What Could Have Been and What Still Has To Happen

Covered California, the state-run Obamacare health insurance exchange, announced on Wednesday that 59,000 people have so far signed up for health insurance.

Given that California amounts to about 10% of the nation’s population, this would suggest a smooth running federal exchange might well have enabled the Obama administration to have met its national first month goal of 500,000 sign-ups.

But the California enrollment also points to the real challenge Obamacare faces.

In the first month, 84% of the enrollees did not qualify for a subsidy. It has been widely estimated that about half of all potential enrollees will eventually qualify for a subsidy. As Covered California’s chief executive said, “Those are individuals who have been waiting a lifetime for health coverage.”

Covered California is not scheduled to release any age data until next week, but the health plans already know what they are getting. The President of the California health insurance trade association also said yesterday, “It is important for the exchange to achieve a balance in enrollment between the old and the young and the sick and the healthy to allow costs to be spread among all people.”

These Healthcare.gov problems have been a sideshow for Obamacare. The main event will be about whether more than just those who have been “waiting all of their lives” to get guarantee issue health insurance they are sure to make money on will eventually sign-up in adequate numbers.

While these information technology system problems were always going to get fixed, I will suggest the depth of these problems will eventually work against getting the broad based enrollment that is critical. Obamacare started with many Americans being cynical about it. That this is now the butt of jokes on late night TV and the Comedy Channel does not help it.

All of the publicity over those people, including me, who have lost their insurance, does not help either. One story after another has made the media with people talking about how they lost their quality health insurance and now have no option but to pay much higher prices for more deductibles and fewer provider choices. That there is rate shock is no longer in doubt. Those constantly repeated real life stories couldn’t help confidence in the law.

The President’s apology and the Democratic Capitol Hill stampede to now reinstate those policies only adds legitimacy to that storyline. And, all of the repeated spin by Secretary Sebelius and others, like trying to excuse the Healthcare.gov early problems as just a matter of the program’s popularity, has just made people more cynical. This administration now has a giant credibility gap when it comes to Obamacare.

Democrats have been arguing all this time that things will get better when consumers can actually go into the website and see for themselves how good the benefits and prices are.

A single person making $28,725 a year in California would have to pay $193 a month for the second lowest cost Silver plan––10% of their after tax income––for a policy with a $1,500 deductible and a $45 primary care co-pay. Even a person making only $22,980 would pay $121 per month––again 10% of their after tax income––for a $1,500 deductible and a $40 primary care co-pay.

I recently showed these numbers to an undergraduate class of about 50 students. I asked them if young people would buy it. I am not exaggerating here; about half the class shook their heads no and half laughed.

A family of four making $59,000 a year will typically pay $400 a month for a policy with a $2,000 deductible.

A family of four making $71,000 a year will typically pay more than $500 a month for that second lowest cost Silver plan with a $2,000 deducible––again about 10% of after tax income.

And these lowest cost plans will likely have “narrow networks.” If they want a better network, and one is available, they will pay more.

In traditional health insurance terms, these are pretty good deals. But, how many of these families have an extra $400 or $500 a month in their checking account for what might look to them to be a piece of paper with a $2,000 deductible?

I will suggest these people will have a very difficult decision to make once they can finally get into the websites.

Getting the first 500,000 likely older and sicker people to sign-up was the easy part––or it should have been.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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  7. Note to Robert:

    I have to quibble about your second to last sentence.

    It has been illegal for a health plan to drop a subscriber after they became sick since the HIPAA laws of 1997.

    The ACA has many virtues, but this is not one of them.

    Some health plans did make rates shoot up wildly after someone in a small group became sick. Some plans tried to expel sick people on the grounds that they cheated on their applications. Some plans abruptly left a market if a lot of insureds got sick.

    But just kicking people off was not legal, and we did not need the ACA to gain this protection.

  8. I thought Robert Laszewski was supposed to know what he’s talking about. His examples are bogus. He says both groups would need to pay about 10% of the their income for Silver policies and would refuse to do so. If a policy exceeds 8.5% of your income, then you are exempt from the mandate. However, all the other experts say that the young people he talked to would want only catastrophic plans. Well, at healthcare.gov their are specific plans designed for those under age 30 that for most single people would almost free or at most $50 after a subsidy. Also, he’s asking unemployed college undergraduates if they would buy a Silver plan? Come on… most would either be on their parents plans thanks to the ACA extending the age limit to 26, or qualify for Medicaid or cheap catastrophic plans. Certainly Mr. Laszewski knows all these things. If I didn’t know better, I’d say he’s still mad that he had to buy a new compliant insurance policy and so now looks for ways to trash the law. What he forgets is that even though his new plan costs more, if he becomes sick or injured, he can no longer be dropped or excluded from future coverage. Is that of no value, Mr. Laszewski, particularly at your age?

  9. I usually give my sources so they can be checked. You seem to be using the Heritage Foundation, which is not exactly a paragon of intellectual integrity (and has gotten much worse since Jim Demint took over). Your claims are almost entirely untrue, but judging their source, I’m not surprised.

    To show you what I mean, all of the following comes from the 2012 Annual Report of the Board of Trustees [of Medicare]

    Tables III.B1 and III.C1 show the allocation of SSA salaries and wages to Medicare expenses, over $2B for 2011. So much for that claim

    The same tables show an allocation of Treasury (i.e. IRS) expenses. These are weighted towards HI because that’s the part funded by taxes.

    You may be right about expenses for bond, bills, and notes sales. WHOOPEE

    Construction, rental and lease, or purchase contracts are included in expenses of the HI, part B, and part D trust funds (pages 61, 100, 125).

    Fraud investigation expenses from your OIG, and also the FBI and the rest of the DOJ are all included in table III.B1 (page 57 ) and come to almost $1.4B

    So with one (possible) miniscule exception every cost you claim is undercounted is in fact explicitly accounted for in the Trustees report. You really should be more careful of your sources.

    Nice try on the private sector administrative costs, but the Council for Affordable Health Insurance, which is explicitly anti-Medicare, says this in its ‘Medicare’s Hidden Administrative Costs’.
    • Administrative costs for Individual Policies 30.0%
    • Administrative Costs for Small Group 23.0
    • Administrative Costs for Large Group 12.5
    • Composite Private Costs 16.7%

    The 8-10% numbers you quote are exclude profits, commissions, and premium taxes (which of course aren’t stated separately). AND they only include the group market, not the individual market, which of course has much higher admin costs and MUCH higher commissions. If you want to say profits and commissions shouldn’t be counted as administrative costs, that’s splitting hairs pretty fine. If you want to say they shouldn’t counted as costs of the private insurance industry … Ahh, Let’s move on.

    Yes, Medicare imposes signification documentation requirements on providers. So in what way is that different from private industry? And private industry avoids fraud, if it does, by refusing payment beforehand.
    How does that not burden the providers?. So far no argument there.

    In almost all cases Medicare (and especially Medicaid) pays less for the same services than private insurance companies. How will that suddenly change by having a full single-payer system?

    Finally, your reasoning for being one time savings is simply incoherent, so I won’t comment on it.

    Cringe as you may, neither facts nor logic are on your side.

  10. Lisa –

    I don’t think there are very many young men who participate in extreme sports and suffer catastrophic injuries as a result. On the other hand, there are roughly 4 million babies born each year in the U.S. Medicaid, by the way, pays for 40% of those. For the record, I don’t really have a problem with the ACA’s definition of essential benefits, which includes, pregnancy, but I do think plans with a much higher deductible should be allowed for those who want to self-insure more of the risk. We should be putting a lot more emphasis on mitigating cost growth in order to make comprehensive insurance more affordable for everyone.

  11. “Administrative costs for Medicare are about 3%, versus about 21% for the private insurance industry.”

    Here we go again. It makes me cringe every time I see this. Medicare has a lot of work done for it by other government agencies which don’t make it into their widely publicized quantification of administrative costs. When one applies for Medicare, it’s through the Social Security Administration, not CMS. The money that funds CMS is collected for it by the IRS and bonds, notes and bills are sold by the Treasury Department. The rent on the buildings that CMS employees work in is paid by the General Services Administration. Fraud investigations are handled by the Office of the Inspector General. Experts estimate Medicare’s true administrative costs at around 8% of the program’s total costs. Fraud is huge but it’s difficult to quantify precisely. Moreover, the more fraud there is, the lower administrative costs look as a percentage of spending.

    In the private sector, administrative costs for large self-funded employee groups are in the 8%-10% range and there is far less fraud. Administrative costs are indeed very high in the individual insurance market but this is small beer in the scheme of things and, under the ACA, medical underwriting will disappear which will put a good dent in the administrative burden in that market.

    Medicare also imposes significant documentation requirements on medical providers. Companies called Recovery Audit Contractors or RAC’s have up to three years after the date of service to come in and audit hospital and doctor bills. There are plenty of inadvertent mistakes that have nothing to do with fraud but the RAC receives a 9% commission on any overpayments it identifies so providers feel a need to spend a lot of time and effort to ensure that their billing is as accurate as possible and in compliance with complex regulations.

    Any savings in administrative costs that might be generated from moving to a single payer system will be quickly offset by growth in healthcare prices and utilization of services. That’s what I meant by any administrative cost savings being one time in nature because it would do nothing permanent to bend the underlying growth in healthcare costs.

  12. Barry,
    Keep in mind that in the age group where women can become pregnant, men are usually the ones playing football, hang gliding, participating in extreme skiing, etc. Overall, the health risks even out, so you may not see any savings by eliminating maternity benefits, especially after your first skiing accident.

  13. Based on my experience with the system so far, more granularity in our choices would go a long way in resolving high premium costs. The statement by Michale Turpin nets it out:
    “minimum coverage must be the lowest common denominator for a few reasons: 1) Some people actually know what they are buying when they buy a catastrophic plan and other than male sea horses, no single male needs a policy with maternity benefits .”

    To that I would add: Make catastrophic plans available to all age groups.

    Well said.

  14. “… presidential wisdom of the ages, which is: Get the other party in on all big things. ”
    That’s pretty hard to do when the stated goal of the other party was to make Obama a one term president.

    Our polarized leadership has has fought itself into a state of paralysis. Both sides are responsible for this mess and the more vitriol they pour on each other the less likely it becomes that we will see reasonable solutions. Enough already.

  15. Administrative costs for Medicare are about 3%, versus about 21% for the private insurance industry. If Medicare added 3% to its administrative costs that would add about $18B , and still be 15% lower administrative spending than the private system.

    For $18B you could buy a lot of fraud prevention. Your recovery would almost certainly be much more than your spend.

    Next Point. How would this be a one-time saving? It would go on year after year.

  16. There have been some lively debates in this blog on insurance mandates within the ACA (maternity, mental health, etc)

    Let me offer another perspective.

    The person who complains about paying for mandates is someone who pays 2.9 % of income for Medicare Part A, and at least 3% of income on their 1040 for Medicare Part B and Medicaid.

    And they pay this with very little complaint. Because it is a broad based tax.

    This leads me to the weakness of the ACA. The extra benefits in the ACA are largely funded by higher premiums on specific people, and these higher premiums are not tucked quietly into a payroll deduction.

    This is not smart politically. Voters do not like getting bills for benefits that are going to other people. Medicare and Medicaid deliver billions of aid to those less fortunate, but there is little resistance because the costs are so diffused.

  17. civisisus,
    Your statement “People covered by catastrophic plans are prone to ‘disengagement’ from the health care information” is intriguing. Where does this information come from? I’ve been trying to find a catastrophic plan on the market for two years. Who is selling these plans? If you’re talking about college students and young people, I would agree with your statement, but any older adult considering a catastrophic plan would be in a plan like that BECAUSE he or she was engaged in responsible health management, and had been for a long time.

  18. Barry, the problem with our present system is cost (as you know). Leaving everything the same and paying through taxes would not be a great fix – cost wise. But it may get us on the road to reducing costs – hard medicine. At least it would cut out this ridiculous process of sign up and “pick-your-plan” roulette with its lottery subsidies.

    Other countries are wrestling with costs but still do it for about half with a tax supported system. There’s no one fix for eternity. Maybe Americans are going to have to choose between all the entertainment they crave and health care.

    Oh that I wish simple tort reform (restriction) would save us. Maybe insurance could price us a plan that signs away our rights to compensation for being injured, but in that bargain would be a high level of oversight that care givers would probably oppose. I’d certainly like to see the policy price comparison though.

  19. If you consider our fundamental needs you could list; Food, Shelter, Education, Transportation and Medical Care. In 4 of the above 5 what you get – just because you live in this country – is minimal – as it probably should be.

    If you can’t afford food you get Food Stamps, if you can’t afford housing you get rent subsidies or Section 8 housing, if you can’t afford college you get help to go to community college, if you can’t afford transportation you get a bus pass.

    We seem to put Health Care in a different category and pretend that everyone is entitled to the top quality care provided by the best doctors etc. And we pretend that we can afford to give everyone top quality care and as much of it as they want. We can’t.

    Until this fundamental philosophical issue is dealt with, all attempts to constrain cost will fail. And neither the Democrats nor the Republicans want to hold this hot potato.

    I remember an incident from college where a group of us were engaged in high finance – dividing the cost of a pizza. One student – who later went on to be a lawyer – said during the course of this very complex transaction: “If we do this right, everyone will come out ahead”

    That seems to be the underlying philosophy of most health care reformers – that if we just set up the right structure, or if we just use the right deductibles, or if we focus on prevention, or if we just create an ACO, etc. etc. everyone will come out ahead. No they won’t.

    It is time for someone to stand up and say: “You can’t always get what you want, ….. you’ll get what you need”

  20. @paolo. “Why should a psychologically healthy person pay for mental health benefits?”

    Are there any?

  21. The ACA goes way beyond dynamics to stop single-payer.

    When Liz Fowler morphed RomneyCare into the ACA, she skillfully crafted the bill to assure that public options and single payer at state or federal levels will not be considered until 2018 and will be very difficult or impossible to enact from 2018 onward.

  22. If men shouldn’t have to pay for pregnancy benefits, then why should anyone have to pay for any benefits at all that they know they may not need? Why should a psychologically healthy person pay for mental health benefits? Why should someone without sickle-cell genes pay for sickle-cell disease benefits? Or someone without genetic predisposition for a particular type of cancer pay for cancer benefits?

    Why don’t we let genetic testing be part of the health insurance underwriting process? That way in a few years, we could offer a-la-carte insurance tailored to the genetic risks of each individual. People with good genes will be able to obtain very cheap insurance, but obviously anyone with any genetic marker for disease will either pay a very large premium or be uninsurable. Who pays for their treatment?

    If you want insurance to cover everyone, you need individual premiums to reflect the shared cost of all health issues important to the community, not just to those that affect the individual.

  23. Peter1 –

    “Nobody’s asking what’s excluded in those cheap policies.”

    Actually, I did hear Chris Wallace on Fox interview a pretty intelligent guy who claimed to be very happy with his policy for which he got a cancellation notice. They guy with a straight face said it covered everything except for pregnancy, mental health, substance abuse and chiropractic care. I’m not thrilled with the general attitude among too many Americans that they just want to pay for what they think they need and aren’t interested in subsidizing anyone else. It gets to the issue of social trust that I wrote about yesterday.

    As for alternatives, in Switzerland, there are only three age rating tiers. Those are children under 18, young adults 19-25 and everyone else 26 and older. For the latter group, the premium is the equivalent of $350-$360 per month and there is no such thing as Medicare or Medicaid. People can choose their own deductible between roughly $300 and $2,500 per person but nothing else. About 45% of the population qualifies for a subsidy. Somehow, though, the Swiss still pay for about 30% of care costs out-of-pocket vs. 12%-13% in the U.S. Moreover, since they only spend about 12% of GDP on healthcare vs. 18% in the U.S. it implies that the comparable premium here for adults 26 and older would be over $500 per month. If out-of-pocket premium costs were capped at 10% of income, the cost of subsidies would be astronomical.

    In Germany, insuring children is paid for out of general federal tax revenue on the ground that they are a national treasure. There is a 15% payroll tax (employee plus employer share combined) on wages up to €45,000 to pay for health insurance and an additional 3% payroll tax to cover the cost of long term care. The wealthy can opt out into a less expensive private insurance system but they can’t get back into the public system unless they can prove that they are destitute. About 10% of the population or a bit less chooses the private option.

    If we had the single payer system that you always preferred, I’m curious what percentage of income you would be prepared to pay to help finance it. If we had a European style VAT, which is Dr. Ezekiel Emanuel’s preferred approach, it would probably have to be in the 20% range just to replace employer coverage, individual market policies and cover the uninsured while leaving Medicare and Medicaid intact and assuming provider fees were paid at current Medicare rates and drug prices were negotiated down to European levels. In Europe, each one percentage point of VAT raises 0.4% of GDP in revenue on average. Would that be OK?

    Personally, I continue to prefer to fix our healthcare system with market based reforms, including sensible tort reform, that preserves what’s best about our system but gets the incentives right and covers all or at least most of us.

  24. “this is a hobby horse of mine”

    I agree with you Bob and this is another failure of the Obama administration to explain to everyone why their policies are costing more and why insurance is coalescing around ACA policies and why there is a benefit if we are all in the same shared societal risk pool. Instead Obama says now keep those policies, even if they’re junk, even if the next person pays more, even if the ACA mandated policies will now cost more to those mandated to buy them.

    Nobody’s asking what’s excluded in those cheap policies.

    Are there any other countries that use this method of determining what individuals pay – or do they just say, hey, you’re covered. No enrollment questions or income determination.

  25. Many other societies consider childbearing a very blessed event, and look on actual and potential young mothers as a protected class. (not China, of course, but most other advanced nations that have low birth rates)

    The idea that a young mother pays higher premiums, while a senior citizen golfer like me pays his flat Medicare B premium and gets his free Part A coverage, strikes me as shall we say inappropriate.

    I would favor childbirth lumped in with ambulance service and ER’s as things which should be supported by tax dollars.

    I realize that I am not speaking right to your point, Barry, but this is a hobby horse of mine that I bring up whenever I can.

  26. I knew people would take the bait. LOL.

    First, Joel, I followed and closely read EVERY draft of the PPACA as it wound its way through Congress. I’m just an ordinary citizen with an internet account. So, that willful ignorance dog just won’t hunt (Nancy Pelosi notwithstanding). I knew what was in the bill drafts, and I know what is in the Not-2,700-pages law (906 pages with 2.5 inch margins, btw)

    See my post “Public Optional”


    Second, Jeff, I’ve been working around CMS/Medicare (QIO analyst) for more than 20 years. They seem to have administered it tolerably well. Not perfectly, but fairly well. I’m now a Medicare bene (67), and I’ve done more than a decade of next-of-kin caregiver / POA / Guardian duty for my now-late parents, having to deal with the bene side on their behalf. The enrollment and administrative machinery is already in place and working; no need for these Clown Car Contractors CGI Federal and QSSI. See my REC blog post “KatrinaCare” Google “REC Blog KatrinaCare” — 1st search result.

    Y’all can do better than those cute little bumper sticker one-liners.

    I know, I Know; it’s the hated “Single Payer” bogeyman. We’re halfway there already. Would Medicare-For-All be perfect? Of course not. Marginally better than these CusterFluck alternatives? Probably. The M4A barriers are political (AHIP clout) not operational.

    But, maybe we’ve in fact enervated our actual federal governance to the point where it will no longer work. Our politicians seem to be ONLY interested in endless partisan campaigning. The boring work of governance is just, well, too boring.

    Barry Carol retorts below that Medicare is “actuarially crappy.” Yeah, perhaps so, but even THAT is in the context of the status quo contending field. Radically alter the space, and maybe M4A would be a better deal.

    Nah, we prefer our nihilist sleepwalk into neo-feudal socioeconomic collapse, I guess.

  27. If a pregnancy benefit were not part of the ACA’s mandated essential benefits package, the only people who would feel a need to buy it are women of childbearing age who expected to become pregnant in the near term or were already pregnant. This would result in significantly higher health insurance premiums for them as compared to single men of similar age.

    Liberals and women’s groups would complain that this is grossly unfair. Yet it’s OK that women pay less for life insurance because they live longer and they pay less for auto insurance because they have fewer accidents. Go figure.

    As I noted previously, I think it would be interesting and instructive to see a breakdown of the health insurance premium into each of the 10 essential benefits so people could clearly understand just how much of their premium is attributable to each and how much could be saved if some like mental health, substance abuse treatment and chiropractic care as well as maternity benefits were discarded or made optional.

  28. The HITECH programme is equally as dysfunctional, but the patients are not aware that they are guinea pigs, and the doctors suffer retaliation as being disruptive if they complain about the impediments from HIT devices that result in deaths and other injuries.

  29. Great point Michael about the time required both to verify subsidies, and then the time required to make a truly informed choice about coverage

    The drafters of the ACA envisioned a point and click enrollment. Only $67 million was appropriated for navigators, though the administration may have wanted more than that but were thwarted by Congressional Republicans.

    I am not sure if there is any great harm in going to manual enrollments and letting the ACA exchanges grow very slowly. Of course this will cause some of the private insurers to drop out. We could then bring the exchanges under Medicare in some fashion — which should have been done 4 yrs ago.

  30. Civisisus – you sure you want to use Massachusetts as your exhibit A for underpinning your arguments for reform. Mass will run another massive budget deficit this year and is also trying to enact healthcare cuts to balance the budget. The state started with the only 400k of uninsured and a system that already supported uninsured reimbursement for uninsured through taxes. The roll-out was a cluster if you talk to John Kingsdale who presided over it. It is not as easy to digitize enrollment as their are very complicated questions that only live enrollees or people willing to spend 20+minutes on the phone with consumers who use the system and want to understand how reimbursement may be impacted ( e.g drug formularies, specialists, in and out of network etc ). Ask those who run private exchanges for retirees ( average call time is 25 minutes, 25 seconds )

    Massachusetts is proposing another $500M in additional taxes for 2014. It has been consistently the highest per capita healthcare spend state — much of this cost not arising from the uninsured but from an oversupply of teaching hospitals, mandated minimum benefits that drive as much as 20% higher costs for any employer meeting coverage requirements in the state. As for mandating minimum national benefits, other than male sea horses, I’m not sure single men need a medical policy that covers pregnancy benefits.

    It saddens me that in today’s society we have this poisonous minority that has such thin skin it can’t tolerate alternative or informed points of view. The truth is normally encountered in the middle and we have allowed ourselves through gerrymandering, wealth gaps and a decline in “news versus views” media to be hijacked where any facts that are presented are attacked and dismissed outright versus debated to raise the collective IQ of the group. Suggest you read this blog:http://trexdad.com, remove your G8 protestor bandana and join the adults table as we discuss the choices we must confront. ACA is not as horrific as many depict but it is also an interim solution and fiscally unsustainable as constructed. Whether it ushers in a single payer or market based reforms that include disintermediating the insurance complex that has presided over the current affordability and quality demise is an issue for economists and informed handicappers. No one knows for certain.

    BTW, many of us support major reform as our current path is unsustainable.

    Massachusetts has lots of problems – physician shortages, ER use still remains way up and costs continue to increase. Mass has a budget deficit as do 44 states and while we would love to lift everyone up, we have finite resources and infinite demand. If you bother reading my comments – based on living inside and outside the US, being treated in a national health system for a life threatening illness and having worked every side of the aisle in healthcare, you’d know that I am not opposed to a single payer. However, it sets in motion things that most Americans may not be ready for. As Barry points out, there are market based reforms that could achieve similar strides in affordability and access but would require people to give up their unrealistic expectations of healthcare quality defined as “open access PPOs, low co-pays, limited medical and case management and everybody in the waiting room looks like me” Opinions are like certain body parts and I recognize everyone has one. And the beauty of anonymous email comment threads is you can be as caustic as you want and really don’t suffer consequences. You sound like a smart guy. You might start by using your real name. You might be taken more seriously — if that’s your goal.

  31. I went to DefenseCare.gov and signed up for the military defense that is my right of citizenship. Worked fine.


  32. “In the first month, 84% of the enrollees did not qualify for a subsidy.”

    “Those are individuals who have been waiting a lifetime for health coverage.”

    I’m confused and surprised about this statement. Are the rates that good in Covered California that attract those who would not buy previous? Are these 84% mostly pre-exist taking advantage of community rating?

  33. Say, from your handle you’re probably good at following numbers. So go look at the progression of signups under the Massachusetts plan – y’know, the model for ACA? And get back to us on it pdq fast, wouldja?

  34. ” the monstrosity of 2000+ pages”


    wanna know a surefire way to identify when a spittle-flecked partisan is talking about ACA?

    When they don’t even know how many pages were in the statute. It’s 906, dude. Not 2000+. 906.

    There’s less “code” in the ACA document than in the operating system for that cellphone in your pocket. But don’t let me prevent you from prattling on; you do a good enough job of discrediting yourself, you don’t need my help.

  35. Great points, Robert. Certainly the signup numbers have been very lackluster — well below what we’d expect even with just the oldest and sickest folks signing up.

    I don’t think that the Affordable Care Act will survive in its current form. It will need to be modified and adapted.

    In what ways? I don’t know yet.

  36. “The way forward might be to do what is both necessary and will be very painful. The President should appoint an independent health reform czar, a person that Republicans can at least live with…”

    gee, Vic, maybe you should call Don Berwick and ask him what odds he’d put on your immoderate proposal coming to fruition.

    You must be forgetting that Obama is still the president who would be proposing this fix.

  37. “If it were up to me, we would focus the subsidies on providing people with catastrophic coverage which would cover the bills that people fear the most. That would be a lot less expensive than the ACA approach. ”

    I’ve no problem with the design Barry, but because health care costs are so heavily concentrated in the population (top 1% accounts for 20% of total annual spend while 6% consume 60%, etc), your design would not be a LOT less expensive. Somewhat, yes.

    And then there’s the engagement/information tradeoff. People covered by catastrophic plans are prone to ‘disengagement’ from the health care information stream, if not from prudent health habits entirely. Improperly designed, catastrophic plans are an interstate with on/off ramps every 500 miles.

    But as to whether insurers should or shouldn’t have bigger, or different, role to play, consider the examples recently provided by HealthSherpa & ValuePenguin. The infrastructure needed for health insurance shopping & selecting is so easy it can be assembled in weeks, maybe mere days. In consequence, what legitimate role can contemporary health insurers even claim? You mention fraud fighting, but that’s small beer for such lumbering operations to fall back on.

    The whole health financing enterprise pretty obviously could be atomized, ‘disintermediated’ into something quite different, if only the tottering apparatus of state-level ‘regulation’ could be razed.

    Perhaps the glare of public attention on all the deplorable shenanigans that have gone on for years in various states’ individual health insurance markets – shenanigans Bob L is apparently being so well compensated to apologize for, here & elsewhere, that he’s abandoned all semblance of the integrity he’s won respect for over the years – will be enough to catalyze genuine useful change in that least transparent and most grimy of financial sectors.

  38. The sooner we get over that the insurance model will solve health care the faster we will be on the road to a better system.

    Actuaries moving the risk calculations is not cost containment, access or care.

  39. Excellent posts folks. It is truly a shame we did not attack this huge national issue with much more thought, deliberation and bipartisanship.
    A few observations:
    I agree wholeheartedly with tort reform, without that, any thought of decreasing costs is not going to work.
    I think Americans are not ready for single payer. We are too impatient and want too much choice to consider that right now.
    I wish we could allow for patients to make reasonable choices based on reasonable medical recommendations (not fear of liability) and have competition for control of costs instead of governmental control.

  40. Michael Turpin –

    As a veteran healthcare industry consultant and former United Healthcare executive, I know that you know a heck of a lot more about this subject than I do so I would be interested in your perspective on a few issues.

    First, it seems that tiered network and narrow network insurance products have considerable potential to create countervailing power against large hospital systems. The recent move by CalPERS to implement reference pricing for hip and knee replacements in Southern CA has significantly reduced the cost of those procedures. As I noted previously, price transparency, including the disclosure of actual contract reimbursement rates, should bring more visibility to the wide variance in the cost of care unrelated to quality. All of these approaches should mitigate unit cost growth, especially for hospital based care.

    If Medicare wants to ration care, it has enough power to do that now without taking over the whole healthcare system. Private insurers generally want Medicare to take the lead on the toughest issues so it can provide them with political cover when they follow suit.

    As more doctors go to work for hospitals on a salaried basis and hospitals learn how to operate in a shared risk / shared savings environment, they can be rewarded for reducing utilization without compromising quality. Moving away from fee for service in favor of bundled payments and capitation where appropriate should be possible, at least in theory.

    I think fear of litigation pervades the medical culture and probably even influences how the specialty societies develop recommended practice patterns. Tort reform that would at least protect doctors from failure to diagnose lawsuits if they follow evidence based guidelines and protocols where they exist should reduce the perceived need to order extra tests that are marginally useful at best.

    Finally, I think Americans like to have choices in the healthcare and health insurance marketplaces even if it costs a bit more and they don’t appear ready for explicit rationing of care anytime soon. What am I missing here?

  41. “Ah fools rush in where angels fear to tread.” Much of what is happening was to be expected by anyone who has hung around the healthcare hot stove and/or worked in the industry. “You can keep your coverage” was a clear misstatement borne out of ignorance of what was buried in the monstrosity of 2000+ pages. No one understood that when you change coverage and community rating requirements, policies must be cancelled, repriced and reissued.

    I gave testimony just prior to Helen Darling to the Institute Of Medicine which was gathering data for HHS when the debate over minimum essential benefits was raging. I urged the designers to understand that minimum coverage must be the lowest common denominator for a few reasons: 1) Some people actually know what they are buying when they buy a catastrophic plan and other than male sea horses, no single male needs a policy with maternity benefits 2) the cost of insurance would increase for most individuals, particularly younger Americans who are now priced in a tighter age banded community rated construct ( the more expensive, the less likely they will be to purchase coverage ) Since half of the uninsured are under 30 years old and we need these kids to spread risk to cover higher utilizers, a rich plan of mandated benefits would backfire 3) Small businesses would drop more coverage in time and kick people into public exchanges which while offering “richer” benefits would not be like for like coverage since these plans will be aggressively managed and be underpinned by narrow networks. People would finally understand what it feels like to be on Medicaid. If you are uninsured, its going to be fine as you had no coverage. If you had an open access PPO, its going to feel like moving from The Ritz to Buddy’s No Tell Motel.

    In thirty years, I only know three ways to reduce the cost of healthcare:

    1) Reduce consumption – this includes managing the volume of services and tightly defining quality of care standards. To Barry’s point, absent torte reform, doctors must oversubscribe services and often hide behind malpractice avoidance to run up higher volumes of services. Reduced consumption can come through emphasizing prevention e.g biometrics/mandatory physicals to catch asymptomatic illness as well as promote better health and help manage chronically unstable individuals who have no access to primary care and use the ER for their services.

    2. Reduce Unit Cost – Aside from the fact that a third party payer system laced with co-pays and meaningless out of pocket caps cannot promote consumerism, we know cost and quality very wildly in medicine. Medicare takes care of this buy peanut butter spreading the reimbursement to providers for services based on case rates and units without regard to quality. It is unmanaged fee for service care. If Medicare represented only $400M instead of $1T of our $ 2.2T spend, fewer doctors would be accepting it.

    3. Decrease the cost of insurance by assuming more risk and eliminating as many unnecessary services and third party providers who do not add value but claim to be essential sentinels over some element of the care delivery ( PBMs, Care Management, DM, TPAs )

    A single payer solves the unit cost issue by rationing reimbursement. It solves consumption issues by rationing access and making tough calls about what the single payer will pay for ( not likely an 70 year old alcoholic gets a new liver). Whoever wears the hat of “payer” wears the black hat and makes tough choices. It eliminates the insurance piece by essentially killing off the sentinels.

    The government is learning the hard way that they are trying to regulate a cat’s cradle of misaligned incentives, an oligopoly of embedded stakeholders and an insured American population that believes good healthcare is access and bedside manner / how much I had to personally pay out of my pocket. Quality should be outcomes/cost.

    We have $ 16T in debt and $50T in unfunded liabilities under Medicare because we are all living to 88 instead of 68. We will pay about $ 150k into Medicare in our professional lives and consume about $350k-$450k depending on which actuary does your math. Its unsustainable. However imperfect Obamacare is, it has set in motion major changes that will force us to change the way we access and think about healthcare. Employers, ever loyal to shareholders, will vote with their checkbooks and begin to move people into public and private exchanges once they start losing the deduction in 2018. Once this happens and insurers fail to moderate the cost of private plans, people will be screaming for the government to open Medicare pre-65. The government would love to do this. If you are part of the CUBA cartel ( Cigna, Blues, Aetna or United ) or you are Express Scripts or any number of well payed sentinels who claim to be essential parts of the cost management and care solution, this scares the hell out of you. Americans may not be ready for a single payer, but they are also not ready for us defaulting on our debt and entitlements. One will surely precede the other. Your guess is as good as mine as to which occurs first….My guess is fiscal crisis precedes tough love.

  42. And, I should add that it looks to me that U.S. society is unraveling, becoming ungovernable. We may be in for a very bad time, a descent into collapse.

  43. thanks for the reference to the Ajami column, read it and will use it in my postings around the net hopefully where appropriate.

    Those analogies to his experiences in the Middle East, will unleash the attack dogs of the Left faster than one can utter “Sic em!”

  44. Peggy Noonan wrote this at the end of her Nov 12 column:

    “The new talking point is that ObamaCare was damaged and fell due to Republican “sabotage.” Republicans on Capitol Hill refused to vote for it, refused to like it and support it. They tried repeatedly to repeal it and defund it.

    And all this is true. But it is not sabotage. This is opposition. The Republicans thought the ACA a bad piece of work, a bad bill that would make things worse, not better.

    Still, Republicans should take the sabotage charge seriously, because it is not a claim aimed at the consideration of the American people but of history. Democrats are admitting with this charge that ObamaCare is a disaster. They no longer want to argue that it is not. They are arguing that it is a disaster brought about by Republicans. That will be what they argue for history and feed their journalistic historians.

    As I remember it, the Democrats on Capitol Hill got the bill they wanted. They were heady, back in the majority, with a new and popular president, and they didn’t much care about GOP support. They wanted the credit: It was their bill. They wrote it in a way no Republican could support. And they got no Republican support. When Paul Ryan, who had emerged as the Republican point man, attempted to come forward with ideas, he was rebuffed.

    The new president—and this was a key historic moment—decided not to act on the accumulated presidential wisdom of the ages, which is: Get the other party in on all big things. Give them a stake in it, use them for cover, show you have bipartisan juice, that you are truly national and not only the leader of one party, show you can wield your mighty power across the aisles. Get them bragging they passed it, with your leadership. Make them co-own it so that when certain parts don’t work, and certain parts won’t, they have deep motives to help you fix it.

    Instead, a perfect storm of misjudgment, immaturity and lack of historical perspective, and a perfect storm of shortsighted selfishness (it’s all ours, it’s not even a little bit yours) brought forth a perfect storm of a health-care disaster. ”

    Yep, it is what personality disordered people do, en mass especially. Get the head Arrogant one to stroke the smaller disordered alphas in the room to go along, and do most of the bidding, avoid and deny any negatives or consequences, and then when it explodes in reality, first deny it is exploding, then try the projection, in this case the sabotage charge is so appropriate, then watch the failures at deflection and minimizing keep coming, until the end.

    Oh, the pathological rationalization is so ugly and perverse, but, it is mixed with truth. I’ll give you my version you will hear by Spring 2014:

    “You voted for me, you believed in my ability to make this happen, you just didn’t believe in me enough to make it work, and now, THIS IS YOUR FAULT!”

    Oh, and that may be around the time Obama tries a little effort at martial law when the masses might be more than annoyed with these continued efforts to ruin the public. We’ll see.

    And pray to God I am very wrong!!!

  45. Bobby Gladd –

    You should understand that Medicare is pretty crappy insurance with an actuarial rating of less than 60% (Bronze level plan). Without a supplemental plan, beneficiaries are liable for 20% of the Medicare allowed cost with no out-of-pocket maximum for Part B services plus a deductible of about $1,200 for each hospitalization. They can get a Medicare Advantage plan instead but would have to accept a more limited provider network in exchange.

    Medicare, most experts believe, is riddled with fraud but the numbers are impossible to quantify with any precision. The program was in existence for over 40 years before it even offered a prescription drug benefit which private insurers offered for decades. Innovation is not the program’s strong suit to put it mildly. It’s a one size fits all approach with coverage and payment decisions unduly influenced by politics.

    All proponents want to focus on is lower administrative costs and even that would only be a one time savings at best. That fixation on keeping administrative costs low would preclude adequate investment in anti-fraud analytics and computerization of medical records. It would also lock in all or most of the inefficiencies of the current fee for service payment model. Except for the UK and Canada, pretty much all other countries private insurers to offer insurance plans and pay providers. Thanks but no thanks.

  46. Barry: thanks so much for emphasizing the issue of cultural differences and homogeneity, both of which inform the political landscape. I think your solutions are quite common sense and doable, which, of course, means we won’t do them because they don’t score enough points with either of the two rabid constituencies that drive our policy paralysis.

  47. In Western Europe and other relatively wealthy but more homogeneous societies where healthcare costs are significantly lower than in the U.S., people, including the young, routinely pay around 10% of their income for health insurance. They also pay a much higher overall tax burden to finance their more generous social safety net.

    Americans, it appears, won’t tolerate the same level of taxation. We have a lot of strengths here from our ability to assimilate people from different backgrounds, countries and cultures to our long history of entrepreneurship and innovation. One thing we have less of that other societies, though, is what economists call social trust. The more homogeneous wealthy societies can apparently engage in quite extensive income redistribution schemes without an inordinate amount of fraud and without taxpayers feeling cheated. Our culture and our values are different here so the Western European model won’t work.

    If it were up to me, we would focus the subsidies on providing people with catastrophic coverage which would cover the bills that people fear the most. That would be a lot less expensive than the ACA approach. We would also focus more on controlling healthcare costs. My favorite strategies to address that are:

    1. Sensible tort reform including safe harbor protection from failure to diagnose lawsuits for doctors who follow evidence based guidelines and protocols where they exist.

    2. Robust price and quality transparency tools for both patients and referring doctors to make it easier to direct patients to the most cost-effective high quality providers.

    3. A better approach to end of life care. Specifically, try to get far more people to execute living wills and advance directives so they can make it clear to both providers and family members what care they want and don’t in an end of life situation when they may no longer be able to communicate their wishes.

  48. When will we read about all the risks and limits? After we pass the bill, Bobby? Been there, had it done to us!

  49. It is very concerning the dialogue by the extreme left is so out of touch with the realities of complications and consequences by this legislation.

    I hear one more person say or write “this population losing their insurance and have to possibly pay more is inconsequential or insignificant”, well, I hope it is not uttered in the physical space of one such inconsequential or insignificant person who has been affected.

    Wow, what a set up for potential violent confrontations. Oh, and the sheer disingenuous attitude by these commenters saying this is not a big deal, but, again, they either ignore or gloss over it is a couple of million or more POLICIES being canceled, not just the person’s name on it is affected alone, my bet is at least 2/3 involve couples and families, so, if accurate to assume 2.5 people to each policy, and what, about 3 Mill now canceled, this is 7.5 Million people, and growing.

    So, all you Left/Progressive apologists and defenders, when is the number of cancellations significant or consequential? When the majority of those canceled are Democrat voters?


  50. There are times when you look at what you’ve done (in your personal or professional lives) and say to yourself and others involved: “OMG, this is not what was supposed to happen, and it is utterly and completely my fault. I am going to fix it, even it means starting over.”

    Leadership is not about bloviation, which is what our nation’s brain-dead media have made it into, no matter whether its Fox/MSNBC or the NYT/WSJ. Leadership has a sacrificial quality to it, which is completely lost on this administration. To read more on this point, I strongly recommend Foaud Ajami’s brilliant essay in today’s WSJ on this President’s lack of it (which even my strongly liberal friends…yes, I have them…agree is measured in negative numbers).

    The way forward might be to do what is both necessary and will be very painful. The President should appoint an independent health reform czar, a person that Republicans can at least live with, if not warmly embrace, and give him or her a finite amount of time to determine what of the ACA as written should proceed, what can be fixed within limits that rational people would deem reasonable, and what elements should be delayed or amended out altogether. The czar should have the authority to audit all aspects of design and implementation be enabled to report his or her findings without filtering to the American people.

    The President is losing the respect of mainstream Americans, most of whom want the country to succeed even if they don’t like the person behind the Resolute desk. The way forward is to take a step back, even at the political cost of a divorce with his base; there are far fewer of them than there of people who just want stuff fixed and want some sign, any sign, that their government can actually do things well.

  51. Great analysis. Nice kicker.

    “Getting the first 500,000 likely older and sicker people to sign-up was the easy part––or it should have been.”