Saturday, February 09, 2013

We get mail!

A reader sends along this link to Avik Roy's take on the ObamaTax Medicaid expansion, and asks:

"What was that again [about] how medical costs cause premium hikes?"

Of course, we always welcome feedback, and appreciate the opportunity to reinforce our long-stated (and well-proven) positions.

I replied:

"Interesting article - Thanks!

Still don't see how that contradicts our position: increasing medical costs cause higher insurance costs. And of course other things also cause increased insurance costs. But the reverse is not true: increasing insurance costs don't cause higher health care costs.

Again, nothing in that article contradicts this very basic, very obvious observation."

Mike had a slightly different take:

"I think your correspondent is just being obtuse.

Of course increasing enrollment increases overall insurance expense.  Doesn't it always?  Specifically, ACA will cause Medicaid enrollment to increase.  This means the overall medical cost for the Medicaid population will be greater than its overall medical cost is today.  Why would it be otherwise?

[Avik] Roy makes the point that ACA - by increasing the Medicaid population - will increase the cost shift to private insurance, so private insurance premiums will experience higher trend and therefore private insurance premiums will be higher.

In other words, higher private sector insurance cost result directly from the Medicaid medical costs shifted to the private sector.

And so, it's medical cost that drives insurance cost.  Exactly what we have been saying for years and years.

The difference here - which your correspondent does not recognize - is that additional Medicaid medical cost will be shifted to private insurance.  That means the private insurance premiums will bear the impact.  Clearly that doesn't prove medical costs don't drive medical premiums.  Instead, it illustrates that very point.  And it reveals once again the ongoing failure of government meddling to accomplish anything constructive about overall medical costs in the first place

Bob also weighs in:

"About that cost shifting ...

Medicaid = lower reimbursement = cost shift to private patients = higher insurance premiums

Of course we all (should) know this, but Medicaid is a Catch 22:

If the government doesn't provide health insurance for those people, they still get sick and those unpaid bills are shifted to private pay. With Medicaid, only a portion of the bills are shifted to private pay with the rest picked up by taxpayers.

Rearranging the deck chairs.

The issue with Medicaid expansion is, even though DC will print magic money to fund the expansion for 5 years (or whatever the time frame is) after that point the burden falls on the states their "fair share

As I said, I have the best co-bloggers.
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