Recently, a number of insurance companies have made very public displays of pulling out of “Obamacare”. Technically, they are withdrawing from some of the regional exchanges set up by the Affordable Healthcare Act to serve as clearinghouses for consumers looking to buy health insurance. Most recently, Aetna announced its withdrawal, although it shortly became apparent that Aetna’s decision was tied to its dismay over the Obama Administration’s rejection of Aetna’s proposed buyout of Humana. However, as noted by The New Yorker’s James Surowiecki, Aetna’s decision reflects an awkward reality: the jerry-rigged, politically compromised nature of Obamacare has undermined the effectiveness of Obamacare.
It’s not that Obamacare has failed. The main goal of the law was to reduce the number of uninsured people, and twenty million more people are covered today because of it. It’s hard to call that a failure. So far, that medical reform package has accomplished a lot, including:
- It has guaranteed access to insurance for people with preëxisting conditions,
- Eliminated caps on how much insurance companies will spend.
- Established a number of important consumer protections for healthcare insurance buyers,
- It has brought the percentage of Americans under 65 without health insurance to its lowest point in five decades
- National health care spending has grown at a historically low pace,
- It created clear, understandable purchasing exchanges in which consumers can compare what they are buying.
Still, as noted by Surowiecki, we’re a long way from the future that Barack Obama envisaged when, in 2009, addressing the American Medical Association, he called for “comprehensive reform that covers everyone” and provides “affordable health insurance to every single American.” Some thirty million Americans remain uninsured. Participants in the A.C.A. marketplaces are less numerous, and sicker, than anticipated: 8.3 million fewer people enrolled through the exchanges this year than the Congressional Budget Office had projected. The Kaiser Foundation released a study in May 2016 estimating significant challenges for rural areas; it estimated that between 20-25% of U.S. counties may have only one insurer offering coverage in 2017; there’s already a county in Arizona with no Obamacare insurer at all. And the insurers that remain in these markets tend to offer an increasingly narrow network of health-care providers. There’s little dispute over the fact that the law is far from perfect. Tens of millions of Americans remain without health coverage and the insurance policies sold on the exchange marketplaces are still unaffordable to too many people, even with subsidies. Shopping for health insurance continues to be a headache, especially in an era of high deductibles and narrow networks of providers. In fact, it is so obvious that Obama, himself, has proposed a number of fixes: in 2015, Obama signed off on a bunch of small changes to Obamacare and reluctantly agreed to delay some key provisions last year. But Congress won’t let him implement many of these small needed fixes, let alone some of the larger ones!
According to the Los Angeles Times in an October 2016 report, Obamacare has worked in California. The state has recorded some of the nation’s most dramatic gains in health coverage since 2013 while building a competitive insurance marketplace that offers consumers enhanced protections from high medical bills.Californians, unlike people in many states, have many insurance choices. That means that even with rising premiums, the vast majority of consumers should be able to find a plan that costs them, at most, 5% more than they are paying this year. The Times reports that between 2013 and 2015, the share of working-age adults in California without coverage plummeted from 23.7% to 11.1%, according to federal data. Only three states saw larger declines over the same period.The new coverage has dramatically improved patients’ access to medical care and reduced financial strains, other research indicates. More than three-quarters of newly insured Californians said their health needs are now being met,according to a recent survey by the nonprofit Kaiser Family Foundation.
However, Obamacare was a first step…..not a final plan. As noted in a 2017 comprehensive discussion about health care reform in The Observer, Obamacare was designed to make emergency rooms operate better, provide health insurance to those that need it, and to generally keep citizens alive. The same way that police provide services to protect people from crime, the health care system should be designed to save people from poor health. Obamacare mandated that everyone have insurance or pay a special tax. It effectively created a larger risk pool. For insurers to cover sick people, they needed to have healthy people in the same pool. Obamacare’s central idea is that combining young, healthy people with poorer, sicker people who didn’t have private health insurance would create a balanced pool that runs at a breakeven. That part worked; millions of people enrolled in Obamacare. The number of people insured by Obamacare grew and grew, but not enough healthy people joined, making it a high risk pool and money loser for insurers. Many healthy people either opted out and paid the tax or they used a private, non-Obamacare plan. Wealthier people tended to have employers that paid for better insurance, and poorer people tended to use Obamacare. Poorer people also tend to have more ailments, mostly due to chronic issues that were previously untreated or because of lack of access to quality food. Typically, rich people have better access to doctors and better access to better food choices. Thus the dilemma — if healthy and wealthy people opt out, then the poor or ill will pay more.
A lot can be done to correct the real flaws in the ACA, and Timothy S. Jost, emeritus professor at Washington and Lee law school, and Harold Pollack of the University of Chicago have provided an extensive guide, published in late 2015 by the Century Foundation. The most glaring defect in the ACA’s subsidy structure is the “family glitch”. Under the ACA, a worker is ineligible for ACA subsidies if he or she is offered affordable health coverage by an employer. Whether because of a drafting error or inattentive rulemaking by the IRS, that ineligibility extends to all members of the worker’s family even if affordable family coverage isn’t obtainable from the employer. The Rand Corp. has estimated that the change would add as many as 4.7 million Americans to the rolls of the subsidized insured at a cost of up to $8.9 billion, or about two-tenths of one percent of the federal budget.
Lack of competition is a recipe for high premiums or low benefits (or both), further deterring younger, healthier people from buying policies. Which means that the risk pool gets still older and sicker, which means that more insurance companies lose money and leave the market, which means that competition is reduced even further, which means: see above. The U.S. could well end up with a two-tier insurance market, in which people lucky enough to get insurance through their employers will get much better coverage and wider options than those on the individual market, even when both groups are paying the same amount in premiums.
Some of the subsidies are also problematic. According to Jost and Pollack, ticker shock in the individual health insurance market has shifted from premiums to deductibles, co-pays and out-of-pocket limit. These still leave too many working-class families with heavy medical bills, and discourage some from signing up for insurance at all, even given the existing subsidies. That’s especially true of families earning over the eligibility ceiling for tax subsidies, which is 400% of the federal poverty line ($97,000 for a family of four). Jost and Pollack endorse increasing subsidies for families below 400% of the FPL, and providing those over that line with subsidies that would bring down coverage costs to a given percentage of household income — say 8.5%. One option is to give those families the option of fixed-dollar tax credits that would improve insurance affordability while still leaving them responsible for most of the costs.
Obamacare is being hobbled by the political compromises made to get it passed. The program’s basic principles were the right ones: everyone would be able to get insurance, regardless of preëxisting conditions, and everyone would pay the same price for a given policy, with upward adjustments made only for older people and smokers. In short, insurance companies were prohibited from managing risk by charging healthy, low-risk people less than frailer, high-risk people. Since managing risk is typically key to how insurers make money, it would have made sense to leave them out and just enroll everyone in a government-run program like Medicare. Politics, of course, ruled that out. Shoring up the private-side approach would require penalties stiff enough to get young, healthy Americans to buy health insurance, but politics ruled that out as well.
Conservatives point to Obamacare’s marketplace woes as evidence that government should stop mucking around with health insurance. In fact, government hasn’t mucked around enough: if we want to make universal health insurance a reality, the government needs to do more, not less. That doesn’t require scrapping the current system: the Netherlands and Switzerland both demonstrate that you can get universal coverage through private insurers. But their examples also show that to do so we’d need to make it much harder to avoid buying insurance, and we’d need to expand subsidies to consumers.
One of the most important “fixes” would be to implement the public option, which Obama himself called for in that 2009 speech: a federal program, modelled on Medicare, open to anyone on the individual market. The public option would guarantee that there was always at least one good choice available in the marketplace, and would provide competition for private insurers. If it used the government’s bargaining power to hold down costs and expand access, it could offer good benefits at a low enough price to attract younger, healthier patients. The original public option, which resembled Medicare for all, was killed during the ACA’s legislative phase by opposition from the drug industry, hospitals and physician groups, and medical device makers who feared having to negotiate prices with Medicare. Jost and Pollack propose a demonstration program offering Medicare to Americans in the near-retirement cohort — say ages 60 to 65, after which they’re eligible for Medicare anyway. This group tends to have high medical needs, pay the highest insurance rates under the ACA’s limited age-based cost ratings and often earn too much to be eligible for subsidies. But they might benefit the most from early admission to Medicare. A few other thoughtful reforms suggested by Hecker & Sather in their Observer op-ed:
1. Tier the system and align incentives: Everyone should be mandated to have some sort of coverage. The only way to make the system work is to balance care. People can qualify for free health care at the base level. TrumpCares will be like Medicare but with a few edits:
- TrumpCares: You can go to select doctors, clinics and hospitals that participate. Patients will be seen on an urgency based system. This is the key to the health system in the UK and Canada. This ensures patients receive service and creates an incentive to upgrade to a private plan. You will still be seen and get care, it just will be from a limited selection of doctors and times. Very sick people and poorer folks will be covered by the government, funded by insurance premium taxes, leaving the better risks to the insurance companies, who will then be able to afford to cover everyone else at reasonable rates.
- Private Plans: If you can afford it, you can upgrade your care to a private plan. The government would recommend a Health Savings Account (HSA) based plan with a high deductible if you are healthy. This allows for part of your premium to go into an account that accrues interest, a rainy day fund which you keep for health expenses like covering your deductible when you have an issue in the future. People can always upgrade to a better private insurance plan if they want to spend more money.
- Deductible Financing: If someone has an HSA plan and can’t afford the deductible, the government should offer government sponsored financing programs so people can fund their deductibles. This would work similar to student loans with a private issuer and a government guarantee.
2. Strip out costs from Medicare and lower the cost of drugs.
- Ban all pharmaceutical ads. We banned cigarette ads, and we can ban drug ads, too. The impact of all of these drugs ads are people rushing to the doctor asking for meds. Americans are more medicated than any other population on earth, yet our lifespan is decreasing. Banning pharma ads will do two things. First, it will get people to stop asking their doctor for more medicines. Secondly, it will get people to stop asking for brand name meds, which are more expensive than generic versions. This will also remove the effect on the P&L for the pharmaceutical companies. The prescription drug industry spends more than $5 billion annually on advertising. Removing advertising could cut health care spending by $5 billion or create $5 billion in new healthcare research—maybe even into fixes that don’t require a pill.
- Require federal price negotiations for drugs. Require drug prices to be negotiated. Medicare is one of the largest payers in the world for drugs. It should always have the lowest price. Mandate the government to go with generic options when available.
3. Make it less expensive to practice medicine and reform malpractice.
- Reform lawsuits against doctors. One of the most expensive parts of running a doctors office is malpractice insurance. This is because it is so easy—and lucrative—to sue a doctor. Being a doctor is a noble profession, but doctors are human and sometimes make mistakes. Make it more difficult to sue a doctor by requiring there to be a pattern of gross negligence to sue in most situations. This creates an incentive to only sue in the worst situations and will lower the cost of care.
4. Increase the supply of doctors.
- Make it less expensive to go into medicine. We need more doctors. Make it easier to start medical school by providing low cost loans to entrepreneurs who want to start medical schools. Then, make medical school less expensive by offering a rebate if the doctor works in a TrumpCares accepted clinic for five years after graduating—a special residency of sorts. This way, doctors will be able to give back to the community at a lower cost and get free medical school, incentivizing more people to become doctors.
- Open more clinics. Provide low cost loans to entrepreneurs to open TrumpCares clinics in neighborhoods that need more clinics that accept medicare. The more access, the healthier people will be. Figure out the right radio of people to health care access by hiring someone from Starbucks or McDonalds to figure out the optimum places to place clinics.
5. Inspire Wellness. The best way to lower the cost of health care is to have healthier people. There is no such thing as a great health care system for a population of unhealthy people. We need to create policies to encourage people to be healthier.
- Wellness Clinics: We should encourage entrepreneurs to open wellness clinics by providing Medicare billing payments for wellness services and low cost loans. These clinics would focus on preventative care, provide annual check-ups, STI screening and wellness workshops around nutrition, weight-loss and fitness. They would be staffed by registered nurses whose job it is to perform routine screens and check-ups and provide low cost training on how to get into the best shape. Nurses can provide a majority of daily services, allowing doctors to focus on ill patients. Invite nutritionists and fitness professionals to teach workshops.
- Launch a WellBot. The government should partner with an artificial intelligence system such as Watson to help people get wellness advice online or via SMS by asking questions to a chatbot. There can also be an in person Wellbot that can do initial screening of people at the clinics. The goal would be to lower the cost of health care by using technology to provide screening and wellness content.
- Create digital health, wellness and fitness content. Create videos and articles about health and fitness. Give away vouchers where the government will cover up to 80 percent of the cost of workout videos and low cost digital nutrition plans. Encourage everyone to sign-up for a nutrition plan and a digital fitness program. We’ve seen benefits from tobacco prevention campaigns. This type of social norming can work, and may be cost neutral when the avoidance of future costs is factored in.
- Digital Support Groups. Sponsor technology to make it easy for people to create and join digital SMS support groups where people can go to get daily positive encouragement for their health and wellness.
- Fresh Food Programs. Mandate that any meal paid for directly or indirectly by the government be fresh food. This includes school and hospital lunches. If the government is giving away a meal, it should be good for the person—especially children, the elderly and the ill.
6. Incentivize the creation of new technologies. The government should encourage entrepreneurs to start businesses and develop technologies in health and wellness. The government should sponsor accelerators and provide student grants to build products for health and wellness. Even if these grant companies don’t succeed, it will inspire people to focus on health and wellness. The government can do this by creating tax incentives for companies that invest. The government should also sponsor prizes for people who achieve breakthroughs in health and wellness technologies. Enable innovation fast lanes for new technologies to get approved by the regulatory bodies fast and efficiently for trials.
These are, on the whole, responsible, well-targeted fixes to flaws that become manifest. Some, including a fix to the family glitch, can be managed by administrative order. Others require action by Congress. Obamacare’s critics in Washington have continually claimed that they’re in favor of better health and healthcare for all Americans, but don’t like the way the ACA delivered it. Here’s their chance to take a few steps showing a genuine commitment.
There are solid arguments for both of these models. Either would work, if there were a shift in the political mood and it were given a shot. Even if nothing is done, Obamacare will continue to limp along, probably turning into something akin to Medicaid. But the departure of big insurers like Aetna has made it clear that, if we don’t do more to help cover people in the individual market, the program will never make good on its original promise of truly comprehensive reform.
In the meantime, if you conclude that it is better to go uninsured, you may be able to avoid Obamacare’s uninsured penalties: if the cost of the lowest-level plan exceeds 8.05 percent of a person’s income, you will not be penalized for going without coverage.