Craighead Democrats

People seek out insurance as a method of pooling risk. Medical expenses can have a devastating impact on family finances. For this reason we turn to those who offer to insure us against those types of financial losses. And since no health care proposal is perfect (and since there are just a few days left before the election) it seems logical to assess the health care plans of both candidates.
After three and one half years, it’s obvious that President Trump has no health care plan. What efforts he has made revolve around making modifications to the Affordable Care Act (ACA). The time frame for signing up for the ACA has been shortened, and information regarding when and how to sign up for insurance has been reduced. In addition, Trump views the elimination of the individual mandate as his most significant achievement. Beyond this, the Trump administration has made no effort to increase the subsidies to those who qualify.
The effect of reducing the time frame and information needed for signing up for health care insurance was to reduce the number of people who could otherwise sign up for the ACA or change an existing plan. The elimination of the individual mandate created a more significant problem, one that economists call adverse selection. This is where those who intend to immediately use the insurance plan have an over riding incentive to purchase it. Thus, people in poor health tend to be the first purchasers of health insurance, with healthy younger individuals being the ones to opt out of purchasing insurance.
With younger and healthier people opting out, the remaining individuals in the pool are more expensive to insure leading to higher premiums. If premium hikes cause the number of insured individuals to further decline, the resulting smaller pool will only accelerate premium increases driving the exchange toward collapse. The results from dropping the individual mandate were predictable.
According to the Census Bureau, adults ages 19 to 34 had the highest uninsured rates of any age group in the United States, according to the 2019 American Community Survey.
People in this age group had an average uninsured rate of 15.6 percent compared to 5.7 percent for those under 19, and 11.3 percent for adults ages 35 to 64, and 0.8 percent for individuals 65 and older in 2019.
If the Trump administration’s efforts to eliminate the ACA via a Supreme Court decision are successful, private insurance will revert to the prior rules of the game which among other things allowed for the exclusion of those with pre-existing conditions. According to a new analysis by the Department of Health and Human Services, 50 to 129 million (19 to 50 percent of) non elderly Americans have some type of pre-existing health condition, meaning that they will be permanently ineligible to obtain insurance. Beyond the problem of adverse selection, eliminating the ACA means that the expanded Medicaid option under the ACA will be eliminated, dealing a potential death blow to many rural hospitals, and eliminating insurance for as many as 225,000 families in Arkansas alone.
Biden’s health care proposal comes with its own limitations. Services that are free tend to be over utilized. To avoid overutilization, insurance plans, including Medicare, come with yearly deductible payments and co-pays. If Biden’s Medicare option contains no deductible payments or co-pays this could be a problem. Deductibles and co-pays need not be overly large to be effective, simply having some “skin in the game” tends to make consumers of any good or service, a better shopper.
Biden’s plan also calls for allowing anyone who likes their private insurance to keep it, while also allowing anyone over 60, who wants to move to Medicare to do so. But this shift to Medicare has problems that will have to be addressed. Private insurance offers hospitals significantly higher reimbursement rates, especially for elective surgeries, which are the bread and butter of hospitals. Even with the ACA, and the expanded Medicaid, we’re seeing a crisis in rural hospitals with many closing due to financial difficulties. If the number of Medicare patients increases relative to private pay patients, the difficulty, rural hospitals’ face will only increase. On the plus side, Biden’s plan calls for increasing market subsidies and increased funding for rural health and mental health services.
While neither candidate’s plan is perfect, Biden’s plan has the potential for improving affordable health care access with minimal disruption to the existing insurance structure. Trump, on the other hand, seems confused about the structure of our system. He criticizes Biden claiming he’s a socialist, while praising the care he received at Walter Reed. Walter Reed is a government hospital, and the staff is government employees, the very definition of socialized medicine.
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When it comes to comprehensive economic assistance, the Trump administration has decided to abandon the economy. This decision on their part makes no sense from an economic perspective and a political one. Ideally, economic policy would have the government running deficits during a recession, then moving into balance as the economy approach’s full employment. Although critics of fiscal policy complain about election years economic policies resulting in never ending budget deficits regardless of the state of the economy or which party is in power.
The problem with the Trump economic agenda is that it follows no logical pattern. Early in 2017, when the economy was in the expansion phase of the business cycle and unemployment had declined for seven straight years to 4.1 percent, Trump and the Republicans decided it was time for a massive tax cut. Two years later in 2019, growth rates were lower than they were during Obama’s last year in office, although unemployment was 0.6 percent lower than it was in 2017.
As head scratching as the 2917 tax cut was, his refusal to see the obvious need for additional fiscal policy action is beyond explanation. It’s not like he hasn’t been prodded from all angles to act. The House passed the Hero’s Act months ago, it’s passage in the Senate would have kept the $600 per week supplementary unemployment insurance payments flowing to families until the end of 2020. But Trump has chosen not to push the Senate to act of the House bill.
On October 06, Fed Chairman Jerome Powell addressed the National Association for Business Economics and sent a clear message to the Trump administration. In his presentation Chairman Powell said, “In the early stages of the crisis, the fiscal response was truly extraordinary. The unanimous passage of the CARES Act and three other bills established wide-ranging programs that provided roughly $3 trillion in economic support overall. The fiscal aid gave vital support to households. The rise in transfers supported necessary spending and contributed to a sharp increase in household saving.”
Chairman Powell has also cautioned that any economic recovery is not guaranteed. Too little fiscal support (in the future) would lead to stagnation, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise harming the economy.
As long as the virus is a threat, a total reopening of the economy is off the table. We can get a feel for how big a health threat the virus is by comparing the annualized COVID-19 deaths to the number of yearly casualties WWII and the Civil War to. Yearly total casualties in WWII averaged 108 thousand, with yearly total casualties in the Civil War averaging 144 thousand. By comparison, the twelve month projections put COVID-19 deaths at 325 thousand by late February, even then, the end of the virus may not be insight.
Thus fiscal policies must be designed to compensate for the decline in income, but they will not move the economy back to its pre COVID condition. Until the virus is eliminated, the best we can hope for is to put the economy in a holding pattern. In other words, use the power of government spending to sustain families with little or no income, assist home owners and renters to avoid eviction, assist those suffering from the virus and the medical expenses they incur.
So while we know what we should be doing, the Trump administration has shown it has no plans to assist the economy. In May, the House of Representatives passed the HEROES Act that called for more than $3 trillion in spending. That was more than 60 days before the CARES Act expired, but the Senator McConnell refused to allow the HEROS Act to be voted on.
On October 6, the same day as Chairman Powell addressed an economics meeting, the President ordered the Secretary of the Treasury to end negotiations with House until after the election, an order he rescinded after the stock market took a dive.
Democrats and the Republicans are still arguing over the size of the next round of assistance payments, with Democrats seeking a $2.2 trillion package and the Republicans refusing to go past $1.8 trillion, even though Trump as of this past Wednesday endorsed the idea of a bigger stimulus package. Both sides are acting as though this was a one-off, it’s not. No matter what stimulus package is passed, more fiscal actions will need to be implemented over the next year to eighteen months. Whoever wins the election will have to come to the realization that until we eliminate COVID-19, abandoning the economy because of outmoded beliefs about the country can and cannot afford, is not an option.

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