Since Obamacare turns eight on yesterday I thought that I would spend some more time on the problems with Obamacare. Sally Pipes of Fox News had a nice review. Consider that when Obamacare turns eight on Friday, the law will have exactly one impressive accomplishment to its name: surviving as long as it has.
Many people now believe that Americans are worse off than we were before ObamaCare was enacted. Health insurance premiums and deductibles are soaring, and consumers face a shrinking number of insurance options. More Americans than ever are now covered by Medicaid – a costly and unsustainable entitlement that, in many cases, is worse for patients’ health than going without insurance altogether. And U.S. life expectancy has dropped for two consecutive years for the first time in over half a century. But, and I have to say this, more people have healthcare insurance coverage.
ObamaCare bears much of the blame for this disastrous state of affairs.
The Affordable Care Act’s most glaring shortcoming has been a failure to make good on its eponymous promise – affordability. President Obama assured Americans in 2010 that the law’s insurance exchanges would create “a competitive marketplace” where Americans could “purchase affordable, quality insurance.”
On the HealthCare.gov marketplace, however, average premiums in 2017 were 25 percent higher than in 2016 – and more than double average individual-market premiums in 2013. Premiums have continued to soar this year – midlevel Silver Plan premiums increased by an average of 34 percent in 2018, relative to 2017.
Out-of-pocket costs have skyrocketed as well. The average deductible for an individual Silver Plan this year was nearly $4,000.
The combination of high premiums and high deductibles has put health care out of reach for millions. In a June survey, one-quarter of Americans said that they or someone in their family had gone without needed medical care because of cost.
Nor have the exchanges been especially competitive. ObamaCare’s mandates have cost insurers hundreds of millions of dollars. Insurers have responded by fleeing the marketplaces in droves. Over half of U.S. counties currently have only one provider selling exchange coverage.
ObamaCare’s defenders have long cited the drop in the uninsured rate as proof of the law’s success, but that argument no longer holds water. The number of uninsured Americans actually increased by 3.2 million last year, in part because ObamaCare has made insurance so expensive.
The law has also managed to funnel 15 million new patients into Medicaid – the health insurance entitlement for low-income Americans. But it’s far from clear whether that’s a blessing or a curse for new enrollees.
Medicaid beneficiaries are no healthier than uninsured people. One recent study compared uninsured Oregon patients with a group that was randomly selected to receive Medicaid. After two years, researchers found “no significant improvements in measured physical health outcomes” among Medicaid patients compared to their uninsured counterparts.
Worse, the Medicaid expansion has exacerbated our nation’s deadly opioid epidemic – at least according to a recent report from the Senate Homeland Security Committee. The expansion made prescription painkillers cheaper and more widely available. People who were eager to abuse these medications – or sell them illegally on the black market – quickly capitalized on this new government-subsidized drug supply.
Medicaid fraud cases related to opioids have increased by 55 percent since ObamaCare’s expansion of the program. Eighty percent of fraud cases have been filed in expansion states. Even more troubling, overdose death rates are rising nearly twice as fast in Medicaid expansion states as in non-expansion states.
Since ObamaCare took effect, insurance coverage has become more expensive, out-of-pocket costs are more onerous, insurance choices have dwindled and Americans are dying sooner. Let’s hope the law’s eighth birthday is its last.
The Glaring Question is Why Did the Uninsured Rate See Its Biggest Increase Since 2008?
One particular type of insurance buyer had the most substantial drop in coverage.
Christy Bieber discussed that question. From the last quarter of 2016 to the last quarter of 2017, there was a 1.3% increase in the uninsured rate, according to Gallup. This 1.3% increase means 3.2 million Americans became uninsured in 2017. It’s the biggest year-to-year increase in the uninsured rate since 2008, which was before the passage of Obamacare.
Why did so many more Americans become uninsured? There are a lot of reasons, and we’ll take a look at some of them here.
The individual market saw the biggest change
First and foremost, it’s clear where the increase in the uninsured population came from: the individual insurance market — the people who buy private policies on the Obamacare exchange or directly through insurers. In the final quarter of 2016, a total of 21.3% of Americans indicated they purchased insurance coverage themselves in the private marketplace. By the last quarter of 2017, this number had fallen to 20.3%, a full percentage-point decline.
According to Gallup, this is a direct reversal of a multi-year trend. In 2013, Obamacare’s mandate — the penalty for not buying insurance — went into effect. Then, from 2013 to 2016, there was a 3.7% increase in Americans buying insurance on the private market.
But from 2016 to 2017, the number of Americans buying these policies went down for the first time since the mandate became enforceable, even as other sources of health insurance coverage such as Medicare, Medicaid, military insurance, and union-provided insurance remained steady. The number of policyholders covered by an employer also declined from 2016 to 2017, but the decline was just .6 percent.
Let’s look at what happened in the private marketplace that caused fewer consumers to take part.
Policy premiums rose — driving out the young and healthy
Gallup cites rising premiums as one of the likely reasons for the decline in the number of Americans buying private policies. When insurance coverage becomes more expensive, fewer people buy it. And insurance became more expensive in 2017.
Kaiser Family Foundation indicated premium increases on the ACA marketplace would be greater in 2017 compared with prior years, thanks, both to insurers adjusting for past losses and the phasing out of a reinsurance program in place from 2013 to 2016. The reinsurance program also left insurers with larger-than-expected losses when it failed to provide promised payments to insurers with a disproportionate share of costly claims.
Changes in insurer participation in the individual market also drove costs upward and left insurance buyers in the private marketplace with fewer choices. While 85% of insurance buyers had a choice of three or more insurers in 2016, just 58% had that same level of choice in 2017.
Unfortunately, when costs go up, the young and healthy are the first to drop out — and Gallup data shows this occurred. In 2017, the uninsured rate among Americans between the ages of 18 and 25 rose 2%. If this trend continues, an insurance death spiral is a real risk.
Americans were confused about whether the insurance mandate will be enforced
The insurance mandate was a key component of Obamacare before it was repealed as part of the 2017 tax reform bill. The sharp uptick in Americans buying coverage in the individual marketplace when the mandate went into effect showcases the importance of this mandate in driving the purchase of insurance. The Congressional Budget Office also estimated the repeal of the mandate beginning in 2019 would result in 4 million people fewer people obtaining coverage during the course of the 2019 year alone.
While the mandate wasn’t actually repealed until December of 2017 and it’s still in effect until 2019 even after repeal, many Americans were confused in 2017 about whether the mandate still applied. More than half of Americans responding to an October 2017 poll either didn’t know whether Obamacare was still in effect or thought it had been totally or partially repealed. Even among those who knew the law and mandate were still in place, it was an open question whether Trump would actually enforce it.
Given that there was so much uncertainty about whether the requirement to purchase health insurance would survive, it’s no surprise that significantly fewer people bought plans for this year.
There was way less advertising and outreach for Obamacare
The Obama administration spent more than $100 million advertising open enrollment in 2016 and partnered with outreach groups to target populations with high uninsured rates. These efforts were credited with helping to secure insurance coverage for more than 4 million Latinos. As a result, Latinos experienced the most substantial drop in the uninsured population of any demographic group.
The Trump administration essentially ended outreach efforts and dropped the advertising budget down to $10 million. The result: Hispanics saw a 2.2% increase in the uninsured population in 2017, and black Americans saw a 2.3% increase. Lower-income Americans saw a 2% increase.
By comparison, middle-income Americans had a 1.4% increase in uninsured rates, and high-income Americans saw just a .8% increase.
What happens now?
Whether the uninsured rate continues to rise in 2018 will depend upon what, if anything, is done to bring premiums down. While there’s a bipartisan effort to stabilize insurance premiums, a dispute over abortion policy may make passage of legislation impossible. And with some prominent Republicans still hoping to move forward with Obamacare repeal — which has little chance of passage — little likely will be done to stabilize Obamacare in the short term.
However, the November 2018 election could potentially change the calculation, depending upon which party ultimately winds up in control of the House and Senate.
The only thing that’s certain is that fights over Obamacare may continue. Insurers tend to dislike uncertainty, and those who buy individual coverage probably will be the ones who’ll suffer due to a continued lack of solutions. If fewer of those insurance buyers decide to get coverage, the uninsured rate will continue to rise.
What Trump doesn’t get about Obamacare and health insurers’ profits!
Tami Luhby wrote that the Trump administration has once again pointed to health insurers’ robust stock market performance as proof that they are profiting from Obamacare.
The White House’s Council of Economic Advisers issued a report this week declaring that insurers have made a lot of money since the Affordable Care Act took effect, primarily thanks to large premium increases and generous federal funding of premium subsidies and Medicaid expansion. The release coincided with an unsuccessful attempt in the Senate to restore funding for the second set of Obamacare subsidies — which helped to reduce low-income enrollees’ deductibles and co-pays — that President Donald Trump eliminated last fall.
“Despite an initial rough patch in the ACA marketplaces, the ACA Medicaid coverage expansion and subsidies to insurers have resulted in a large increase in health insurer profits,” the four-page report said.
The council’s main argument: That the stock prices of health insurance companies rose by 272% since the health reform law’s implementation in January 2014 — more than double the gain of the S&P 500 over that period.
This is a flawed rationale that the Trump administration has used before.
Despite Trump’s attacks, Obamacare sign-ups dip only slightly, which I did point out a few weeks ago.
While it’s true that Obamacare insurers are finally becoming profitable, they aren’t exactly rolling in the dough because of their involvement in the individual market, experts say. And carriers’ stock prices are a poor measure of their performance on the exchanges given how many other factors contribute to their bottom line.
Let’s take a closer look:
In the first few years of Obamacare, many insurers priced their plans too low, resulting in big losses. This prompted many carriers — including most of the large publicly traded ones — to downsize or exit the market completely. There are just over 130 insurers on the exchanges this year, down from 237 two years earlier, according to data from the Centers for Medicare & Medicaid Services.
Anthem (ANTM) is the only large public insurer with a sizable presence on the exchanges, but even it pulled out of several states for 2018.
At least two years of big rate hikes have helped the insurers that remain get on a more solid financial footing. Several recent studies, including ones by the Kaiser Family Foundation and S&P Global, have found that many insurers’ premiums in 2017 were more than adequate to cover policyholders’ medical expenses.
The average monthly gross margin per member was nearly $79 in the third quarter of 2017, up from $9.90 two years earlier, according to the Kaiser Family Foundation. (The gross margin doesn’t take into account administrative expenses.)
Several insurers have reported their first profits in their Obamacare businesses. Highmark Health in Pittsburgh, Pennsylvania, announced earlier this week that its Affordable Care Act division generated income for the first time in 2017, calling it “a substantial turnaround.”
“The fact that it has taken so long to achieve some level of profitability speaks to the challenges that have long existed in the individual market,” said Kristine Grow, a spokesperson for America’s Health Insurance Plans, an industry trade association.
Still, the individual market is not likely to be a font of big profits for insurers. It’s expected to generate margins of only 1% or 2%, which is why many of the larger public carriers left, said Deep Banerjee, a director at S&P Global. The employer insurance market, on the other hand, generally produces profit margins of 8% to 10%.
The Affordable Care Act also boosted enrollment in insurers’ Medicaid divisions, which are generally profitable, experts said. States are increasingly contracting with insurers to manage the health care needs of their Medicaid enrollees, said Larry Levitt, a senior vice president at Kaiser. This includes the more than 11 million low-income adults who entered the program through Medicaid expansion.
Nearly two-thirds of plans in states that expanded Medicaid said that it has had a positive effect on their financial performance, according to Kaiser’s 2017 Survey of Medicaid Managed Care Plans.
As for the insurers’ stock prices — that’s usually driven more by their employer and Medicare divisions, which are typically much larger, as well as by carriers’ efforts to control costs, Banerjee said.
I still believe that Obamacare was and still is a step in the right direction. The main problem is that no one ever really figured out the long-term financial sustainability strategy. So, back to our evaluation of a single-payer healthcare system.
Elizabeth Warren Has New Plan to Improve Health Care – and It Isn’t Medicare for All!
A recent poll found that likely voters want the Democratic Party to prioritize health care if it controls Congress and the White House in 2021. Sen. Elizabeth Warren (D-MA) is on it.
Warren on Wednesday introduced a new health care bill — and unlike the Bernie Sanders bill that Warren still co-sponsors, it does not call for a single-payer system. Instead, the legislation, called The Consumer Health Insurance Protection Act, aims to make insurance within the existing Obamacare system more affordable and protect more enrollees from insurance company policy changes and premium hikes. It would increase federal subsidies for people buying Affordable Care Act plans, allow more people to qualify for ACA tax credits and impose tighter controls on private insurers.
Health policy expert Charles Gaba calls Warren’s bill, and similar House legislation that was introduced recently, “ACA 2.0.” Here’s some of what Warren’s plan would do:
- Limit insurance premiums to no more than 8.5 percent of income
- Cap out-of-pocket prescription drug costs for those on private plans at $250 a month, or $500 per family
- Require insurers who sell Medicare Advantage or Medicaid managed care plans to offer coverage on ACA exchanges that have limited competition
- Require private insurance plans to spend 85 percent of the premiums they receive on paying out claims, up from 80 percent under the ACA currently
- Set limits on insurance company profits to match what those private insurers can earn from Medicare and Medicaid
- Provide more money for ACA outreach and enrollment efforts.
You can read more about what the bill would do at HuffPost or FierceHealthcare.
“We need #MedicareForAll – and until we get it, there’s no reason private insurers can’t provide coverage that lives up to the high standards of our public health care programs,” Warren tweeted in announcing the bill.
Democratic Sens. Sanders, Kamala Harris (CA), Maggie Hassan (NH), Kirsten Gillibrand (NY) and Tammy Baldwin (WI) are co-sponsoring the Warren bill, which means it has “total buy-in from the senators most likely to run on the more liberal side of the Democratic Party in the 2020 presidential nomination contest,” Bloomberg’s Jonathan Bernstein notes.
Why it matters: This bill isn’t going anywhere right now, but Democrats appear to be pulling together a plan that could win broad support within the party and thus actually pass in some form if they retake Congress and the White House in 2020. “None of these senators is giving up on single-payer as an aspiration,” Bernstein adds. “But they apparently recognize that ‘Medicare for all’ is a long-run goal, and that they have a serious responsibility to also have a short-term, achievable and significant plan to improve on the post-Donald Trump, post-Paul Ryan status quo.”
As I mentioned last week, we need a bipartisan solution to solving the healthcare crisis. Nothing will be accomplished by fighting each other and attempting to derail the parts of the Affordable Care Act that make so much sense and correcting the parts that will eventually lead to its demise or make things worse.
Maybe more people should start by reading our book The Search for Excellence in Clinical Process Improvement published bt Sentia Publishing.