AETNA, Poor People and Stuff

Discrimination in health care was institutionalized in Independence, Missouri on July 30, 1965 when President Johnson signed the Social Security Amendments of 1965 into law, creating “two moral frameworks for public financing of healthcare”. Medicare was supposedly an “earned” right for the elderly, while Medicaid was framed as a “welfare” program for the poor. It was a necessary political compromise. It was just a first step and bigger and better things would certainly be accomplished in due course. It was better than nothing. But fifty years later, and after taking yet another “first step” with Obamacare, the wasteful, divisive, discriminatory, and ultimately self-defeating direction we chose back in 1965, and again in 2010, has not changed one bit.

After 45 years of tinkering with Medicare and Medicaid, Obamacare in a bold stroke expanded the welfare model of medical care upwards into the heart of what used to be known as the American middle class, the former engine of progress and prosperity.  First, Obamacare expanded the Medicaid program itself to include people who are less poor than current Medicaid recipients. When Medicaid opened its doors in 1966, it provided charity health care to approximately 2% of Americans. Today, over 22% of Americans (72.6 million) and almost half of our children (35.3 million) are receiving their medical care via this welfare program and the numbers are trending sharply upwards.

Gift Horses

But the greatest innovation of Obamacare is undoubtedly the Health Insurance Marketplace, which is a brand new welfare program for the middle class. People who are not deemed poor enough to receive Medicaid charity can obtain Federal medical assistance on a means-tested sliding-scale. Largely unbeknownst to them, another 10.5 million working Americans were placed on welfare while “shopping” for health insurance in 2016.  These people are reportedly rejoicing their good fortune, because Obamacare is better than anything these people ever had, or could ever hope for.

In recent days, Aetna announced that it will drastically reduce its participation in the Obamacare marketplaces, joining a long string of other health insurers, including giants like United Healthcare and Humana, and small local outfits like Scott & White in Texas, all of which cited massive financial losses in this market. It looks like next year the many “choices” available to these people in the Obamacare marketplace will be severely curtailed, particularly in areas where poor, uneducated, low-information voters reside. The “choices” were not great to start with, seeing how most Obamacare plans rely on managed care provided by narrow networks of doctors and hospitals, and the level of charitable support is fixed, regardless of your “choice”. The optics of many choices was there to create an illusion of consumers “shopping”, as opposed to just having people apply for welfare.

The price for sparing these people the social stigma of being on welfare turned out to be not only too high, but also too low (think Escher paintings here). People who qualify for Medicaid are prohibited from “shopping” on the Obamacare marketplace, unless they are willing to forgo handouts and pay full price, because a “Marketplace insurance plan would cost more than Medicaid and usually wouldn’t offer more coverage or benefits”, and a government website proudly declares that Medicaid “generally provides a more comprehensive benefit package than private insurance”. If this is true, the Obamacare architects decided to pay private insurers on the marketplace more for less, which is not preventing insurers from bleeding cash. On the other hand, some of the same insurers, and many others, seem to be making money hand over fist in the Medicaid market which pays less for more.

How is that for a brain twister? Yes, yes, I know, if you are a physician and you accept Medicaid, you know precisely how to untwist this nasty little knot, but this narrative was not created for you. The first thing, or person (loosely speaking) to remember here is Jonathan Gruber. A while back Mr. Gruber shared with us that the guiding principles in the rooms where Obamacare was designed were that American voters are stupid and that lack of transparency is a good thing. It should be obvious by now that the introduction of Obamacare to the public was false and its initial incarnation, chockfull of choices, “subsidies”, marketplace “shopping” and all, was (designed to be?) temporary. But hey, it was just a first step and it was better than nothing. So what’s next?

The Morning After

As is the custom in our great nation, now that Obamacare marketplaces have been exposed as the hoax they really are, the cheerleading section is transitioning to its Monday morning role of funeral criers. Every ‘splaining media outlet is diving into lengthy treatises about risk pools, moral hazard, actuarial values, complete with charts and “I told you so” interviews on how to salvage the situation. The government, as usual, is doubling down on the “everything is (still) awesome” anthem of planned stagnation. Insurers leaving the marketplace are a sign of normal competitive business. Sky rocketing premiums are a result of initial underpricing of products. Things will eventually even out. And besides, why worry your little head about premiums going up or down, if the government is paying for the ride?

See, the more the premiums go up in 2017, the more people would be able to pay less for marketplace plans. This is because very poor people are disproportionately more likely to use the Obamacare marketplace, and these people seem to have a predilection for cheap health insurance plans. Theoretically, all Americans except the 20% or so at the top (the fifth highest income quintile), are eligible for welfare in the marketplace if their stars fall slightly out of alignment. Right now, the self-appointed elites are piloting this marketplace solution for people who have few if any choices in life in general, but make no mistake, the forthcoming rollout to the rest of us will be fast and furious.

After you read a dozen or so articles on the subject, several options surface as the popular wisdom of the unpopular elite minority who won’t be caught dead anywhere near an Obamacare marketplace:

  • On autoplay since 2012 – Repeal and replace the whole darn thing with something really good.
  • Whistling past the graveyard – Stay on target. Ignore the noise. Keep pushing the happy narrative. Nothing to see here. Next year will be better.
  • Pedal to the metal – Add some serious fangs to the individual mandate. Force insurers to eat their marketplace veggies if they want public cash desserts.
  • Resurrection – Remind me, why did we drop that “public option”? What was it again?

Plebeian logic says that at least for the immediate future we will be whistling past the graveyard of health care in America. After that, as strange as it may sound (go ahead and bookmark this), they will be rolling all four option into one grand solution.

The Pauper Option

If you are eligible for Medicaid in the state of Louisiana for example, you have five choices, which is more than some Obamacare marketplace “shoppers” have. On the Healthy Louisiana website, you can enroll, select a plan, compare plans, compare networks of providers, and compare plan benefits, including co-pays, cash rewards for healthy behavior, free cell phones and even free diapers and school supplies. Is this a marketplace? I think Healthy Louisiana is as much a marketplace as the Obamacare Venezuelan shopping mall. It provides infinitely more information. It includes plans from Obamacare quitters, such as Aetna and United Healthcare. The state pays less, beneficiaries get more, and insurers make very nice profits.

In Baton Rouge, there is one (1) oncologist in the United Healthcare network and zero (0) plastic surgeons in the Aetna network. Sometimes, you just have to travel to New Orleans, Shreveport or Lafayette. It’s only a few hours by car. Most people don’t need oncologists and plastic surgeons. Most people are perfectly fine just having 100 family practitioners, almost half of which are doctors.  In Louisiana, Medicaid pays $41.53 for a typical office visit (99213), which is a bit more than half the Medicare rate, and usually less than half of what private insurers pay. With a full time schedule, and average overhead, a primary care doctor seeing nothing but Medicaid patients in Louisiana, will end up with $100,000 to $130,000 a year before tax.

This is the secret sauce. This is what’s missing from the Obamacare marketplaces. There may be room for additional tinkering with networks, but it won’t be enough. The only way to bring costs down is to attack the supply chain. Like Walmart. Like Medicaid. But you can’t do it if you have to compete in earnest, because you will lose all your suppliers. Everybody has to do it together, and that would be collusion. So you either merge & acquire until you are the sole insurance provider in a market, or you make the government do it for you. Either way, we end up with a marketplace of Medicaid plans. Like Healthy Louisiana.

Before you argue that physicians will just stop accepting Obamacare marketplace plans, remember that many, many doctors do take Medicaid and adding 12.5 million people from the marketplace to the 72.6 million already on Medicaid is not a big deal at all. This is why insurers that specialize in Medicaid do better on the Obamacare exchanges. It’s not that they know how to manage these people. They know where to find and how to manage these doctors.

They probably won’t call it Medicaid. Maybe Medimart will be acceptable. It will most likely cost a little more to maintain the appearance of respectability, at least for a while, but this is a generous program for these people. The line is drawn at 400% Federal Poverty Level (FPL), and as the global sharing economy grows, and as employers begin to see the light, those who can’t quite reach six figures incomes, eighty percent of people in America, will be “shopping” at Medimart, because that’s what these people do.

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26 replies »

  1. Your take home pay is after all your deductions. As a self employed you get to deduct your insurance premiums from your gross income. Too bad we all can’t do that.

    I support better compensation for primary care – take it up with the RUC and your own AMA.

  2. who does not receive a subsidy for health care ????? Me. I am paying 25 % of my take home pay for two deductibles mine 12,000 and spouse 2600. Me. I subsidize the exchanges but I am exempt from the penalty Oh And I am a primary care physician Who in their right mind would take this job?

  3. Excuse me if I missed something . At 41.53 x 20 patients a day we get 830.06/day x 190 days a year= 157,814 At standard PCP over head of 66% the doc gets 52,078 You can add more a day( 190 is about 4 days a week not 5) and more days a year but 130,000 pre tax and after overhead would be 9390 visits a yr = 39 visits a day

  4. So then you agree that just about everyone in America gets a subsidy to afford health care.

    Your “80-90 percent” is because these are pretty much poor people with little disposable income. I doubt many of those not qualifying for subsidy can actually afford a direct pay policy.

  5. Don, if the US becomes insolvent, health insurance is probably not going to be at the top of of our concerns list, don’t you think?
    The reason private insurers cannot compete with a public “option” is because the government gets to print money and Aetna doesn’t.

    That said, I don’t think they should have to compete. They can act as TPAs for tax funded health care. If they insist on competing, they should easily beat the incompetent government as I said above, just look at how much better Medicare Advantage does compared to traditional Medicare FFS… (not).
    They are most welcome though to compete on supplemental insurance packages, such as Botox, Viagra, massage therapy, and freshly baked brioche at the bedside… stuff rich people like and need, so they can feel superior to wrinkled, impotent, stressed out, jell-o eating masses…

  6. The USA does not have the expertise to run an insurer because it has shown time after time with Medicare and Social Security it can disregard the importance of receiving its full allocation and keeping the reserves intact
    If you are not concerned with solvency, then apparently you believe the US government is somehow shielded from the natural law of economics
    If you believe that to be true, you need not reply
    For if common sense is not part of your opinion, it would be better for all concerned to keep further elucidations of your opinions to yourself

  7. The public insurer is the United States of America. Somehow, I am not too terribly concerned with its solvency.
    I don’t see why anybody would need to compete on basic insurance, but if the government is as screwed up as people say it is, it should be easy to compete, no?

  8. Yes
    But the subsidies taken by employers and the self employed are much less than 80-90 percent of the gross premium
    And subsidies go to insurers in the exchange which I feel is intolerable

  9. So you’re just giving me the estimated numbers of people who would not qualify for ACA subsidy as per subsidy income rules?

    Do you consider employer sponsored health insurance as a “subsidy” or self-employed tax deductible insurance as a “subsidy”?

  10. Peter
    You asked me to list the non subsidized participants which I did
    They are individuals earning over $45,000 and families earning over $90,000
    When subsidies are needed to afford just the insurance, not the direct purchase of the item, we have a problem?
    Could you buy a car if you could not afford the insurance for that car?

  11. Don, the 15% and 12 million are buying as individuals not through employer, or through their own tax deductible (subsidy) self employed status?

    And what income group would this represent?

  12. Peter
    The 15 percent of people on the public exchanges and the 12 million people on the private exchanges
    In addition the people who have bought individual non ACA policies such as hospital indemnity, cancer, accident, and critical illness policies

  13. Margalit
    Do you understand Medicare taxes like Social Security and income taxes go to the Treasury’s general fund?
    From there, they are spent on General appropriations of which Medicare consumes 10 percent of the budget
    So the allocated dollars are 10 cents on the dollar and the other 90 cents is debt
    There are no liquid reserves in the trust fund for those dollars were spent on other federal expenses
    Debt was issued as collateral for the raiding of the trust fund
    The reason a public option is nonsense is that what private insurer could compete with an insurer that receives only 10 cents of every dollar of premium it bills, and the other 90 cents and its entire reserves are funded with debt
    Who would regulate the public insurer to ensure its solvency?
    Every state department of insurance would issue an immediate cease and desist order for such an entity

  14. I don’t really care what Republicans want. Paul Ryan wants “defined contributions” for Medicare and block grants for Medicaid, effectively gutting both programs. I want Medicaid shut down and Medicare Advantage shut down and Obamacare shut down and employer insurance shut down, and everything replaced by tax funded Medicare fee-for-service for all..

  15. Margalit, it’s hard not to sit next to a “poor” person waiting for health care as most people are “poor” when it comes to paying for coverage/access/co-pays/deductibles.

    The few times I have been in a waiting room there was a generous mix of “subsidized” patients – from observation. I think we’re past the black segregation in health care, even in the south – where I live.

    My take is that Republicans don’t want Medicaid “expanded”/rolled into Medicare because it would be just another wedge toward a universal gov’t run health system.

    But, the Donald will solve all this for us – so I’m hopeful.

  16. Should read: without employer coverage or Medicare. Sorry about that.

  17. For those with income above 400% of the FPL and without employer coverage of Medicare, only 2% of that population buys an unsubsidized exchange plan which, as it happens, is the same percentage of the population eligible for COBRA coverage that actually buys it. The reason for the very low purchase rate is obviously cost / affordability especially if they need family coverage. Subsidy eligibility for exchange plans should have no income ceiling at all.

  18. The original title of this post was “The Dog Whistles of Health Care”, so yeah….
    We “evolved” though. Now the fifth quintile doesn’t want to sit next to any poor person, regardless of race, color or country of origin…

  19. “Discrimination in health care was institutionalized in Independence, Missouri on July 30, 1965 when President Johnson signed the Social Security Amendments of 1965 into law, creating “two moral frameworks for public financing of healthcare”.”

    I’ve heard that it was created this way because Southern whites did not want to sit in the same waiting room as blacks.

    Again, race defines and divides America.

  20. “Very accurate with your description of the Exchanges as welfare redo
    85 percent of the participants receive subsidies. Three fourths of them pay less than $106 a month”

    Don, who in America does not receive a “subsidy” for health care?

  21. The primary question is “What are the gross premiums, not the net premiums?”
    Non subsidized ACA plans are very expensive
    A family is paying a mortgage-like payment considering premiums, deductibles, and out of pocket expenses
    We need to offer plans of up to $250,000 over a 3-5 year period, less claims paid
    This will cover 90-95 percent of all claims
    It will involve contiguous separate coverages of 213(d) medical expenses
    We should have such a plan within the year
    We are selling nationwide the foundational first part – a patented plan that covers deductibles and co-pays over a 3-5 year period, less claims paid

  22. Margalit
    Very accurate with your description of the Exchanges as welfare redo
    85 percent of the participants receive subsidies
    Three fourths of them pay less than $106 a month
    This welfare program goes not to the people, but to the insurers
    It has been touted by the administration as affordable for the subsidizers for virtually the entire premium increase is offset by increased subsidies

  23. You nailed it! My favorite comment is about Obama’s Venezuelan shopping mall. When are we planning a trip to see the marketplace?