Matthew Holt

The ACA– As Much As We Could Have Hoped For, Despite Sensible Old Men

The Administration has snatched victory from the jaws of defeat and enrolled 7 million people (give or take a million who may not have paid their premiums) into health plans under the ACA, and more into Medicaid. The Affordable Care Act (ACA) isn’t as big a change as some of us would have liked, But in this moment of modest celebration let’s remember what some of the sensible old men said all along.

Sensible old men said reform couldn’t pass without bring in the Republicans. Sen. Baucus tried hard to do that, and it’s beyond clear that no Republican would have ever supported it–even a moderate like Snowe who was quitting. It passed anyway.

They said that we’d see massive rate shock. Instead plans tightened networks and rates were in general lower than they had been before.

They said that the web site debacle meant no-one would sign up and we’d go into an insurance death spiral. The web site launch was a cock up, but Medicaid expansion (where allowed) has more or less been OK, and the exchange web site(s) now more or less work(s)–outside Oregon & Maryland. By the way this backs my argument for having one Federal exchange, which you may remember was in the House bill before we ended up being forced to take the Senate version due to Ted Kennedy’s death.

One wise old man (Robert Laszewski) was still saying that the exchanges would be financial disaster for insurers the very week Wellpoint raised earnings expectations because they had more enrollees than expected.

Let’s also remember that because of the politics of the nation, the ACA is a ridiculous hodge-podge of a law requiring–you’ll recall:

a) an opt-in to what’s basically a social insurance program (hey, let’s opt-in to fire protection while we’re at it!)

b) arbitrary tax (and now subsidy) distinctions between those who get insurance via an employer and those who don’t, and

c) arbitrary access to insurance (well, Medicaid) for the poor depending on their income and which side of a randomly drawn line they live.

If this was a sensible country no one would have designed either the system we had before or the ACA–which is itself very trivial reform–as the solution to fix it. But if this was a sensible country the Senate would have been abolished by 1935 (or sooner).

But given the hand they have, I’m not convinced the Administration and those rolling out the bill have done that bad a job. Don’t forget  that the previous Administration’s crowning achievement (also coming from sensible old men) was the restoration of peace & democracy in Iraq. The ACA’s doing way better than that!

And the sensible old man’s alternative of waiting for a grand coalition would have meant that we did nothing. And frankly anything’s better than that.

 

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Matthew Holt@BobbyGvegasJohn R. GrahamBob HertzWilliam Palmer MD Recent comment authors
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William Palmer MD
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William Palmer MD

@Ballard You wrote: “To me it is “managed” competition which was the best outcome politically possible after years of failed efforts on the part of both parties to do something — anything — to put the brakes on the runaway costs of health care.” I can’t imagine who is competing with whom and what they are competing about/with/for/on. Certainly the Medicaid expansion component has little competition unless the states are running Medicaid HMOs and even here everyone is using procedure price lists generated by Medicare. Has anyone ever heard of Medicaid competing with anyone before?..maybe the cloud? In the exchanges,… Read more »

John Ballard
Guest

Excellent points, Dr. Palmer. And no arguments from me. “Managed competition” for me refers to insurance, not health care. Very little in ACA affects health care costs directly but the mechanisms for billing and reimbursements have been messed with in a big way, with IPAB replacing MedPac with serious new controls. My understanding is that pre-ACA Congress had such leverage over CMS policy-making that individual members could basically tell CMS how to do its job. The legislation gave IPAB (remember the famous “death panel”?) control over CMS policy-making that changed the dynamic from Congressional default from opt-out to opt-in. Under… Read more »

Bob Hertz
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Note to John B and Allan:

Let me play the Robin Hanson role here.

What if no one in America got a preventive colonoscopy?

How many extra deaths would we have? 10,000 a year? I have no idea.

But we all seem to be in thrall to what Arnold Kling called premium medicine, which refers to spending massive amounts of money to get very small increases in life expectancy.

John Ballard
Guest

I can only speak for myself, but I had my only colonoscopy a few years ago and I don’t aim to have another unless I have specific symptoms and a very persuasive doctor talks me into it. Even then I will argue for a sigmoidoscopy or (last resort) a colonoscopy without anesthesia. As far as I’m concerned too many screening and tests are nothing more than trolling for business. I had less than two minutes for conversation with the doctor doing my procedure before the anesthesiologist went to work, and I asked what were my odds of having a problem… Read more »

William Palmer MD
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William Palmer MD

@Ballard
I think Allan has it right, John.

You don’t have to worry about surgicenters sprouting up like daisies beyond need.

Prices in a free market tell producers what and how much to produce and they tell buyers what and how much to buy.

It’s like magic.

William Palmer MD
Guest
William Palmer MD

The further down in the actuarial value of a plan– now they are considering a copper plan with an AV of 50%–the less sense it makes to control the precise benefits of a plan. Eg how can the government tell an exchange customer that his plan must cover X and Y when that customer is paying out of pocket for 50% of the covered services. Extrapolate further to a hypothetical lead plan with an AV of 40%. I guess this would be tantamount to self insurance as the buyer would be paying for 60 % of services himself OOP. In… Read more »

John Ballard
Guest

Dr. Palmer, your comment sent me to find out what the heck “monopsony” meant. The Wikipedia article blew me away, but I think I get the gist of it. You’re right, of course, about the Part D competition part (though I don’t see much impact on ED and other designer drugs that can still afford to buy the most expensive air time on TV) and when the Wikipedia article mentioned the military industrial complex I had an aha moment. http://en.wikipedia.org/wiki/Monopsony You’re correct that our government will not use monopsony fo reasons beyond this discussion. As long as corporations are people… Read more »

Bob Hertz
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John, check out a writer named John Graham who describes the reinsurance and risk adjustment programs in a series of posts on the John Goodman Policy Blog.

Every European country that uses multiple insurers to provide universal coverage makes use of reinsurance. Heck, Medicare Advantage in the USA (a Republican program if ever there was one) uses risk adjustment.

The basic reason is that if health insurers are not allowed to underwrite, which most of us find a good thing, then individual companies can get swamped by claims and will leave the market — sometimes in droves.

John Ballard
Guest

Thanks. I think I get the gist of it without trying to do actuarial crib study. It’s like looking at a blueprint or electrical schematic — I know it works and thank God someone else is in charge of the details. (I feel the same way about computer programming and plumbing.) This year I took the leap to MA because the local alternative is a strong alliance of two outstanding systems. If I ever decide to return to original Medicare (read “private costs keep going out the roof”) I’m concerned about the return price for supplemental plans. If you never… Read more »

allan
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allan

John B: “It’s like looking at a blueprint or electrical schematic — I know it works and thank God someone else is in charge of the details.” Electrical schematics are based upon science so if the schematic is properly prepared it should work as expected. That is not true for what government does in the health care sector. The health care sector is not based upon science rather political expediency. That is why the Medicare program cannot control costs or rid the system of marginal care which probably wastes at least a third of the costs. If the MA is… Read more »

John Ballard
Guest

Oh, how well I know. The profit motive has impacted the Hippocratic Oath more than the discovery of germs. Medicare was forbidden to control prices for the same reason that AMA initially hated the notion of Blue Cross — doctors were scared that somebody would enact “price controls” as they had during wartime. The separation of “hospital” and “medical” expenses (a nutty distinction if ever there was one) was the difference between the original Blue Cross and Blue Shield insurances. It is no accident that Medicare somehow enshrines that artificial taxonomy with Parts A and B — a distinction without… Read more »

allan
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allan

John B, the profit motive isn’t the best, but I’ll bet that at the end of the workweek you demanded your check.

In essence Medicare does control the prices charged, but it doesn’t control over all costs that continuously rise.

HMO’s and PPO’s are very different with hybrids in the middle. The ACO is just a bigger and more powerful HMO with all the lousy incentives attached.

John Ballard
Guest

@allan, as a retired food service manager I’m well aware of the importance of getting paid for your work. (That’s why I tell anyone who will listen that nobody goes into the food business on purpose. It’s great if your family owns the operation, it has unparalleled job security, and it ain’t rocket science. But once you’re in and have a family, you’re trapped.) But allow me to make two points. First, Medicare does not control either prices or costs. The role of Medicare is to steward our tax dollars and determine how much of what providers charge will be… Read more »

allan
Guest
allan

@John B. “First, Medicare does not control either prices or costs” Sure it does. It states how much you can sell your head of lettuce for and under what conditions you are permitted to sell it. It also can bundle the lettuce with a bit of tomato without permitting a change in price. Even your ability to open a new store or expanding is controlled by Medicare. Under the system one can’t even create a contract that leaves Medicare out and thus saves Medicare money by declining Medicare payments for a specific service.Thus if your client wants lettuce of an… Read more »

John Ballard
Guest

@alan, you will appreciate this: http://www.washingtonpost.com/business/economy/medicare-pricing-drives-high-health-care-costs/2013/12/31/24befa46-7248-11e3-8b3f-b1666705ca3b_story.html A new and untested approach known as the Independent Payment Advisory Board became law under the health-care law, creating a government panel to review Medicare costs. But one of the essential problems is that Medicare pricing so often becomes subject to political pressure. “Go through every single payment system in Medicare and each one is highly political,” Scully said. “I can tell you a war story about every one of them.” “When you are creating winners and losers, the losers will cry pretty loudly,” said Stephen Zuckerman, a health economist at the Urban Institute.… Read more »

allan
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allan

Thanks, John, for the WP article.

“What happens if the government gets those prices wrong?”

An interesting psychosis of government’s claim that healthcare prices are too high. Colonoscopy costs twice as much in a hospital as it does in a surgicenter, but government is trying to close down surgicenters.

Tom Scully: “Medicare is a wonderful program, but behaviorally, because of the price-fixing, it’s a mess,”

We need the market place. (Government setting prices and conditions of the healthcare contract doesn’t work.)

All the things mentioned in the WP article have been known for decades. Some bloggers even on this site still haven’t got the news.

John Ballard
Guest

@allan, I understand your point, but I would rather hospital costs go down than surgical centers proliferate like fast food outlets. After all, how many surgical centers per square mile does any community need.? The footprint of most health care systems in America is often as big as an industrial park. There are so many clinics, labs, private practices, specialty centers, agencies, imaging centers, retail outlets selling durable equipment and disposables, pharmacies, the list is endless… And that doesn’t take in to account the ancillary non-medical businesses from window-cleaning, landscaping and waste removal to uniform sales, food service outlets and… Read more »

allan
Guest
allan

@John: ” I would rather hospital costs go down than surgical centers proliferate ” Why? Ever have a colonoscopy in the hospital? most of the times one waits and is subject to every illness that walks through the hospital. For that Medicare pays twice as much as it does to an outpatient center where convenience and cleanliness are just two of the advantages. We should keep people out of hospitals as much as possible. Ever notice that is where a lot of people die? What is a hospital? One can look at it as a giant mall where all the… Read more »

John Ballard
Guest

@allan, The time has come for you and I to agree to disagree. We no longer speak the same language and it’s doubtful that either of us will change his opinion about ACA. If I understand your point correctly you see PPACA as a terrible mistake and that health care is best left in the hands of the free market where it will yield the best outcomes for the most reasonable prices. I too have serious reservations about PPACA but for very different reasons. To me it is managed competition which was the best outcome politically possible after years of… Read more »

allan
Guest
allan

Yes, John we have come to the point where one has to look at the facts and the principles involved instead of picking a program out of thin air that even those that passed it never read it. So you are right I believe the ACA is a terrible piece of legislation and apparently that is being born out while we speak. Both the left and the right have significant concerns with the ACA that very much need to be addressed. I can’t answer your statement “health care is best left in the hands of the free market ” because… Read more »

John R. Graham
Guest

Yea, that Graham guy is “smart like truck”! Thanks for the tip.

Matthew Holt
Guest

I think he’s just helping to manufacture consent….

John R. Graham
Guest

The proletariat needs its revolutionary vanguard.

Bob Hertz
Guest

Just to be somewhat contrary , why did insurers have to be included in the ACA? Say that we expanded Medicaid to 140% of poverty, and gradually dropped the eligibitly age of Medicare by 2-3 years per annum. Persons who were denied coverage for health reasons could have joined a federal high risk pool. I fully grant that this would not have been perfect. Those who believe that health insurance should make us healthier (by covering preventive care) would not have liked my plan. Still, private insurers would have minor roles and need not have been placated, then manipulated, then… Read more »

John Ballard
Guest

@Bob Hertz, I read somewhere about some kind of three-year safety net for the insurance industry to make the transition without getting whiplash. The term “reinsurance” was mentioned — which I took to mean something like a hedge for insurance, or insurance for high risks shifted from on company to another,
Does any of that make any sense? Do you (or anyone) know anything about any of that? I’m just an old layman who has been trying to keep up (and not go crazy reading a welter of stupid comments).

John Ballard
Guest

This is probably what I was thinking about. It applies to group insurance plans, not individual plans. http://www.uhc.com/live/uhc_com/Assets/Documents/ASOEmployerGuide.pdf This is from a helpful pdf from United Health Care: The Reinsurance Fee generally applies to major medical coverage, including grandfathered plans. The following types of coverage are specifically excluded from the fee: * Accident-only coverage * Children’s Health Insurance Program (CHIP) * Employee Assistance Programs (EAP) or wellness programs that do not provide major medical benefits * Expatriate-only plans * Flexible Savings Accounts within the meaning of Section 125 of the Code * Health Reimbursement Arrangements that are integrated with major… Read more »

@BobbyGvegas
Guest

You’re welcome for the photo, btw, Matthew.

http://tinyurl.com/lvzuoez

😉

John R. Graham
Guest

I love the fact that THCB is sponsored by WellPoint, as Mr. Holt wrings his hands about the political reality that the insurers had to be in the ACA tent.

@BobbyGvegas
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And, of course, YOU have no patronage conflicts.

Right.

John R. Graham
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I didn’t say he had a conflict. I’m a big fan of the whole Health 2.0 government-medical-industrial complex.

Bob Hertz
Guest

One cannot blame the state by state inconsistency of Medicaid on Obama. Congress blithely assumed that all states would go along with the expansion. The resistance of Southern and Western states (inspired by hatred of taxes, fear of more welfare in general, and dog-whistle racism) was not to be denied. Medicaid has always been like that. The state of Arizona did not even join the original Medicaid for 21 years. Still and all, it would have been legally possible to expand the ACA subsidies to more poor people after the Roberts decision. It would have been legally possible to expand… Read more »

Aurthur
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Aurthur

“Still and all, it would have been legally possible to expand the ACA subsidies to more poor people after the Roberts decision.”

Not in states that did not establish exchanges, where legally, there are no subsidies.

John Ballard
Guest

Every state has an exchange. States that opted not to create an exchange have a federally-organized exchange in accordance with the law. Tax subsidies are available for a defined income group beginning with 138% of FPL (federal poverty level). The Medicaid expansion was to cover everybody, but those states that opted not to expand Medicare created an uncovered class — earning too much to qualify for Medicaid but not earning enough to merit a subsidy. http://kff.org/interactive/subsidy-calculator/ As usual, misinformation is easier to understand than the facts. Facts often require more thinking and inquiry. Another widespread bit of misinformation has to… Read more »

Aurthur
Guest
Aurthur

“As usual, misinformation is easier to understand than the facts.
Facts often require more thinking and inquiry.”

Mr. John Ballard, please consider learning something beyond stage one thinking.

“Tax subsidies are available for a defined income group beginning with 138% of FPL (federal poverty level).”

Not in states that did not establish state exchanges. The Act plainly and repeatedly allows subsidies only in state established exchanges. To argue elsewise is to embrace lawlessness. But then again…
“As usual, misinformation is easier to understand than the facts.
Facts often require more thinking and inquiry.”

John Ballard
Guest

“Not in states that did not establish state exchanges. The Act plainly and repeatedly allows subsidies only in state established exchanges. To argue elsewise is to embrace lawlessness. But then again…” Here is a link explaining the gap in coverage that occurs in states that did not expand Medicaid, The only way there can be a “gap” is that some who purchase insurance via an exchange (which ALL STATES DO HAVE, even those that have not expanded Medicaid) is that the amount of the subsidy (which IS AVAILABLE, even in states that did not expand Medicaid — study Figure #3)… Read more »

William Palmer MD
Guest
William Palmer MD

@Ballard
As I understand it most Medicaid programs of yore were primarily for single poor women with children and nursing homes. If you reside in such a state and you hide your income, you will still be uncovered. Yet, your friend, who makes a little over the poverty limit, will be happily covered with high subsidies. Not good. Happily insured vs dogmeat uninsured.

John Ballard
Guest

Right. I think we’re both on the same side of the argument. I’m an ACA supporter, legislative sausage that it is, and dismayed to be living in a state that opted not to expand Medicaid. Whatever is gonna happen I will be able to watch up close and personal. If you could see the TV ads that are running you would think we’re still in 2011! Sam Nunn’s daughter Michelle is running for Saxby Chambliss’ seat in the Senate and the attack ads are crafted to link her to the hated Barack Obama and “Obamacare.” The politics here are down… Read more »

William Palmer MD
Guest
William Palmer MD

There will be political hell to pay when poor folks in states where Medicaid was not expanded –and who accordingly cannot get coverage–are chatting with their slightly richer peers who have found subsidized coverage in their community exchange–because they are making 138% of the FPL. They will feel like Alice in Wonderland, but with anger.

John Ballard
Guest

Perhaps. But if I were among those falling through the cracks I would be resourceful enough to either let my income drop to the Medicaid level or find ways to keep it hidden under the table. Either way, those states have deliberately opted for a work disincentive. (And complain when so many people, uninsured of course, use the ED for non-emergency care.)

Perry
Guest
Perry

“We are all in this for the long run, we may just need to more anesthesia.”

We should just legalize marijuana and spend the next decade in a haze.

Lynn in SC
Guest
Lynn in SC

But gentlemen, we’ve “saved” private health insurance companies! I’d thought I’d been in techno hell when enrolling in the ACA until I spent 2 hours today helping a friend untangle her current medical bills, EOBs, and reconciling her detailed bills from two hospital stays from last Oct/Nov. Handling the denied CT professional charges, alone took 20 minutes of navigating health care billing technology, online and on the phone, to simply connect with a real live human being who understood almost immediately what the error was. Now lets see if it does indeed get corrected. So status quo can’t remain our… Read more »

John R. Graham
Guest

None of the problems with private health insurance you illustrate in your case will get better. They will get worse, post-ACA, because insurers have more incentives to hassle the expensively sick.

John Ballard
Guest

Years ago I had a homeowner’s policy with an interesting feature (now gone — this was in the Seventies) called a “disappearing deducible.” The deductible was five thousand dollars, but individual claims paid 105% of the amount. This meant that a relatively “small” loss of, say, six thousand dollars would yield $1050.00, not $1,000.00. If the house got destroyed by some catastrophe, however, the deductible vanished at $100,000.00 — a welcome savings when the policy-holder would be hit with additional uncovered expenses as well. Too bad medical insurance can’t offer such an arrangement. Why? Because the amount of medical bills… Read more »

Perry
Guest
Perry

” My favorite is that in the letter I got from my insurance company they said my rates would double, but didn’t give me any idea of what new benefits I’d get for the added costs.” Why you’re getting “free” PAP tests, colonoscopy, birth control pills, mammography, vaccines, etc. There’s also added costs because you can’t be denied for pre-existing conditions, or have caps on your insurance. Laudable additions to insurance, but the costs have to come from somewhere. Maybe the writers of the ACA figured by the time everyone signed up, the costs should be evened out. Otherwise how… Read more »