In a recent opinion piece for the New York Times, Governor Kasich argued that the way forward for health care reform is more government spending. He says:
One vital improvement would be to provide adequate tax credits, which would help keep health plans in the individual market and encourage — not undermine — robust competition. Companies should also be required to continue following reasonable guardrails like ensuring minimum coverage that is genuinely useful and covers pre-existing conditions. Once we see these repairs taking hold, Congress should then take up needed improvements to Medicaid as part of comprehensive entitlement reform.
Health Care Reform Starts With Controlling Health Care Costs
The problem I have Governor Kasich’s argument is that he ignores the elephant in the room, health care costs. I can understand how the federal subsidies have benefitted hospitals, doctors, pharmaceutical companies, and insurance companies but not the consumer. Each of these groups publicly stated they were going to make health care bigger, better, faster, and cheaper. I don’t see it happening. Kasich is arguing that the health insurance markets will get better if we throw more government money at them. This is the exact same argument ACA supporters have made for the last eight years. The failure of the ACA to control costs tells us we need a different strategy if we want a different outcome. After eight years of using a carrot to encourage health care reform, maybe it is time to use the stick.
Thinking Outside Of The Box Idea Number 1 – Repeal The Individual And Employer Mandate
One of the things I learned over the last couple of years is that the individual mandate is not necessary or important. Although the ACA supporters argued in the Supreme Court that it was necessary to avoid a death spiral in the health exchanges, the consumer is largely unaffected by premium increases. It is the federal government who bears the brunt of the cost increases since the consumer’s portion is limited to 8.13% of their income. Why will the consumer leave the exchange if their payment stays the same? The primary purpose of the individual mandate was to keep unsubsidized, healthy people in the exchanges. The lack of affordable health insurance forced healthy people to evaluate their health care options. They voted with their feet.
If our politicians really wanted to help the American people by putting more money in their pocket, the simplest solution is to repeal the individual mandate. In a letter to members of Congress, IRS Commissioner John Koskinen said about 6.5 million Americans paid an average penalty of $470 for not having health insurance in 2015. Ironically these Americans are the group who can least afford the penalty. As health insurance continues to get unaffordable for more people, we should expect that fewer people will be required to pay the penalty. If the government continues to get less and less money from this penalty, maybe we should admit that the individual and employer mandate are not working and never will. This would be a great time for both parties to join together and get rid of both mandates.
Senator Portman is one of my senators and typically an astute legislator. His objection to the Senate health care bill because of the opioid epidemic is puzzling. Technically we have been fighting the opioid epidemic for several years now. In 2015 it was readily apparent to the people selected for jury duty that Clermont county had a serious opioid problem. Ohio was one of the states that expanded Medicaid. If the expansion of Medicaid has helped diminish the opioid epidemic, I don’t see any indication of it. I went to his website and could not find any details on his proposal. You would think that he would have a well thought out plan by now.
Medicaid Will Continue To Play A Major Role In Fighting The Opioid Epidemic
Most people on Medicaid being treated for drug addiction are earning less than the federal poverty limit(FPL). Drug addicts typically do not work. As an example here is a story about a drug addict from Cincinnati who was not employed, The Obamacare repeal ‘could be a disaster’ for states fighting the opioid epidemic. Medicaid coverage for people earning less than the FPL is not affected by the Medicaid expansion. The people who will be affected are those drug addicts earning between 100% and 138% of the FPL. Since I doubt there are many drug addicts in this earnings bracket, the Medicaid expansion helps fight drug addiction in a trivial sense.
Is Medicaid Part of the Problem?
Many people think the opioid addiction problem starts with doctors over-prescribing Oxycontin. Ohio’s governor is recommending:
Gov. John Kasich’s order limits the amount of opiates primary care physicians and dentists can prescribe to no more than seven days for adults and five days for minors.
Here is an interesting point brought up by Dr. Siegel on Fox and Friends.
SIEGEL: “In states that have the Medicaid expansion, emergency room visits are up by 9 percent. Hospitals like that because patients that used to be uninsured now have their Medicaid card. But they are flocking into the ERs to get services they don’t often need. Did you know, Brian, that 15 percent of Medicaid patients are prescribed an opioid every year? Now, that’s the doctor’s fault for over-prescribing. But Medicaid allows doctors to over-prescribe and that’s one of the secret stories that we’re breaking right now, is that the opioid epidemic is tied to Medicaid as an enabler. Doctors are the problem. Medicaid is enabling it.”
Considering our lack of success fighting the opioid addiction battle I am not sure how much additional money I would commit to Medicaid efforts to fight drug addiction. A city in the local Cincinnati area, Middletown, budgeted $10,000 this year for Narcan, the antidote of choice for overdoses. They are on track to spend $100,000 this year. Assuming that the city will get reimbursed for most of these costs by Medicaid, how does extending Medicaid compensate Middleton for the uninsured addicts. If we agree that the opioid epidemic is a public health crisis that needs to be addressed, is giving more money to Medicaid the best addiction prevention and treatment idea we can come up with?
The article, “How Would The Senate Discussion Draft Affect Individually-Purchased Health Coverage?“, caught my attention. As a person who opted to not purchase health insurance in 2017, I hate to give advice to those folks still trying to make this pig fly but here goes.
Still Searching For Affordable Health Care Options
Prior to the ACA the individual market was the only health insurance market that demanded affordable health insurance. Compared to the small, medium, and large business markets, the individual market was aggressively priced in most states in 2011. The price increases I experienced from 2011 to 2016 led me to believe that federalizing health insurance has encouraged cronyism and corruption. I can see where the insurance companies and politicians benefited but not customers like me. If the health care industrial complex wants me back they have to offer me affordable health insurance(<8.05% of AGI) with a lot less lying.
I believe that the ACA attitude toward health care reform was best expressed by Professor Gruber’s “lack of transparency is a huge political advantage” comment. This attitude explains why we succeeded in creating a dysfunctional, unsustainable health care system that surprisingly poisoned the waters for a single payer system, too. The next health care reform needs to be less political and more honest.
If society wants to subsidize high-risk pool, chronic care, and low-income customers than it is society’s responsibility. Trying to get the smallest insurance market with the most price sensitive insurance customers to pay a disproportionate share of the cost is just plain foolish. The government should make the rules in markets they are paying the majority of the cost. Let’s start calling the subsidized market what it really is, Medicaid Plus. Let the individual insurance market have the flexibility to go back to being the spearhead of health care cost control for healthy people. Let’s make health care great again for the customers.
Unbridled Wealth Redistribution Breeds Corruption
There is nothing that says health care policies are not working than 13% annual increases in health insurance premiums for healthy people. My wife and I have not had a health insurance claim in over two decades and until this year we had a grandfathered health insurance plan. Since our health insurance plan and health status did not change, we have to conclude that unbridled wealth redistribution leads to cronyism and corruption. The insurance companies raised the rates because they could get away with it. What options did we have? Some people might call that an unintended consequence of the ACA, I call it cronyism. At some point the customer has to say, enough is enough. Not only did our most recent grandfathered health insurance premium exceed 8.05% of our adjusted gross income but so did every ACA plan. I am 63 years old. For the first time in my life, I can not find affordable health insurance. Sadly this is the ACA’s most important accomplishment.
Unbridled Wealth Redistribution Versus The Healthy Customer
This embrace of unbridled wealth redistribution has corrupted the only market that had any resemblance of a well-functioning market. The only way the ACA health exchanges would succeed at attracting healthy customers is if they offered affordable health insurance. Putting healthy customers in the same market as high-risk pool and subsidized customers was probably too much to ask. Where the subsidized customer is not price sensitive, the healthy customer is. The ACA health exchange is meaningless to the healthy customer if every health insurance plan costs more than 8.05% of a person’s adjusted gross income. It did not have to be this way. The ACA chose to leave cost control to the next administration.
Making Markets Work For The Healthy Customer
In 2015 my wife and I came to the conclusion that the health care industrial complex would not willingly change their ways so we started building up our HSA. At the end of 2016 I asked our insurance company if they would offer me a lower rate. They declined and we chose to drop our health insurance. The markets are working, the customer has spoken, and our health policies are dysfunctional. Although we are nervous about our choice, we think we can do a better job managing our health care than the health care industrial complex. It is amazing how fast the money builds up when you divert your old health insurance premium amount into a savings account. I am mildly optimistic we can get better health care advice for non-emergency room treatments if we tell our health care providers that we are a cash customer. Every month we get by without a cancer diagnosis makes us a little more confident we made the right decision. If the insurance companies want us back all they have to do is show us an affordable health insurance plan!
I posted this comment to David Henderson’s article When You Lose Something You Don’t Want, Is that Really a Loss?
Last December we decided to drop our health insurance. Our reasoning was pretty simple. Which would make us feel more financially secure, health insurance or an extra $7,500 per year in a savings account?
We did think it through. My wife and I have not filed an insurance claim in over twenty years. We are the perfect health insurance customers so why not take advantage of our good health?
1. Since 2011 our health insurance has increased 13% annually. Medical cost inflation was around 5% annually over the same time period. It sure looks like the health insurance companies were raising rates because they thought they could get away with it.
2. The lowest cost bronze plan for my wife and I exceeds 8.13% of our income. It also was considerably more expensive than our grandfathered health insurance plan which also failed the affordability test. Even though the lack of affordable health insurance makes us exempt from the individual mandate, we are reminded that the ACA failed at its most important mission, affordable health care. When will the ACA or the AHCA start working on this problem?
3. For most of my life, I thought that health insurance was a no-brainer. The ACA completely reversed my position. I no longer believe that giving more money to the healthcare industry is beneficial or compassionate. Although some people maintain that health insurance is the same thing as healthcare, this insularity to healthcare costs bothers me. The politics of the situation has made it easier for the healthcare industry to ignore better-valued healthcare options. As an example when I asked my insurance company for a lower price, they said, “we do not do that”. They could not seem to grasp that healthy people do not want health insurance the same way unhealthy people do. Healthy people tolerate the cost of health insurance up to a point and then they start looking at alternatives in the same way they might change auto insurance. Healthy people are different and the health insurance exchanges are not sustainable without them.
4. How do we send a message to the healthcare industry? Our choice has been to hit them in the pocketbook. We are not trying to be heroes. Their loss is our gain. Every month my wife and I get by without a major medical expense, we win and they lose. It takes only a few months of savings to cover the AHCA pre-existing illness penalty. After a year or so we are in pretty good shape to cover most major medical expenses outside of cancer. At some point, the insurance companies will realize that chasing away their best customers is bad for business.
One of the greatest ironies about the Affordable Care Act was that it whiffed on providing affordable health care. Any idiot can expand Medicaid without paying for it. It takes a savvy group of politicians to bend the cost curve in a sustainable way. The key to sustainability was to focus on the unsubsidized health insurance cost.
The Hidden Health Insurance Goal
The Affordable Care Act supporters did believe in the importance of affordable health care. In fact, they had a very specific goal for affordable health insurance. When you go to healthcare.gov it says that if the lowest cost Bronze-level plan available to you through the Marketplace is more than 8.13% of your household income then your health insurance is unaffordable. This implies that since the Marketplace subsidies cease at 400% of the federal poverty limit(FPL), the lowest cost Bronze-level plan should cost no more than 8.13% of the 400% FPL. As an example for a two person household, the lowest Bronze-level plan should cost no more than .0813 times $64,080 or $5,209.70 per year. This rate is not unreasonable. A couple of years ago my grandfathered health insurance plan cost that much.
Affordable Health Insurance For The Middle Class Means Affordable Health Insurance For Everyone
My Health Inflation
As a healthy family who not filed an insurance claim in twenty years, I find it exceeding odd that I cannot find affordable health insurance. As an example when I priced health insurance in the Marketplace last October, the lowest cost Bronze-level plan would cost me $12,696 per year. Even my grandfathered health insurance plan exceeds the 8.13% limit. The cost control performance of the Affordable Care Act remind me of the Zig Ziglar quote,
You hit what you aim at, and if you aim at nothing you will hit it every time.
The canary in the coal mine is those healthy people purchasing unsubsidized health insurance and yet this is the group that is most likely to be taken advantage of. When I look at five years of 13% increases in my health insurance premium, I feel like my insurance company took advantage of my situation. When I look at the $12,696 premium from the Marketplace, I feel like the government and the insurance companies conspired to take advantage of my situation. The Urban Institute has offered some ideas on fixing the Affordable Care Act such as a premium cap at 8.50% of income and an individual mandate modeled after Medicare. The premium cap at 8.50% of all income is a step in the right direction but I prefer 8.13% of the 400% FPL. Since I do not think the Affordable Care Act supporters and insurance companies have been honest with me over the last five years, I think the only way we can keep these folks honest is to have no mandate. Frankly, I have not found any Medicare participants who like their mandate so why push this headache on the rest of the population? The most pragmatic solution for me is to self-insure even though healthy, unsubsidized people are the foundation that allows us to offer affordable health insurance to everyone. If the Affordable Care Act had any redeeming value to the middle class, I do not see it in this graph. We did not get more affordable health care.
Life expectancy vs. health expenditure over time, 1970-2014
As part of the 21st century Cures Act health reimbursement accounts(HRA) were restored for small businesses yesterday. Qualified small employer health reimbursement arrangements are now exempt from the Affordable Care Act group health plan requirements. Without the exemption the small businesses using a HRA would face severe penalties for having a non-compliant “group health plan”. The small business I work at terminated their health reimbursement account at the end of 2014. They replaced it with a monthly cash bonus.
Will Health Reimbursement Accounts Make A Comeback In 2017?
My boss indicated that he would like to offer a Health Reimbursement Account in 2017. Potentially this sounds like a good deal even if we have to give up our bonuses. Pretax money goes about 20% farther. The problem is in the details.
- What happens if you have a subsidized health insurance plan purchased through ACA exchanges? Zane Benefits implies that HRA payments will lower the premium tax credit. If the HRA amount is greater than the premium tax credit the employee will get a small benefit. Otherwise the only beneficiary is the government.
- What happens if an employee wants to self-insure? Zane Benefits implies that the employee needs an ACA compliant health insurance plan to claim qualified out-of-pocket medical expenses.
I was thinking about Paul Krugman’s claim that the Affordable Care Act is saving us money when I remembered a graph I made in 2014. My graph showed the life expectancy at birth vs. health spending per capita for various countries in 2011. An updated graph should show the progress the Affordable Care Act made at saving us money.
Did The Affordable Care Act Make Our Health Care Costs Better Or Worse?
According to the OECD the United States spent $8,508 per person in 2011 to achieve a life expectancy of 78.7 years. In 2013 the United States spent $8,743 to achieve a life expectancy of 78.8 years. This means we spent an extra 2.7% to achieve a 0.1% gain in life expectancy. For the amount of money the United States is spending we should expect our life expectancy would be 84.6 years. When you compare these numbers to a country like Denmark it looks like we got a really bad deal. Denmark spent an extra 1.2% to achieve a 0.6% gain in life expectancy. The United States spent way too much money on health care in 2011 to achieve average health care outcomes. The Affordable Care Act was going to fix that problem by creating affordable health care. The graph below shows that this ratio is still way outside of band of developed countries in 2013. Using these simple metrics the Affordable Care Act made our health care cost problem much worse.
OECD Life expectancy at birth vs. health spending per capita
One of my Affordable Care Act pet peeves is the claim that it is saving us money. As an example Fortune said it this way in the article, U.S. Will Spend $2.6 Trillion Less on Health Care Than Previously Estimated.
The United States will save about $2.6 trillion on health care expenses over a five-year period compared to initial projections made right after the passage of the Affordable Care Act.
Cost Savings Or A Bad Estimate
The trick to understanding the Affordable Care Act cost savings is the qualification, “than previously estimated”. If there are actual health insurance savings than we should see the cost curve bend. When we use 2011 as our benchmark health insurance inflation metrics tells us a different story. The cost curve did not bend. Health insurance inflation was largely unaffected.
My Health Inflation
Something strange happened this weekend. My health insurance company sent me a letter saying they could continue my grandfathered health insurance plan with them as long as I was happy with a 13% increase in my premium. I threw it out on the counter for my wife to look at. Her gut reaction is to screw them. It is a natural reaction from someone who is still reacting to the misinformation that “you can keep your health care plan if you like it”. Since I did not expect my insurance company to offer my grandfathered health insurance plan in 2017 I had to think.
My previous health care plan for 2017 was based on my presumption that my grandfathered plan would not be available. Despite the craziness of the Affordable Care Act it still makes sense for an insurance company to attempt to keep the perfect customer in the program. The problem is that for the last five years I endured 12% increases despite never making a claim. Now that I have over $5,000 in my Health Savings Account I can be more aggressive about the price I would self-insure. The fact that the lowest cost bronze plan from the exchange is much worse than my current plan is not relevant except that it makes me exempt from the individual mandate. The Health Savings Account with an extra $6,500 in my savings account is a very attractive health care strategy. At what price would my grandfathered health insurance plan be attractive?
Did The Affordable Care Act Screw Up The Health Insurance Market?
Medical Care Inflation
Recently I came across a chart over on the Health Care Blog that summarizes my problem. If my health insurance had increased at the inflation rate for medical care(~3.2% annually since 2011) my health insurance would be well within my boundaries for affordable health insurance. It did not. If my health insurance premium in 2011 was the fair market price then you have to wonder why my health insurance did not increase at a rate closer to 3.2%. Were the 12% annual increases an unintended consequence of the Affordable Care Act meddling with the health insurance market for healthy people?
My Revised Health Care Plan For 2017
Since I was already outside my boundaries for affordable health insurance in 2016 the question is what price would lure me back in for 2017? My plan is to ask my insurance company if they would accept a 0% increase. If they accept my proposal we will continue with our health insurance and putting additional funds in our Health Savings Account. If they reject my proposal we will self-insure.