March 19, 2014
Bloomberg View columnist Megan McArdle gives us yet another rendition of the story of young invincibles killing Obamacare, (literally, it is the headline of the piece). Remarkably, the column actually notes the Kaiser Family Foundation analysis showing that young invincibles really don’t matter much for the program. This analysis points out that because young people pay much less in premiums than older people, it really doesn’t matter much whether they don’t sign up in proportion to their population.
The column then cites a column by Seth Chandler, which argues that a skewing by subsidy size could indeed cause problems for the program. Chandler’s analysis is undoubtedly correct and acknowledged explicitly in the Kaiser analysis. If only people receiving large subsidies of all ages sign up for the program then it will face problems, just as would be the case if only people with bad health signed up for the program. However neither Chandler nor McArdle present any reason to believe that such skewing would be correlated with the sign-up patterns of the young invincibles.
The Chandler piece also takes issue with the conclusion of the Kaiser analysis that the 2.0 percent increase in insurer costs that would result from an extreme skewing by age would be unlikely to lead to a death spiral for the system, pointing out that any increase in costs makes a death spiral more likely. While this is true, it is worth noting for comparison purposes that per capita health care costs in 2014 are about 10 percent lower than was projected in 2008. In other words, this 2.0 percent increase is only a little bit larger than average error in annual health care cost projections.
Thanks to Aaron Beeman for calling my attention to this one.
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