Obamacare is a job killer

Finally, the evidence is in.  Obamacare is significantly hurting a segment of the US economy.

From Bloomberg:

Early evidence suggests that the Affordable Care Act is working — at least in one important respect, according to researchers at the Federal Reserve Bank of New York.

Analysts Nicole Dussault, Maxim Pinkovskiy, and Basit Zafar state that the primary purpose of this law “is not to protect our health per se, but to protect our finances.” And they’ve found a big difference between indebtedness trends in states that embraced the Medicaid expansion versus the ones that did not…

U.S. counties that had a particularly high uninsured rate prior to the implementation of the Affordable Care Act have seen the per capita collection balance fall if their state embraced the Medicaid expansion. If not, the collection balance continued to climb:

Will someone think of the debt collectors… Ohh the humanity.

 



Yet another distributional analysis

The Hill has “details” on the latest “plan”-like scribblings of the Republican policy “wonks” on healthcare. There is one thing I want to look at before I start my morning coffee:

The core of the plan is a $2,500 tax credit that any citizen would be eligible for and use to purchase health insurance. The lawmakers say this gives flexibility to people, whether they get employer-based insurance or not, to more directly control their healthcare spending, for example by using a health savings account.

I’m looking at one of the sponsor’s web pages and I get very few more “details”

every American citizen is eligible to claim a $2,500 tax benefit as well as a $1,500 tax benefit per dependent minor. This benefit can be assigned to an employer, transferred to a Roth Health Savings Account, or advanced for annual distribution. With this benefit, individuals and families now have the freedom to use pretax dollars to plan and save for their health care futures.

Let’s look at the distributional consequences of this type of policy.

For people who make under 200% of FPL, pre-tax dollars aren’t too valuable as most of their dollars are minimally taxed.  For people making six figures and only have a kid or two at most, pre-tax dollars are fairly valuable as they are facing a much higher explicit marginal rate.  Worrying about pre-tax dollars is overwhelmingly an upper middle class to affluent problem.

More importantly it is the flat subsidy.

$208 a month is a decent subsidy.  In some regions that will buy the equivalent of a Silver plan with absolutely no out of pocket monthly premium.  That is fine for a healthy and young individual (as underwriting is back with a vengeance).  There are Silver plans for 40 year old non-smokers that cost under $200.  However, that same $200 a month Silver plan with a $3,500 deductible will cost a 63 year old $450 a month.  And odds are that 63 year old will need to use their policy a lot more than the 40 year old.

Furthermore, a flat subsidy is great for people who don’t need help.  I get my insurance through my employer and the visible premium payment is roughly two hours of pay per month for a Platinum like coverage for my family.  I don’t need help.  My family does not need help.  We already have access to good, high actuarial value, affordable coverage.

Families and individuals that are not mid-career professionals and are making under median income will see a far higher percentage of their income go to post-subsidy premiums.  The poorer you are, the higher the premium percentage is for a given level of individual risk.  And that is a major problem as the people who should bear the least risk are the one’s with the fewest available resources to mobilize in an oh-shit scenario.

TLDR: Comfort the comfortable



Relief, of Sorts, For the Middle Class

In reality, it’s just enforcing a bit of fairness:

The Department of Labor on Wednesday will finalize a rule extending overtime protections to 4.2 million more Americans currently not eligible under federal law, boosting wages by $12 billion over the next 10 years, the White House said Tuesday evening.

The updated rule, which takes effect Dec. 1 and doubles the salary threshold below which workers automatically qualify for time-and-a-half wages to $47,476 from $23,660 a year, or from $455 to $913 a week. Hourly workers are generally guaranteed overtime pay regardless of what they make.

“We’re strengthening our overtime pay rules to make sure millions of Americans’ hard work is rewarded,” President Obama said in a statement. “If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones.”

One of those Americans, Obama said, is Elizabeth Paredes, a single mom from Tucson, Arizona, who works as an assistant manager at a sandwich shop. “Elizabeth sometimes worked as many as 70 hours a week,without a dime of overtime pay,” Obama said. “So Elizabeth wrote to me to say how hard it is to build a bright future for her son. And she’s not alone.”

$12 billion over ten years is real money, and could be a game changer for a lot of people.



Finding woodworkers in Louisiana

Louisiana is expanding Medicaid with the new eligibility date starting on July 1st.  The Times Picayune  reports that Louisiana is using its SNAP (food stamp) database as a means of identifying individuals who are Expansion eligible and then automatically signing them up.

Department of Health and Hospitals officials are “highly confident” they’ll receive federal approval to use data from food stamp applications to qualify people for Medicaid, the first state in the country to use such a method through what’s known as a state plan amendment….

Kennedy said DHH is preparing to send out about 100,000 letters to people that the agency has determined are eligible for Medicaid but aren’t among the state’s 1.4 million enrollees. All the recipients will have to do is respond to the letter, Kennedy said, and they’ll be added to the program….

DHH officials had previously said they would use a “fast track” approach to Medicaid expansion enrollment, but the food stamp enrollment is particularly significant because the federal government had never before approved using food stamp data to qualify Medicaid recipients.

I think this is interesting from a few angles.

First it is an example of a government that wants to do well by maximizing the data that it already holds.  The state of Louisiana in a variety of data sources that it owns already has an excellent idea of who is eligible for Medicaid based on income and who is not.  The challenge has always been integrating those data sources into a coherent information stream.  Using the SNAP database is an excellent starting point.

Secondly, it makes sense that Louisiana is doing this for an expansion roll-out.  All else being equal, an individual who otherwise would not have signed up for Medicaid Expansion without being automatically enrolled will be healthier and less expensive once they are signed up via the letter than people who actively sought out enrollment into Medicaid.  The active seekers are more worried about their health care costs because they know themselves to have a good reason to worry about paying for health care services.  This will lower the average cost on a capitated basis.

The most interesting angle to me is how does this outreach change the Medicaid cost savings for Louisiana.  The woodworkers have a FY2017 62/38 Federal/state split on their costs.  The Expansion eligible individuals have a CY2016 100/0 split on their costs.  A large rush of legacy woodworkers will eat up most of the cost savings gained through lower charity care appropriations, and shifting of voluntary Legacy Medicaid qualified individuals to Expansion eligibility groups.

This is a good problem to have, as more people covered with the Feds picking up most of the tab is a good thing in and of itself.  However the problem is Louisiana has a balanced budget constraint and a large structural deficit.  Medicaid expansion is taking a decent chunk out of the structural deficit caused by Jindal’s decision to destroy Louisiana to boost his Presidential chances but a 100% Medicaid Eligibility uptake rate would take away most of the savings.

 



Hacking the Exchanges

This is a non-ironic tweet from last night:

I spent some time last night playing the the actuarial value calculator and found a corner case that has significant negative public policy problems and a probable flaw in the CMS model.

This is a hack that companies can use to spam the Exchanges in states with very light regulation.  Here is the 2017 AV calculator to check my work.

A deductible can be thought of as a first dollar 100% co-insurance where the patient is responsible for all of the contracted rate expenses.  It is logically equal and it should be mathematically equal to a 100% co-insurance rate.  Logically a deductible of X which is also equal to the same out of pocket maximum  is the same thing as a 100% coinsurance rate with an out of pocket maximum of X.

The policy problem is the definition of substantial difference for plan differentiation allows for the addition of a plan design by a company if there is a significant difference in deductible.  going from a $3,750 deductible to a $0 deductible qualifies as a significant difference.     Companies can submit their first plan with a deductible only cost sharing design and then submit the same exact plan with a 100% coinsurance design to the same out of pocket maximum.  For plans that are not the first or second Silver there is no value from the point of view of the company.  However if this is done for the plan that is the first Silver, the cloned plan becomes the second Silver at the same price point.  It is an illusion of choice.

Health Sherpa search toolsI believe the 100% co-insurance design would significantly outsell the 100% deductible design because the current set of decision support tools prioritizes low deductible plans.  This is an Search exploit as well as a Subsidy exploit.

Ambetter in Chicago actively spammed the Exchanges with functional isomorphs of their Silvers so that cost-sensitive buyers could be fully subsidized on an Ambetter product only and then pay significant incremental premiums to go to any other insurer.  However there was at least some gap between the first Silver and the second Silver.  This plan design strategy eliminates that gap.  The AV calculator allows for this plan design strategy to occur.  There is a single “Are you sure” message box to ward against data entry errors on 100% co-insurance but no hard prohibitions.

plan design hack

 

This hack would not work in all states.

California with their active purchaser model has a very high substantially different standard.  A cloned plan design fails that standard miserably.  Washington state only allows a maximum 50% co-insurance rate.  My state’s regulators have broad discretion to laugh at us and reject one of the two plan designs.  However not all states have active or empowered regulators.  If the plan design meets model requirements, they will approve anything.  This is a special concern for the states that have outsourced all regulatory authority for the individual market to the federal government.  Those plans have to meet very minimal standards, and these plans will meet those standards.

Finally on a technical note, I think there is a problem in the AV calculator as the co-insurance design has a lower actuarial value than the full deductible design.  In my opinion, the model should produce the same actuarial value with these two inputs.



Insert Clever Title About Glacial Speed

Seriously- that was quick:

The Panama Papers leaks apparently resulted in a political casualty Tuesday when Icelandic Prime Minister Sigmundur David Gunnlaugsson resigned.

Sigurdur Ingi Johannsson, the deputy chair of the Progressive Party, announced Gunnlaugsson’s resignation Tuesday on Iceland’s national public service broadcaster RUV.

Gunnlaugsson had been under intense pressure to step down since leaked documents hacked from a Panamanian law firm revealed his links to an offshore company, triggering mass protests in the capital.

Senior political figures in the Nordic nation have been holding emergency talks amid fallout from the Panama Papers leaks.
Critics said the revelations surrounding the offshore company, which allegedly had holdings in Iceland’s collapsed banks, shattered public confidence in Gunnlaugsson’s leadership and could harm the country’s international reputation.

Hee’s a decent explainer of the Panama Papers. this being an election year, I would be remiss if I did not add this:

The Panama Papers leak, that reveals how the rich and powerful rely on a secretive law firm to hide their wealth in tax havens, has drawn attention to a 2011 speech by Senator Bernie Sanders against the Panama-United States Trade Promotion Agreement, which became law in 2012. He noted that Panama’s entire economic output at the time was so low that the pact seemed unlikely to benefit American workers. The real reason for the agreement, Sanders argued, is that “Panama is a world leader when it comes to allowing wealthy Americans and large corporations to evade taxes.” Sanders said the trade agreement “will make this bad situation much worse.” We get reaction from Michael Hudson, senior editor at the International Consortium of Investigative Journalists, which published the Panama Papers, and Frederik Obermaier, investigative reporter at Germany’s leading newspaper, the Munich-based Süddeutsche Zeitung. He is co-author of the book “Panama Papers: The Story of a Worldwide Revelation.”

This is going to end up being the international story of the year.



The Company He Keeps

Look who Ted Cruz has recruited as his economic advisor:

If it’s true that a man can be judged by the company he keeps, what are we to make of the appointment of former Sen. Phil Gramm as economic advisor to the Presidential campaign of Ted Cruz?

Cruz made the appointment Friday, when he collected Gramm’s endorsement of his quest for the Presidency.

As Micheal Hiltzik points out in his coverage of this — what’s the word?– curious appointment, Gramm is exactly whom you’d choose if one global financial meltdown just wasn’t delicious enough:

Gramm left a long record as a dedicated financial deregulator on Capitol Hill, with much of his effort aimed at freeing up trading in derivatives. That’s why he’s often identified as one of the godfathers of the 2008 financial crisis, which was spurred in part by banks’ imprudent trading and investing in these extremely complex financial instruments.

JMWTurner_Sunrise_with_Sea_Monsters

Gramm himself is undeterred by his own disastrous record, and clearly Cruz is equally unbothered.  That would be why both men are ignoring Gramm’s last appearance as a campaign surrogate:

Gramm’s previous stint as a Presidential campaign advisor ended inauspiciously. That was in 2008, when he served as co-chairman of John McCain’s Presidential run.

Gramm’s most notable moment in that position came on July 10, 2008, when he dismissed the developing economic crisis as “a mental recession” in an interview–and video–released by the conservative Washington Times. “We’ve never been more dominant,” he said. “We’ve never had more natural advantages than we have today. We’ve sort of become a nation of whiners.” McCain immediately disavowed the remarks, and a few days later Gramm stepped down as his campaign co-chairman.

I’m assuming that Ted Cruz does actually hope to become president, and thus makes his choices in the belief that they will advance him to that end.  So I can only see two possible interpretations for this exhuming of one of the most egregious poster children for GOP economic failure.

One is that this is what epistemic closure looks like when it’s at home.  It takes a hermetic seal between you and reality to think the “nation of whiners” trope is a winner this year (or ever, really, but especially now).

The other is that this is just trolling, or rather yet one more instance of believing an action is simply good in itself, transcendently so, if it pisses liberals off.  Which lands Cruz — and the GOP — in exactly the same place as option one: doubling down on the crazy for reasons extremely clear only to those with the correct implants in their upper left second molar.

All of which is to say that I remain firm in my belief that the entity identifying itself as Senator Cruz is in fact one of these guys.

“Where are we going?”

“Galt’s Gulch”

“When?”

“Real soon!”

Image:  J. W. M. Turner, Sunrise With Sea Monsters, 1845