The eco­nom­ics of Oba­macare

Baltimore Sun - - COMMENTARY - By Toby Gor­don Toby Gor­don (tgor­ is an as­so­ci­ate pro­fes­sor at the Johns Hop­kins Carey Busi­ness School, with joint fac­ulty ap­point­ments at JHU’s Bloomberg School of Public Health and School of Medicine.

Those rail­ing about the fail­ure of Oba­macare are con­fused about the cause of health in­sur­ance pre­mium in­creases.

The in­sur­ance pre­mium in­creases in the news are for in­di­vid­ual poli­cies for sale un­der the Oba­macare in­sur­ance “ex­changes,” the mar­ket­places for such poli­cies. How­ever, the vast ma­jor­ity of the 91 per­cent of Amer­i­cans now cov­ered by health in­sur­ance do not buy in­di­vid­ual poli­cies on these ex­changes. More than half get in­sur­ance from their em­ploy­ers, and a good chunk of the rest get it from govern­ment pro­grams such as Medi­care, Med­i­caid and the mil­i­tary. Just 16 per­cent of Amer­i­cans di­rectly pur­chase health in­sur­ance, ac­cord­ing to the U.S. Cen­sus Bureau, and of these, about half do not shop on the ex­changes set up un­der the Af­ford­able Care Act.

Those who do shop on the ex­changes are fac­ing pre­mium in­creases mostly be­cause not enough young healthy peo­ple, who tend to be­lieve they’re in­vin­ci­ble, bought in­di­vid­ual in­sur­ance poli­cies to help off­set the costs in­curred by the older and sicker, who not only bought in­sur­ance, but used it. Such “ad­verse se­lec­tion” re­sulted in pre­mium in­creases for those who bought poli­cies to cover the bur­den of care.

For those who opt out of Oba­macare al­to­gether, the as­so­ci­ated tax penalty is too low to pre­vent the ef­fects of ad­verse se­lec­tion. In other words, it’s cheaper to pay the tax penalty, about $700, than buy a pol­icy, which could run sev­eral thou­sand dol­lars. Of course, an un­ex­pected ill­ness or ac­ci­dent could run in the tens of thou­sands of dol­lars for the unin­sured, who are in ef­fect gam­bling with their health.

In coun­tries with uni­ver­sal health care cov­er­age (all in­dus­tri­al­ized na­tions ex­cept the United States), es­sen­tially ev­ery­one pays in, whether through taxes alone or via em­ployer con­tri­bu­tions added to the govern­ment funds, as in the Ger­man health care sys­tem.

As long as we have an opt-out op­tion that does not eco­nom­i­cally cor­rect for the ad­verse se­lec­tion is­sue through higher penal­ties or greater in­cen­tives for pur­chas­ing in­sur­ance, those who buy in­di­vid­ual in­sur­ance pre­mi­ums will pay higher pre­mi­ums.

So let’s fix the struc­tural is­sues in Oba­macare, which in­clude chang­ing in­cen­tives to pro­mote in­di­vid­ual re­spon­si­bil­ity for health be­hav­iors and buy­ing in to the health in­sur­ance pool, rather than go back to what we had: some 50 mil­lion peo­ple with­out health cov­er­age. It’s hard to imag­ine how we can main­tain our strength as a na­tion if we con­tinue to be sad­dled with the most costly health care sys­tem in the world that does not pro­duce health out­comes com­men­su­rate with our ex­pen­di­tures. Get­ting ev­ery­one in­sured won’t fix the prob­lems that our sys­tem faces com­pared to those of other na­tions, but it would be a start.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.