Moneybox
A blog about business and economics.

March 28 2017 6:20 PM

If the Moral Imperative to End Segregation Wasn’t Enough, Here’s Some Economic Data

Fifty years after passage of laws meant to break down barriers to racial integration, racial segregation in the American city persists.

 

And it has a cost. A new analysis by the Urban Institute, in collaboration with Chicago’s Metropolitan Planning Council, analyzes how economic indicators in the country’s hundred largest commuting zones (a proxy for metropolitan areas) vary according to racial and economic segregation.

 

Using data from the 1990, 2000, and 2010 U.S. Census, the researchers found that economic and racial segregation are correlated with bad outcomes not only for segregated groups, but for regions as a whole. In doing so, they make the case that racial and economic segregation—as much as the crime rate, median household income, and the prevalence of college degrees—should be a concerted focus of local, state, and federal leaders.

 

“We find that higher levels of economic segregation are associated with lower incomes, particularly for black residents,” they wrote. “Further, higher levels of racial segregation are associated with lower incomes for blacks, lower educational attainment for whites and blacks, and lower levels of safety for all area residents.” We know how covenants, redlining, and racial violence kept black families from building home equity, the central factor in the racial wealth gap. Now we’re learning how segregation drags down important economic indicators for entire regions.

 

March 27 2017 9:09 PM

Donald Trump Says Obamacare Is Going to “Explode”? Only if He Lights the Fuse.

After the Republican health care bill crashed and burned without so much as a vote on Friday, President Trump told reporters that he saw a silver lining in the defeat. “I've been saying for the last year and a half that the best thing we can do politically speaking is let Obamacare explode,” he said. “It is exploding right now. Many states have big problems—almost all states have big problems.” Trump went on to repeat the word explode four more times, explaining that once the Affordable Care Act had been sufficiently blown to bits by its own design flaws, Democrats would be desperate to strike a deal and save the health care system, lest voters hold them responsible for the carnage after the blast.

“It's imploding, and soon will explode, and it's not going to be pretty,” Trump said, handily if inadvertently describing the detonation of a plutonium bomb. “The Democrats don’t want to see that, so they're going to reach out when they're ready. And whenever they’re ready, we’re ready.”

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To a careful listener, this might have sounded less like a prediction and more like a threat. It’s true that the health insurance markets created by the Affordable Care Act have yet to stabilize in some states, and the trouble could get worse next year. But the exchanges are not generally combusting, either. The only way Obamacare will explode is if Trump lights the fuse. And unfortunately, he may have the power to do just that, thanks to a court case that’s currently sitting on appeal.

Right now Obamacare is succeeding far more in some parts of the U.S. than others. Large states like California and New York boast healthy exchanges where lots of insurers are competing to offer health plans. But in many smaller, more rural states, the situation is shakier, because there aren’t enough young, healthy customers for insurers to do business profitably. As a result, many carriers have abandoned those markets, leaving residents with fewer, more expensive health plans to choose from. Many liberals seem to be taking comfort in the Congressional Budget Office’s recent conclusion that Obamacare’s exchanges would naturally stabilize as long as the law was left in place. But the report only suggested that would naturally happen in “most areas of the country,” not all of them.1

This year, five states—Alabama, Wyoming, South Carolina, Alaska, and Oklahoma—had just one insurer selling individual coverage. Nationwide, according to the Kaiser Family Foundation, there are more than 1,000 counties with a single insurer, up from 225 in 2016. And while those places tend to be more sparsely populated than the dense metro areas where Obamacare is thriving, they’re still home to millions of customers: In October, Kaiser estimated that about 1 in 5 Americans enrolling on the exchanges this year would have a choice of just one insurer.

The worst-case scenario for Obamacare is that some of these counties might suddenly find themselves without any insurers serving their residents at all. Could that happen next year? Maybe. Humana, which announced last month that it was abandoning the Obamacare marketplaces entirely in 2018, is the only carrier on the exchanges in 16 Tennessee counties. If no company swoops in to the rescue, those places are out of luck.

We won't really know how many other counties around the U.S. are in similar danger until insurers start filing their requests for 2018 rate increases with state regulators later this spring. That will tell us how many carriers plan to participate on the exchanges, and where. But given that about 500,000 fewer Americans purchased plans during Obamacare's open enrollment this year compared with last, it's plausible that more insurers will sour on the whole shrinking endeavor. If those disappearing customers were largely the sorts of young and healthy people carriers count on for profits, it could also mean another round of big premium increases coming up.

“Nationally, [Obamacare] isn’t going to implode next year,” Chris Sloan, a senior manager at the health care consultancy Avalere, told me. “There are states where there are serious concerns about the viability of the exchanges as soon as 2018.”

In the end, if insurance premiums spike again or exchanges collapse entirely in a few scattered counties, I doubt it will doom Obamacare. It will be a political problem, and—more importantly—a policy failure that hurts families. But if the ACA is still basically functioning in 90 percent of the country, Nancy Pelosi and Chuck Schumer aren't going to be eager to replace it with a Republican scheme that strips coverage from upward of 20 million Americans.

If Trump wants to reduce the whole structure of the ACA into unworkable rubble so that Democrats will have to agree to replace it, the administration will have to sabotage it. Unfortunately, there's a pretty easy path for them to do it.

According to most health policy experts I've talked with, there are really three main ways Trump could realistically undermine Obamacare. Two would make a difference around the edges while the third would be potentially catastrophic. First, the administration could ease or eliminate enforcement of the individual mandate, which forces Americans to buy health insurance or pay a tax penalty. That could lead to fewer young and healthy customers enrolling and would likely scare off some insurers. Second, the administration could cut outreach about open enrollment—some people blame this year's disappointing numbers on the Trump administration's decision to pull some last minute advertising—or shorten the window for signing up. “Pulling back on outreach could cripple the marketplaces over time,” Larry Levitt of the Kaiser Family Foundation told me in an email. “There’s a lot of natural churn in and out of the marketplaces, so outreach is necessary each open enrollment period to reach new potential enrollees.”

Then there's the nuclear option. If Trump wants to throw Obamacare's exchanges into chaos, he could choose to stop defending a lawsuit filed by the House of Representatives that attempted to halt the government from making what are known as “cost-sharing reduction” payments to insurers. Under the Affordable Care Act, carriers are required to limit how much low-income customers pay out of pocket for things like deductibles and co-pays. In return, the companies are supposed to get direct subsidy payments from Washington to cover the expense. Those checks are worth billions to the industry, since more than half of marketplace enrollees benefit from cost-sharing reductions, and are absolutely essential to making the marketplaces work.

As part of their unyielding efforts to kill the Affordable Care Act in court, Republicans in the House of Representatives sued the Obama administration a few years ago to stop the payments, arguing that because Congress had never technically allocated the money to fund them, the government was disbursing the cash illegally. You can go deep on the legal merits of the case—I did here back in 2015—but the bottom line is that a lower-court judge ruled in the GOP's favor, which led the Obama administration to appeal. The House agreed to pause the litigation after Trump won the election, and it looked like Obamacare repeal might actually happen. But now that their first effort has failed, Paul Ryan & co. will have to decide whether to continue the case, and Trump will have to choose whether to keep defending it.

If Trump drops the appeal, it could have profoundly damaging consequences for the insurance market. Insurers would still be required to keep offering low-income customers their discounts but wouldn't be compensated for it. The result would be financially disastrous. In all likelihood, some insurers themselves would intervene as defendants in the case to keep it alive. But with the outcome far from assured, many insurers would likely exit the market rather than risk the outcome. “It would be very devastating to the marketplaces,” Sara Collins, senior vice president for health care and access at the Commonwealth Fund, told me.

Of course, killing the cost-sharing reduction payments would require an active decision on the Trump administration's part. And that makes it politically tricky. For it to be effective, Trump not only needs to bet that voters really will blame any dysfunction in the health insurance market on Democrats, but that they won't notice how the administration actively undermined them. It's possible that would work; the litigation is complicated, which might make it hard for cable news viewers to grasp who, exactly, is responsible for the fallout. But if voters do decide to blame the man in the Oval Office when they discover insurers aren't selling health plans in their county, the backlash against the White House could be deadly.

So Trump might be able to make Obamacare explode. But his own presidency could get blown away with it.

1 The CBO believes that most of Obamacare's exchanges are essentially explosion-proof, because the law's subsidies cap what lower-income Americans have to pay toward their premiums as a percentage of their income. That means no matter how high the cost of coverage rises, buying it will still be a good deal for enough of a critical mass of customers to keep the market afloat. That theory may or may not prove to be true, but it's worth remembering that “stable” doesn't necessarily mean “thriving.” You could certainly end up with a situation where families who don't qualify for aid find themselves totally unable to afford insurance. (Return.)

March 27 2017 6:43 PM

Record-Breaking Public Subsidy Lures Hated Football Team to America’s Gambling Capital

Maybe it flies.

How else to explain the $1.9 billion that the Oakland Raiders and Clark County, home of Las Vegas, have committed to spend on the new stadium that lured the team to Nevada?

This sum was announced last summer, but the details only fell into place this March. The team announced a $650 million loan from Bank of America earlier this month, and on Monday overcame the NFL’s longtime opposition to a team in America’s gambling capital. League  franchise owners voted 31-1 to approve the move.

Las Vegas appears poised to claim the mantle of World’s Most Expensive Stadium from East Rutherford, New Jersey, where the Jets and Giants play in the $1.6 billion MetLife Stadium. (Los Angeles Stadium, Stan Kroenke’s project that will host the Rams and Chargers, is estimated at $2.6 billion—but that cost includes parts of the surrounding entertainment district. Tokyo’s National Stadium for the Olympics is moving towards $2 billion, but it won’t open until 2020—and it’s designed by Zaha Hadid.)

Clark County taxpayers will contribute $750 million to the new arena, a record for a sports facility—about $354 per resident, taken from an increased tax on hotel rooms. That tax currently pays for schools and transportation, in addition to tourism-related expenditures.

Stanford economist Roger Noll said was the “worst deal for a city” he had ever seen.

March 24 2017 8:21 PM

Let Us Now Appreciate Paul Ryan’s Utter Failure as a Political Leader

As he gave his brief press conference Friday afternoon confirming that Republicans had pulled their bill to repeal and replace the Affordable Care Act, House Speaker Paul Ryan both looked and sounded like a hangdog high school football coach spilling out a few defeated platitudes after watching his team get ground into the turf.

“Moving from an opposition party to a governing party comes with growing pains,” he said, “and, well, we’re feeling those growing pains today.”

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“We came really close today, but we came up short.”

“I will not sugarcoat this. This is a disappointing day for us. Doing big things is hard.”

In a sense, Ryan was being too easy on himself. Yes, “doing big things” is difficult in Washington. The Capitol dome is practically designed to bottle up and suffocate dramatic change. But whatever growing pains they may have experienced, fractious Democrats still managed to execute an ambitious agenda in the early Obama years without a major legislative collapse the likes of which we all witnessed this week. The rollout of the American Health Care Act, by contrast, was a mystifying debacle. And as much as anything, its demise is an indictment of Paul Ryan that should shatter what’s left of his myth as competent policy thinker or political leader.

Aside from the occasional PowerPoint, it’s really not clear what the man is good for.

Journalists often describe Ryan as a “wonk”—or if you’re CNN, a “legendary wonk“—mostly because he has sold himself as one. It’s Ryan’s #brand, which he’s nurtured with a stream of lofty white papers and interviews with credulous reporters. But in truth, he’s always been far better at playing a policy nerd on TV than at doing the hard work of crafting legislation that could ever conceivably pass Congress or be implemented without causing mass havoc to the poor. First and foremost, the man is an ideologue who can competently dress up his Randian fantasies with some numbers, and an occasional magic asterisk where key details should be.

That became painfully obvious with the AHCA, a nonsensical piece of legislation that despite his lame attempt to sell it with a slide deck presentation, somehow achieved the distinction of being panned by policy experts from the left, right, and center, without actually attracting the support that a normal, if unsatisfying, political compromise might. Ryan initially took Obamacare’s basic structure, then defunded the things that made it work in order to pay for massive tax cuts. The bill only became more preposterous and unworkable as Ryan and the White House bargained away necessary regulations for support from hardliners. Now, it’s possible this is not truly a reflection on Ryan’s aptitude as a policy thinker; the inherent contradictions of the Republican Party may have made it impossible for anybody in leadership to craft a coherent health reform bill. But then, after making last minute changes that would have fundamentally reshaped the entire individual insurance market, the speaker attempted to bring it to a floor vote Friday without any kind of score from Congressional Budget Office. The man pushed legislation with little to no clue as to what it would actually do to the country. Generally speaking, wonks care about that sort of thing.

So Paul Ryan’s reputation as a policy mastermind has finally been shown to be a myth. What about his leadership skills? They appear to be nonexistent. From the start, his entire strategy of pursuing health care as an early, quick win for Republicans never made much sense. Ryan argued that it was necessary in order to prep the runway for tax reform easier later on, since nixing the various taxes that fund Obamacare now would allow the GOP to cut rates deeper in a second tax bill while keeping it revenue neutral, and thus allowing it to pass as a permanent bill rather than one that expires after 10 years. But that was entirely predicated on the idea that health reform was actually doable. Back on planet earth, where the American Health Care Act was a disaster in waiting, doing taxes first, and maybe settling for a slightly higher capital gains rate, would have made far more sense. A man who had any sense of his own caucus’s limitations might have actually accepted that reality.

It’s also crystal clear that Ryan no longer has sway as an intellectual leader among conservatives. This was his chief qualification for becoming speaker, mind you: He was a star of the mainstream GOP who had the ideological credibility to bring along recalcitrant hardliners in the House Freedom Caucus. That was always a little bit of a dubious theory—off the bat, Ryan had to retract some of his demands he’d floated before taking the job after meeting resistance from the Freedom Caucus. And now it’s been totally debunked. In Ryan’s first truly serious legislative test, the Freedom Caucus has killed his bill.

Back in 2012, anti-tax lobbyist Grover Norquist summed up the prevailing sentiment among professional conservatives, when he said that it didn’t really matter who Republicans picked for president, so long as the party had Paul Ryan’s vision. “We don’t need a president to tell us in what direction to go. We know what direction to go. We want the Ryan budget,” he said. “We just need a president to sign this stuff. We don’t need someone to think it up or design it. The leadership now for the modern conservative movement for the next 20 years will be coming out of the House and the Senate.” Well, we know Donald Trump can sign stuff. It’s apparently Paul Ryan who can’t deliver on his end of the deal.

March 24 2017 3:03 PM

Steve Mnuchin Doesn’t Think A.I. Is an Immediate Threat to Jobs. That’s Insane.

Treasury Secretary Steven Mnuchin is a sharp guy. He’s a (legacy) alumnus of Yale and Goldman Sachs, did well on Wall Street, and was a successful movie producer and bank investor. He’s good at, and willing to, put other people’s money at risk alongside some of his own. While he isn’t the least qualified person to hold the post of treasury secretary in 2017, he’s far from the best qualified. For in his 54 years on this planet, he hasn’t expressed or displayed much interest in economic policy, or in grappling with the big picture macroeconomic issues that are affecting our world. It’s not that he is intellectually incapable of grasping them; they just haven’t been in his orbit.

Which accounts for the inanity he uttered at an Axios breakfast Friday morning about the impact of artificial intelligence on jobs.

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"it's not even on our radar screen.... 50-100 more years" away, he said. "I'm not worried at all" about robots displacing humans in the near future, he said, adding: "In fact I'm optimistic."

Now, there is a lot of apocalyptic thinking about robots taking all our jobs in the near future. (See Derek Thompson’s Atlantic piece on a world without work, or Martin Ford’s Rise of the Robots or The Second Machine Age, by Erik Brynjolfsson and Andrew McAfee.)

I’m not in that camp—yet. If anything, in the United States we have a shortage of people able to fill jobs that require human labor; there were 5.5 million job openings in the U.S. at the end of January. However, the notion that A.I. substituting for human labor is something that is 50 to 100 years away is, simply, nuts.

A.I. is already affecting the way people work, and the work they do. (In fact, I’ve long suspected that Mike Allen, Mnuchin’s Axios interlocutor, is powered by A.I.) I doubt Mnuchin has spent much time in factories, for example. But if he did, he’d see that machines and software are increasingly doing the work that people used to do. They’re not just moving goods through an assembly line, they’re soldering, coating, packaging, and checking for quality. Whether you’re visiting a GE turbine plant in South Carolina, or a cable-modem factory in Shanghai, the thing you’ll notice is just how few people there actually are. It’s why, in the U.S., manufacturing output rises every year while manufacturing employment is essentially stagnant. It’s why it is becoming conventional wisdom that automation is destroying more manufacturing jobs than trade. And now we are seeing the prospect of dark factories, which can run without lights because there are no people in them, are starting to become a reality. The integration of A.I. into factories is one of the reasons Trump’s promise to bring back manufacturing employment is absurd. You’d think his treasury secretary would know something about that.

It goes far beyond manufacturing, of course. Programmatic advertising buying, Spotify’s recommendation engines, chatbots on customer service websites, Uber’s dispatching system—all of these are examples of A.I. doing the work that people used to do. One of the biggest occupations for males without college educations is driving a truck. Last fall, Otto, Uber’s self-driving truck, made its first delivery. Companies are working on pilotless planes as we speak.

And, hello, even in the world that Mnuchin knows something about, software-empowered computers are doing the jobs of highly paid people. Many hedge funds trade stocks based not on the tips and edge their Wharton-schooled analysts can garner at lunch but based on the ideas that algorithms come up with. The big trend in money management, of course, are robo-advisers—essentially, programs that generate and suggest asset allocation plans for investors.

It’s not a question of when artificial intelligence is being used—or will be used—in your workplace. It’s how. If Mnuchin is serious about helping the economic sufferers in Trump’s America, he needs to learn that.

March 23 2017 7:38 PM

The Crazy House Conservatives Might Actually Be Right About Obamacare Repeal

So, here we are. It's Thursday evening, and House Republicans have had to cancel their vote to repeal and replace Obamacare because their bill still doesn't have enough support from hard-line conservatives to pass. House Freedom Caucus Chairman Mark Meadows, the face of the holdouts, says leadership needs to turn another “30 to 40” votes to reach the finish line. Trumpcare appears to be on life support.

What do the noes want? Meadows isn't getting into specifics, except to say that he doesn't think the current bill would lower premiums enough for his constituents. But the answer seems to be that conservatives are determined to kill off many of the insurance market regulations that make up the very heart of Obamacare. House leaders seem to be hesitant to do so, because many of those rules are quite popular, and nixing them would tee up some easy 30 second ads against Republicans in swing districts.

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But, purely from a policy perspective, the hard-liners may be on stronger footing. Sure, the changes they're seeking might not go over well outside their own ruby-red districts. But their approach might be slightly less disastrous for the insurance market than the misbegotten, unloved compromise bill Paul Ryan and the White House are currently pushing.

Up until last night, the American Health Care Act was animated by a very specific legislative logic. Because Senate Republicans planned to pass their version of the bill using the budget reconciliation process in order to avoid a filibuster, the plan could only deal with spending issues, not regulations. So Congress could slash Obamacare's subsidies, eliminate its taxes, and cut Medicaid down to size, but it couldn't eighty-six rules barring insurers from discriminating against patients with pre-existing conditions. That was the theory, anyway. In reality, many parts of the bill looked a whole lot like regulatory tweaks, such as a change that would have allowed insurers to charge older Americans up to five times what young adults pay for coverage. Why was that fair game, but not Obamacare's hundreds of other pages of regulatory dictates? Nobody would really say. This angered conservatives, who really, really want to tear out Obamacare root and branch, without worrying about obscure Senate parliamentary rules.

On Wednesday, the pretense that the bill couldn't touch regulations finally fell apart for good when, in order win over skeptical Freedom Caucus members, the White House reportedly offered to repeal Obamacare's essential health benefit rules, which require insurers to cover a wide array of services such as maternity care and hospitalization. These are regulations, pure and simple. You can argue that they affect the budget, and therefore should be fair game for reconciliation, because they affect the cost of the insurance the government has to subsidize. But that logic applies to pretty much all of the other regulations in Obamacare, as well.

And now, like the mouse that got its Milano, the Freedom Caucus wants to repeal the rest of Obamcare's regs, too. According to the Washington Post, they're pushing to scrap pretty much everything important in Title I of the law. That includes rules that stop insurers from charging people more based on their health or sex, from canceling their customers' plans at the drop of a hat, or from imposing lifetime or annual limits on coverage. The two provisions they're apparently willing to leave in place are the rules letting children stay on their parents' insurance until age 26 (nobody opposes that one) and barring insurers from turning down customers because they have pre-existing conditions (of course, that extremely popular rule would be rendered mostly useless, since carriers would be allowed to charge those sick individuals more).

This sounds barbaric. It is barbaric. The Title I rules are generally popular for a reason. They were designed to make the Kafka-esque nightmare of America's individual health insurance market something predictable and fair. Nobody wants to go back to a world where insurers can rescind coverage because somebody forgot to mention their childhood allergies on some paperwork or where sick people have to pay exorbitantly for insurance or go without.

And yet, at this point, that would be a more coherent approach to health policy than what GOP leaders seem to have settled on. That's because, by eliminating the essential benefit rules, the GOP plan would already make it possible for insurers to discriminate against the sick and aged. They just have to do it indirectly. Without any minimum benefit requirements to get in the way, carriers will be free to offer bare-bones plans that don't cover the needs of your typical 50- or 64-year-old. Carriers wouldn't reject anybody outright—they would just make sure not to sell health plans that might accidentally appeal to an unprofitable customer. I'd expect to see carriers start offering a whole lot of "insurance" that covers one night in the hospital and some antibiotics with maybe a gym discount thrown in to lure millennials.

Those are extremely perverse incentives that would warp the insurance market in some very ugly ways. Not only would sick people not be able to find the health plan they need, but relatively healthy and well-off customers looking for more comprehensive care like you'd typically get from an employer might have nothing to choose from but junk coverage designed to scare off the ill, or very expensive plans designed to compensate for the cost of caring for them. If you're a successful self-employed contractor with a nice roofing business, neither of those options probably sounds too appealing.

Eliminating most of Obamacare's regulations, rather than just the essential health benefits, might make this bizarro world of insurance a little more rational. Rather than indirectly discriminating against the sick by only offering cheapo or crazily expensive coverage in a way that also punishes healthy people, companies would be allowed to just charge the ill more. Meanwhile, it could offer somewhat comprehensive coverage to healthier customers at something approaching a reasonable price. What would happen to people with pre-existing conditions? Their situation wouldn't be great. But Trumpcare does have a $100 billion fund that states could use to set up subsidized high risk insurance pools, which has long been the standard conservative policy approach for dealing with people with pre-existing conditions. That might not be enough to adequately fund them over a decade, but it's something.

Now, to be clear, the insurance market that Freedom Caucus types are aiming to set up would still be an absolute horror. As I wrote on Wednesday, without essential benefit rules in place, insurance companies will be able to offer trash coverage priced at exactly the value of Trumpcare's premium subsidies, market the plans as free to consumers, and skim money off the government the way for-profit colleges have gobbled up Pell Grant and student loan money while ripping off undergrads for years. Older, sicker patients would certainly suffer, too, especially if the high risk pools are badly underfunded.

But those things would also be true if House leadership got its way. Obamacare's regulations, remember, really were designed to work as a cohesive whole. If you pull out a few of its key stones, you're likely to create as much wreckage, if not more, than if you demolished the whole thing. So maybe Trump and Paul Ryan ought to let the Freedom Caucus have its way. Then they can hopefully let whatever politically radioactive bill comes of it die mercifully in the Senate.

March 23 2017 5:08 PM

Head of D.C. Metro Says Escalators Too “Sensitive” for Passengers to Walk on Them

We should be kinder to escalators. The District of Columbia learned this Wednesday.

Talking to D.C.’s NBC affiliate station one day before the D.C. Metro board approved fare hikes and service cuts to begin in July, the head of Washington’s Metro system said that by walking on the left side of the escalator and standing on the right—a mainstay of subway decorum!—people are actually harming the moving stairway. “These are very sensitive pieces of equipment,” Metro General Manager Paul Wiedefeld said as a new escalator at the Bethesda station was unveiled.

Even as he said it, he knew the futility of his cause. “We prefer that they stand as they move up the escalator, but also we know that people will do what they want to do.” It’s true. And to well-behaved Washington commuters, the Metro chief’s comments amounted to heresy:

March 23 2017 12:21 AM

The GOP Might Make a Deal That Would Screw the Sick While Letting Insurers Scam Taxpayers

This is nuts. Straight. Up. Nuts.

Right now, Republicans are negotiating a last-minute deal to save their health care bill before Thursday's vote in the House that, were it to actually become law, could have massive repercussions for the entire U.S. health care system. It would simultaneously be an enormous blow to the sick and a boondoggle for taxpayers that would turn the whole individual insurance market into an opportunity for insurers to skim money from the government by selling junk coverage.

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I really, really wish I was exaggerating. But no.

According to multiple reports, the White House is trying to win over votes from the archconservative Freedom Caucus by adding an amendment to its health care bill that would kill off Obamacare's “essential health benefits” rules. Those regulations require insurers to cover 10 different areas of care—things such as hospital and outpatient services, prescription drugs, and mental health and maternity care. Liberals like the rules because, among other things, they ensure that when people pay for coverage, they get something of value. (Back in the pre-Obamacare days, people often bought cheap coverage, only to discover it was worthless once their hospital bills arrived.) Republicans dislike the essential benefits, however, because they make coverage more expensive. Which is true. When insurers actually have to cover stuff, it costs more.

Getting rid of the regulations has been at the top of the Freedom Caucus' wish list, because it would allow premiums to drop for people who don't need much in the way of actual benefits. Unfortunately, it would also turn the insurance market into a massive exercise in graft by allowing insurers to game the living hell out of the subsidy system that Republicans are presently setting up.

Remember, the GOP plan offers Americans who make less than $75,000 flat tax credits to help buy insurance, and these credits go up as you age. If you're under 30, you get $2,000 toward your premiums; if you're between 30 and 40, you get $2,500, and so on. If there are no rules about what insurers have to cover, companies will design extremely pared-down health plans that cost exactly as much (or maybe just below) what the tax credit is worth. Sure, they won't really provide much in the way of actual help if someone gets sick, but to insurance buyers they'll be free.

It doesn't take a lot of imagination to see how this leads to companies hawking lots of dubious insurance products at unsuspecting customers. Forgive the quoting of my own tweet:

Of course, those free, threadbare plans will appeal to young people who might otherwise go uninsured, thus gobbling up the most profitable part of the market. That will leave carriers hesitant to offer more comprehensive coverage that actual sick people might want to purchase. Older Americans who want assurance that someone will cover their hospital bills are going to end up paying through the nose for it.

And all this dysfunction will be fueled with billions in taxpayer dollars. Because, again, if the plans are free after the tax credit, there's no reason for people not to snap one up. Whatever the Republican tax plan was supposed to cost before, it's probably going to be whole hell of a lot more expensive now.

Of course we won't know for sure before the House vote—which, again, is this Thursday—because the Congressional Budget Office won't have time to score the plan. To be clear, we do not know for sure whether this bargain will make it into the final bill. It's also an open question whether it would be allowed into the legislation under the budget reconciliation rules the Senate will be using in its attempt to pass the legislation. But this whole exercise still feels like some nightmare version of a high school kid writing his term paper a 2 a.m. the morning before it's due. Except in this case, it's Donald Trump and a couple fringe right-wing ideologues rewriting the whole damn health insurance system. God save us all.

March 22 2017 4:06 PM

Surprise! Even With an Extra $85 Billion, Trumpcare Is Still Terrible for the Old.

Despite a last-minute attempt to make the legislation more generous to people over 50, it looks like the Republican health care plan would still be an unmitigated disaster for many Americans nearing retirement age. Or so suggests a new analysis from the progressive Center on Budget and Policy Priorities.

After the Congressional Budget Office reported that some older insurance customers would see their premiums rise by as much as 750 percent under the GOP's plan, party leaders went back and added a roughly $85 billion dollar placeholder into their bill supposedly designed to beef up its insurance subsidies for the 50-to-64 demographic. While nobody knows precisely how the money would be used—it's been called a magic asterisk”—the move was meant to assuage the fears of moderates in the House and Senate who are feeling queasy about the idea of pricing near-seniors out of the insurance market.

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Unfortunately, it appears that the asterisk doesn't actually perform that much magic.

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Even with the additional $85 billion kicked in, the CBPP estimates that the average 60-year-old earning $22,000 would still see his premiums after tax credits rise by more than $6,000, to $7,470. That's slightly less vertiginous than the $9,349 they'd have owed under Trumpcare 1.0, but it's still way outside the realm of affordability.

In some states, the price hikes will be far more dramatic, CBPP finds. In Alaska, premiums for 60-year-olds could reach near $27,000, while in Wyoming, West Virgina, Oklahoma, North Carolina, Nebraska, and Arizona they'd top $10,000.

Here's why the $85 billion, which amounts to a roughly 24 percent increase in the bill's total funding for tax credits, doesn't do much good for the people it's supposed to help. Under the Affordable Care Act, the government currently gives lower-income Americans tax credits to buy insurance that cap their premiums as a percentage of their income. So if you're a 62-year-old earning a bit above the poverty line in Arizona, the ACA keeps your monthly insurance payments low no matter what. Trumpcare nixes that system and replaces it with a series of largely flat tax credits based on age (they start phasing out for those who make more than $75,000). As written, those work to $3,500 for 50- to 59-year-olds and $4,000 for those 60 and up—not nearly enough to cover the full cost of premiums, which could easily reach five figures for an individual in their 60s, since Trumpcare would allow insurers to charge them up to five times what they charge twentysomethings (under Obamacare, the ratio is 3 to 1). The extra $85 billion, CBPP estimates, would only get those credits up to $5,100 and $5,900, not enough to make a significant difference for someone with a lower-middle-class income.

The CBPP's analysis suggests there's no real way for Republicans to paper over this problem in the legislation without spending far more money than they'd be willing. As long as insurers can charge near-seniors through the nose and the tax credits aren't targeted based on income but instead spread thinly across large demographic brackets, poorer, older Americans are going to face a massive affordability gap. All the way down to its foundations, this bill is engineered to screw poorish 64-year-olds.

March 22 2017 11:44 AM

After Bashing Obamacare for High Deductibles, the GOP Has Crafted a Health Care Plan That Raises Deductibles

Republicans like Donald Trump and Mitch McConnell have often pointed to the high insurance deductibles that Americans face under Obamacare as evidence of the health reform law's failure. This has always been an awkward and transparently cynical line of attack, since basically every replacement plan Republicans have floated over the years has been designed to allow insurers to sell cut-rate coverage with even higher deductibles. This is no less true of the proposal now making its way through the House of Representatives, which is designed to let carriers sell plans that cover less of their customers' health costs.

And so, in the brave new world of Trumpcare, average deductibles are almost certainly going to go up. In a column at Axios, Kaiser Family Foundation President Drew Altman estimates that the deductible in a “typical plan” will rise about $1,550, from $2,150 to to $4,100. He bases this calculation on the Congressional Budget Office's projection that the average “actuarial value” of insurance plans on the individual market—how much of customers' expenses they cover, on average—will fall from 72 percent to 65 percent.

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Now some Republicans might look at this and say something like, “Great. Under Obamacare, Americans are required to buy high deductible plans. Under Trumpcare, they'll be able to choose cheap coverage that fits their needs!” If you encounter this argument in the wild, please respond with a withering stare. One of the major reasons Americans will have to choose cheap coverage under Trumpcare is that Republicans are cutting funding for premium tax credits and eliminating the “cost-sharing reduction” subsidies that lower deductibles for low-income households. Furthermore, because Trumpcare will allow insurers to sell skimpy plans without also offering more robust options—Obamacare forces them to sell both in order to participate on the markets—a lot of Americans will have few choices to pick from. If this bill passes, expect that a whole lot of people won't have any option but to pay more for worse coverage—if they can afford any coverage at all.

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