H = I + G

I suspect that this is something that will debated for decades. This study, of 3,137 of the 3,144 U. S. counties, certainly seems to have found that healthcare insurance premiums have risen sharply under the PPACA:

There are hundreds of aspects of Obamacare that people argue over. But there’s one question that matters above all others: does the Affordable Care Act live up to its name? Does it make health insurance less expensive? Last November, our team at the Manhattan Institute published a study indicating that Obamacare had increased the underlying cost of individually-purchased health insurance in the average state by 41 percent in 2014, relative to 2013.

[…]

Across the country, for men overall, individual-market premiums went up in 91 percent of all counties: 2,844 out of 3,137. For 27-year-old men, the average county faced 91 percent increases; for 40-year-old men, 60 percent; for 64-year-old men, 32 percent.

Women fared slightly better; their premiums “only” went up in 82 percent of all counties: 2,562 out of 3,137. That’s because Obamacare bars insurers from charging different rates to men and women; prior to Obamacare, only 11 states did so. Because women tend to consume more health care than men, the end result of the Obamacare regulation is that men fare somewhat worse.

I think there are several possible retorts to this study. You could take the position that it’s still early days and that at some point the PPACA will result in lower healthcare premiums. This might be thought of as “the Pony Hypothesis”. The trends for that don’t look particularly good. You could also point out that the study merely determines that healthcare insurance premiums have risen not that the PPACA caused insurance premiums to rise. It might be that premiums increased despite the PPACA rather than because of it.

It could also be maintained that since the study doesn’t not appear to be weighted by population but is strictly geographic that although prices increased for most areas they didn’t increase (or increased at a lower rate) for most policies. You can’t conclude that from the study but it might be the case. That will be the food for a different study, presumably one carried out by the legislation’s defenders.

The study does cast the number of insurers getting into the healthcare market in a different light. We may be seeing a gold rush incentivized by rising premiums and the mitigation of risk in the form of federal subsidies.

Whatever the case, it’s becoming increasingly difficult to claim that the PPACA is achieving one of its stated objectives, to reduce healthcare premium prices.

The equation that forms the title of this post just says that “healthcare spending is composed from the spending of individuals plus spending by governments”, something obvious stated in mathematicalese. Democrats have focused their attentions on the “I” component, the shrewd political strategy. If you reduce what people pay out of pocket by increasing government subsidies, from an experiential standpoint healthcare will cost less. Republicans on the other hand have tended to focus on the “G” component. That was the essence of the Ryan plan. It did nothing to reduce “H” (unless you assume that patient-induced over-consumption is the most significant driver of healthcare spending, something for which there is little evidence) while driving “G” down which inevitably meant that “I” would increase.

I have focused unfailingly on “H”. Healthcare insurance premiums are proportional to the cost of the underlying risk. As long as spending is increasing in real terms, healthcare insurance premiums will increase in real terms, too. Changing who writes the checks won’t change that.

3 comments… add one

  • Jimbino

    I think there are a lot of considerations left out of these calculations that Obamacare has raised costs.

    One big one is that, since health insurance returns health care value that, at best, amounts to only some 80% of the premium dollar, all those who were self-payers (uninsured) before Obamacare have seen their rates go up some 25%.(where they earlier paid $80 for a treatment, they now pay $100 in insurance for the same).

    The premium of the young, uninsured male will have gone up far more than that, of course, since the male uses 60% of the health care that the female uses, and the young person uses only 16% of what the elderly do, so you could say that that formerly uninsured young male’s rates have gone up around 500%.

    I myself have used about $30 in health care (in Brazil!) in 45 adult working years, so my personal premiums would go up some 2000% if I were foolish enough to participate in Obamacare.

  • jan

    The latest studies have shown HC premiums rising, not falling, especially for the previously self-insured demographic. Young, healthy males were predicted to get slammed, as were most of the millennial generation, who were fiscally designated to be the sacrificial lambs of the PPACA, all along.

    Also there are emerging discrepancies in that much-touted 8 million enrollment figure, which the administration publicly flaunted as a declaration of victory. For instance, upwards of 2 million enrollees are now being re-checked for giving erroneous information in order to qualify for subsidies. Mind you, there was no verification process in place at the time, meaning that gross amounts of money — tax-payer dollars —has already been tendered for what could be exposed as fraudulent data. But, who cares, it’s always been more about the delivery of politically correct/manipulated calculations, backing up this administration’s agenda, rather than basing the merits or demerits of their policies on unbiased, true numbers.

    Presidential tweaking of the law, circumventing major deadlines and mandates of the originally passed legislation, has also distorted immediate outcomes. In this way, the law can become fully entrenched before the ax of full implementation falls. However, that’s how the last 6 years of this presidency has proceeded — smoke and mirrors type of rhetoric until the curtain is finally pulled, and then it’s usully too late to alter the course.

    Even in this administration’s military escapades, this kind of logic has been utilized. Ironically, though, it has been said that General McArthur asserted only two words applied to all military failures — “Too late. Unfortunately, that’s been the bottom line of how events have transpired and failed during this current president’s term(s) in office.

  • steve

    Avik Roy. I should have guessed. Short on time, but I cannot get to the raw data for this study and there are several things that are clearly important and not in his summation. He reports everything in percentages. We also need raw number. If what we did was increase spending from $25 to $50 a month for that 27 y/o, and in return they went from a mini-med plan to real insurance, that strikes me as a good trade off. Which means we also need to know what they mean by “insurance”. Avik has been guilty in the past of being fast and loose with the term. (He was a political advisor, so I guess we should expect that.)

    We alos need to know what real out of pocket spending is with these plans. Again, if my premiums double, but my overall spending decreases, I am happy with that.

    Finally, note that way late in his piece he notes that these are price increases before subsidies. This is not what people are actually paying. It would be good to know those numbers also.

    (I interacted with Avik a fair bit before he went big time. Since he became a big time political advisor I have found his “research” suspect at times.)

    Steve

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