It's not that most of us don't *know* that PPACA met Paygo rules, it's that we don't believe (and are, incidentally, correct in that belief), that those rules will ultimately translate to deficit neutral, or ultimate deficit reduction. Here's why.
First of all, a few months after PPACA was passed, the 1099 reporting requirement was repealed. This had been estimated to be going to raise 20 billion to fund the PPACA. The loss of funding was not replaced.
The PPACA included a reduction in reimbursements for medicare/caid, those reductions have been repealed, and the funding not replaced.
The PPACA included, and still does include a medical device tax. A tax that is supposed to fund the program that PAYS FOR THE DEVICES!!! I am going to try paying for food by taxing the people that sell me food. Let's see how that works out!
And there are a HORDE of other similar tricks, inherently unworkable flaws, and other issues, many of which the CBO pointed out during the scoring of the PPACA that mean that it will NOT "pay for itself".
Sometimes, the problem with the information environment is not what you might think it to be.
The employer mandate is fatally flawed. The way it works is that employers who have more than 50 employees must provide "creditable coverage" (i.e., possibly more expensive) health insurance to their employees that does not cost more than (I forget exactly, but something like) 9% of the employee's household income. If the insurance is not at least that generous the employer will get hit with a fine of $2,000 per employee.
The thing is, the employers cannot possibly know the employee's household income. All they're privy to is an estimate of how much that employee is likely to get in compensation from them that year. They don't know if the employee works two jobs, or if the employee's spouse works, or if they live on trust fund income... but the employer is on the hook for knowing this. (How do you feel about the idea of showing all your tax returns to your boss, by the way?)
So since the employers are set up to fail, the only sane thing to do is to not even try: you just pay $2,000 in fines for not providing subsidized health insurance (that will cost far more than $2K PLUS have the $2K as an uncertainty.)
When this law was explained to a room of CPAs and lawyers we were astonished at how fucked up this law is. The INEVITABLE outcome will be levying a $2K/per worker tax on employers (which will, of course, come out of their calculations of how much they can afford to pay their employees.)
Happily, this has also been set aside for "future implementation". Ya think?
The OMB is notoriously bad about understanding the way humans respond to stimulus.
I'm not worried at all about people who can make an argument for what's wrong with current law. I am worried about the people who propose that we implement demonstrably worse alternatives, or who quite honestly do not know that PPACA met paygo rules. One disadvantage of having a job communicating science to the public is that you are very rapidly exposed to people who believe that there's a difference between ObamaCare and the PPACA. There are an awful lot of them.
I don't see any way through this other than iterating our way to better laws.
You have way more faith in PayGo rules than I do. I never thought of it as more than a tissue paper construct. And since it's already shredding, well, whatever. The "it'll cost less" idea never made the slightest amount of sense to me. If you start consuming massively more amounts of health care services, guess what? The costs don't go down. It's lovely to be able to do that, it may be morally right to allow that, but it is NOT less expensive.
My thinking is something along the lines of: If the proposal can't even meet paygo, what's the point? Paygo is a floor, not anything more than that.
Can you clarify something on the employer mandate for me? I have had it explained like this: ----------- If the employer offers coverage where the employee premium for INDIVIDUAL coverage is not more than 9.5% of the employee’s wage, the employer has offered affordable coverage.
If the employee declines the coverage, the employer is off the hook.
If the employee is offered such coverage (9.5% or less of wages) and declines it then the employee can NOT buy coverage on the exchange for themselves or their kids, because the actual cost of the family plan does not matter,
And if the cost of insuring the employee’s tax household is more than 8% of the household income, there is no penalty on the members of the household. -----------
Which I read as saying that the employer just has to know the employee's wage to offer insurance, but the employee has to figure out if penalties are going to bite or not.
A couple of things here: the individual coverage they have to offer must meet "creditable coverage" standards, which in practice are more expensive policies than people tended to want to buy for themselves. So they aren't cheap policies, but moderate level.
The way it was explained to me was that the coverage had to be not more than 9.5% of the HOUSEHOLD income, which raised all the same crappy issues about EITC and two-adult households who don't get married to appear poorer than two-adult households who do get married. That also makes sense, because a lot of workers may cobble together a variety of revenue sources, something that is completely common in my world, but the "salaryman" mindset can barely even believe exists.
I believe you are correct about not being allowed to buy on the exchange if you're offered health insurance deemed affordable at work but decline it because you'd be able to get it cheaper if subsidized on the exchange. That reality has helped most of the small businesses in MA feel less guilty about not offering health insurance, since we realize that our poorer workers are actually better OFF being subsidized in real terms (and we as employers can offer them larger cash portions of their compensation package, which is great because they never correctly valued the cost of their insurance in their compensation packages.)
You are also correct about the penalty. It's a little more complex, there's a four page form to fill out every year but it essentially determines that you owe a penalty and the penalty is calculated out to be zero.
But, look what just happened: we now have an uninsured poor person, and we don't have any resources to deal with them because we redirected the uninsured health CARE pool money to fund the free health INSURANCE money. In MA our network of free clinics with volunteer doctors has gone completely away as their grant funding got redirected to health INSURANCE. Now people can go to any doctor they want instead of the clinic, but look what just happened? Health care got more expensive.
In practice employees are very scared about these toothless penalties. I calculate them hundreds of times a year (my self-employed clients in the poorest county in Massachusetts are disproportionately uninsured) and I very rarely find anyone with a penalty they have to pay. If they do, we check the box to contest the penalty and, uh, nothing happens. I don't think anyone ever follows up on those contested penalties.
I am entirely in favor of decoupling health insurance from employers, though, so these pressures work in the right direction, but I think a lot of people didn't realize that Obamacare was aiming to move insurance out of the workplace. It's GOOD to get this conversation going, though, because when you realize that you get to pick a plan YOU like rather than what the employer likes, and you can keep your employer out of your most private personal business, and get portability... it's all good.
People aren't talking enough about the tax credits, by the way. That's where the real cost surprise is going to be, in both directions. People are going to find that the increase in prices from the creditable coverage requirement is offset by their new snazzy tax credits. They're going to LOVE those tax credits. They're going to tape the subsidy tables to their desk and make sure they manage to keep subsidized because those subsidy levels are CLIFFS and you only have to lose $15,000 once to realize you never ever want that to happen again.
AND THAT is the surprise waiting for the country when this is implemented. There is a huge moral hazard here to climb into the safety net. What kind people thought of as "helping the poor, i.e., people who make below this amount" is going to turn out to be "making sure no one ever earns above that amount."
I predict the GDP will fall and/or tax fraud will increase (fewer tax revenues coming in) when people start to get used to this, the same way as people avoid getting married to maximize EITC. Extend or withdraw benefits worth many thousands of dollars to someone every year, year in and year out, and just WATCH how they respond to stimuli!
I think there is something called the IRS "safe harbor" rule which only dings employers if coverage isn't pegged to less than 9.5% of employee wage - not household income. I would think the trick there would be to peg employee rates at 9.45% of wage and then *family* rates at way, way higher - thereby dumping the families onto the exchanges.
Refundable tax credits available in advancegwendallyOctober 4 2013, 02:29:35 UTC
Ah, good find. Yes, I knew they had suspended implementation of the original rules because they were so badly done. (A rule based on employer knowing HOUSEHOLD income should never have passed the first reader's eyes.)
This safe harbor looks like they're fixing it back to what they MEANT to say instead of what they said.
I think people are way overwrought about the employer mandate, by the way. Last I saw 97% of employers had fewer than 50 employees, and of the 3% who had over 50 employees, 96% of those offered health insurance. Now, a whole lot of that 96% didn't offer "creditable coverage" and that's going to cause a world of name-calling (because for some incomprehensible reason Obama told people they wouldn't have to change their insurance... and then went ahead and required the sort of insurance coverage that rich liberals deemed everyone ought to happily pay for.) That squawking should play out when they find out about the tax credits, though.
People are going to LOVE the tax credits. They're shaping up to either be a big tax refund OR to go directly to the insurance company to pay premiums. I'm already getting phone calls. I'm worried, though, because they are available in advance in anticipation of maybe qualifying for them, which should cause tons of trauma when people overshoot the subsidy level and have to pay back their tax credits. Imagine finding out that you owe $15,000 on April 15th.
But, hey, that moment isn't coming until April, 2015.
Re: Refundable tax credits available in advanceoscarmamaOctober 4 2013, 02:53:13 UTC
I am running into a number of people who don't understand the difference between the tax credits, and the subsidies. As I understand it, the tax credits are pegged to the cost of the second lowest silver plan on the exchange and move stepwise -
100-133% of Federal Poverty Level/ 2% of Income 133-150% of FPL/ 3-4% of Income 150-200% of FPL/ 4-6.3% of Income 200-250% of FPL/ 6.3-8.05% of Income 250-300% of FPL/ 8.05-9.5% of Income 300-400% of FPL/ 9.5% of income
and might also be described as premium subsidies. But the *actual* subsidies are the ones that change copays:
100-150% of FPL 94% of baseline copay 150-200% of FPL 87% 200-250% of FPL 73% 250-400% of FPL 70%
and then there are similar caps on out-of-pocket liability as well.
I'm not sure how this plays out, and I doubt anyone is yet. Since the HCTC goes away, I have read some people explaining that PPACA subsidies and credits are less robust, resulting in savings, but of course some nonparticipants in HCTC will be eligible for PPACA. I'm sure they crunched the numbers they had, made projections, and are waiting for data.
I have heard that the actuarial tables work so long as there are 7 million enrollees, and that enrollments over that level improve the numbers. I imagine we'll find out.
In Massachusetts they weren't able to calculate the subsidies - the exchange never started working - so they just told everyone "we'll send an advance on your subsidy straight to the insurance company and you don't have to pay a dime". The insurance companies got paid.
The next shoe to drop is to do their 2014 tax return and determine what subsidy they were ACTUALLY entitled to. Then, presumably, a bunch of them who got too much are going to have to pay it back.
But... the insurance companies got paid. The IMPORTANT thing happened.
"our network of free clinics with volunteer doctors has gone completely away as their grant funding got redirected to health INSURANCE"
it still exists but it's pretty tattered, and mostly limited to those that also had a paying business. Major problems at some of the 'safety net' providers since, as you note, the state declared that everyone was insured and largely reneged on its promise to continue covering the remaining 2-3% uninsured. (why anyone would trust a government promise is beyond me...) Some of the safety net hospitals sued a few years ago, but lost.
I don't think GDP will fall. Remember MA already has MittCare, with some of the same issues, and GDP did not fall here as a result. But some of those in lower end jobs will reduce their productivity to qualify (we see that already), but instead it will hasten the transition already under way to more automation (also under way, but won't happen overnight). It will help to harden the barriers between lower income working class and upper income working class, since the cost of that transition will be higher.
Fundamentally, that's one of the biggest problems with all democratic forms of government (of which the Republic is one of the more stable). Fundamentally speaking, people are STUPID. The *average* IQ is 100. 100 is barely capable of the complexity of basic semi-skilled trades work. 100 is an intelligence that will be able to comprehend complex concepts only with incredible devotion, and then will never be able to do the least bit of outside the box thinking (yes, I know that there's more variability in people than can be accounted for in a single number, but leave off that and run with it). Half the population, both on the left and the right, is below that.
So, we have roughly 1/2 of the population that is incapable of comprehending anything beyond either "the PPACA gives free healthcare to the poor", or "Obamacare kills jobs". depending on which side of the aisle their spokesperson of choice is coming from.
And, because this IS a democratic form of government, a form in which the party that can convince the most people to repeat their slogan wins. Do you do that by providing in-dpepth and serious analysis? No, you do that by giving dumb people easily repeated slogans.
Now, I, for one, would be in agreement with an incremental, iterative approach to solving he healthcare problem. For instance, by reducing the federal control over the system, and allowing the states to each function as a petrie dish for different ideas, even forming consortiums or "reciprocity agreements" with each other to iterate and experiment their way to a better deal. OR, we could analyze the issue, isolate individual real problems, and solve them. OR, we could look at the systems that ARE working, and attempt to expand upon them. OR, we could .... There are a lot of good, incremental iterative options.
But none of these things is, in any way, what the PPACA did. What it, in fact did, was to eliminate all innovation in the healthcare provision marketplace, either at the state or private level. It also made broad sweeping, poorly considered and obviously fatally flawed changes. It isn't an incremental iteration toward a good solution. It's taking a wrecking ball to your home without the slightest clue where you're even going to sleep tonight.
And while you and I, and Gwen, and others, are having this discussion, Obama is accusing the Republicans of "messing with him", Pelosi is calling us "terrorists", Biden is explaining that we want poor people to die. And, the stupid left believe it. Just as the stupid right don't know that it passed paygo rules. Why? Because, in the end, it ISN'T your opinion, or mine, or Gwen's that will determine which way it goes. It's that slobbering fool that, if asked where Florence Italy is, will point at China on the map.
PPACA did actually attempt to build in iteration. That's why there are so many demonstration projects that are designed to go up against one another. The effective ones (the ones that really save money, as opposed to the others) make it to round 2 - survival of the fittest.
One of the things that makes me sort of happy about Obamacare is that in the process of shoving this on 350 million people the problems with Romneycare will come into sharp focus and there'll be a real impetus for effective change because the issues will be so stark when magnified like that.
But.
Then I remember that the group who are supposed to revise the rules, to manage this behemoth nimbly, is Congress.
First of all, a few months after PPACA was passed, the 1099 reporting requirement was repealed. This had been estimated to be going to raise 20 billion to fund the PPACA. The loss of funding was not replaced.
The PPACA included a reduction in reimbursements for medicare/caid, those reductions have been repealed, and the funding not replaced.
The PPACA included, and still does include a medical device tax. A tax that is supposed to fund the program that PAYS FOR THE DEVICES!!! I am going to try paying for food by taxing the people that sell me food. Let's see how that works out!
And there are a HORDE of other similar tricks, inherently unworkable flaws, and other issues, many of which the CBO pointed out during the scoring of the PPACA that mean that it will NOT "pay for itself".
Sometimes, the problem with the information environment is not what you might think it to be.
Reply
The thing is, the employers cannot possibly know the employee's household income. All they're privy to is an estimate of how much that employee is likely to get in compensation from them that year. They don't know if the employee works two jobs, or if the employee's spouse works, or if they live on trust fund income... but the employer is on the hook for knowing this. (How do you feel about the idea of showing all your tax returns to your boss, by the way?)
So since the employers are set up to fail, the only sane thing to do is to not even try: you just pay $2,000 in fines for not providing subsidized health insurance (that will cost far more than $2K PLUS have the $2K as an uncertainty.)
When this law was explained to a room of CPAs and lawyers we were astonished at how fucked up this law is. The INEVITABLE outcome will be levying a $2K/per worker tax on employers (which will, of course, come out of their calculations of how much they can afford to pay their employees.)
Happily, this has also been set aside for "future implementation". Ya think?
The OMB is notoriously bad about understanding the way humans respond to stimulus.
Reply
I don't see any way through this other than iterating our way to better laws.
Reply
Reply
Can you clarify something on the employer mandate for me? I have had it explained like this:
-----------
If the employer offers coverage where the employee premium for INDIVIDUAL coverage is not more than 9.5% of the employee’s wage, the employer has offered affordable coverage.
If the employee declines the coverage, the employer is off the hook.
If the employee is offered such coverage (9.5% or less of wages) and declines it then the employee can NOT buy coverage on the exchange for themselves or their kids, because the actual cost of the family plan does not matter,
And if the cost of insuring the employee’s tax household is more than 8% of the household income, there is no penalty on the members of the household.
-----------
Which I read as saying that the employer just has to know the employee's wage to offer insurance, but the employee has to figure out if penalties are going to bite or not.
Reply
The way it was explained to me was that the coverage had to be not more than 9.5% of the HOUSEHOLD income, which raised all the same crappy issues about EITC and two-adult households who don't get married to appear poorer than two-adult households who do get married. That also makes sense, because a lot of workers may cobble together a variety of revenue sources, something that is completely common in my world, but the "salaryman" mindset can barely even believe exists.
I believe you are correct about not being allowed to buy on the exchange if you're offered health insurance deemed affordable at work but decline it because you'd be able to get it cheaper if subsidized on the exchange. That reality has helped most of the small businesses in MA feel less guilty about not offering health insurance, since we realize that our poorer workers are actually better OFF being subsidized in real terms (and we as employers can offer them larger cash portions of their compensation package, which is great because they never correctly valued the cost of their insurance in their compensation packages.)
You are also correct about the penalty. It's a little more complex, there's a four page form to fill out every year but it essentially determines that you owe a penalty and the penalty is calculated out to be zero.
But, look what just happened: we now have an uninsured poor person, and we don't have any resources to deal with them because we redirected the uninsured health CARE pool money to fund the free health INSURANCE money. In MA our network of free clinics with volunteer doctors has gone completely away as their grant funding got redirected to health INSURANCE. Now people can go to any doctor they want instead of the clinic, but look what just happened? Health care got more expensive.
In practice employees are very scared about these toothless penalties. I calculate them hundreds of times a year (my self-employed clients in the poorest county in Massachusetts are disproportionately uninsured) and I very rarely find anyone with a penalty they have to pay. If they do, we check the box to contest the penalty and, uh, nothing happens. I don't think anyone ever follows up on those contested penalties.
I am entirely in favor of decoupling health insurance from employers, though, so these pressures work in the right direction, but I think a lot of people didn't realize that Obamacare was aiming to move insurance out of the workplace. It's GOOD to get this conversation going, though, because when you realize that you get to pick a plan YOU like rather than what the employer likes, and you can keep your employer out of your most private personal business, and get portability... it's all good.
People aren't talking enough about the tax credits, by the way. That's where the real cost surprise is going to be, in both directions. People are going to find that the increase in prices from the creditable coverage requirement is offset by their new snazzy tax credits. They're going to LOVE those tax credits. They're going to tape the subsidy tables to their desk and make sure they manage to keep subsidized because those subsidy levels are CLIFFS and you only have to lose $15,000 once to realize you never ever want that to happen again.
AND THAT is the surprise waiting for the country when this is implemented. There is a huge moral hazard here to climb into the safety net. What kind people thought of as "helping the poor, i.e., people who make below this amount" is going to turn out to be "making sure no one ever earns above that amount."
I predict the GDP will fall and/or tax fraud will increase (fewer tax revenues coming in) when people start to get used to this, the same way as people avoid getting married to maximize EITC. Extend or withdraw benefits worth many thousands of dollars to someone every year, year in and year out, and just WATCH how they respond to stimuli!
Reply
ETA: like this: http://www.cigna.com/health-care-reform/news/irs-issues-proposed-rules-on-employer-mandate
Reply
This safe harbor looks like they're fixing it back to what they MEANT to say instead of what they said.
I think people are way overwrought about the employer mandate, by the way. Last I saw 97% of employers had fewer than 50 employees, and of the 3% who had over 50 employees, 96% of those offered health insurance. Now, a whole lot of that 96% didn't offer "creditable coverage" and that's going to cause a world of name-calling (because for some incomprehensible reason Obama told people they wouldn't have to change their insurance... and then went ahead and required the sort of insurance coverage that rich liberals deemed everyone ought to happily pay for.) That squawking should play out when they find out about the tax credits, though.
People are going to LOVE the tax credits. They're shaping up to either be a big tax refund OR to go directly to the insurance company to pay premiums. I'm already getting phone calls. I'm worried, though, because they are available in advance in anticipation of maybe qualifying for them, which should cause tons of trauma when people overshoot the subsidy level and have to pay back their tax credits. Imagine finding out that you owe $15,000 on April 15th.
But, hey, that moment isn't coming until April, 2015.
Reply
100-133% of Federal Poverty Level/ 2% of Income
133-150% of FPL/ 3-4% of Income
150-200% of FPL/ 4-6.3% of Income
200-250% of FPL/ 6.3-8.05% of Income
250-300% of FPL/ 8.05-9.5% of Income
300-400% of FPL/ 9.5% of income
and might also be described as premium subsidies. But the *actual* subsidies are the ones that change copays:
100-150% of FPL 94% of baseline copay
150-200% of FPL 87%
200-250% of FPL 73%
250-400% of FPL 70%
and then there are similar caps on out-of-pocket liability as well.
I'm not sure how this plays out, and I doubt anyone is yet. Since the HCTC goes away, I have read some people explaining that PPACA subsidies and credits are less robust, resulting in savings, but of course some nonparticipants in HCTC will be eligible for PPACA. I'm sure they crunched the numbers they had, made projections, and are waiting for data.
I have heard that the actuarial tables work so long as there are 7 million enrollees, and that enrollments over that level improve the numbers. I imagine we'll find out.
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The next shoe to drop is to do their 2014 tax return and determine what subsidy they were ACTUALLY entitled to. Then, presumably, a bunch of them who got too much are going to have to pay it back.
But... the insurance companies got paid. The IMPORTANT thing happened.
You may know them by their actions.
Reply
it still exists but it's pretty tattered, and mostly limited to those that also had a paying business. Major problems at some of the 'safety net' providers since, as you note, the state declared that everyone was insured and largely reneged on its promise to continue covering the remaining 2-3% uninsured. (why anyone would trust a government promise is beyond me...) Some of the safety net hospitals sued a few years ago, but lost.
I don't think GDP will fall. Remember MA already has MittCare, with some of the same issues, and GDP did not fall here as a result. But some of those in lower end jobs will reduce their productivity to qualify (we see that already), but instead it will hasten the transition already under way to more automation (also under way, but won't happen overnight). It will help to harden the barriers between lower income working class and upper income working class, since the cost of that transition will be higher.
Reply
Fundamentally, that's one of the biggest problems with all democratic forms of government (of which the Republic is one of the more stable). Fundamentally speaking, people are STUPID. The *average* IQ is 100. 100 is barely capable of the complexity of basic semi-skilled trades work. 100 is an intelligence that will be able to comprehend complex concepts only with incredible devotion, and then will never be able to do the least bit of outside the box thinking (yes, I know that there's more variability in people than can be accounted for in a single number, but leave off that and run with it). Half the population, both on the left and the right, is below that.
So, we have roughly 1/2 of the population that is incapable of comprehending anything beyond either "the PPACA gives free healthcare to the poor", or "Obamacare kills jobs". depending on which side of the aisle their spokesperson of choice is coming from.
And, because this IS a democratic form of government, a form in which the party that can convince the most people to repeat their slogan wins. Do you do that by providing in-dpepth and serious analysis? No, you do that by giving dumb people easily repeated slogans.
Now, I, for one, would be in agreement with an incremental, iterative approach to solving he healthcare problem. For instance, by reducing the federal control over the system, and allowing the states to each function as a petrie dish for different ideas, even forming consortiums or "reciprocity agreements" with each other to iterate and experiment their way to a better deal. OR, we could analyze the issue, isolate individual real problems, and solve them. OR, we could look at the systems that ARE working, and attempt to expand upon them. OR, we could .... There are a lot of good, incremental iterative options.
But none of these things is, in any way, what the PPACA did. What it, in fact did, was to eliminate all innovation in the healthcare provision marketplace, either at the state or private level. It also made broad sweeping, poorly considered and obviously fatally flawed changes. It isn't an incremental iteration toward a good solution. It's taking a wrecking ball to your home without the slightest clue where you're even going to sleep tonight.
And while you and I, and Gwen, and others, are having this discussion, Obama is accusing the Republicans of "messing with him", Pelosi is calling us "terrorists", Biden is explaining that we want poor people to die. And, the stupid left believe it. Just as the stupid right don't know that it passed paygo rules. Why? Because, in the end, it ISN'T your opinion, or mine, or Gwen's that will determine which way it goes. It's that slobbering fool that, if asked where Florence Italy is, will point at China on the map.
Ain't universal suffrage grand?
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Here's a list: http://e-caremanagement.com/pilots-demonstrations-innovation-in-the-ppaca-healthcare-reform-legislation/
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But.
Then I remember that the group who are supposed to revise the rules, to manage this behemoth nimbly, is Congress.
And then I despair again.
Reply
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