25 Oct 2013

But the President Said I Could Keep My Health Insurance…?

Health Legislation 62 Comments

Remember how President Obama defused all the paranoid whining from people who didn’t want the government to help poor people get insurance? For example:

Yesterday I got this letter from my insurance company:

I thought I was happy with my health insurance plan, but I must have been mistaken. That’s the only explanation.

In any event, I can’t wait to see all the savings I’m going to get from my new plan with more benefits!

62 Responses to “But the President Said I Could Keep My Health Insurance…?”

  1. Tim says:

    More benefits and more savings? Easy, just bend the cost curve!

  2. Matt Tanous says:

    Only in liberal fantasy land can you force someone to give you MORE of a good and have the result be LOWER prices. I’m pretty sure this should be the next Amendment to the Constitution (for all the good that would do):

    1. Any candidate for President or Congress that cannot explain a supply and demand curve is ineligible for the office.

    • ben says:

      nah, he would forge that too.

    • joe says:

      According to the supply and demand curves, more can cost less if demand decreases.

      • Peter says:

        True. More can also cost less if productivity increases, but that ain’t gonna happen now either, is it?

      • Bob Murphy says:

        joe wrote:

        According to the supply and demand curves, more can cost less if demand decreases.

        Huh? Only if supply simultaneously increases. Do you think a lot of young people are rushing to become doctors now?

        • Joseph Fetz says:

          Ugh. I doubt that joe will quite understand why you said that, but the key words are “more” and “cost less”. Assuming a particular number of resources at time x (which is the reality at any given time), that’s literally impossible. Resources have to go somewhere, and if demand is shrinking, what incentive would there be to increase supply?

          It’s sort of like saying, “hey, I’m losing my ass on my initial investment, I think that this means that I should increase production”.

          How somebody could entirely misunderstand something as simple as supply and demand is beyond me.

        • martinK says:

          If demand drops dramatically and as a result price per unit of a good drops by more than half, you can buy two units and it will cost you less than one unit at the old price. You will have more for less cost.

          • Bob Murphy says:

            You will have more for less cost.

            Oh, I thought we were saying how can all Americans consume more health care at lower price, and then the suggestion was “lower demand.” OK I get what you guys were saying.

            • Peter says:

              Yeah, I understand what you are saying too. It’s hard to imagine how demand for health services will fall with O-care. And even if it did, I would be willing to bet that supply will fall accordingly. Just speaking from the economics of it, I fail to see how this legislation will ever live up to its name. The reason that healthcare is so expensive is all due to the forced restrictions on supply. The AMA licensing monopoly, the FDA, patent laws, tort laws, health insurance that is really not insurance and provides no incentive to be healthy, collusion between gov, insurance and health providers in setting preferred treatments and prices, and all the other regulations at all levels of government all conspire to restrict supply and increase cost. The list goes on and on. Here is a typical example:
              http://mises.org/daily/6567/The-FDA-A-Pain-From-the-Neck-to-the-Big-Toe

              The fundamental problem with healthcare providers is that the sicker we are, the more money they make. So it’s in their interest to make/keep us sicker, and they’re doing an awesome job at it. The “food pyramid”, wars against salt and fat, subsidizing corn and tobacco farmers, etc. have all resulted in an explosion of lifestyle diseases such as heart disease, diabetes, which, lo and behold, can be kept in check by a daily regimen of expensive patented drugs.

              I do believe, as with everything else (wars, NSA spying, bailouts, money printing, etc.), that people are starting to see through the lies and are waking up to the truth.

              Anyway, enough ranting, arm yourself with knowledge (Thanks Bob, for arming me).

              PS: And eat your veggies!!

          • Cosmo Kramer says:

            ok, but who is predicting a demand decrease?

            Obamacare is analogous to promising all inhabitants in Mexico a full stomach at our dinner tables. The only thing that was legislated was the promise of a full stomach.

            You will either have to wait a long time for health care or receive very little of it.

            My latest appointment to the VA lasted all of 60 seconds with my doctor(not an exaggeration). I was complaining of major pain (I’ve had 3 hip surgeries a few years back). He just told me to get another x ray, which never show anything as my problem is soft tissue related. Is this the model that the rest of the country should emulate?

            What is it going to take to convince Keynesians that you can’t summon goods and services into existence?

            • Tel says:

              You will either have to wait a long time for health care or receive very little of it.

              Or resources get shifted away from some other activity in order to create more health care.

            • Tel says:

              What is it going to take to convince Keynesians that you can’t summon goods and services into existence?

              In their own minds they are activating idle resources, not creating new resources.

          • Joseph Fetz says:

            Wait a minute, if you do purchase two units (whereas before you could only purchase one unit), didn’t demand just double? Assuming that we’re talking about the same marginal buyers and that they all did the same.

            In terms of the program, I could have sworn that the purpose was to make health care more accessible, which would normally mean that the demand curve is going to shift to the right.

            It is essentially a consumption subsidy, and while such a thing would generally reduce the price for some consumers (those that are subsidized), this also means that they would generally demand more of that good or service (because it costs them less due to the subsidy).

            Further, this creates a disconnect in real pricing, because those that are making the decisions on the demand side (in the case of a subsidy, this would be a bureaucracy) are doing so arbitrarily, because they are not the owners of the funds that go to such a subsidy (their demand to hold is effectively zero).

            I will grant that, ceteris paribus, if the demand curve shifts to the left, that the price will generally decrease, thus allowing one to buy more units at the same price. But this doesn’t necessarily mean that there is less cost. Also, this example only requires one logical step, but there are many moving parts here, which requires numerous logical steps.

            Even if we assumed static supply and demand, you’d still have the added cost of a bureaucracy on top of the whole thing, which would generally increase the resultant price.

            In any case, while I cannot predict the future, I still have an inkling that the real-world result will be decreased supply, increased demand, and much greater costs and prices. Incentives will be the key factor.

            • Tel says:

              Wait a minute, if you do purchase two units (whereas before you could only purchase one unit), didn’t demand just double?

              I was thinking the same.

              People seem to be very sloppy in their usage of what “supply” and “demand” actually means. From an accounting perspective supply always exactly equals demand in the real world… everything else is imagination.

              I will grant that, ceteris paribus, if the demand curve shifts to the left, that the price will generally decrease, thus allowing one to buy more units at the same price.

              But the whole point about the demand curve shifting to the left is that people don’t want to buy more units. Mind you, the curve itself is an aggregate which tells you nothing about individuals. It’s entirely possible that your personal demand curve is shifting to the right, while other people are shifting the other way.

              Even if we assumed static supply and demand, you’d still have the added cost of a bureaucracy on top of the whole thing, which would generally increase the resultant price.

              The standard socialist argument is that you save money by removing the profit motive. I’m not sure how that theory fits with the observation that half a billion dollars was spent on one broken website, but there you go, I’m just including the common counter-argument for completeness.

              • Joseph Fetz says:

                “But the whole point about the demand curve shifting to the left is that people don’t want to buy more units.”

                Right, that was the whole point. If the demand curve is shifting to the left, the certainly you aren’t getting more for the cost. I think that it is instructive to differentiate between cost and price, which is what I imagine is the confusion here.

              • Tel says:

                I think that it is instructive to differentiate between cost and price, which is what I imagine is the confusion here.

                My accounting knowledge mostly comes from doing software for cash registers and retail stock control. Our standard usage (from the perspective of the retail store) was always that “cost” implies purchasing and “price” implies sales. Roughly speaking the difference between price and cost is the gross profit of the business.

                So yeah, the socialists believe they are eliminating the profit overhead which brings prices down to equal the costs. Thing is, you can’t really run a business at zero profit.

                The ideal theory of a competitive market is not real, it’s just a mathematical shortcut to skip past the bit where some guy sees the incentive of a profit and strives to achieve something… because that bit is confusing and complicated.

              • Joseph Fetz says:

                It’s true that accounting uses many of the same terms as economics, but they aren’t defined the same way. But both uses are related to profit.

                Profit or loss is determined by the difference between revenue and cost. Revenue is the highest ranked use of a good that is undertaken (the marginal utility), while cost represents the next highest ranked use forgone. The results of this use in action (whether successful or unsuccessful) is what determines the profit of loss (i.e. revenues being either greater or less than the costs). As you can see, neither money nor interpersonal exchange is required in determining costs, revenues, profits, or losses. It’s entirely subjective.

                Prices are the results of interpersonal exchange and are determined by the individual valuations of the actors in the exchange (which is represented as the supply and demand for the good(s) in the exchange). Where supply and demand intersect, that is the price. Of course, there are many other things that go into supply and demand, such as the number of units of a good demanded and the number of units of a good offered in exchange, as well as diminishing marginal utility and other economic ideas, but I’m keeping it simple. The important thing is that prices are entirely objective (they are the objective result of the individual valuations of the exchange).

                Of course, in today’s world there exists money and money prices, so revenues, costs, profits, and losses are typically represented in terms of money prices. This is very helpful in guiding our actions, because it allows us to use objective prices in order to calculate in an area that is otherwise entirely subjective. But certainly, that we do this does not mean that they are the same thing, because after all, one is subjective while the other is objective (even though we use an objective thing as a representation of that subjective thing).

            • martinK says:

              Wait a minute, if you do purchase two units (whereas before you could only purchase one unit), didn’t demand just double? Assuming that we’re talking about the same marginal buyers and that they all did the same.

              If they all did that, then the new demand at the new price would be double the old demand at the old price. In that case supply would have to increase also for all the buyers to be able to buy twice as much as before. (I guess now that’s what Bob meant with his reply to joe.)

              But what I meant was one person (who doesn’t follow the general trend) buying more while paying less. I was just pointing out joe was right, strictly speaking: it *is* possible to buy more for less due to falling demand.

      • konst says:

        “According to the supply and demand curves, more can cost less if demand decreases.”

        More will cost more regardless if govt does it with a supply of free money.

  3. Richie says:

    I have seen Obamabots argue that cancelling current plans is a great thing because those plans must have been bad if they were not ACA compliant.

    Don’t let a little thing like freedom get in the way.

    • Matt M (Dude Where's My Freedom) says:

      Why not? It’s the exact same logic they use to defend almost every other intervention.

      Have a low-wage job? It must be really bad if it pays below $7.50 an hour, so it’s a good thing that we make them illegal. You’re better off. Want legal advice or medical services from someone who isn’t officially licensed because they charge lower prices? Can’t do it, it’s a good thing we have licensing because obviously those bozos without licenses can’t help you and are ripping you off. You’re better off.

      • Major_Freedom says:

        Logic? That’s cute. Logic isn’t their strong suit.

        They have the minimum number of brain cells to understand that the Jews were not really bad people in WW2 Germany and Poland, despite the government declaring them bad.

        But when the complexity is only slightly increased, poof goes the logic.

  4. Will says:

    So what exactly was your plan’s coverage that is now deemed not good enough? Will you end up spending more money (you can probably get an estimate from the exchanges)?

    • Anthony says:

      Doesn’t cover enough services, like mammograms etc.

      • Z says:

        Or maybe Bob has not been keeping up with his Pap smear screenings.

  5. Anthony says:

    I can’t wait to hear the excuses one year from now. There is literally nothing that can happen to convince them that ACA was a bad idea. They will only look at the post-subsidy cost and not the total amount paid to the insurance company. Even worse will be how they explain the many millions that accept the penalty.

    • Matt M (Dude Where's My Freedom) says:

      There won’t be many millions for long. They’ll be increasing that penalty pretty damn fast in order to absolutely ensure the penalty is FAR higher than the cost of insurance.

      Legally speaking, isn’t it something like a $250,000 fine to pirate a $15 movie?

      • Anthony says:

        I was afraid you’d say that. But, yes that is the logical “solution”.

        • Anthony says:

          So what do they do to smokers and people with poor diets? No longer able to charge them a higher premium?

          • Matt M (Dude Where's My Freedom) says:

            Don’t worry, within the next decade or so, smoking and junk food will both be illegal.

            • Major_Freedom says:

              Socialism is not inevitable.

              • Cosmo Kramer says:

                I pray for the Gary North outcome. i.e. ACA et. al destroy themselves.

  6. Peter says:

    Bob, think about it:
    Free mental health counseling as a result of reading too much Krugman, Yglesias, de Long et al!
    I’m looking forward to getting free mammograms for my manboobs.

    • Tel says:

      Let me try a long shot prediction:

      * Krugman publishes an article claiming that mental health counsellors deserve much higher pay under the new Obamacare system.

      * Mental health counsellors start telling their “customers” that reading the NYT makes you smarter.

  7. Peter says:

    And regarding the “it’s your choice” bit: if your current plan does not meet current ACA minimum requirements, you will have no choice in the matter, guaranteed.
    http://www.kaiserhealthnews.org/Stories/2013/October/21/cancellation-notices-health-insurance.aspx
    And as for the “savings”, don’t hold your breath.
    The sad part is that while you may get covered for “more stuff”, you pay for it in two ways:
    - higher premiums (around 90% higher on average for guys)
    - less choice. most ACA plans have fewer hospitals and doctors to choose from. Chances are high your doctor won’t be in the plan, as will be your nearest hospital.
    Good luck, and Godspeed.

  8. Jim PM says:

    Murphy, your current plan is a scam.

    It doesn’t cover anything, and when you get sick, you’ll end up having to go bankrupt and we’ll get stuck with the bill!

    It’s only moral that you buy a new, more expensive, ACA compliant plan. Have you no integrity?

    /sarc

  9. @ZeevKidron says:

    We all know, or should, that you can’t give more services and good without the bill being paid by someone, at some point in time.

    We also know that the cost of more goods and services CAN be lower if innovation, productivity increases and efficiencies happen. But that almost always (I’m not that great an historian, there CAN be, in theory, a case here or there) Governments inhibit innovation, decrease productivity and reduce efficiency because the profit motive and the loss fear don’t operate for Governments. Don’t y’all yell at me, the power to print fiat money is also a reason for it.

    But the real question about Obamacare is how is the Law written in regards to it’s financing? Is it on baseline autopilot budgeting? If the answer is yes than it doesn’t matter what happens and how good or bed it works.The young invincible will or wont’s enroll, the death spiral will or won’t spin, Only the sick uninsured will enroll, the exchanges can work or they can’t. None of this will matter.

    In any of those cases there will be more (of your) money thrown at it and in 3 years it’s going to feel like it’s as permanent and irremovable as the Constitution itself. Maybe more so.

    Anyone knows the answer?

  10. Major_Freedom says:

    My favorite part is how “It’s your choice” is underlined. You and your insurance provider are being forced by the government, at the threat of violence, to either give up your current plan “now or later.”

    Oh the freedom.

    Also love the word “Marketplace” in large font…

    • Tel says:

      Do what I say now, or do what I say in a year’s time, or get hurt if you don’t do what I say.

      It’s your choice.

      Everyone has choices, sometimes the options aren’t all that good.

      • Major_Freedom says:

        I distinguish between “alternatives” and “choices.”

        I identify what you describe as “alternatives”, but not a choice.

        I identify choice as an aspect of reason. Since violence and reason are antithetical, I hold that the application of violence against X precludes X exercising choice.

        • Keshav Srinivasan says:

          If there’s even a possibility of violence if you choose a particular alternative, then does that not count as a choice? Isn’t there always a risk that someone might go crazy and not like some action that you did, and punch you on the nose as a result? Does that mean you never have any choice?

          • Major_Freedom says:

            Again, we’re just using different terms.

            We know what’s going on, we’re just using a different word to describe it.

    • Keshav Srinivasan says:

      Well, your current plan would have to be replaced by a plan that’s almost the same, except it has to meet a few more conditions. See my comment here: http://consultingbyrpm.com/blog/2013/10/but-the-president-said-i-could-keep-my-health-insurance.html#comment-76797

      Or the other alternative is to buy a plan that’s dramatically different on the exchange.

  11. Jason Bonner says:

    Anthem BC & BS sent me something similar along with a 10% increase in my premiums. I’m the healthiest person, a grade 1, according to their scale. At least they specifically state its due to ACA.

    I work for a small manufacturing business and our employer based coverage had been increasing every year by about 6-8%. This year when our company went to renew our contract with Anthem it jumped 40%. We obviously didn’t renew the contract and we all had to go out and individually purchase coverage. Not a big deal really, but its just too bad because most people loved their coverage.

  12. Samson Corwell says:

    Ehh, it was doomed to fail.

  13. Blackadder says:

    Don’t worry, Bob. I’m sure you can find a much better plan on Healthcare.gov.

  14. Tel says:

    http://www.black-and-right.com/wp-content/uploads/2013/10/obamacare-3.jpg

    Only slightly on topic, but very funny. Apologies for anyone who has seen it already.

  15. Warren says:

    So if people don’t want to sign up and they don’t want to pay the fine will we see a lot of people moving into the all-cash, un-banked shadow economy?

    They can’t fine you if you don’t give them the opportunity!

  16. Gamble says:

    I still have my individual, high deductible insurance plan, it has NOT been canceled yet.

    I inputted my information into the Colorado Health Exchange website and the plan options I was given were MORE expensive than my current plan and the benefits were no better other than the removal of the lifetime limit I currently have. After 10M, my plan expires. IF I have more than 10M in health expenses I want to die.

    The new plans are expensive, plain and simple. How can poor people or others now afford a plan they could not afford a year ago, they can NOT, duh.

    IN a few years, the new plan benefits, all of the pre-existing and other risk takers will cause the cost of all insurance to skyrocket, it is only a matter of time until I can no longer afford any insurance.

    The real problem is the 1974 Federal guidelines for HMO’s and the barrier to entry related, all the way down to State licensing level. The true cost of health care, not health insurance, must come down. The entire industry has no concept of profit, loss, efficiency and other normal market factors.

    1913 was a bad year for Lady Liberty. Some say she was murdered in the year 1913, I tend to agree…

    • Cosmo Kramer says:

      Exactly. The poor can’t afford to USE their insurance, even if the plan is given to them. High deductible and co pay……

      The “rational” thing to do is to pay out of pocket until you get sick or need a surgery. Then sign up…… and go back to paying out of pocket afterwards.

  17. konst says:

    Who wants to wager the prices of the available plans at that time will be higher than they are today including those comparable to the plans available today?

  18. Keshav Srinivasan says:

    In case anyone is curious, these are the conditions that grandfathered health insurance plans have to satisfy beginning in 2014: (New insurance plans on the exchange have to comply with more requirements, like guaranteed issue and community rating.)

    “Children — Children under the age of 19 may not be excluded from coverage because of a pre-existing health condition.

    Rescission — unless fraud or misrepresentation of material fact can be proven, no rescissions of coverage may occur for insured individuals.

    Plan Limits — Healthcare plans may no longer place lifetime or restricted limits on healthcare coverage.

    Young Adults — all group health plans must cover young adult children until they reach the age of 26. However, for grandfathered plans children are not eligible for this benefit until 2014 if they are also eligible for employer-provided healthcare.

    Advance Notice – All health plans must provide participants with at least 60 days’ notice of any changes to their benefits, plus the cost of a group health plan must be included in the W-2 for any group health plan participant.

    Four-Page Summary — A document known as the “Uniform Explanation of Coverage,” which cannot exceed 4 pages, must be prepared and distributed to all plan participants.

    Exchanges — Starting in January 2014, all health plans must notify employees about the existence of healthcare exchanges and, if their employer picks up less than 60% of the premium costs for their existing group health plan. Employees must also be made aware of any tax credits and cost-sharing discounts if the employee were to purchase health coverage through an exchange.

    Waiting Periods — As of January 1, 2014, group health plans will no longer be allowed to impose a waiting period that exceeds 90 days.

    Retiree-Only Medical Plans – Those plans that cover retirees only are exempt from the PPACA’s mandated extension of coverage to adult children up to age 26.

    “Excepted” Plans – Certain benefits, such as vision only, dental only or flexible spending accounts are exempt from the operational and design changes of Obamacare.

    Collective Bargaining Plans – Any collectively bargained health plan that was ratified prior to March 23, 2010 will enjoy many of the same exemptions as other grandfathered group health plans. One exception, however, is that “grandfathered” collective bargained plans may change insurance carriers during the term of the agreement without losing grandfathered status.”

  19. Bitter Clinger says:

    Of course you can get more for less. But then again my field is Operations Research, not the pseudoscience of economics. This morning I went to my clinic (I am old and a big user of health care and I appreciate you young guys paying for it, my costs will go down by $94 per month next year) for some blood work and I was the only person in the place. So for my encounter, the costs were the guard by the door, the lady who took my insurance card and driver’s license to give me the paper for my lab work, the lab lady who took my paper, the lab lady who took my blood, and since my clinic does urgent care I assume there was a nurse and doctor fooling around in the patient rooms someplace, maybe in a threesome with the radiology person. Also there were the costs of the building and all the equipment. If instead of me being the only patient, there had been fifty people queuing up for lab work and urgent care the cost of my encounter would have been only one fiftieth of what it was. So before you laugh at someone who thinks you can get more for less you need to know how much “slack” there is in the system. As far as I can see there is a bunch in the medical field and it is all fixed cost. If I hadn’t gone in for the lab work all those people still would have been paid. If a thousand people showed up, those people would have been paid the same. I would love to write work standards for those people.

  20. Dyspeptic says:

    The now famous lie about keeping your health care if you like it is classic demagoguery. Practical politics is all about finding out the lies voters want to believe and repeating them constantly. Most people prefer being lied to if the alternative truth makes them uncomfortable, which is usually the case.

    Did anyone notice the inscrutable smirk of Jon Corzine in the video background? I wonder how he managed to escape the perp walk after the MF Global meltdown. It must be nice to be an oligarch.

  21. Russell says:

    Bob,

    Who are you to decide whether or not you’re happy with your current health plan? That kind of important decision can’t be left to the masses. Luckily for for all of us, we have a President who can make such choices for us.

  22. 9HasNo22 says:

    I swear, you CAN simultaneously increase access, quality, and regulation while decreasing cost. It’s TRUE!

  23. Jack says:

    ”We are giving you some months before we offer you a switch to a slightly different plan”. Wow! How horrendous! the USA is now a Communist state!

    You are throwing an utterly pointless tantrum. Get over it.

    • Richie says:

      Pointless? Hardly. Freedom means nothing to you does it?

      • Major_Freedom says:

        Not to he who is scared of it.

        Think of someone who would rather kill innocent people in order to stay in a cage.

  24. Keshav Srinivasan says:

    If anyone’s still reading this thread, this may explain why insurance companies are canceling policies:
    http://motherjones.com/kevin-drum/2013/10/are-all-those-insurance-company-cancellation-letters-too-good-check.

    Basically, insurance companies have tried to get as many people as they can to switch to a new plan, so that they lose their grandfathering (which was the “if you like it you can keep it” promise by Obama) and thus the insurance company can cancel plans at will, as they’re now doing.

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