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Rational Responses to an Irrational System
ObamaCare is not proving to be the boon insurance companies expected (I know, I know; the poor dears). Via Megan McArdle, one of the many causes is that a number of health providers have figured out some very clever ways to game the system:
This weekend brought a new suggestion across my desk. At Forbes, Bruce Japsen writes that insurers think providers are funding nonprofits to pay Obamacare premiums for high-cost Medicaid patients, thus sticking insurers with a lot of big bills for a lot of very sick patients.
Why would they do this, you may be asking yourself? Because Medicaid reimbursements are extremely low. If you have a patient who is consuming tens of thousands of dollars a year worth of care, reimbursed at the rock-bottom rates that Medicaid permits, then it may well make financial sense for you to pay the premiums to switch that patient onto private insurance, where your services will be reimbursed at much higher rates. Since insurers are no longer allowed to charge sick people more for insurance, the insurers have to take them — and then pay their enormous bills. And since, needless to say, this only makes financial sense for patients who are extremely sick, that will have the effect of skewing the Obamacare risk pool in a very expensive direction.
Undoubtedly, the fix will be to regulate such “charities” out of existence. And, equally undoubtedly, people will respond by finding some new loophole — likely even less-efficient than this one — that will work until it’s closed by yet more state intervention; that’s just what we do. Baring a medical or political miracle, the process will continue until the money runs out and people start dying of preventable disease. It’s like climbing a ladder in free-fall: Each step is rational, but merely delays the inevitable by an instant while our downward speed increases massively due to gravity.
There might be an opportunity after the crash, but no one should look forward to getting there.
Published in Healthcare
It’s almost like there’s this dastardly invisible hand that you can’t outsmart… strange…
So what you’re saying is a 1,000 page bill that nobody read before they passed it had unintended consequences?
Outstanding metaphor; never heard that one before.
Tom,
This is where I’m not satisfied with just making the free market argument. Yes, of course, the ACA is a disaster. Doing nothing at all would have been much better. A narrowly targeted approach would have had far more good results and far fewer side effects.
What I’m not satisfied with is just leaving it at that. Someone needs to say “PEOPLE WILL DIE BECAUSE OF THE ACA“. You can’t just take all of this societies medical resources and grossly misallocate them and then expect to be let off because you had good intentions. Pelosi & Obama & Gruber and the whole gang need to have their noses rubbed in it. This smells to high heaven like nothing else.
Regards,
Jim
As I recall, these consequences were predicted, and therefore, when the Democrats proceeded anyway, these results must be classed as “intended.”
However, the “dog-chasing-its-tail” phenomena – which most people think proves its stupidity – is actually a benefit to two stalwart Democrat party bases: lawyers and government bureaucrats. This is a guaranteed, work-generating, job-security merry-go-round that’ll keep Democrat workers employed for years. Expensive and wasteful? Sure, but so what, so long as it pleases the base?
I feel like it was only a matter of time before providers caught onto this. I work for Colorado’s state Medicaid agency and we have a similar program in house called HIBI (Health Insurance Buy-In). The program can pay health insurance premiums, deductibles, and coinsurance for a Medicaid client if the health insurance plan is likely to be cost-effective to Medicaid.
Indeed they were, in large part because this phenomenon has already been taking place for years in the healthcare sector – particularly with regard to expensive drugs, for which drug companies have set up programs to “help” people with their co-pays.
The problem wasn’t that they didn’t read it. The problem is that it wasn’t long enough that is why the TPP is a winner.
2,700 pages (not counting supplemental regulations)
While it’s both easy and proper to rail on the inevitable shortcomings of Obamacare, I think there’s a deeper lesson here that should give conservatives pause.
The underlying principle behind much of Obamacare is a reflection of the conservative insight that you can’t just give everything away for free, because then people will feel no cost constraints and tend to overconsume.
But since many of the “necessary” services are still too expensive, we compromise by making people pay only as much as they can, and then having someone else (i.e. other taxpayers) defray the rest of the cost. This principle – making people pay for their welfare so they feel some cost constraint – can be traced back to free market thinkers and is an underlying principle of many “conservative healthcare reforms”.
The moral seems to be that you can’t alter the fundamental incentives of welfare spending, even if you try to game it using a smattering of the “free market”. Since many conservative counter-proposals to Great Society programs are based on this notion, we need to exercise caution.
Wellll…
Except that climbing a ladder in freefall doesn’t delay the inevitable at all, not even by an instant.
But I’m quibbling.
No, no, no Mike. Our overlords at HHS are wise enough. Their motivations are pure and their vision omniscient! Truly, they are a wonder to behold. All hail the bureaucracy!
I think the insurers, hospitals and the AMA moved a step closer to their own elimination when they foolishly endorsed Obamacare supposedly to forestall a full government healthcare takeover and to receive various subsidies. As the system collapses, the ratchet will turn left, our great thinkers will declare a ‘market failure’ and the private medical sector will shrink. I fully believe that this was very much the Plan B of the Democrats when they passed this mess.
I gotta say — it’s just incredible that our brilliant president — who I’ve been told ad nauseam by otherwise very smart people — is the smartest man ever to grace the Oval Office — could get through all that education without ever learning the law of unintended consequences.
Yabbut, people will die without the ACA as well.
The trick of government is to reduce the likelihood of revolt in the face of inevitable consequences.
It’s why it was completely rational for the band to keep playing while the Titanic is sinking. The people are going to die, but at least the music will help keep the process orderly.
The problem is that the politicians are circling the ship in a private jet. If they had to live within the same health care system as the rest of the people, they’d surely design it differently.
Of course it is. It was just a small step shy of being Plan A.
When ObamaCare passed, the first thing I remember thinking is “at least now I know how I’m going to die. I’m going to die waiting in line.”
You assume the consequences are unintended.
I so rarely agree with your comments James, but with this one, you nailed it.
I am mostly just thankful that the Senate Republicans were wise enough to fund the implementation of this benevolent program and that weasel Ted Cruz who was trying to interfere was shut down.
As in so many other Obamanations, “gaming the system” is the system. A few smart and well connected people and companies will make money, and will become invested in a corrupt system by doing that.
At bottom, Obamacare was built to break what’s left of “private practice” in the USA and lead to a public demand for single payer health care. It’s working.
Everyone hates a pendant. Especially when they’re right.
Mis,
I think the regulations derived from the 2,700 pages of law are over 90,000 pages last I heard. Any one of those regulations could be life or death for some man, woman, or child out there in Americaland.
Yes, for sure, the dogs in Congress should have been forced to take the ACA as their health insurance. Finally, these as#%$les want to pick out the music, rearrange the deck chairs, and redecorate all of the cabins on the Titanic as it sinks.
Once again I’d like to bring back keelhauling as a punishment. Wolf Larsen wasn’t completely wrong.
Regards,
Jim
Clearly we just need to get someone in the White House that can make it work properly and take care of everyone.
Are you sure about this? As a biologist I’m constitutionally incapable of the logical thought of Newtonian physics, but I nonetheless was under the impression that even in freefall, if I put a downward force on an object, I will exert an equal force on myself in an upward direction – thus delaying my impact ever so slightly.
I’m not sure that he is right. The force of stepping on the ladder would accelerate the ladder’s fall and decelerate the falling person. While it wouldn’t keep the person from falling, it would slow the fall slightly and delay them from impact. Though each step, presuming a person is stepping at the same speed, would become less effective. I still think the metaphor holds.
Thoughts?
So the Avik Roy presidency?
As a more direct answer to the post title: conservatives have been attempting rational answers to the Left’s irrationality for a long time, and mostly losing ground. The two sides are not playing the same game. Conservatives still aren’t but maybe Trump is.
This is what Scott Adams is driving at in his analysis of persuasion. It’s all very well to say “that’s not how it’s supposed to be” but to a large extent while one can argue how large, he his absolutely correct when he says that fact driven logic is only a small part of the way most people make most decisions including voting. That’s what “facts are irrelevant” means in his lexicon.
From a recent blog post of his:
RTWT.
I was thinking more about the candidate that promised exactly that.