David R. Henderson  

Coming ObamaCare Challenges

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John Goodman had an excellent post yesterday discussing the coming challenges in implementing the Affordable Care Act. One of his major points is that the Affordable Care Act makes health insurance less affordable:

Adding to the problem is that the law will require all of us to have access to a long list of preventive services without deductible or copayment. Economists at Duke University calculated that if every American actually got all of the recommended screenings and tests, the average primary care physician would have to spend 7 ½ hours of every working day doing nothing else but giving preventive care to mainly healthy patients!

The whole, relatively short, piece is worth reading.

John left out, though, one of pressing challenges, the one about exchanges. Economist Michael F. Cannon and law professor Jonathan H. Alder have laid out the issue here. The abstract:

The Patient Protection and Affordable Care Act (PPACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. Contrary to expectations, many states are refusing or otherwise failing to create such exchanges. An Internal Revenue Service (IRS) rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because the granting of tax credits can trigger the imposition of fines on employers, the IRS rule is likely to be challenged in court.

And, of course, it has been challenged in court.

It strikes me that what the IRS is doing is clearcut illegal. If courts pay attention to, you know, the actual law, they will have a hard time upholding the IRS. Then a large part of the structure of ObamaCare would go away.


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COMMENTS (14 to date)
Yancey Ward writes:

Congress's clear intent was to let other branches decide what Congress intended.

I only write that half-jokingly, since it was pretty much the basis for June's Supreme Court decision upholding the mandate as a tax.

Silas Barta writes:
Economists at Duke University calculated that if every American actually got all of the recommended screenings and tests, the average primary care physician would have to spend 7 ½ hours of every working day doing nothing else but giving preventive care to mainly healthy patients!

These tests don't typically involve a full MD's attention to their performance, though, do they? Is this 7.5 hours really just the MD contribution to the screenings? Or does it maybe attempt to convert all the non-physician labor back to an equivalent amount of physician labor based on relative costs of each? (e.g. 1 hour of lab tech = 15 minutes of physician work)

I know that for my routine or preventative visits, a physician accounts for maybe 5, perhaps 10 percent of my time there.

Demosthenes writes:

There are no economists on that study.

Ted Levy writes:

I haven't seen the figures, but as a physician I'm less skeptical of the claim than Silas seems to be. Colon cancer, for example, is the third most common cancer killer, and requires a moderate amount of time on the part of gastroenterologists (MDs specialized in internal medicine with a further fellowship in diseases of the GI tract) to screen with colonoscopy. My GI friends tell me if every American followed national screening recommendations, there wouldn't be enough gastroenterologists to comply. (And now, per regulations, it's FREE!!) Similar arguments could be made re the time consumed for radiologists if all women complied with breast cancer screenings.

Silas Barta writes:

@Ted_Levy: There's a difference between physically required and legally required. I suspect most of these tests don't need the full gamut of MD training in order to perform, no matter what make-work regulations they have in place now. Ask how the army does it: they cut out credential requirements that don't add value. (Well, I guess except in the case of higher degrees needed for officer status...)

MingoV writes:

@Silas Barta: Colonoscopies and mammography interpretations cannot be done by anyone other than gastroenterologists and radiologists, respectively. PAP smears can be obtained by a nurse and screened by a cytotechnologist, but any abnormalities must be reviewed by a pathologist. Most of the other ACA-related preventive services can be performed by non-physician health care workers, except that some states require physician orders for lab tests.

john hare writes:

Of course as the screws tighten, medical tourism will increase in direct proportion to the number of MDs that get sick of the nonsense and set up on an island somewhere with a somewhat more casual governmental viewpoint.

Shayne Cook writes:

I remain convinced that ACA was intentionally designed to be so onerous, byzantine, unworkable, unenforceable and costly that fully nationalized health care (after the Canadian/European model) would appear palatable/preferable to the American public.

I fully expect that by around 2016 the Federal Government will fully nationalize health care in response to public demand for a "fix" to ACA and Medicare.

Daublin writes:

Shayne, I've encountered a number of people making the argument you predict. They say gee, all this non-socialized medicine sure is complicated.

Shayne Cook writes:

To Daublin:

I'm beginning to hear that from other folks as well.

In keeping with my libertarian tendencies, I'd propose a vastly more market-based alternative to either the albatross ACA, or the socialist "nationalized" health care ... as follows:

1.) Make all health care costs (either for actual individual's health care outlay, or insurance payments) fully tax-deductible for individuals only. (Delete tax-deductibility of health care premiums from business - get business and government out of the business of health care finance.)

That change alone still leaves low-income folks and/or high health-care maintenance cost folks "disadvantaged", per se. Tax deductions are of little incentive/value to low income folks, and high health-care maintenance folks will incur costs in excess of earnings. A workable market-based solution to that range of problems is to add the following stipulation to number 1.);

2.) Make the tax-deductibility of health care costs, (afforded only to individuals per stipulation 1.), completely transferable, by contract, on a per-treatment basis. That would allow for others - businesses or individuals - to assume the actual health care treatment costs for either the poor or those with excess health care costs, in exchange for their tax-deduction.

That sort of "solution" seems entirely workable, market-based, and dramatically preferable to either ACA or a "nationalized" system - at least as a starting point for a discussion of alternatives.

And I suspect we "market-based" folks had better start devising workable alternatives right now, lest the "nationalized" system be viewed as the only alternative in the very near future.

Shayne Cook writes:

Follow-up - on Dr. Henderson's post regarding further potential legal challenges to ACA ...

There was a "referendum" (Legislative Referendum No. 122) on the ballot in Montana that would "Prohibit the state or federal government from mandating the purchase of health insurance or imposing penalties for decisions related to purchasing health insurance."

The referendum passed by a very wide margin in the recent election. Given the recent U.S. Supreme Court ruling, I suspect the Montana referendum won't have much "teeth", but it may well set the stage for a very much larger "states rights" SCOTUS challenge.

Thomas Boyle writes:

Shayne,

There is a solution that gives everyone - libertarian and socialist - what they want, at only a little over twice the price. It's widely used - in fact, I believe it's used in most countries that have socialized healthcare (although notoriously outlawed in parts of Canada). It is to impose the socialist solution, then allow the libertarian one to run in parallel. Thus, for example, in the UK you have the NHS, but there are for-cash walk-in clinics on High Street and you can buy private insurance.

This is similar to the way we currently do K-12 education in the US: it's available free to everyone, but you can send your children to a private school if you prefer and can afford it.

The downside for the affluent, of course, is that they pay twice: once for the "free" service for those who use it, and once for the private service they use themselves.

The downside for those who rely on the "free" service is that quality may be mixed and, in the case of healthcare, provision may be anything but timely (your urgently-needed heart bypass will be free, and we'll get to you in about 3 years). On the other hand, a poor service, free, is often preferred to a good one that is unaffordable.

Of course, for this solution to work in the US, we would have to allow the sale of health insurance policies that cover only catastrophic care, something most states, and Obamacare, make illegal. (The slogan, "End The War On Health Insurance!" almost writes itself...)

Shayne Cook writes:

Thomas,

I agree, sort of. I have quite a few Canadian relatives - some of whom like and others who dislike the Canadian system. In fact, I've had several of my Canadian relatives come to my home and stay in order to purchase health care services here (U.S.), that they would have to wait for - or not get at all - in Canada.

While I agree your "dual and parallel" system is preferable to ACA or a pure Canadian-type system, it has, as you note, the "twice the price" feature. Additionally, it introduces the unfairness/inequity criticism that "rich folks" can "buy better health care".

I still think my proposal is superior - especially in those regards. Under my proposal, "rich folks" are incentivised to offset or completely cover the actual incurred health care costs of those less advantaged, in addition to being incentivised to cover their own actual incurred health care costs.

And I completely agree with the criticism you have regards current (and ACA) health "insurance". As Arnold Kling and others have noted, it's not "insurance" at all - but it should be.

ThomasH writes:

"Economists at Duke University calculated that if every American actually got all of the recommended screenings and tests, the average primary care physician would have to spend 7 ½ hours of every working day doing nothing else but giving preventive care to mainly healthy patients!"

If this is a problem it has an easy fix: like all other covered procedures, tests should be covered only if cost effective. Decisions about what should be covered will evolve as costs and benefits change.

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