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SCOTUSCare Post Mortem: Goldman Warns Healthcare Costs Will Continue To Rise
Via Goldman Sachs,
- The US Supreme Court upheld the Obama administration's interpretation of the Affordable Care Act (ACA). This resolves most of the uncertainty regarding the subsidies under the law, though a few less significant legal challenges continue to work their way through the system. Congress looks unlikely to make any significant changes to the ACA this year, though a few smaller changes, like repeal of the medical device tax, are possible.
- While there was some uncertainty regarding the outcome of today's ruling, we do not expect it to lead to the same kind of rise in health employment that the resolution of uncertainty may have spurred in mid-2014. That said, continued strength in health employment and consumption seems likely.
The Supreme Court ruled yesterday (June 25) in favor of the Obama Administration's current implementation of the Affordable Care Act (ACA), denying claims from challengers that health insurance subsidies were improperly paid for enrollees in states that did not operate their own health insurance exchanges.
Q: What was the case about?
By way of background, the ACA (also known as "Obamacare") provides subsidized insurance coverage for low- and middle-income individuals through two main channels: an expansion of the existing Medicaid program to cover individuals with incomes up to about $16,000 and the establishment of a new system of “health exchanges” providing standardized insurance, which is subsidized for individuals with incomes up to about $47,000. To maximize coverage, the law requires insurers to provide coverage to anyone who applies for it, individuals face tax penalties for failure to purchase it, and employers face penalties for failing to provide it.
The case that the court ruled on today, King v. Burwell, hinged on the interpretation of one phrase in the ACA: the challengers contended that, when Congress stipulated in the law enacted in 2010 that subsidies would be allowed for insurance purchased through an "Exchange established by the State,” Congress intended that benefits would not be subsidized if purchased through the federally operated exchanges that operate in 34 states. The Obama Administration argued that the broader context of the law makes clear that insurance from both types of exchanges are eligible for subsidies and that other aspects of the law would be impossible or pointless to implement under the alternative interpretation.
Q: What did the court rule?
In a 6-3 ruling, the court sided with the Obama Administration's interpretation. The court took two steps to reach this conclusion. First, it showed that although the plain text of the legislation (i.e., the meaning of "established by the State") is straightforward, the meaning becomes ambiguous in the context of the broader law. Second, in light of this ambiguity, it judged the alternative interpretations of the purpose of this phrase put forth by the challengers to be "implausible."
The upshot is that the current system of subsidies is maintained and the Obama Administration will not need to make any changes to the program. The strong wording of the ruling also suggests that future administrations would have little flexibility in interpreting it differently. (This had been an open question prior to the ruling, though as a political matter the likelihood that a future administration would want to wade back into this debate was low in any case.)
Q: Will there be any more legal challenges?
Other legal challenges to the ACA are waiting in the wings. In May, the Federal District Court for DC heard another challenge to the law brought by House Republicans (House of Representatives v. Burwell). In that case, the challengers claim that the subsidies provided to low-income individuals to lower deductibles and other cost-sharing—these are separate from the premium tax credits at issue in the case decided today—were never specifically appropriated by Congress. The dollars at stake in this challenge are smaller (around $10bn in FY2016) but without these subsidies the cost-sharing associated with the insurance offered through exchanges would become unaffordable, and could lead to much lower enrollment (and hence lower subsidy payments in general). In addition to this challenge, a few other ACA-related cases are pending in federal courts, though they generally look unlikely to have a significant effect on the law.
Q: How will Congress respond?
Congressional Republicans will not be able to repeal the law this year or next, but might still try to block a few aspects of it. In theory, congressional Republicans might be able to use the budget "reconciliation" process to repeal major sections of the law. In their annual budget resolution earlier this year, they laid the groundwork for using this process, which allows Senate passage with a simple majority rather than the 60 votes normally required. However, such a strategy faces three hurdles. First, important parts of the law, like the requirement that insurers must grant any applicant insurance regardless of health status, probably cannot be repealed using this approach because it is reserved for budget-related matters. Second, repeal of the law is estimated to add $353 billion to the deficit over ten years ($137bn when macroeconomic feedback or "dynamic scoring" is included). Third, and most importantly, President Obama would surely veto a repeal of his signature health care law, and Congress would lack the votes to override it. The upshot is that until at least 2017, we can see no viable legislative path for major changes to the program.
Short of repeal, congressional Republicans may still aim to make incremental changes to the law. One of the annual spending bills winding its way through Congress would make it more difficult for the Administration to backstop risk in exchange plans (so-called "risk corridors"). The House has also recently passed legislation to repeal a tax on medical devices, and another bill to eliminate the Independent Payment Advisory Board (IPAB), which the ACA established to set the payment rates necessary for Medicare to stay under a given growth rate each year—these would take effect automatically unless overturned by Congress. Repeal of the medical device tax later this year is slightly more likely than not, in our view, though how and when remain unclear. By contrast, IPAB repeal seems unlikely.
Q: How could this affect spending and employment in the health sector?
Relieving residual uncertainty should support continued strong hiring in the sector. Uncertainty in 2013, ahead of insurance changes and the onset of ACA subsidies in 2014, may have been an important factor behind slow hiring in the health sector, shown in the left panel of Exhibit 1. The sharp rally in the stocks of health care providers following today's ruling suggests that the outcome was perceived as genuinely uncertain. That said, the consensus among investors and the health industry seemed to lean toward the court ruling as it did today, and the level of uncertainty surrounding this ruling seems to have been far lower than in 2013. Likewise, while health consumption may have been pulled forward from early 2014 to late 2013 in anticipation of ACA-related disruptions (for example, consumers may have wanted to have less time-sensitive services performed in late 2013 before they changed insurance at year-end), public awareness of this legal challenge was much lower and seems unlikely to have affected spending plans. The upshot is that employment and consumption trends in the health sector are already strong, and today's ruling should do little to change them.
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affordable health care
of course costs are going up, average american is a 70 lbs overweight unemployed high school dropout too lazy to exercise
The Supremes' Chief Justice Diana Ross is an idiot. ;-)
Looney
Are Goldman's "warnings" actually "warnings" ? or are they "Promises" ?
Health Care cost will rise but only for those that actually pay for it....and somehow Obama calls that equality?
Somebody tell those Jonathan Pollard Bibi-loving and Soros-Ukriane Junta loving "conservatives" over at Free Republic that Ted Cruz's wife works for Goldman and he brags that he is on her healthcare.
The dude is not the next Reagan.
Whatever side you are on for these decisions, notice how they all both "strengthen" the bottom lines of counterparties in a positive way.
However, surveillance, drug laws, labor - these will never change because any progress would AFFECT the bottom lines of the counterparties in a negative way.
Correct, given the success of the "war on drugs", the "war on poverty", and the "war on terrorism" I really hope we get a "war on physical fitness" or a "war on peace"....
I think a "War on War" would be too expensive.
A "war on wr" would result in moar war...
get long MIC companies in that case...
Wait, Im confused..who's right? Krugman says:
Paul Krugman: Conservative’s worst fears about Obamacare succeeding have been fully realizedConservatives were right about all their fears, they lost.
Leftists won.
America lost.
more like, anyone with half a fucking brain and a modicum of interest in calling balls and strikes knew that the government was simply going to ignore any and every challenge to their latest invention of undelegated powers.
When words are no longer anchored to their meaning, you have passed through the looking glass. Would a penalty be a penalty by any other name, or a tax? Does by the state sound ambiguous?
If the very words mean what anyone wants them to mean, I choose to interpret the law as a mere suggestion; require unambiguously means if you want.
"When I use a word,' Humpty Dumpty said in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less."
Impeach him. Prosecute him for treason.
Third world health care, here we come.......
We unafforded some folks....
It's cheaper to live off the government tit.
Welfare and SS disability is the new norm. Those manufacturing and technology jobs shipped off to India and China were the old economy.
The Federal Reserve can print all the money we need.
Right Krugman?
Not until 2016 is when its in full effect..still has alot of waivers now...just wait for 2 to 3 years when doctors start quiting the system....and more illegals get to join for free...costs will skyrocket.....in 5 years it will break this country...
"in 5 years it will break this country"
That's the plan.
Kill manufacturing, technology jobs, hike healthcare cost and education. Print money until it's worthless.
Have the majority of US citizens on food stamps and living off the government while the others work part-time in service jobs for the most part.
You couldn't figure out a better way to destroy a country.
I'm sorry, what exactly does "higher healthcare costs" mean when any given procedure might cost "X" at one hospital, and 10X at another? It's all pretty much totally random and subject to nothing resembling sanity or an actual functioning free market. When you're talking about something where the prices are set by moon phases, dart boards, and unchecked greed, it's really hard to make any sense of the notion that it's going to rise, because that suggests that there is some semblance of a baseline that it is going to rise from.
Huh? What are you talking about? UP means UP.
"X" becomes "3X". "10X" becomes "30X". Or "50X". Or "100X"
EVERYTHING goes up...first by a little, then by a lot, then finally to infinity, upon which medical care gets 100% allocated by politicians, to the politically favored.
Get it??
Afraudible care. Brought to you by the most transparent administration ever.......
I would never risk my family's financial independence by becoming a victim of the Obummercare system. However depending on the circumstances, I might consider leaving the country for quality medical care and pay a fraction of the US prices in cash or gold.
US "Health Care" is nothing but a bunch of quacks tapping away at their tablets, worthless turds all.
In the US I would trust a competent country veterinarian who can still use his or her brain over any MD or DO.
The US system sucks. I would rather die than be "treated" by US medical scum.
America 2015
Breaking the crosses off war memorials and dishonoring the Confederate cause.
Austerity has landed on the beaches and gotten a foothold.
Forget race war, it's class war from here on out.
Congressional Democrats created a private health insurance cartel pretty much like Republicans created a private banking cartel a hundred years ago. It's taken me awhile to lose faith in the system. I was naive, manipulated, and stupid even. Now I know there is only one party. Their only goal is power. Just like in 1984.
Q: How will Congress respond?
A: Continue to heavily invest in insurance stocks.
B: Continue to accept donations from Big Pharma and Big Sickcare
C: Pass through the "revolving door" to the "private sector" to receive your multimillion dollar payday upon retirement from CONgress.
D: Use their immunit from insider trading law to bet 10x what the farm's worth, at the right time
No fucking shit you robber barons!
The USSR is gone and replaced by the USSA. I expect the USSA to last 20 more years...then BOOM!!1
"I expect the USSA to last 20 more years...then BOOM!"
Your optimistic.
There flooding the US with H1Bs and then using the TPP to take any other jobs that are left in the US.
And these CONgressmen and Senators keep being voted in.
But fags can legally get married, so who gives a fuck about affordable healthcare, right asshole? Titsoona Mangina really can do no wrong, especially on the domestic front this week. Give him another Nobel Prize and a facade on Mt. Rushmore. What a hero, a statesman, a true man of the people - golly they just don't make men like this anymore - concerned about doing the greatest good for the greatest number of people in the greatest country in the world he was undoubtedly born in!
Fuck you your legacy is gonna be remembered positively by a few and negatively by a great many.
Health care costs go up further? The U.S. health care cost is 3X that of Japan's. Normed to Germany's mostly white European population, U.S. costs are 2X. In plain money terms, a U.S. dollar would buy 3 dollars worth of medical care in Japan.
Rent seeking and monopoly pricing is everywhere, driving up costs. Giving monopoly powers to insurance companies guarantees privledge to a "class" of special interests. Obamacare is guaranteeing Oligarchial Privledge to "Insurance" corporations.
Insurance oligarchy is part of FIRE (finance, insurance, and real estate). All of these groups are working together. Since Obama is but a manipulated puppet on strings, it is easy to see how U.S. Oligarchial interests are gaining rent extraction on the backs of U.S. laboring population.
The cat needs to bite the hand.
Power, Power, Power! We need more Power!
- We need Term Limits for Lawyers, Bankers, Lobbyists, Politicians, and Government (Federal) Employees!!
- Idiot Republican Congress was hoping the Supreme Court would do what it IS TOO Chicken to DO!!
- Audit Health Care, Find out where the Money is going, Apply Cost Controls, Monitor/Track Costs & Profits & Expenditures like Rate of Leasing/Buying New Equipment & Building Expensive Offices and New Facilities, use a Program Manager Approach to "Control" US Health Care Costs
- Change Financial Ratings Organizations, to consider high Admin Costs, High Overhead, High Executive Compensation
- Or just Cancel Obama Care and apply Reforms to Industry which has Increased the Costs and Drug Costs
- Senate Showing Its Age...
- As gray as it's ever been...
http://blogs.rollcall.com/hawkings/average-age-of-senators-health/?dcz=
Like "warning" that the sun will come up tomorrow...
Pay attention to (courtesy of Express Scripts)-medication aherence scoring for anyone who fills a prescription. This is bad stuff as you are dinged just for being a man here, got kids..well they have to go as well if you want to increase your medication adherence score. This is nothing but 300 bullshit metrics that if we had the opportunity to tear down the compiler that holds the discriminating code and queries in this thing, we would be shocked and law enformcement would touch down, that is if algorithms are found to be given illegal authority to discriminate. Humans can't do it but those algos can rock the world with unjustitied segementation like you can't believe, sadly.
I'm hoping some big fat Congressmen gets a hold of this or even someone like Donald Trump to demand their score and we could get rid of this money making sow that big pharma pays for. Medication adherence is always for the drug companies to blame consumers when sales are slow..total BS. This will via segmentation reduce your access to some drugs too, i.e. the expensive ones.
http://ducknetweb.blogspot.com/2015/06/medication-adherence-predictions-...
So that's one way how the cost of healthcare will be attacked and if it's not that, well there's the health insurers also evaluating your current state of mind on the phone with their call centers, and yes this is happening and the scores are sold. Welcome to the world of Algo Medicine denials, this is SCOTUS care.
http://ducknetweb.blogspot.com/2014/05/this-call-may-be-recorded-for-qua...
American health care costs are fucking stupid! can you yanks not see that you are being bull fucked right up until your final moment. Yes it is the same here in England, they claim the National Health service is brilliant but its not. If the price of the cure is to high they will watch you die. Big Pharma' and all the corporations connected to it are greedy heartless mother fuckers! Its time to bring the chaos! If my comment offends any yank I do not care! you had it all! and you fucked it up! For some reason England became the power base of scum Jewish bankers centuries ago. The English never saw it coming and are subjects of the bankers to this day! America managed to fight the bastards off But let them back in with the Fed Reserve in 1913. It was never the British Empire it was always the bankers empire and they just use American kids as there main source of cannon fodder these days instead of British kids. Its time to burn things down!
Ah bollox! I just remembered 1190 On March 16th 1190 a wave of anti-Semitic riots culminated in the massacre of an estimated 150 Jews – the entire Jewish community of York We got rid of the money lenders, but alas Oliver Cromwell let the fuckers back in! I guess my drunken rant is about kicking the bankers out! And keeping them out!
http://www.historyofyork.org.uk/themes/norman/the-1190-massacre
5 years later, Obamacare's broken promises get worse