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Get paid or sue? How the news business is combating the threat of AI

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Get paid or sue? How the news business is combating the threat of AI

Journalist Javier Cabral wanted to test Google’s much-hyped, experimental artificial intelligence-powered search results. So he typed out a question about a topic he knew intimately: the Long Beach bakery Gusto Bread’s coffee.

In less than a second, Google’s AI summarized information about the bakery in a few sentences and bullet points. But according to Cabral, the summary wasn’t original — it appeared to be lifted from an article he wrote last year for the local food, community and culture publication L.A. Taco, where he serves as the editor in chief. For a previous story, he’d spent at least five days working on a feature about the bakery, arriving at 4 a.m. to report on the bread making process.

As Cabral saw it, the search giant’s AI was ripping him off.

“The average consumer that just wants to go check it out, they’re probably not going to read [the article] anymore” Cabral said in an interview. “When you break it down like that, it’s a little enraging for sure.”

The rise of AI is just the latest existential threat to news organizations such as Cabral’s, which are fighting to survive amid a rapidly changing media and information environment.

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1

2 A neon L.A. Taco sign.

1. L.A. Taco editor Javier Cabral in the alleyway behind the Figueroa Theatre in Los Angeles in 2020. (Mariah Tauger / Los Angeles Times) 2. The L.A. Taco office in Los Angeles on June 26. (Zoe Cranfill / Los Angeles Times)

News outlets have struggled to attract subscribers and advertising dollars in the internet age. And social media platforms such as Facebook, which publishers depended on to get their content to a massive audience, have largely pivoted away from news. Now, with the growth of AI thanks to companies including Google, Microsoft and ChatGPT maker OpenAI, publishers fear catastrophic consequences will result from digital programs automatically scraping information from their archives and delivering it to audiences for free.

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“There’s something that’s very fundamentally unfair about this,” said Danielle Coffey, president and chief executive of the News/Media Alliance, which represents publications including the New York Times and the Los Angeles Times. “What will happen is there won’t be a business model for us in a scenario where they use our own work to compete with us, and that’s something we’re very worried about.”

Tech companies leading the charge on AI say their tools are not engaged in copyright infringement and can drive traffic to publishers.

A News Crisis in California

Google said in a statement that it designed its AI Overviews — the summaries that appear when people enter search queries — to “provide a snapshot of relevant information from multiple web pages.” The companies also provide links with the summaries so people can learn more.

AI and machine learning could provide useful tools for publishers when doing research or creating reader recommendations. But for many journalistic outlets, the AI revolution represents yet another consequence of the tech behemoths becoming the middlemen between the content producers and their consumers, and then taking the spoils for themselves.

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“For the past 20 years, big tech has dictated the business model for news by essentially mandating how news is distributed, either through search or social, and this has turned out to be pretty disastrous for most news organizations,” said Gabriel Kahn, a professor at USC’s Annenberg School for Communication and Journalism.

A group of people sitting around a table and using laptop computers.

L.A. Taco operates on a tight budget; its publisher doesn’t take a salary. The site makes most of its money through memberships, so if people are getting the information directly from Google instead of paying to read L.A. Taco’s articles, that’s a major problem. Above, a staff meeting at its Chinatown office.

(Zoe Cranfill / Los Angeles Times)

To respond to the problem, news organizations have taken dramatically different approaches. Some, including the Associated Press, the Financial Times and News Corp., the owner of the Wall Street Journal and Dow Jones, have signed licensing deals to allow San Francisco-based OpenAI to use their content in exchange for payment. Vox Media and the Atlantic have also struck deals with the firm.

Others have taken their fights to court.

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The New York Times in December sued OpenAI and Microsoft, alleging that both companies used its articles to train their digital assistants and share text of paywalled stories to its users without compensation. The newspaper estimated that those actions resulted in billions of dollars in damages.

Separately, last month Forbes threatened legal action against AI startup Perplexity, accusing it of plagiarism. After receiving Forbes’ letter, Perplexity said it changed the way it presented sources and adjusted the prompting for its AI models.

The company said it has been developing a revenue sharing program with publishers.

The New York Times said in its lawsuit that its battle against AI isn’t just about getting paid for content now; it’s about protecting the future of the journalism profession.

“With less revenue, news organizations will have fewer journalists able to dedicate time and resources to important, in-depth stories, which creates a risk that those stories will go untold,” the newspaper said in its lawsuit. “Less journalism will be produced, and the cost to society will be enormous.”

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OpenAI said that the New York Times’ lawsuit was without merit and that it has been unable to reproduce examples the newspaper has cited of ChatGPT regurgitating paywalled articles. The company said publishers have a way to opt out of their sites being used to train AI tools. Microsoft did not respond to a request for comment.

The OpenAI logo appears on a mobile phone.

The Associated Press, the Financial Times and News Corp., the owner of the Wall Street Journal and Dow Jones, have signed licensing deals to allow San Francisco-based OpenAI to use their content in exchange for payment.

(Michael Dwyer / Associated Press)

“Microsoft and OpenAI have the process entirely backwards,” Davida Brook, a partner at law firm Susman Godfrey, which is representing the New York Times, said in a statement. “Neither The New York Times nor other creators should have to opt out of having their works stolen.”

The legal war is spreading. In April, eight publications owned by private equity firm Alden Global Capital also accused OpenAI and Microsoft of using and providing information from its news stories without payment.

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In some cases, OpenAI’s chat tool provided incorrect information attributed to the publications, Frank Pine, executive editor for MediaNews Group and Tribune Publishing, said in a statement. For example, according to Pine, OpenAI said that the Mercury News recommended injecting disinfectants to treat COVID-19 and the Denver Post published research suggesting that smoking cures asthma. Neither publication has made such claims.

“[W]hen they’re not delivering the actual verbatim reporting of our hard-working journalists, they misattribute bogus information to our news publications, damaging our credibility,” Pine said.

OpenAI said that it was “not previously aware” of Alden’s concerns and that it is “actively engaged in constructive partnerships and conversations with many news organizations around the world to explore opportunities, discuss any concerns, and provide solutions.”

One such partnership is OpenAI’s recent deal with News Corp., which allows the tech company’s tools to display content from news outlets in response to user questions and access content from the Wall Street Journal, New York Post and publications in the United Kingdom and Australia to train its AI models. The deal was valued at more than $250 million over five years, according to the Wall Street Journal, which cited unnamed sources. News Corp and OpenAI declined to comment on the financial terms.

“This landmark accord is not an end, but the beginning of a beautiful friendship in which we are jointly committed to creating and delivering insight and integrity instantaneously,” Robert Thomson, chief executive of News Corp. said in a statement.

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“We are committed to a thriving ecosystem of publishers and creators by making it easier for people to find their content through our tools,” OpenAI said in a statement.

Although OpenAI has cut deals with some publishers, the tech industry has argued that it should be able to train its AI models on content available online and bring up relevant information under the “fair use” doctrine, which allows for the limited reproduction of content without permission from the copyright holder.

“As long as these companies aren’t reproducing verbatim what these news sites are putting out, we believe they are well within their legal rights to offer this content to users,” said Chris MacKenzie, spokesman for Chamber of Progress, an industry group that represents companies including Google and Meta. “At the end of the day, it’s important to remember that nobody has a copyright on facts.”

But outlets including the New York Times reject such fair-use claims, arguing that in some cases the chatbots do reproduce their content, unfairly profiting from their thoroughly researched and fact-checked work. The situation is even more difficult for smaller outlets such as L.A. Taco, which can’t afford to sue OpenAI or develop their own AI platforms.

Located in L.A.’s Chinatown with four full-time workers and two part-timers, L.A. Taco operates on a tight budget; its publisher doesn’t take a salary. The site makes most of its money through memberships, so if people are getting the information directly from Google instead of paying to read L.A. Taco’s articles, that’s a major problem.

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Legislation is another potential way to deal with big tech’s disruption of the journalism industry. The California News Publishers Assn., of which the Los Angeles Times is a member, is sponsoring a state bill known as the California Journalism Preservation Act, which would require digital advertising giants to pay news outlets for accessing their articles, either through a predetermined fee or through an amount set by arbitration. Most publishers would have to spend 70% of the funds received on journalists’ salaries. Another bill lawmakers are considering would tax large tech platforms for the data they collect from users and pump the money into news organizations by giving them a tax credit for employing full-time journalists.

“The way out of this is some type of regulation,” USC’s Kahn said. “Congress can’t get anything done so that basically gives these platforms free rein to do what they want with very little consequence.”

Times editorial library director Cary Schneider contributed to this report.

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How the ‘Wicked’ Movies Boosted the Musical’s Broadway Sales

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How the ‘Wicked’ Movies Boosted the Musical’s Broadway Sales

Oct. 30, 2003

Broadway Opening

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Kristin Chenoweth and Idina Menzel in the Broadway debut of “Wicked” at the Gershwin Theater.

“Wicked” is an undisputed juggernaut — one of the biggest productions in musical theater history. The stage show, by the composer Stephen Schwartz and the librettist Winnie Holzman, has grossed $1.8 billion on Broadway, and $6.2 billion globally. Worldwide, it has been seen by more than 72 million people.

But none of that was a foregone conclusion. Based on Gregory Maguire’s 1995 novel, which in turn was based on L. Frank Baum’s “The Wonderful Wizard of Oz,” the musical had a so-so reception during its pre-Broadway run in San Francisco in the spring of 2003. In New York that fall, it divided critics when it opened on Broadway at the Gershwin Theater, starring Idina Menzel as the green-skinned “wicked witch,” Elphaba, and Kristin Chenoweth as her frenemy, Glinda, a.k.a. the Good Witch of the South. (“There’s Trouble in Emerald City” was the headline on the review in The New York Times.)

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“You wake up the morning after opening night, and some of those notices were pretty devastating, and you think, ‘Oh, well, this is the final word,’” Mantello said. “But then the audiences are telling you a completely different story.”

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Menzel performed “Defying Gravity” at the 2004 Tony Awards, and took home the prize for best leading actress in a musical.

The production pretty quickly became a fan favorite, and over the years, audiences made the show their own. The “Wizard of Oz” base was, of course, a huge factor — the 1939 film is a much-loved American classic — but, also, the musical’s depiction of female friendship became a central part of its allure, and kept audiences returning for repeat viewings.

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March 23, 2006

1,000th Broadway Performance

“Once word kicked in, it took on a life that none of us could have ever predicted,” Mantello said. “It was the audience, and not a critical consensus, that turned it into the hit that it became.”

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It’s a hit! Fans waiting for Menzel’s autograph outside the Gershwin Theater in May 2004.

Menzel, the original Elphaba, won a Tony Award for best leading actress in a musical in 2004. In 2005, the day before her final performance, she fell through a trap door onstage; she couldn’t perform at her last show, but made a cameo in a red tracksuit.

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Sept. 27, 2006

‘Wicked’ International

The show expanded rapidly, and now has a global footprint. The London production opened in September 2006, after the prior year’s introduction of a North American tour and a production in Chicago, where it ran for three and a half years. Los Angeles, Japan and Germany began in 2007; and Australia in 2008. In the years since, productions have run in the Netherlands, Mexico, South Korea and Brazil; productions are still running in London and South Korea, and touring in North America.

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A South Korean production featured, in 2016, Jeong Sun-ah and Cha Ji-yeon.

Oct. 30, 2018

Another Milestone: 15 Years

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The 15th anniversary cast included Amanda Jane Cooper as Glinda and Jessica Vosk as Elphaba.

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In 2018, the show celebrated its 15th anniversary, a milestone achieved by few shows. And “Wicked” has continued to outpace its peers: It has since become the fourth-longest-running production in Broadway history, following “The Phantom of the Opera,” “Chicago” and the top-grossing show, “The Lion King.”

Sept. 14, 2021

‘Wicked’ Reopens After the Shutdown

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The show reopened with Ginna Claire Mason as Glinda.

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Broadway shows were closed from the spring of 2020 through the fall of 2021 because of the coronavirus pandemic. In August 2021, the touring production of “Wicked” restarted in Dallas — the first Broadway touring production to do so — and in September 2021 “Wicked” reopened on Broadway.

Dec. 7, 2022

Yes, We’re Making a Movie

The idea of adapting “Wicked” for the screen goes way back. In fact, it predates the stage musical. Universal Pictures had optioned the novel but couldn’t figure out how to turn it into a film, and agreed to let Schwartz, working with Holzman, develop it into a stage musical first. (Universal didn’t miss out; it is one of the lead producers of the stage musical, along with Marc Platt and David Stone.)

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Cynthia Erivo and Ariana Grande rehearsing “Popular” in September 2022.

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Once the stage production became a ginormous hit, the film adaptation was an inevitability, but still there were false starts, abandoned schedules and creative-team overhauls along the way. News coverage of a film adaptation began in 2010; at one point, the director Stephen Daldry was attached and a 2019 release was announced; in 2021 Jon M. Chu became the director, and the next year he said it would be split into two films.

Grande and Erivo had both become fans via the stage show. Grande saw it with her grandmother on Broadway in 2004 (and met Chenoweth backstage); Erivo saw the London production when she was a student.

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Feb. 11, 2024

Marketing Saturation

The “Wicked” films’ rollout began in earnest in early 2024, with a trailer that ran during the Super Bowl, and the actresses were ubiquitous throughout that year, including in promotional spots that aired during the Paris Summer Olympics. (NBC Universal, the parent company of Universal Pictures, has the American broadcasting right to the Games.)

The marketing budgets for most Hollywood films are vastly larger than those for Broadway shows. In this case, because there are two films — one released last year and one released last month — the marketing campaigns, as well as publicity and news coverage, was doubled. The films had an estimated marketing budget of at least $125 million each — or $250 million total — along with the numerous brand partnerships that also generated a ton of attention. By contrast, the Broadway show has an annual marketing budget of about $11 million.

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Nov. 22, 2024

‘Wicked: Part I’ U.S. Theatrical Release

The movies’ effect on the stage production was significant. In 2023, “Wicked” grossed $97.85 million on Broadway; in 2024 it was up nearly 15 percent, to $112.13 million, and this year it expects to be up another 13.4 percent, to $127.3 million.

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The show says the effect in London has also been sizable: It expects London “Wicked” grosses this year to be up 29.4 percent over last year, and last year the grosses were up 10.5 percent over the previous year. (​​The show also holds a record for the highest weekly grosses in West End history, set this year during the week that included New Year’s Day.)

“It’s amazing,” Schwartz said in an interview. “Before the movies came out, I wondered what the impact would be on the show. I don’t think any of us anticipated how strong it would be. You can never plan on this kind of thing, or even hope for it, but it’s really lovely.”

Dec. 25, 2024

$5 Million on Broadway

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Actors don harnesses and elaborate wings to portray the flying monkeys who become Elphaba’s allies.

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The Broadway production of “Wicked” grossed $5 million over Christmas week last year (just a month after the first film’s release) — it is the first and only Broadway show to gross that much in a single week. (It was also the first show to cross the $2 million mark and the $3 million mark.)

Nov. 21, 2025

‘Wicked: For Good’ U.S. Theatrical Release

What’s next? The second movie was released just before Thanksgiving, giving a second surge for “Wicked” in all its forms, and now the year looks to be ending strong for the stage show. The Broadway production grossed more than $3 million over Thanksgiving week (by comparison, it had generally been grossing $2.3 million to $2.5 million during Thanksgiving weeks that preceded the films’ release). Just around the corner: the Christmas and New Year’s stretch, always a good period for Broadway, and this year, even more so for “Wicked.”

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Broadway grosses reflect the most recent box office receipts as reported by the Broadway League. Grosses are not adjusted for inflation.

Images: Sara Krulwich/The New York Times and Universal Pictures.

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Videos: CBS; Wicked Musical Korea; Broadway.com; Theater Mania; Ariana Grande; Pink News; Out; FOX; NBC; Universal Pictures.

Produced by Leo Dominguez, Hollis Johnson, Rebecca Lieberman and Josephine Sedgwick. Additional reporting by Leo Dominguez and Jeremy Singer-Vine.

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Senators dig into FCC chairman’s role in Jimmy Kimmel controversy

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Senators dig into FCC chairman’s role in Jimmy Kimmel controversy

U.S. senators peppered Federal Communications Commission Chairman Brendan Carr with questions during a wide-ranging hearing exploring media censorship, the FCC’s oversight and Carr’s alleged intimidation tactics during the firestorm over ABC comedian Jimmy Kimmel’s comments earlier this fall.

Sen. Ted Cruz (R-Texas) called Wednesday’s hearing of the Senate Commerce, Science and Transportation Committee following the furor over ABC’s brief suspension of “Jimmy Kimmel Live!” amid social media backlash over Kimmel’s remarks in the wake of conservative activist Charlie Kirk’s killing.

Walt Disney Co. leaders yanked Kimmel off the air Sept. 17, hours after Carr suggested that Disney-owned ABC should punish the late-night comedian for his remarks — or face FCC scrutiny. Soon, two major TV station groups announced that they were pulling Kimmel’s show, although both reinstated the program several days after ABC resumed production.

Progressives were riled by the President Trump-appointed chairman’s seeming willingness to go after broadcasters in an alleged violation of their First Amendment rights. At the time, a few fellow Republicans, including Cruz, blasted Carr for suggesting to ABC: “We can do this the easy way or hard way.”

Cruz, in September, said that Carr’s comments belonged in the mob movie “Goodfellas.”

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On Wednesday, Carr said his comments about Kimmel were not intended as threats against Disney or the two ABC-affiliated station groups that preempted Kimmel’s show.

The chairman argued the FCC had statutory authority to make sure that TV stations acted in the public interest, although Carr did not clarify how one jumbled sentence in Kimmel’s Sept. 15 monologue violated the broadcasters’ obligation to serve its communities.

Cruz was conciliatory Wednesday, praising Carr’s work in his first year as FCC chairman. However, Democrats on the panel attempted to pivot much of the three-hour session into a public airing of the Trump administration’s desire to punish broadcasters whom the president doesn’t like — and Carr’s seeming willingness to go along.

Sen. Ted Cruz (R-Texas) called Wednesday’s Senate committee hearing.

(Associated Press)

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Carr was challenged by numerous Democrats who suggested he was demonstrating fealty to the president rather than running the FCC as an independent licensing body.

Despite the landmark Communications Act of 1934, which created the FCC, the agency isn’t exactly independent, Carr and fellow Republican Commissioner Olivia Trusty testified.

The two Republicans said because Trump has the power to hire and fire commissioners, the FCC was more akin to other agencies within the federal government.

“Then is President Trump your boss?” asked Sen. Andy Kim (D-N.J.). The senator then asked Carr whether he remembered his oath of office. Federal officials, including Carr, have sworn to protect the Constitution.

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“The American people are your boss,” Kim said. “Have you ever had a conversation with the president or senior administration officials about using the FCC to go after critics?”

Carr declined to answer.

Protesters outside the Jimmy Kimmel Theater in September 2025.

Protesters flocked to Hollywood to protest the preemption of “Jimmy Kimmel Live!” after ABC briefly pulled the late-night host off air indefinitely over comments he made about the fatal shooting of conservative activist Charlie Kirk.

(Genaro Molina / Los Angeles Times)

The lone Democrat on the FCC, Anna M. Gomez, was frequently at odds with her fellow commissioners, including during an exploration of whether she felt the FCC was doing Trump’s bidding in its approach to merger approvals.

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Trump separately continued his rant on media organizations he doesn’t like, writing in a Truth Social post that NBC News “should be ashamed of themselves in allowing garbage ‘interviews’” of his political rivals, in this case Sen. Raphael Warnock (D-Ga.).

Trump wrote that NBC and other broadcasters should pay “significant amounts of money for using the very valuable” public airwaves.

Earlier this year, FCC approval of the Larry Ellison family’s takeover of Paramount stalled for months until Paramount agreed to pay Trump $16 million to settle a lawsuit over his grievances with edits of a CBS “60 Minutes” pre-election interview with Kamala Harris.

“Without a doubt, the FCC is leveraging its authority over mergers and enforcement proceedings in order to influence content,” Gomez said.

Parts of the hearing devolved into partisan bickering over whether Democrats or Republicans had a worse track record of trampling on the 1st Amendment. Cruz and other Republicans referenced a 2018 letter, signed by three Democrats on the committee, which asked the FCC to investigate conservative TV station owner Sinclair Broadcast Group.

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“Suddenly Democrats have discovered the 1st Amendment,” Cruz said. “Maybe remember it when Democrats are in power. The 1st Amendment is not a one-way license for one team to abuse the power.

“We should respect the free speech of all Americans, regardless of party,” Cruz said.

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Commentary: Republicans don’t have a healthcare plan, just a plan to kill Obamacare

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Commentary: Republicans don’t have a healthcare plan, just a plan to kill Obamacare

For millions of Americans, Jan. 1 won’t be an occasion to celebrate the coming of the new year. It will be an occasion for dread.

The reason is the impending termination of crucial premium subsidies for Affordable Care Act health plans. Without a last-minute agreement between congressional Democrats and Republicans, the subsidy structure that has been in place since 2021 will revert to the original arrangement written into the act in 2010.

Millions of Americans dependent on the ACA will face potentially ruinous increases in coverage costs. Many will have to drop their coverage. That process will leave those with the most urgent and costly treatments in the ACA, and those who think they can get away with dropping insurance — or simply can’t afford it — on the outs. The result will be a sicker coverage cohort, which will raise prices for everybody.

I want to see the billions of dollars go to the people, not to the insurance companies and I want to see the people to go out and buy themselves great healthcare.

— An empty promise from President Trump

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The current stalemate is the offspring of the GOP’s 15-year campaign to undermine — really, to kill — Obamacare.

Republicans have dressed up their attack on the ACA with reams of empty rhetoric. They habitually call the ACA a “disaster,” without offering a cogent explanation of why.

Plainly, they see Obamacare as a nice, juicy partisan target, but they’re not reading the room. The ACA’s popularity has steadily increased since mid-2016; in KFF’s most recent tracking poll, taken in September, favorable opinion swamped unfavorable opinion 64% to 35%.

Americans have voted for the ACA with their feet. Since 2018, enrollment in Obamacare plans has more than doubled, from 11.4 million to 24.3 million this year, with a notable enrollment increase starting in 2021, when the premium subsidy structure was improved. That’s the change due to expire on Dec. 31 (Republicans, please note). The enrollment figure doesn’t include the 16.7 million Americans enrolled in Medicaid under ACA expansion rules — a provision still rejected by benighted political leaders in 10 red states.

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They blame the ACA for higher healthcare costs. A few things about this: Yes, healthcare costs have continued to rise since its enactment. But they’ve risen at a much slower rate than before. Out-of-pocket per capita healthcare spending rose at a rate of 3.4% a year from 2000 to 2018, often exceeding the general inflation rate, but by only 1.9% a year since then.

That increase isn’t driven by the ACA. It’s the result of several factors, including the general aging of the U.S. population and a sharp increase in pharmaceutical costs, due in part to the advent of high-priced specialty prescription drugs.

The GOP has amended its attack on the ACA in recent months, as the clamor to extend the premium subsidies has intensified. Republicans are now decrying the ACA as a haven for fraud — “a broken system fueled by fraud,” says House Speaker Mike Johnson (R-La.). Johnson drew his conclusion from a report by the Government Accountability Office published earlier this month.

Johnson may have been hoping that no one would actually go and read that report. I did so, only to find that it doesn’t say what he claims it did. The GAO tested ACA enrollment controls on the federal marketplace — did enrollees accurately estimate their income and submit accurate Social Security numbers? Its test involved submitting applications from 20 fictitious individuals, of whom 18 were approved.

Is this an adequate sample? The GAO itself says it isn’t. The results, it says, “cannot be generalized to the overall enrollment population.” In some test cases, the applications included false Social Security numbers, which are used to verify income claims. But the GAO says that in the real world, absence of verified Social Security numbers “does not necessarily represent overpayments.”

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Are these findings cause for concern? Sure, even though the GAO provided no findings about how widespread these flaws may be. In any case, there’s no evidence here that “the ACA marketplace is a magnet for fraud,” as Johnson called it, suggesting that thousands or millions of applicants are lined up for some healthcare gravy train. And it’s certainly no reason to kill the subsidies.

The other linchpin of the GOP attack on the Affordable Care Act is heavy breathing over how the ACA premium subsidies are paid directly to insurance carriers, rather than as cash to households. This idea trickles down from President Trump but has been embraced by Republicans in Congress. So it deserves a very close look.

Here’s Trump last week: “I want to see the billions of dollars go to the people, not to the insurance companies and I want to see the people to go out and buy themselves great healthcare. Much better healthcare at very little cost.” This has been an enduring promise from Trump, who never bothers to explain how the nirvana of great healthcare at little cost can be achieved.

Here’s Sen. Bill Cassidy (R-La.), a physician who cast the final vote to confirm Robert F. Kennedy Jr. as Health and Human Services Secretary, a vote that has left him humiliated over and over by Kennedy: “Republicans absolutely want to help the American people with the affordability of their out-of-pocket [spending]. We want to put money in their pocket to pay the out-of-pocket.”

Before delving deeper into this issue, a few words about the existing ACA premium subsidies.

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The original ACA subsidies capped premiums on a sliding scale ranging from 2.07% of income for those earning 138% of the federal poverty line to 9.83% of income for those at 400% of the poverty line. This year, 138% of the poverty level for a family of four is $44,367, and 400% is $128,600.

The ACA’s architects knew these subsidies were inadequate. Especially troubling was the sharp cutoff of any subsidies for families earning even a dime more than 400% of the poverty level. This became known as the “subsidy cliff.” But it was an artifact of political compromise; the expectation was that Congress would get around to fixing the cheeseparing subsidy schedule at a later date.

In the pandemic-driven American Rescue Plan Act of 2021, Congress refashioned the subsidies so families with incomes up to 150% of the poverty level ($56,475 for a family of four this year) could find decent Obamacare plans for free. For those above that level and up to 400%, the subsidies were significantly increased. That’s the change set to expire Dec. 31.

It’s true that eligibility for these subsidies is technically unlimited, but the conservative trope that they benefit “millionaires” is nonsense. As I reported earlier this year, the new structure means technically that someone earning $1 million a year would have to pay no more than $85,000 per person for an ACA plan.

Is this a handout? ACA expert Charles Gaba tested the claim by hunting for a benchmark Silver ACA plan, on which the subsidies are based, costing that much anywhere in the U.S. The highest-cost plans he found anywhere are in four counties of West Virginia, where a Silver plan for a 64-year-old couple tops out at $63,100 a year — in a state with the highest ACA premiums in the nation.

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Cassidy’s proposal is essentially to replace the existing subsidy enhancements with health savings accounts, which must be paired with high-deductible health plans, and to seed them with $1,000 a year per adult ages 18 to 49 and $1,500 for those 50 and up. Households with income up to 700% of the federal poverty level would be eligible — that’s about $225,000 for a family of four.

Let’s start with the plain arithmetic of this proposal. The accounts must be paired with a bronze-level ACA plan. Those plans cover only about 60% of average healthcare costs. Deductibles are high — at Covered California, the state’s ACA marketplace, the bronze plan deductible is $5,800 per person and $11,600 for a family. Out-of-pocket maximums are also high — $10,600 per individual and $21,200 for a family.

So right from the outset, the Cassidy proposal would leave families facing serious medical expenses out in the cold.

The HSA idea is part of a GOP argument that giving families cash to spend on healthcare gives them “skin in the game” — that by forking over dollars, they’ll be more sensitive to the cost of medical care and therefore seek out or negotiate lower prices.

Two of the argument’s leading academic promoters, Liran Einav of Stanford and Amy Finkelstein of MIT, wrote in a 2023 book lauding deductibles and co-pays that “patients must pay something for their care, otherwise they’ll rush to the doctor every time they sneeze.” More recently, as the facts have come in, they’ve said: “We take it back.”

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The truth is that there’s no evidence that higher financial obstacles to healthcare produce better outcomes. They do discourage unnecessary treatments, as a seminal Rand Corp. study found in 1981. But they also discourage necessary treatments.

The idea that deductibles and co-pays will prompt the average person to seek out low-cost providers is a fantasy. People typically seek out medical care in an atmosphere of urgency. They don’t take the time to compare prices as if they’re buying a car; they go to the doctor and follow his or her instructions, including prescribed procedures and diagnostic tests. (Sometimes they do price shop, but generally for treatments that can be deferred and are medically routine and elective — one study showing cost savings from price shopping focused on hip and knee replacements, for instance).

As for the claims of Trump and other Republicans that Americans, armed with cash in their pocket, can use it to negotiate medical care — who has the time, energy or bargaining skill to do that?

In any case, the HSA is mischaracterized as a healthcare provision. It’s not; it’s a tax break in disguise, useful for higher-income taxpayers who can afford to cover the high deductibles themselves while pocketing a tax deduction. It’s especially appealing for those who are in good health and expect to stay so — they proceed on the assumption that they probably won’t have a serious (and expensive) medical issue.

U.S. healthcare costs per capita have continued to rise since the enactment of the Affordable Care Act, but at a much lower rate than before.

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(JAMA)

The bottom line is that the Republican Party is out of healthcare ideas. They’ve had 15 years to conjure up a better program than the Affordable Care Act, and have nothing to show us except proposals that won’t work for the average family. They’re up against a wall of their own making, and are pretending that they have something better. They don’t, and you and I will be paying the price of their failure.

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