I write this email the day before new Health Insurance Marketplaces, or “Exchanges” will go live in each of your respective states and hours before attempts to defund the Affordable Care Act (ACA) by House Republicans results in a government shutdown that will put 800k federal employees out of work and will hurt the economy.
There’s a whole lot of misinformation and spin going on about the ACA, so I wanted to provide my thoughts on what the ACA is and what it isn’t. I’ll start with some practical/informational items and will move on to broader issues with the ACA.
Exchanges: Starting tomorrow, Tuesday October 1st, 2013, you will be able to shop for individual health insurance plans on www.healthcare.gov. Please share this link with your friends & family.
Regardless of where you live, insurers in your state will offer individual health care plans online and in certain community locations where you can buy a new insurance policy that will kick in Jan 1st, 2014. There will be 4 tiers of plans with different prices, deductibles, and coverage: Bronze, Silver, Gold, and Platinum.
What most people don’t know is that, unlike the current status quo, any plan on the Exchange has to cover the following 14 items at a minimum:
- Addiction treatment.
- Ambulatory patient services.
- Care for newborns and children.
- Chronic disease treatment (such as diabetes and asthma).
- Emergency services.
- Laboratory services.
- Maternity care.
- Mental health services.
- Occupational and physical therapy.
- Prescription drugs.
- Preventive and wellness services (such as vaccines and cancer screenings).
- Speech-language therapy.
Also, insurance companies can no longer price, or deny your coverage based on preexisting conditions.
If you are poor enough, you qualify for Medicaid, which under the ACA is expanding in most states (in many Republican states, Republicans opposing Obamacare are refusing the offer to expand eligibility of Medicaid, even though the federal government is offering to cover most of the cost of expansion).
If you are not poor enough to qualify for Medicaid, but still don’t make enough money to afford even Bronze-level health insurance, you will get a subsidy to buy insurance.
Here’s a great calculator that will estimate your price, which depends on your state, age, smoking status, etc. http://kff.org/interactive/subsidy-calculator/
For example, a 30 year old non-smoking single woman in NC who makes $25k/year (too much to qualify for Medicaid), can buy a Silver plan on Tuesday (Oct 1, 2013) for around $3,100/year, but will receive a subsidy for ~44% of that coverage, thus being able to buy that plan for ~$1,700 per year.
I personally know self-employed people who have lived for years without insurance due to the very high cost of individual coverage and because of preexisting conditions. I believe the Exchanges will provide those people with more affordable options than they have had in the past.
Individual Mandate: What it is and why it’s there
A major component of the ACA is the mandate that, by January of 2014, every American who doesn’t already have insurance will have to buy insurance or pay a fee for choosing to be uninsured. The reason for this mandate has to do with actuarial (i.e insurance) science and considers things like what would happen if only sick people bought insurance, where healthy uninsured people who get sick go for health care, and the reality of the high cost of health care for those uninsured who get sick (issues loosely known as the “free rider problem”)
The idea of the individual mandate was actually created by the conservative Heritage foundation in 1989 (read the original essay here: http://healthcarereform.procon.org/sourcefiles/1989_assuring_affordable_health_care_for_all_americans.pdf) and was championed by conservative Republicans, like Newt Gingrich and Orin Hatch who opposed government run programs like Medicare and recognized that for a private-sector based healthcare system to offer near-universal coverage, everyone, including healthy people, would have to buy insurance (they’re obviously against it now and ironically call it “government-run healthcare”).
The truth is, the only way to have near universal coverage in a private health care system (ie. private insurers paying private doctors) is by addressing the “free rider” issue by having an individual mandate for everyone to buy insurance. The irony of GOP opposition to it is that, if Obamacare fails, it may represent the last nail in the coffin of private-based universal coverage (vs. the single-payer universal healthcare systems that are providing better care cheaper in Canada, England, and many other industrialized nations).
The individual mandate was the subject of a Supreme Court ruling in June 2012 that upheld its constitutionality.
Anti-Obamacare Arguments/Talking points and My Response
Claim: Obamacare has been a failure
Response: Most components of Obamacare, such as the Exchanges and individual mandate, have yet to be implemented. The components that have been implemented include allowing people under 26 to stay on parents health insurance plans. It’s simply too soon and thus untrue to claim that Obamacare has been a failure or a success.
Claim: Obamacare is pushing our country into deeper debt
Response: The latest estimate by the Congressional Budget Office (CBO) scored the law as reducing the budget deficit by $109 billion over the next decade. In fact, repealing Obamacare would increase the deficit. Even repealing the medical device tax, one of the demands House Republicans are making in order to avoid shutting down the government, would add some $30 billion to the deficit over 10 years.
Claim: Healthcare costs have gone up under Obamacare
Response: Besides the point made above that most components of Obamacare have yet to go into effect, there is no evidence to support the claim that Obamacare is resulting in higher costs. Healthcare reform was a major policy issue precisely because the status-quo trajectory of healthcare costs were projected to swallow up the American economy in just a few decades. Under the ACA, the double-digit yearly increases in healthcare costs we saw through the 2000s are reduced to 6.5% increases in 2014. Still increasing, but at decreasing rates than the pre-Obamacare trajectory.
Obamacare has some modest cost control elements, like Accountable Care Organisations (ACOs) that reward networks of doctors for keeping costs below a benchmark, or bundled payments that pay a set price for an entire episode of care vs. a fee for each service, etc. However, we could do much better in terms of cost-reductions (for example, moving away from a fee-for-service model entirely towards a fee-for-results model, switching to a single-payer system with massive bargaining power to reduce costs for everything from provider costs to pharmaceutical costs to medical supply costs, etc.)
Claim: Obama promised that you can keep your doctor, but some that’s not necessarily true if you buy a plan that doesn’t cover your doctor.
Response: This is just a gotcha question. For example, my employer recently switched us from Humana to Aetna, which is something that happens all the time in the current system. I suppose there may have been some doctors covered by Humana that aren’t by Aetna and visa versa. Blaming Obama for this common phenomenon is just silly.
Claim: Employers like UPS are dropping coverage to avoid cost of providing healthcare.
Response: Under Obamacare, companies with over 50 full-time employees (this excludes 96% of employers) must provide healthcare coverage for their employees and can purchase coverage on Exchanges. A few companies are reducing worker hours to avoid this requirement (so hiring more workers to work <30 hours vs. fewer workers to work >30 hours), while other companies are making changes to coverage for spouses that are covered by spouse employees. UPS fits into this latter category. UPS announced that they would no longer cover employees’ spouses if those spouses are working and eligible to receive coverage from their own employer. Opponents of Obamacare conveniently leave out this last part in claiming that UPS is dropping 15,000 spouses from coverage.
The Bottom Line
While Obamacare doesn’t fix the U.S. healthcare system, it represents a significant improvement as is and can be used as a vehicle to much broader improvements over time (assuming leaders actually interested in improving it vs. doing everything they can to make sure it fails.) Even after Obamacare is implemented, the U.S. will still have the most expensive health care in the world per capita, per procedure, and per result, though the inequity of health care as a privilege will be significantly dampened. Exchanges will spur some competition, but the state-by-state barriers to entry from truly competitive insurance markets that could result in real cost savings are still there. The real achievement of Obamacare as it exists today is to dramatically expand coverage to near-universal levels, modestly improving quality of health care, and while moderately lowering the rate of growth of healthcare costs.
Personally, I’m a big fan of a single-payer system and think the employer based health insurance model makes no sense and straddles our companies with costs that other industrial countries take on as a role of government. The fact is that the single-payer Medicare program, a program beloved by its enrollees, has controlled costs far better than private insurance, with a rate of growth in per person spending below that of private health care plans for over 40 years running. In fact, attempts to introduce private plans into the Medicare system to try to reduce costs or improve quality have failed do either: CBO says that Medicare Advantage plans covering the same care as traditional Medicare cost 12 percent more. To quote one of my favorite experts on the matter, health economist Dr. Austin Frakt, “There is overwhelming evidence that public programs exert greater control over health care spending than private insurers.“
Opponents of single-payer systems talk about rationing care, but the fact is we currently use money to ration care. Tell a working-class uninsured person who needs a $100,000 kidney treatment that he has the freedom to pay for that treatment in the U.S. vs. waiting on a list in Canada to receive the same treatment and see how excited he is about not being subjected to “rationing.” And besides, anyone under a single-payer system who cares to spend $100,000 on a procedure outside of their insurance offerings is still free to do so.
For top notch discussion of all things healthcare related, please check out my favorite blog on the matter, The Incidental Economist, at www.theincidentaleconomist.com.