Coyote Blog

I like digging through the raw data in the Obamacare report rather than just accepting the bits the New York Times wants to report.  As a business guy, I was looking at the data from a sales-conversion perspective -- ie, who is buying and who is not?  And of course, why?

When I was in the marketing world, we used to call the process of sales conversion the sales funnel.  For the exchanges this means some percentage of the available market actually show up at the exchange, and then some percentage of those actually complete the arduous sign-up process, and some percentage of those actually select a policy, and presumably some percentage of those actually pay, though we don't know what that latter percentage is.  At each step, we ask ourselves what people are we converting from one step to the next, and why.

Here is the Obamacare exchange sales funnel through December (as has become tradition, it is a scavenger hunt to fill this in and the data locations move around from month to month).

As you can see, of the nearly 3.7 million people who have selected a private plan or been put in Medicaid or CHIP, fully 88% are on the government dole (subsidized or full Medicare).

The interesting new data is on the plan selection breakdown between subsidized and un-subsidized.   This leads to an interesting finding that is a bit non-obvious from the report itself because the data is spread all over the report.  But lets look at conversion of applicants to plan selection based on whether folks are subsidized or subsidized.

For the 2,383,131 applicants who find they are no going to be subsidized, only 436,603 have selected a plan, for a 18% conversion rate

For the 2,756,667 applicants who find they will get supported by the taxpayer, 1,646,237 selected a plan, far a 60% conversion rate.

In essence, applicants are more than 3 times more likely to sign up if they are getting taxpayer money.  The exchanges are not selling health care, they are selling subsidies.  People sign up, check to see if they have money coming, and go away if they don't and stay if they do.

The next really interesting piece of data would be the demographics and health status of the 18% who did sign up for an unsubsidized plan.  I would not be at all surprised if the demographics there were far, far worse than the average.  Emerging hypothesis:  People come to the exchange, and sign up if they get a subsidy, or if they have health problems or high risk.

The proletatrianization of the middle class has been a Marxist goal from the beginning.  To this end, Obamacare is making great strides.  I will get my new Obamacare enrollment summary out soon, but apparently 79% of the people buying private policies are subsidized.  Add to this all the people who are being added to Medicare, and my guess is that over 90% of enrollments are into plans fully or partially funded by taxpayers.  Since almost by definition, these are all people who were paying their own way before, these are all people converted from individual responsibility to wards of the state.

And don't forget my 9 predictions for Obamacare stories in 2014.  Remember this one?

3.  Despite fewer exchange enrollments than expected, total Federal subsidy payments higher than expected

Here are a few shoes that are left to drop for Obamacare:

1. Millions complain about their doctor no longer being in-network
2. Thousands of companies are finding it cheaper to drop coverage and pay Obamacare penalties than continuing to provide health care coverage under new rules
3. Despite fewer exchange enrollments than expected, total Federal subsidy payments higher than expected
4. Emergency rooms overflow with new Medicaid patients that no private doctor will take on
5. Exchange-sold health policies, particularly the unsubsidized ones, were mainly bought by the old and sick
6. Obama Administration works to bail out health insurers via a number of different avenues
7. Small to mid-size companies are shocked as Obama Administration finally reveals new record-keeping requirements
8. After 5 years of 3-4% growth, health care spending skyrockets in 2014
9. ________ health insurance company dropping coverage in  ____(state)_______
10. Hackers steal tens of thousands of names and social security numbers from health care exchange computers.

I will score myself as the year progresses to see how many of these we actually see.  I would not be surprised to see every one of these.

Normally, the closure of a business operation or division is not grounds for a celebration, but in this case I am going to make an exception.  At midnight on December 31, I not only drank a toast to the new year, but also to finally getting all my business operations out of Ventura County, California.

Never have I operated in a more difficult environment.  Ventura County combines a difficult government environment with a difficult employee base with a difficult customer base.

• It took years in Ventura County to make even the simplest modifications to the campground we ran.  For example, it took 7 separate permits from the County (each requiring a substantial payment) just to remove a wooden deck that the County inspector had condemned.  In order to allow us to temporarily park a small concession trailer in the parking lot, we had to (among other steps) take a soil sample of the dirt under the asphalt of the parking lot.   It took 3 years to permit a simple 500 gallon fuel tank with CARB and the County equivilent.   The entire campground desperately needed a major renovation but the smallest change would have triggered millions of dollars of new facility requirements from the County that we simply could not afford.
• In most states we pay a percent or two of wages for unemployment insurance.  In California we pay almost 7%.  Our summer seasonal employees often take the winter off, working only in the summer, but claim unemployment insurance anyway.  They are supposed to be looking for work, but they seldom are and California refuses to police the matter.  Several couples spend the whole winter in Mexico, collecting unemployment all the while.  So I have to pay a fortune to support these folks' winter vacations.
• California is raising minimum wages over the next 2 years by $2.  Many of our prices are frozen by our landlord based on past agreements they have entered into, so we had no way to offset these extra costs.  At some point, Obamacare will stop waiving its employer mandate and we will owe $2000-$3000 extra additional for each employee.  There was simply no way to support these costs without expanding to increase our size, which is impossible (see above) due to County regulations.
• A local attorney held regular evening meetings with my employees to brainstorm new ways the could sue our company under arcane California law.  For example, we went through three iterations of rules and procedures trying to comply with California break law and changing "safe" harbors supposedly provided by California court decisions.  We only successfully stopped the suits by implementing a fingerprint timekeeping system and making it an automatic termination offense to work through lunch.  This operation has about 25 employees vs. 400 for the rest of the company.  100% of our lawsuits from employees over our entire 10-year history came from this one site.  At first we thought it was a manager issue, so we kept sending in our best managers from around the country to run the place, but the suits just continued.
• Ask anyone in the recreation business where their most difficult customers are, and they likely will name the Los Angeles area.  It is impossible to generalize of course, because there are great customers from any location, but LA seems to have more than its fair share of difficult, unruly, entitled customers.   LA residents are, for example, by far the worst litterers in the country, at least from our experience.  Draw a map of California with concentric circles around LA and the further out one gets, the lower the litter clean-up costs we have.  But what really killed it for me in Ventura County was the crazy irresponsible drinking and behavior.  Ventura County is the only location out of nearly 200 in the country where we had to hire full-time law enforcement help to provide security.  At most locations, we would get 1 arrest every month or two (at most).  In Ventura we could get 5-10 arrests a day.  In the end, I found myself running a location where I would never take my own family.

And so I got out.  Hallelujah.

PS-  People frequently talk about taxes in California being what makes the state "anti-business."  That may be, but I guess I never made enough money to have the taxes really bite.  But taxes are only a small part of the equation.

Update:  Wow, reading this again, I left out so much!  An employee once sued us at this location for harassment and intimidation by her manager -- when the manager was her sister!  It cost me over $20,000 in legal expenses to get the case dismissed.  I had an older couple file a state complaint for age discrimination when they were terminated -- despite the fact that our entire business model is to hire retired people and the vast majority of our employees are 70 and older.  And how could I have forgotten the process of getting a liquor license?  I suppose I left it out because while tedious (my wife and I had to fly to California to get fingerprinted, for example), it is not really worse than in other places -- liquor license processes are universally bad, a feature and not a bug for the established businesses one is trying to compete with.   We gave the license up pretty quickly, when we saw how crazy and irresponsible much of the customer base was.  Trying to make the place safer and more family friendly, we banned alcohol from the lake area, and faced a series of lawsuit threats over that.

As I did in October, here are the Obamacare Exchange activity numbers to date, based on their recent report.  Hopefully this presentation is a lot clearer than the report.

I know the nomenclature is kludgy, but it is the report that is a pain to work with.  No CEO would ever let one of his business units get away with this garbage.  The report shifts from visitors and applications to people covered by applications, presumably to pump the numbers up.  This means, for example, that the 364,682 number of people who have selected a plan is actually the number of people covered by plans that have been selected (yeah, awkward, I know).  Given that they have on average 2 people covered per plan in their application pool, the actual number of selected plans is half this number.

That is the kind of cr*p one has to put up with in this report.  Further, there is no actual enrollment data, just number of people who have put a plan in their online shopping cart.  Worse, they have a split of subdidized vs. unsubsidized in their applicant pool, but not for the plan selections.  How many of the selected plans are subsidized.  My bet is that it is a high percentage, which is why they won't tell us.  Someday we will find that few of these people are actually selecting plans they intend to pay for with their own money.

For several years I have feared that my high-deductible health insurance would be illegal.  I am a big believer in high deductible insurance.  First, it is real insurance, requiring that I pay day-to-day expenses but protecting me from catastrophic bill.  Second, it improves the health care system by providing incentives for consumers to actually price-shop services.

Well, I was wrong.  In fact, most people see to be getting higher deductibles than they want.

My only excuse is that the Obama Administration has acted for three years as if they hated high-deductible health coverage and were planning to make it go away.  Kathleen Sebelius has said on a number of occasions that it is not "real insurance" (she believes that insurance should actually be pre-paid medical care).  Seriously, here is an example of what she was saying:

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

She is saying this all while the policies being prepared for the exchange were exactly the kind of coverage she was speaking out against.  And she had to know -- I cannot believe a former state insurance commissioner was not looking at what policies were being prepared for the exchange.  After all, her organization made the last minute decision to hide policy pricing from the public (e.g. deleted the window shopping functionality) and this almost certainly was in response to seeing the policies being prepared for the exchange and realizing the pricing and features were not going to make people happy.

By the way, there is a certain schizophrenia here that is entirely political:  These new policies have a $10,000 deductible, but they pay 100% for condoms?    They may well be creating a combination of catastrophic insurance and pre-paid medical care that has the worst of both approaches.

Politicians lie.  But what is it about this administration that lies in ways that are inevitably going to be discovered, in just a few months?  Can they really be so focused on getting through each individual news cycle that this kind of behavior makes sense?

I have seen several stories of late suggesting that minimum wage phase-ins tend to mask the full employment effects of the wage change.  That is because people tend to look at employment before and after the wage change itself, when in fact many companies may have already adjusted their employment long before the wage change goes into effect based on the original announcement.

This certainly rings true with me.  We decided to close one operation in California after the state passed legislation to raise the state minimum wage (the minimum wage change was one of three factors leading to the closure, the other being the PPACA employer mandate which would be particularly expensive at this location and vexing litigation harassment in this one particular area).   This means that for a minimum wage change that does not take effect until July 1, 2014, our decision to reduce staff came in the fall of 2013 and the jobs will go away on December 31, 2013, months before the minimum wage change actually takes effect.

I can certainly see how this would make designing a study to capture the employment effects of the minimum wage change very difficult.  From a more cynical point of view, it also makes it far easier for minimum wage supporters to understate the employment effects.

This same phase-in effect can be seen with the Obamacare employer mandate.  I criticized Brad Delong for arguing that we would not see any shifts to part time labor until the employment report after the actual start date of the employer mandate.  But I know our company had been shifting people to part-time status in anticipation of the start date nearly a year earlier, as had most other retail businesses.  While it may be normal for the government to put off working on something until on or after the due date (e.g. the Obamacare web site), private industry tends to start planning and implementation of responses to government regulations months or years in advance.

Almost three years ago, I wrote over 5000 words on problems with Obamacare in three parts (part 1: information, part 2: incentives, part 3: rent-seeking.  Since then I have discussed how Obamacare is forcing the retail service sector into a part-time work model, how my policy was dropped, how the real price increases are coming next year, and how millions of dropped corporate policies will soon follow.

Not one single word was about the web site.

We haven't even gotten to the point where the real problems of Obamacare will manifest themselves.  While the backlash may be very real right now, we are still in the  pre-season.

One of the real frustrations I have with Obamacare is that I believe we were on the cusp of a revolution in health care costs and payment systems, which the PPACA will likely kill.  As more and more of us adopted high-deductible health insurance plans, there was an increasing transparency in pricing, and new delivery models were emerging to serve this consumer-based, non-third-party payer health niche.

I think this even more as I read about the CMS revising its future health care cost inflation numbers to take into account a flattening of medical price inflation that has been occurring over the last few years.  The Left has hilariously claimed credit for this cost reduction via some kind of time-travelling effect of not-yet-implemented PPACA measures.  But Charles Blahous reads the CMS report more carefully and finds that the PPACA has nothing to do with these inflation reductions, and in fact is if anything slowing the cost reduction progress.

The obvious point that leaps out from this graph is that the chief CMS actuary found that the ACA would increase national health expenditures through 2016. Not content to let the tables speak for themselves on this point, CMS was explicit in the text of its memorandum that the ACA increased the near-term cost projections:

“The estimated effects of the PPACA on overall national health expenditures (NHE) are shown in table 5. In aggregate, we estimate that for calendar years 2010 through 2019, NHE would increase by $311 billion or 0.9 percent, over the updated baseline projection that was released on June 29, 2009. Year by year, the relative increases are largest in 2016, when the coverage expansions would be fully phased in…The increase in total NHE is estimated to occur primarily as a net result of the substantial expansions in coverage under the PPACA…”

...CMS is now projecting slower health care expenditure growth than they were in 2009 and 2010. CMS’s current projection of 2016 health spending totaling 18.4% of GDP is 1 percentage point lower than its June 2009 estimate (19.4%) and 0.9 points lower than its February 2009 estimate (19.3%).

Why did CMS lower its estimates of future health spending? It wasn’t because of the ACA. We know this for a fact because CMS has released a memorandum detailing the reasons for changes in their ten-year outlook since April 2010. Here are the factors CMS cited, and the percentage of the improvement each was responsible for:

1) Medicare/Medicaid/other programs “unrelated to the ACA” (50.7% of improvement).

2) Other factors “unrelated to the ACA” (26.1%).

3) Updated data on historical spending growth (21.8%).

4) Updated macroeconomic assumptions (6.1%).

Now, that adds up to 104.7% of the total improvement. The reason these four factors add to more than 100% is that a fifth factor, the “impact of the ACA,” worked against the improvement. Per CMS, adjusting the April 2010 projections for the subsequent impact of the ACA shows it further increasing spending over ten years (equal to and opposite from 4.7% of the total change).

Kevin Drum thinks it is an insight to his readers that the insurance companies are a source of support for President Obama in keeping Obamacare alive.  And perhaps it is a surprise.  After all, most of the anti-insurance company rhetoric was for the progressives, who are always fired up for any endeavor they think will punish a private corporation.

The rest of us understand that of course the health insurance industry is all for Obamacare. For them, this is the greatest bit of crony legislation in history. For all the Administration rhetoric, essentially the US government has required that every citizen buy their product, and subsidizes many of these purchases with taxpayer money. Corporatism is rampant nowadays, a bipartisan affliction, but ethanol is that only other industry I can think of that has been granted this ultimate crony grail of subsidies combined with a requirement to purchase  (though maybe ethanol wins because, at least for cellulosic ethanol, there is actually a mandate to purchase a product that does not even exist).

Hospitals are required to treat everyone who shows up at the door, which results in a substantial amount of uncompensated care that hospitals must spread into their rate structure for other patients (and which also gives the lie to the syllogism that being uninsured means one does not have access to health care).

Supposedly, the PPACA was going to eliminate all these costs.  Actually, it does not eliminate these costs, it just changes who subsidizes them.  Currently, other hospital patients (and their insurers) subsidize this care.  In the PPACA medicaid expansion, some of this subsidy would shift to taxpayers  (whether the actual amount of costs subsidized would go up or down depends on your assumptions as to whether the Feds or the hospitals are better at managing them).

But hospitals think they might have found a third approach.  By law, insurance companies cannot legally turn down any applicants, particularly through the exchanges, based on their health condition.  So why not have the hospital (or its non-profit Foundation) buy policies for its perennially most expensive uncompensated patients?

US hospitals are exploring ways to buy “Obamacare” insurance plans for their sickest and poorest patients as they strain under the weight of tens of billions of dollars in uncompensated costs from the uninsured.

...The controversy is another reminder of the complexity of the US healthcare system, where hospitals are forced to pay about $40bn a year in so-called “uncompensated care”. People who are not insured go to emergency rooms because they cannot legally be turned away, and often hospitals bear the brunt of the costs.

“Hospitals are considering it,” says Mindy Hatton, general counsel of the American Hospital Association, the hospital lobby group. “Hospitals shouldn’t be on the front lines delivering preventive care that patients should be receiving in a clinic or doctor’s office. That doesn’t make sense for anyone.”

This is insurance companies' worst nightmare, of course.  It would not take very much of this sort of thing to trash the whole insurance market.

The Administration response to all this has been typical of its behavior through the whole PPACA implementation.  In general their approach to all new problems has been to:

1. Make it clear that it hadn't really thought very deeply or completely about important implementation issues
2. Make snap implementation decisions to tactically deal with one problem only to find they had created new problems
3. When everything gets really messy, claim broad dictat-by-press-release powers it is not clear the law actually gives them

In this case, the Administration was faced with questions from Representative Jim McDermott.  He asked if exchange-sold health plans were considered Federal Qualified Health Plans (QHP) under the law.  If so, he pointed out that several of the things the Administration had discussed (e.g. allowing insurers to offer monetary inducements to customers who maintained good health habits) could be illegal under anti-kickback provisions.

As usual, it was pretty clear the Administration had no answer.  Or more accurately, had five different answers from five different people and agencies.  Kathleen Sebelius wrote back to McDermott that no, exchange sold plans were not QHP's and so the anti-kickback law did not apply.  This tactically solved McDermott's issue.  But it created large new issues, since it is the anti-kickback law that would have prevented hospitals from buying exchange plans for their most expensive patients.  If exchange plans are not QHP's, then hospitals considered that buying such plans was now legal.

All Sebelius has been able to do to temporarily quiet this mess has been to claim vague and unlimited powers to regulate virtually any behavior related to the exchanges.  Like Obama, she believes her press releases have force of law.  But in fact, even if she does have the claimed regulatory power, she actually has to go through a rules-writing process before any such rules can take effect.   These are structured, drawn out affairs with long delays for public comment.  This is the type of thing she needed to be doing 18 months ago.

The Feds are claiming they know of at least one Denial of Service (DOS) attack on the Obamacare exchange.  Talk about irrelevant.   This is a site that crashes under the onslaught of about a dozen regular users.  A DOS attack could be executed by me and three of my friends just by trying to log on and create accounts.  First day exchange visitors are guilty of an unwitting DDOS attack just for navigating to the site.

I was just thinking this morning that it would have been a funny Onion article to show some average schlub with a headline that Joe Smith was being accused of a DOS attack for visiting the exchange on October 1.

I had fun photoshopping (here, here) the first batch of these ads.  But now they seem to have entered the realm of self-parody, so here are some of the actual ads, without modification (source).

As a libertarian, I have no desire to grade the choices they are making.  I just don't want to subsidize them, though this seems to be the proud message of the ad campaign:  "Obamacare subsidizes bad choices and dangerous behavior".

This has to be one of the more bizarre moments in the history of insurance.  Never before has any insurance company likely ran ad campaigns aimed at attracting the worst risks.  The irony of course is that President Obama needs to sell this to young people precisely because most of them won't use it.

The Washington Post has a very good article on failures of Obamacare exchange implementation.  The Left is finding the article to be convincing evidence that the failures were all ... wait for it .. the Republican's fault.

Every single failure, save one, in the article (we'll come back to that one in a minute) was due to the Administration's fear of Republican criticism.  So results were hidden, bad decisions were made, and key steps were delayed until after the last election.  All because the Obama Administration appears to incredibly thin-skinned about criticism.

But blaming these decisions on Republicans and other Obamacare opponents is absurd.  One could easily say that the bad decisions made by the Nixon administration to cover up Watergate and other campaign shenanigans were driven by a fear of political reprisals by Democrats, but no one would be crazy enough to blame the Democrats for them.  It reminds me of the folks who wanted to blame failures in the Vietnam war on the anti-war movement.  But that is exactly what is going on here, and the amazing thing is just how many people seem willing to enable and support this incredible evasion.

The one other example that Republicans are supposedly to blame is latched onto by Kevin Drum, among others, quite eagerly.  Apparently, the PPACA legislation, which was written entirely by Democrats and passed without a single Republican vote, failed to actually provide financing for an enormous new organization to build and run the exchanges.  And, amazingly enough, Republicans refused to fix the Democrat's problem with the Democrat-written legislation in a law they hated and wanted repealed.  So the Obama Administration had to build the exchanges within the existing CMS organization, which botched the implementation.  And for THAT, apparently Republicans are to blame for it all.

Of course, beyond the just bizarre "buck stops anywhere but here" mentality, there are other problems with this logic.  First, it is hard to believe that a brand new greenfield organization run entirely by Obama's policy folks and completely without any systems experience would have done better than an organization that at least has some health care systems experience.  Further, would the schedule really have been aided by having to start an entirely new organization from scratch?  Finally, it is clear from the article that a large part of the reason for moving the work to CMS was not just money but a desire to avoid transparency, to bury and hide the work.  Even had the financing mistake** not been made, one gets the sense that Obama might have buried the effort inside CMS anyway.

In fact, this is the overriding theme from the entire article.  Every decision made for the Obamacare implementation seemed to be driven by political expediency first, avoiding transparency and accountability second, and actual results last.  It is well worth reading yourself to see what conclusions you draw.

** I am not entirely convinced it was a mistake.  Remember, the Democrats were scrambling to make the PPACA seem budget neutral.  They might easily have left out key bits of financing they know they needed, thinking they could hide the appropriation later.   A plan that died when Scott Brown was unexpectedly elected.

I have understood for years that politicians are power-hungry, irresponsible, ego-driven, and not nearly as bright as the image they like to project.  But some people still seem to trust them, even at times idolize them.  Post-Obamacare, how is that even possible.  Check out this interview with Senator Feinstein.

SCHIEFFER: The president said in the beginning that one thing was that if you liked the health care program you had, you could keep it. We now know there was debate within the administration before he said that as to whether that was actually a promise that could be kept. Should the president not have made that statement?

FEINSTEIN: Well, as I understand it, you can keep it up to the time — and I hope this is correct, but this is what I’ve been told — up to the time the bill was enacted, and after that, it’s a different story.  That part of it, if true, was never made clear.

You have heard the term, "low information voters" but this is the low information Senator.  Either that, or she is the dumbest liar on Earth.  She seems to have no idea what is actually in the most substantial piece legislation she has helped to pass in the last 10 years.  And as spin goes, this has to be the lamest.

Via Reason's Hit and Run

In the opening days of Obamacare’s October 1 launch, federal officials touted high web-traffic numbers, but repeatedly refused to provide enrollment data for the federally facilitated exchanges.

On October 3, White House spokesperson Jay Carney, pressed for enrollment numbers, said, “No, we don’t have that data.” On October 7, in an appearance on the Daily Show, Health and Human Services Secretary Kathleen Sebelius repeated the claim when questioned about enrollment: “I can’t tell you,” she said, “because I don’t know.”

But that simply wasn’t true—at least not during the first few days.

Leaked meeting notes from high-level war room briefings inside the federal health bureaucracy on October 2 and October 3 report that federal officials were aware of the exact number of federal enrollees on the first and second days in which the exchanges were running.

And, as seemed likely at the time, it turns out that the numbers were very, very low.

According to the notes, which were released by the House Committee on Oversight & Government Reform and taken from daily briefings in the Center for Consumer Information and Insurance Oversight, the federal office directly in charge of the exchanges, there were just six successful enrollments across the 36 federal exchanges on launch day.

A friend by the way sent me this stat:  Of the 5 million first day exchange visitors, more will be hit by lightening this year than successfully enrolled that day

Frequently, in selling Obamacare, President Obama and Administration officials said that if you like your health insurance you can keep it, period.

Suddenly, as of yesterday they are arguing that there were actually all sorts of implicit asterisks to this promise.  The exact meme is still evolving retroactively, but the favored excuse is to say that of course this promise only applied to "real" insurance, "real" being defined as having the features the President thinks the policy should have  (this despite the fact that the promise very clearly defines insurance suitability based on the customer's, not the President's, preferences -- he said if you like your insurance, not if I like your insurance).

But what strikes me is the word "period."  This word adds no extra detail to the promise.  The only point to including it is to emphasize that this is the entirety of the promise, without any additional disclaimers or elaborations necessary.   By saying "period", Obama was saying that there were no asterisks, no hidden small print.

Via the Daily Caller:

The White House is pressuring insurance companies not to speak publicly about Obama administration policies that could eliminate the existing health insurance plans of millions of Americans.

The administration made “clarifications” to the 2010 Affordable Care Act after it was passed that have already wiped out hundreds of thousands of existing health plans.

“Basically, if you speak out, if you’re quoted, you’re going to get a call from the White House, pressure to be quiet,” said CNN investigative reporter Drew Griffin on Anderson Cooper 360 Wednesday night. Insurance companies executives, Griffin said, ask heads of consulting firms not to criticize the Obamacare rollout debacle publicly.

“They feel defenseless before the White House P.R. team,” Griffin said. “The sources said they fear White House retribution.”

Prior to the Obamacare rollout, insurance companies issued warnings to the White House about the possibility of mass cancellations, which the administration ignored.

As has become usual of late, Jay Carney channels Ron Ziegler with this absurd answer.  Apparently, the fact that insurance companies are still engaged in routine conversations with their customers proves they have not been silenced from publicly criticizing Obamacare.

White House press secretary Jay Carney, however, waved off the allegations.

“That accusation is preposterous and inaccurate,” Carney said. “Plus, it ignores the fact that every day, insurance companies are out talking about the law, in large part because they are trying to reach new customers who will now have new, affordable insurance options available from providers through the new marketplaces.”

Obviously, the whole Obamacare implementation is in disarray.  Some of this I expected -- the policy cancellations -- and some of it I did not -- the horrendous systems implementation.  But I actually thought that most of this would be swept under the rug by a willing media.

What I really expected was for the true shock to come next fall.  And I think it is still coming.  I believe that despite rate increases, insurers are likely being overly optimistic about how much adverse selection and cost control issues they are going to have.  As a result, I expected, and still expect, huge premium increases in the fall of 2014.

Why?  The main benefit of Obamacare is for people who cannot afford health insurance but want it, and for people who are very sick and have lost their insurance.   Obamacare is a terrible plan as implemented because it futzes with virtually everything in the health care system when a more limited plan could have achieved the same humanitarian coverage goals.

Anyway, one reason Obamacare is so comprehensive is that it is based on a goal of cost control for the whole system.  Unfortunately, most all of its cost control goals are faulty.  From Megan McArdle, in an amazing article covering a huge range of Obamacare issues:

But I think it’s also clearly true that the majority of the public did not understand this. In 2008, the Barack Obama campaign told them that their premiums would go down under the new health-care law. And the law’s supporters believed it.

Q. Obama says his plan will save $2,500 annually for my family. How?

A. Through a combination of developing efficiencies in the system, expanding coverage to all Americans, and picking up the cost of some high-cost cases. Specifically:

-- Health IT investment, which will reduce unnecessary and wasteful spending in the health care system. Examples include extra hospital stays because of preventable medical errors and duplicative diagnostic tests;

-- Improving prevention and management of chronic conditions;

-- Increasing insurance industry competition and reining in the abusive practices of monopoly insurance and drug companies;

-- Providing reinsurance for catastrophic cases, which will reduce insurance premiums; and

-- Ensuring every American has health coverage, which will reduce spending on the “uncompensated” care of uninsured people who end up in emergency rooms and whose care is picked up by institutions and then passed through higher charges to insured individuals.

The part about reinsurance was always nonsense; unless it’s subsidized, reinsurance doesn’t save money for the system, though it may reduce the risk that an individual company will go broke. But the rest of it all sounded entirely plausible; I heard many smart wonks make most of these arguments in 2008 and 2009. However, it’s fair to say that by the time the law passed, the debate had pretty well established that few to none of them were true. “We all knew” that preventive care doesn’t save money, electronic medical records don’t save money, reducing uncompensated care saves very little money, and “reining in the abusive practices” of insurance companies was likely to raise premiums, not lower them, because those “abuses” mostly consist of refusing to cover very sick people.

The result?  Many of these things that supposedly reduced costs actually increase them.  So if you think the shock is high now, wait until next fall.  We will see:

• Rates going up
• Less choice, as insurers pull out of many local markets
• Narrowing of doctors networks, and reduced choice in doctors
• Companies dropping health care and dumping workers (and retirees if they can get away with it) into the exchanges and Medicare.

So I guess the Left has hit on its favored meme in response to the millions of insurance cancellations.  From Obama to Valerie Jarrett to any number of bloggers, the explanation is that the cancelled policies were "sub-standard".  We may have thought we liked them, but it turns out we were wrong.  Deluded in fact.

These folks -- despite not knowing my income, my net worth, my health situation, my age, my family size, my number and age of kids, my risk adversity, my degree of hypochondria, my preventative care habits, my diet, my lifestyle, my personal preferences and priorities, or any details about my insurance policy that I spend many hours analyzing and cross-comparing -- have decided they know better than I what health insurance I should want.

My plan was not substandard.  I graduated magna cum laude in engineering from Princeton and was first in my class at Harvard Business School.  I spent hours shopping for my coverage and was fully satisfied with my resulting policy.  Many of the aspects of my policy that cause Obama to call it "sub-standard" -- lack of mental health care, lack of pediatric dental care, lack of maternity care, lack of free contraception, a higher than average deductible -- were my preferences.  I got what I wanted.

More expensive, more highly featured products are not necessarily "better".  A Mercedes is not necessarily the best car choice for a middle class buyer just because it has more features than his Taurus.  Would Obama tell that person his Taurus is "sub-standard" and force him to pay for a Mercedes? If not, why the hell is doing the exact same thing but with health insurance OK?

From his speech today, via Bryan Preston

When Obama came to that section of his speech when the line usually falls, he went with a new spin. If you’ve lost your healthcare thanks to his law, he wants you to know that you were just “under-insured.” Because he says so.

“One of the things health reform was designed to do was to help not only the uninsured but also the under-insured,” he said.

“If you had one of these substandard plans before the Affordable Care Act became law, and our really liked that plan, you are able to keep it. That’s what I said when I was running for office.”

“But ever since the law was passed, if insurers decided to cancel or downgrade these substandard plans, what we said, under the law, is you have got to replace them with quality, comprehensive coverage,” he said, “because, that, too, was a central premise of the Affordable Care Act from the very beginning.”

Update:  ugh

Update #2:  Yesterday I said the time seemed right for the Left to pick a meme to explain the insurance cancellations and then give the media its marching orders.  David Firestone of the NYT has gotten the memo

The so-called cancellation letters waved around at yesterday’s hearing were simply notices that policies would have to be upgraded or changed. Some of those old policies were so full of holes that they didn’t include hospitalization, or maternity care, or coverage of other serious conditions.

Republicans were apparently furious that government would dare intrude on an insurance company’s freedom to offer a terrible product to desperate people.

“Some people like to drive a Ford, not a Ferrari,” said Marsha Blackburn of Tennessee. “And some people like to drink out of a red Solo cup, not a crystal stem. You’re taking away their choice.”

Luckily, a comprehensive and affordable insurance policy is no longer a Ferrari; it is now a basic right. In the face of absurd comments and analogies like this one, Ms. Sebelius never lost her cool in three-and-a-half hours of testimony, perhaps because she knows that once the computer problems and the bellowing die down, the country will be far better off.

So you see the talking points as the media gets their orders.  1.  All policies that were cancelled were sub-standard.  2.  People will be better off with more expensive policies, even if they are too dumb to konw it.

My policy was perfectly fine.  I was not tricked.  I am willing to bet I am at least as smart as David Firestone.  I am positive I am smarter than Barrack Obama.  And yet my policy was cancelled.

And folks, the opponents of my plan are trying to scare you. But if you like your health insurance the way it is, and if I like your health insurance the way it is, then you can keep it.

Seriously, this is how Jay Carney explains it

White House press secretary Jay Carney on Tuesday said President Obama's claim that all Americans could keep their health insurance plans under the new health law deserved a “fuller explanation,” acknowledging millions of consumers would not keep their current coverage.

After the passage of Obamacare, the president has repeatedly insisted that if any individual likes their health care plan, they could “keep it.”

Carney on Tuesday added a crucial caveat to that promise, saying Americans could keep their insurance if the plan is “still available.”

This is absolutely absurd.  The whole meaning of the "If you like your health insurance..." promise was that the government would not ban your current policy, that the program was simply about adding options for the uninsured, not reducing options for the insured.  Now Carney was saying, as if we all should have known, that what Obama meant was that you can keep your policy as long as we don't ban it.

It is an amazing spectacle to see Senators Feinstein and McCain, both A-OK with NSA spying on ordinary American citizens, draw the line at NSA spying on foreign politicians.  A reasonable person would say that tapping the German leader's phone is a hell of a lot closer to the NSA's true brief than tapping mine, but our political leaders believe the opposite.

That is because they have come to believe that politicians and government officials are a special class with special rights and privileges.  They don't have to follow labor law (Congress is exempt), they don't have to deal with the Obamacare exchanges (Congress is exempt), they don't even have to follow the same laws, like DWI (DC police typically help drunk Congresspersons home rather than arrest them).

Via Bloomberg

The health-care law eliminates “substandard policies that don’t provide minimum services,” said Jay Carney, a White House spokesman, in response to the cancellations. The “80-plus percent” of Americans with employer plans or covered by government programs are unaffected.

I chose my policy very carefully, and don't think it is "sub-standard" because it does not include pediatric dental care for two people in their fifties.  This is the worst consumer dis-empowerment that I can remember in my lifetime.

And I totally agree with this

Now an effective levy of several thousand dollars on the small fraction of middle class Americans who buy on the individual market is not history’s great injustice. But neither does it seem like the soundest or most politically stable public policy arrangement. And to dig back into the position where I do strong disagree with Cohn’s perspective, what makes this setup potentially more perverse is that it raises rates most sharply on precisely those Americans who up until now were doing roughly what we should want more health insurance purchasers to do: Economizing, comparison shopping, avoiding paying for coverage they don’t need, and buying a level of insurance that covers them in the event of a true disaster while giving them a reason not to overspend on everyday health expenses.

If we want health inflation to stay low and health care costs to be less of an anchor on advancement, we should want more Americans making $50,000 or $60,000 or $70,000 to spend less upfront on health insurance, rather than using regulatory pressure to induce them to spend more. And seen in that light, the potential problem with Obamacare’s regulation-driven “rate shock” isn’t that it doesn’t let everyone keep their pre-existing plans. It’s that it cancels plans, and raises rates, for people who were doing their part to keep all of our costs low.

With my high deductibles, I am actually out shopping every day on health care prices and I can tell you from my experience that if everyone did so, we would see a reversal of health care inflation.  More here

I try to read a couple of team-politics blogs from both the red and blue side, to stay in touch with what they are saying and stay out of an echo chamber.  Also, of course, libertarians make common cause with both parties on various issues.  But the mindless team politics angle can really be a bore.

One of the reasons I like to read Kevin Drum on the left is that his initial reactions to things often seems pretty honest.  When his side really screws up, like the IRS scandal or failing Obamacare exchanges, his initial reaction will generally be to honestly critique a bad situation.  And then about 3-5 days into the scandal or crisis or discussion of an issue, he will catch on to and adopt the party line on an issue and then become incredibly tedious (for example, on the IRS scandal, he was honestly critical for a while and then adopted the silly "leftish groups were equally targeted meme" and has stuck to it by rote since).  But at least there are those few days of honesty, which separates him from a lot of the left and right team politics blogs.

So the timing is just about right for the Left to pick a meme to explain away the millions of people who are getting their policies cancelled despite being told that they could keep their health insurance.  Mainstream outlets like CBS and NBC are pushing the story, not just right-wing and libertarian blogs, so the Ezra Klein's of the world must be working diligently to pick a meme and then enforce it.  It will be interesting to see what they choose.

Update:  Well, here is an early entrant from Valerie Jarrett:

FACT: Nothing in #Obamacare forces people out of their health plans. No change is required unless insurance companies change existing plans.

This is hilarious.  Technically true, since my cancellation came from Blue Cross and not the government, but obviously the Blue Cross decision to cancel me was forced by the terms of the law.  This is obviously absurd, but is it too absurd for the media?  I don't know, and of course it gets extra lefty bonus points for blaming government-caused problems on private businesses.  Next up, Exxon to blame for gasoline taxes!