Calculating Healthcare Strategy


This week’s health policy news roundup curated by Jane Orient, MD

Political machinations continue after Ryan Care was withdrawn for lack of enough votes. Strategists try to figure what will satisfy the Senate parliamentarian on reconciliation rules, what will attract enough support from moderates and from conservatives, what the CBO score will be, how the inevitable pain will be distributed and redistributed—and how insurers can be kept in the Exchanges.

The “Three Pronged Care” proposal had the first prong (the American Health Care Act or AHCA) scored, but the second prong (action by Secretary Price) was unknown, and the third (a later bill that would have Democrat support) was fantasy.

As Margalit Gur-Arie described it: “Since we are talking about health care, think of this as some sort of orthopedic, cardiac or transplant surgery. First you cut the patient open, then you remove or adjust the offending parts, and then you put in something new and hopefully better. Coming in after a previous surgeon messed things up is obviously harder, but cutting the patient open and walking away until you figure out if you want or are able to do more, is hardly a viable option for the patient….”

The magnitude of the problem we are trying to solve, she notes, is the 10% of Americans in the individual health insurance market. Of these, half are getting big subsidies. “The other 5% are facing the full brunt of health insurance price increases under Obamacare. Of those, 3% are paying for Obamacare health insurance and getting garbage in return for their money, while the remaining 2% are uninsured” (ibid.)

If one is trying to calculate the effect of AHCA on ACA’s Medicaid expansion, Michael Cannon points out that (1) states that use work requirements to help Medicaid-expansion enrollees achieve financial independence would see only 10 percent of the savings (the other 90 percent goes to Washington), and (2) the 31 expansion states could keep adding new enrollees to the expansion until 2020, and keep receiving the enhanced, 90% federal “match” for those enrollees after 2020. The incentives in both ACA and AHCA are to increase enrollment of able-bodied adults (for which the federal government pays 90%) and to cut care for the disabled and vulnerable (for which the federal government pays much less).

The effect of AHCA on premiums would be to increase them on average by 20%, Cannon says.

AHCA would have repealed ACA taxes, an estimated $0.9 trillion revenue loss. But the actual effect is uncertain because taxes change behavior, and tax cuts spur economic growth. The CBO is therefore supposed to do a dynamic analysis, but only did a static one, citing lack of time.

The AHCA tax credits created “benefit cliffs,” with significant reduction in assistance to low-income earners and significant cost increases to older persons, which Avik Roy shows in colorful figures.

The CBO score for AHCA was better than expected. But CBO’s record for accuracy is not good. Its coverage estimates could be off by 19 million, writes Avik Roy.

Despite all the calculations, “intuiting the effect of the AHCA if the bill passed is most certainly an act of God,” writes Anish Koka. He states that it is tempting to look to the experts for counsel on such complex matters, but warns of the danger in trusting experts, quoting Friedrich Hayek:

“It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available-though this is of course merely shifting the difficulty to the problem of selecting the experts. …It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.”

The best solution is probably the simplest, Koka concludes: “the one that gives maximum flexibility to the two most important players in the health care tangle: the patient and their [sic] doctor.”

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