Friday, May 3, 2013

The PPACA is Awful, if You Pretend the Out of Pocket Maximums Don't Exist

I think there are a lot of flaws with the PPACA, it certainly isn't what I'd implement if I was dictator for a day. But that doesn't mean it isn't progress and doesn't excuse those who make it sound worse than it is in hopes of, well, I'm not sure since this is coming from the left. I find comments like these from a post on Naked Capitalism exasperating, but too common on the left wing:

ZEESE: [T]here’s several levels of insurance coverage [available under ObamaCare:] —90/10, where the insurance company pays 90 percent, consumer pays 10 percent; 80/20; 70/30; 60/40. The subsidy provided by Obamacare to people who can’t afford insurance will only cover 70/30 plans. So when you get a serious illness, you’re paying 30 percent of the cost of that health care.
Now, what’s really bad about this is that prior to Obamacare, some of the state insurance regulators were pushing insurance coverers to a higher level, where they would provide more coverage rather than less. Obamacare has now put it into law that 60/40 is okay and 70/30 is what the government will pay for. And so the 80/20 and 90/10′s become less common. So you’re going to see more and more people with under-insurance and not going to see lack of insurance completely go away.

This just isn't accurate. From Kaiser Family Foundation:

Within each tier, insurers could design a wide range of options with varying deductibles, copays, and coinsurance to meet the specific actuarial value. The only cost-sharing element specified for all plans is a cap on total annual out-of-pocket costs, equal to the out-of-pocket limit in Health Savings Account qualified plans (currently $6,050 for an individual and $12,100 for a family).
Lower-income enrollees who buy coverage through a health insurance exchange would have lower out-of-pocket caps and be eligible to enroll in plans with lower cost-sharing levels. For example, enrollees with incomes between 150% and 200% of the poverty level ($34,575 to $46,100 for a family of four) would have an out-of-pocket maximum equal to one-third of the standard level (e.g., a little over $2,000 per person) and receive coverage with an actuarial value of 87%.
The standard out of pocket maximum is something like $6500 (I don't feel like looking it up). In addition to the out of pocket maximum there will be a large number of mandatory covered benefits that won't be a part of the cost share. It's not exactly up to developed world standards but neither is it the status quo either. There will be some issues with individuals with an income just above the subsidy cut-offs, though the catastrophic plans available to those under 30 will mitigate this somewhat, but this is the kind of tweaking that can be done with time.

There will be very few people who actually end up in a situation where they pay 30% of their health care costs with a serious chronic illness, either their income will fall so they get the subsidies (yeah, this ain't great but it's the reality of serious illness) or they'll be making enough that they hit the maximum out of pocket maximum. The slice of the population that will be disadvantaged by this is far thinner than those disadvantaged by the status quo. Yes it would be nice if this slice did not exist, but shrinking this proportion is progress (it's also one of the few real, defensible examples where the middle class ends up worse off than the truly poor, since their benefits might erode a bit while they still bear high costs).

It is true that the PPACA will probably make corporate insurance plans less generous. This is something that doesn't bother me all that much. About the only thing the right is correct about is when they howl that insurance benefits are a burden on businesses. I disagree that having a mixed system where some companies voluntarily provide it is better (if employer provider insurance is the standard, making it mandatory is better than creating space where employers can gain a competitive edge simply by being dicks and breaking community standards), but I do agree generally that businesses financing healthcare makes US businesses less competitive. Eroding this coverage probably isn't a bad thing, it will help equalize the healthcare available across economic brackets. Of course, this is only another step on the path to a working health care system (the PPACA moves us from completely broken to completely broken but less so), but saying it's worth than nothing is just nonsense.

Of course, the limitations to the Medicaid expansion is a major problem.

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