It’s not all good news.

Let’s say you are a 60 year old divorcee in 2014.  You make $46,136, which is 401% of the poverty line.  You are therefore eligible for NO subsidy from the government.  Your premium will be $10,162.  Should you actually need care, your out of-pocket costs will be capped at $6250.

So in a best case scenario, your health insurance/care will cost you 22% of your income.  In a bad year (or a regular year if you have a chronic illness) your health insurance/care will cost you 36% of your income.  Um… that’s not affordable.

Granted, the cost is so high that you would likely not be subject to the mandate.  Great.  So you continue to have the option to be uninsured.

The people who are going to be hit hardest by this are those making just over 400% of the poverty line.  Because, ironically, if you make just a little bit less – say $45,906 (399% of the poverty line), then – due to subsidies – your premium will cost you $4361.  That’s less than 10% of your income.  And your out-of-pocket costs are capped at $4167.  So the most you could pay in a year would be 19% of income.

That’s still a lot.  But it’s WAY less than if you make just over the 400% line.

I have yet to see a good answer for what the government is going to do when people start asking for pay cuts to get under the 400% line.  I don’t see why it won’t happen.

Press Corps-pls do your job as Obama sneaks in Berwick appt;pls cover his mission:socialized healthcare&rationing based on”quality of life”

This kind of thing makes my head explode.  Look, I’m not going to get into the politics of the Berwick appointment.  But who oppose him see his “mission” to be twofold:

1. He’s for increasing government paid/run health care
2. He’s for decreasing spending on government paid/run health care

Ok.  You can’t be angry at him for both of these.  You can be angry at him because you believe he will increase the amount of money that government spends on health care or you can be angry at him because he will limit the amount of money that government spends on health care, but you can’t be angry at him for both.  For that matter, he really can’t do both.

Moreover, you, yourself, can hate one of these things, but you can’t hate both.

So, please, rail against increases in health care spending or against them.  Choose.  This is sort of silly.

Look, there’s a problem with Medicare funding.  I’ve already talked about this:

Basically, back in the 90’s, Congress tried to slow the rising costs of Medicare by pegging how much they pay doctors to a formula.  Yes, the formula underestimated how quickly medical costs would rise, such that every year, Congress “fixes” the problem by ignoring it and pushing it to next year.  They’ve been doing it so long that if they let the SGR kick in, reimbursement rates to physicians would drop overnight by more than 20%.

That’s me.  Quoting myself.  That’s how bad it’s gotten.

They let the SGR kick in.  Reimbursement rates dropped a ton.  The usual stories appeared about the sky falling.  Docs will rush to leave Medicare.  The system will collapse.  This is why the ACA sucks.  Blah blah blah.

Look.  First of all, the ACA has nothing to do with the SGR.  Actually, it has little to do with Medicare.  Not one more person got Medicare because of the ACA.  So if you think Medicare reimbursement rates are too low, so be it.  It has nothing to do with health care reform.

Further, this is all theater.  There’s no way they will let the SGR kick in permanently.  This is politics.  They will increase the rates.  They always do.  They always will. The politicians don’t have the stomach to actually lower costs.  So everyone can chill.  They will do what you want and spend, spend, spend.  They will even pass it so that docs who were reimbursed at rates lower than they expected can get the money back later.  Sure, it will cost more to file that extra paperwork.  But that’s what you want, right?  More spending!

I’m exasperated because it seems to be the same crowd screaming about the deficit and high spending that’s screaming about the lower reimbursement rates.  You can have lower spending or you can have lower deficits, but you can’t have both.  Pick.  Stop wasting my time.

Let’s break it down.  On the x-axis, you have a measure of how much a country would have to change its spending in order to bring down the debt to a reasonable amount.  I believe for the purposes of their calculations, for a developed country it’s about 60% of GDP.  Countries further to the right have the most cuts to make to spending in order to get the debt under control.

On the y-axis, you have a measure of how much a country can expect its spending to increase because of health and pension increases (think Medicare and Social Security).  Countries closer to the top of the graph will have higher increases in spending because of their projected costs in these areas.

Do you know where you absolutely do not want to be?  The upper right corner.  That’s where a country would be if it both had the most cuts needed and the most anticipated spending in health and an aging population.  It’s a perfect storm.

Can you guess where the US is?

I hear more and more people talking about the size of the debt and the increases in spending.  None of them are talking seriously about Medicare or SSI spending, or how we might cover them.  Wake me when they do.

(h/t The Economist)

Part of the health care overhaul due to kick in this September could strip more than 1 million people of their insurance coverage, violating a key goal of President Barack Obama’s reforms.

Under the provision, insurance companies will no longer be able to apply broad annual caps on the amount of money they pay out on health policies. Employer groups say the ban could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.

I’ve never been an ACA apologist.  This is entirely true.  But the why is just as important as the what here:

This market’s limited-benefit plans, also called mini-med plans, are priced low because they can, among other things, restrict the number of covered doctor visits or impose a maximum on insurance payouts in a year. The plans are commonly offered by retail or restaurant companies to low-wage workers who cannot afford more expensive, comprehensive coverage.

Depending on how strictly the administration implements the provision, the ban could in effect outlaw the plans or make them so restrictive that insurance companies would raise rates to the point they become unaffordable.

Look, the ACA doesn’t ban low-cost plans.  It sets no minimums on what a plan can cost.  It does, however, set minimums on what a plan can cover.  It does ban low-benefit plans.  It just so happens that low-benefit plans are also usually low-cost.

There are a host of health insurance plans out there that are cheap.  It’s just that the majority of those also are crappy.  Sure, they’re great if you’re healthy.  They only stink when you get sick; but that’s when you need them.

One of the things the ACA does is try and eliminate under-insurance.  It tries to regulate the insurance companies so that you can’t get sold a plan that provides too little coverage when you need that.  That costs money.

The companies that are complaining about this were giving their employees skimpy insurance.  They are upset that they won’t be able to do so in the future.  They’re also upset that real insurance will cost more.

This is America; they’re allowed to be upset, and they’re allowed to complain.  I just don’t have a lot of sympathy for them.

P.S. More robust reform would have eliminated issues like this, but you didn’t want that, America.  Deal with it.

Pressured by an aging population and the need to rein in budget deficits, Canada’s provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system.

Before I even get into this, can we acknowledge that rising health care costs in not a Canadian problem, but a worldwide problem?  Please remember as we go through the rest of it that – today – we spend about twice per person what Canada does on health care.  If they are complaining that it costs too much, what are we doing?  And while they spend about 10% of GDP on health care, we spend 16%.  So anyone who points to their model as “unable to contain costs” should just shut up.

Anyway, here is my favorite line:

In some ways the Canadian debate is the mirror image of discussions going on in the United States.

Canada, fretting over budget strains, wants to prune its system, while the United States, worrying about an army of uninsured, aims to create a state-backed safety net.

Huh?  We already have a safety net. It’s called Medicaid.  It’s not as good as I like but it exists.  This reporter, however, seems to think that the ACA is about the safety net.  It’s not.  It’s mainly a huge plan to give taxpayer money to people to buy private insurance.  It’s an expansion of the private system, albeit with government money.  It’s not some new government plan.

Moreover, Canada wants to contain rising costs.  Like we should.  But as they take steps to be fiscally prudent, we deride them as failures.  Here’s a United States Senator:

What will happen in the U.S.? | Reuters: Soaring costs force Canada to reassess health model

Soaring health costs?  As opposed to here?  Am I losing my mind?

They quote four people in the article.  One is the Ontario Finance minister.  He says:

“Our objective is to preserve the quality healthcare system we have and indeed to enhance it. But there are difficult decisions ahead and we will continue to make them”

Seems reasonable enough.  I don’t disagree.  You would think, that if this was an article describing the upcoming demise of the single payer system, that there would be other politicians calling for, say, the demise of the single payer system.  But no.  Instead, we get the following three players:

1) A senior economist at Toronto-Dominion Bank.  You read that right.

2) A professor at University of Toronto’s Rotman School of Business.

3) A senior economist at Scotia Capital.  What is Scotia Capital?  This is Scotia Capital:

Scotia Capital is the marketing name covering the Scotiabank Group’s integrated global corporate and investment banking and capital markets functions. Scotia Capital’s global operations are divided into two primary business units:

Global Corporate and Investment Banking

Global Capital Markets

In Canada, Scotia Capital offers a full range of corporate and investment banking and capital markets products and services.

Really?  This is who they went to for health policy expertise?  Can you possibly predict what she will advise?

Scotia Capital’s Webb said one cost-saving idea may be to make patients aware of how much it costs each time they visit a healthcare professional. “(The public) will use the services more wisely if they know how much it’s costing,” she said.

“If it’s absolutely free with no information on the cost and the information of an alternative that would be have been more practical, then how can we expect the public to wisely use the service?”

Ah….  the moral hazard.  Like music to my ears.

No health policy experts.  No politicians advocating for change.  A bank economist, a business professor, and an economist for Scotia Capital.  The article never mentions that the single payer system in Canada is wildly popular.  The article never mentions that no serious politician is running on a platform of repealing it.

But most importantly, the article never mentions that the Canadian health care system is not like ours in any way.  No matter what headline you read, the ACA is not a single payer system.  The ACA changed very little structurally.

Our system is still mostly private.  Ours costs way more.  Ours covers far fewer people.  And ours has similar, if not worse, outcomes.

Our system is nothing like Canada’s.  We should be so lucky.

Now, many claim that the ACA will “bend the curve” and slow the growth of costs.  But how much?  Well, since the CBO has been doing most of the heavy lifting so far, no reason to let them stop now.  CBO director Doug Elmendorf recently gave a talk to the Annual AAAS Forum on Science and Technology Policy on the economic and budget outlook.  What’s the verdict?  Here are outlays for 2020:

Do you see Medicare there?  It’s almost $900 billion.  We’ll be spending more on Medicare than on Defense.  This doesn’t include Medicaid (another $444 billion).  Together, they will cost more than Social Security.  More than interest on the debt.  more than all discretionary (other) spending total.

You want to balance the budget?  Ain’t gonna happen.  Not while health care costs this much.  And we haven’t even added in private spending on insurance, out-of-pocket costs, or the cost of reform (which is small compared to the big M’s).

We need to seriously get a handle on health care costs.  The sooner everyone starts to accept that, the better we’ll be.

Congressional Budget Office estimates released Tuesday predict the health care overhaul will likely cost about $115 billion more in discretionary spending over ten years than the original cost projections.

The additional spending — if approved over the years by Congress — would bring the total estimated cost of the overhaul to over $1 trillion.

And, of course:

Republicans pounced on the news, which they called another sign that the Obama administration makes promises it cannot deliver.

Deep breath, people.  I’m serious.

Before I even get into the weeds, I’m inclined to say this.  No one ever said health care reform would be cheap.  And even if this were taken at face value, and it meant that reform was going to cost about $11.5 billion more per year on average than we thought, that would mean that overall health care spending would be less than half a percent more than we thought it would be.  I’m not losing sleep over that.

But it shouldn’t be taken at face value.  Paul Van de Water, a Senior Fellow at the Center on Budget and Policy Priorities, writes:

In March, when CBO estimated health reform’s effects on the deficit, it appropriately included all of the legislation’s impact on mandatory spending. (Mandatory spending, like Medicare and Medicaid, continues from year to year unless Congress passes new legislation to reduce it.)

CBO’s March estimate did not include the legislation’s impact on discretionary spending — the spending Congress provides each year in appropriation bills — because the legislation did not directly affect discretionary spending. Moreover, there’s no way CBO can estimate how the legislation might affect the future discretionary funding Congress will actually appropriate for any specific program or how that appropriation will affect total discretionary spending. (For an explanation of why CBO’s treatment of discretionary spending is necessary and appropriate, see this paper Jim Horney and I wrote on March 25.)

Instead, CBO in March provided a separate table showing the possible discretionary spending that could — contingent on future appropriations legislation — result from enactment of health reform. Yesterday’s letter from CBO simply updated those figures.

While the new figures are indeed larger than the March ones, the biggest single reason is that they include the cost of renewing the Indian Health Service (IHS), totaling $39 billion over ten years. (Many of the health reform law’s provisions continue existing discretionary programs rather than create new ones.) As CBO’s letter points out, that $39 billion is simply a projection of what the federal government is currently spending for the IHS; not a single dollar represents additional real spending.

Aside from $10 or $20 billion of administrative costs, the estimate is based on items that are not currently funded and that may not ever be funded. It’s up to the appropriations committees to make those decisions, and we don’t know what decisions they’ll make. Moreover, because discretionary spending is limited, new programs tend to compete with old programs (i.e., appropriators decide to spend $2 billion on a demonstration project in Medicare and take that money from somewhere else, which means net cost to the deficit is zero). So CBO doesn’t count potential discretionary costs because they may or may not be real, just like it doesn’t count savings that may or may not happen, because they can’t be projected with any sort of certainty.

Bottom line? As has so often the case with health-care reform, there’s plenty of evidence to argue that the bill will save very little money, and plenty of evidence to argue that the bill will save lots of money. Where you end up depends on how you weight different probabilities. But so far as discretionary costs go, it’s worth saying that CBO always separates them from mandatory costs and people don’t generally complain. It’s only when bills get controversial that these quirks of the budget process are given such a sinister cast.

Look, if you want to find a reason to be upset about the law, you shouldn’t have a problem doing so.  You can hate the mandate (even though if you want to prevent gaming the system you need one).  You can hate the fact that it doesn’t address the way we shield ordinary people from true costs, and therefore subtly encourage them to continue demanding expensive and ineffective things.  You can hate that it does nothing to dismantle the private for-profit insurance system.  You hate that it still leaves millions of Americans without insurance, does too little to contain costs, and doesn’t address quality much at all.

But it’s not a lie.  It’s not a trick.  They didn’t game the numbers or pull a fast one.  This bill is just what it said it was, including the cost.

The great mystery surrounding the historic health care bill is how the corporations that provide coverage for most Americans — coverage they know and prize — will react to the new law’s radically different regime of subsidies, penalties, and taxes. Now, we’re getting a remarkable inside look at the options AT&T, Deere, and other big companies are weighing to deal with the new legislation.Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government…

In a statement to Fortune, Verizon said it is not, “considering or even contemplating” the plans laid out in the report, though records show the company did send the report to its board shortly after the reform plan was passed by Congress…

Caterpillar and AT&T actually spell out the cost differences: Caterpillar did its estimate in November, when the most likely legislation would have imposed an 8% payroll tax on companies that do not provide coverage. Even with that immense penalty, Caterpillar stated that it could shave $25 million a year, or almost 10% from its bill. Now, because the $2,000 is far lower than 8%, it could reduce its bill by over 70%, by Fortune’s estimate. Caterpillar did not respond to a request for comment.

AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead. AT&T declined comment.

The gist of this piece is that companies are weighing the economics of paying for health care under the ACA versus dropping coverage and paying the employer penalty.  For some, paying the penalty is less than paying for health care.

I’m of two minds about this.  The first is sort of an “I told you so.”  If you don’t want to have an all-inclusive system (like single payer), then you need to find another way to make sure everyone participates.  The whole point of the mandates and penalties is to make sure that people and companies don’t opt out of the system.  But, such mandates and penalties are unpopular.  Therefore, Congress kept watering them down to make them more palatable.  The result is what you see – it may be economically advantageous not to pay for insurance.  The fact that companies are considering this should not be unexpected; nevertheless it’s not a good development.  If companies decide  to drop coverage it will make people unhappy and might make the bill cost more than it otherwise would have.

On the other hand, I wouldn’t make too much of this.  While the penalty that tries to force companies to provide health insurance is less than it possibly should be, it’s more than what exists today (which is zero).  You see, there is nothing today that forces companies to provide insurance at all.  They do it because that’s how they stay competitive as employers; it’s part of the compensation package.  Companies that drop coverage, today or in the future, will be much less attractive to employees, and that could result in a loss of talent at those companies.  Plus, they will have to pay a penalty.  If they aren’t dropping coverage today (when they face no penalty), there’s no reason to assume they will in the future (when there is a penalty).  I think this is more of a threat than something that will actually happen.

(UPDATE: Some have pointed out to me the fact that a number of conservative blogs have picked up on this story.  So I amended my first statement.)

I’m confused. Some of you are emailing me as if this is some sort of vindication that you were right and I was wrong.  As if you’ve uncovered some hidden truth that the law will make things cost more.

Huh?

No one claimed that covering 30 million more people would cost less.  Some have claimed that it will slow cost growth.  The jury is still out on that.  But come on.  This is still a decent deal.  Ezra Klein shows it well through two charts:

The first looks at national health expenditures with and without the Affordable Care Act:

Now look at the change in the uninsured:

And that actually understates the case. Third Way, the centrist policy outfit, sent over its own analysis of the data. “The fact is that by 2019, national health spending per insured person will be $15,132 compared to $16,812 without the new law,” they write. “That’s 10 percent less spending per insured person than it would have been, according to the actuary’s report.”

You don’t have to love the law.  And it has flaws.  But this report hasn’t found a new one.