A $100 Billion Solution to a $43 Billion Problem

As Jacob Sullum noted earlier, Health and Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder have attempted to justify ObamaCare’s mandate by saying that it is a response to the expense of cost-shifting that occurs as a result of uncompensated care. Judge George Steeh, the Michigan judge who ruled the mandate constitutional under the Commerce Clause, agreed, writing the following in his ruling last October:

Far from “inactivity,” by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.

Writing for the Cato Institute, Cal State economist Glen Whitman has taken issue with the mandate's logic, arguing that “It's wrong to say we solve’ the free-rider problem if all we're doing is paying for the free riders in a different way.” But even if cost-shifting is the problem, then the administration’s solution does not line up with the costs.

As Steeh notes, recent government estimates suggest that the total cost of uncompensated care in 2008 was about $43 billion. But the cost of the PPACA is estimated to be around $100 billion a year (and that’s if the subsidized health insurance exchanges are not flooded with a larger number of participants than currently expected). So we’ve replaced a $43 billion problem with a $100 billion solution.

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  • Almanian||

    So we’ve replaced a $43 billion problem with a $100 billion solution.

    And Washington DC collectively responds, "Right! Is there some problem with that?"

  • ||

    The difference is the cost of making sure that none of the money is wasted.

  • ||

    Oops.

    I didn't mean that as a cut on Thatcher!

  • Suki||

    Sounds like the first number is high and the second is low.

  • Congress||

    Don't worry, we'll find a way to spend it.

  • Old Mexican||

    As Steeh notes, recent government estimates suggest that the total cost of uncompensated care in 2008 was about $43 billion. But the cost of the PPACA is estimated to be around $100 billion a year (and that's if the subsidized health insurance exchanges are not flooded with a larger number of participants than currently expected). So we've replaced a $43 billion problem with a $100 billion solution.

    Well, it's the Old Mexican's Law of Public Policy, with this corollary:

    The COST of the solution to a problem generated by a previous government "solution" increase exponentially, compared to the cost of the problem the solution purported to solve.

    But we're trying to "fix" the free rider problem, right???

  • Ebeneezer Scrooge||

    I've got a $43 billion problem. Do you think the government can help me solve it? I'd really rather have $100 billion.

    btw, once the courts sign off on ObamaCare, it's also going to save the entire US economy. GM, for example.

    By foregoing the purchase of a new GM vehicle you are making a decision that is contributing to the (further) bankruptcy of GM. The End of GM cannot be permitted, so you will be compelled to buy a new GM vehicle. Or be fined, and called a scoundrel and other much worser very bad things.

    And stuff.

  • Byron||

    The Commerce Clause was intended to cover this.

  • ||

    I was about to say that as government solutions go it's not half bad, then realized it's actually about 57% bad. Still, better than usual!

  • Dello||

    Winner!

  • ||

    probably why we have a deficit - if you pay 2.5 times what something should cost, your gonna end up in a big hole

  • Almanian||

    Math is hard!

  • Tim Geithner||

    Tell me about it!

  • Turbotax||

    I tried to help!

  • #||

    really its $250 billion per year once its fully implimented. Its only 100 billion per year if you take the ten year window startiong now with no expendatures until 2014. From 2014-2024, the total price tag via CBO is currently estimated at 2.5 trillion.

  • ||

    Far from “inactivity,” by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.

    Wait, what?

  • No Name Guy||

    The judge is a lawyer. Logic and reason aren't necessary for that career field.

  • ||

    You left out justice. It's not necessary, either.

  • ||

    He also left out a conscience.

  • ||

    And lack of venality.

  • ||

    To be fair, commerce clause jurisprudence can be, without any exaggeration or hyperbole, be used to give the government the power to regulate butterflies flapping their wings, since in the aggregate those flaps can cause changes in the weather, which effect interstate commerce. It's hard to hew to logic and reason when precedent demands you stop thinking and start waving a magic wand.

  • SFC B||

    I wish you weren't right.

  • tiger swallow tail||

    Butterflies are free, you'll never regulate me!

  • ||

    I just sneezed and subjected myself to Congressional jurisdiction.

  • ||

    I just sneezed and subjected myself to Congressional jurisdiction peed myself a little.

  • robc||

    If you hadnt sneezed, you all would have subjected yourself to Congressional jurisdiction.

  • ||

    Sneezing needs to be regulated more anyway.

  • ||

    For General Welfare, who is actually an extremely long-lived guy who lives in a small castle at Camp David.

  • Ted S.||

    If they're not accessing any health care services now, there aren't any costs to shift.

  • Bucky||

    the gub'mint is estimatin' it's 43 billion...
    since WHEN has the gub'mint's estimates even been remotely close to what the the true costs have been.
    how much is related to illegals?
    how much is fraud?
    AND how much is related to 4Loko?

  • libertarian democrat||

    last line made me laugh.

  • ||

    how much is related to illegals?

    Certainly something less than $43 billion.

    That's why those who have followed the illegal immigration issue know how comical it is to watch Obama & Co. try to solve a 40 billion dollar problem with hundreds of billions of dollars.

  • Bucky||

    >$1,

  • ||

    Since illegals are excluded from the program, it's safe to say that the solution won't actually save much of the portion they contribute to the $43 billion anyway.

  • ||

    Excellent point.

    And it's not as if illegals are excluded just from the subsidies. No, in order to show how tough Congress is on illegal aliens, they are excluded from the state-run insurance marketplace as well, where their inclusion would actually reduce the $43 billion uncompensated cost.

    Governing is hard!

  • ||

    Aren't they excluded from the mandate as well?

  • ||

    Indeed they are.

  • ||

    Far from “inactivity,” by choosing to forgo insurance plaintiffs are making an economic decision

    In other words, the word inactivity applies to a null set and has no meaning in this context. Under this logic, there is absolutely nothing that doesn't constitute economic "activity."

    When your argument rests on stripping a word of all meaning, you should probably rethink your argument.

  • Almanian||

    Under this logic, there is absolutely nothing that doesn't constitute economic "activity."

    Nooooooooow we're gettin' somewhere...

  • smartass sob||

    ...collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.

    Oh, as in making them pay the full cost of their healthcare themselves? Gee, wouldn't that be a tragedy?

  • ||

    This is a legitimate problem but a retarded government solution per usual. First off, health insurance is less insurance and more a prepayment vehicle. We are all basically assured of having some medical needs in life...particularly towards the end. A homeowners insurance underwriter does not assume every house will ultimately burn to the ground in the end for example. I'm a health policy analyst in DC and smash my head against the wall dealing with the lawyers who have no clue about economics. The issue of uncompensated care is this...In 1986, we passed EMTALA which requires stabilizing emergency care regardless of ability to pay. Poor people use the ER and can't pay. The hospitals shift the cost to those insured on private plans. This drives a good portion of our health cost inflation. The whole point of the exchange system is to give subsides to those 133-400 FPL to buy private insurance that has the same reimbursement as any employer sponsored plan. This would remove some serious market distortion BUT then there is Medicaid and Medicare that already have pathetic reimbursement rates which cause the exact same problem. Oy vey...

  • ||

    Do you know The Commander by any chance?

  • sevo||

    Assuming this is *the* shrike and not someone trying to make shrike look like more of an ignoramus than shrike is:
    Do you have enough cognitive abilities to read the post?
    The Enforcer makes points confirming OM's Law of Public Policy.

  • ||

    Speaking of wasting brain cells

  • sevo||

    Rather|12.15.10 @ 6:53PM|#
    "Speaking of wasting $"
    Did you read your own link? Looks like a pretty well-run organization. I'd say wasting band-width on your comments is a worse use of assets.

  • ||

    My solution is very pragmatic and cost-effective (again) - assign interns and P/A's to work on MediXXXX patients and remove the doc fix thus saving 23% immediately.

    These fucking docs want full price to work on old indigent patients with the feds/30 yr olds paying the bill.

    This is why Teabaggers hate people like me. They know their Medicare Welfare gig is in the spotlight.

  • shrike||

    I am such a prickface.

  • Edwin||

    I'm better at it, slacker!

  • ||

    I'll put you down as a Medicare Welfare supporter!

  • sevo||

    "This is why Teabaggers hate people like me. They know their Medicare Welfare gig is in the spotlight."

    No, teabaggers among others hate ignoramuses like you because your ignorance is so tiresome, asshole.

  • SFC B||

    I'd love to see shrike's preferred politicians get "Old people must be treated by PA's" passed.

    I really would. I'd vote for Bernie Sanders (were I VT resident) if he advocated removing the doc fix by having non-docs treat those who get Medi*.

  • sevo||

    Problem here is presuming shrike actually proposes anything.
    Shrike is the pure troll; find some opposing view, copy/paste here and throw in some 3rd-grade vocabulary; like your neighbor's leaf-blower on a summer morning but without the advantage your neighbor gets.
    But I agree with your comment.

  • Old Mexican||

    Re: Shrike,

    My solution is very pragmatic and cost-effective (again) - assign interns and P/A's to work on MediXXXX patients and remove the doc fix thus saving 23% immediately.

    So you want to get rid of licensing laws?

  • ||

    So we’ve replaced a $43 billion problem with a $100 billion solution.

    Multiplier!

  • I Should Be A Judge||

    When you breathe, you inhale oxygen and exhale carbon dioxide. The relative scarcity and/or supply of these various elements affect the market price of these elements (not to mention the climate change related aspects and relative economic effect of carbon dioxide oversupply in the atmosphere). Ergo, breathing is an economic activity. As health care availability may affect one's ability to continue breathing, anything that has an effect on that availability, such as failure to purchase health insurance, is therefore defacto economic activity and regulatable under the commerce clause.

  • ||

    I love it when Reason picks up on my arguments.

  • Tman||

    "they like ME, they REALLY really Like ME!!

    You deserved a tip for the headline in this thread.

    http://reason.com/blog/2010/12.....nt_2047663

  • ||

    Nah. I like being the shadow contributor.

  • ||

    And now they care just going to deny the care they would have given to you uncompensated and take the money anyways. That's how it works in Canada.

  • sevo||

    Bet it takes another gov't program to 'fix' that problem.

  • sevo||

    "Far from “inactivity,” by choosing to forgo insurance plaintiffs are making an economic decision..."

    I make plenty of decisions which result in "inactivity". For instance, I might decide to turn over and go back to sleep in the morning.
    Looks like I'm in trouble.

  • ||

    Please refer to this judge by his proper title, Clinton appointee Judge George Steeh.

  • Binky||

    by choosing to forgo insurance plaintiffs are making an economic decision

    By choosing to forgo playing the legal lottery I am making an economic decision. By choosing to forgo buying illegal drugs I am making an economic decision. Both the lottery and the black market affect the nation as a whole. Should I be fined for these decisions as well?

  • ||

    Probably.

    Irnonically, if you forgo actual work, you are rewarded. So stop working and start jogging. Its for the economy.

  • Paul Krugman||

    And be sure to carry some window-smashing bricks!

  • FleeingCali||

    It's my understanding that most illegals and/or poor won't have to purchase insurance under the individual mandate. I think the threshold is 8% of your income and your income is over the poverty line. If you don't meet the threshold, then you won't have to pay and will get your insurance for free through various subsidies. Is that right? If so, then it's really just penalizing the young, healthy, middle-class or higher and transferring their dollars to the poor.

  • ||

    It always about wealth transfer. That's all liberals can understand.

    Oh, and smoking pot is OK if you're trendy, but verboten if you're not.

  • Obama||

    I will cut taxes to the bone. I will cut the federal alphabet soup agencies to the bone, and advocate getting rid of half of them. I will negotiate with the Republican congress like a California municipal officer negotiating with the head of the public employees union, giving them everything they want and throw in a few extras like a permanent end to the estate tax. I will make Reagan look like Mondale, and George W. Bush look like Carter at a peace summit. I will expand the wars, expand the CIA hit jobs, show Iran up with a series of humiliating and very public checkmates, and I'll do everything else every Goddamned yahoo between the Coasts wants me to do to the point that in two years they will vote me in for four more. All of this I will do to protect my landmark legislative achievement. If I'm still president in 2016, there is not a chance in Hell you will reverse it by that point. I'll do anything to see to it that you wont even try to stop me in 2012.

  • ||

    I have posted this already here before You guys should stop complaining because, one the health care we have now isnt as good as it was supposed to be. also the law has just been signed so give it some time. so if u want to say u have the right to choose tell that to ur congress men or state official. If you do not have insurance and need one You can find full medical coverage at the lowest price check search online for "Wise Health Insurance" If you have health insurance and do not care about cost just be happy about it and believe me you are not going to loose anything!

  • Calvin Tran||

    Oh here go hell come!

  • Cyto||

    So we’ve replaced a $43 billion problem with a $100 billion solution.

    This assumes that they are being honest about their reasoning. Which would be your first mistake. All parties involved in pushing the healthcare bill made it clear that their true objective was to move to single-payer government run healthcare and that this plan was a camel's nose under the tent intended to get us to a single payer system in about 2017.

    So taken in context of the true goals and objectives of the bill's supporters, $100 billion per year is just advertising costs for their $2.5 trillion dollar per year solution. Peanuts really.

  • ||

    The other $57B is for the federal jobs program that will be needed to run the damn thing.

  • ||

    As I posted on the earlier piece on same subject: The core story here is a blatant attempt by the government to "newspeak" the real meaning of "cost shifting." Cost shifting in actual actuarial terms is the rather huge amount of underpayment by government programs (Medicare and Medicaid) to providers that in turn drives up the price to all other payers as those providers attempt to make up the generally below cost payment from the government. This amount more than likely dwarfs this $43 Billion figure, and is the main source of destabilization, disruption, and distortion in the US medical expense system. If providers were required to set (by provider) and charge a consistent price for their services to all payers, and those payers (including the government programs and all insurers) had to accept those charges without an ability to negotiate discounts (thus requiring balance billing to be an accepted and in fact expected and required element of the system), a truer market equilibrium would largely solve the "cost curve" problem within both the medical services sector and the medical insurance sector. This in itself would not take care of the voluntarily uninsured "problem," but it would make for an environment where the true cost of such care can be evaluated and addressed. Right now, no one really knows what medical care is "worth" because of true cost shifting.

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