NCPA - National Center for Policy Analysis

Senate Better Care Act: A Big Bunch of Sausage Meat Loaf

June 30, 2017

Senior Fellow Devon Herrick writes at Townhall:

Backroom policy deals have been described as akin to making sausage. You don't really want to see it done or you'd lose your appetite. The new Senate health bill is more like meat loaf than sausage, however. By that, I mean a recipe composed of delicious ingredients mushed together with really distasteful ones in an unappetizing blob that could have been a great burger but wasn't. Remember that 1977 song "Two Out of Three Ain't Bad" by the band Meat Loaf? That pretty much sums up the Senate health reform bill.

The Better Care Reconciliation Act of 2017 (BCA) proposes a couple good changes: it repeals the Obamacare mandates and associated taxes, sort of caps Medicaid growth but does nothing to make health coverage a better deal for most people. First and foremost, BCA does not attack the root cause of high premiums. These are the regulations requiring insurers to accept customers they do not want and make up the difference by overcharging desirable ones. The catch: gouging good customers makes them less likely to enroll since their perceived need for health coverage is lower. Without profitable customers, premiums must rise to cover all the unprofitable ones.

To be precise, the Better Care Act does not repeal Obamacare's costly guaranteed issue/community rating regulations. Everywhere these regulations have been tried, they resulted in adverse selection. Adverse selection is a condition where sicker than average consumers are most likely to join because it's a bad deal for everyone else. This causes medical claims to skyrocket, requiring premium increases to compensate. Each successive round of premium hikes causes a fresh round of healthy people to drop out -- leading to more premium hikes. For the small number of sick people, Obamacare is a bargain, but it's a huge ripoff for the majority of people without health problems.

 

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