The Ever-Shifting Price of ObamaCare

One reason the price of a new Cadillac isn't higher is because not everyone wants a new Cadillac -- at least not if they themselves have to pay for it. But if everyone were in the market for a new Cadillac, one could be assured with metaphysical certitude that the price would "necessarily skyrocket."

As it is with the Cadillac, so it is with everything else: Limited supply and soaring demand make for soaring prices.

But defenders of ObamaCare tell us that the dynamic at play in the price of everything else, including Cadillacs, doesn't work for health insurance. They say that the price of health insurance will fall if everyone buys a policy. They tell us we need to get all the healthy, young people -- the ones least likely to make an insurance claim -- to buy health insurance, and only then will the price of policies come down. (This is analogous to forcing everyone to buy a new Cadillac when only a few can take possession of one.)

It's the "pool theory" of pricing: require everyone to buy health insurance and get into the pool.  But there's a fatal flaw in this theory: Not everyone is going to get in the pool.  In fact, ObamaCare doesn't even require that everyone buy insurance and get into the pool.  Some folks will get free health care from the government courtesy of the American taxpayer.  This was the case before ObamaCare, and it will be the case under ObamaCare.  So the "pool theory" is just as wacky as comparing ObamaCare's "individual mandate" to the requirement to carry car insurance -- not everyone drives. Indeed, the entire "theoretical" underpinning of ObamaCare is incoherent.

The problem with "free" government health care is that government doesn't completely pay its medical bills. And what government doesn't pay gets cost shifted to the private sector, which makes prices in the private sector higher than they would otherwise be. Under ObamaCare, more folks are going to be shifted onto Medicaid: free government health care. So there'll be even more cost shifting. On March 11 in The Wall Street Journal, John Cogan, Glenn Hubbard and Daniel Kessler reported:

The bad news for the new law's supporters (and for individuals with private insurance) doesn't stop there. If anything, the likely impact of the law will be to increase, not decrease, cost shifting. According to the Congressional Budget Office, around half of the people who are expected to become newly insured under the new law will be enrolled in Medicaid. But Medicaid payments to doctors and hospitals are so low that the program creates a cost shift of its own. In fact, a long line of academic research shows that low rates of Medicaid reimbursement translate into higher prices for the privately insured.

Unlike private payers, government can dictate to health care providers what they'll pay, regardless of whether it's enough to cover the costs of services rendered.

One might think that if all payers were charged the same for the same services and paid their bills off in their entirety on the same schedule, that cost shifting in health care would end. Unfortunately, costs would merely shift to a different payer: the taxpayer.  Instead of one's private insurance premium and/or out-of-pocket expenses being higher, one's tax bill would be impacted. So with "free" government healthcare, cost shifting is inescapable.

Only when all payers pay the same price can the true price of any good be known. Cost shifting, as happens in health care, undermines "price discovery," and the free market is subverted. (As Jerry Lee Lewis might put it: Whole lotta shiftin' goin' on.)

Because government doesn't pay it bills, more providers are dropping Medicaid patients. But even with reduced prices, Medicaid is still too expensive. Last December, The New York Times reported: "Effective at the beginning of October [2010], Arizona stopped financing certain transplant operations under the state's version of Medicaid."

"Death by budget cut," is how the article put it.

On May 2, the Times reported that the Obama administration "is proposing a rule that would make it much more difficult for states to cut Medicaid payments" and which "could also put pressure on some states to increase Medicaid payment rates." Maybe Obama can get blood out of a turnip, too, but here's the interesting paragraph:

Federal officials said Monday that the rule was needed to fulfill the promise of federal law, which says Medicaid recipients should have access to health care at least to the same extent as the general population.

So the feds think that those whose don't pay for their health care should get the same health care as those who do pay for their own care. The key word here is "access." Everyone in America has "access" -- if they can pay.  Should the poor have "access" to the same food and shelter as the rich?  If so, what's the use of working?

On May 5 at Marketplace, Gregory Warner reported:

In 2014, the health care law will make it a lot easier to sign up for Medicaid, and 17 million Americans without insurance are expected to enroll. Then if states can't pay doctors less, that still leaves that dirty naughty decision to make: which treatments will they stop paying for?

Mr. Warner asks the big question. If the states can't afford to pay for mere liver and heart transplants, how are they going to pay for face transplants? How are they going to pay for separating conjoined twins?

Transplant patients in the states may be experiencing "death by budget cut," but the states are undergoing "death by budget deficit." They're going bankrupt, and they must make budget cuts. Which forces the states to decide what services they can afford to provide under Medicaid.

So if you're financially challenged, my advice is: Stay healthy.

Jon N. Hall is a programmer/analyst from Kansas City.
One reason the price of a new Cadillac isn't higher is because not everyone wants a new Cadillac -- at least not if they themselves have to pay for it. But if everyone were in the market for a new Cadillac, one could be assured with metaphysical certitude that the price would "necessarily skyrocket."

As it is with the Cadillac, so it is with everything else: Limited supply and soaring demand make for soaring prices.

But defenders of ObamaCare tell us that the dynamic at play in the price of everything else, including Cadillacs, doesn't work for health insurance. They say that the price of health insurance will fall if everyone buys a policy. They tell us we need to get all the healthy, young people -- the ones least likely to make an insurance claim -- to buy health insurance, and only then will the price of policies come down. (This is analogous to forcing everyone to buy a new Cadillac when only a few can take possession of one.)

It's the "pool theory" of pricing: require everyone to buy health insurance and get into the pool.  But there's a fatal flaw in this theory: Not everyone is going to get in the pool.  In fact, ObamaCare doesn't even require that everyone buy insurance and get into the pool.  Some folks will get free health care from the government courtesy of the American taxpayer.  This was the case before ObamaCare, and it will be the case under ObamaCare.  So the "pool theory" is just as wacky as comparing ObamaCare's "individual mandate" to the requirement to carry car insurance -- not everyone drives. Indeed, the entire "theoretical" underpinning of ObamaCare is incoherent.

The problem with "free" government health care is that government doesn't completely pay its medical bills. And what government doesn't pay gets cost shifted to the private sector, which makes prices in the private sector higher than they would otherwise be. Under ObamaCare, more folks are going to be shifted onto Medicaid: free government health care. So there'll be even more cost shifting. On March 11 in The Wall Street Journal, John Cogan, Glenn Hubbard and Daniel Kessler reported:

The bad news for the new law's supporters (and for individuals with private insurance) doesn't stop there. If anything, the likely impact of the law will be to increase, not decrease, cost shifting. According to the Congressional Budget Office, around half of the people who are expected to become newly insured under the new law will be enrolled in Medicaid. But Medicaid payments to doctors and hospitals are so low that the program creates a cost shift of its own. In fact, a long line of academic research shows that low rates of Medicaid reimbursement translate into higher prices for the privately insured.

Unlike private payers, government can dictate to health care providers what they'll pay, regardless of whether it's enough to cover the costs of services rendered.

One might think that if all payers were charged the same for the same services and paid their bills off in their entirety on the same schedule, that cost shifting in health care would end. Unfortunately, costs would merely shift to a different payer: the taxpayer.  Instead of one's private insurance premium and/or out-of-pocket expenses being higher, one's tax bill would be impacted. So with "free" government healthcare, cost shifting is inescapable.

Only when all payers pay the same price can the true price of any good be known. Cost shifting, as happens in health care, undermines "price discovery," and the free market is subverted. (As Jerry Lee Lewis might put it: Whole lotta shiftin' goin' on.)

Because government doesn't pay it bills, more providers are dropping Medicaid patients. But even with reduced prices, Medicaid is still too expensive. Last December, The New York Times reported: "Effective at the beginning of October [2010], Arizona stopped financing certain transplant operations under the state's version of Medicaid."

"Death by budget cut," is how the article put it.

On May 2, the Times reported that the Obama administration "is proposing a rule that would make it much more difficult for states to cut Medicaid payments" and which "could also put pressure on some states to increase Medicaid payment rates." Maybe Obama can get blood out of a turnip, too, but here's the interesting paragraph:

Federal officials said Monday that the rule was needed to fulfill the promise of federal law, which says Medicaid recipients should have access to health care at least to the same extent as the general population.

So the feds think that those whose don't pay for their health care should get the same health care as those who do pay for their own care. The key word here is "access." Everyone in America has "access" -- if they can pay.  Should the poor have "access" to the same food and shelter as the rich?  If so, what's the use of working?

On May 5 at Marketplace, Gregory Warner reported:

In 2014, the health care law will make it a lot easier to sign up for Medicaid, and 17 million Americans without insurance are expected to enroll. Then if states can't pay doctors less, that still leaves that dirty naughty decision to make: which treatments will they stop paying for?

Mr. Warner asks the big question. If the states can't afford to pay for mere liver and heart transplants, how are they going to pay for face transplants? How are they going to pay for separating conjoined twins?

Transplant patients in the states may be experiencing "death by budget cut," but the states are undergoing "death by budget deficit." They're going bankrupt, and they must make budget cuts. Which forces the states to decide what services they can afford to provide under Medicaid.

So if you're financially challenged, my advice is: Stay healthy.

Jon N. Hall is a programmer/analyst from Kansas City.