Since January 2017, many of us have spent a lot of time – often it felt like too much time – watching a string of proposals and votes in Washington regarding healthcare. It has been a tiring and confusing exercise.
I propose that there are two really important questions:
- What U.S. citizens are going to have insurance coverage?
- Is the Federal government going to continue its previous aggressive push towards payments based upon cost and quality or not?
In this piece, I will write about the first issue – who is going to have health insurance?
The Republicans and Trump all ran on the promise to repeal and replace the Accountable Care Act (ACA, also known as Obamacare). They promised that their replacement would be a better health plan. Better meant more people could get access to health insurance at a lesser price.
Their problem was that all the replacement plans that they put forward would have reduced access to health insurance by tens of millions of Americans, raised prices even more and re-introduced the “pre-existing condition” impediment, even if indirectly. Not surprisingly, this wasn’t very popular among the electorate and three votes with three different plans failed in the Senate due to Republican defections and Democratic opposition.
As of this writing in December 2017, it looks as though the ACA is going to be killed by a thousand cuts, not by one fatal stab wound.
WHOSE OX GETS GORED?
Most health systems and, therefore, health system affiliated medical groups have exposure to uninsured or underinsured patients. The degree often varies by the zip codes that they serve. Some are very dedicated to the less affluent, others less so.
Many independent groups have less exposure to un- or underinsured patients because, as for-profits, they don’t have to take all comers. There are some independent groups who do serve more uninsured, but such groups are the minority. So this issue is largely about health system affiliated medical groups.
In the aftermath of 2008 financial crisis, there was many as 50 million Americans without health insurance. That was 16.7% of the total US population. Many of the uninsured were the working poor – folks who earn minimum wage up to about $20.00 per hour or more and who did not get health benefits as a part of their employment.
Obamacare expanded Medicaid for anyone whose income was ≤133% of the federal poverty level. Nineteen states did not expand Medicaid so this benefit was unequally applied. For those with incomes from 134% to 400% of federal poverty, there were exchange based products where the premiums were directly subsidized by the government.
All of the proposals that were made in the recent rounds of House and Senate legislation would have very substantially reduced the number of Americans who have insurance or Medicaid.
If a major illness or injury occurred, these folks would come to the health system without insurance and, for the most part, be unable to pay a big bill. Thus, the cost of their care was a loss to the system. Many health systems had an uptick in profitability back in 2013 and 2014 when the ACA monies started flowing into their revenues. Even if Medicaid revenues were low, they were better than zero.
It is important to recall that health systems and independent groups are under a lot of financial distress at this time. When the number of uninsured in our communities shoots back up, it could be devastating to a lot of health systems and some independent groups.
DEATH BY ATTRITION
Having been unable to kill the ACA, the Trump administration and the Republicans have set out to destabilize it. There is every reason to believe that they can inflict death. The real question now is how long that death will take.
First, the health insurance companies cannot tolerate unknowns. Their business model – and I am no fan of their business model – is based upon a lot of carefully measured risks which are then hedged by assuring that revenues will outpace the risks. They have legions of actuaries to help them define and measure their risk. The degree to which they are conservative about risk cannot be overestimated.
The insurers clearly signaled that Trump’s talk about killing the ACA while they were putting together their plans for 2018 cause a huge spike in their sense of risk. Further, the threats to stop paying the subsidies for Exchange enrollees with incomes of 134% - 400% of the poverty level (i.e. those getting a federal subsidy) caused so much consternation that several insurers quit many markets and those who remained raised their premium prices another 20%. Then, the threat to end the mandate – which was just enacted in the Tax Bill – caused them to raise rates even more. One can count on another substantial increase in 2019 due to this revision.
Keep in mind that, in many parts of the country, employer sponsored family health benefits cost between $15,000 and $25,000 and, even at those prices, many have significant deductibles and other employee costs. Healthcare is very expensive whether you buy from an exchange or your employer pays for you. Thus, the idea of bringing down health insurance prices is not limited to the Exchanges – everyone is struggling to pay their health insurance premium!
Thus, together with the inflationary cost trends of healthcare, the increase in Exchange rates including the extra costs added by Trump and Republican actions, will cause the price of Exchange premiums to rise very rapidly. Enrollments will further decline largely due to affordability, those who are enrolled will more frequently be the sickest and most expensive and the death spiral will continue into the ground.
The question is how long all this will play out. I doubt very long.