Patterico's Pontifications

3/31/2012

The other side of the Obamacare bubble

Filed under: General — Karl @ 8:34 am

[Posted by Karl]

Like a number of others, I noted this week the bubble in which liberal legal analysts and pundits hid from how tenuous the claims are for the constitutionality of Obamacare.  It is also worth noting that conservatives and libertarians generally did not hide in a bubble of their own to ignore the proffered justifications for the law.

The Obama administration and its fellow travelers largely justify the mandate based on the supposedly unique features of the healthcare market, e.g., the general inability to “opt out,” legal requirements that hospitals provide emergency care, and cost-shifting related to uncompensated care.  Judge Roger Vinson addressed these arguments in his decision striking down the mandate; his arguments were generally accepted by the 11th Circuit Court of Appeals, creating the split with the 6th Circuit that essentially guaranteed Supreme Court review. (Again, liberal geniuses somehow missed this split as an indicator their case was not a slam dunk, even though these decisions have not always followed neat partisan lines.)  Judge Vinson’s decision was echoed in some of the skeptical questions raised by Chief Justice Roberts this past week, e.g., asking whether Congress could impose a cellphone mandate to summon emergency services.

Meanwhile, analysts like Avik Roy and Shikha Dalmia examined the free-rider and uncompensated care issues and found them wanting.  Again, their critiques were echoed by Chief Justice Roberts, e.g., asking how issues with emergency care are addressed by mandating comprehensive insurance coverage.  Although uncompensated care can be an issue in certain circumstances the $43 billion Congress claims affects interstate commerce amounts to only 3%-5% of total healthcare spending, roughly equivalent to the percent big law firms seek to provide as pro bono services.  Indeed, it’s only slightly more than the 2% average shrinkage in the retail sector.

Moreover, as John F. Cogan, R. Glenn Hubbard and Daniel Kessler note, peer-reviewed studies suggest cost shifting actually raises private health insurance premiums by a negligible amount, ($80 annually for the typical plan, far less than the $1,ooo Congress estimated):

Where did Congress go wrong? We traced its estimates of the magnitude of the hidden tax of $43 billion per year, or an increase in family premiums by an average of $1,000 per year, to two sources—the aforementioned Health Affairs study, and a non-peer-reviewed study commissioned by FamiliesUSA, a Washington, D.C., group long known for its advocacy of greater government involvement in health care. Yet Congress simply ignored the evidence in the Health Affairs study and failed to recognize the serious flaws in the FamiliesUSA analysis.

Specifically, Congress ignored the $40 billion to $50 billion that is spent annually by charitable organizations and federal, state and local governments to reimburse doctors and hospitals for the cost of caring for the uninsured. These payments, which amount to approximately three-fourths of the cost of such care, mitigate the extent of cost shifting and reduce the magnitude of the hidden tax on private insurance.

Moreover, the economics of markets for health services suggests that any cost shifting that may occur is unlikely to affect interstate commerce. Because markets for doctor and hospital services are local—not national—the impact of cost shifting will be borne where it occurs, not across state lines.

While taxpayers may not be thrilled at picking up the tab for uncompensated care, it is already being done.  Moreover, Cogan, Hubbard and Kessler make a point Roy also makes — Obamacare’s reliance on expanding Medicaid (which chronically under-compensates providers) is likely to increase cost-shifting, not decrease it.  Furthermore, as Peter Suderman notes, Congress purports to solve this supposed $43 billion problem with $200 billion in subsidies.

Nevertheless, even when fisking Linda Greenhouse, NRO’s Ed Whelan added his point “is not to maintain that any reasonable person must agree with the states’ brief,” while James Taranto noted it was quite possible Greenhouse would turn out to be correct in predicting a lopsided vote for Obamacare and that conservative lawyers he spoke with thought Obamacare would be upheld (which lefties see as an admission they are correct, rather than a recognition of a debate).  Despite the profound problems with the key justifications for Obamacare, folks on the right generally have not engaged in the level of dismissive denial the left has.

–Karl


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