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Ever since Jon Walker and I pointed out the real and superficial similarities between Paul Ryan’s proposed RyanCare for future seniors and the Affordable Care Act (ACA) structure for non-seniors, numerous pundits have been trying to deny either the similarities or the differences.
For example, Ryan’s supporters are in denial that RyanCare requires a mandate, even though he admitted — just as the logic suggested — that he’d require future seniors to purchase a private health insurance plan from a government-overseen exchange. And ObamaCare supporters are in denial that their ACA insurance exchanges rely on pretty much the same faith in the ability of a mostly free private insurance market to sufficiently control health care costs and hence insurance premiums.
We’ve tried to categorize and distinguish Medicare, RomneyCare, ObamaCare and RyanCare — see, e.g., here, here, here, and here — some have tried to grapple with the distinctions, and others have tried to fuzz it all up to serve whatever agenda they had.
The latest effort to make something out of the similarities is from the Washington Post’s Steve Pearlstein, who provokes Paul Krugman into describing Pearlstein as a Very Serious Person, — i.e., someone who gets it wrong.
Krugman and DeLong (responding to Mankiw) address the question, “are non-seniors better off under the ACA/ObamaCare’s subsidized exchanges than they would be without the ACA?” If those are the only choices, their answer is “yes,” though I don’t think they’ve confronted the numerous “affordability” arguments Marcy Wheeler made when ACA was being debated. But let’s assume they’re correct. That still leaves the large question about how well the exchanges can control costs unanswered.
The Administration, Democrats and ACA supporters insisted the exchanges would work to control health care costs because competition within the insurance market would control prices while maintaining quality care and service. But I understand Paul Ryan to be making the same argument for RyanCare: his private insurance market exchanges will make health care affordable, he claims, because future seniors exercising choice when shopping in the insurance exchange markets will benefit from private market competition. Both rely on a mostly free market theory.
Either this claim and its faith in markets are plausible or they’re not. My concern is that when Paul Krugman (or DeLong citing him) talks about the merits of Medicare versus RyanCare, there’s a reminder that ever since Ken Arrow, economists have known the competitive market argument doesn’t work in this industry.
Even ignoring the already huge concentration in the insurance industry, and increasingly so in the hospital and other provider sectors, none of the elements required to make an industry amendable to effective competition and efficient market pricing exist. Therefore, RyanCare can’t achieve the cost savings Ryan claims. But government-sponsored systems like Medicare, because they can reduce administrative costs, and because they can exercise single-buyer market power that individuals in the exchanges will not have, can do better — and have done better, here and in Europe.
If that’s true, then it’s not enough for economists and other ACA supporters to argue the ACA should be better than not having insurance at all; they need to explain why Arrow’s analysis and real-world experience do not apply to the market-based claims for the ACA exchanges, just as they do to RyanCare. And if this is a fatal flaw for RyanCare, isn’t it also a fatal flaw for the exchange structure of ACA?
25 Comments
Clear and helpful, Scarecrow.
The grip of the ‘competition’ model on the American mind is so tight that it needs saying again and again: the economic ‘competition’ model simply does not apply to providing medical care.
Maybe one could argue that, in some instances, it does. E.g., medical tourism. But I’d call that evidence of the failure of a country’s system of medical care — not a feature.
Rec’d
Exchanges are a farce.
Both rely on a mostly free market
theorydogma.Fixed it for you.
A theory requires testing, and documenting the testing with independently repeatable results. Economics is no science becuse it is not possible to “test” any economic utterance (I hesitate to call them hypotheses) and take the utterance through rigorous experiment to proof.
One set of conditions (a loop) is provable:
job->money->consumption->sales->distribution->production->job
Yeah, it’s funny how the Obamabots get all huffy when you tell them ACA (Obromneycare) is really just RyanCare for the non-elderly. Another inconvenient truth.
As to my politics for “medical care delivered” I have pretty much opted out on any discussion relative the Affordable Care Act, along with Ryan and Romney.
And since “insurance is not medical care” I find that the Federal Government’s medical care systemic is far better than is any private sector systemic.
Consequently, I’ve come to realize that I must exercise my self-restraint, and accept whatever is inevitable, given that my “patience” is now focused on the long term. To, America’s “racial and ethnics” and to the extent that demographics trends, will ultimately become the “force is with us” and thusly, an expanded federal governmental systemic that will eventually prove to be detrimental to private sector’s health insurance schematic.
And since the “gold standard for me is found in the VA, Medicare and the Indian Health Services, I will “mute” my voice in further discussions on national health care.
Jaango
From the Krugman link:
“As Carroll said, this is wrong in part because Ryancare would dismantle the much better system — Medicare — that seniors already have, while Obamacare would provide insurance to those who would not have it otherwise.
But beyond that, the subsidies in the health care law are supposed to make care affordable; the vouchers in Ryancare are not, and in fact would be grossly inadequate.”
Krugman comes across as someone who just doesn’t want to admit that Obamacare and Ryancare work similarly. First the existence or lack thereof of Medicare is a flaming red herring by Krugman as to whether or not Obama/Ryan operate similarly. Secondly both are “supposed to make care affordable” and both are inadequate as even Jonathan Gruber himself has admitted (if you get sick under Obamacare, you’d better die quickly):
http://fdlaction.firedoglake.com/2011/05/06/paper-sheds-new-light-on-affordable-unless-you-are-actually-sick-and-need-care-act/
Krugman in particular owns Gruber’s comments about the lack of affordability of Obamacare since Krugrman attacked FDL over Gruber:
http://fdlaction.firedoglake.com/2010/01/11/krugman-shoots-the-messenger-blames-wheeler-fdl-for-%E2%80%9Cfueling-a-fake-scandal%E2%80%9D-over-gruber/
Also keep in mind that Krugman works for Pete Peterson:
http://iiea.iie.com/staff/author_bio.cfm?author_id=55
All this talk about health “care” is just flat out wrong. All we are discussing here is INSURANCE. Nothing in any of these plans is about care. Nothing.
Everyone keeps talking about the cost of medical care. How there is a savings here or there. There isn’t. All there is is insurance premium cost cutting. Or cost shifting. Shifting from the insurance companies to patients. Or from hospitals to the taxpayers.
Nothing in any of these plans does anything at all to control or even address the costs of health CARE.
That’s because some of the only things that would were given away before the negotiations even began by Obama. Like letting the government negotiate drug prices for the Medicare Part D. Now that would have been a real health care cost control.
And more emphasis on the best practices information-sharing (you know, one iteration of Palin’s death panels), but that hardly gets a mention and almost zero funding.
What about a very simple mandate that instead of giving all this windfall money to health insurance companies – we instead pay off the student loan debt of any doctor who goes into primary care practice? That would cut medical costs. Why do you think doctors have to charge so much? They day they open their practice they are $500,000 in debt!
I’m sick of talking about insurance. I want to talk about actual care.
“Both rely on a mostly free market dogma.”
Actually they just pay lip service by claiming it’s about the free market when it’s not – if it was actually free market, we’d have the PO, Dorgan Amendment, no mandate, drug price negotiation, etc.
The free market idea of keeping costs down through competition is Bullshit on its face. You can even argue that HAS Bullshit on its face. The reason is, the insurance companies will do like they’ve always done: They’ll get together and divvy up the country into territories and agree not to poach customers on each others turf. Therefore, they’ll have their regional protected markets just like they do now and they’ll charge whatever the hell they want.
Fuck all this baloney. Medicare buy-in for all. The system is already in place, just scale it up if need be.
So the wankers think that inserting a middleman into the relation will push down prices? Why would that be so if there is a mandate to buy some kind of policy? What difference does the price it charges make to the middleman as long as the middleman gets its 10% cut?
The ACA subsidies are 100% above a certain income percentile – that is a huge difference. Everyone here is more obsessed with bashing obama and completely avoid that fact – the only one who acknowledges it is dday, who is coincidentally not linked in the diary.
Thank you! Great point! We are talking about insurance, not health care. They are two completely different things, no matter much how the corporate elite say otherwise.
“…none of the elements required to make an industry amenable to effective competition and efficient market pricing exist.”
Truer words have never been spoken. Of course the intention of both the Democratic and Republican wings of the ruling Fascist Uniparty is to create more profits for the health insurance industry at the expense of the American people, their actual health care be damned. They just have different angles on how to go about doing that. Recc’d.
The Republicans want to abolish Medicare and create in its place a private health care system. Such a change will result in seniors being once again at the mercy of private insurance companies or their families, as I remember my grandparents were. The Republican program will result in seniors paying for: health advertisements they do not need; CEO salaries far above what public sector managers receive campaign contributions to Congressmen like Tom Reed; lobbying expenses to remove government rules, regulations and restrictions as well as corporate profits.
The Republican plan is immoral and unethical. Programs like Medicare and Social Security should be strengthened not cut. The federal budget should not be balanced on the backs of our youth, our poor, our seniors, our veterans or our middle class workers.
The insurance exchanges wont control costs, especially without a “public option” and without antitrust regulations for the private health insurance industry.
Relying on medical loss ratio regulations wont help either, since the industry already has experience with reclassifying administrative expenses as medical expenses.
http://commerce.senate.gov/public/index.cfm?p=PressReleases&ContentRecord_id=c9a3b9b4-175f-4b71-9086-a080e2b08480
It may sound cutsie to use terms like Obamacare, Romneycare and RyanCare but that is just playing to the critics’ mocking terms which they love. In truth, there is no such thing in spite of the accepted sloganeering, mainly by Republicans, to diminish any positive aspects of the Affordable Care Act (ACA, a legitimate designator).
ACA, unlike the plan by Ryan, forbids insurance companies from rejecting those patients with preexisting conditions. It also forbids those who are already on an insurance plan from being booted out if their care is deemed too expensive to treat. It eliminates the doughnut hole gap period in which seniors must pay the full cost of their prescription drugs.
There is absolutely no guarantee, even if a senior was in good health, that he or she could purchase adequate, affordable health care coverage with their limited Ryan vouchers. There is no guarantee that insurance companies would cover any person over 65 because that is the age most elderly begin requiring more medical attention.
If insurance under the Obama proposal mandates health care coverage for seniors then those companies who don’t comply with the requirements would lose thousands of clients and billions of dollars in profits.
Therefore, the argument that Obama’s plan would create more, not less, competition is valid because it would bring more people into the system to spread out the costs. Insurance companies have every incentive to offer coverage since there would be millions of healthier, younger citizens, who are less likely to get sick as often as those over 65.
The younger generation who will likely be the ones most affected by the Ryan plan, however, have a much bigger stake in this fight for the simple reason that they may be the ones who will be burdened by their own parents’ illnesses if the measly Ryan vouchers are inadequate. Those who are now under 55-years-old will suffer the most, especially since their coverage will be drastically reduced by the time they reach retirement age — only ten years away.
The most specious accusation that Republicans make is that the ACA is socialized medicine, creating an an unfair advantage for the Obama plan. But, the truth and the facts on this argument are the opposite.
Every health care plan offered for federal and state workers is already comprised of dozens of private insurance plans to choose from. The way it is right now, many of the behemoth insurance companies, like the cable TV companies, have carved up certain geographical centers in the U.S. whereby they collude to fix prices following each others’ plan allowances, once called “customary and usual” costs for procedures and treatments. Without the euphemism, fixed prices, it should be called gouging.
There is nothing commendable in the Ryan plan with the exception that it continues the status quo and perpetuates the monopolistic practices that have driven up the costs of health care today, exceeding the inflation rate often by double or triple digits each year.
Medicare and Social Security imperfect as they may be, still offer the best care for seniors and soon-to-be seniors because their administrative costs are less than 10% compared to 19% in the private sector. The biggest impediment is the inability of the government to control and prosecute fraud in the system, a cost to the taxpayers of $60 billion per year.
Republicans, of course, want no regulation at all. We see how well that worked out during the decade-long no-seeum regulations that created the Ponzi schemes, banking swindles and the worst economic damage in American history.
The only thing Americans can do is wait out the greedheads until 2012 and jettison the biggest corporate lobbyists in history — the Republican Party and their Tea Party spawn.
Excellent analysis Scarecrow. It’s about time we trot out our mathematically sophisticated Nobel-prize-winning economist, Ken Arrow.
Ryancare tries to move Medicare incrementally to the right, in hopes of eventually eliminating government’s responsibility.
Romenycare tries to triangulate so that Massachusetts will not go single payer.
Obamacare does the same.
People now hate all three of them in spite of the fact that for some people Romneycare and Obamacare is better than what they had before.
The political logic is moving in the direction of “Medicare for all”. To get there, we need a strong mandate to keep Medicare as it is for the current recipients (including the dear folks of Libby MT); I think we are close to there. And to build a mandate under the banner of “Medicare for all” and stop talking about “single-payer healthcare” which gets a MEGO response.
The results of the debt ceiling showdown are going to be decisive for the politics of 2012. And every single one of the current candidates for President, including Barack Obama, are at risk of a backlash. (Not to mention the members of Congress; I’d love to be a fly on the wall at the local diner in Janesville, WI, right now.)
The similaries of Romneycare, Obamacare, and Ryancare are not accidential. It is what happens if you triangulate between what the people need and the powerful interests sucking money out of the health care system. It is political logic, not economic logic that drives the similarities. When the political ground under this issue shifts, as it might as a result of this debate, those triangulated positions will be politically vulnerable unless the politician retriangulates to the new reality. The likely new reality is that folks won’t take Social Security and Medicare for granted any more and will fight to keep them.
It’s looking more and more like a premature agreement before the debt ceiling shit hits the fan will be more of a disaster than blowing past the debt limit and dealing with bondholder confidence directly through scheduling which payments get paid first. My preferred order is (1) women and children, (2) certain categories of bondholders who are critical to markets, (3) everything else, (4) funds for the legislative branch. But that’s just me.
Everything you can say about the Republican plans is true. But you conveniently fail to list one glaring problem with the misnamed Affordable Care Act–it’s NOT affordable! It does NOTHING to prevent private insurance companies from raising premiums up to whatever these rapacious bastards want. AND it requires everyone to buy these plans!
Already, many people I know say their employer-backed health insurance premiums are going up by a factor of ten later this year. Why? Because ObamaCare has no cost controls. And why is that?
Because Obama took the public option off the table before he even started negotiations. Because Barack Obama is a Fascist.
Sorry, but there is nothing in the ACA exchange and mandate structure that creates more “competition.” What that structure creates, via the mandate, is more individual customers with zero market power who are then subject to whatever market imperfections and supply concentration existed before . . And those will become worse. Competition requires a set of conditions leading to efficient prices that do not exist here.
In that structure, the natural response of private insurers will not be to get all customers to choose them but instead to selectively market to, and provide better service to, those low cost customers that will thus enhance the insurers bottom line. Since higher cost customer are penalized for opting out, and don’t have a rational Public option like Medicare, they are captive customers or non-customers with no coverage. That condition is ripe for exploitation by predators, with the government being the enforcer, rather than the protector. If you think Sebelius will not allow that, despite all the waivers, what about her successor?
The intent of some, the hope, is that this will be better than today’s system, which leaves 50,000,000 uninsured. Maybe so . . . it’s a very low bar, but the incentive structure is also an invitation for exploitation that gets mitigated only if one assumes a substantial commitment to regulatory oversight that looks like utility regulation . .. Highly unlikely.
However, without insurance there is effectively little or no health care beyond primary care, so insurance and health care are pretty inseparably linked in most people’s minds.
Just saying; given you have inelastic demand in a necessity service with a government enforced captive market and provided by a monopolistic industry with an anti-trust exemption and governmnet subsidies, one doesn’t need to be a Nobel laureate to know prices and profits are going sky high and the consumer is completely screwed.
I could not agree with you more. The ACA is not healthcare reform. It is “protectionism” for state based health insurance corporations, tax exempt, not for profit or for profit. You speak the absolute truth. Abolish health insurance corporations and provide care. Fund “healthcare,” not, health insurance corporations, from the billions of dollars Americans waste daily out the tailpipe, instead of servitude to oil corporation??????????????????????????????????
I think we need a concise fact sheet that outlines the similarities between “Obamacare” and “Ryancare”, in the spirit of the fact sheet about the ACA written last year.
http://fdlaction.firedoglake.com/2010/03/19/fact-sheet-the-truth-about-the-health-care-bill/
Actually, it specifically does not require anyone to buy anything if it isn’t affordable. If insurance companies raise premiums to higher than 8% of one’s income, that person is not mandated to do anything.
But of course that would be inconvenient to your farcical diatribe.
This is asking entirely the wrong question. The proper question is not how ACA or Ryancare compares to what you want. The actual question is how ACA or Ryancare compares to the previous status quo for the group each program would affect.
To some people, premiums capped as a percentage of income for anyone under 400% FPL is somehow worse than the previous status quo. Putting that nonsense aside, it is clear to anyone focused on facts that the ACA is much better than the pre-ACA status quo.
On the other hand, Ryancare takes people out of a government run program and puts them on exchange where subsidies only grow with inflation. This is in direct contrast to the subsidies in the ACA, which grow with MEDICAL inflation.
So your post misses two points. One is that even if Ryancare and Obamacare were absolutely identical, Obamacare would STILL be a good thing, and Ryancare would STILL be a bad thing, because the under-65 baseline (no insurance) and over-65 baseline (Medicare) are completely different.
But on top of that, the difference between growing at inflation and growing at Medical inflation is a fundamental difference that you leave out. Sure — both problems might fail to control costs. But with Obamacare, that is ultimately the government’s problem, since subsidies grow with medical inflation. On the other hand, with Ryancare, that would be the people’s problem, since subsidies only grow with the CPI.