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The Real Cost of ACA

Let’s be clear on one major point- there is plenty of blame to go around on why the Affordable Care Act isn’t working for working families. The plan started with the same for-profit model that Democrats built upon. Then Republicans proposed 98 different amendments that made it even worse and have been chipping away at consumer protections ever since. There is a better, cheaper alternative through expanding Medicare to every citizen then making small changes to make it the best path forward.

For now, lets take a look at the plan we have in place today.

The Affordable Care Act (ACA/Obamacare) did little to stem the cost of insurance policies. What it did was allow those who qualified to get an ADVANCED TAX CREDIT on Federal Taxes to use to pay for premiums. If we move to eliminate individual deductions in a streamlined tax system as proposed by the GOP, subsidy credits go away for everyone.

Silver level plan  
Family of 4 (2 adults age 45, 2 children)  
 
Monthly Premium $1,921
Annual Premium Cost $23,052
Deductible (individual $2,250) $6,750
Max Out of Pocket (MOOP) $14,700
Total Annual Risk (Annual premium + MOOP) $37,752
Subsidy premium tax credit ($695/mo) $8,340
$29,412

Data obtained from 2018 plans on Healthcare.gov and Kaiser Subsidy Calculation Tools https://www.kff.org/interactive/subsidy-calculator/)

Insurance protects you when you go to doctors and hospitals that are in your insurer’s network. If you go to a doctor or hospital that is not in the network, you could end up paying much more.

On a bad year, this family of 4 is looking at a total of $29, 412 in expenses WITH a tax subsidy if just two family members have a broken bone, illness or other need for insurance. On a good year, each family member will need to spend money on the premium and pay up to that $2,250 deductible limit just to realize a benefit from their insurance.

If Illinois spent just over $5,000 per Medicaid patient, why are we asking Illinois families to shell out $23,000 just to have a policy they can’t afford to use?

https://www.healthcare.gov/see-plans/#/plan/results/36096IL0810096/details

 

Controlling Costs

ACA only focused on controlling the cost for the government – not the consumer.

ACA helped restricts the growth of total Medicare spending by adding in reimbursement caps, the growth of Medicaid hospital spending, and (after 2018) the growth of federal tax subsidies in the health insurance exchanges to no more than the rate of growth of real GDP per capita plus about ½ of a percent. This means that as health care costs become more and more of a burden for the average family, they will get less and less help from government through time. – At a time when wages are not rising to meet ordinarily living expenses. http://www.healthaffairs.org/do/10.1377/hblog20150625.048781/full/

Cuts to Medicare as a Result of ACA

CMS sought to achieve quality outcomes by reducing reimbursement payments to providers. This doesn’t make sense for health outcomes.

“Decreasing healthcare expenditure has been one of the main objectives of the Affordable Care Act (ACA). To achieve this goal, the Centers for Medicare and Medicaid Services (CMS) has been tasked with experimenting with provider reimbursement methods in an attempt to increase quality, while decreasing costs.”

The Affordable Care Act’s (ACA) goals upon enactment were to slow the rising cost of health care and encourage a more efficient and higher – value health care delivery system (Sparer & Thompson, 2015). The best way to contain cost over the next five to ten years is through reformed provider payment to gradually decrease Fee– For- Service (FFS) payments (Ginsburg, 2013). http://mds.marshall.edu/cgi/viewcontent.cgi?article=1180&context=mgmt_faculty

 

For-Profit Insurance Carrier Model

In order to keep premiums as low as possible, the insurers are offering very narrow networks, often leaving out the best doctors and the best hospitals and offer higher deductibles than what most people are used to. Healthy buy on price — ignoring other features of the plan. By keeping deductibles high and fees so low that only a minority of providers will accept them, the insurers are able to lower their premiums and still make a profit.

Lack of Real Oversight

There is no real oversight on the MLR benefit. ACA mandated that insurers had to cap profits at 20% – 25% to ensure most of what consumers paid was spent directly on health care. There is little oversight on this provision and it isn’t applied equally across states and plans. The data is provided by the insurance companies themselves with no real auditing process in place. http://www.naic.org/cipr_topics/topic_med_loss_ratio.htm

Consumer Penalties via Mandate

The mandate required everyone to obtain insurance coverage or file a waiver. The intent was to incentivize people into being responsible and sharing the risk to bring cost down for the for-profit insurance companies. The problem is people are gaming that system easily. Some stop paying for insurance in September because the Federal government guarantees to cover premiums for 90 days. Others file a waiver and in 2016, 90% of the uninsured were exempt from the mandate altogether. Why?

Consumers were granted waivers for:

American Indians religious objections
earn too little to be required to file                   an income tax return Homelessness
domestic violence being evicted from a residence
having a utility cut off property damage from a fire or flood
canceled insurance plan Death of a close family member
medical expenses resulting in substantial debt Foreclosure
file for bankruptcy within the last 6 months  

 

Consumer Access

Access to a Doctor

Insurer participation also declined in many areas, leaving more counties with only one insurer, which contributed to the high rate of premium growth for 2017, 2018. That’s a monopoly. Fortunately, Silver plans across IL14 largely stayed the same across the lowest priced Silver level plans because there has been one dominant carrier for several years.

Medicaid patients experience longer wait times for appointments, have more difficulty finding a provider who will treat them, have more trouble obtaining transportation, or have to wait longer at the provider’s site of care (MACPAC 2016b, 2016e).

Who is looking at fixing these disparities? Survey information is voluntary! For the Federal 2015/16 reporting year, few states returned survey data at all; only 20 reported in wait times, 19 on limitations disabled children and adults had in getting access to care at all. A few looked at the overall number of providers in the state, but didn’t identify those serving Medicaid beneficiaries (15 states). Is that fair?

 

https://www.macpac.gov/wp-content/uploads/2017/03/Monitoring-Access-to-Care-in-Medicaid.pdf

 

Outcomes and Care Can’t Be Measured

One stated purpose of ACA was to help improve outcomes. The HRRP program penalizes eligible hospitals with readmission rates for Medicare patients higher than the national average, if those patients were initially admitted for specific, listed ailments and they returned to the hospital for any reason within the following 30 days. The penalty is about 3% of their reimbursement cost.

This program does not apply to any patient under the Medicare eligibility age. That eliminates the benefit for millions of Americans who could have been served, but no adequate measures have been put in place nor have private insurance companies agreed to participate.

 

Bait & Switch, Plans and Networks are not the same

Remember, insurance protects you when you go to doctors and hospitals that are in your insurer’s network. If you go to a doctor or hospital that is not in the network, you could end up paying much more. Consumers buy a policy thinking they have access to a wide network of doctors only to find out their preferred physicians aren’t in the plan at all. Worse, in rural areas like much of IL14, access to doctors in an carrier’s network can be scarce. For Mediciad patients, it is worse. One study of Medicaid managed care providers conducted by the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services found that about 33 percent of contracted providers could not be found at the location listed by the plan; another 8 percent said that they were not participating in the plan; and an additional 8 percent were not accepting new patients (OIG 2014a)

Doctors Limit Accepting New Medicaid Patients

In Illinois, nearly 1.5 million of the people on Medicaid are children, nearly 200,000 are seniors and about 230,000 are adults with disabilities.

More than 3 million Illinois residents — about 1 of out of every 4 people in the state — have health insurance through Medicaid, which is funded by state and federal dollars. (Chicago Tribune 2017) https://www.macpac.gov/wp-content/uploads/2017/03/Monitoring-Access-to-Care-in-Medicaid.pdf

Prior to 2015, there was a 10% payment bonus to healthcare providers, but that ended in 2015. Today, doctors who wish to remain independent are forced to accept a 48% payment to care for Medicaid recipients. They have to choose between keeping their doors open and seeing those most in need.

Removing the added 10% reimbursement rate after 2015 predictably showed that of the 85% of doctors accepting new patients, only 65% accepted Medicaid covered patients. In Illinois, the Medicaid reimbursement rate is roughly .80 or private insurance reimbursement rates. Without the added 10% Federal incentive payment, few providers are willing to take on lower paying patient accounts.

Stephen Zuckerman, Laura Skopec, and Marni Epstein, “Medicaid Physician Fees after the ACA Primary Care Fee Bump,” Urban Institute, March 2017.

 

For-Profit Care Models

Under the NFP model, hospitals based their pricing on the actual costs of services, procedures and overhead while adding on some measure of profit to allow the facilities to invest in bettering their offerings. It is no longer that simple as hospitals now artificially raise their rate card charges as a part of the negotiation process they enter into with private, for-profit health insurers.

The ACA law did nothing to limit these excessive charges across geographic locations. HHS did release a list of comparative cost for Medicare consumers, but expected consumers to comparison shop on their own.

Here’s How It Works:  If a hospital’s actual cost plus reasonable profit totaled $1,000 for a given procedure and the insurer demanded a 50 percent discount, the hospitals negotiated towards doubling the price from $1,000 to $2,000 in order to make a profit and return for investors. Hospitals now also include other charges with the cost of a procedure, including their unpaid collectibles from patients who are uninsured and could not pay, plus other inefficiency as administrative expenses.

https://www.forbes.com/sites/rickungar/2013/05/08/the-great-american-hospital-pricing-scam-exposed-we-now-know-why-healthcare-costs-are-so-artificially-high/#5e2d24013bff

Jonathan Blum, director of the Center for Medicare ,“What drives some hospitals to have significantly higher charges than their geographic peers? I don’t think anyone here has come up with a good economic argument.” (Forbes, 2014)

 

https://data.cms.gov/d/4hzz-sw77/visualization#

ACA does NOTHING to address this trend. Nor does it allow for negotiated drug pricing.

Drug Prices Unchecked

Merck gets more than twice as much in the U.S. for a monthly supply of the same drug as in Canada, the next most costly place to buy it, Bloomberg found. Humira, AbbVie Inc.’s best-selling rheumatoid arthritis treatment, costs an estimated $2,500 a month in the U.S. after discounts, compared with about $1,750 in Germany, Bloomberg found. In other nations, the drug’s price drops even lower.

The analysis found that Roche Holding AG’s Herceptin breast cancer drug, after rebates of roughly 15 percent, still cost about 85 percent more in the U.S. than in other high-income countries, and a third more than in Saudi Arabia, where the price is highest after the U.S.

https://www.bloomberg.com/graphics/2015-drug-prices/

Video: https://www.bloomberg.com/news/videos/2015-11-09/why-do-drug-prices-keep-going-up-

 

Going back to an income-based model that left so few covered is not an option. Staying with ACA is also unsustainable. This is why proposals like Medicare for All are becoming popular alternatives that allow the United States to join the rest of the industrialized world in helping every citizen gain access to healthcare.

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