Obama Claims Repealing ObamaCare Would Benefit Insurers. In Fact, They Stand to Lose $1 Trillion

At last week's presidential debate, President Obama defended his health care legislation from GOP rival Mitt Romney's threats to repeal the law. 

In his pitch, the president pitted individuals against health insurers, arguing that patients and families would lose while health insurance companies would gain if the legislation is excised from the books. On two occasions, he mentioned the rebates insurers have already paid out thanks to a provision in the law, rebates which have totaled over $1 billion. 

"The primary beneficiary of that repeal," he said, "are insurance companies that are estimated to gain billions of dollars back when they aren't making seniors any healthier."

But the president's Big Corporations Vs. Little Folks narrative doesn't stand up to much scrutiny. The health insurance rebates, for example, may actually be making health care more expensive overall, and because many of those rebates are sent to employers, many individuals won't see the rebates directly.

Regardless, the $1 billion in rebates customers stand to lose doesn't come close to what the health insurance industry has on the line. According to a Bloomberg Government study from May, insurers stand to lose $1 trillion in revenue if the law is repealed.

As Square One taught us, $1 billion is big, but $1 trillion is bigger

It's not just health insurers. Most of the health system's biggest and most powerful industries are betting on the law to boost their bottom line. The drug industry cut a deal with the White House to help finance the promotion of the health law. And following the debate, investors in the hospital industry got spooked. Via MarketWatch:

Investors in hospitals started heading for the exits in the wake of President Barack Obama’s lackluster debate performance by selling off shares in virtually all companies in the sector early Thursday.

With the prospect that Obama — who spearheaded the health-care overhaul bill that gives aid to hospital balance sheets — could be vulnerable in his re-election bid against Republican Mitt Romney, shares plunged even though the broader market enjoyed substantial gains.

...In a morning note to clients, CRT Capital Group analyst Sheryl Skolnick said: “After an at-best lackluster and at-worst pitiful performance by President Obama in last night’s debate, health care investors have to be wondering this morning whether the reform-on play of the last several weeks is the right one going into the Nov. 6 election.”

She added: “Investors who are long hospital stocks this morning should be thinking, ‘Thanks a lot, Mr. President,’ at least in our view.”

Part of the reason that President Obama was able to get a major health care overhaul passed was that the law's Democratic authors agreed not to seriously upend the current health system. Instead, the law built on top of the existing system, leaving most of its flaws in place and coaxing current players into supporting the law through horse trading and handouts. In the end, insurers and the rest of the health industry got a bill they felt they could live with, and arranged their business accordingly. As polls repeatedly remind us, on the other hand, you can't say the same about a majority of the country

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  • Almanian's Evil Twin||

    I never would have guessed that government meddling with the health care market would benefit teh Evul Kochporashunz, and that potentially NOT engaging in that meddling would NOT benefit teh Evul Kochporashunz.

    Ya learn sumpn ebby day.

    /derp

  • 16hnny||

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  • Almanian's Evil Twin||

    Also, Flustered! And Secondtard!

  • The Late P Brooks||

    Investors in hospitals started heading for the exits in the wake of President Barack Obama’s lackluster debate performance by selling off shares in virtually all companies in the sector early Thursday.

    Don't tell Mika Fluffszinski.

  • RBS||

    "The primary beneficiary of that repeal," he said, "are insurance companies that are estimated to gain billions of dollars back when they aren't making seniors any healthier."

    Hmmm, I had no idea it was insurance companies that are responsible for "making seniors healthier."

  • wareagle||

    come on, now. Something is only a lie when Mitt says it.

  • flye||

    Certainly hospitals will gain financially under ObamaCare due to the reduction in uncompensated care, so this move by spooked investors makes sense. But health insurers will do very poorly, despite this promised influx of new members, due to the new rules that distort the insurance market beyond all recognition (primarily Guaranteed Issue and Community Rating).

    These will eventually kill the insurance model and turn health care finance into a sort of government utility. To many this is a feature, not a bug.

  • John Thacker||

    But health insurers will do very poorly, despite this promised influx of new members, due to the new rules that distort the insurance market beyond all recognition (primarily Guaranteed Issue and Community Rating).

    Not so long as they have the mandate, no. They'll make a fine, cost-plus, regulated profit.

  • KDN||

    Calling major medical "insurance" has been incorrect for ages, but we've never had the right word to express just what it is they are. Now we know: they're public utilities.

  • Jordan||

    I thought Community Rating was pretty much the law of the land everywhere, well before Obamacare was passed.

  • flye||

    Not exactly. The two rules work together such that insurers have to offer a plan regardless of the health of the applicant (GI), and cannot incorporate any risk factors into the price other than the few allowed by the new law (CR).

    Smoking made the cut on the latter, naturally. But not, say, being 8 months pregnant or having prostate cancer.

  • John Thacker||

    No. Community Rating was very rare beforehand, though I believe it was the law in New York and New Jersey, and they were thinking of passing it in California.

    In related news, the individual health insurance market was way more expensive in NY and NJ.

  • R C Dean||

    Certainly hospitals will gain financially under ObamaCare due to the reduction in uncompensated care,

    Slow down there, big fella.

    What we know for sure about ObamaCare is that it reduces Medicare reimbursement rates for hospitals, leaving a guaranteed loss for the large Medicare book of business.

    The reduction in the uninsured is purely speculative, and relies on the following:

    (a) States expand Medicaid, which many of them have already said they aren't going to do.

    (b) Companies not dropping existing coverage even though it gets more burdensome and expensive.

    (c) The uninsured buying insurance on the health insurance exchanges.

    Personally, I suspect that the number of people that hospitals don't get paid for will stay flat.

  • flye||

    I don't think the impact will be nearly as large as wishcasted by the CBO, but I don't think it will be flat either. In any case you are putting me in the position of being on the "less cynical about ObamaCare" side of the argument, and I am in no way prepared for that!

  • R C Dean||

    We'll see, won't we?

    I'm somewhat acquainted with the indigent/uninsured population now, and they know good and well they will get all the care they want, and will never pay a nickel for it. Their motivation for buying insurance, with or without subsidies, is zero.

  • robc||

    Was discussing the with my dad this weekend.

    He had stints for aortic aneurysms put in this spring, major surgery obviously. Total bill:211k. Medicare said: 36k. I think they paid 80% of the 36k and his supplemental insurance picked up the other 20%.

    How much did the hospital really lose doing that for 36k?

  • flye||

    Ambulances, for example, receive full compensation for patient-initiated calls less than 10 percent of the time. So imagine the rates they have to charge to cover that fact. Thus the difference between rack rate, Medicare reimbursement rate, and the interesting and probably unknown cash on the barrel head rate.

  • R C Dean||

    How much did the hospital really lose doing that for 36k?

    Dunno on that specific procedure, but I can tell you that across the entire Medicare book of business, hospitals typically run a loss today. "Breaking even on Medicare" is viewed as the gold standard of efficiency and financial acumen, achieved by a very few.

    And that was before the ObamaCare Medicare cuts went in.

  • Loki||

    Companies not dropping existing coverage even though it gets more burdensome and expensive.

    It's a pretty safe bet that this will happen. I've already seen the beginings of it in the aerospace industry in the form of many companies offering fewer choices of plans, and many going to self insured plans. Which I'm almost certain is a prelude to dumping insurance benefits altogether. And this is the aerospace industry, which relies on having a highly educated, fairly specialized workforce (IOW rare, aerospace engineers and techs don't grow on trees). I can only imagine how bad it's going to be for people in the service or retail industries.

  • Rasilio||

    "What we know for sure about ObamaCare is that it reduces Medicare reimbursement rates for hospitals, leaving a guaranteed loss for the large Medicare book of business.

    "

    No, we know that Obamacare "SAYS" it will reduce Medicare reimbursement rates.

    However we have had a law on the books since 97 which "SAYS" reimbursement rates to Doctors would be cut. Yet it has never once happened, every year Congress passes a bill overriding the cuts because if they didn't the majority of Doctors would simply stop accepting Medicare.

    Now, what do you think the odds are that large Hospital companies would not be able to make the same threat and get those rate cuts overturned?

    Sure you might see some small cuts over the next 5 - 6 years as Obamacare is implemented and then as Hospitals either start going into Bankruptcy as a result and/or start threatening to stop accepting medicare the rates will be frozen or even increased relative to inflation going forward.

  • John Thacker||

    The rebates are dumb, because they're based on a "percentage of money spent by insurance companies that go to medical costs."

    Problem 1: It entirely discriminates against higher deductible plans, because insurance companies don't pay that out. Have $1000 lower premiums but a $500 higher deductible-- congratulations, that looks like a worse health plan according to this stupid metric.

    Problem 2: A lot of the costs of an insurance plan are fixed per patient or per claim. So more and more expensive claims mean a better medical loss ratio. It essentially penalizes insurance companies for trying to keep costs down.

  • flye||

    Isn't there a word for when the government determines an acceptable business model for private companies? Clusterfuck? No wait that's not it...

  • Generic Stranger||

    Fascism?

  • The Hammer||

    Another lie from this cheap huckster.

  • Rasilio||

    This is the thing I have never understood about your average liberals support for Obamacare. Anyone who took 30 seconds to think through the outcome of the major provisions of the law would recognize that it was intentionally designed to ensure the profits of the existing large medical corporations and NOT benefit the average person.

    Sure there are a handful of people who will benefit from it, someone with no job and Lupus or something like that but for 99% of the populace it simply means paying more for health care and having less access to it.

    I mean this bill is so bad that it would probably have made more economic sense to have actually implemented a Canadian style single payer system and yet people still support it just because the holy Obama signed it (and he didn't really have much to do with drafting it, he left that pretty much up to the Congress).

  • Hyperion||

    There are already people benefiting from it. I am sure there are going to be different ways that organizations handle it, but here is what my employer is doing, regardless of whether it is a direct result of Obamacare or just that we need to jump on resdistribution wagon.

    Employees making more than 60k will see their rates increase by at least 25%, and the scale is progressive and it goes all the way up to 40+% increase.

    Everyone who makes under 60k will see their rate go down at least 25%, and that is also progressive meaning you could see up to a 40% decrease.

    In other words, resdistribution, high earner subsidizings low earners. The big O would be very proud.

    This is our nations new direction under the great divider in chief, punish success, reward sloth and failure.

  • Rasilio||

    My prediction:

    Over the next few years turnover of employees earning more than $60K a year at least doubles.

    $60K a year ain't even that much and unless your employer is picking up 98% of the health care tab I'm betting that most people earning between $60k and $90K a year probably can't afford a 25%+ increase in health insurance rates which would come out to an extra $600 - $2000 a year unless they are child free or a dual income family.

  • Loki||

    it would probably have made more economic sense to have actually implemented a Canadian style single payer system

    To many of these assholes this is a feature, not a bug.

  • Emmerson Biggins||

    I think that was the idea. Get something passed, no matter how shitty. Then later say "see what those mean republicans did when they prevented us from passing single payer?"

  • Hyperion||

    The left have a new plan. The brilliance of Joe Biden. No, really:

    Joe Biden’s Turn to Take Down Paul Ryan

    Here is just a small sampling of the insane and delusional ramblings, on Paul Ryan:

    All this has made him the GOP’s ideological leader—the devotee of Ayn Rand’s “objectivist” theory of selfishness, of the makers and the takers, who once said he got into politics because of Rand, which is sort of the moral equivalent of being inspired to go into the energy business by Enron.

    The bullshit gets much deeper.

    If you have a strong stomach, read this article. If you don't, best to avoid it. It made me feel ill just to realize that there are people living among us who actually think the way this author does.

  • R C Dean||

    I love the way Paul Ryan reading an Ayn Rand book as a kid makes him a crypto-Randian for life, but Barack Obama's 20 years ofproviding financial support to, and attending regularly, a racialist nutbar preacher's church doesn't mean a damn thing.

  • Hyperion||

    Yeah. I can only imagine if Mitt Romney would come out and say something like 'Well, you know, Ron Paul does have some good ideas and maybe we should take a look at them'.

    Every leftist in the media would be screaming from every rooftop that Mitt is a crazed Anarcho/Libertarian extremist who will drink the blood of children.

  • ||

    They're already screaming stuff like that because it's the only way they can try to energize the base with President Due-Processfree Drone Murderer's laughable record.

  • Zeb||

    I happ0en to think that both criticisms are pretty dumb. But Obama's association with Rev. Wright certainly seems worse than Ryan reading a book a long time ago and agreeing with some parts of it (he obviously is not a full on Randian).

  • mr simple||

    You seem to have SF'd the link.

  • Hyperion||

    Damnit. Here it is:

    Super Joe

  • KDN||

    Blank link.

  • Hyperion||

    I was obviously typing too fast for only half a cup of coffee. I re-posted it above.

  • The Hammer||

    What article?

  • The Hammer||

    Of course it's fucking Tomasky.

  • mr simple||

    Yeah, that was enough for me. I saw that and read the first paragraph and knew there was no way I could make it through that pile of shit.

  • Hyperion||

    Good choice. I read it all and now really wish that I hadn't wasted my time. I was waiting for the author to say something objective but it was just pure leftist drivel all the way down.

  • ant1sthenes||

    Enron? What does Krugman have to do with this?

  • The Late P Brooks||

    the moral equivalent of being inspired to go into the energy business by Enron.

    What? Where's Barbara Billingsley when you need her?

  • Barbara Billingsly||

    "Jive ass dude don't got no brains anyhow! Shiiiiit."

  • Loki||

    You mean Obama lied during the debate too? But I have it on good authority* that Mitt Romney was the first politician to ever lie and pander his way through a debate in the history of politics.

    *Kos, Huff-Po, and of course our resident sock puppets dipshits.

  • The Late P Brooks||

    "Breaking even on Medicare" is viewed as the gold standard of efficiency and financial acumen, achieved by a very few.

    EEK!

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