ObamaCare’s Immediate Impact

As we all know, most of ObamaCare is pushed out to 2014 or so. But Ezra Klein, ever helpful, points out this nice PDF which explains what will occur nearly immediately. Ezra is always celebrating the cost control measures of ObamaCare, so let us see how these provisions stack up:

1. SMALL BUSINESS TAX CREDITS. Offers tax credits to small businesses to make employee coverage more affordable. Tax credits of up to 35 percent of premiums will be immediately available to firms that choose to offer coverage. Effective beginning for calendar year 2010. (Beginning in 2014, the small business tax credits will cover 50 percent of premiums.)

Okay, an immediate hit to Uncle Sugar here, but probably not big unless it really changes behavior immediately. So we start hurting the deficit right away. This is a net hit on government spending, but one might think that it probably will not do much to private healthcare costs in the short run. I expect this will result in marginally increased coverage and thus will show no real change to health insurance premiums.

2. BEGINS TO CLOSE THE MEDICARE PART D DONUT HOLE. Provides a $250 rebate to Medicare beneficiaries who hit the donut hole in 2010. Effective for calendar year 2010. (Beginning in 2011, institutes a 50% discount on brand name drugs in the donut hole; also completely closes the donut hole by 2020.)

Another government spending hit on drug coverage. In 2011, a 0% subsidy in this range jumps to 50%. According to Wikipedia, this may affect somewhere in the range of 25% of Medicare Part D enrollees. I will leave it to others to quantify this, but this is another spending measure.

3. FREE PREVENTIVE CARE UNDER MEDICARE. Eliminates copayments for preventive services and exempts preventive services from deductibles under the Medicare program. Effective beginning January 1, 2011.

Oh, look! Another government spending increase subsidy! And as one of the colleagues at WaPo points out, preventative care does not really lower total medical spending costs. So overall this is not a cost control measure for government budgets or spending in general.

4. HELP FOR EARLY RETIREES. Creates a temporary reinsurance program (until the Exchanges are available) to help offset the costs of expensive health claims for employers that provide health benefits for retirees age 55 to 64. Effective 90 days after enactment

Another subsidy. This will mainly hit government, I do not see a major change to insurance premiums here, so hopefully those who are looking at the cost of Medicare and other healthcare options won’t be put off getting on board with them in the future. There may be additional companies who provide early retiree benefits, but only union jobs and government tend to do so. Most who are wealthy enough to retire early on their own will cover their own medical insurance costs, not their employer.

5. ENDS RESCISSIONS. Bans health plans from dropping people from coverage when they get sick. Effective 6 months after enactment.

And here we go. The first of [many] provisions that will raise private insurance premiums. Of course, this depends on how common rescissions are. The left says they happen OMG like ALL THE TIME, so if they are right, it is a big hit. I do not think it is a huge change, but it is definitely going to raise premiums.

6. NO DISCRIMINATON AGAINST CHILDREN WITH PREEXISTING CONDITIONS. Prohibits health plans from denying coverage to children with preexisting conditions. Effective 6 months after enactment. (Beginning in 2014, this prohibition would apply to all persons.)

Again, an increase to private health insurance premiums. But hey, who will complain? After all, it is for the children.

7. BANS LIFETIME LIMITS ON COVERAGE. Prohibits health plans from placing lifetime caps on coverage. Effective 6 months after enactment.

Again, if you think anything other than that this will increase premiums up front, you are smoking something. And you should not be smoking, because it is bad for you. But on the bright side, in 6 months you can be assured your lung cancer will be treated with no limits. And do not worry about lying about that smoking habit on your insurance application, because rescissions are banned too.

(UPDATE 7:55 AM PDT: Commenter Fabio Escobar notes that rescissions are still allowed in cases of fraud, so it would be best not to lie on those applications, folks.)

8. BANS RESTRICTIVE ANNUAL LIMITS ON COVERAGE. Tightly restricts new planned use of annual limits to ensure access to needed care. These tight restrictions will be defined by HHS. Effective 6 months after enactment. (Beginning in 2014, the use of any annual limits would be prohibited for all plans.)

Again, we have a regulation that will up private premiums. [Do you see a pattern here?] Costs must be amortized, so this added risk is going to show up in premium hikes rather than limits on annual coverage. Insurance is built to hedge risk, and its increasingly looking like the risks to the insurer do not expire [until you do].

9. FREE PREVENTIVE CARE UNDER NEW PRIVATE PLANS. Requires new private plans to cover preventive services with no copayments and with preventive services being exempt from deductibles. Effective 6 months after enactment. (Beginning in 2018, this requirement applies to all plans.)

Ahh, two fun ones here. Immediate premium increase (costs must be amortized, you know), and a probable increase in total healthcare costs, for the aforementioned reason that preventative care does not lower total spending.

10. NEW, INDEPENDENT APPEALS PROCESS. Ensures consumers in new plans have access to an effective internal and external appeals process to appeal decisions by their health insurance plan. Effective 6 months after enactment.

Again, here come higher premiums. Unless you think the external appeals boards are going to rule less in favor of the patient than the insurance companies would have, of course. Since the left believes insurers deny care left and right, this has to be a big impact, right?

11. ENSURING VALUE FOR PREMIUM PAYMENTS. Requires plans in the individual and small group market to spend 80 percent of premium dollars on medical services, and plans in the large group market to spend 85 percent. Insurers that do not meet these thresholds must provide rebates to policyholders. Effective on January 1, 2011.

“Ensuring value for premium payments” sounds a lot nicer than “capping profit margins”, right? If the left belief that insurers are fat and happy and spend all their money on lavish bonuses instead of medical services, this would in fact be a cost control measure. One story from late last year suggests insurers already spend above 80% (Wall Street analysts say low 80s, industry says 87%). Overall, my read is that this probably is not a major component either way.

12. IMMEDIATE HELP FOR THE UNINSURED UNTIL EXCHANGE IS AVAILABLE (INTERIM HIGH RISK POOL). Provides immediate access to insurance for Americans who are uninsured because of a preexisting condition through a temporary high risk pool. Effective 90 days after enactment.

Initially there will be $5B in subsidy for this risk pool. It is unclear whether some of this funding will replace existing state govt funding (35 states already have high risk pools), so I am not sure how much of that $5B is a net adder to the total cost. But the simple fact is this , while it might be better for some of those people currently denied due to pre existing conditions (i.e. 100% risks), much of the cost will come out of *OUR* pockets.

13. EXTENDS COVERAGE FOR YOUNG PEOPLE UP TO 26TH BIRTHDAY THROUGH PARENTS INSURANCE – Requires health plans to allow young people up to their 26th birthday to remain on their parents insurance policy, at the parents choice. Effective 6 months after enactment.

This one just baffles me. Should we really be disincentivizing kids adults to get good jobs where they might be covered? I can understand an exemption for people on the 7+ year college program (hopefully grad school, not this guy), but if your offspring is 24 and not in school, it seems to me that it is not your employers problem to provide them with health insurance (since it is usually the cheapest method). Perhaps this *IS* actually a cost control measure, since most 23 to 25 year olds are healthy and will add to the risk pool. But even so, I can imagine “Employee + Family” or “Employee + Children” plans increasing in premium, because they are not usually charged based on how many kids are specifically enrolled.

14. COMMUNITY HEALTH CENTERS. Increases funding for Community Health Centers to allow for nearly a doubling of the number of patients seen by the centers over the next 5 years. Effective beginning in fiscal year 2010.

There is a short run deficit cost here, but the goal is understandable. Clinics are likely a better way of treating immediate non emergency medical needs than emergency rooms, so there may be some cost reduction in the delivery method of care. Presumably not all of the supposed “doubling” of patients will be people whose only alternative was a regular doctor visit or ER visit, so there may be some gross increase in the total number of patients served. This one could go either way, and I will leave it to the statisticians to score it. But I will grant that there is at least a possibility of cost control here.

15. INCREASING NUMBER OF PRIMARY CARE DOCTORS. Provides new investment in training programs to increase the number of primary care doctors, nurses, and public health professionals. Effective beginning in fiscal year 2010.

Again, another big subsidy. Gives 10% bonuses to PCP and General Surgeons starting in 2011, and it is unclear here what “new investment in training programs” really amounts to, but the early notes I have seen suggest it is largely student loan repayment changes. I do not see that much here that will blunt the existing trend for doctors to head into specialization rather than primary care. 10% is nice but it is nowhere near the difference between a specialist salary and a primary care doctor.

16. PROHIBITING DISCRIMINATION BASED ON SALARY. Prohibits new group health plans from establishing any eligibility rules for health care coverage that have the effect of discriminating in favor of higher wage employees. Effective 6 months after enactment.

This one is also somewhat vague. But usually when I hear about plans to avoid “eligibility rules” that “discriminate”, I think they are trying to find ways to make it impossible to discriminate against bad health risks. Richer people tend to be healthier people, so it seems that if they accomplish their goal, it necessarily raises premiums.

17. HEALTH INSURANCE CONSUMER INFORMATION. Provides aid to states in establishing offices of health insurance consumer assistance in order to help individuals with the filing of complaints and appeals. Effective beginning in FY 2010.

Ahh, a two fer! First is the direct government subsidy to states to hire new “consultants”. The second is the premium increase by pushing harder against health providers regarding complaints and appeals, which will likely often be adjudicated by the external appeals boards mentioned in point 10.

18. CREATES NEW, VOLUNTARY, PUBLIC LONG TERM CARE INSURANCE PROGRAM. Creates an extended care life insurance program to be financed by voluntary payroll deductions to provide benefits to adults who become functionally disabled. Effective on January 1, 2011.

Voluntary? I wonder how long it will remain so. And how exactly does this differ from the disability portion of Social Security? As things currently stand, in order to qualify for Social Security disability benefits, you must have held qualifying employment for a certain period of time, and you must also be able to prove that you suffer from a totally disabling condition that prevents you from working. It could pose an issue for those who need the aid they get from their Social Security disability benefits that could aid with their day-to-day living and improve their ability to work. An example of this could be getting a car that is wheelchair compatible for travel or making their home and place of work accessible with the aid of services like Terry Lifts. Putting such restrictions on Social Security disability benefits could be defeating its purpose. If you would like more information about the law surrounding Social Security Disability benefits, you can take a look at some of the resources on the Crest SSD website. As for this potential change though, I am not sure how this going to work yet. All I see here is a big new shiny bureaucracy, that will work as quickly as possible to entrench themselves by making this as involuntary as possible.


So there you have it, folks. Of 18 highlighted points, most or all of them will increase payments made by government or increase health insurance premiums. This is “bending the cost curve”.

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