The Affordable Care Act: What do I need to know?
By Samuel Metz, M.D.
Street Roots (Portland, Ore.), Oct. 23, 2012
PNHP note: The following series of three articles appeared between Sept. 26 and Oct. 23 of this year in Street Roots, a member of the North American Street Newspaper Association. A fourth installment is expected soon. The writer, an anesthesiologist in Portland, is active in Physicians for a National Health Program, Mad as Hell Doctors, and Health Care for All Oregon.
Health care reform without tears: What’s the least I need to know?
Public discussions of health care reform send most people ducking under chairs and rushing for exits. Who can blame them? Our health care system is hideously complex. A flurry of opinions swirl from all parts of the political spectrum; some seem reasonable, others preposterous, and many simply make our heads ache.
This article offers a guide to the perplexed — the simplest a introduction to health care reform you will encounter. When finished, your new understanding may give you the confidence to discuss reform intelligently without fear of embarrassment.
In this first part, we start with basics. Why do we need reform? We need it because Americans spend twice as much as people in other countries, and yet our public health outcomes rank nearly last among industrialized nations, and our families’ health and finances are being devastated.
Let’s take a closer look.
Why do we need health care reform?
Although most of this year’s presidential candidates and several leading congressmen claim we have the “best health care in the world,” it is exceedingly difficult to support this opinion. Here are reasons why.
First, U.S. health care is the most expensive in the world.
Second, on almost every measure of public health, the United States US ranks at or near the bottom of the industrialized world. There are 40 other countries where a pregnant woman and her baby have a greater chance of surviving pregnancy. American diabetics are twice as likely to suffer a foot amputation from diabetic complications than diabetics in other industrialized countries. Unless you are Paula Deen, the diabetic who makes millions selling high calorie recipes, the U.S. is a dangerous place for diabetics.
The United States ranks near the bottom in life expectancy and at the top in infant mortality. And even when life expectancy is adjusted for homicide, accidents, race, obesity, smoking and alcohol use, the U.S. ranking flirts with last place. As for our unhappy infant mortality ranking, even when compared only to countries with similar definitions of “live birth,” the United States retains first place.
Third, health care costs are devastating American families. Medical crises cause most personal bankruptcies, and most of those families had health insurance when the crisis began (so much for the illusory safety net offered by insurance policies). Most collection agency debts are medical. A diagnosis of lung cancer in the U.S. carries a 7 percent chance of bankruptcy within five years. Most labor-management disputes, such as last year’s confrontation in Wisconsin, pivot on medical benefits.
These crushing burdens are the norm in the U.S., whereas other industrialized countries have national health plans covering nearly everyone. Citizens in those nations aren’t denied treatment because they lack money. Citizens in those countries don’t lose their homes, their savings or their feet because they cannot afford health care.
It is difficult for many Americans to imagine every member of their families enjoying guaranteed access to health care no matter how old, sick, poor, unemployed or disabled they become. But guaranteed access is a fact of life in every other industrialized nation.
While wealthy Americans (notably presidential candidates and leading congressmen) sleep soundly knowing their families will always have access to health care, most of us cannot say the same.
What should health care reform achieve?
First, we want health care access for all Americans regardless of our income. Who needs a health care plan that removes access to health care when we become unemployed, sick or too poor to afford premiums, deductibles and co-pays? Assuring health care access for our families is essential.
Second, we want lower costs. Whether we pay with taxes, premiums or out-of-pocket, it’s all our money. A health care plan reducing taxes but increasing premiums, or reducing premiums but increasing out-of-pocket payments, or reducing out-of-pocket payments but increasing taxes is sleight of hand, not reform. We want lower costs.
Finally, we want better health outcomes. Our health care dollars should improve our family’s the health of Americans, and not be diverted to a growing army of hospital billing agents, whether government or private. We want better health.
What can successful health care systems teach us?
If we want to change our health care system to gain better care for less money, we should learn from other industrialized nations that provide comprehensive health care at far lower costs. Fortunately, they are easy to find: Every other industrialized country provides better care to more people for less money than we do.
A first glance, other industrialized countries finds a mind-boggling array of health care systems. But these successful systems share three characteristics.
First, all citizens have lifetime access regardless of health. American insurance companies discriminate against people who are sick or have pre-existing conditions by charging higher prices for premiums, restricting their benefits or denying care altogether. In other industrialized countries, citizens enjoy access regardless of health, wealth or employment.
Second, patients are encouraged to seek care without the penalty of high out-of-pocket costs. Rather than compelling people to determine whether they need care before they see a physician, other countries allow the physician to determine if a patient needs care after he or she sees the patient. In the United States, higher deductibles and co-pays actually deter people from seeking care.
Finally, health care financing is provided by publicly accountable and transparent not-for-profit agencies. Financing agencies are simply brokers: They transfer money from patients to providers. Although most countries allow profits to be made delivering health care, the United States is the only country to allow profit-making from financing basic health care.
What do these three attributes mean to us?
Some may dismiss all foreign health care systems as “socialized medicine,” run by governments and therefore unacceptable. Most foreign systems, however, use private (non-government) providers, and many use private financing agencies.
What does this mean for us? The U.S. can achieve real reform with as much or as little government as we think appropriate. Socialized medicine is an option, but not the only one, for reform.
Most importantly, these three characteristics — universal lifetime access, no obstacles to seeking care, and not for profit brokers — all relate to financing, not delivery. Financing determines who is included and who provides funding. Delivery, on the other hand, determines how much doctors are paid, the conditions for treatment and who qualifies for care. Successful systems teach us that when the three common financing characteristics are employed, there still are many options for health care.
We need health care reform because we spend twice as much as other nations, our public health outcomes are abysmal, and our families (and businesses) are financially and medically ravaged. We want reform to guarantee health care access to our family, to reduce our costs and improve our health.
We can learn from successful health care systems around the world that all provide better care to more for less. These systems teach us: (1) include everyone, (2) encourage care, and (3) finance care with publicly accountable and transparent not-for-profit agencies.
Will the Affordable Care Act, also known as “Obamacare,” change everything? The next part of this series will answer that question.
Health care reform, part II: Will Obamacare save America from itself?
Just when despair engulfed our dysfunctional health care system, Congress passed the Affordable Care Act (also known, inappropriately as we will see, as “ObamaCare”). Is the Affordable Care Act a knight in shining armor, a red herring or the end of civilization as we know it?
Let’s look closer.
The Affordable Care Act (ACA) was a response to powerful health-care forces pulling in many directions — from families bankrupted by medical bills, businesses crippled by employer-sponsored insurance, hospitals and physicians paid less for Medicaid and Medicare patients than the cost to provide the care, insurance companies protecting their industry, and voters demanding that something — anything — be done to solve an apparently unsolvable crisis.
Ultimately, Congress created a 400,000-word compromise of baffling complexity. Before we review whether this effort was worth the trouble, let’s look at the major (but not the only) provisions.
By increasing both the number of Americans with private insurance policies and those participating in government health care programs, Congress hopes Americans will get the health care they need. The act’s scope covers both businesses and individuals.
The ACA encourages businesses to purchase private health insurance for their employees by fining businesses if they do not. In many cases (but not all), businesses will find it cheaper to buy the insurance rather than pay the fine. Because insurance prices go up as the number of employees goes down, small businesses may qualify for government subsidies to enable them to purchase insurance for their employees.
What about those of us who can’t get insurance through employers?
Individuals without employer-sponsored insurance must buy their own insurance or face a similar fine. This format is called a “mandate.” Individuals unable to afford any policy may qualify for government subsidies or be excused from both insurance and fine. To ease the challenge of finding insurance, Congress compelled states to create “health insurance exchanges.” These are websites where insurance companies offer policies in similar formats to make comparisons easier. Additionally, participating companies must provide minimal levels of benefits in policies sold in the exchange. The ACA does not compel insurance companies to participate in exchanges, and individuals may purchase policies outside the exchange.
What if you depend upon Medicaid or Medicare for health care?
The ACA expands some benefits for Medicaid and Medicare patients. States providing a higher level of benefits for Medicaid patients receive larger federal subsidies. Medicare benefits, especially primary and preventative care, are greatly expanded. The increased spending on Medicaid and Medicare combined with subsidies for businesses and individuals will increase government spending on health care.
To pay for this increase, the federal government will reduce other spending and seek new revenue. For example, many providers will see lower payments for Medicare patients. Most Medicare patients will pay more money out of pocket. Wealthy individuals will pay higher income taxes. Private insurance companies, drug companies and businesses that make medical equipment will pay new taxes.
And the ACA encourages health-care providers to form Accountable Care Organizations (ACOs). ACOs are variants of managed care, in which provider organizations receive a fixed annual fee for Medicare patients rather than be paid fee-for-service. In this fashion, ACOs make providers financially responsible for medical outcomes of their Medicare patients: If a Medicare patient does well and requires less money, providers keep the difference. If patients do badly, providers absorb the cost.
What happens to total government spending when all these increases and decreases are added up?
Most studies suggest overall government spending will go down.
So the ACA sounds like a heck of a deal: More insurance policies, reduced government spending and passing financial risks onto providers. What’s not to like?
Some readers may remember from Part One of this series the three fundamental goals of reform: (1) health care access when we need it, (2) lower costs and (3) better health.
Does the ACA achieve these goals?
The ACA will not provide universal access. Even when working perfectly, 40 million Americans will be underinsured. Ask any of the 750,000 Americans with health insurance who were still bankrupted by an illness (especially the 34,000 Oregonians who suffered this fate last year). Worse than that, 20 million additional Americans will have no access at all because they have no money. Result: 60 million Americans (20 percent of us) remain at risk for losing homes, limbs or lives if we get the wrong disease at the wrong time.
Will the ACA reduce costs?
No. The savings to taxpayers in reduced federal spending will be billed to them when they become patients, with higher insurance policy prices and higher out of pocket spending. Even though it reduces government spending, the ACA neither lessens overall health-care costs nor does it stop the relentless increase in health care spending.
Will the ACA improve outcomes?
For the answer, we must take a closer look at Massachusetts.
In 2006, then-Gov. Mitt Romney signed a law of his own design compelling everyone in Massachusetts to purchase health insurance or face a fine. Sound familiar? The ACA applies the same principles of the Massachusetts law (call it “RomneyCare”) to the entire nation. The similarity was put more succinctly by Jonathan Gruber, the MIT economist who assisted in designing both laws: “They’re the same (expletive deleted) bill.”
So what happened in Massachusetts after 2006?
Nearly 100 percent of residents (98 percent in 2010) own a health insurance policy. That’s good. But public health measures have not improved, medical bankruptcies continue to rise, and Massachusetts is still the most expensive state, in the most expensive country, for health care. This does not bode well for American health care when the ACA applies those same principles on a national basis.
The ACA qualifies as health care legislation, but it fails to qualify as reform.
To its credit, the ACA has one dramatic asset: For the first time in American history, the U.S. Congress decided health care access for all citizens is a fit subject for congressional concern. Too bad Congress was unable to create a program to provide that access.
Ultimately, however, the ACA damages American U.S. health care by its very premise: It enshrines private health insurance as the sole portal to health care for most Americans. Thus, it perpetuates and strengthens the very aspect of our health care system that makes us uniquely vulnerable: our dependence upon the private health insurance industry.
Hence the disappointment in the Affordable Care Act. One would have hoped all the agony endured by Congress to generate this massive bill would have produced a result worthy of that effort. But we enjoy no progress. American health care remains a juggernaut that devastates our families, cripples our business, smothers our economy and steals our health.
After this discouraging assessment, we deserve some good news. And there are indeed reasons to be hopeful which we’ll get to later in this series. But first we’ll visit the American health insurance industry. If the ACA can’t save America from itself, can a liberated and empowered insurance industry save our health and make our families whole again?
Health Care Reform without Tears, Part 3: Private health insurance
Part two of this series left readers with the unhappy prospect of an Affordable Care Act (ObamaCare) failing to achieve universal access, lower costs or better health. What about our private health insurance industry? Many individuals and organizations advocate unfettered competition among insurance companies on a nationwide basis, releasing them from the jungle of regulation created by 50 individual states. Free market competition brought down the costs of flat-screen televisions. Can’t it do the same for health care?
There is some foundation for this position. After all, most central Europeans finance health care with private insurance companies and their health is better than ours while spending half of what we do.
The flaw in this proposition is in vocabulary. European “Private health insurance” resembles American “Private health insurance” the way European football does to American football. Different games, different goals, different rules.
Yes, European health insurance companies both compete with each other and provide better care at lower prices than American companies do. However, they operate under regulations both alien and unacceptable to American insurance companies.
Europeans created rules to achieve specific goals: provide access for every citizen no matter how sick, or poor, or unemployed; reduce total costs; and improve everyone’s health. And European companies succeed.
Americans designed their health insurance rules to achieve what any business in America wants to achieve: to enable insurance companies to make as much money as possible. And, to be honest, American insurance companies succeed. But our rules are different and our goals are different from Europe.
Here are the European rules. Remember none apply to American companies.
(1) An insurance company can charge whatever it wants for a policy, but it must sell it at the same price to everyone regardless of health.
(2) Insurance companies cannot refuse a policy to anyone, sick or healthy. As the Good Book says, “Ask and it shall be given.” No exceptions.
(3) Insurance companies cannot drop a patient for any reason, not even failure to pay – the government will make sure premiums are paid. Patients, on the other hand, can change insurance companies at any time without notice. If your client gets one grumpy customer service agent, she takes her business elsewhere.
(4) Every policy must cover every treatable disease. No patient can inadvertently pick a policy that risks bankruptcy or death if they acquire a treatable disease. Supplemental policies may offer additional benefits, like single hospital rooms, cosmetic surgery, or experimental drugs. Patients can always get more than they need for basic health care, but they can never get less.
This next rule only applies in a few countries.
(5) If the government discovers that an insurance company still manages to cherry-pick healthier patients, the company pays a premium to subsidize companies with sicker patients.
Within these constraints, how can European insurance companies compete? There’s not much wiggle room: lower premium prices, added benefits, and improved customer care.
If you were an American insurance executive playing by American rules, how would you compete in the U.S.? Remember, no insurance company makes money selling policies costing more in health care than are collected in premiums.
Offering comprehensive coverage at affordable prices to sick patients who will need expensive care is the highway to bankruptcy.
You would compete by playing it safe.
(1) Pay expert medical underwriters high salaries to predict which patients will cost the most money. Then avoid those patients. The extra costs of underwriters can be passed on to patients by increasing policy prices.
Pricing your policies as high as possible is an excellent way to avoid sick patients. With our health care access determined by income, health follows wealth. If only healthy people can afford your policy, you have elegantly eliminated the most expensive patients to insure.
(2) Carefully craft benefit packages to reduce your financial liability. Remember most patients (and physicians for that matter) are incapable of deciphering what their policy will really pay for.
(3) Discourage policyholders from seeking health care by passing as many costs on to patients. High deductibles, high co-pays, and restricted benefits do the job quite nicely.
Remember most American workers change insurance companies every six years. It makes no sense for an insurance company to invest in preventative care if the savings ten years later accrue to a competing insurance company.
(4) Delay or deny payment to providers as long as possible. After all, you’ve got the premium money as soon as it is paid; the longer you hold on to it the more investment return you accrue. If you exhaust the patience of the provider long enough, they may even give up without any payment at all. That’s money in the bank.
These practices sound cruel, and they may be. However, in contrast to Europe, our rules align business interests against patients and providers. Competition rewards those insurance companies who avoid the sick, pass the most expenses onto patients, and deny both care and payment. Insurance CEOs who place their clients’ medical interests ahead of their company’s financial interests will, at best, be fired or, at worst, be arrested for violating their fiduciary obligation to make the interests of their owners paramount.
Removing regulatory barriers to allow free exercise of these rules is thus unlikely to promote better access, reduce costs, or improve health.
One last industry protest: Passing costs to patients (also colorfully known as “cost-sharing,” “skin in the game,” and “catastrophic-only insurance”) makes patients savvier consumers of health care and decreases their health care costs. Is this true?
The experience of European health care systems reveals the opposite. Europeans see their physicians two to four times as frequently and spend more time in the hospital than we do. At first glance they appear to be consuming more care than Americans do. Yet these non-U.S. patients spend half as much as we do for health care and enjoy better health outcomes.
Now it gets easier to understand why health care economics drive us to distraction. Health care does not follow conventional rules of supply and demand. Health care needs do not change when health care costs increase. However much we might covet flat-screen televisions, everyone has a minimal need for health care. But once that need is addressed, we have little incentive to consume more. Few people look forward to painful procedures or hospital food.
European health insurance companies have much to teach us.
If our goal is to provide better care to more people for less money, we must apply the three rules of health care financing, noted in the first part of this series and used successfully in every industrialized country other than ours.
(1) Include everyone, even the sick.
(2) Encourage patients to seek care by lowering or removing deductibles, co-pays, and excluded conditions.
(3) Finance health care with publicly accountable, transparent, not-for-profit agencies.
With considerable disappointment, we must acknowledge neither the Affordable Care Act nor our American health insurance industry will pull our health care system back from the brink of destruction. But, as promised, the next and final part of this series will present refreshing news, that we can still create a cost-effective health care system in Oregon.
Samuel Metz is a Portland anesthesiologist active in health care reform. He is also a member of two organizations advocating publicly funded universal health care: Mad As Hell Doctors and Physicians for a National Health Plan. He is the local chapter representative to Health Care for All Oregon, an umbrella organization of over 50 groups working for better health care in Oregon. He can be reached at 3Q9A@samuelmetz.com.