Repeal + Replace

Repeal + Replace

Not Really Insurance: The Pre-Existing Condition Debate

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The recent debate over the potential repeal and replacement of the ACA, with the current focus on coverage for preexisting conditions, has drawn a great deal of attention to the concept of health insurance.  While our political leaders are constantly talking about it, few of them seem to understand the “insurance” component of health insurance. As a result, much of what they say about preexisting condition coverage is gibberish. We are here to set the record straight.

At its most basic level, insurance provides protection against the risk of unexpected financial losses. We focus on the term risk because if we were risk neutral (i.e., we were indifferent between sure things and actuarially equivalent gambles), then we would not value this protection. But nearly all of us are risk averse, meaning that we would rather not face having to dramatically reduce consumption of everything we enjoy in the event we are hit with an astronomical medical bill.  Because we are risk averse, health insurance improves our collective well-being by helping us collectively smooth our consumption.  Everyone who purchases insurance consumes somewhat less of everything else when healthy, but does not have to consume dramatically less when sick.

A Health Plan CEO Daydreams

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Jim was at his desk, looking weary.

The last few weeks had been brutal.  Despite working twelve-hour days, he felt that he had little to show for it.  His annual board meeting was to take place the next day, and he expected it to be tense.

With a replacement bill for the ACA about to be voted on, and with Trump in the White House, the situation seemed particularly precarious.  The board members had asked him to present a contingency plan, in case things in DC didn’t go well.

As CEO of a major health insurance company, Jim was well aware that business as usual had become unsustainable in his line of work.  No matter what insurers had tried to do in the last few years—imposing onerous rules, setting high deductibles, pushing for government subsidies—prices had been going up and up.

Premiums, of course, had had to do the same but, evidently, the limit had now been reached.  The horror stories being told at town hall meetings across the country were all too real.  People were fed up, and politicians were feeling the heat.

Something needed to be done to change course, but what?  He did not have any good plan to propose to the board.

Replacing the ACA; Closing the Deal

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Last week, the CBO threw buckets of cold water on the American Health Care Act.

While there are serious questions concerning the CBO’s methods and its historical accuracy (see Avik Roy’s critique), Democrats fighting to defend the ACA as it heads towards collapse celebrated; they know CBO scores have potent political weight.

The Republican response was two fold—the loudest voices want to repeal the ACA and see what happens.  They’re wishing away the concerns of millions of Americans to demand a rapid march over the political cliff.

Many other Republicans (e.g., Senators from Medicaid expansion states) are quietly eying the hills. To succeed politically and substantively, the AHCA needs to preserve the ACA’s most popular features in a fiscally sustainable way while building a base of political support that lasts beyond the next election.

Here’s a path forward.

ACA’s core flaws.  The ACA has two fundamental flaws—it is financially unsound and politically unstable.  The ACA’s financial instability is hard-wired.  Combining a weak individual mandate, community rating that strongly tilts against young people, guaranteed issue and comprehensive benefits has produced predictable results. Too many young people have concluded the ACA’s a bad deal, too many others are gaming the system and premiums/deductibles are too high for too many.

Whether the ACA is in a death spiral is debatable.  Whether it’s heading that direction is not.

The ACA’s enactment added political instability to the mix. 

Had common ground with Republicans been found when the ACA was enacted, its repeal would not be today’s top legislative priority.

AHCA’s proposed fix; heat and light

The AHCA carries a heavy load of political peril. The AHCA replaces subsidies with refundable tax credits.  Critics on the left believe the tax credits won’t be generous enough.  Refundable tax credits give the Freedom Caucus real heartburn.

Interview with Mark Pauly: Part 1

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Community Rating – The Worst Possible Way To Do a Good Thing

I have a grudging respect for health economists, “grudging” because, like many doctors, I want my pieties unchecked. Health economists check our pieties with quantitative truths. They describe the way the healthcare world is – a view from 29, 000 feet, pour cold water on the way we think the world should be, and guide, with abundant disclaimers, the way we can make things better. It’s unwise climbing Everest without a Sherpa, nor is it wise reforming healthcare without listening to health economists from across the political spectrum.

President Trump, along with the Republican House and Senate, will be dismantling the Affordable Care Act (ACA). In a sense, President Trump is not just descending Everest, a treacherous feat in its own right, but scaling a peak arguably more dangerous than Everest. Despite their differences, Mr. Obama and Mr. Trump share one commonality – an implicit distrust of the health insurance industry.

How did the American health insurance industry become so vilified? This is, in part, because necessity is the father of all vilification. Insurers are a necessary evil in a country where there’s still deep mistrust of the government. Partly, this is because we transfer our angst about the uncertainty of our future, the dice which plays with our lives, to insurers who are in the business of rolling the dice. But mostly it’s because the misdeeds of the insurance market have been grossly exaggerated, and the benefits of the market have been attenuated by a few damning anecdotes. This is what Mark V. Pauly (MVP), Professor of Health Economics at the University of Pennsylvania, and one of the most eminent health economists of his generation, believes.

The Arc of Justice in Healthcare

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We all fear that phone call.  A medical report turns out the wrong way and life may never be the same.  When that call arrives we all have the same needs:  A doctor who cares, a place to go for treatment and the finances to afford what’s needed.  Starting on January 20th, some of my patients will join the 20 million whose lifeline to those fundamental needs becomes jeopardized.  

One of my patients facing this threat lost his job and health insurance during the 2008 recession.   Because he’s a diabetic and has a special needs son, no insurance company would sell his family a policy.   Why would they?   Diabetics and others with serious illnesses pose high risks for future health expenses.  Insurance companies make money by avoiding such risk.   After exhausting all the options, he sweated out 18 months with no coverage.   Finally, the roll-out of the California Exchange, funded by the Affordable Care Act (ACA), allowed him to buy an Anthem Blue Cross policy for his family.  

Do we really want millions of our fellow Americans to relive those nightmares?  We all benefit from the ACA’s fundamental commitment: That everyone deserves access to healthcare regardless of their ability to pay.  The policies guided by this principle moved us toward the achievement of universal coverage without changing the existing care of the majority of working families with employer based plans nor those with self-funded coverage.   

Interview with Mark Pauly: Part 2

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President Trump and Obamacare

 

 

Healthcare reformers, like the wives of King Henry the 8th, have a thankless job. In a curious inversion of the Tudors, President Trump, who has promised to make healthcare great again, finds himself in the same predicament as the King’s sixth wife who knew what she had to do, just didn’t know how she could do it any differently. Dr. Mark V. Pauly (MVP), Professor of Economics at the University of Pennsylvania, believes President Trump’s options are neither exhaustive, nor exhausted.

The Interview

SJ: I’m quoting from your book Healthcare Reform without side effects “with community rating…doors are open for political and special interests to lobby…Imagination will be stifled…political rent seeking will be rampant.” When I read this paragraph I checked the publication date of your book. It was not 2016. It was 2008 – before the passage of the ACA.

MVP: Unfortunately, the book wasn’t published soon enough before the ACA.

SJ: What, in a nutshell, is the problem with the ACA?

Examining How Senate Republicans Frame Their Health Care Bill

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You can find the full text of the Senate Bill here.

Following is the Senate Republicans summary of their Obamacare replacement bill, with comments by NYU’s Jason Chung.

Seven years ago, Democrats imposed a risky health care experiment on Americans that led to skyrocketing costs and collapsing insurance markets.  Senate Republicans are working to fix the mess Democrats made by acting to rescue the millions trapped by Obamacare.

Jason Chung: While Obamacare has been largely successful in its aims to get millions of uninsured Americans medical coverage, including low-income and those with pre-existing conditions, it has also thus far failed to rein in premiums.  Some of that can be attributed to Obamacare failing to institute a public option, which would charge premium lower by 7% to 8% according to the Congressional Budget Office.

This is a nuanced position.  One can support former President Obama for extending coverage for up to 17.7 million more people and criticize him for failing to account for or communicate the possibility of rising premiums in an unchecked for-profit health insurance model.

Repealing the Right to Redistribute ‘Other Peoples’ Money’

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Republicans are having a hard time agreeing on how and when to repeal Obamacare. The Patient Protection and Affordable Care Act (ACA) is difficult to unravel because it was designed to alleviate a problem too costly for the government alone to fix. The health care law was passed to make medical care more accessible for low-income Americans and those with pre-existing conditions. This was to be done largely by socializing the costs and spreading the burden among a much broader segment of the healthy population. This is not unlike a pyramid scheme, where a broad base of people at the bottom get ripped so a few at the top can benefit.

Republicans have it within their power to use a process known as budget reconciliation to repeal Obamacare provisions that involve the budget, with a simple majority vote. For example, Republicans can repeal the taxes, fees and appropriations that fund the ACA. The individual and employer mandates, with associated penalties, can also be repealed. What Republicans cannot do is repeal the costly insurance regulations that drive up premiums for most people. That would require the help of perhaps a dozen skeptical Democrats.

Health Reform Must End the Harms of Prior Authorizations

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As the White House continues to push for a revised Republican proposal to replace the Affordable Care Act (ACA), one thing is for certain, many of the sickest Americans will continue to suffer as they are denied medications and other treatments under current health insurance strategies to save costs.

Both the ACA, and the recently proposed MacArthur Amendment, do not address a well-established practice of health insurers’ use of restrictive prior authorization requirements to deny or delay coverage of medications and treatments to seriously ill patients. In my own practice caring for cancer patients and those with terminal conditions, I have witnessed the additional suffering caused by denying these patients timely access to medications for pain.

A prior authorization is essentially a check run by insurance companies or other third party payers before approving certain medications, treatments, or procedures for an individual patient. Insurance companies justify this practice as a means to save costs to consumers by preventing unnecessary procedures from being covered, or requiring generic drugs to be used instead of brand-name, more expensive alternatives.

Here’s What Won’t Happen in 2017
(And What Will)

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In the political drama surrounding the new administration, healthcare is certain to take center stage as the 115th Congress convenes tomorrow and Donald Trump is sworn in as our 45th President and Chief Executive January 20. As it turns out, healthcare was a major issue in Campaign 2016, especially with Clinton-Sanders followers who wished expansion of coverage and a vocal minority of GOP voters who liked the promise of Repeal and Replace. Now it’s time to govern.

For the new Congress and administration, governing healthcare will play out against a testy backdrop: it will not be easy.

The Nation is Divided about the Affordable Care Act (HR3590): Only one in four Americans and one in two Republicans surveyed after the election wants the ACA repealed. By contrast, 30% want it expanded and 19% want it to remain as is, (Kaiser Family Foundation Poll December 28, 2016). Elements of the law are popular, like protections against denial of coverage due to pre-existing condition and continuation of coverage for young adults under 26 on their parents’ policy. But the individual mandate became a rallying cry for opponents who labeled it “government run healthcare” and partisans who tagged it ‘Obamacare’ voting to repeal it more than 60 times in the House. Objectively, for the past four years, the ACA has been shorthand for a debate about health insurance coverage and premium costs. The law imposed restrictions on how insurers operate and expanded coverage via Medicaid expansion and subsidies for those between 100 and 400% of the federal poverty level. Access increased–20 million are now covered that weren’t before—and premiums went up for everyone because the law imposed restrictions on how plans were required operate. Ironically, the insurance reforms are in Title I of the ACA “Quality, Affordable Health Care for all Americans”; delivery system reforms that address gaps in quality, care coordination, healthcare workforce innovation and unnecessary care are covered in the other 9 titles that got little attention from media, political pundits and politicians. Nonetheless, the ACA divides America though most know little about what’s in it.