Who Won When the AHCA Failed?

You may have heard that repealing and replacing Obamacare recently failed.  The analysis of what went wrong comes from many corners.  Andy Slavitt, former insurance executive and most recent director of CMS, writes that the ‘failure of Trumpcare can be seen as a rejection of policies that Americans judged would move the country backward.’  Apparently, the theory goes, moderate republicans, especially in states that expanded heavily and rely on Obamacare Medicaid expansion, were skittish of a repeal and replace plan that endangered the healthcare of millions of constituents.  The conservative David Frum writes in the Atlantic that most Democrats and Republicans have accepted the concept of universal health care coverage – and that the idea of a repeal of the right to healthcare is sheer anathema.  And if the Republicans were wavering, town halls filled with angry constituents were sure to provide an extra dollop of pressure.

The effort to get the messaging right is clearly important to many, but I find most of it functions as a smoke screen seeking to obscure the real battles being fought over your healthcare.

It is certainly true that Obamacare insures millions of Americans.  But it is also true that having health insurance and having health care are two very different things.  To be clear, the folks attempting to preserve the status quo want to preserve the ability to force all Americans to buy health insurance that costs hundreds of dollars per month.  Put another way, the folks attempting to preserve the status quo want to force Americans to give a monthly fee to health insurance companies.  Remember, these plans have deductibles so high that most of the cost of care delivered during the year in the form of labs, copays, and imaging studies falls on the hapless patient.  The insurer, for the average healthy person, doesn’t pay a dime.

It is also, of course true, that the vast majority of folks signing up for Obamacare were not of the young, healthy kind (one of the problems with the marketplace) – they were poorer and sicker than predicted.  The kind designers of Obamacare had a built in solution – tax dollars would kick in to make up the difference so that insurance companies could keep the cost to the patient low.

It should not be hard to see through the smokescreen to realize that this is a system that serves to keep insurance companies as focal points in health care delivery.  The theory is to pay the nations dollars to insurance companies so they can be stewards of the nations health.   This would be a great idea if it weren’t for the fact that insurance companies, in the current construct, have proven to be poor stewards of our health and our money.

Consider that insurance companies are terrible negotiators that routinely pay hospital claims that are multiples of what medicare pays.  The reason hospital chargemaster schedules are as outlandish as they are is because somewhere there is an insurance company that will pay a significant portion of that price.  On average, hospitals around the country charge 550% of medicare and the commercial insurance companies provide discounts of 50% of those prices. As laid out by Dave Chase in Forbes, commercial insurers receive uniform bills (UB) from a hospital as an invoice that they typically blindly pay.

OR services cost $76,312 – what exactly this pays for is a mystery, and there is little due diligence that takes place on the part of the payer.  The claims administrator typically applies some overall discount and moves on to the next claim.  The hospital outpatient setting is no picnic either.  A friend of mine showed me a bill for an outpatient pediatric echocardiogram of $4000, and an electrocardiogram for $1000.  The facility was out of network and the insurer paid 80%, leaving an ~$1800 responsibility left to be paid.  There is no doubt hospitals are bad actors here, but its hard to blame them too much – faced with a commercial payer that will pay multiples of medicare rates, they charge what the ‘market’ will bear.

Except this is no normal market – it is a market where the actual payers (consumers) are usually blind to the actual cost at the time of service.  All the consumer knows is that premiums and deductibles rise on a yearly basis to pay for ever spiraling health care costs. Insurers predictably blame hospitals while hospitals cry of penury, all the while making acquisitions, paying EMR companies hundreds of millions of dollars for garbage products, and paying proceduralists handsomely for being the rain makers that bring patients to hospitals for procedures.

There are precious few places in healthcare that are free of third party payers, but they do exist.  One such example is coronary calcium scans.  These are low dose CT scans of the chest that demonstrate the presence of calcium in the coronary arteries.  The lack of calcium in the arteries of the heart suggests low risk, and may mean you don’t need to take the statin your cardiologist has prescribed.  The presence of calcium may alternatively suggest you would benefit from a statin when your serum lipid profile says otherwise.  Using this tool as a screening tool is a controversial topic among cardiologists, and insurance companies followed the lead of Medicare by deciding not to pay for this.  Remarkably, this did not sign the death warrant for coronary calcium scans.  Indeed, in any given city almost every hospital offers this scan, at price points most of the people walking into my office can afford (Philadelphia ~ $50 – $185).  Thus hospitals with CT scans set prices, and heed a maxim that even the caveman no doubt understood : You can’t sell what the buyer can’t buy.

The importance of reimbursement in dictating the unit cost of healthcare cannot be overstated. When I started practice in 2013, significant cuts to cardiac imaging had recently been made by CMS.  Practices with fixed cost structures that suddenly faced 50% reductions from their imaging revenue rushed to become hospital leased entities that were immune from these cuts. Knowing nothing, I figured I would take a loss to buy/lease an ultrasound machine to do echocardiograms.  Imagine my surprise when the device companies showed me tables of the current reimbursement from Medicare for echocardiograms to convince me to buy a machine from them.  Reimbursement rates are public, and this allows device companies to set prices based on these rates.  I realized then that the amount of money I would make per echocardiogram had nothing to do with what medicare in this case would pay me.  The amount I made per echocardiogram was fixed – the device makers simply varied the cost of the machine based on reimbursement rates set by medicare.

The handwringing that accompanied repeal of the ACA in large part related to eliminating the individual mandate and reducing federal subsidies to insurance companies.  If you assume health care costs are fixed and will only go up, reducing these subsidies and shrinking the pool of people buying insurance by eliminating the mandate would seem to be a sure way to make insurance unaffordable.

But what if the cost of healthcare is being driven up by the slovenly stewardship of third party commercial payers blindly paying 80% of the $1200 being charged for an electrocardiogram that costs $12?  What if the best mechanism to reduce the cost of health care is to reduce the footprint of third party payers?  Would a hospital continue to charge $4000 for an echocardiogram if patients knew this before the procedure was performed? This is an unsustainable path.  No amount of stabilization of the marketplace with tax dollars can fix this in the long term – it is simply unaffordable.

Lost in all the messaging about what the failure of the AHCA says about Americans is that the actual problem with health care today has been obfuscated.  As the philosopher Puff Daddy, puts it – It’s all about the Benjamins.  America’s health care problem is one of cost.  Focus on making healthcare more affordable and healthcare will become more accessible.  Counterintuitively, the best way to make healthcare more affordable may be to have third parties cover less – a line of reasoning bound to elicit outrage from the bleating wing of the left.  Mandate, or allow consumers to buy catastrophic insurance plans, but allow patients to use health savings accounts (HSAs) and shop for everything else.  Even better, explicitly allow HSAs to be used to pay a low monthly subscription fee to a direct primary care (DPC) physician to cover all outpatient office care (office procedures, vaccinations, basic labs, same day visits) and allow them to serve as your guide to low cost specialists and imaging centers.  An even simpler option would be to have the government set all prices by taking insurance companies out of the mix by extending Medicare to all.  Of course, given a taste of the avalanche of mandates that naturally occur when bureaucrats are given too much control, (the British NHS experience is not pretty)  I am wary of such a system.

There are many that are gleeful about the failure to significantly reform or ‘replace’ the ACA. I don’t share in their joy.  A failure to replace or significantly reform the ACA is a win for insurance companies and hospitals – an outcome that may keep more people ‘insured’ but does nothing to expand access to actual healthcare.  Americans are right to be scared of losing access to healthcare – but the danger comes not from a replacement plan that threatens the status quo, it comes from keeping the status quo.

Anish Koka is a cardiologist based in Philadelphia.

19 replies »

  1. “and because of the ACA there are 72 million are on Medicaid.”

    Part of that is Children’s Health Insurance Plan. So I guess you want to deny children health care as well. And so what if there are 72 million, that’s 72 million that did not have health coverage before – not that the low Medicaid reimbursements helps access.

    The ACA did not create that many people needing health coverage, the huge disparity in incomes and resources that this country has created, mostly due to tax policy, is the reason there are so many without the affordable means to coverage. I wonder how many had employer coverage before the bank fraud mortgage coverage – where no one went to jail, but the government bailed out a lot of dishonest bankers.

    But J, Trump says he’s going to get all those people jobs, jobs, jobs, so it won’t be long before they all have employer health subsidies, and you can relax.

    Medicaid provider reimbursements are less than Medicare and less than your coverage – whatever that is cause you haven’t told us yet. I wonder if you’ll complain about Medicare when you get there. The out of control health care costs in America is what makes health care so expensive. We’re about double the rest of the world.

  2. The only thing ACA did was put millions of more people on Medicaid. There are now over 72 million people on Medicaid.

    Let me repeat. There are only about 325 million people in the US, and because of the ACA there are 72 million are on Medicaid.

    But we don’t have a universal system, right? You’re right, we don’t. The poor and the rich make out much better than that and the rest of us in “the Middle” have to go to the CVS urgent care because we have to be responsible with our healthcare dollars, HSA’s,etc.

    There are only about 10 million people on the exchanges, all the exchanges did was replace the prior commercial individual market and gave some folks a subsidy. Big deal.

    Everyone talks about the exchanges, but it’s the explosion of the Medicaid population and all of those added patients that cripple the system and was the as the real trojan horse of the ACA. You ‘give’ someone medicaid and you might as well give them a subsidy for $35,000 a year, because that’s what the coverage is worth, per person. And they get the best care money can buy… Go to any ER they want. There is no downside.

  3. Mustering public support against the mantra of – ‘ if you change the ACA fundamentally – people will die’ is challenging. From the left it appears that being against an individual mandate, and against scalable/sliding scale tax credits to insurance companies is a nonstarter. The debate is held hostage to this narrative…

  4. It solved few problems and did nothing to reduce the cost curve which means that we are worse off in the future. I take note how you insult the Republicans. Go ahead I am not fond of most of them, but as bad as they are they are not as deceitful as our present Democratic group that presides. Slowly it is being revealed that in every aspect the Democrats have sacrificed America for lust and power. Just look at the most recent NSA scandal that is developing.

    I enjoy a subsidy I neither need nor want, but the socialists want socialized medicine and instead of passing bills to correct problems they tried to socialize medicine for those over 65. Yes throwing trillions of dollars over the years has helped make some people happy, but as usual you forget the trade offs if you even know what they are.

    Steve, I am still waiting for you to prove your case.

  5. “The ACA was expensive for millions. It didn’t solve the problem of the uninsured as we still have plenty of them. It didn’t solve the problem of the millions sent to Mediaid and made the problems worse for all those already on Medicaid.”

    Well it solved enough problems for enough people that the spineless Repugs would not repeal and replace with a worse program.

    But Allan, what would solve those problems you list is Medicare for all – you know, the government subsidy program you and I enjoy.

  6. Go ahead Steve and provide the raw data numbers over a sustained period of time preceding the ACA and include all the data. Prove your case. I don’t expect you will.

  7. Medicare costs have advanced more slowly that those of private insurers.

  8. The ACA was expensive for millions. It didn’t solve the problem of the uninsured as we still have plenty of them. It didn’t solve the problem of the millions sent to Mediaid and made the problems worse for all those already on Medicaid. We all recognize that things are tough for those that had difficulty obtaining insurance, but for the most part they did get healthcare which is the end product we are seeking. The number of people through no fault of their own that didn’t have insurance within the decade or so before the ACA was about 8 million. Our population is over 300 million. Let’s create a system for the 300 million and try to add that 8 million without negatively affecting the marketplace for the rest.

    A real insurance insurance policy doesn’t include wellness benefits though in today’s world many think it should. Insurance is for the unpredictable things that happen. It is to protect assets and leverage one’s financial status. What you are talking about is welfare in the form of prepaid medical care. That is not the most successful way to deal with problems of this nature.

    You can look up the states that mandate auto insurance and those that don’t. You can look up the dates as well to see when the mandates were passed. Maybe since the last time I looked things changed, but if that happened it doesn’t change the argument.

    As far as your argument goes look at the number of people who carry insurance and drop it and then look at how those people say that their deductibles and premiums are so high they can’t afford the care even though they are insured.

    Medicare is far from affordable. In fact Medicare has never been able to get ahold of costs for a sustained period of time. Eventually more rationing will occur or entry into Medicare will be limited. Before that happens taxes will go up on young families so that we can further diminsh parental care of their young which represent the future of America.

    You seem to come from a group of people that think money grows on trees. It doesn’t. Additionally everything you propose has a trade-off quite frequently worse than what you are trying to correct.

  9. ACA policies were expensive for those who did not get a subsidy, just like those unable to get insurance on individual market before ACA. The ACA policies included no pre-exist, no cap, wellness, etc. in other words, a real health insurance policy.

    “The idea should be that the premium falls and the individual is left with money in the bank.”

    Tell me where this happens in the non ACA market.

    “We don’t all have to buy auto insurance. That is up to the states.”

    Which state does not enforce auto insurance?

    “Mandated insurance doesn’t mean all people will carry health insurance any more than auto insurance.”


    I wonder how many seniors 65 and older do not have Medicare because they can’t afford it? If a policy does not get you health care then how much health care can you get without one.

    Seems you’d be in favor of Medicare for all, since that government program is very affordable.

  10. Peter, you are correct. The ACA didn’t invent high deductibles/ co-pays and narrow networks. It was supposed to save everyone $2,500, but instead the ACA was so costly that the premiums went up and inadvertantly the deductibles went up. The idea should be that the premium falls and the individual is left with money in the bank. Narrow networks were also a result of bad ACA policy.

    We don’t all have to buy auto insurance. That is up to the states. But, amazingly and at least prior to the ACA, the uninsured rate in states where it was mandatory to carry insurance found that almost the approximate percentage of people were driving uninsured as the percentage of people uninsured nationally.

    Mandated insurance doesn’t mean all people will carry health insurance any more than auto insurance. Additionally health insurance is not healthcare.

  11. Why is it that those opposed to the ACA think it invented high deductibles/co-pays and narrow networks. This is a condition of unaffordable premiums for all insurance unless you get a great subsidy.

    Yes, we all must pay into medical coverage, just as we all must pay into state auto insurance. All insurance operates on the premise that low risks pay for high risks.

  12. Tis sad to think that people viewed it as a win. We all lost when, faced with reforming health care, the GOP spent 2 1/2 weeks on it, then failed to pass anything. We need people willing to put in the time and effort on this issue, not people who are too lazy to work, or more interested in symbolism. I may not like what they pass, but if they can muster public support for a replace plan then I will find a way to deal with it, and be surprised if it works.

  13. Anish – Nice piece. Lots of good issues and examples/specific surfaced. Right problem. Wrong conclusion, in my view. Jumping from system-is-broken-costwise and reimbursement-wise to repeal the ACA does not follow. ACA created a new and better individual insurance market, building on private insurance system that was not possible to destroy or get around in 2010. Attacking costs and broken price/cost system were not the priority in the ACA. Republicans so far have offered no alternative that would change that or address the issues you raise. I concur that it’s long past time we got serious about this broken payment system. Lots of experiments are underway in that area, as you and other THCB bloggers and readers know well. Just repealing and replacing ACA insurance market components will not solve problem and of course AHCA would have made things far worse for consumers and I would argue docs too.

  14. Fun read. Fired me up.

    The problem is not just cost, in my view; it is that there are no or really small benefits to most of what medicine provides. Without knowing what is the gas milage and color of a car, would you buy? We force patients into that conundrum routinely. Hospital bills are capricious; get bill from multiple components of care and we are forced to fend for ourselves. There is nothing good about the way we practice medicine. Time to revolt. If doctors want to be part of change they will have quit being part of the system; they will have to do the following:

    Drop malpractice insurance. Let lawyers come after your home; so what. They won’t as costs more to sue than your homes worth.
    Drop sending insurance bills for ambulatory care; charge cash and negotiate with patient.
    Drop out of AMA; get rid of all conflicts.
    Participate in a PMA (Patient medical association).
    Stand up to hospitals; don’t participate in their lunches, nice parking spaces, incentives. Force reduced costs by taking hospital bills public.
    Never, never, never let anyone give you lunch.
    Never practice with a guideline; they are the worst ideas ever and support over use.
    Never listen to a radiologist who asks for another test after you get one.
    Quit bouncing patients all over high water to organ based subspecialty, fragmented care.
    Realize that the entire ideology of insurance is bad; my kids don’t need to be charged for over treating anyone.
    Demand a universal health plan but don’t let our government run it; they are conflicted with business interests.
    Don’t ever, ever make another decision for a patient. Inform them of incremental benefits (small, most often) and harms and they will tell us what things are worth.
    Start advocating for patients and not the system.

    But, doubt many will agree. Hence, as I have said before, the only solution is to let patients take over and put our present system out of business.

  15. As in the co-dependency between the institutions that pay for healthcare and the institutions that offer health care for Complex Healthcare Needs.

  16. Anish, self interest dominates.

    Who has the most interest in one’s own life, the patient or the bureaucrat?

    Many of our paternalistic members will say the bureaucrat because they believe the individual isn’t smart enough without recognizing that the bureaucrat is no smarter than the individual and is miles away from the problem. The bureaucrat’s self interest is his job and feeding his family. That doesn’t necessarily correlate with the needs of the patient.

  17. Excellent insights. When I went on the Board of a non profit insurer I thought the insurer was primarily interested in being a purchasing agent for employer plans….seeking the best value for our employees. It took me a while to realize they were primarily a funding mechanism for the hospitals [it was private communication with UC Santa Barbara economist H.E. Frech who explained this…see his book Competition and Monopoly in Medical Care], all the while sincerely believing they were acting for the social good. An essential element of reform is to have a system where patients get to keep (in their HSA) a big chunk of the savings from prudent shopping and use of health care services. Insurers, hospitals and government bureaucrats oppose this as it would result in a reduction in their $ and their power, influence and prestige.

  18. The underlying theme of AHCA was probably to eventually lower the Federal cost of the ACA Medicaid expansion (think State unfunded responsibility) and its uncontrollable cost. Without the prospects of that outcome, the excess cost of our nation’s healthcare will eventually bring our Federal government into bankruptcy. I project that the excess cost of our nation’s healthcare for this year will be more than $1 Trillion. The portion paid out of the Federal Treasury will represent 70% of the national deficit. The total excess cost represents the equivalent, in 2005 dollars, of supporting 10 Iraqi/Afghanistan Wars, simultaneously. The growing cost, primarily healthcare, of our nation’s entitlement obligation will soon trigger the bankruptcy of our Federal government. Then, NO ONE will be able to borrow money because of the prohibitive interest rates. The capitol churn will dry up just as it did 8 years ago. The Federal government’s neglect during the last 10 years has been profound.
    Remember that virtually “all” of the world’s developed nations spend less than 13.0% of their national economy on their nation’s healthcare. We are now more than 18.0%.