Tag: "Health Reform"

A Health Reform Agenda to Replace Obamacare

The most pressing goal of health reformers in Congress should be to replace all the costly provisions in Obamacare with the consumer-friendly health plans Americans prefer. In the process, reformers must change the way medical care is financed so that consumers have control over their health care dollars, as well as the means to pay for medical care over their lifetimes. As a starting point, Congress should repeal the individual and employer mandates and taxes of the Patient Protection and Affordable Care Act (ACA).

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.

Advice for Trump on Health Policy

Of all the Republican presidential candidates, Donald Trump has said the least about health policy. Far more is known about Rubio, Cruz, Clinton and Sander’s health care agenda. Remember, Trump is the guy who once said it would be easy; just “Lock the best health care policy minds in a room — and don’t let them out until they’ve crafted a plan for providing terrific coverage for everyone.” Some of the more detailed comments on health policy Trump made during his early campaign were disjointed. Fortunately, much of the bad health policy Trump flirted with on the campaign trail is absent from his official website.

Jindal’s Attack on Walker’s Health Plan is Off-Base

Yesterday, I addressed Governor Scott Walker’s health plan in largely positive terms. Governor Bobby Jindal, a competing Republican presidential contender, has launched a broadside against Walker’s plan, describing it as a “new federal entitlement.”

JW

The charge is way off-base. Governor Jindal proposed a health reform back in 2014, via his America Next policy shop. The point of contention is that Governor Jindal’s proposal would not offer everyone a refundable tax credit. Instead, it would eliminate the exclusion of employer-based health benefits from taxable income and replace it with a standard deduction.

I criticized the proposal when it was issued. True, it is an easier switch than a refundable tax credit. On the other hand, a deduction does nothing for low-income households – which means the welfare state continues to exist. Jindal himself proposed throwing $100 million more at states to fund their medical safety nets.

Health Insurers Just Fine Under Obamacare

New research from the Commonwealth Fund, a pro-Obamacare think tank, shows that health insurers are doing just fine under Obamacare.

Well, the stock market has been telling us that for years. The report’s purpose is to cheer the rebates that insurers which made too much money paid to consumers. Obamacare regulates the Medical Loss Ratio (MLR). If an insurer does not spend enough premium on medical claims, it has to pay a rebate to its beneficiaries.

Rebates have collapsed from over $1 billion in 2011 to $325 million in 2013. The report concludes that Obamacare caused insurers to reduce their overhead expenses and profits. Actually, there is less to this story than meets the eye. Exhibit 5 shows that there has been very little change in insurers’ income statements over the three years.

T5

(Source: Michael J. McCue & Michael A. Hall, The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 3, New York, NY: Commonwealth Fund, March 2015, page 6.)

Obamacare Beneficiaries 2.5 Times More Likely to Have HIV/AIDS Than Commercially Insured

One of our themes is that Obamacare causes health plans to attract the healthy and shun the sick. However, they do not succeed, according to a report by Prime Therapeutics, a pharmacy-benefit manager:

During tVariety of Medicine in Pill Bottleshe first year public health exchanges existed, Prime Therapeutics’ (Prime) members who enrolled in plans on these exchanges filled an average of 11.7 prescriptions, exceeding fills by commercial members by 13.6 percent. Public exchange members were also 2.5 times more likely to have hepatitis C or HIV, driving an almost 200 percent higher spend on related medicines.

More specifically, nearly $1 out of every $5 spent on drugs for public exchange members was spent to treat                                               hepatitis C or HIV.

The report also states that exchange beneficiaries are significantly older than commercially insured persons: 42.6 years versus 34.7 years old, on average. 28 percent of Obamacare beneficiaries were between 55 and 64 years old, versus only 16 percent of commercially insured persons.

Why does this matter? While Obamacare beneficiaries are older and sicker than people with employer-based benefits, they have less access to health services. Obamacare is not the right way to take care of these peoples’ needs.

Government and the Private Sector: The Case of eHealth, Inc.

Businessman Sitting at His DeskFor years now, Wall Street has cheered as Obamacare fuelled the stock prices of corporations in the healthcare industry. One of them was eHealth, Inc., a private health-insurance exchange that was founded in 1997.

Obamacare – in case you need reminding – mandates the purchase of private health insurance for working-age Americans above a low income. Last April, The Motley Fool’s Keith Speights speculated that eHealth might have been “Obamacare’s biggest winner”.

Well, that’s not how things turned out.

eHealth, has announced that it will lay off 15 percent of its workforce and take a restructuring charge of up to $4.7 million. This announcement followed horrific fourth quarter earnings.

The Kline-Ryan-Upton Republican Off-Ramp from Obamacare

Tomorrow is the day the Supreme Court hears oral arguments in King vs. Burwell, and all the talk is about what Congress will do if the Supreme Court directs the Administration to obey the law by not paying subsidies in the majority of states, which have declined to establish their own Obamacare exchanges and defaulted to the federal one.

The Wall Street Journal ran an op-ed (available by subscription) by John Kline, Paul Ryan, and Fred Upton, who chair committees of jurisdiction in the House of Representatives that will be tasked with proposing a Congressional response to this decision. Here’s what they write:

Let people buy insurance across state lines. Stop frivolous lawsuits by enacting medical-liability reform. Let small businesses band together so they get a fair deal from insurance companies.

Obamacare Subsidies One Fifth of the Increase in Government Transfer Payments in January

January’s Personal Income and Outlays report from the Bureau of Economic Analysis shows how significant Obamacare’s subsidies are in the scheme of government transfer payments to households, accounting for 21 percent of the increase in government transfer payments in January:

Personal current transfer receipts increased $24.8 billion in January, compared with an increase of $13.8 billion in December. The January estimates of current transfer receipts reflected several special factors…… Other government social benefits to persons was boosted $5.3 billion, primarily reflecting health insurance premium subsidies paid in the form of tax credits to enrollees of the Affordable Care Act exchanges.

Crowd-out Effect of CHIP Expansion 44 to 70 Percent

In 2009, Congress reauthorized the Children’s Health Insurance Program (CHIP), providing states added resources and options to insure children. About 15 states expanded CHIP eligibility to families with incomes up to 400 percent of the federal poverty level (an income of $94,000 for a family of four) with a median upper limit for coverage at 250 percent of poverty, the highest since CHIP’s inception in 1997. Federal CHIP funding is up for reauthorization in 2015 and some argue that CHIP is unnecessary because of Obamacare’s subsidies, which kicked in this year.

ex1

Source: “The Impact of Recent CHIP Eligibility Expansions on Children’s Insurance Coverage” from Health Affairs.