Is Obamacare Dead?

“It’s dead. It’s gone. There’s no such thing as Obamacare anymore. It’s no longer – you shouldn’t even mention.”

— President Donald J. Trump  October 17, 2017

Not so fast, President Great-Again. First off, this is an obviously and flatly false statement. But also, don’t look now but Congress and the Trump administration itself are haltingly and chaotically moving to enact bipartisan legislation to stabilize the ACA exchange marketplaces for 2018 and 2019.

Importantly, passage of such a measure would get the ACA through the 2018 mid-term elections, although it’s unlikely that any legislation will tamp down the long-running and fierce debate about the fate and future of the law.

The primary aim of the bipartisan effort is to get funding for cost-sharing reduction (CSR) payments on the budget books. The payments, which go to health insurance companies, lower deductibles and co-pays for millions of low-income people.

They are the subject of a long-running legal dispute, which entered a new phase on Oct. 25 when a federal judge in California rejected an urgent appeal by 18 states to compel the Trump administration to continue making the payments as litigation continues. Trump announced earlier this month he would cease reimbursing insurers for the assistance, which insurers are required to deliver.

The ruling leaves the dispute to be resolved over the next few months in the California court even as a separate case involving the payments continues in a federal court in the District of Columbia.

The payments will total about $8 billion this year and were projected to come in at $10 billion in 2018. The Obama administration drew on general HHS and ACA funds to make the payments for 4 years. The Trump administration continued that practice until Trump’s decision earlier this month.

As expected, Trump’s action triggered insurers to announce they would—to recoup the loss—raise premiums 10% to 20% more than already planned for plans in the ACA exchanges. Such premium increases will hit people who get little or no subsidies the hardest. That includes the 8 million or so people who buy coverage off-exchange because they get no subsidies.

Those who buy on-exchange and get premium subsidies will be largely held harmless from the premium increases since the ACA requires the subsidization of premiums to keep up with premium increases.

Republicans characterize the CSR payments as insurance company bailouts. And Trump this month said several times that the payments have significantly enhanced insurer profits, which he said have soared since Obamacare went into effect in 2013.

All these assertions are incorrect. Again, insurers are mandated by the ACA to provide the assistance. Unfortunately, a technical error in the drafting of the law failed to establish an explicit process to appropriate funds for the payments.   As for profiting from the payments, data filed with HHS and the states overwhelming show insurer losses for their exchange business from 2014 to 2016. Those losses began to abate in 2017.

Despite the daily machinations and statements of doom, there’s still at least a 50/50 chance that some kind of compromise bipartisan measure will become law by year’s end.

Insurer, physician and hospital groups are pushing hard for it. Governors and state regulators—Democrat and Republican—want it. And the public favors bipartisan action; 70 percent now support fixes to the ACA rather than any further attempts at repeal and replace as the Nov. 1 start of open enrollment looms.

The major obstacle now is that the Trump administration and far-right conservatives are trying to leverage negotiations in the Senate—led by Tennessee Republican Lamar Alexander and Washington Democrat Patty Murray—to shoehorn in a batch of ACA changes Republicans failed to get via repeal and replace legislation over the summer and last month (Graham-Cassidy).

Namely, the White House has floated these additions to the Alexander-Murray bill: (a) buying insurance across state lines, (b) association health plans, and (c) state flexibility that permits states to nix some essential health benefits, thus undermining the ban on discriminating against people with pre-existing conditions.

Adding to the mix on October 24, Senate Finance Committee Chairman Orrin Hatch (R-Utah) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) introduced proposed amendments to Alexander-Murray that would kill the individual mandate, expand health savings accounts, and exempt employers from penalties if they didn’t offer coverage.

Said Hatch, who is trying to reclaim his committee’s ownership of health care: “If Congress is going to appropriate funds for CSRs, we must include meaningful structural reforms that provide Americans relief from Obamacare.”

Democrats will not agree to these changes.   Moreover, as well said in a blog at the Georgetown University Center on Health Insurance Reforms website:

“The negatives associated with the end of the CSR payments are not strong enough to require a compromise on other provisions of the ACA in exchange for restoring the CSR payments…..In fact, negotiating away key consumer protections in return for a couple of years of CSR payments would create more harm to consumers. Eliminating the individual mandate would result in 15 million more uninsured by 2026 while increasing the budget deficit by $416 billion. Weakening the guardrails on the 1332 waiver, such as by allowing states to waive some or all of the essential health benefits, would result in higher costs for people with pre-existing conditions.”

At last count, the Alexander-Murray bill had 12 Democrat sponsors and 12 Republican sponsors.   Thus, it is at the 60 votes needed to pass in the Senate.   Leader McConnell has said, however, that he would not bring the bill up for a vote unless Trump signals he’ll sign it.

House Republican conservatives (The Freedom Caucus folks) said on Oct. 24 that Alexander-Murray as configured now is a “non-starter” for them.

On Oct. 25, CBO forecast that Alexander-Murray would lower the federal budget deficit an estimated $3.8 billion during the next decade and not affect the number of people with health insurance.

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9 replies »

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  2. ” Specialist referrals , non-invasive imaging and lab testing just to be thorough is another area.”

    All of these gates controlled by doctors – so who’s doing the wasting?

    “Then there is PT, home health and custodial care.”

    PT hastens proper recovery, do you want that too expensive? How expensive would home health and custodial care be if done in a hospital?

    “Mental health services along with alcohol and drug abuse treatment would likely be more widely used if someone else besides the patient or family paid.”

    Areas that only the rich can afford unless Medicaid pays. Should we make those inaccessible to poor people? How’s that going to help the opioid “crisis”?

  3. In the absence of copays and deductibles, I think moral hazard is most likely in primary care and use of the ER for non-emergencies as patients seek reassurance for minor complaints. Specialist referrals , non-invasive imaging and lab testing just to be thorough is another area. Requests for brand name drugs when generics are readily available is still another area. Then there is PT, home health and custodial care. Mental health services along with alcohol and drug abuse treatment would likely be more widely used if someone else besides the patient or family paid. Don’t even get me started on end of life care and defensive medicine. Heck, even France uses substantial coinsurance for good reason — to reduce moral hazard.

  4. Anyone could use hc resources more than justified by the illness…rich or poor. If you subsidize something, you might get more if it.

    My point is that moral hazard in portions of hc might not exist and therefore copayments and deductibles are serving no purpose other than lowering the actuarial value of a plan…ie making it more stingy.

  5. “Do we want poor people to engage in moral hazard”

    What do you even mean by this William? Do you think poor people pick poor choices because it won’t cost them anything? Do you think they eat poorly because their health care is “free”? Do you think they get sick because the cost is the same as not getting sick?

    Why is a rich person not participating in moral hazard by using all the free health care subsidized by their employer they can get? Are their decisions based on saving the system money or just because it’s free?

  6. The typical Medicaid plan does not have co-payment or deductible responsibilities. Basically, there is no reciprocity involved. Furthermore, the cost to the provider for even collecting any payment required is prohibitive for families that use Medicaid for their health care. There is some benefit to the co-payment process since the patient always knows what their cost will represent before seeking services. This is also true for many people on Medicare. They especially like the Medicare Advantage Plans. The real issue are the non-working employable group that has mushroomed in the last 15-20 years. Even when they have insurance temporarily, collection issues were common. I have always thought that a step program would solve that situation: same insurance but more restrictions with small or no co-payments graduating in steps to eventually a level of fewer restrictions and standard co-payments. The restrictions might include written referrals to specialists, pharmacy lock-in, or restricted referral networks.

  7. The whole purpose of cost sharing was to reduce patient moral hazard, apropos the famous Rand study of yore. Do we want poor people to engage in moral hazard and rich people not to? If you pay for the poor’s cost sharing expenses, don’t they begin too use moral hazard more? It doesn’t make any sense to allow one segment of the population to engage in moral hazard and waste a lot of resources. But also we can’t have poor people spend a lot on co’s and deductibles because 1. they do not have the dough and 2. it is not altruistic. Is it possible to inhibit moral hazard–if it exists at all–in rich people by charging a few bucks OOP? The practice of charging a co-payment or a deductible takes clerical energy and costs money. Is this whole effort a waste?

    So, what do we do? The theory of why we use cost sharing is vague and murky.

    I think we have to study moral hazard again. Is it real? Does it occur? Would it occur in hospital care?…or mostly in ambulatory care? Do we need cost sharing at all in non-ambulatory care? Who is going to voluntarily want to use hospital inpatient care too much?

    I would like to see some examples of rampant moral hazard. Do the docs practice moral hazard in their zeal to defend against litigation? Is this true moral hazard or something else?

    If there is just a little moral hazard going on?, is it significant? and is preventing it with cost-sharing worth the C/B?

    Recall that the original economic definition of moral hazard was that people would begin to engage in risk taking behavior if that risk was covered financially. I’m not sure that people using health care resources frivolously is exactly moral hazard. What do you think?

    My gut is telling me to forget cost sharing and its theory, moral hazard, especially for non-ambulatory care where elasticity of demand is not great. But, I could be wrong. It may be important in ambulatory settings.

  8. The chaotic political process will likely continue ‘ad nauseam’ until we achieve universal health insurance that accommodates the range of disposal income that each person uses for survival without interfering with a person’s autonomy, our nation’s Federalism or our Nation’s health spending as a portion of the GDP. Basically, we should prepare for a long, drawn-out and unpredictable scenario. I personally vote for any proposal that would aim to achieve health spending’s annual change to 0.5% less than economic growth until it reaches 12.0% of the GDP. It would only take 5-10 years with a much higher level of economic growth coupled with a community by community effort to improve the character of its SOCIAL CAPITAL.
    My view of SOCIAL CAPITAL defines it as follows:
    .the expression of ‘trust,’ ‘cooperation’ and ‘reciprocity’
    .by the citizens of a community that is more likely to occur for resolving
    .the ‘social dilemmas’ they encounter daily within their community’s civil life
    .when the attributes of a ‘caring relationship’
    .increasingly characterize the enduring networks of the community’s citizens,
    .especially the neighborhood network of each citizen’s ‘family.’