The Golden Ticket in Health Care Reform? Experts, Not Politicians.
Although nothing is ever truly dead in Washington, now that Senators Collins, McCain, and Murkowski have derailed a seven-year effort to undo the Affordable Care Act (ACA), we need to stop treating health care like a political football and face realities about what can work. It is not hyperbole to say that lives are literally at stake, and ideology won’t pay medical bills.
Data from the Centers for Medicare and Medicaid Services estimate that for 2015 the average cost of health care per person in the US was about $9,990. Of course, that number could be as low as zero or upwards of hundreds of thousands of dollars, and none of us can reliably predict where on the spectrum we will fall. So, potential financial ruin can loom if you are the unfortunate victim of a random gene gone awry producing cancer or a serious traffic accident.
Yet, that is what insurance guards against. It spreads financial risk over a large enough population to reasonably protect a given insured from financial catastrophe, typically by limiting exposure to premiums plus a maximum out-of-pocket amount. Furthermore, premiums (and likely deductibles) should be lowest when the risk pool is the largest it can be. That happens when everyone has insurance, most reasonably expected to occur under either a mandate to have insurance or a fully government-sponsored program (i.e., single payer).
So, unless a majority of legislators are willing to accept the latter -- hardly likely -- a stable system that can adequately limit the financial risks to our citizens must embrace a mandate to have insurance.
Interestingly, in addition to that, the ACA framers pretty much included everything else we could want to promote a stable insurance market:
- Subsidies for those financially less well off or (for states opting in) an expanded ability to participate in
- Predictable medically necessary (“essential”) benefits
- Guaranteed coverage
- Bankruptcy-avoiding limits on out-of-pocket expenses and elimination of lifetime caps)
- Limited premium differentials based on age and habits (e.g. smoking)
- Functional limits on administrative expenses
- A system of reinsurance
- Seemingly adequate funding sources
So why hasn’t the ACA controlled key metrics such as premiums and deductibles? Put simply, because its vital components ended up being more driven by politicians than policy and insurance experts.
Most glaringly, the individual mandate is nothing of the kind. The White House is fond of highlighting statistics such as “6.5-plus million have determined to pay the penalty” (rather than buy insurance on the exchanges), seeming to suggest they feel the insurance is not worth having. More reasonably, however, they are probably far better off financially not acquiring insurance (That is, of course, until they get sick or are injured).
The Healthcare.gov and IRS websites indicate the 2017 penalties for foregoing coverage are $724 for a single person making $40,000 and $1737 for a family of three making $80,000. In comparison, I found the yearly premiums for representative (central California) silver plans (that has subsidized out-of-pocket expenses and deductibles) to be $2,916 and $4,968 after tax credits, respectively.
Even if the least expensive bronze plans are considered the amounts were still higher than the penalties at $1932 and $2,142.
So what choice will reasonably be made?
Further exacerbating this is the existence of exemptions (one of which is for coverage being unaffordable) -- utilized by more than 13 million as estimated by the White House -- that would seem far less palatable than, say, a more flexible subsidy system that better estimates need.
So at a minimum, before we consider throwing the baby out with the bathwater, wouldn’t we at least want a sense -- perhaps in the form of a Congressional Budget Office score -- of where we might stand premium- and deductible-wise if all (or nearly all) Americans were actually covered?
None of this means we should ignore the cost side of the equation, and the specifics of the other components of the ACA -- deductibles, subsidies (including the specifics of any needed tax revenue), the makeup of the essential benefits, the burgeoning costs of long-term care, and more -- should all be on the table. Many of the proposals batted around for inclusion in the Better Care Reconcilation Act (BCRA), however, seemed counterproductive at best.
Take the idea of just deeming Medicaid to be too expensive, arbitrarily cutting funds in a draconian fashion, and leaving it to the states to pick up the pieces. Not only would this heartlessly threaten services for our most vulnerable, it would actually suggest there is no confidence in the potential success of tax reform proposals purported to lead to huge economic growth. After all, the simplest -- and probably most humane -- way to drastically reduce Medicaid spending is to make more Americans better off financially so they would no longer qualify. Why not address that “promise” first and leverage dynamic scoring to eliminate the need for such cuts?
As for Health Savings Accounts, which are only feasible for those with sufficient income to contribute (and probably benefit more the financial institutions that manage them), despite their being touted as some kind of a panacea regarding controlling costs, they are actually more likely to have the opposite effect. That is because they basically create first dollar coverage -- meaning they eliminate the need to worry about covering co-pays or other out-of-pocket costs once money is committed to the account -- for any marginal service that might not have been agreed to if the money instead came out of disposable income. The idea that these would facilitate payment of premiums is also misplaced. We could simply eliminate limits on deductibility and allow calculations of tax withholding to better take health care expenses into account as they occur.
Additionally, no one seems to even be considering the impact the displacement of some or all of those who entered the “Health Care and Social Assistance” sector of the Bureau of Labor and Statistics, which has seen a growth of approximately 2.43 million since the passage of the ACA. Loss of such jobs as 22 to 32 million people lose or forgo insurance depending on the version of the bill, will in turn result in new unemployment claims, reduced tax revenue, and diminish or eliminate the value of the significant education and training for those who invested to qualify to serve in, as well as lost supply chain costs of related medical products that would no longer be required for, an industry that represents about one-sixth of the nation's Gross Domestic Product (around $3.2 trillion).
Therefore, as I indicated in a letter written shortly after the U.S. Supreme Court upheld the ACA by validating its penalties as a form of tax in 2012, the way forward is still tweaking the law. In short, it’s time to start looking to those who work in the insurance sector, interact with enrollees, and have degrees on this sort of policy. Let’s give doctors and insurance experts a leading voice instead of politicians.
I am fond of making an example of the circumstances faced by characters in the film “Willy Wonka & the Chocolate Factory” where Gene Wilder as Wonka nonchalantly warns, “Stop. Don’t,” as they impulsively try unknown products with predictably unfortunate results.
So, before those in Congress are tempted find a way to revive the seven year effort and undermine legislation that -- if looked at objectively -- has a reasonable chance of working with the proper guidance, it might well recall Wonka’s warning to young Violet Beauregarde as she started chewing a piece of gum that ended up turning her into a giant blueberry: “Oh! I wouldn’t do that. I really wouldn’t.”
Dr. Kliger is a board-certified physician with 30 years of involvement in health policy and insurance administration. He is Executive Vice President of the California Academy of Eye Physicians and Surgeons.