Later On

A blog written for those whose interests more or less match mine.

The problems with Price’s Obamacare replacement

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Kevin Drum lays it out:

The Washington Post tells us this morning that we have another new member of the incoming cabinet:

Trump picks fierce Obamacare critic as health and human services secretary

His name is Tom Price, a Republican member of Congress from Georgia, and the fact that he’s a “fierce” critic of Obamacare doesn’t really faze me. He’s a Republican, after all. Anyone Trump picked would be a fierce critic of Obamacare.

However, there is something different about Price: he actually has a replacement plan. Not a white paper, but actual legislation. Sarah Kliff runs down Price’s plan here, but I want to pull back from the details and focus on the bigger picture instead.

You’ve probably heard a million times that Obamacare relies on a three-legged stool. If you want universal coverage, you have to require insurers to cover everyone, even those with pre-existing conditions. That’s guaranteed issue. But that will wreck the insurance pool: it will have too many sick people, who will rush to buy coverage, and not enough healthy people. So you also need to provide an incentive for healthy people to join your plan. In Obamacare, that’s the tax penalty for going without insurance. Finally, once you’ve done that, you have to provide financial help for the poor, since they can’t afford full-price coverage no matter how much incentive you give them. In Obamacare, that’s the subsidies.

This is not just an Obamacare thing. It’s true of all health insurance. Take the employer market that most of us are familiar with. Everyone who works for a company that offers health coverage gets it. That’s guaranteed issue. It’s pretty cheap and the price is deducted painlessly from your paycheck. That’s an incentive for everyone to join. And the company provides the insurance either free or at a very discounted price. That’s the equivalent of Obamacare’s subsidies.

So how does Price’s plan work? He mandates that insurance companies cover even those with pre-existing conditions. That’s guaranteed issue. However, insurers are only required to take you on if you maintain continuous coverage. That’s a huge incentive for healthy people to buy insurance, since if you skip it for a year you might not be able to get coverage if you get sick. Finally, he offers tax credits based on age to everyone, and a high-risk pool for those who still can’t afford insurance. That’s very similar to Obamacare’s subsidies.

So what’s the problem? Why shouldn’t Democrats ditch Obamacare and accept Price’s substitute? Or to flip things around, why should Republicans bother with this? If they’re just going to get a different version of Obamacare from Price, why not skip the whole thing? . . .

Continue reading.

Do read the rest of the column. It’s grim. We’re so screwed.

Written by Leisureguy

29 November 2016 at 2:32 pm

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