Tuesday, February 23, 2010

The newest iteration of Obamacare

I have three big things to add to this article:
Firstly, replacing the tax on high-value health insurance with a capital gains tax replaces a revenue source that would slow healthcare cost growth with a revenue source that will slow economic growth. That is a very, very bad change.
Secondly, creating a review board to reject "unreasonable" rate increases (ie, those that are actuarially fair but politically unpopular) can take 2 scenarios:
1) it doesn't block any rate increases, so it just becomes a black swan political risk for insurers that makes premiums a little bit higher (to account for future risk)
2) it starts blocking rate increases, serves as price controls (anyone wanna check the history of price controls? I'd challenge you to name a single time that price controls have ever worked), and leads to 2 concurrent dilemmas: 1) health insurance plans refuse to cover new people, pull out of a number of states, and perhaps even liquidate, reducing competition and access, and leading to a government run monopsony medical plan that will crush innovation and lead to a lot of doctors or potential doctors exiting the field, and 2) health insurance plans refuse to cover a single new treatment that doesn't cut costs, functionally permanently ending our search for cures to things like cancer, diabetes, heart disease, etc.
Is that a world you want to live in? One where medical costs skyrocket (increased demand and decreased supply), wait times explode, economic growth slows down and new diseases aren't cured (and if you believe that innovation can happen in the presence of price controls, I'd challenge you to read any one of the bajillions of studies that has demonstratively shown that the single biggest driver of increased healthcare costs is new, expensive treatments. As they say, dying is cheap and treatment is expensive)
The sad thing is that there are so many better ways to achieve healthcare for everyone and slowed growth in healthcare costs.
Thirdly, if you have earnings power, America is possibly the highest tax regime in the world, and certainly one of the top few highest tax regimes. This will only get worse as the national debt continues to grow (and btw, this healthcare bill will be deficit expanding - it's only "deficit neutral" via accounting tricks with the timing of revenues and costs, and a Medicare "doc fix" that won't happen). One of the principal reasons to stay in America as a high earner is that the cost-independent quality of healthcare here is very, very good (US morbidity and mortality rates for most major diseases are tops in the world).
If America loses that healthcare advantage while also increasing taxes, do we see brain drain?

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