Five years into the nation’s top-down experiment with the delivery of health care, the Affordable Care Act (ACA) is proving to be unaffordable.
That should come as no big surprise, since almost every feature of the act serves to drive up costs.
There are reformers at work transforming the busted model for the delivery of care in America, but they are self-insured private payers, entrepreneurs and, to some extent, Medicare leaders. The massive manipulation of the health care sector by the Obama Administration has produced more minuses than pluses.
First the big plus: The uninsured rate in the country has dropped from about 15% before the ACA debate began in 2009 to 12% today. In big, round numbers, those three points mean some 10 million Americans have gained coverage through the Obamacare exchanges or the ACA expansion of Medicaid. That’s no small feat.
Remember, though, the dimensions of the problem that President Obama addressed in 2009: an uninsured population of some 40 to 50 million. In short, Obamacare has solved about one-fifth to one-quarter of the challenge.
In fairness, had Republican governors not stonewalled the federal offer to pay for most of an expansion of Medicaid, the pool of uninsured would have shrunk more.
The biggest minus for the new law is a total strikeout on the cost side. A lead article in the Wall Street Journal showed big premium hikes coming in some states in 2016, as high as 51.6% in New Mexico. Not all states have bared their pending increases, but the premiums offered for individual policies range from a zero increase from insurers in Maine, to 2% in Connecticut, 3.8% in Indiana, 8.4% in Vermont, 9.8% in Washington state, 25% in Oregon, 30.4% in Maryland and 36.3% in Tennessee. In most states, the inflation is just plain scary.
Preliminary projections from seven major insurance companies in Wisconsin call for price hikes next year of 10% to 32%. For people eligible for ACA subsidies, the increases may be bearable, but for ineligible people they will be unbearable. That will be true for 7.5 million more people if the U.S. Supreme Court strikes down the subsidies offered on the new federal exchange. Their ruling is expected this month.
Further, subsidies notwithstanding, the high deductibles that are imbedded in the individual policies sold on the ACA exchanges are proving to be an unsustainble burden for low and middle income Americans.
The collapse of Assurant Health in Milwaukee, and the loss of its 1700 jobs, tells the story of how much Obamacare (ACA) changed the economics of health care. It tried to keep selling individual and small group health insurance after ACA kicked in in 2014, as it had been doing since 1892.
But, with guaranteed issue, required coverage of pre-existing conditions and mandates for coverage of a wide-range of procedures, it became impossible to set viable premium levels on the new health exchanges. Assurant hemorrhaged money and had no alternative but to close its doors. The insurance coops created with capital from ACA won’t be far behind.
Consider the contrast between the Democratic experiment with one-fifth of the U. S. economy and the new business model for the delivery of care that is racing ahead at private companies. Designed by wonks, Obamacare is based on mandates, a maze of rules and regulations, penalties, IRS enforcement and higher taxes.
It was anything but pragmatic.
The private sector reforms are the opposite. They are ground-up, company-by-company, consumer-by-consumer. They are empirical. Try innovation; see what works; keep if good results follow; drop if not.
The model includes these platforms:
• Self-insurance at four out of five firms, so companies and their people can benefit from smarter purchasing and staying healthy.
• Consumer-driven plans with higher deductible and co-insurance, offset by health accounts (“It’s the incentives, stupid!”) Savings are 20-30%.
• Value-based purchasing at hospitals and clinics that offer high quality, low infection rates, lean disciplines and low all-in prices. Savings can be 40% or more.
• Proactive primary care, often at on-site clinics, that aggressively manages chronic diseases and keep people out of the hospitals. Savings can be 30%.
Private companies have given Republicans a ready recipe for amending Obamacare, should the high court strike down subsidies on the federal exchange this month, or if they want to capture the White House in 2016.
Mitt Romney blew it in 2012 when he didn’t apply these learnings to create Romneycare Version 2 as an alternative to ACA.
Democrats will stand as at as they can on Obamacare, so there’s a clear opportunity for innovation and leadership. To date, none of the battalion of GOP candidates for President has offered a compelling, market-driven answer to fix Obamacare. Will they be empty suits on the health care issue again in this campaign?
Don’t bet against it.