Penalties looming, what grade for Obamacare?

Official_portrait_of_Barack_ObamaWith stiff penalties looming for citizens without health insurance in 2015, at least $325 per person and up to $975 for a family, the question looms: Is Obamacare working like it was supposed to?

Specifically, did the Affordable Care Act (ACA): 1) significantly improve access, and 2) reduce the cost of care?

When the Democrats controlled Congress and the White House, rammed ACA through both houses and President Obama signed it in early in 2010, the major argument they made to the country was that 50 million uninsured Americans was a national problem that had to be fixed. In short, a major overhaul of the health care industry (hospitals, doctors, insurers, brokers, patients/payers, and the tax system) would be worth it.

The turmoil on the financial side of health care, almost one-fifth of the U.S. economy, has been predictably enormous. So, then the question: how many uninsured does the nation have today – three years into Obamacare?

Gallup says the number of uninsured is now about 40 million.

Looked at through another filter, the percentage of uninsured — before the major impact of the Great Recession in 2008 — was 14.6%. It bounced around at about 17% from 2009 to 2013. In 2014, it looks to be around 15.6%.

That’s not a big dent, but let’s concede that Obmacare has had some impact. But 40 million people are still without health insurance. Mission still largely unaccomplished. A major access problem remains.

That’s where the equation between access and affordability comes into play. The higher the cost of care, the fewer the number of people who can afford it. And the inescapable reality is that everything about ACA, with one exception, raises the costs of care and, therefore, prices as expressed in premiums.

More mandated benefits under ACA, even if politically popular, raise costs. Guaranteed issue to high-risk people, even if it’s a good thing to do, raises costs to an insurance pool. Taxes on medical devices raise costs. Minimum benefit levels in health policies offered on the new exchanges raise costs. Maximum out-of-pocket limits raise costs.

All of the above explains why premiums will rise more than 5% in 2015 and why they have risen continually since 2010. Going up is not going down, as promised under ACA.
The new federal subsidies have mitigated the premium increases for consumers That is the one exception that lowers expenses for citizens. Note: subsidies are not a cost reducer; they are an offset to inflating prices.

How much more consumers will actually pay for health care under ACA remains to be assessed. It’s not just premium inflation. It’s also about out-of-pocket expenses in the new ACA sanctioned policies. The most popular plan offered on the ACA exchanges has been the “silver plan,” which carries a deductible of about $2000. The deductible is more than $5000 for lower-priced “bronze plans.”

There’s an irony here. Families will take a big hit when they incur a major medical issue, possibly an unaffordable hit.

But it is the growth of high deductible plans, both in the ACA policies and outside of them, that have slowed the overall inflation in health costs. As one bright economist said, “It’s the incentives, stupid!” When people have to pay out of pocket for the first dollars (as with car or home insurance), over-spending drops.

High deductible plans are now the norm for most employers. And they also include co-insurance and co-pays — additional out-of-pocket hits on consumers.

There is one saving grace. Some plans include Health Savings Accounts (HSA) that offset consumer out-of-pocket costs. There are now an estimated 20 million Americans covered by tax-advantaged HSAs, created by Republicans back in 2003, and the number is rising rapidly every year.

This fast march by consumers and private employers to high deductible/HSA plans is the wave of the future, but that was not what the Democrats had in mind when they passed ACA. High deductibles were not their game plan.

Nor were the narrow networks that limited consumer choice of doctors, clinics and hospitals.

Nor was the stampede in the private sector toward proactive primary care delivered in on-site medical homes.

Nor was value-based purchasing, which includes bundled prices, transparent prices and caps on payments for procedures.

All those fundamental grassroots reforms of the U.S. delivery model happened outside of Obamacare. And they are proving more impactful than the new law.

So, what should be the grade for ACA and its top-down reforms? How about “C” at best?

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