The “Unaffordable” Care Act Turns Six

 

This week marks the sixth anniversary of the Patient Protection and Affordable Care Act (ACA). But it’s hardly anything to celebrate. The average bad marriage that ends in divorce lasts about eight years in the United States. So maybe there’s still time to end this ill-conceived union of bad health economics and income redistribution.

The ACA was intended to make health coverage affordable using an age-old strategy — other peoples’ money. For instance, ACA regulations require insurers to accept all applicants — including unprofitable ones — at rates not adjusted for their health risk. Premiums can vary somewhat based on age, but not health status. A plethora of new taxes — mostly on medical care and health insurance — are supposed to somehow make coverage more affordable. For those who don’t understand economics, taxing something raises its cost, not lowers it. Other funding mechanisms include draconian cuts to Medicare and higher deficits to expand Medicaid.

In an attempt to transfer wealth from medical low-spenders to big-spenders, Obamacare has purposely undermined affordable coverage. In the process it also removed the incentives health plans use to encourage healthier lifestyles. Healthy Middle-class folks, who don’t qualify for subsidies, have largely shunned Obamacare Marketplace plans. The inevitable result is that the exchange has become an expensive high-risk pool for people who are poorer or sicker than average. Obamacare is a bad deal for all but the most costly enrollees or those receiving lavish subsidies. Indeed, 83 percent of exchange enrollees are ones who receive subsidies. A report from the University of Pennsylvania’s Wharton School found all but the most heavily subsidized Obamacare enrollees would still be better off financially if they skipped coverage and pay for their own medical care out of pocket.

People often make the mistake of assuming that everyone needs comprehensive coverage that protects them from medical problems that are exceptionally rare. But most people covered by health insurance actually experience very low claims in any given year. About half the population spends less than $500 annually on medical care. Thus, health plans with benefits less generous than Obamacare would be both affordable and meet the typical medical needs of most Americans. But to accomplish the goal of making generous health coverage affordable to people with health concerns, the ACA had to force Americans to purchase health coverage and limit their choice of health plans. Health insurance that does not cover a plethora of preventive care, plans that cap benefits at predetermined levels and plans that reward Americans for having led healthy lifestyles are no longer allowed.

Prior to ACA, health plans with limited benefits (or high deductibles) were less expensive than coverage with onerous mandates and costly regulations. Those who could not afford comprehensive coverage could choose to either self-insure for day-to-day medical needs (now illegal), enroll in a limited benefit plan (now banned under Obamacare) or enroll in a high-deductible plan. Of those three options the only option left are high-deductible plans. Prior to the ACA, high-deductible plans were very affordable. Premiums were low enough to have money left over to fund Health Savings Accounts to cover a portion of the costs below the deductible. Since Obamacare high-deductible plans have become costly even though they cover almost none of Americans’ day-to-day medical needs.

Consider this: according to the comparison website, HealthPocket.com, a family who receives no subsidies pays nearly $1,000 per month for a bronze plan with a high deductible. I priced Bronze plans for my own family and premiums would run $12,000 per year and require deductibles of $6,750 apiece. A family deductible of $13,500 means that despite sending $12,000 to a health insurer, all of our health care needs must be paid out of pocket. That akin to throwing money down a rat hole to most sensible Americans.

I’ve talked to people who say they’ve made the conscious decision to forgo health coverage and just pay the penalty and pay cash for medical care. A few even think they can get out of the penalty. One lady I talked to suggested she’d be far better off just taking the money she would have spent on largely worthless insurance coverage and using it to pay for actual medical care. She will pay out of pocket for her physician visits. She will use a discount pharmacy card for her prescription drugs. She will pay for laboratory testing out of pocket.

Many enrollees remain uninsured despite the mandate — only signing up for coverage if they become sick or need expensive medical services. Eager to grow exchange plans as much as possible, the Obama Administration foolishly created multiple special enrollment categories that allows just about anyone to sign up long after the open enrollment deadline has passed. Individuals signing up using special enrollments aren’t just slackers who lost track of time during open enrollment. Late enrollees use more medical care than those enrolling during open enrollment. They are also more likely to drop coverage soon after receiving expensive medical care.
Many of those enrolled in Obamacare are gaming the system, cheating insurers and driving up the costs for honest folks who just want affordable coverage. It’s rather sad when you realize the Affordable Care Act made health care unaffordable for millions of middle-class families and left many formerly-insured better off with no coverage. Obamacare is hardly a legacy to celebrate. It’s time for Congress to go back to the drawing board and work together to find a solution that creates the appropriate incentives for all stakeholders.

2015 GDP: Health Services Spending Grew More Than Twice As Fast as Non-Health GDP

 

BEALast Friday’s release of the third estimate of Q4 Gross Domestic Product and annual GDP confirmed spending on health services grew at more than twice the rate of growth in non-health GDP in 2015.

For Q4, the third estimate significantly reduced the share of GDP allocated to health services from the previous second estimate (Table I). At $18.7 billion (annualized), growth in health services spending accounted for almost one fifth of GDP growth. This was sa much faster rate of growth (3.6 percent) than for non-health GDP (2.1 percent). Almost all Q4 GDP growth was in services, not goods. Personal consumption expenditure on goods actually dropped.

2016 GDP TI

No Blogging on Good Friday

 

We’ll be back blogging on Monday. Have a blessed Easter.

Americans Think Their Health Care Is Fine, But “American” Health Care Is Not

 

doctor-mom-and-sonNational Public Radio, the Robert Wood Johnson Foundation, and Harvard University’s T. H. Chan School of Public Health have released findings of a February survey, Patients’ Perspectives on Health Care in the United States:

Even though most (55%) Americans reflect positively on their state’s health care system, saying it is excellent or good, few give their state top marks. Just one in six (17%) say the health care system in their state is excellent, while more than two in five (42%) adults in the U.S. say it is fair or poor.

Americans are much more negative about the nation’s health care system than they are about the health care system in the state where they live. Only 38 percent of adults in the U.S. had positive things to say about the country’s health care system, and fewer than one in ten (9%) gave it top marks. In contrast, more than three in five (61%) U.S. adults say the nation’s health care system is fair or poor.

Almost half the people who believe their own state’s health care is excellent deny that it is excellent elsewhere!

When You Need Care Now But aren’t Likely to Die, Urgent Care is the Answer

 

According to a Wall Street Journal article, urgent care centers are becoming Americans medical home away from home – mainly evenings and weekends when their primary care providers are not available.  About two-thirds of patients at urgent care centers have a family physician.

There are an estimated 10,000 urgent care centers in the United States and another 1,400 are expected by 2020. Increasingly, traditional providers are getting in on the act. Hospitals are building, acquiring or partnering with urgent care providers. Walk-in patients are welcome, although many allow patients to make an appointment. Wait times are 30 minutes or less whereas a wait in the emergency room can run eight times that length. The average cost at an urgent care center is about $150, compared to $1,354 for an emergency room visit. Centers are usually open evenings and weekends when doctors’ offices are closed.

When a retail clinic won’t do, this sounds like a much better solution that non-emergent ER visits or waiting a week for a physician visit.  It would be even better if these facilities were integrated so you could choose the level of provider (and price level) you need. As one of the commenters said in the WSJ article, why doesn’t every hospital have one of these next to the emergency room?  I’d go even farther; why doesn’t every hospital have one of these with a retail clinic inside next to the ER?

Ever Increasing Tax Hikes Won’t Save Medicaid

 

Ambulance at Emergency Entrance(A version of this Health Alert was published by the Orange County Register.)

After more than a year, California’s politicians and health insurers have finally agreed to and passed last month what California Healthline calls a “tax hike in name only” to finance Medi-Cal, California’s Medicaid program. If only it were that simple.

Funded jointly by the state and federal governments, Medicaid is the subject of perverse political incentives to hike taxes and spend more money on this welfare program, impoverishing treasuries. California and the nation need a new way to finance Medicaid.

Two Thirds of Patients’ Hospital Debts Unpaid

 

Doctors Rushing Patient down HallHolly Fletcher of The Tennessean has written a very informative feature on the hospital revenue cycle, including a seven-deck slideshow that translates the process into layman’s terms. (The Tennessean is the best daily newspaper for understanding hospitals, because Nashville is home to over for-profit hospital chains which control 60 percent of the beds in that industry, so the journalists know what they are talking about.)

Ms. Fletcher describes an insane system of billing which has been focused on getting dollars out of the byzantine bureaucracies we call health insurers. The main economic reason insurance should be for rare, unforeseen, catastrophic events is that claims processing is expensive. It is not just shuffling paper around, but also managing fraud, waste and abuse. This adds to what is called the “load” of insurance.

When it comes to getting money from patients directly, hospitals are hopeless, with two thirds of their accounts receivable remaining unpaid: “Billing practices are not designed to collect small, incremental payments from hundreds or thousands of patients. They are designed to bill a handful of large entities — insurance companies — not individuals who walk in the door.”

One might think this was a problem that is not too difficult to solve: Just call the supermarket or department store and ask them to recommend a point-of-sale technology vendor.

Strange Bedfellows Defending Obamacare

 

The primary component of GOP presidential candidates’ health policy proposals is to repeal Obamacare. Once GOP frontrunner Trump released his plan, the Committee for a Responsible Federal Budget took notice and performed an analysis of the likely fiscal effects from Trump’s plan. Presumably, these fiscal effects would also apply to the other Republican candidates who support repealing Obamacare as well.

One Quarter of Obamacare Enrollees Dropped Out in 2015

 

people-in-waiting-roomThe administration recently announced 12.7 million people selected or were automatically enrolled in an Obamacare exchange plan at the end of the third open season – February 1. Except for special cases, anyone who missed that deadline cannot enroll in an Obamacare plan for 2016.

That is a few more people than the 11.7 million than at the end of 2015’s open enrollment. However, the administration also announced that only 8.8 million people remained enrolled in Obamacare on December 31, 2015. That is a drop of almost one quarter from the end of 2015 open enrollment.

Whither Obamacare’s Death Panel?

 

elderly-man-worriedPresident Obama’s nomination of Merrick Garland to the U.S. Supreme Court has not shaken Senate Republicans from their commitment not to hold confirmation hearings for any candidate President Obama might nominate to the Supreme Court in the last eleven months of his second term.

Given the high drama and politics surrounding presidential appointments that require Senate confirmation, it might be a good time to ask why another 15-member “court,” which President Obama himself established in 2010, and which was supposed to deliver its first decision in January 2014, has not yet seen its first member nominated!

This “court” is the almost forgotten “death panel,” officially named the Independent Payment Advisory Board (IPAB). Based on a target rate of Medicare spending per capita, the IPAB was supposed to start cutting Medicare payments to providers in 2015.