Tuesday, July 20, 2010

Ezra Klein Whiffs It

Twin sisters Obamacare and Romneycare are not looking so great these days. Romneycare was introduced in Massachusetts in 2006 and barely 4 years later is on life support.

Don't take my word for it. The folks at the Wall Street Journal and Cato Institute say the same.

From the WSJ -

While Massachusetts' uninsured rate has dropped to around 3%, 68% of the newly insured since 2006 receive coverage that is heavily or completely subsidized by taxpayers. While Mr. Romney insisted that everyone should pay something for coverage, that is not the way his plan has turned out. More than half of the 408,000 newly insured residents pay nothing, according to a February 2010 report by the Massachusetts Health Connector, the state's insurance exchange.

When half the newly minted insureds pay nothing, and another 28% pay less than the full price of admission, how is this considered a success? If 408,000 unemployed residents found jobs but half of them were placed in volunteer positions (without pay) and another 28% found jobs at less than what they would normally earn, no one would consider that a success.

But Ezra Klein says Romneycare is working.

Between 2006 and the fall of 2009 (which is the most recent data [pdf] we have), insurance coverage among non-elderly adults jumped from 87.5 percent to 95.2 percent.

And half of those (according to the WSJ) paid NOTHING for their coverage so Ezra says this is a successful program.

That's like testing a new STD (sexually transmitted disease) treatment on 408,000 healthy people where half of them get a placebo and the other half get the real deal, but all of them are also injected with an STD.

Cato's take on Romneycare is . . .

Massachusetts requires health insurance companies to sell to all applicants, and imposes price controls that require insurers to charge all applicants the same premium, regardless of their health status. ObamaCare would do the same.

Those price controls have two principal effects on healthy people. First, they increase the premiums that insurers charge healthy people (the additional premium goes to reduce premiums for sick people). Second, they enable healthy people to wait until they are sick to purchase coverage. Since insurers must take all applicants, and charge them the same premium, there is little or no downside to waiting until one gets sick to purchase coverage.

Insurance is designed to indemnify you for a financial loss that is unpredictable. If you were able to buy life insurance from the EMT while being rushed to the hospital with a life threatening condition, and you could buy as much insurance as you wanted at the same rates as triathletes, do you think that would impact the rates everyone would have to pay?

Or perhaps your house catches fire and while you are calling 911 your spouse is calling Allstate to buy a homeowners insurance policy. But Allstate can not turn you down and they have to charge the same rate they would have yesterday when your house was not burning. How long would Allstate remain in business if those were the rules?

Ezra tells us "the plan's popularity also remains quite high: The Urban Institute study found approval at 67 percent".

And why wouldn't it be popular? When you can wait to buy insurance AFTER you get sick or injured, that's a great deal for you.

But not so for the rest of the folks who have to pay for your claims in the form of higher premiums.

Ezra does admit the system isn't totally idiot proof.

The Massachusetts reforms, unfortunately, were not designed to deal with cost. They weren't even designed to improve the delivery system.

To recap, Romneycare added 408,000 on to insurance plans (half of those got coverage for "free") but did nothing to lower the cost of health care or make health care more accessible.

And this is a good thing?

Health insurance premiums are driven by the cost of health care. If nothing is done to control health care costs premiums will continue to rise. Additionally, when you provide health insurance at NO COST to 200,000 people overall utilization of health care will rise. This results in more limited access to care, and more total dollars spent on health care.

Once more Ezra makes a statement that refutes his initial premise that Romneycare is working.

Before the reforms, Massachusetts had the highest health-care costs in the nation. That's still true after the reforms

The baseball trading deadline is approaching and it is looking like Ezra will be sitting on the bench for the remainder of the season and soon become a free agent.
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