Vol. 163 January 16, 2017 From Zero to $7,500: One Consequence of Obamacare Repeal.

January 16, 2017

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“As a doctor, I will take it and make it my mission
to heal the nation, reverse the course of Obamacare,
and repeal every last bit of it. ”
-Rand Paul

What exactly could happen if Obamacare was taken away? My daughter’s recent landing of a second part-time job offered an opportunity for me to understand the possible result in one case.

As a singer-songwriter, energy healer, and part-time retail clerk my daughter shares a common situation with many on Cape Cod; an annual income of less than $16,000, which is the current federal definition of poverty.  She is therefore eligible for Medicaid in Massachusetts. She pays no premium, has no deductible, and except for some named prescription medicines she has no co-pays. Preventative, pre-natal, and behavioral health services are covered. Her out-of-pocket cost per year is essentially zero. Some Obamacare repealers want to roll back the extension of Medicaid eligibility financed by federal subsidies. In many states that would strip this kind of  coverage from many of those newly covered under the ACA, but that is not a possibility in Massachusetts.

In my daughter’s case her new, second part-time job may push her annual income over $16,000. If so, she will no longer be eligible for Medicaid. As a part-time worker she is not be eligible for an employer-sponsored (and partially paid for) health plan. Her employer’s HR department told her she could buy a basic policy with a $2700 annual deductible for $226 a month through the school. “Co-pays varied and are difficult to predict.”  For her that is a new potential cost of $5400 out-of-pocket per year.

She got married last year and her spouse is in the same “low-income” bracket, so she inquired about a family policy (“for 2”). The answer: $400 a month at the same $2700 deductible amount for a $7,500 potential out-of-pocket cost. A $7,500 out-of-pocket cost “exposure” per year is a big nut for a family earning less than $22,000 a year.

Her other choice (besides going uninsured and paying a fine of $300-$2,085 in 2017 depending on income level) is buying an individual policy through an ACA Health Insurance Exchange. Under Obamacare any individual that is making less than 138% of the federal poverty level (about $22,000) can shop for a policy via a state or federal health insurance marketplace (also called health insurance exchange).  The exchanges can offer federally-financed subsidies of up to 60% of premium for eligible “working poor”. After lengthy website surfing, face-to-face help from the Health Connecter facilitator at a local hospital, and several phone calls with prolonged holding periods, she discovered that she could buy about the same basic policy of $2700 deductible for $226 a month through the health insurance exchange. BUT, despite providing all sorts of financial info they could not tell her…”yet” … what the premium would be and whether she was eligible for a premium subsidy. She was told that “things were in flux”, and that she could get a “call back in a week or two about that”. The enrollment deadline for signing up is January 31.

Just “for the fun of it” and to satisfy my curiosity I masqueraded online as my daughter to experience the health insurance application process via the Mass Health Connector. Over three different days I persisted on the internet and on the telephone to try to get the answer to : ”What would it cost to buy a basic individual health insurance policy?”  After reviewing and clicking on 5 to 7 different logos with unfamiliar company names, after entering the same information on multiple screens, after holding for more than 20 minutes on three separate phone calls, after being passed on to three different “responders” on one phone call, and after twice being hung up on after saying that “I was currently on Medicaid, but was looking for insurance to start February 1 when I would become ineligible”, I GAVE UP THE QUEST WITHOUT AN ANSWER.

Different sites had different definitions of “basic” and most had three or more different levels of benefits (coverage). Descriptions of benefits were quite lengthy and often complex.  For instance, the Bronze (basic) Level of “Access Blue Saver II“ (from Blue Cross; the easiest comparison charts to read) offered a 9 page policy offering no preventative or prenatal care with a $3,350 deductible and $60 co-pay for office visit and $1000 co-pay for an ER visit. Silver, Gold, and Platinum “Access” policies had different benefits. I could not get any information about actual premiums without further phone calls to “licensed brokers.”

Why is this so convoluted and confusing in contrast to the simpler processes of Medicaid and Medicare? One answer is that individual insurance policies are a gamble. For instance, a life insurance policy is really a bet between you and the insurance company. If you lose (die), you win (receive all the premiums back). If you win (out live the term), you lose and the company wins (keeps all the premiums). Another answer is that 400,000 people more than 2015  are flocking to sign up through health insurance exchanges.(1)

Obamacare has not changed the basic premise of individual health insurance policies, and the insurance companies are trying to make their  “best bets”. The betting odds are not as clear as the 1:6 of Russian Roulette, though we know that lack of health insurance can be lethal. The betting odds are more like those of Black Jack. The dealer (health insurance company) is using multiple decks, other players (consumers) at the table can affect your odds, the best odds are not always intuitively obvious, and the dealer (health insurance company) can change the betting rules every year.

Medicaid and Medicare are insurance programs based on large populations and therefore need less of the gambling “tricks of the trade” of writing individual polices. Hence my support for a health insurance program based on a large population, sometimes called a single-payor system. If not “Medicare For All”, then how about state-based programs of “Medicaid For All.” (2)

References:
1. Boston Globe, pg.2, December 22, 2016, from the NY Times.
2. NEJM, 375;26, December 29, 2016, “Maintaining Insurance Access Under Trump – A Strategy”

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

December 15, 2016

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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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