Healthcare

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New Study Shows Obamacare’s Impact on Ohio Coverage and Premiums

As a resident of Ohio and purchaser of individual health insurance, I am particularly interested in how Ohio is impacted by the Obamacare reforms. In a previous post this year I performed a simple price check of similar health care policies in Ohio and in Massachusetts using my family information. Massachusetts was chosen as a proxy for Obamacare. The policy in Ohio would cost me $305 a month and $1,296 if I lived in Massachusetts. I tried and failed to find an extra benefit offered in Massachusetts plan was necessary for my family. My conclusion was that the higher rates required in Massachusetts were an income redistribution scheme that resembled a tax more than a traditional insurance plan. The Milliman report linked below provides additional evidence that the expected individual policy rate hikes are more about bringing more money in to the insurance companies than providing benefits for policy holders. As a purchaser of health insurance for over 30 years, health insurance has gotten progressively worse in benefits for the cost as it has migrated to a more tax like system. The idea that we are trying to model our national health care after a state in which all of their  people paying $1,296 a month or higher for their health insurance is not rational since the rest of the world is paying half that amount. If $1,296 a month is the best Massachusetts can do, than we need to pick a different state to model our health care after. Health care as a tax is not working. If we assume that Obamacare will fail because of insurance rates that are too high, then our national health care plan should be modeled after the individual insurance policies offered in Ohio, essential services offered at a reasonable rate.

Americans knew the negative impact Obamacare would have on the nation before the law even passed. Millions of Americans will be added to Medicaid, which already provides low-quality coverage and patchy access to care. The new law will not result in universal coverage, despite its $1 trillion+ price tag. Premiums will go up. And Americans who like their current health plans will not be able to keep them.

Now, states are beginning to better understand the impact of Obamacare. Earlier this month, Gorman Actuarial and Jonathan Gruber reported on Wisconsin residents’ moving out of existing coverage and experiencing premium hikes.

Milliman, an independent consulting firm, recently released its findings on the law’s effects in Ohio.

Greater dependence on government coverage. The most striking finding of the study is the expansion of taxpayer-funded, public health care programs under the new law. Before Obamacare, enrollment in Ohio’s public health programs, including Medicaid, was a little more than 2 million. Now, Ohio (and federal) taxpayers will be picking up the tab to expand these public health programs by 52 percent. Of the more than 1 million state residents added to these programs, more than half had coverage before the law passed, and only 47 percent were uninsured in 2010.

Though Obamacare expanded Medicaid by as many as 25 million Americans and created a new health entitlement, millions of Americans will still go without coverage. In Ohio, only 53 percent of the uninsured will have coverage in 2017, when all the provisions of the law will be in effect. Real health care reform could expand coverage for those who are currently uninsured without these negative consequences, and with better success than Obamacare.

Escalating premiums. The Milliman study also shows across-the-board increases in premiums resulting from the new law, on top of customary growth due to medical inflation. Premiums will grow by 3 percent to 5 percent in the large group insurance market, 5 percent to 15 percent in the small group market, and a whopping 55 percent to 85 percent in the individual market. As the authors point out, these numbers represent the estimated average premium impact and will vary based on age and health status. According to the report, “In the individual market, a healthy young male…may experience a rate increase of between 90% and 130%.” At the same time, older and less healthy individuals could see a decrease.

Premium increases will result from a number of policies and effects of the new law. These include new benefit requirements, age rating, and other types of requirements placed on insurers. They also include shifting of costs by providers from publicly covered individuals to the privately insured; the authors warn that “The significant expansion of the Medicaid population may result in increased charges to commercial payors to account for low provider reimbursement under Medicaid.”

The impact of Obamacare on Ohio is clear: The huge expansion of government-run health care will raise costs for state residents by increasing taxpayer funding of government health care programs and by escalating health care costs. The Milliman study is the latest reminder of why Obamacare must be repealed.

New Study Shows Obamacare’s Impact on Ohio Coverage and Premiums
Kathryn Nix
Mon, 26 Sep 2011 22:30:06 GMT

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Some Employers Already Sending Workers To Exchanges to Buy Health Insurance

 

Entrepreneurs create new private marketplaces ”“ years ahead of similar exchanges called for in the health law ”“ in a move that could save employers money but continue to shift cost and responsibility to employees.

Here’s the quote that got my attention since it is an issue no one seems to be talking about but is a core piece of the healthy person insurance rate.

"Most companies are over-insuring their employees right now. We want to right-size that," says Curtiss Butler, chief marketing officer at Liazon, which also operates a private exchange.

Some Employers Already Sending Workers To Exchanges to Buy Health Insurance
Fri, 29 Apr 2011 04:31:00 GMT

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Response to The high-deductible plans in the Affordable Care Act

I posted this as a comment to Ezra Klein’s post, The high-deductible plans in the Affordable Care Act. My complaint with his post is that although high-deductible plans are in the Affordable Care Act, they made them very expensive when compared to existing high-deductible plans. If this is reform, I want no part of it. The changes to high-deductible plans are bad public policy if we expect individual responsibility and market forces to reduce future health cost increases.

 

As a person with "skin in the game" I did a price check on high deductible plans in Ohio and Massachusetts and found that high deductible plans appear to be an Affordable Care Act victim. I chose Massachusetts since it is our best example of Affordable Care Act in action. The price for the lowest price high deductible plan in Ohio would cost me $305 per month and the lowest cost Bronze plan in Massachusetts would cost me $1,296 per month. That is a 425% cost increase. As a healthy family we would be paying an additional $11,892 per year. My family’s 35 years of health care expenses excluding insurance premiums is just slightly larger than one year’s insurance premium in Massachusetts and a large percentage of that amount was paid out of my annual deductible. People like me should be a health insurance company’s dream customer but evidently not in Massachusetts. So despite the fact that Massachusetts is offering a low cost, high deductible plan it is a really bad deal when compared to Ohio. If Massachusetts cannot provide health insurance at competitive rates to Ohio, it is highly unlikely that the Affordable Care Act will provide competitive rates either. As a country we spend twice what the rest of the developed countries spend on health care and we get the same health outcomes. Massachusetts spends over twice what the rest of the developed countries spend on health care. There is something fundamentally wrong about the way spend money on health care and it appears to be institutionalized in Massachusetts and in the Affordable Care Act. Affordable health care are words that were lost in translation when they wrote the Affordable Care Act.

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Romneycare a big bust – BostonHerald.com

Ouch!

As a health care plan, Romneycare is an unmitigated fiasco. It has caused costs to skyrocket, insurance premiums to soar and nonprofit providers like Blue Cross to suffer hundreds of millions of dollars in losses.

But as a political policy, Romneycare is nearly unparalleled in Republican history. It has destroyed one front-runner’s presidential hopes (Romney’s) and helped undermine an entire presidency. For, as Barack Obama’s supporters keep reminding us, Romneycare was the precursor to Obamacare.

Romneycare a big bust – BostonHerald.com

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Are Health Care Costs a Financial Bubble?

In a previous post I compared my health insurance costs in Ohio with the lowest available plan in Massachusetts. The Massachusetts health care system is our best example of a fully implemented PPACA. The lowest available plan in Massachusetts would cost me an additional $991 per month or $11,892 per year. Now I see an article that says the average family plan for a municipal worker in Massachusetts is almost $21,000. I am 57 years old and our family has not spent $21,000 on health care in our lifetime and Massachusetts municipalities are paying that each year. Either Massachusetts has considerably more sick people than healthy people or something other than health care is going on! The health care cost saga is beginning to look like another chapter to Charles Mackay’s book, Extraordinary Popular Delusions and the Madness of Crowds.

WBUR: Report: Health Coverage For Municipal Workers More Generous Than State, Business Plans

 
The rising cost of health insurance is squeezing municipal budgets across the state. … The average family plan for a municipal worker is almost $21,000, 37 percent more than coverage companies buy, according to the report from the Boston Foundation and the Massachusetts Taxpayers Foundation (Oakes, 4/5).

State Roundup: Report Urges Mass. City Employees To Pay More Health Costs
Tue, 05 Apr 2011 13:12:00 GMT

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Economics of Privately Sponsored Social Insurance | The Incidental Economist

on Taylor who is now blogging on The Incidental Economist blog pointed out an interesting essay on the Economics of Privately Sponsored Social Insurance by Uwe Reinhardt. The interesting part of the essay for me was his definition for employer-based insurance:

Employment-based group health insurance, American style, is publicly subsidized, privately sponsored, community-rated social insurance sold to American employees on formally organized health insurance exchanges.

He goes on to make an eloquent argument that the Affordable Care Act is just like employment-based health insurance but with broader coverage. I have a couple of problems with his analysis.

  1. Most of America will probably agree that our number one health care problem is the amount we spend on health care. Our spending is double what the rest of the developed countries are spending and its growing faster than our wages. All of the economists and politicians agree this is not sustainable and our solution according to Uwe is to do more of the same! On the other hand if you think health care costs are the primary problem we need to address, it is pretty obvious that we need to do things differently. Since most of the people in this country have health insurance, the cost growth has been driven by this strange public-private concoction we call employment-based insurance. It is probably safe to say employment-based insurance cannot continue in its present form if we want to reduce health care costs.
  2. An annoying trend in health care essays like this is the assumption that health care insurance is equivalent to health care. The logical extension of this argument is that with 100% percent insurance coverage we will have perfect health. More health insurance will probably help but as Austin might say, things are complicated. Delivering good health care still has a lot of major problems other than insurance. In my favorite low income neighborhood I don’t think much will change. They are still going to the emergency room for their basic care. Infant mortality will remain high because they are not going to change their lifestyle or go to appointments.
  3. He also continues the fallacy that the healthy, uninsured people should subsidize sicker Americans. I wish it was this simple. This argument falls apart when you look at a real life example like I did. I compared health insurance rates for my family in Ohio and with health insurance rates as if I lived in Massachusetts. It would cost me an additional $11,892 per year for the lowest cost insurance available in Massachusetts. This does not make sense. I doubt we will ever get a good explanation of why Massachusetts costs so much more but it is not because we are subsidizing sicker Americans.
  4. Although Uwe speaks highly of health exchanges, I remain a skeptic. It does look like we are spending money on something the business world can do a lot more cost efficiently. I used the Massachusetts Health Exchange to come up with my estimate of health insurance costs in Massachusetts. I used www.ehealthinsurance.com to come up with the low cost plan for Ohio. The lowest plan on ehealthinsurance.com would cost me $305 per month. In fact there were 15 plans available for less than $400 and 55 plans for less than $600. I got a lot more plans from eHealthInsurance.com. So what exactly is our rationale for taking away ehealthinsurance.com’s business.
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ObamaCare and the Truth About ‘Cost Shifting’ – WSJ.com

Healthcare cost shifting is an issue that is near and dear to my heart. As a healthy person I have been practicing my form of “cost shifting” for over ten years. My health care strategy arose when I moved to Cincinnati and was unemployed. When I looked at the COBRA insurance rates and our health history, it was financially attractive for my family to go without health insurance. I did not plan to go with our insurance for so long but it worked. The two times we had major medical costs we used our “unemployed” status to negotiate lower payments. Cost shifting is not just for poor people any more!

My situation has changed over the years. Although I am now covered by a HRA at work, I still have the passion for getting the most out of my health care spending. For over twenty years while covered by a comprehensive health care plan, I exceeded my annual insurance deductible twice. Whether I was covered by insurance or not, most of my health care expenses have been out of pocket costs. So its natural that I question health care providers about costs. It is my money that is going to pay for the service. This sense that I own my health care is probably a good thing and something PPACA would like to encourage. In a strange irony, I am the type of person our health care reform needs to help drive down health care costs and the type of person PPACA wants to eliminate. I was surprised to find out a couple of months ago that the Individual Mandate and Essential Benefits provisions of PPACA take a direct aim at people like me. It seems so strange to me. How did I become the problem?

Although I have no qualms about pursuing “cost shifting” tactics as part of my health care strategy, I am confronted with a moral dilemma when it comes to “cost shifting” as a public policy. Since the primary weakness of the PPACA is in controlling health care costs, it is probably a good public policy to have a group of people with a vested interest in driving down health care prices.  On the other hand this group may be too small to have an effect on health care costs rates for the general population. The primary problem with this tactic is that the  lower rates experienced by this group may get swallowed up in “cost shifting”. Although “cost shifting” has some social benefit for the poor, it can be used by health care providers as a tactic to avoid change. I assumed that “cost shifting” with uninsured patients was a significant cost driver to health care cost growth. In today’s Wall Street Journal article, John Cogan, Glenn Hubbard, and Daniel Kessler express the view that “there is no credible evidence of a cost shift of any substantial evidence”. This would partially explain why the individual mandate has not reduced insurance rates in Massachusetts when I compared them to Ohio. Unfortunately this leaves the justification for an Individual Mandate and what constitutes “essential services” on shaky grounds. If the Individual Mandate is essential to health care reform, then it should have a significant effect on health care costs. In the case of Massachusetts, the Individual Mandate appears to have an insignificant effect. The Individual Mandate and Essential Benefits may have an effect on health care quality but I doubt anyone will presume that these quality improvements are essential to health care reform. It would be nice to have these quality improvements but they are not essential. It follows that “essential services” must be primarily linked to controlling health care cost growth. This brings me back to the same old question, “Why is the Individual Mandate and Essential Benefits necessary to health care reform if they are not lowering insurance rates?”

Here is some of the more pertinent parts of the Wall Street article.

But how strong is the evidence for this proposition? Our review of the research has found that there is no credible evidence of a cost shift of any substantial consequence, either within state boundaries or across state lines. Moreover, the new law will likely generate more cost shifting””the opposite of what its supporters would have us believe.

There are, surprisingly, few peer-reviewed studies of the magnitude of alleged cost shifting at the national level. A study conducted by George Mason University Prof. Jack Hadley and John Holahan, Teresa Coughlin and Dawn Miller of the Urban Institute, and published in the journal Health Affairs in 2008, found that so-called cost shifting raises private health insurance premiums by a negligible amount. The study’s authors conclude: "Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurance." For the typical insurance plan, this amounts to approximately $80 per year.

The Health Affairs study is supported by another recent peer- reviewed study that focused exclusively on physicians. That 2007 study, authored by Massachusetts Institute of Technology economists Jonathan Gruber and David Rodriguez and published in the Journal of Health Economics, found no evidence that doctors charged insured patients higher fees to cover the cost of caring for the uninsured.

Where did Congress go wrong? We traced its estimates of the magnitude of the hidden tax of $43 billion per year, or an increase in family premiums by an average of $1,000 per year, to two sources””the aforementioned Health Affairs study, and a non-peer-reviewed study commissioned by FamiliesUSA, a Washington, D.C., group long known for its advocacy of greater government involvement in health care. Yet Congress simply ignored the evidence in the Health Affairs study and failed to recognize the serious flaws in the FamiliesUSA analysis.

Specifically, Congress ignored the $40 billion to $50 billion that is spent annually by charitable organizations and federal, state and local governments to reimburse doctors and hospitals for the cost of caring for the uninsured. These payments, which amount to approximately three-fourths of the cost of such care, mitigate the extent of cost shifting and reduce the magnitude of the hidden tax on private insurance.

ObamaCare and the Truth About ‘Cost Shifting’ – WSJ.com

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Steal this talk | The Incidental Economist

Here is a great resource for the key issues in health care reform. Nice job Austin!

Last fall I posted slides for my talk on the challenges presented by our health care system. In preparation for giving it tonight in my community and twice more at the University of Chicago and MIT, I’ve updated the slides. In particular, I’ve inserted a bunch on market power-related issues. Go ahead, steal them, and put them to good use:

Click here for PDF version of slides

Click here for Power Point version of slides

Steal this talk | The Incidental Economist

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Why Hospital Price Quotes Are So Often Useless

A co-worker of mine is in the process of finalizing his quote for the hospital costs for his second child. He is using the same hospital that he used for his first child. For the first child he was charged $15,000 by the hospital but he eventually settled for a lower amount when he started making “good faith” payments. This time he will get a package that includes pre-natal exams, ultrasounds, and delivery costs for $2,400. If his wife requires a c-section then it will cost an additional $2,600. The hospital requires that he not be covered by health insurance and that he pays the fee up front. His plan is to drop his insurance and pick it up after the birth.

Why Hospital Price Quotes Are So Often Useless.