Obamacare is Working, or it Isn’t

A few weeks ago I received notice of our annual health insurance increase. This year it was 38% more to keep the same coverage. Last year the proposed increase was 22%. The year before 12%. The year before that, 18%. The next day I got a reminder from my broker that with the increase, my premium would qualify as a “Cadillac Plan,” incurring another 40% non-deductible excise tax on the premium amount over what was considered “reasonable” under the Affordable Care Act. (Employers will calculate the tax and their insurers will pay it, effective in 2018).

Let’s put aside the irony for a moment, since I don’t consider these premiums to be in any way “reasonable.” Of course, we did the same thing we’ve done for four out of the last five years, and reduced benefits until we achieved an increase that was “only” in the low double digits.

How can an act named Affordable be so expensive, and how can I keep cutting my coverage each year but have it still be considered in the “Cadillac” range? Is the ACA working, or isn’t it?

That depends on what the ACA is supposed to accomplish. When I read the bill in 2010 (at least its provisions, not all 1,600 pages), I stated in a four part series here that I thought its main purpose was to drive everyone into a single-payor system. I still do. Here’s why.

The ACA’s supporters promote increased access to health care for those who were left out of the system. In reality, access to care hasn’t improved all that much. What has improved is access to insurance. If doctor’s won’t accept it, or patients won’t abide by the parameters of the system (by staying out of the ER for example) insurance doesn’t translate automatically into care.

dollars and caduceusEvery study for the last 40 years has found that the best way to contain costs is to steer people into primary care dominated networks, where their health is tracked and managed by a physician. The ACA does nothing to change the delivery system. In fact, even the government sponsored exchanges have co-payments for routine doctor visits; co-pays which can be avoided by using the Emergency Room for minor care, even though the costs are ten-fold or more. An ER is not allowed to turn you away over a co-pay. Many poorer patients consider medical collection calls a fact of life. In the ER, they just don’t have to pay right now.

The theory promoted about the ACA was that a more broadly insured community would reduce per-capita costs by encompassing the healthy. Instead, to no one’s surprise except perhaps the ACA marketing folks, easier access to insurance has resulted in adverse selection; the enrollment of people who are sicker than the average. No rational being believed it would be anything else. We are assured that the positive impact will be felt when healthy people eventually are forced to join, but the penalties for not enrolling are so minor, there is no reason to think that will come anytime soon.

So the taxes and penalties have become an income transfer mechanism from private industry to government programs. With the cost per person for health care at around $6,000 annually, how long do you think that the government will leave the tax on uninsured employers at $2,000 per employee, or exempt the first 30 employees from the qualifying head count? The law allowing those taxes is in place (and Supreme Court approved), but the amounts are to be determined by regulators, not legislators. They can change those by decree, and I’m sure they will.

In order to gain passage of the bill, President Obama publicly announced deals with the hospital, legal, physician, pharmaceutical and insurance lobbies to exempt each from specific price controls. Not surprisingly, stocks in all those industries rose on the announcement of the bill’s passage.  That’s not much of a sign that the markets feared the impact on the health care industry’s profits.

When I mentioned the Cadillac Tax a colleague said “Oh yeah, but that’s not until 2018.” Like the frog in the slowly boiling water, we are being gradually exposed to the actual costs of the ACA over time. The expansion of Medicare tax to capital gains, abolishing the taxable income limits, the recasting of how we calculate “full-time” employees, the uninsured tax, the tax on carriers (which they are expected to pass along to consumers) because of “unexpectedly” high costs of care. On the horizon are the Cadillac tax and the expiration of matching funds to states for expanding Medicaid under the bill. If it all came at once, we’d be up in arms.

The ACA has made health care less affordable except for people with medical conditions who were previously denied coverage. It is designed to make private insurance so costly that almost everyone will eventually capitulate and join a government plan. Then the government will have enough muscle to control costs by fiat. That objective is being met admirably, and without the revolution that nationalizing health care would have caused. In that sense, the ACA is brilliant. It’s a British National Health Service where everyone will sign up voluntarily; if only because not signing up costs so much more.

Don’t get me wrong. I’ve been to countries where access to every public building requires negotiating a phalanx of the crippled and deformed, many of which could be saved with basic care. I don’t want to go there as a nation. We need a rational approach to universal health care that controls unnecessary spending and delivers consistent quality.

Unfortunately, the ACA isn’t designed to address those needs at all. It’s primary objective is to put the government in control, and it is working. We just have to hope that better health care will eventually be the result.

 

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11 Responses to Obamacare is Working, or it Isn’t

  1. Will Shain says:

    John, I can’t find fault with any of your logic. I can only speak to my circumstances. Over the past year, my rates have decreased by nearly 7% compared to 2014, but I had to move to a new carrier to get them. If I stayed with the old carrier, I was facing an 18% increase for a silver-level HMO-style plan based on wellness/.prevention. I can’t say that the ACA had any impact on moving to a gold-style PPO plan with a top flight carrier here in New England, but my $500/$1000 deductibles are down from last year’s $2,000/$4,000. We’re clearly paying significantly less than 2014. Maybe it’s New England, but competition appears to be a factor. Only 2016 will tell whether our new carrier will emulate the old carrier for exorbitant price increases.

  2. I agree with you 100% – about the actual intent of the bill, about the way it was put into being, about the sneaky “boil the frog” aspect to make people who don’t think very deeply stay clueless, and about the ultimate consequences.

    I was always very proud of our company paying for all of the employee coverage and most of the family coverage for health care – something that has shifted dramatically over the last couple of years. I have my own employees going out and shopping for better deals because it’s so expensive to have the company plan now. And, we are aggressively looking for the best possible pricing/benefits.

    It’s become a lose-lose for everyone – except those in governmment who want more control over all of us.

  3. David Basri says:

    Our small business experienced outrageous increases to our small group plans year-after-year in pre-ACA times. Finally we gave up and just had ourselves and our employees purchase individual plans for about 60% less than the group plans. After getting to keep the grandfathered individual HD plan for the extra year, we are going to see a huge bump in premiums this year.Basically, all the plans are headed to where small group plans used to be for all the reasons listed by John.

    The pre-ACA environment was completely unsustainable. The ACA itself is a poor compromise instead of a rational plan, but it was all that could be done in this fractured political era.

    There is more than enough money being spent on health care in the US every year to give everyone good care. The problem is that we have the least financially efficient system anywhere in the developed world, by a wide margin. Trying to force market principles on something that is not, and frankly should not be, a market does not work very well.

    The current system is based on the the market-oriented question of whether, when, to whom and how much you would like to PAY for your health care. Under that, however, is the real question: “Would you like your health?” That is a distinctly NOT market-oriented question that people always answer “yes” to given any choice at all.

    The ACA is poorly constructed and is pushing a muddled and convoluted path towards some kind of not well planned change.If it eventually leads in 10 years to the only rational choice of a single payer system, the messy transition will have been worth it. There is not enough political or cultural will in the US to do the rational thing deliberately.

    • John F. Dini says:

      You are right, David. We could never buck five of the most powerful lobbies in the country without restructuring lobbying itself, campaign financing, tort reform, and on and on. That’s why I said ACA was brilliant. Whether we agree with it’s long-term objectives or not, it set us on what appears to be an irreversible road to national health care.

  4. John Hyman says:

    The software industry has benefited by shifting from a transactional model to a subscription model. Now you pay a monthly fee to access the application(s) and get updates to the software automatically, as they become available. The company increases revenue because, in reality, no one always pays to upgrade to the latest and greatest version of the app

    So when will we see this approach applied to wellness? I’d prefer to pay my primary care provider a fee for wellness and care visits, tests and consultations. They’d see improved cash flow, reduce office administration costs, far less paperwork and accounting (sorry, John).

    It’s simple, easier to orchestrate, and could still be subsidized by the Federal Government for people who qualify based on financial need.

    • John F. Dini says:

      You know, John, the model for traditional Chinese village medicine was to pay a monthly stipend to the local herbalist/physician. If you fell ill, you stopped paying until you were better again. Of course, that isn’t “sophisticated” enough for advanced western medicine. 😉

  5. David Basri says:

    Several large providers (Mayo Clinic, Kaiser) are starting to follow a subscription model aimed at wellness, as opposed to services, as John Hyman suggests. That helps, but still does not address the monumental waste baked into a system where the entire payment side consists of competing, for-profit insurance companies.

    At the primary care practice we use, 10% of the employees are devoted to nothing but dealing with insurance. Insane and replicated throughout the provider side of health care. That does not count the billions in advertising, overhead, executive pay and profit that is being sucked out of the system with zero benefit to health outcomes.

  6. Cheryl Swanson says:

    ACA created the worst insurance plan coverage in 2015 we’ve ever had in our entire lives. We basically paid for a family of four all year and never used it due to the high deductibles PER PERSON. It only drives healthcare into the “delay”, “don’t address”, “self-insure”, or “self-treat” categories. Good thing we know doctors personally!

  7. Hello John,
    Perhaps a view from outside of the US, up here in “semi-socialist” Canada. This is also likely more of a big picture comment on national governance than anything.
    I of course cannot comment specifically on rates for medical insurance in the US, but I do think it is a fact that the US is the only really industrialized country that doesn’t have true universal health care. Now, I am by no means holding up our system as the model – after all we were ranked 30th by the WHO and the US, 37th, so clearly we both have a great deal to do in this 21st century world in this regard. (I realize these rankings a re a bit old and do have their flaws).

    What I will say though is that there is plenty of evidence to show that as a country’s healthcare and education systems go, so goes the overall success of the country in the long term. Its a bit like you are only as strong as your weakest link. If you do not provide general access to healthcare and education for all citizens, it is only a matter of time before the social fabric begins to erode – the cost of which is far, far greater than the specific costs of delivering those programs. My observation is that you are seeing some of this in the US – it is likely a key factor that is causing such massive division and polarization in the country politically.
    I personally don’t agree with fully private health-care. I have many friends in many countries in the medical system, and none of them agree with “medicine for profit”. I think the best models are private delivery within a publically managed system that provides equal access. I know many people in the US when they hear this rush to the – “well you have long wait lists in Canada – we don’t”. That really is not a complete picture. If you need treatment, you get it. But if its not required and/or elective, yes you will go on a wait list. Most Canadians (and Europeans) are fine with that. I have a friend who got sent for an angiogram, which found 4 major blockages in his heart. He had quadruple by-pass surgery the next morning – by a team rated as one of the best in North America. This would all be covered by Health Canada and paid in his taxes – no co-pay, no deductibles, no having to take a 2nd mortgage to pay his medical costs.

    At the end of the day, its how you view things – you have lower tax rates than we do, but we pay for our health care in our taxes. Lastly, I think this is a tough transition for the US – it is not going to be easy. You are likely where the National Health or Canada Health or Germany were 30 years ago. But what I think you cant afford to do is leave this to politicians to use as an election football (There is a difference between “politicians” and “public health care” – the former change frequently – the later should be enshrined in law).

    This is not meant to be criticism – like I say – we have much to work on too – but I think objective debate that takes this vital topic out of being called OBAMAcare is needed for long term success.
    Malcolm

    • John F. Dini says:

      Your point is very well made, Malcolm. I will point out, however, that Canada shares a 3,000 mile border with a pay as you go system, which is open to any Canadians who have the money to opt out of their system. That said, I’m not arguing against universal health care, but rather a system that tries to deliver that care in a market with no cost (not price) controls. Despite our low WHO ranking, the US spends a higher percentage of our GDP on health care than any other nation.

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