The latest flap over ObamaCare, whether state or local government will run the exchanges, has once again created a major distraction from real reform of the health care delivery system.
All manner of politics and some sketchy financial analysis are driving state-by-state decisions on whether to manage the required web-based marketplace for health insurance or to default to the federal bureaucrats.
Maybe the question should be rephrased to which one can mismanage the least worst?
At any rate, the monster issue in American health care, as everyone acknowledges, is the out-of-control costs, which, in turn, have caused the access issue that ObamaCare was written to address.
Will exchanges and ObamaCare work to lower premiums for health insurance? Not likely. Indeed, there is every reason to conclude that the implementation of the new law in 2014 will have the opposite effect, that of accelerating costs. Consider these pieces of the new dynamic:
• Health plans sold on the exchanges to individuals and employees of small businesses will have to cover pre-existing conditions. Whatever you believe about the morality of covering those conditions, they are extremely expensive and can only drive premiums up. And, the new law contains no obvious incentives for chronic disease management.
• The theory behind the exchanges is that they will engender competition among the insurance companies trying to land the bonanza of new individual policies, and that competition will put pressure on the health providers to lower costs and improve value. This is Swiss-cheese theory – full of holes. First, the insurance companies already compete to the max. Second, any improvements made by the providers get passed on generally to all insurers. Third, there are already a good number of ways to compare health plans – through insurance agencies or on web site like Health Plans of America. In short, insurers are middlemen between payers and providers; they are not the principal drivers of reform.
• While the first year of expenses for running the exchanges will be picked up by the feds (to wit: federal taxpayers), the second year and on will be a state expense. A new state tax on insurance premiums appears to be the favored source of revenue. That new premium tax will, obviously, raise premiums.
• No question that the transparency on premiums could help consumers, but the real transparency needed by consumers is on quality and prices at the hospital and doctor level (not at the premium level). That’s where the real action is on cost cutting.
• The feds will set guidelines on what insurers must cover in their policies, called “essential benefits (EB).” Every player in the health care industry ($2.7 trillion annually) will be lobbying at the state and federal level to include their drug, their procedure, their service in the EB package. The more the inclusions (aren’t they all worthy additions?), the higher the premium prices. An example would be the latest oncology or arthritis drugs, which can run $10,000 per month. Good stuff, yes; expensive stuff, also yes.
• The law is counting on young healthies to carry the cost load through mandated policies. But they may well choose to stay uncovered, pay the small federal penalty and then sign up for coverage under the law’s guaranteed issue requirement if they get hurt or sick. Wouldn’t you if you were immortal?
So, the verdict is decidedly out on what exchanges, public or private, will do for the overall cost structure of health care.
For sure, though, the hoopla over exchanges will distract from real reform. Did you notice that the rate of health care inflation has mitigated in the last two years? They increased 5-7% in 2012, vs. double digit in the previous decade.
The real reformers, employers and employees in consumer-driven plans in the private sector, an army of them, have been demanding better value. And they are shrewder about utilization and their own health care management. They are bringing costs down.
They are doing fundamental problem solving. The exchanges are just another middleman.