In the Land of the Health Care Experts

Arguably, the most consequential moment of the nascent Trump administration will take place later today when Congress Votes on the first iteration of the bill known as the American Health Care Act (AHCA). If the success or failure of the bill to this point is to be judged by its reception from policy thinkers on most sides of the political spectrum, it is already an unmitigated failure.

It should be worth noting, however, that healthcare in America is a massive business accounting for 3 trillion dollars in spending with powerful stakeholders. Any real attempt at reform is bound to be opposed by those who would naturally resist attempts to dam the river of dollars that flows to them. The resistance from these parties always comes in the form of entreaties to think about patients harmed by whatever change is trying to be made.

Figuring out which stakeholder actually has the patients best interests at heart is akin to playing a shell game. All the cups look the same and its entirely possible the marble is underneath none of the cups. As a physician, I am of course, another stakeholder with inherent bias but I would submit that practicing physicians, among all the players at the table, have their interests most aligned with the patients they must directly answer to every day.

Of course the actual language of legislative bills defies understanding by mere physicians, and while my grand wish would be to leave it to the healthcare policy experts to hash out, the last eight years suggests that it is folly for the practicing physician to pay no attention to these machinations. While it may seem obvious that all parties at the table would seek to ensure the primacy of the physician-patient relationship, one can never underestimate how deep health care policy experts have their heads buried in the sand.

Understanding the AHCA requires understanding the context in which it was created, its intent, and its ultimate effect. Discerning context is easy because these events have already happened an are a matter of record. Grasping the intent of the bill is a matter of some faith, but also manageable. But intuiting the effect of the AHCA if the bill passed is most certainly an act of God. The current hyperpartisan media coverage, with some notable exceptions, fails miserably at providing consumers anything but slogans to be used to deepen the divide the country and marshall outrage. Watching the current coverage, one is left with the very distinct impression that the Republicans have chosen to gut the ACA in order to give a tax cut to the rich and bankrupt the elderly and the poor. While I understand that Satan himself is said to have given birth to the Grand Old Party, this does seem to be an odd tactic for any political party that needs votes beyond the 1% Wall Street demographic to stay in power. Certainly, gutting Obamacare does make for poor optics. It was, after all, the program that valiantly attempted to both provide health insurance to the uninsured and lower the spiraling cost of health care. I know this because I cheered these words as they left the former President’s lips a long eight years ago.

The reality of Obamacare was a far cry from the vision. I have written a fair amount about mandates buried in Obamacare that made life challenging for physicians, but from a patient standpoint, the major complaint was that it was just too darn expensive. A nurse I work with has a Obamacare bronze plan with a very high deductible and and a premium that he could buy an iphone a month with. He hasn’t seen a primary care physician since he has had the plan, because the deductible ensures that he will be responsible for the entire cost of the visit as well as any routine bloodwork at chargemaster inflated hospital prices.

There are many lessons so to learn from the last eight years of health care policy making, but a particularly salient one is that insurance turns out to be a complicated business better left to professionals than politicians. Insurance is expensive for a variety of reasons that certainly relates to band-aids in hospitals being worth their weight in gold, but beyond the high dollar unit cost of health care, fundamental problems with policies that regulate the insurance plans were baked in to Obamacare.

The major problem relates to a paucity of young, healthy members enrolling in the marketplace. Health insurance needs a large pool of healthy patients to pay for those that are sick. Unfortunately, getting young healthy folks to buy insurance is challenging. Healthy patients are young invincibles with thin bank accounts who prioritize data plans, smartphones, and cable plans that include ESPN and the Kardashians over health care. Getting someone to choose health insurance over the Kardashians is a tall order, and in the case of Obamacare, the plan was to use a stick in the form of a mandate to buy health insurance. Starting in 2010, all Americans choosing to gamble and not buy insurance were subject to a dollar penalty.

With the mandate in place, the Congressional Budget Office (CBO) – responsible for predicting the actual effect of legislation – estimated that by 2016, 21 million people would be enrolled in the Obamacare exchanges. The CBO, in this case, wildly overestimated. The actual number was around 10 million. The 10 million that were signing up were also disproportionately sick and poor. The prized young and healthy stayed out of the exchanges, instead choosing to pay a penalty ($695 or 2.5% of income) that was much smaller than the yearly cost of paying for health insurance. As a result, premiums in the exchanges rose year over year as insurance companies scrambled to cover losses in the marketplace.

Obamacare had a partial answer for this – subsidies from the federal government kicked in at 400% of the Federal Poverty Level (96k for family of 4 in 2017) to insulate relatively poor patients from these premium hikes. Of course, using subsidies in this manner is good for the patients who qualify and insurance companies, but not so good for the american taxpayer. In no small part because of significantly increased federal outlays for healthcare, national health care expenditures in 2014, and 2015 accelerated faster than the 10 years prior.

Many blamed the insurance companies for rising premiums, and while it is true that insurance companies bear blame, they had complaints that appear valid with regards to well intentioned regulations within the ACA that made buying insurance so expensive

  1.   Plans under the ACA were required to provide certain Essential Health Benefits which included prescription drug plans, mental health and addiction services, as well as rehabilitation services.  If you’re a 27 year old with a few hundred dollars a month who wants to buy a skinny plan that doesn’t cover prescription drugs or mental health benefits – you’re out of luck.
  2. The individual mandate itself was more like swiss cheese than the Hoover Dam.  Even at its most expensive, the penalty for not complying with the mandate was $695 or 2.5% of your income. So the penalty may certainly have been a deterrent to high income earners, but it did little to dissuade the less well off, young and healthy from choosing not to buy $400/month insurance plans that they saw little chance of using.
  3. There were exemptions galore from the mandate for hardships such as ‘experiencing the death of a family member’ (no documentation needed) that could be used to avoid the penalty altogether.
  4. Gaming the insurance market was easy.  You could choose to stay out of the marketplace until you got sick.  A 90 day non payment grace period meant you could go three months without paying your premium.  Get sick in those 3 months? Just pay the missed premiums and reenroll without any gap in coverage.
  5. An age rating band of 3:1,  attempted to ensure that older, and sicker patients would pay no more than 3 times young, and healthy patients.  In reality, this ratio was used to define the floor for premiums of the young and healthy as opposed to providing a ceiling for the old and sick.

Donald Trump, having promised cheaper health insurance for more people very publicly met with insurance executives in the White House.  While there isn’t much more than a photo-op of the visit, I am certain the conversations between the Tweeter-in-chief and insurance executives revolved around trying to deliver on the Trump promise to make health insurance cheaper by decreasing premiums.

Little surprise then that many of the changes most vilified publicly are designed to help insurance companies who, at the end of the day, want nothing more than a large working profitable marketplace. Now, I’m not terribly sympathetic to the words profit and insurance company, but even I find the treatment of the changes proposed as pure political theater.   Doing away with the essential health benefits to allow patients to choose skinnier, cheaper plans turns into being against the future children of America because health plans would be allowed to not include maternal care benefits.  Similarly, the age band rating change designed to lower premiums in the young, instead becomes a tool created to raise taxes on the old.

These issues still do not begin to touch the two areas of greatest concern in the AHCA: the number of individuals that will gain coverage, and the cost of premiums.  The Republicans, and particularly Donald Trump assured the country more people would have coverage, and the health care delivered would be terrific.  Clearly, no one talked to the CBO before making these promises.

Many have high regard for the CBO – a group of non-partisan technocrats who use the best available evidence to make predictions of the future.  Prized for their non-partisan brand, they are also alternatively vilified or lauded based on what is politically most expedient.  In the case of the AHCA, the CBO believes premiums don’t appreciably reduce, and may in fact increase in the short term.  They also strongly believe that the lack of an individual mandate means even fewer younger and healthier will sign up for the program – thus recreating the problem of adverse selection that plagued the Obamacare markets.  Getting the estimates right on millions who would enroll is critical to assess the impact on premiums.  The fewer people that sign up, the higher premiums are.

The CBO’s projection of enrollment in the past are instructive, and this nice chart from Avik Roy’s FREOPP.org demonstrates the grand difficulty of predicting whether Jim and Mary in Altoona will sign up for health insurance whether you’re partisan or not.  This is even more complicated by the fact that many of the Obamacare enrollees were covered under an expansion of Medicaid – 19/31 states rejected medicaid expansion in the past, and estimating the future of how states will respond to medicaid rules reminds of the time I tried to play ping-pong on a windy day.  I gave up – but I guess the CBO isn’t allowed to throw its hands up in the air and walk away.

The effect on premiums is thus even harder to predict. The CBO estimates that average premiums in the individual market will increase prior to 2020 and decrease after – precisely because they believe taking away the individual mandate will induce ‘fewer comparatively healthy people to sign up’. These estimations are, of course, fraught with assumptions.

Take this next, pretty series of graphs by Avik Roy, a prominent conservative health policy wonk.

The lines in this figure represent the net cost to the patient after ACA subsidies or AHCA subsidies that go to insurance companies to lower the burden of premiums on patients. The simpler green line represents the current (perhaps already dated?) GOP idea to have a flat tax credit that varies with age, but doesn’t rise with income or geographical area as the ACA did. It would appear from the graphs that the AHCA is a loser, especially for older and poorer americans.

Studying these graphs tells you why so many different ideologies are upset by this bill. The liberals are upset because this appears to shift costs from younger, healthier, relatively better off consumers to older, and sicker consumers. Pure conservatives and libertarians are hopping mad because the bill preserves subsidies from the tax payer to third party payers (insurers).
But it should be clear that these predictions and analyses are fools missions. It should be obvious that the strength of these assumptions that predict enrollment to the nearest million and premiums to the nearest dollar have a flip of a coin’s chance of being correct. If young and healthy patients flood into the marketplace, the average premium falls greatly, and if far fewer than even the CBO estimates stay out of the marketplace, premiums will be even more expensive than what’s predicted. If all my decisions on therapy for a patient were based on this quality of evidence, I would quit.

None of the analysts with very strong opinions on either side of the debate cop to the tremendous uncertainty baked in to all of this. The large majority of opinion-holders hold their ideology sacrosanct, and gleefully and selectively pick up ‘data’ that falls off the garbage truck of what passes for evidence in health care policy today.

I have no idea what the effect of health care policy legislation will be as it arises from the font of central planners in the nation’s capital, but I am left with the strong impression that decisions surrounding the nations healthcare are poorly made in this manner. The false impression being given to a hapless public is that one policy think tank or the other has a surfeit of knowledge with regards to what will happen. The words of economist Friedrich Hayek, champion of a decentralized approach to complex problems identified the problem inherent in leaving decisions to a select few ‘experts’:

“It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available-though this is of course merely shifting the difficulty to the problem of selecting the experts. …It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.”

The lesson being missed in all this may be that the health care policy you should support is the simple kind – the one that gives maximum flexibility to the two most important players in the health care tangle: the patient and their doctor.

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17 replies »

  1. “The best doctors in the world can’t make patients take their drugs and follow other advice and recommendations.”

    No, but we can design tax policy to shift the culture. Tax sugar, fat, calories, stop subsidizing corn and subsidize fresh fruits and vegetables. This has to be a culture change. Some communities are attempting to tax soft drinks, but this needs to be national. Spend those taxes on health care.

  2. Love the hard-hitting analogies describing the underbelly of our nation’s health care legislative process and the approaches used calculate the costs of a bill. The most cash flow-advantaged players in the sector have a sly way of oversimplifying the physician’s cognitive tasks while over-complicating the physician’s technical duties.

    In a regional health care system near me, the marching orders for primary care docs are 10-minute visits at a rate of 25-30 visits per day. They are supplied with clinical guidelines for the diagnoses that apply most of the time. The productivity targets are designed to maximize revenue per hour based on health insurer payment rates. The guidelines are designed to minimize costs. Poor outcomes can be explained away. Just look at the failed pay for performance experiments. The payers and managers have effectively boxed in their primary care fleet and the medically unexplained patients I see are livid about it.

    High deductibles are consumer-driven in that consumers are driven like cattle to avoid the care they need or to opt out altogether and let hospitals foot the bills. The GOP failed to clarify how AHCA would have increased competition among the Big Dog insurers. The ACA failed at this and has caused a great deal of financial pain. Will the next ghost-written fix from partisans and lobbyists also be wrapped in slogans that consumers are most likely to fall for?

    Love how this post boiled the problem down to the obstacles that interfere with the relationship between patients and their doctors. Thank you, Dr. Koka. What can patients and physicians do to regain leverage in our tainted health care reform process?

  3. Steve, do you read other people’s minds?

    Assuming the dates are the same, correlation is not causation.

  4. ” The game is all about the rate of use of services caused by ever increasing rates of chronic illness.”

    So what are those rates in other industrial countries with government run/controlled health care? Do Canadians have less chronic illness? Certainly their diet/exercise is pretty much the same as the U.S. Barry has stated in the past that our use of the system is about the same, but it’s our prices that make us spend way more – and make care so unaffordable to more people.

    Why is it that we want to control costs by denying care to poor(er) people???

  5. Been swamped at work so missed some of the details on this, but I finally found out that their goal was to pass this on the anniversary date of the ACA passage. Rather than craft a bill that could get support from their own party, they have the numbers, they made symbolism their priority. What a bunch of idiots.


  6. I’ve seen it written today about how Ryan ostensibly “played” Trump. I stand by my characterization. Trump drew a line in his Mar-a-Lago sand trap and made Ryan walk the plank (to mix metaphors) with that still-moist AHCA turd, knowing full well it didn’t have the votes (few of the Goopers even read it), notwithstanding the huge GOP House +44 seat margin, (and, knowing it would be would be DOA in the Senate anyway).

    And, blaming the Democrats, yeah, THAT was rich. Try to imagine how much they care about that predictable, no-legs, toss-away line.

  7. Seems we have evolved into a coalition style variant for Federal governance. Its hard not to imagine that the true sources of political capital originated from the land of “Complex Healthcare” institutions. A future story to be told, to be sure. The true elephant in the closet continues to be ignored: the high cost of our nation’s healthcare industry. Parkinson’s Law continues unabated, at least for now. More importantly, the quality of our nation’s state of health continues to worsen. And, our nation’s humanitarian and scientific determinants for HEALTH continue to worsen unabated.

  8. I’ve read that 75%-80% of our healthcare costs are attributable to chronic illness and its management including virtually all of my own claims. I wonder about the extent to which patient non-compliance not just with respect to prescription drugs but also adhering to advice to stop smoking, drink in moderation, lose weight if appropriate and get some moderate exercise even if it’s just walking exacerbates their disease or condition and the cost of treating it. The best doctors in the world can’t make patients take their drugs and follow other advice and recommendations.

  9. We continue the nonsense argument over who pays. I think it was Joe Flower who made that point. The real issue is the overall cost of the care of individuals (and hence the cost of insuring them). As Barry points out 90% of premium is claims. Claims consist mostly of price (fees) and use. Fees have largely been flat, and further ratcheting down of fees alone just pisses off providers who then are incented to increase the rate of use of services to keep income stable. The game is all about the rate of use of services caused by ever increasing rates of chronic illness. THERE. What do we do about THAT to start to impact costs? That is the discussion that should be had.

    Anish, a fine article, and I was wondering who the experts are that are advising Cong. Ryan et als. Is their effort mostly a cobbled-together piece designed to answer political desires alone? It seems so.

    How do we reward providers for reducing the rate of chronic illness? Big time. Not medicating it, but reducing it. There’s the challenge.

  10. Not exactly, he’s blaming Democrats in his alternate universe.

    If Repugs have a ounce of intelligence they’ll now work with Democrats to fix the problems with the ACA without tossing millions “under the bus” and off coverage.

  11. Other incentives for insurers to lower premiums:

    1. Increase medical loss ratios by the same percentage as you negotiate reduction in provider pay.
    2. Merge with other insurers so that you are an oligopoly selling insurance and an oligopsony buying provider services.
    3. Join with providers to form a pharmacy purchasing cooperative and try to get monopsonic prices for drugs.
    4. Take risk by paying claims through indemnity method. Risk will incent you to pay less and indirectly lower premiums. Indemnity will teach all stakeholders about costs.
    5. Continuing patient education re what is covered in their plans and what is not.
    7, Continuing patient education about actuarial value of plans so that patients buy plans with more accuracy and less guesswork.
    8. Work with providers to continue improvement and simplification of all your EHR demands.
    9. Organize with other insurers ways to lend money to patients and providers who have incurred large debts…akin to mortgage loans. This keeps provider supply high and prices low.
    10. Invite interstate and foreign insurers to create businesses in your location so that competition is enhanced.
    11. Try to forever simplify your plan offerings so that you keep ypur administration costs as low as possible.
    12. Have more doctors on your claims payable review so that fewer adjudicated claims occur.
    13. Try to gain acceptance of the idea that health insurance is not to pay for the running and operating costs of the human body–it is for exceptional costs that might incur bankruptcy.

    Note: I am not recommending all of these. You asked for ideas.

  12. Anish – I have no idea what conservatives have in mind when they talk about incentives for health insurers to lower premiums. Roughly 80% to 90% of the premium dollar goes to pay medical claims. The only ways I can think of for insurers to lower claims costs and premiums are to negotiate deeper discounts with providers, especially hospitals, narrow the breadth of coverage, increase deductibles, copays, and out-of-pocket maximum amounts or convince government / taxpayers to pay for the 3 R’s – risk adjustment, reinsurance and risk corridors. I assume you and your fellow doctors don’t want insurers meddling in how you interact with your patients though requiring basic documentation is reasonable, in my view. The definition of reasonable, of course, is subject to vigorous debate.

    More and more hospitals are getting into the health insurance business but not very successfully so far. If they have any ideas about how to lower the cost of care that traditional insurers either haven’t thought of or haven’t executed very well, maybe the hospitals can show the way and win business with lower premiums for comparable coverage though most are limited network (their own) plans.

    Separately, it doesn’t make any sense for patients to pay full chargemaster or list price for services, tests and procedures that are within their deductible. It seems that all services, tests and procedures should be subject to the insurer’s contract reimbursement rate whether the patient or the insurer is responsible for paying the bill. Prescription drugs are a different story because of the way the rebate system works. That needs to be changed but it’s a subject for another day.

  13. Good article… A lot of info.. one point that I tend to not agree with is… “The major problem relates to a paucity of young, healthy members enrolling in the marketplace.” Who are these fantasy people? I honestly don’t believe they exist and they are not the reason the “insurance” is underwater. People are smarter than everyone gives them credit for and it’s so easy to scam the current health care system.

    Most of the “newly” people covered on the Obamacare exchanges were the people in the old individual health market who had insurance prior. But they now HAD to buy through the government website to get subsidies, so they did and I’ll admit there were others who were uninsured prior and then were able to purchase, but a much smaller population.

    All of these government entitlements and especially health care are too easy to scam. I feel like Rodney Dangerfield in the movie back to school when the professor is trying to explain how the real world works to him, a guy who is actually doing the work. Where are you going to build this factory, fantasy land?

    The exchanges were filled with people who keep their income “off the books”. They are good people, (I never blame people who take advantage of the stupid government), but they take advantage nonetheless. I know people who report they make 30k on the books and really make more money than me tax free.

    Ever go in to a pizza shop and wonder why they still only take cash? Or why ANYTHING is less that a contractor does if you give him cash? It’s because many of these smart folks are reporting lower income and taking advantage of Health subsidies, etc. To think that waste, fraud and abuse is not the number one reason these entitlements fail, is that people don’t understand the real world or don’t want to understand.

  14. I believe I said that we should focus on the patients and doctors. I think most people who actually take care of patients and have had to jump through the hoops set up in the name of ‘quality’ would say that the ACA falls far short of delivering the best care feasible to the greatest number.

    Wasn’t meant as a pro-AHCA piece – or a cbo bashing piece.. I think I said that its hard to prognosticate especially when one doesn’t even know what the final legislation will be.

    You seem to be a health policy person – if you are – I’m happy to be educated. Can you tell for sure what happens to insurance premiums with a structure that makes it cheaper for young healthy folks to join, and has a nudge in the form of continuous coverage thats not quite the individual mandate?

    It also feels like the only way to get a good CBO score would be to have an individual mandate and subsidize premiums heavily. This certainly doesn’t square with the conservative idea that subsidizing premiums disincentivizes insurance companies to lower premiums (seems like most things subsdized by the govt raises costs).

    I think there’s a good debate to be had here, even if your name is FakeJason 🙂

  15. Anish,

    You did a great job exposing the fatal conceit of health care experts, but be careful: You’re so fluent in their jargon, you could be mistaken for one! 🙂


  16. *Skipping past the hundreds of words written in defense of know-nothingism and the CBO bashing used as a flaccid attempt to defend the garbage AHCA bill*

    “The lesson being missed in all this may be that the health care policy you should support is the simple kind – the one that gives maximum flexibility to the two most important players in the health care tangle: the patient and their doctor.”

    Maximum flexibility for the doctor is the key thing we should focus on in health care policy? How hilariously self-serving! Morally, the goal of a HC system must be to deliver the best care that is feasible, to the greatest number. As your hero Trump pushes forward a bill that covers fewer people and increases costs, what’s left but to complain about aspects of the ACA you still don’t like, even though the AHCA wouldn’t fix them?

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