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By Lambert Strether of Corrente.
As readers know, ObamaCare is going to have another “Open Enrollment” period starting November 1. The White House could be lowballing the estimates to look good, or at least better, when the final numbers come in, but consensus seems to be that enrollment is becoming increasingly difficult:
Health and Human Services Secretary Sylvia Mathews Burwell announced Thursday that an expected 10 million Americans will be covered by late 2016 by health plans they bought on the federal and state insurance exchanges created under the law.
That figure is just half the most recent forecast by congressional budget analysts, who have long expected 2016 to usher in the biggest surge in enrollment. The number represents a marginal increase from the 9.1 million Americans the administration believes will have ACA health plans by the end of this year.
But questions linger over whether it can reach deep into the pockets of the nation’s most intractable uninsured populations and whether people who currently have health plans through the marketplaces will decide that the coverage is worth keeping.
Yes, “whether [the administration] can reach deep into the pockets of the nation’s most intractable uninsured” is a precise description of the problem. Although pockets can be found in many places, as we shall see.
At the highest possible level, there are three things to be said for ObamaCare, and Obama, in his speech atKnox College in Galesburg, Illinois, July 24, 2013, hit all three:
If you don’t have health insurance, then starting on October 1st, private plans will actually compete for your business, and you’ll be able to comparison-shop online.There will be a marketplace online, just like you’d buy a flat-screen TV or plane tickets or anything else you’re doing online, and you’ll be able to buy an insurance package that fits your budget and is right for you.
That is, ObamaCare is a neoliberal, market-based policy.
And if you’re one of the up to half of all Americans who’ve been sick or have a preexisting condition — if you look at this auditorium, about half of you probably have a preexisting condition that insurance companies could use to not give you insurance if you lost your job or lost your insurance — well, this law means that beginning January 1st, insurance companies will finally have to cover you and charge you the same rates as everybody else, even if you have a preexisting condition.(Applause.)That’s what the Affordable Care Act does.That’s what it does.(Applause.)
In other words, ObamaCare ensures that pre-existing conditions are covered. (Just as a troll prophylatic, I think this is humane, although it has unexpected side effects I’ll get to.)
Now, look, I know because I’ve been living it that there are folks out there who are actively working to make this law fail.
And Republicans (“folks”) vehemently oppose it; by February of this year, the House had voted to repeal ObamaCare 56 (!) times.
As usual with Obama, he sounds so good you might actually believe him if you didn’t know the detail. So, I’m going to re-order and recombine Obama’s points just a little. First, I’ll review the neoliberal history of Obamacare, because that really can’t be explained too often; then, I’ll look at ObamaCare’s failures as a marketplace, which are, if not mortal, grave; and lastly I’ll look at some unexpected, or possibly expected, consequences of ObamaCare’s (praiseworthy) coverage of pre-existing conditions. Spoiler alert: Those consequences are not adverse selection, at least not completely; and the consequences could be said to affect the neoliberal project generally. This last point will be a research project more than an indictment, and I very much hope knowledgeable readers will participate.
ObamaCare as a Neoliberal Program
Let’s review. Quoting a great slab from an earlier post at Naked Capitalism because, as I said, we can’t hammer this point home too often:
Make no doubt. Romneycare was the model for Obamacare.
The conservative DNA of ObamaCare is hardly a secret. “The Obama plan has a broad family resemblance to Mitt Romney’s Massachusetts plan,” Frum wrote. “It builds on ideas developed at the Heritage Foundation in the early 1990s that formed the basis for Republican counter-proposals to ClintonCare in 1993-1994.”
Now let’s consider those Heritage “ideas,” because they ended up setting the boundaries for acceptable discourse in the policy debates that followed. In a 1989 Heritage Foundation brief, Assuring Affordable Health Care for All Americans, Heritage Foundation’s director of domestic policy strategies, Stuart M. Butler, Peter J. Ferrara (George Mason), Edmund F. Haislmaier (Heritage), and Terree P. Wasley (U.S. Chamber of Commerce) proposed the essence of ObamaCare: “[E]very resident of the U.S. must, by law, be enrolled in an adequate health care plan to cover major health care costs.” However, from the “political advantage” standpoint, the key goal of the Heritage plan was to fend off single payer. From the conclusion:
The mandate made its political début in a 1989 Heritage Foundation brief titled “Assuring Affordable Health Care for All Americans,” as and the employer mandate, which were favored in Democratic circles.
So, reminding ourselves of Jeff Sessions’ strictures on “anything goes” post-modernism, we have Democrats (Obama + Gruber) adopting a Heritage-inspired plan pioneered by Republicans (Romney + Gruber), whereupon the Republicans turn around and fight their own plan tooth and nail, while the Democrats, fighting back furiously, never mention they adopted the Republican plan. However, we also find Democrats, Republicans, Heritage, and Gruber in simultaneous agreement that “single payer” is verboten, taboo, unmentionable, “off the table,” and not politically feasible. So all parties noisily and venomously seek “political advantage” at a level of mind-boggling illogic and contradiction, but the real policy conflict — the policy both parties and the political class seek to avoid — is buried, and never mentioned at all.
Political point the first: The party that voted to repeal their own plan 56 times is, indeed, crazy pants. But if you were a Martian just come to Earth, wouldn’t you ask the obvious question: How crazy pants is the party that adopted the crazy pants party’s plan as their own? Pretty crazy, you might say, although, to be fair, in a more rational-seeming and hair-raisingly subtle way.
Political point the second: We can also see that ObamaCare, as a neoliberal program, is firmly inside the Overton Window in official Washington, and that both parties are fighting to keep the Overton Window from being dragged left to include single payer, very much including Presidential candidate Hillary Clinton.
ObamaCare as a Failing Neoliberal Program
We’ve had two rounds of “open enrollment” for ObamaCare, and we’re closing in on the third. That’s time enough to gather evidence on how the program really works. (The first two of these points I’ve cited before, but it’s useful to gather them together in once place. The third is new.)
ObamaCare Policies are Sketchy Policies. (See Naked Capitalism here for ObamaCare’s narrow networks, and here for how ObamaCare crapifies policies). The Los Angeles Times describes Covered California’s narrow networks:
A new study finds that 75% of California’s Obamacare health plans have narrow physician networks — more limited choices than all but three other states… Nationwide, 41% of networks were labeled narrow, meaning they included 25% or less of the physicians in a rating area…. But [Dan Polsky, executive director of the Leonard Davis Institute of Health Economics at Penn] said consumers still don’t have an easy way to tell whether a health plan is narrow or not before enrolling… Consumers often have the ability to search for specific doctors before picking out a policy. But that information doesn’t tell a consumer how restricted an overall network may be for primary-care doctors or specialists.
Even with subsidies, ObamaCare premiums are high given that you can’t know in advance what you’re buying in exchange for having your pocket reached into. (I’m not saying all ObamaCare policies are bad; I’m saying it’s too hard to tell in advance whether they’re going to be bad or not. And see below on “false statements or representations.” Why are these issues being treated under the heading of “communication,” rather than fraud?)
ObamaCare is a Bad Deal (for Many). From Mark Pauly, Adam Leive, Scott Harrington, all of the Wharton School, NBER Working Paper No. 21565:
This paper estimates the change in net (of subsidy) financial burden (“the price of responsibility”) and in welfare that would be experienced by a large nationally representative sample of the “non-poor” uninsured if they were to purchase Silver or Bronze plans on the ACA exchanges. The sample is the set of full-year uninsured persons represented in the Current Population Survey for the pre-ACA period with incomes above 138 percent of the federal poverty level. The estimated change in financial burden compares out-of-pocket payments by income stratum in the pre-ACA period with the sum of premiums (net of subsidy) and expected cost sharing (net of subsidy) for benchmark Silver and Bronze plans, under various assumptions about the extent of increased spending associated with obtaining coverage. In addition to changes in the financial burden, our welfare estimates incorporate the value of additional care consumed and the change in risk premiums for changes in exposure to out-of-pocket payments associated with coverage, under various assumptions about risk aversion. We find that the average financial burden will increase for all income levels once insured. Subsidy-eligible persons with incomes below 250 percent of the poverty threshold likely experience welfare improvements that offset the higher financial burden, depending on assumptions about risk aversion and the value of additional consumption of medical care. However, ; indicating a positive “price of responsibility” for complying with the individual mandate. The percentage of the sample with estimated welfare increases is close to matching observed take-up rates by the previously uninsured in the exchanges.
Shorter: The dog doesn’t want to eat the dog food. Or have its pockets reached into, if it has pockets.
Most filers who received government subsidies to buy Obamacare plans had to pay money back to the IRS this year, according to an H&R Block analysis released Monday that looks at the health law’s first full tax season.
The tax-prep giant studied its own massive customer base and concluded that two-thirds of its filers who got subsidies from Obamacare were overpaid during the course of the year, and owed money back to the IRS on the April 15 deadline.
It’s hard to imagine a more unwelcome surprise — other than a ginormous bill because you accidentally went out-of-network for medical care — than finding out in an H&R Block office that you owe more money than you thought you did, and after jumping through all ObamaCare’s income eligibility hoops to begin with. Could this have contributed to the administration’s difficulties reaching into people’s pockets? I’m guessing yes.
ObamaCare as an Engine of Fraud?
I freely admit that this portion of the post is speculative; but as the great Peggy Noonan once wrote: “It would be irresponsible not to speculate.” Basic proposition: Under neoliberalism, experience tells us that if there can be fraud, there will be fraud. In the neoliberal dispensation that began, in this country, in the mid-70s, we’ve seen this proposition prove out in the Enron scandal, engineered bubbles in Silicon Valley, “the intelligence and facts” that were “fixed around the policy” in Bush’s march to war in Iraq, in charter schools,in “robosigning” scandals, and in accounting control frauds generally.
That’s quite a list of #FAILs, and they are both enormous and in major, major social structures; if government were like a household, they’d be equivalent to failures in the electrical system, or serious water damage from a plumbing break. They are #FAILs in American corporate accounting, both American stock markets, the entire American military establishment, the entire American public school sytem, the entire American housing market, and the American C-suite. All these #FAILs were very expensive — or lucrative — and they all have fraud and corruption at their rotting hearts. Now, one might argue that these #FAILs are one and all accidents — after all, the market can never fail, it can only be failed — but it is not my purpose here to assign causes, but rather to point to probabilities, based on our experience (rather as one might infer the likelihood of cockroaches, even if as yet unseen, if food is left out).
So our question becomes: Does ObamaCare enable fraud? And the answer — hold on to your hats, here, folks — is “Why yes. Yes, it does.” Why? Because HHS’s Secretary Kathleen Sebelius ruled, in 2013, that a key Federal Statute preventing fraud does not apply to health insurance policies purchased through the ObamaCare “marketplace.” From her 2013 letter to Representative Jim McDermott:
Thank you for your letter regarding whether qualified health plans (QHPs) are considered federal health care programs under section 1128B of the Social Security Act. Section 1128B(f) of the Social Security Act defines “Federal health care program” as “any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government…. or any State health care program….”
The Department of Health and Human Services does not consider QHPs, other programs related to the Federally-facilitated Marketplace, and other programs under Title I of the Affordable Care Act to be federal heatlh care programs. This includes State-based and Federally-facilitated Marketplaces; the cost-sharing reductions and advance payments of the premium tax credit; Navigators for the Federally-facilitated Marketplaces and other federally facilitated consumer assistance programs, consumer-oriented and operated health insurance plans; and the risk adjustment, reinsurance, and risk corridors program.
What are the implications of determining that ObamaCare is not a “health care program” (!) within the meaning of the act? Robert M. Radick, former Chief of Health Care Fraud Prosecutions and Deputy Chief of the Public Integrity Section in the U.S. Attorney’s Office for the Eastern District of New York, explains:
The Anti-Kickback Statute And The Affordable Care Act: A Law Enforcement Tool Suddenly Goes Missing
[L]ess than two weeks ago, one of the most potent resources that law enforcement has had at its disposal in the fight against health care fraud suddenly fell out of the government’s toolbox.In fact, while many in Congress and the mainstream media have focused on problems with the Healthcare.gov website and the cancellation of policies that do not meet the requirements of the Affordable Care Act, another critical development has attracted considerably less attention:HHS Secretary Kathleen Sebelius’s announcement, in an October 30, 2013 letter to Representative Jim McDermott (D-Wash.), that insurance offered through the Affordable Care Act’s new health insurance exchanges do not constitute “Federal health care programs” and thus are not within the scope of the federal anti-kickback statute.
The significance of Secretary Sebelius’s decision is underscored by the critical role that the anti-kickback statute has long played in the government’s ability to impose significant penalties and obtain massive recoveries in the health care industry.
And Radick points to the statute that Sibelius has determined should not apply to health insurance policies sold under ObamaCare. 42 U.S. Code § 1320a–7b – Criminal penalties for acts involving Federal health care programs:
Making or causing to be made false statements or representationsWhoever—
knowingly and willfully makes or causes to be made any false statement or representation of a material fact in any application for any benefit or payment under a Federal health care program (as defined in subsection (f) of this section),
And there’s a lot else. Now, I don’t even play a lawyer on TV, but to my simple mind, it would seem that when health insurance companies sell policies on the ObamaCare Marketplace that list doctors as in network when they aren’t, or adopt titles that suggest they are affiliated with hospitals when they aren’t, or use artful language to conceal the benefits actually offered, or even make it impossible to acquire accurate information because of differences between the summary language proferrred on the website, and the actual multipage policy delivered after sign-up, that all these are “false statements or representations,” and that if you get tripped up by any of them, that they are “material facts.” Odd that Sebelius should exempt ObamaCare from the statute, then.
Or not so odd (and this is the spoiler I foreshadowed in the Introduction). Consider the incentives. ObamaCare — again, this is praiseworthy, because humane — forces health insurance companies to accept all comers, regardless of their pre-existing conditions. That means health insurance can’t do underwriting any more. That, in turn, means that one of their main sources of profit has been outlawed. How will they recover their lost profits? Experience suggests the answer.
They’ll make their money the old-fashioned way. Fraud. (In this connection, it’s worth noting that Covered California awarded $142 million in no-bid contracts. “The no-bid contracts represent about $2 of every $10 that Covered California awarded to outside agencies.” Ka-ching! Covered California also, rather like Hillary Clinton, doles out email as it chooses. And Covered California contract negotiaions are exempt from the Public Records law. How con-v-e-e-e-n-ient. Seriously, can anyone think of a good reason for this, from the standpoint of public purpose?)
Now, to be fair, this is speculation. Which is why I called for a research project!
Readers, it would be useful if you could supply examples of “false statements or representations” by health insurance companies on the ObamaCare marketplace what would be considered fraud if a rational determination of fraud, rather than Sibelius’s, were to be used. It would be even better if some whistleblowers threw some documents over the Naked Capitalism transom — as they did with the “robosigning” scandal — that showed how “false statements or representations” are specified, drafted, and approved.
The failures of ObamaCare’s Marketplace are the failures of neoliberalism itself. There are public purposes that cannot be achieved by market-based solutions: Provisioning health care is one such, as the experience of the civilized world should tell us, if we would look:
[S]ince the mid-70s, when Canada adopted its single payer system, we’ve conducted the largest controlled experiment in the history of the world. We’ve had two political systems spanning the same continent, both nations of immigrants and once part of the British empire, both mainly English-speaking but multicultural, both with Federal systems, and both with a free market system backed by social insurance. And the results of the experiment? The “evidence”? Canadian-style single payer wins hands-down.
What neoliberalism can achieve — has demonstrably achieved, over its forty-year dominance of the world’s political economy — is fraud. There is good reason to think that same will be true for ObamaCare. Readers?
 To be fair, the WaPo reporter might have intended a military metaphor, like “pockets of resistance.” Marketers often think in terms of warfare (“marketing campaign”).
 The seventy-five cents way to say “crazy pants” is “presenting with a case of epistemic closure.”
 Qualifying with “under neo-liberalism” to avoid discussion of human nature, first causes, original sin, and so forth.
 One might argue that under neo-liberalism, there is no principled reason for the regulatory functions of the State not to be “on the market” along with everything else. Hence the three-card monte aspect of affairs at Justice, the SEC, and so forth: We have the crooks dealing the cards, the shills roping in the marks, and the marks (that is, us). We also have the cop on the beat, who, every so often, collects a portrait of Andrew Jackson from the dealer. The parallel between the cop collecting a twenty to keep the game going and Justice collecting a cost-of-doing business fine is exact. It’s rather like Dostoevsky’s Crime and Punishment, where Raskalnikov comes to believe that “everything is permitted.” Except without the punishment part, of course.
 There are plenty of other anti-fraud provisions in the PPACA statute, including anti-kickback. Just not for health insurance policies.
 It’s true that health insurance companies can game this requirement by manipulating drug regimens, but its unlikely they can recoup all their “lost profits” that way.