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JLeslie's avatar

Is Trump right that the the subsidies for health care raise prices?

Asked by JLeslie (55789points) October 15th, 2017 from iPhone

First, let me say that I am in favor of socialized medicine, and I have little faith that free market will result in overall lower prices for American healthcare costs.

Several months ago I had to buy health insurance and I got it through an “Obamacare” plan hoping I’m going to make little enough money that I’ll get about a $300 discount per month. I’m pretty sure I’m going to make too much money, and will wind up paying the $300 back to the government. It’s going to be a really close call, I’m really not sure.

Recently, I find out there are other plans I could have looked at that would have probably been cheaper. I didn’t understand all of this when I was looking for insurance. The only insurance available to me in my county is BCBS, and I kind of walked in the office with an idea that I would be qualifying for the government subsidiary, so I’m giving the woman who helped me the benefit of the doubt that we didn’t have a thorough enough conversation.

If it’s true that my insurance could have been lower if I had bought it outside of the “marketplace” then isn’t it true that the government is probably paying unnecessary subsidies?

I’ve questioned this sort of thing previously with college tuition. Because the money is flowing from the government, I believe universities probably have prices higher than really necessary.

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14 Answers

JeSuisRickSpringfield's avatar

Economics 101: marginal subsidies decrease the cost to the consumer while increasing the revenue of the producer. This is true regardless of whether the subsidy is on consumption or production. There are ways of spinning this to make it look like the subsidies are causing the prices of your insurance premium to increase, but the real cost will always be lower than it would be without the subsidy (unless the whole of capitalist economic theory is baseless).

This is why the decision to halt the subsidies is expected to drive up the cost of health insurance for middle class consumers. If conservatives want to complain about the subsidies creating market inefficiencies, then they’d have a case. The problem is, most voters don’t care about market inefficiencies, especially ones that keep them alive. Subsidies are an easy target, but they’re not the source of market instability. That’s caused by uncertainty about the cost sharing rules (which is a problem with the ACA itself, though one that has been exacerbated by all of the recent political maneuverings around the bill).

P.S. It’s not government subsidies that drive up the cost of college tuition. It’s the student loan system.

stanleybmanly's avatar

Of course he is right. But you have to see the underlying truth. What he is really saying is that costs can be controlled if you deny assistance to people who can’t possibly afford insurance. Another way of stating this is that if suddenly most people can’t afford to see a doctor, the price for an office visit will decline. It is absolutely true that our ripoff healthcare system becomes impossible without government money. Both the insurance and drug mafias would be up the creek minus federal payoffs. And Trump proposes to prove the obvious through the convenient expedient of sacrificing those without money to the rigors of the “free” market.

JLeslie's avatar

@stanleybmanly I’m not talking about paying for other people though, I’m talking about the insurers raise their prices, because they know the market can typically bear a $600 a month price point, so they raise their price to $900 so they can picker the profit.

The way the subsidy works is horrible too in that at $64k a year I get about $300 a month paid by the government, and at $64,001, I get zero. How the hell did they decide that it would be a drop off like that? It’s horrible. I’m discouraged from making a little more money. The BCBS women said a lot of business can get around showing incone, and work the system. I am a business owner, but I don’t see how I can do it in my business, so that’s not the case for me. I report all of my income. I also don’t have a business that I can screw around with the expenses, like a restaurant can buy food for their house and reduce their profit, etc.

flutherother's avatar

Anything Trump says about healthcare is suspect as he has promised that Obamacare will implode and he will do everything he can to bring that about. The health of the average Joe American is not a priority in Trump’s view of the world.

Health care prices are rising because of Trump’s threats to end subsidies. That uncertainty has put some providers out of the market altogether and has caused others to raise prices for 2018.

Trump’s tactics are plain. He will try to sabotage the Affordable Care Act while blaming the act itself for failing.

JLeslie's avatar

^^Healthcare prices have been rising exponentially for 20 years. The healthcare industry uses political battles to blame the high prices on the republicans or the democrats or the president, but really it has mostly to do with greed and profit.

Trump was the only republican on stage during the debates who said he was not going to leave someone dying in the street just because they are poor. Not that I am saying trust what Trump always says, but that was counterproductive to the message constantly said by the republicans. He also said we are getting robbed by the healthcare industry. Most republicans talk about capitalism being great and the industry is great because it’s greedy.

I actually believe Trump does want healthcare to be accessible to all, I just think he is in fantasy land about the free market solving the problem. Healthcare care has an unfair advantage over the consumer.

Mariah's avatar

Removing the subsidies will not only raise premiums by 25% by 2020, it will increase the federal deficit by $200 billion. This is because the federal government will still be providing subsidies to people who can’t afford their insurance, and there will be more of those people now that premiums are rising.

Removing the subsidies accomplishes literally nothing productive. He is breaking our healthcare just to put pressure on Democrats in Congress.

flutherother's avatar

@JLeslie Healthcare costs have been rising everywhere, including here in the UK, but Trump’s plan is forcing them up even more. I don’t trust anything Trump tweets or says.

JLeslie's avatar

^^Obama’s plan pushed them up too. Obama insured more people, but many people wound up paying more. I really don’t mind part of my money helping to insure others, because honestly, I don’t even think of it that way. First, I could have a major illness at any time, God forbid, and need the coverage myself. Second, I really look at like I’m paying in for MYSELF. At some point I’ll probably need an expensive treatment of some sort, or someone I love. What I resent, is paying a fortune so doctors make $400k a year, and hospitals and pharmaceutical companies make millions in profit. See that I wrote profit. No excuses for research for drugs, that’s part of the expenses of the developing the drugs, and expenses are already accounted for in profit.

They, the government, need to clamp down on profits. If they don’t address the cost of healthcare it won’t get solved. It doesn’t matter if we are paying directly, through employers, or through the government via taxes. If the bill is at the gouge level it’s too high.

I doubt the U.K. comes close to what we pay for drugs and services

Tropical_Willie's avatar

@JLeslie Sounds like you support a Single-payer healthcare including the pharmaceuticals. I also think that is a better away of healthcare.

JLeslie's avatar

^^I basically said that in my original Q. But, I also think blaming Trump for cost increases, and not blaming Obama also, is ignoring facts. I also think the healthcare industry has run wild for a good 30 years now, and many presidents have made it worse, or ignored the problem.

Pandora's avatar

Insurance rates go up no matter what because they can. They are simply a money making business. They aren’t really in the business of caring about anyone’s health. They only care about the health of their bottom line.
True subsidies may encourage them to raise prices because who doesn’t believe in greed in Wall Street, but the prices were always going to be on their way up. As their prices were increasing, the more people were dropping their insurance. So then what happened is emergency rooms became primary care and the cost of an emergency room is 10 times more. So when they couldn’t pay, then, who do you think paid for these emergency visits? The government will or hospitals will either turn people away or go broke. What people don’t figure in is that poor people are needed to keep prices down in other ways. It’s an ugly circle.

JLeslie's avatar

@Pandora I thought overall during Obamacare more people were paying for insurance not less?

Also, are you saying during the ACA years more people were going to the emergency room than previous years?

Unpaid ER visits are paid by everyone else who visits the ER, or probably even other parts of the hospital, who do pay. Like you said, the hospitals look to make a profit.

I don’t know how fast they will go broke if they charge more reasonable prices in the ER. Maybe they should be in profit. I know there is financial abuse even in non-profits, but it might help. Back in the day the churches owned and ran a lot of hospitals, and they were nonprofit. Now, even the hospitals that are run by religious organizations are profit based from what I understand. Is it’s true, I’m surprised it’s legal.

Edit: I just found this eye opening article about religious hospital profits.

Pandora's avatar

I was referring to conditions before the ACA. The ACA was becoming necessary because people didn’t have insurance through their jobs and could not afford to get private insurance. Especially those who had pre-existing conditions like asthma. So those who couldn’t afford insurance used the emergency rooms like it was urgent care. Then the hospitals would bill the government. So either way it was costing the government. I still don’t get why the ACA needs to be destroyed. Insurance companies did not make mad money the first 2 years or so, but they are back on track to making millions in profits. What the government needs to do is regulate costs of medical care and medications. I’ve lived in 2 states in the past 12 years and in one of them I have moved. twice. The cost of medical care is so different for the same care depending on where you live. In one place the cost of living was less then where I live now but the hospital and medical cost was almost twice as where I live now and that was some years ago. Same state. And the other state that I lived in also had extreme hospital prices. for a very low cost of living area.
I’ll give you and example of the difference in just a colonoscopy cost between a hospital and a doctor with a private practice in a small clinic.
Hospital. 12,000 dollars. Small clinic, 5000. Same exact procedure. Go in, get it done and and hour or two later you are home. For and emergency room visit with one xray, 10,000. The xray was about 500 dollars. The rest was for the emergency room visit. One doctor. one nurse to take vitals. No drugs, only asprins suggested for nerve pain. Out in one hour. I have insurance but I look at those prices and think they are crazy. Now these were a few years back. I hate to think what the prices are now.

Oh, I almost forgot. Took my daughter to a clinic when she had no insurance (none through her job and she was too old to be on ours) for her bad eczema rash and asthama. Doctor charged 89 dollars for initial fee. Gave her a quick look and quickly diagnosed all her issues and gave her one penicillin shot and steroid shot and gave her a breathing machine with a lot of little vials for her asthma. All for 150 dollars, total. In less than a week she was good as rain. Her skin cleared up and her asthma was under control. Actually didn’t need to go see a doctor for her skin for over 2 years after that. And the breathing machine helped her out for over a year. So why the huge differences in prices?

By the way. When she was on my insurance. They would charge 300 for the visit in other clinics and only gave her minimum care. Inhaler pumps that did basically nothing and if she got antibotics, they were in pills and did very little to actually get her infected eczema under control. Two to 3, months later we would be back in with her because the infection never truly went away and they would prescribe the same lame crap. This leads me to believe that doctors sometimes don’t want to really cure you if you have insurance. So long as you remain partially sick they can count on billing your insurance every few months.

All of this was before the ACA.

JLeslie's avatar

@Pandora I don’t see any difference before and after ACA in my personal experience with doctors or insurance companies regarding my care. Now, let’s make it plain that I had insurance before ACA, so that would be different than where you are discussing people without insurance.

I think my last colonoscopy was $2700? That was with a biopsy or two. I don’t remember how many.

I completely agree that preexisting conditions was a nightmare before ACA.

A lot of people use the emergency room because they can’t get to the doctor. Either because of work or no appointment available. Urgent care is popping up more and more in cities, but ten plus years ago they were harder to find.

Underlying medical costs is the key. Plus, as you said the costs can vary greatly from one doctor to another. Cost of living is not always the valid reason, sometimes it’s just more greed.

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