The CBO Outlines How Obamacare Is Hurting Workers

If Lee Mullins lived in Pittsburgh, he could buy mid-level health coverage for his family for $940 a month. If he lived in Beverly Hills, he would pay $1,405. But Mullins, who builds custom swimming pools, lives in southwest Georgia. Here, a similar health plan for his family of four costs $2,654 a month.

This largely agrarian pocket of Georgia, where peanuts and pecans are major crops and hunters bag alligators up to 10 feet long, is one of the most expensive places in the nation to buy health insurance through the new online marketplaces created by the federal health law. The only places with higher premiums are the Colorado mountain resort areas around Aspen and Vail, a high-cost-of-living area unlike Georgia.

“We’re not real happy with the way things are going in our neck of the woods,” said David Hardin, Mullins’s insurance broker.

All the dynamics that drive up health costs have coalesced here in southwestern Georgia, pushing up premiums. Expensive chronic conditions such as obesity and cancer are common among the quarter million people in this region. One hospital system dominates the area, leaving little competition. Only one insurer is offering policies in the online marketplace, and many physicians are not participating, limiting consumer choice.

Until these elements are brought under control, it will be challenging for the Affordable Care Act to fully live up to its name, not just here but in other parts of the country where premiums are high. Other expensive places include rural Nevada, parts of Wisconsin, most of Wyoming, southeastern Mississippi, southwestern Connecticut and Alaska.

In these places, government subsidies are shielding people with low and moderate incomes from the full cost of the premiums. Randy Gray, a flower shop owner in Albany, is paying just $32 a month, with taxpayers picking up the remaining $805.

But for those earning too much to qualify for federal financial help, the premiums can be overwhelming. A 60-year-old making $47,000 in Albany would have to pay a quarter of her income for the least expensive mid-level “silver” policy, the level most consumers are buying.

Even some people who qualify for federal assistance, such as Stacie Brown, owner of a pottery shop, are balking. The cheapest “bronze” plan for Brown, her husband and son would cost the family $300 a month but not begin paying medical bills until they exceeded the $6,300 individual deductible. The cheapest silver plan would cost $508 a month but not start paying until a $3,000 individual deductible was met. Her son’s pediatrician was not in any of the networks, and that was the one medical service she felt sure her family would use.

Brown ultimately bought a $256-a-month Assurant Health plan for her son, sold outside the marketplace, which covers his pediatrician and unlimited office visits. She and her husband have decided to forgo coverage for themselves, even though they may face a tax penalty of $700.

“I can’t afford the affordable health care,” she said. “I don’t know anyone in this area who can afford it, and I do pretty well in life.”

Start with the assumption that just about everyone wants health insurance. You can easily find polls that support this proposition. ObamaCare architects assumed that if you offered health insurance with subsidies for those with relatively modest incomes, those currently uninsured would flock to apply. So far that seems not to have happened. A McKinsey & Co. survey of those thought to be eligible for ObamaCare health-care exchanges found that only 11% of those who bought new coverage between November 2013 and January 2014 were previously uninsured.

Two small insurance companies told Wall Street Journal reporters for a Jan. 17 article that only 25% and 35% of those purchasing their policies were previously uninsured. Larger insurers don’t yet have numbers, but it seems that far fewer of the uninsured than expected are signing up. The latest Kaiser Family Foundation poll reported that only 24% of uninsured under 65 had a favorable view of ObamaCare while 47% had an unfavorable view.

One reason may be that ObamaCare requires policies to cover not just the expenses of catastrophic illness – the sort of thing auto and home insurance policies cover – but routine medical expenses and procedures that many individuals will not need. To that extent ObamaCare policies are not insurance but prepayment of routine expenses. Apparently many of the uninsured aren’t interested in prepaying for health insurance any more than they are interested in prepaying their credit cards.

A second assumption of ObamaCare’s architects is that health insurance will make people healthier. That assumption has been tested in Oregon. In 2008 the state government, with limited Medicaid funds, held a lottery to determine which people who were eligible for Medicaid would be enrolled. The result was an unusual randomized control trial of similarly motivated people with and without insurance. The results, reported in the May 2013 New England Journal of Medicine, were that after two years there was no significant difference between insured and uninsured in blood-sugar level, blood pressure and cholesterol levels – although those with Medicaid saved money and were less likely to suffer depression.

A third assumption is that those with health insurance are more likely to seek care from physicians and less likely to go to emergency rooms. But the Oregon health study showed that those with Medicaid were 40% more likely to go to emergency rooms than those without insurance.

The idea seemed transformative. The Affordable Care Act would fund a new research outfit evocatively named the Innovation Center to discover how to most effectively deliver health care, with $10 billion to spend over a decade.

But now that the center has gotten started, many researchers and economists are disturbed that it is not using randomized clinical trials, the rigorous method that is widely considered the gold standard in medical and social science research. Such trials have long been required to prove the efficacy of medicines, and similarly designed studies have guided efforts to reform welfare-to-work, education and criminal justice programs.

But they have rarely been used to guide health care policy – and experts say the center is now squandering a crucial opportunity to develop the evidence needed to retool the nation’s troubled health care system in a period of rapid and fundamental change.

“It’s the greatest irony,” said Gordon Berlin, president of MDRC, a nonprofit organization whose studies have influenced American policies on welfare, job training and education. In health care, of all areas, he said, in which every group that evaluates medical evidence ranks such studies as the most reliable by far, they have rarely been used.

“The results,” Mr. Berlin said, “speak volumes about the path not taken – an extraordinary body of evidence has been built to inform welfare policy and practice while we have only just begun the process of learning what works in health policy.”

The studies that are regarded as the most reliable randomly assign people or institutions to participate in a program or to go on as usual, and then compare outcomes for the two groups to see if the intervention had an effect.

Instead, the Innovation Center has so far mostly undertaken demonstration projects; about 40 of them are now underway. Those projects test an idea, like a new payment system that might encourage better medical care – with all of a study’s participants, and then rely on mathematical modeling to judge the results.

Dr. Patrick Conway, the director of the center, defended its reliance on demonstration projects, saying they allowed researchers to evaluate programs in the real world and regularly adapt them. “Does it look like it is working?” he asked. “If it does not look like it is working, we can stop.”

He said that the center has had trouble getting such studies to yield solid results because those in the control groups – who do not get the innovation being tested – tend to drop out.

Drug costs are rising, but in the opaque world of health care pricing, figuring out what’s driving the increase has become difficult – if not impossible.

Nonetheless, pharmacists want Congress to try. Vexed by triple- or quadruple-digit percent increases in drug costs, the National Community Pharmacists Association [NCPA] is asking lawmakers to hold a hearing to find out why.

The problem, the group says, is that pharmacists are getting gouged. Pharmacists trying to get their hands on generic drugs such as Pravastatin, a drug for patients with high cholesterol, or the antibiotic Doxycycline faced price spikes upwards of 1,000 percent in 2013, according to a survey by the group.

Some 77 percent of pharmacists surveyed by the association said in the last six months of 2013 they experienced 26 or more instances of a large upswing in the acquisition price of a generic drug.

An additional 84 percent said the price fluctuations impeded their ability to provide care and remain in business, as some community pharmacies could not fill prescriptions that would result in losses and some patients declined medication that would have emptied their wallets.

The findings are consistent with reports nationwide that generic-drug prices are experiencing bank-breaking price increases. Health care and pharmaceutical consulting firm Pembroke Consulting, for instance, found that within the last year, more than a dozen drugs hit prices 10 times their standard rate. NCPA wants Congress to hold a hearing to find out what’s driving the price points and whether anything can be done by the feds to stop the trend.