Consumer Power Report #435
The widely accepted view among policymakers in Washington, DC is that even if President Barack Obama’s health care law is currently more unpopular than ever, by the time 2016 rolls around, it will be an immovable object, impossible to wholly repeal.
I have previously argued this is an incomplete picture of the politics of the issue, one that underestimates the Republican base’s dedication to repeal and the necessity of Republican candidates to respond to that desire.
You could assume the continued unpopularity of Obamacare would play to Republicans’ advantage within the battle over health care policy, and that’s certainly correct at the moment. The fact that a Democratic Senator touting his support for Obamacare (albeit without naming which law he voted for) is national news is an indication of that. Had the politics of the Affordable Care Act played out as most Democrats anticipated, every candidate up for re-election would be loudly trumpeting their support for it.
So in the short term, the law plays into the hands of Republican critics, who have plenty of easy targets and little need to propose a comprehensive reform. But what about what comes after 2016, assuming a Republican presidency but lacking 60 votes in the Senate? At that point, Obamacare’s political toxicity may actually hamper efforts to achieve pro-market reforms.
Consider Avik Roy’s recent proposal, Transcending Obamacare, possibly the most comprehensive proposal for health reform offered by a conservative. It is more ambitious than other reforms: Not content to focus merely on replacing Obamacare, Roy’s plan relies heavily on the expansion of the existing private insurance marketplace as a replacement for the Great Society, shifting individuals away from Medicare and Medicaid and the VA, and toward private insurers.
While Roy’s proposal is certainly more conservative than Obamacare, it is also very centrist. It relies on the Democratic acceptance of the exchange + subsidies model via the ACA as a method of eliminating the nation’s current single-payer systems. In the absence of Obamacare, it is the sort of proposal that ought to receive significant support from moderate Democrats – Joe Manchin, Mary Landrieu, and Mark Warner all ought to approve of an approach that retains community rating and guaranteed issue. And in an alternate universe where the reconciliation process was never deployed, you could see many Republicans viewing this as a positive and comprehensive reform of the existing health care entitlement system, increasing personal responsibility and rolling back government’s regulatory dominance of the marketplace.
Except this is not the universe we live in. Instead, we live in one where Obamacare has become synonymous with a number of steps health policy wonks on both sides of the aisle have long favored. So the question now is: How much will the unpopularity of this law spill over to prevent the deployment of similar steps as a method of reform?
The most critical area where this question remains unanswered is on the subject of exchanges. While Roy’s reform eliminates the most unpopular aspects of the law – the majority of its mandates and taxes – its reliance on an exchange could prove to be a politically difficult sale. Consider the most recent poll data from The Morning Consult: It found, “A majority of people are worried about employers moving them on to insurance exchanges, with Republicans reporting the highest level of concern at 72 percent.” And: “The majority of Republicans and Independents say they would consider looking for another job if they were shifted onto an exchange, at 62 percent and 52 percent respectively.”
For a Republican candidate, these numbers demonstrate the political challenge of proposing an exchange-based reform. If more people are receiving their coverage through their employers than was true before Obamacare’s passage, proposing these exchange reforms could prove politically challenging, even for Republicans who want to roll back regulations and transform them into more open marketplaces.
Roy’s assessment is based on an assumption that no Republican presidential candidate will be able to successfully campaign on taking insurance away from millions of Americans. But the challenge of proposing an alternative that takes on the Great Society using approaches the Republican base closely associates with Obamacare may prove to be just as difficult.
Most Americans and most conservatives do not understand that America’s health care system was not a free-market system prior to Obamacare. Ultimately, the reforms they support may be more modest in aim, as the safest place for many Republicans is to argue for rolling back the clock to before the ACA’s passage. If that’s where the Republicans end up, it would mark a major missed opportunity to address the pre-existing failures of government-run health care in America. But addressing those failures in an environment where Obamacare has sucked up the oxygen for almost eight years will require navigating a minefield of public opinion – a task challenging even for skilled politicians.
— Benjamin Domenech
IN THIS ISSUE:
The [Affordable Care Act] will play out in two phases. The first will take place between now and 2016. During that time, the price of health care plans will increase. We already saw this happen last year and will likely see the same again this summer and fall. Another event will also likely repeat itself. This is one the law’s opponents may prefer to ignore. The number of uninsured will decrease as people sign up for Medicaid or the Affordable Care Act’s health exchanges.
But this trend will come to a sudden end in 2017. That year, health insurance companies will lose their ability to artificially depress health care costs using taxpayer money. (Two ACA provisions, both of which expire in 2017, currently let insurers tap federal taxpayer funds for various reasons.)
This will send shock waves through the health care world.
We estimate that average annual costs for the cheapest individual plans – the “bronze” plans – may increase by 96 percent, from roughly $2,100 to nearly $4,200. Bronze family plans prices, meanwhile, may increase by nearly 50 percent. The average plan in this category could come close to $13,000 a year in total premiums. Almost every plan will see a price increase of some kind.
Consumers will learn these unpleasant truths in the fall of 2016 when they attempt to extend their policies.
No matter where you live, the effects will ripple across the entire industry. The dramatically higher prices will almost surely drive some consumers out of the exchanges. But they won’t have many places to turn. Many – perhaps most – won’t be eligible for Medicaid, while others won’t have jobs that offer replacement health insurance. People in this position will thus choose between health insurance they can’t afford and becoming uninsured. Not even the IRS penalty will convince everyone to bite the bullet.
In 2017, we estimate that the number of uninsured Americans may increase by nearly 20 percent, undoing the gains of the previous two years. In subsequent years, that number may continue to grow – some years by 1 percent, other years by a bit more. Within a decade, some 40 million Americans will once again lack health insurance.
SOURCE: Michael Ramlet, National Journal
When Congress passed the Affordable Care Act, it required health insurers, hospitals, device makers and pharmaceutical companies to share in the cost because they would get a windfall of new, paying customers. But with an $8 billion tax on insurers due Sept. 30 – the first time the new tax is being collected – the industry is getting help from an unlikely source: taxpayers.
States and the federal government will spend at least $700 million this year to pay the tax for their Medicaid health plans. The three dozen states that use Medicaid managed-care plans will give those insurers more money to cover the new expense. Many of those states – such as Florida, Louisiana and Tennessee – did not expand Medicaid as the law allows, and in the process turned down billions in new federal dollars.
Other insurers are getting some help paying the tax as well. Private insurers are passing the tax onto policyholders in the form of higher premiums. Medicare health plans are getting the tax covered by the federal government via higher reimbursement.
State Medicaid agencies say they have little choice but to pay the tax for health plans they hire to insure their poorest residents. That’s because the tax is part of the health plans’ costs of doing business. Federal law requires states to pay the companies adequate rates.
“This situation results in the federal government taxing itself and taxing state governments to fund the higher Medicaid managed care payments required to fund the ACA health insurer fee,” said a report by Medicaid Health Plans of America, a trade group.
SOURCE: Phil Galewitz, USA Today
In the 27 states that have accepted the Medicaid expansion, hospitals’ profits are climbing while more patients are getting access to care. Some large hospital chains say the Medicaid expansion alone has already added tens of millions of dollars to their bottom lines, and they’re expecting to make even more money as enrollment continues.
But in states that haven’t signed on to the expansion, hospitals are in a bind – they’re getting the bad parts of Obamacare without the good. All hospitals agreed to take payment cuts as part of the law, on the theory that an influx of new patients would make up for those losses. In states that haven’t expanded Medicaid, that influx isn’t happening.
The discrepancy between expansion and non-expansion states, outlined in a new report from PricewaterhouseCoopers, helps explain why hospitals are at the front lines of the debate over Medicaid. While states’ decisions about whether to expand are largely political, millions of dollars are also at stake for the health care industry.
Together, the states that haven’t accepted the Medicaid expansion are foregoing more than $420 billion in federal funding between now and 2014, according to PwC, while leaving more than 6 million people uninsured.
At the same time, hospital chains in those states will lose out not just on newly insured customers, but also on nearly $170 billion in enhanced Medicaid payments tied to the expansion.
Hospitals always knew they stood to make money as the Affordable Care Act expanded health insurance coverage, particularly through Medicaid. The fundamental reasons are simple enough: Hospitals have to care for everyone who comes in the door, so if fewer of those people are uninsured, hospitals get reimbursed for more of the care they provide.
But Medicaid has turned out to be even more profitable than most hospitals and health industry experts predicted, according to the PwC report.
Community Health Systems, which operates hospitals in 12 states that have accepted the Medicaid expansion, said the Affordable Care Act added $40 million to its earnings in the first half of this year. The company expects another $40 million in the second half, according to PwC.
LifePoint, which operates in 20 states, credits Obamacare with roughly $13 million in increased earnings.
The new revenues come from a drop in the number of uninsured patients.
The country’s three largest hospital chains have seen a nearly 50 percent drop in the number of patients who don’t have insurance, along with increases of as much as 32 percent in their Medicaid admissions, according to PwC.
SOURCE: Sam Baker, National Journal
On Nov. 15, the health-law marketplaces will reopen for business, selling coverage to millions of Americans. Last October’s debut of the online exchanges was widely seen as disastrous, with technical malfunctions early on preventing many consumers from buying plans or freezing them in confusing limbo.
Eventually, fixes and workarounds enabled about eight million people to select plans through the government marketplaces. But the delays meant many people didn’t sign up until late in the enrollment period, which wound down in April, leaving insurers little time to assess their new enrollees and figure out rates for next year.
Now, insurers are bracing for the sequel. So far, industry officials say, they are expecting hiccups, but likely not a crippling meltdown. Deborah Rice-Johnson, president of Highmark Inc.’s health plan, says she is more comfortable than she was at the same point a year ago. Still, “will there be a glitch here or there? Absolutely,” she says.
Insurers are hoping for even more consumers this time around, and an influx of healthy, younger enrollees, prodded by the rising penalty that some will face for lack of coverage next year. The Congressional Budget Office has projected enrollment for 2015 at 13 million. (Graphic: Faces of the Affordable Care Act)
Rates will be a mixed bag – based on figures for 31 states and the District of Columbia, the average premium increase would be 8%, according to PwC’s Health Research Institute. But the individual moves ranged from proposed 23% cuts for two plans to increases of more than 30% for a few other plans.
While patients today are undoubtedly paying more for medical care, less of that money is actually going to the people who provide the care. According to a 2002 article in the journal Academic Medicine, the return on educational investment for primary-care physicians, adjusted for differences in number of hours worked, is just under $6 per hour, as compared with $11 for lawyers. Some doctors are limiting their practices to patients who can pay out of pocket without insurance company discounting.
Other factors in our profession’s woes include a labyrinthine payer bureaucracy. U.S. doctors spend almost an hour on average each day, and $83,000 a year – four times their Canadian counterparts – dealing with the paperwork of insurance companies. Their office staffs spend more than seven hours a day. And don’t forget the fear of lawsuits; runaway malpractice-liability premiums; and finally the loss of professional autonomy that has led many physicians to view themselves as pawns in a battle between insurers and the government.
The growing discontent has serious consequences for patients. One is a looming shortage of doctors, especially in primary care, which has the lowest reimbursement of all the medical specialties and probably has the most dissatisfied practitioners. Try getting a timely appointment with your family doctor; in some parts of the country, it is next to impossible. Aging baby boomers are starting to require more care just as aging baby boomer physicians are getting ready to retire. The country is going to need new doctors, especially geriatricians and other primary care physicians, to care for these patients. But interest in primary care is at an all-time low.
Insurance plans with multiple cost tiers have become more prevalent in recent years, as prescription drug costs have increased over all. In 2000, nearly half of workers with private insurance had two price categories – typically, one for generics, the other for name-brand drugs, according to a survey by the Henry J. Kaiser Family Foundation and the Health Research & Educational Trust. An additional 22 percent of covered workers paid the same price for all drugs.
By 2013, though, more than eight in 10 workers had private insurance plans with three or more tiers of drug prices.
But my co-payments may not be the same as yours. Each insurance company – and employer – sets its own list of approved drugs and out-of-pocket costs. Some are fixed amounts and others are percentages of a drug’s cost, sometimes called coinsurance. Medicare prescription drug plans also have their own rules.
Another change is that generic drugs aren’t as cheap as they used to be. An article in The New York Times in July detailed how the cost of some generic drugs had doubled recently, as suppliers left the market and reduced competition. Other reports have found similar problems.
Some insurance companies, including mine, have increased the share that consumers pay for more expensive generic drugs, placing them on tiers once reserved for name-brand drugs. Your health plan should have a list on its website.
SOURCE: Charles Ornstein, ProPublica