The Biden Plan Has Already Failed

 

As Democratic presidential candidates debate their healthcare plans, one of those plans has already been tried – and failed. I’m speaking of the Biden plan, better known as ObamaCare.

Biden has resisted the progressives move to Medicare for All, doubling down instead on Obama’s plan, The Affordable Care Act. Like most legislative names, this one cannot live up to its billing. It has become increasingly unaffordable for everyone except those who get generous government subsidies.

Former Vice-President Biden plans to “protect and build on the Affordable Care Act.” Brian Blasé, writing in The Wall Street Journal, says ObamaCare has failed in its primary goal – to create a better market for individual health insurance. The ObamaCare exchanges are performing much worse than expected when they were launched in 2014. Furthermore, this has nothing to do with the Trump administration as Democrats claim.

ObamaCare has failed because of its perverse incentives and haphazard construction. It mandated a long list of expensive coverage benefits while insisting that every policy contain each of these benefits, regardless of need. Therefore, seniors are paying for pediatric dental coverage, men are paying for mammograms, and women are paying for prostate exams. Understandably, under these perverse conditions, premiums have soared.

To make matters worse, young healthy people were asked to pay higher premiums than older sicker people. The Individual Mandate was supposed to force conformance with this plan but they chose to pay the penalty (“tax”) instead. This raised rates for those purchasing coverage because there were not enough healthy people in the case mix. The Trump administration has simply eliminated this nonsense by removing the penalty.

Blase says the congressional Budget Office estimated in 2014 that there would be 25 million enrollees covered in the exchanges in 2019. But the actual figure is about 10 million. Those who don’t qualify for the government subsidies has chosen to go without coverage at all. Democrats try to blame the Trump administration for this decline in the number of covered Americans, but this only represents what people choose when they have the freedom to decline these expensive, little used policies.

The result is the exchanges have become a high-risk pool for lower-income people with a limited selection of plans. The left has accused the Trump administration of sabotage of the system but in reality they have stopped the bleeding. Blase explains:

“First, a market-stability rule limited enrollees’ ability to game ObamaCare’s rules by waiting until they need care to buy coverage. Second, the administration approved state programs to subsidize high-cost patients without spending additional federal money. States implementing these programs have seen premiums drop by more than 10%.”

“The Trump administration also took action to improve options for those left behind. It reversed a late-2016 Obama administration regulation that restricted the ability of families to obtain affordable short-term plans that don’t comply with all the ObamaCare mandates. Another Trump rule, now under court review, expanded businesses’ ability to form association health plans. In total, these expanded options, along with the elimination of the individual mandate penalty, provide Americans an annual net economic benefit of $45 billion per year.”

 

Despite all these adjustments to the Affordable Care Act, it remains a failed system that gets worse with every passing year. The decline in covered lives necessitates rising premiums just as the plans are becoming even less attractive. This downward “death spiral” promises higher premiums, less generous benefits, and higher deductibles unless the system is overhauled soon. The Obama- Biden healthcare plan is a failure and no amount of first aid will ever produce a healthy system. The Biden plan is dead on arrival.

The Warren Healthcare Plan

 

Senator Elizabeth Warren has a “plan” for everything. Recently she released her healthcare plan with enough details to analyze it and render an opinion. The response even from liberal commentators has been harsh, to put it mildly.

Warren has embraced Senator Bernie Sanders’ Medicare for All plan, but with her own ideas on funding. By her own mathematics, her plan will cost a cool $52 Trillion over the next ten years. That’s $20 Trillion more than the conservative estimate of the Mercado Institute at George Mason University.   

The Wall Street Journal editorial board gives her credit for ambition – but not much else.

“You certainly can’t criticize the new Iowa Democratic caucus front-runner for lack of ambition, Despite criticism from fellow Democrats, she is sticking to her plan for a government takeover of American health care, including the elimination of private insurance that 170 million or so Americans now have. She continues to claim that this will cost “not one penny in middle-class tax increases. She walks on water, too.”

Liberal columnist William A. Galston describes her plan as “Elizabeth Warren’s Health-Care Hara-Kiri”, a suicide pact for her political future. Here’s how he describes the plan:

“She has zoomed past the last off-ramp and is now fully committed to a plan that would revolutionize the way health care is financed and delivered in the U.S. She can’t run on this plan in the primaries and then shift to something more modest in the general election, even if she wants to. If Ms. Warren is the nominee, Medicare for All is what she’ll take to the country. Given the centrality of health care in our political debate, this plan will be much of the basis on which she is judged.”

Galston correctly points out that more than 218 million Americans now are covered by private insurance plans, of which 179 million are employer-provided. Many of these plans are the result of tough negotiations in which employees have given up wage increases for more generous health insurance benefits. Asking these workers to give up these hard won gains in return for a promise of what they’ll get from the government is a hard sell.

Economists and mathematicians will argue about the numbers to pay for Warren’s plan, or the Sanders plan, but health insurance analyst Robert Laszewski has another important point of view. He notes the current healthcare system is largely financed by the private insurance market. Current Medicare and Medicaid rates are often below providers’ costs but these are supplemented by higher rates for private insurance. If the entire private insurance system is shut down, as Warren and Sanders propose, providers reimbursement rates will suddenly be cut in half. (See the chart below.)

Laszewski poses the relevant questions: What would happen to your local hospital if suddenly the nation went to a single-payer Medicare for all system and 177 million out of a total of 298 million people had their hospital payments cut almost in half? Or what would happen to your doctor’s practice if suddenly your doctor had their reimbursement for about 60% of their patients cut by an average of 22%?

When you consider these crucial questions, it becomes obvious that the real issue is not whether or not you can raise enough money to pay for Medicare for All through higher taxation, but rather what will be left of the healthcare system providers when you cut their payments across the board to Medicare rates? As a healthcare provider, I can assure you the current doctor shortage will go from serious to catastrophic overnight.

 

Democratic Healthcare Choices

 

It’s good to have choices. Many years ago there was a Fram oil filter ad that showed an auto mechanic holding up one of their oil filters with a wry smile saying, “Pay me now (for the oil filter) or pay me later (for the engine repair).” One way or the other he was going to get your money; either in the short run or later.

I was reminded of this ad by the recent Democratic presidential candidate debate. They argued over slight variations in their healthcare plans – but sooner or later they were going to get to the same place – socialized medicine.

Senator Bernie Sanders is the leader of the charge for Medicare for All – his form of socialized medicine that would take effect immediately and eliminate all private healthcare insurance. In the first Democratic debate nearly every leading candidate including Kamala Harris, Elizabeth Warren, Kirsten Gillibrand, Corey Booker, and Pete Buttigieg agreed with Sanders. The only leading candidates that disagreed were Joe Biden and Amy Klobuchar.

Now, after the second debate, many are coming out with nuanced versions of their support. According to The Wall Street Journal editorial board, Harris now proposes her own version of Sanders’ plan that would move the country to single-payer healthcare over the next 10 years, rather than in four years as the Sanders bill outlines in the Senate.

WSJ says, “Ms. Harris says she’ll provide a “common-sense path” for folding everything from Medicaid to employer insurance into the federal system. She conveniently leaves out details on how she’ll land this Evel Knievel jump, but her political goal seems to be to claim that she wouldn’t eliminate private insurance.”

“She does this by saying that private offerings will continue to exist similar to Medicare Advantage, the program that lets private plans compete for retiree business. One reason to be suspicious: Democrats have hated Medicare Advantage for years and raided the program to pay for the Affordable Care Act.”

Joe Biden tries to paint himself as the moderate in this debate because he wants to keep the Affordable Care Act (ObamaCare) intact, which preserves the private health insurance that 180 million Americans get from their employer. However, Biden is once again promoting the “Public Option” be added to ObamaCare, an idea too radical for Democrats who controlled Congress when the ACA was passed during the Obama-Biden years.

The Public Option (see Public Option Kills Private Insurance) is just a slower path to single-payer healthcare than Medicare for All. The Public Option is a business model that can’t fail because it is backed by the taxpayer. When lowball premiums lose money for the business, the government will simply raise your taxes to pay the shortfall. No private insurance company can afford to compete and lose money. Eventually it will crowd out private insurance and you’ll be left with only government –run healthcare.

So the choices are clear:

  • Sanders’ Medicare for Allsingle-payer healthcare in 4 years
  • Harris’ Medicare for Allsingle-payer healthcare in 10 years
  • Biden’s ObamaCare with Public Optionsingle-payer healthcare sooner or later

 

All three choices eventually will eliminate your private health insurance.

Just like the Fram oil filter mechanic: single-payer healthcare now, or later. Your choice!

(Since I first wrote this post, Senator Elizabeth Warren has become the front-runner and has doubled down on Medicare for All.)