Vol. 160 December 15, 2016 ACA or Not ACA, That Is The Question.

Hub thumbnail 2015

As Trump continues to form his cabinet and Obama counts the days left while Hillary remains hidden in the woods, speculation about what will happen to the Affordable Care Act (ACA) is wide-ranging. Will it be repealed? CAN it be repealed? What will replace it? What if nothing replaces it?

It may help to remember that the vast majority of citizens who had health insurance before ACA were already heavily subsidized by government funds via Medicare, Medicaid, and tax subsidies for employer-sponsored insurance ($300 billion for the employer-sponsored policies alone). Studies have shown that 5% of the population accounts for 50% of health expenditures. The least costly half of our population accounts for 3% of the expenditures. (This is, of course, the essential element of risk spreading that makes insurance of anything “work”.)

ACA accomplishments since 2010

23 million citizens have gained health insurance coverage
-coverage that is not denied due to pre-existing conditions
-coverage of children up to 26 yo. on parents’ policy
-more than half of those (13.7 million) gained coverage under expanded Medicaid (by increasing the eligible income levels)
-all but 19 states took the federal subsidy to expand Medicaid coverage

Uninsured citizens dropped from 16% in 2010 to 9% in 2016
91% of U.S. citizens now have health insurance coverage (Spoiler Alert: in our big, or should I say “Hu-u-y-ge”, country that 9% translates into 29 million citizens still un- or underinsured.)

All this without additional net cost over the cost of medical services that was predicted in the U.S. without the ACA, i.e “no net increased cost due to the ACA.” (The largest single source of spending increase since 2013 was “retail pharmaceuticals”.)

Reduced “gender bias” by mandating maternal health benefits (coverage of contraception) as part of essential benefits package.

Mandated some mental health service coverage.

Mandated some coverage of substance abuse services.

What about repeal?

Unlikely, but possible. Outright repeal could immediately create another 23 million people without health insurance which would dump all that cost burden back on the states, the insurance companies, and the health care providers.

Repeal would require 60 votes in the Senate, and the Republicans are 8 short. There is speculation that some Democrats running for reelection in 2018 might join a repeal vote knowing that some of their Democratic colleagues that supported Obamacare lost reelection in 2016. The Gallup poll currently puts the public attitudes toward Obamacare at 50/50 “favorable/unfavorable”.

“Replacement” of selected provisions is more likely since it could be done as part of the “budget reconciliation process” which requires only a simple majority of 51 votes.

Replacement?

Coverage to age 26 on your parent’s policy and ban on denying coverage of pre-existing conditions are so popular that they are here to stay.
What parts might Republicans target to replace?
(An “ACA repeal bill” passed by the Senate in 2015 and vetoed by Obama gives us some clues).

Individual mandate – Even though this was proposed by Republican Mitt Romney and successfully passed the Supreme Court test as a tax, this penalty for not getting health insurance rankles the Republicans, and a sizable portion of the public. Proponents argue that it is essential to incentivize “healthy people” to buy insurance, a fundamental principle of spreading the risk over a large group.

Block grants to the states and/or vouchers for Medicare – Block grants would change this federal standard “entitlement” program into a state-controlled one with variable benefits and premiums. Vouchers, touted as making consumers more “powerful in the marketplace”, really shift the obligations (“unpaid bills”) to the states and health care providers

Reduce income level eligibility for Medicaid from the ACA level of 138% of federal poverty level (about $22,000 for a couple) back down to about $16,000 a year for a couple.

Middle-class subsidies via insurance marketplaces to be replaced by Health Savings Accounts (HSA), tax credits, across-state line insurance policies, and reestablishment of high-risk pools. All of these are advantages to people who have income, often sizable incomes.
-70% of HSAs are currently held by people with over $100,000 annual income.
-Many insurance companies already sell across state lines, but this provision would free companies from state mandated benefits and other state regulations.
-Reestablishment of high risk pools could provide higher premium policies for those with chronic diseases without unduly penalizing healthy individuals. This reflects a trend back toward indemnity or catastrophic insurance policies with few preventative benefits.

Rescind the new taxes to fund the ACA – details on how to pay for replacement provisions TBD.

Maternal health benefits– Trump suggests making contraception available over-the-counter without a prescription, thus avoiding the problem of exempting churches from this mandated benefit. Planned Parenthood would, of course, be defunded.

Medical liability reform – Though a cherished symbol of support of and a psychologically warm and fuzzy concept to physicians, all studies show that no significant cost reductions occur from tort reform because the actual cost of “defensive medicine” is very small compared to the total.

What about ACOs?

Remember them? Accountable Care Organizations are physician groups and hospitals organized together to reduce costs without degrading quality. The first ACOs, so-called “Pioneer” ACOs, could keep a share of any savings if they delivered care to a defined population at a cost below a “target cost” without missing any of the “quality targets.” If they overshot the “target cost”, they would owe money to the federal government at the end of the year.

This is the last year for the original 32 Pioneer ACOs, and only 16 remain in the program. Half have withdrawn from their contracts because of losing money, continuous wrangling over targets, and lack of flexibility in defining risks and benefits. The “Next Generation” ACOs are due to sign up in January 2017, and most will opt for sharing savings without taking financial risk for losses.

Bottom Line:

The vetoed 2015 Senate “ACA repeal bill” had a two-year transition period embedded in it, so even if a repeal bill is passed and Trump signs it the loss of health insurance will not be immediate. Many political experts, if we can still use that label for them after this election, suggest that even “replacement” of ACA provisions will be politically difficult and will take at least two years to pass. A new study by the Urban Institute shows that Paul Ryan’s proposed Republican replacement plan would result in more uninsured citizens than existed before ACA. 80% of those losing insurance would be part of a working family.

How high are the stakes? A 2009 study by Harvard Medical School and the Cambridge Health Alliance estimated that the lack of health insurance led to almost 45,000 unnecessary deaths. “Lack of health insurance can be fatal.”

So, for a variety of reasons, the next two years will be “vel-l-ly in-ter-esting” In the meantime if you have health insurance through a ACA-based insurance marketplace make sure you re-enroll by January 31 to continue coverage.

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