... In the face of such uncertainty–not even knowing who will need healthcare and when–pooling money into an insurance fund and then sharing the risk... is... natural.... But health insurance markets have... “adverse selection.” When people are pooled together in an insurance fund some will have very high expected medical costs.... For... [those more likely to remain] healthy, that... [can be] a bad deal–the premiums are more than their expected health spending.... Many... won’t purchase insurance (and the emergency room is available for serious problems, and if the bill is big enough someone else will end up paying). That leaves more people with high expected health costs in the insurance pool, leading to higher premiums and more dropouts, a process that continues until only the highest cost patients are left and the premiums are unaffordable.

One way to stop this spiral to market collapse is a mandate that keeps healthy people in the insurance pool. The mandate in... the Republican proposal... creates a [stronger] incentive to go without insurance.... It’s hard to see how this will work....

But the most problematic aspect of delivering healthcare in the private marketplace is that consumers do not have the information they need to make informed healthcare choices.... In this regard, Professor Arrow made an interesting comment in an interview in 2009....

The market won't work—it doesn't work well in the health context. But something else supplements the market, and the thing I put stress on in the paper are the elements that put a non-economic influence on the market: professional commitments to provide a service, to engage in services that aren't self-serving. Standards of caring decided by non-economic actors. And one problem we have now is an erosion of professional standards. In a way, there is more emphasis on markets and self-aggrandizement in the context of healthcare, and that has led to some of the problems we have today.

Another way to overcome the information problem is to let an informed agent make decisions on your behalf.... HMO’s.... But HMOs make less money when consumers receive more care, and consumers do not trust HMO-type institutions....

Once the need for government involvement to overcome market failures is accepted, and to me, it seems impossible to deny, the question is how well a particular healthcare proposal addresses these problems.... The Republican plan does not even seem to recognize the full extent of the problems in healthcare markets, and when it does, the remedies are far from adequate. Anyone who is serious about a delivering broad-based, affordable healthcare insurance should give it two bigly thumbs down.


Edwin Park: CBO: 24 Million People Would Lose Coverage Under House Republican Health Plan: "The plan... would effectively end the ACA’s Medicaid expansion starting in 2020...

...repeal the ACA’s marketplace tax credits and subsidies, substituting a highly inadequate tax credit in 2020, and immediately end the ACA’s individual and employer mandates to buy and provide health coverage.... The plan would retain most of the ACA’s market reforms and consumer protections.... [The plan has] a deeply flawed, ineffective alternative to the individual mandate....

Federal Medicaid spending would be cut by $880 billion or 17.6 percent over the next ten years, relative to current law.... CBO’s estimate of a 24 million increase in the number of uninsured under the House bill is only 8 million lower than CBO’s 32 million estimate of the ACA repeal bill that President Obama vetoed in January 2016.... At the time, congressional Republican leaders dismissed the 32 million estimate because it didn’t account for their “replacement” coverage provisions, which they hadn’t yet agreed upon.... CBO estimates that this “replacement” bill would offset only 25 percent of the coverage loss expected under the earlier repeal bill...


Jacob Leibenluft: [CBO: Millions Would Pay More for Less Under House GOP Health Plan][]: "While dismissing CBO’s analysis, Republicans have pointed to one of its numbers...

...that average individual market premiums will fall by 10 percent by 2026.... They... misunderstood.... The premium decrease... is the average change in the sticker price of health insurance, without accounting for the House plan’s large reductions in tax credits.... Average premiums fall, [but] what many people actually pay will rise.... A 40-year-old with an income of $26,500... could buy a health plan in 2026 with a sticker price somewhat less than under current law, but would have to pay $700 more in premiums.... Despite promises by President Trump and others, deductibles and other cost-sharing would rise substantially—further increasing how much families pay out of pocket....

The drop in average premiums occurs partly because older adults are likelier to lose coverage because they can no longer afford it, removing them from the average. Average premiums would rise 20 to 25 percent for 64-year-olds, while dropping 20 to 25 percent for 21-year-olds.... Unsurprisingly, older people would be the most likely to find individual market coverage unaffordable. “A larger share of enrollees in the non-group market,” CBO concludes, “would be younger people and a smaller share would be older people.” That fact alone will reduce average premiums because older people have higher health costs and premiums than younger people...


Alvin Chang: The CBO’s nonpartisan report on the Republican ACA replacement plan, explained in 6 charts: "It’s an attack on the poor... a devastating report for the Republican plan, and it can be summed up in one chart:

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