The Affordable Care Act (ACA) is the law of the land, and nothing the Tea Party does is likely to lead to its repeal. But the ACA can be amended to make it less objectionable, and it wouldn’t be that hard. We just need to modify it to allow Tea Partiers (and others) to form their own healthcare groups.
All insurance, including healthcare insurance, works by forming risk pools. The members of the pool contribute to a pool of money which is then used to pay the claims by the members. Most participants pay in more than they use. In healthcare most people pay more money into the pool than the cost of the care they receive. A few people receive far more care than they pay for.
For risk pools to work, boundaries have to be drawn around what is paid for by the risk pool. As an example car insurance policies place a limit on how much they will pay for any one accident. It’s nice to think that as a rich country we don’t have to draw boundaries around healthcare, that we should be able to pay for any possible medical treatment, but we can’t. We already spend almost twice as much on healthcare as other nations and if costs keep increasing eventually it will bankrupt our country.
Many people blame private insurance companies for our expensive healthcare system, but insurers actually have very little to do with rising costs. Instead advancing medical technology is the primary cause. Our for-profit medical technology industry has made amazing advances in treatment and care that have allowed us to save people that used to die. But its primary goal is still profit. Every year the industry comes up with new procedures or refinements. Most provide only incremental improvements in care but they all come with a higher price tag. Every year the industry spends billions of dollars – yes, billions – successfully encouraging doctors to recommend the new procedures. And it’s about to get much, much worse. There is a flood of new treatments and targeted drugs getting ready to hit the market. Some will undoubtedly be true advances, but all are likely to cost tens and even hundreds of thousands of dollars per treatment.
October 1st marks the first ever public exchange open enrollment season. This means some of the speculation around consumer awareness and understanding, enrollment/uptake, premiums, and payer participation (not to mention the technical readiness of the exchanges) will finally subside and give way to a clearer picture of the PPACA’s initial success in mandating individual health coverage.
Despite this approaching level of clarity, however, several very significant “blind-spots” will continue to persist, principally for the health insurance carriers that choose to participate by offering PPACA compliant plans in the exchange.
This is due to the law’s guaranteed issue mandate prohibiting health carriers from denying coverage based on preexisting conditions. As a result, the traditional enrollment process which consists of a comprehensive assessment of each applicant’s health status and risk cast against the backdrop of time-tested underwriting guidelines is completely thrown out.
What takes its place is an extremely limited data set (i.e., the member’s age, tobacco/smoking status, geographic region, and family size) from which carriers can determine pre-approved premiums and variability therein. To use an analogy, health insurance companies no longer have a “bouncer at the door” turning people away, or a sign reading No shirt, No shoes, No service at the entrance.
In other words, everyone, regardless of their risk profile, must now be welcomed in with open arms and with very limited risk-adjusted rates.
This wouldn’t necessarily be a problem if the enrolling population comprised a well understood risk pool representing a true cross-section of the population. The reality, however, is that a predominantly unknown and potentially unhealthy population will flood the individual health insurance marketplace in a two weeks just as most states quickly phase out their high-risk pre-existing condition pools and shift them into the exchanges.
Oct. 1, 2013 is a focus of increasing anxiety in this country. That’s the date when enrollments begin for the federally run health insurance exchanges, created under the Affordable Care Act (ACA). No one really knows what to expect, but it could be far worse than advertised —and for a reason that has more to do with the federal deficit than health care.
What’s anticipated is unsettling enough. President Obama speaks of inevitable “glitches and bumps” in the implementation. Senate Finance Committee Chairman Max Baucus (D-Mont.) sees the possibility of “a huge train wreck” if the public isn’t adequately educated and prepared. Supporters of the ACA, especially Democrats in the Congress, are nervous about taking the blame if the exchanges don’t unfold as intended.
All these worries are legitimate. The American people, already burdened by a numbingly complex, inefficient and inequitable tax system, now wonder if an increasingly government-run health care system will follow suit. Many are concerned that some employers will dump their current health care plans and pay the relatively modest fine. There’s also worry that young people will opt out of the exchanges (preferring to pay the small penalty), leaving the exchanges with a disproportionately older and sicker pool. Then there’s the very real uncertainty surrounding the ACA’s ultimate cost — illustrated by the impact of Medicare alone, which the Office of the Chief Actuary of Medicare estimates could cost cost $10 trillion more than claimed.
Amid all these concerns and speculations, almost no attention is being paid to the opportunity that the ACA’s insurance exchanges could represent for state and local governments’ retiree health care programs. It’s time to think about it because the consequences could be far-reaching.
States in a deep hole
We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office (GAO) makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060. A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees. These largely unfunded obligations are similar to the pressures on the federal government to fulfill its unrealistic Medicare promises.
Under the Patient Protection and Affordable Care Act (PPACA), state governments are expected to set up health insurance exchanges through which individuals will buy their own health insurance, in many cases with substantial subsidies. Should the states comply?
In the following point-counterpoint discussion, Linda Gorman and I give opposing answers to this important question. Leave your thoughts in the comments.
John Goodman: Yes
If the states abdicate their responsibilities under PPACA, the federal government will step in and act in lieu of the state. Under this scenario, states will relinquish all power to make a bad law better. Letting the federal government implement reform almost guarantees bad outcomes.
Linda Gorman: No
Exchanges are required to perform a variety of duties beyond distributing ObamaCare subsidies, and these duties are likely to add significantly to estimated costs. Some of them will damage a state’s business climate by creating new opportunities for crony capitalism. Some require that currently fashionable, but poorly tested, models be forced on health care providers. Some require that state exchanges have expertise equal to private insurers. Others force states to increase the cost of health insurance for people who currently have coverage.
John Goodman continued:
The states should engage in preemptive reform over the next two years. This means enacting responsible, rational reforms — the kind of reforms that they should have enacted all along, in the absence of federal legislation. Where possible, states should try to make their reforms compatible with the new federal law — but only if compatibility does not sacrifice the major goals of the state’s reform.