Obamacare Sinking The Middle Class

Healthcare LunchboxAfter listening to Episode 49 Obamacare Sinking? Why, It’s Just a Flesh Wound, Says Krugman! I felt compelled to add my two cents.  Although I have not written about the Affordable Care Act in a long time I have not given up hope for meaningful health care reform. Just last week after a little prodding from Ross Kohler of ZaneBenefits I sent emails to my senators asking for their support for The Small Business Healthcare Relief Act [H.R.5447/S.3060].  The odds of it passing are up to 39% on govtrack.us! I remain optimistic for healthcare reform in the same sense as Jonathan Tepperman is optimistic in his TED talk, The Risky Politics Of Progress. He lays out a framework that worked for several previously intractable issues. I am afraid that with this issue we will have to wait for the collapse of the health exchanges before we will find the political motivation to make meaningful bipartisan changes. Think of it as the first step in a Twelve-step program for health care reform.

My comment to Episode 49.

As a middle class person who was hurt by the Affordable Care Act I was disappointed that Mr. Krugman did not reach out to the middle class with some better ideas. My annual health insurance premium went from $3,732 in 2011 to $6,564 in 2016. The lowest cost bronze plan for 2016 was going to cost me $12,300. I do not need a Nobel prize in economics to figure out that I am much worse off in 2016 than I was in 2011. For a person who has not filed a health insurance claim in this century, I lay the blame on the Affordable Care Act.
Since it is highly likely that my grandfathered health insurance plan will not be available to me in 2017, next year I am confronted with an interesting dilemma. The IRS says I should spending no more than 8.05% of my income on health insurance. That means the lowest cost bronze plan will be affordable for when I start earning $152,795. Sadly I am not earning anywhere close to that number. In an ironic twist since there are no health insurance plans available from the exchange that are affordable to me, it appears that the Affordable Care Act is recommending that I should be uninsured and enjoy my exemption from the individual mandate. I am not sure which universe Mr. Krugman is living in but the lack of affordable health insurance in the exchange is more than a bump in the road to the average middle class person. For the first time in my forty year career I will not have affordable health insurance available to me. Is this the Affordable Care Act good news Mr. Krugman was referring to?

Health Care Strategies for 2017

Healthcare LunchboxSince it is highly unlikely that my grandfathered health insurance plan will be offered to me next year, I have been looking at various health care strategies for 2017. I see two options available to us, self-insurance or figuring out a way to get subsidized health insurance.

  1. Our favorite option is to self-insure from 2017 until 2019 when we become eligible for Medicare. The reason we are self-insuring is because health insurance from the exchange is greater than 8.05% of our adjusted gross income. The good news is that we are exempt from the individual mandate tax because health insurance is too expensive. In 2016 we are on schedule to max out our Health Savings Account(HSA) contribution. Assuming that we do not have any significant medical issues before 2017 we will start the year out with about $10,000 in the HSA. In 2017 we plan on depositing an amount equivalent to our current health insurance premium, $547, into a savings account. Ideally it would be a HSA since a HSA account should be completely flexible. Under current regulations people who self-insure are not allowed to contribute to a HSA. If we run into a major medical issue we will either pay it, delay treatment until we can get health insurance from the exchange, or use an interim health insurance plan to tie us over until we become eligible to purchase insurance from the exchange. If we can make it through 2017 without a major medical issue, we could enter 2018 with about $16,500 in savings for medical care.
  2. An option I have not fully evaluated are strategies to reduce my taxable income below the subsidy threshold(4 times the Federal Poverty Limit). If we both contributed to a traditional IRA then our Adjusted Gross Income might qualify. Even if we qualified for a health insurance plan through the health exchange, I am not sure it we would buy it. My grandfathered health insurance plan has a $3,000/$5,000 deductible. This means I need to dedicate about $5,000 of my emergency fund to health care costs. When I look at the health insurance plans on the exchanges, they had much higher deductibles, $6,500/$13,000.  In this case I should have about $13,000 in my emergency fund. If you have only $10,000 and are healthy, it probably make more sense to use our health care money to build up the savings until we exceed $13,000 money and then use an interim health insurance plan to tie us over until the next health insurance exchange enrollment period.

 

Affordable Care Act And The Cadillac Tax

Here is a nice story about the Cadillac Tax provision of the Affordable Care Act. Although I am not affected by the Cadillac Tax I found the video clips of Mr. Gruber and Mr. Emanuel to be particularly insightful at explaining why lying and deception was necessary to pass the Affordable Care Act. Since most of America expected that passing the Affordable Care Act would result in more affordable health care, it would have been wiser if these two men spent more of their time thinking of ways slow down health care cost increases rather than gloating over how they pulled one over on the American public.

ACA Exchanges Appear To Be Morphing Into High Risk Pools

As I have said in the past unless health insurance exchanges changed their ways and started to offering affordable health insurance to the un-subsidized healthy people they were going to morph into high risk pools. It appears that Brian Blase and I agree on this matter. In a recent article posted on Forbes and the Mercatus Center he highlights some of the problems that are worth repeating, enrollees are poorer, enrollees are  older, and un-subsidized healthy people are not signing up.

Takeaway #2: Enrollees Skewing Much Poorer Than Expected 

The table below shows enrollment by income group in 2015 and 2016 contrasted to the Urban Institute’s projections of 2016 enrollment made in January 2015. The table shows that exchange enrollees are much poorer than Urban expected. Other groups, including CBO and Rand, also made large errors with this projection. For example, when the law passed, Rand projected that nearly half of exchange enrollees would be unsubsidized when the law was fully implemented.

 

As a healthy person who is exempt from the individual mandate because I cannot purchase health insurance from the exchange for less 8.05% of my salary, I have indicated that I will go without health insurance in 2017 because saving the equivalent of my 2016 insurance premium into a savings account gives me better bang for my healthcare buck than paying exorbitant premiums for insurance I will unlikely use when it has a $10,000 deductible. With the lowest cost 2016 bronze plan costing $1,025 a month, this is up 78% over my 2016 grandfathered plan and 229% over my 2011 premium of $311. Not surprisingly Brian says it differently but the result is the same.

Unless people receive extremely large subsidies or have very expensive health conditions, buying exchange plans generally makes them worse off than remaining uninsured. As a result, the exchanges appear to be morphing into high risk pools for people with income less than twice the FPL. Simply put, it now appears that there is a significant risk that the ACA, without major change, may lead to the destruction of the individual market for health insurance.

The Health Exchange Transformation Is Almost Complete

TransformationIsAlmostCompleteI am a firm believer that the health insurance exchange concept as envisioned by the Affordable Care Act was a bad idea that was poorly implemented. In a masterstroke of stupidity, the Affordable Care Act combined health exchanges with “high-risk pool” plans. Health exchanges work reasonably well as long as the individuals are relatively healthy and health insurance from the exchanges is affordable. Since the exchanges are market-based they are fragile and largely depend on cost, trust, and goodwill for their survival. “High-risk pool” plans have been offered for many years by states to provide coverage if you have been locked out of the individual insurance market. People who purchase health insurance from high-risk pools are actually purchasing charity health care from the government. This is a completely different product than the health insurance being purchased by healthy people. The only way this combination of health exchange and high-risk pools could work is if the unsubsidized health insurance from the exchanges continued to be affordable despite the addition of high-risk pool individuals. This is where the Affordable Care Act really screwed up. The individual insurance market is a small market and the addition of high-cost individuals has already caused health insurance premiums to soar and for the cost sensitive, healthy people to start seeking a lower cost alternative. We have already begun to see the beginning of a death spiral in the health exchange as more and more healthy people leave in response to higher insurance premiums and out of pocket costs. At some point the only people left are the high-cost individuals and the exchange is transformed back into a high-risk pool. It was when I was reading this article, Obamacare’s Cost per Beneficiary Explodes with Shrinking Enrollment, that I realized that the transformation is almost complete and the exchange in its present form will never be a properly functioning, broad-based, market for health insurance. There is no way the Affordable Care Act supporters can argue that the high-risk pool version of the exchange is a step forward. We spent a lot of money and time making an exchange that does not work and will likely never work. In order to re-establish the cost, trust, and goodwill we had before the Affordable Care Act, we have to go back and humbly offer a health exchange where healthy people matter again.

Is The $2.5 Billion Risk Corridor Shortfall A Reality Check For Insurance Companies?

Healthcare-LunchboxWhen I first heard about the $2.5 billion risk corridor shortfall in 2014 I was both happy and dismayed. I was happy because I did not believe the Congressional Budget Office estimate that the risk corridors would make the government $8 billion. It just did not make sense that the insurance companies would have excess profits from insuring enrollees who were generally older and sicker than anticipated. I was dismayed that the insurance companies would be confronted with two choices:

  1. Raise insurance rates for policies issued through the exchanges
  2. Get the middle class to pay for a bailout

Today I read an article, How Congress Stopped a Massive Obamacare Bailout, which said that Congress had looked at the “risk corridor” appropriation problem and decided last year that the risk corridor program would be budget-neutral for fiscal year 2015. Since Congress has already opted for the budget-neutral approach that makes it almost impossible to switch to a “risk corridor” appropriation method  in an election year without it looking like a bailout. That leaves insurance companies with only one alternative. They will have to raise rates to recoup their losses. Since 87% of the people in the exchanges have subsidized insurance, their cost is unchanged. It is the government and that 13% of the people who do not get subsidized insurance who will be hurt from the higher insurance rates. This is the first step of the death spiral. Maybe this is the reality check the insurance companies needed to get on board with either repealing or replacing the Affordable Care Act. It should be obvious to the insurance companies that the current system is not working and they were duped!

Why Does Medicare Cost More Than My Health Insurance?

I was reading the latest Thoughts From The Front Line newsletter, Unhealthy, Not Wealthy, and Far from Wise, and could not help wondering whether Medicare costs more than my health insurance. My wife and I are 61 years old and our health insurance premium is $479.  According to the Medicare website the 2015 “Part B” premiums is $209.80 per month for a couple earning less than $170,000. That looks nice but it is only the part of the total health care bill. According to the Medicare NewsGroup in “2011, Medicare spent a total of $549.1 billion on health care coverage for 48.7 million beneficiaries” or about $11,275 per person. This is considerably higher than what we are paying for private insurance, $4,764 per person. It sure looks like the vaunted cost efficiency of single-payer health care systems is more sizzle than steak and you have to wonder how many of these services were necessary!

John Mauldin goes on to say that Medicare costs are going to get much worse.

In July, the Medicare trustees issued a report estimating that next year’s Part B premium will have to rise 52% in order to keep the system solvent. That’s right, 52%. This will be an increase of $50 to $175 per month, again depending on your income. So much for 2% inflation.

Some supporters will agree that Medicare has not done a good job of controlling costs but then say at least it is not dysfunctional. I think they are sorely mistaken. Nothing describes how dysfunctional Medicare has become than Health and Human Services Secretary Sylvia Burwell pledging that 70% of Medicare enrollees will be exempt from the rate increase. Now I am beginning to dread the day I become eligible for Medicare because health care costs are growing faster than Social Security Cost of Living Adjustments and I will be part of the 30% who will bear a disproportionate burden of the cost increases. Someday we will have to start thinking outside of the box about cost cutting because this is not a revenue problem. Both the single-payer health care systems and the health insurance exchange rely too much on wealth redistribution. Without intelligent cost cutting to temper our health care abuses and inefficiencies,  the system continues to get more dysfunctional.

My Grandfathered Health Insurance Plan Is Alive!

I was sure that this was the year my grandfathered health insurance plan would die. Some people have had their plan canceled twice. Yesterday I got a letter telling me that the 2016 premium would be 14% higher than last year. The consolation prize is that my grandfathered health insurance plan is better and cheaper than getting health insurance from the exchange. Although we were leaning toward going without health insurance in 2016, we opted to go another year of grandfathered health insurance to build up our health savings account.

I am puzzled why my grandfathered health insurance plan is still alive. When I see a report of a $2.5 billion risk corridor shortfall in 2014, I wonder what went wrong and how the insurance companies and our government officials are going to make the middle class pay for their mistakes. Since health insurance from the exchange does not become affordable for me until I earn $146,850 a year, I assume insurance companies have given up trying to entice healthy people to buy unsubsidized insurance from the exchange.  To avoid the dreaded adverse selection scenario the only solution left is to force these healthy people into the exchange by canceling their grandfathered health insurance plans. That will not be pleasant and may have an unintended consequence. When health insurance goes over 10% of a family’s budget, self insurance looks pretty attractive for pissed off, healthy people.

Things that make me go hmm… Medicare Drumming Up Business For Health Care Professionals

Since I am not enrolled in Medicare and my birthday is in March I was surprised to get this email a few days ago. Obviously Medicare does not follow the best practice used in the business world of verifying email addresses by using a Double Opt-in process. I guess I will continue to get the other Mr. Huber’s Medicare emails until he notices that he is not getting emails from Medicare. Arghhh!

What I found particularly interesting in the email is the fine line between preventive care and what looks like Medicare going the extra yard to drum up business for the health care industry.  I am really curious whether this strategy will achieve different results than the Oregon Medicaid Experiment which showed no statistically significant impact on physical health measures despite increased use of health care services.


 

Dear WILLIAM H HUBER,

Happy Birthday from Medicare! We wish you well in the upcoming year and want to remind you of the preventive services Medicare offers to help you stay healthy.

Our records show that you have not taken advantage of some of the preventive services which are available to you now or in the future and listed in the table below. Please talk with your doctor to decide which ones are right for you.

Name Eligibility Date
ANNUAL WELLNESS VISIT 10/01/2016
ALCOHOL MISUSE SCREENING 10/01/2015
ABDOMINAL AORTIC ANEURYSM 10/01/2015
CARDIOVASCULAR DISEASE (BEHAVIORAL THERAPY) 10/01/2015
HIGH INTENSITY BEHAVIORAL COUNSELING 10/01/2015
OBESITY COUNSELING 10/01/2015
DEPRESSION SCREENING 10/01/2015
COLORECTAL 10/01/2015
PSA 10/01/2015
PROSTATE 10/01/2015
PPV 10/01/2015
DIABETES 10/01/2015
CARDIOVASCULAR 10/01/2015
PHYSICAL 10/01/2015

To see more details of the services you are eligible for, visit www.MyMedicare.gov and select “Preventive Services” under the “My Health” tab. Or, talk to your doctor for more information.

Remember, Medicare is your partner in health.

Sincerely,
Centers for Medicare & Medicaid Services.

Why Are Planned Parenthood Offices Not In Low Income Areas?

I was reading Sara Rosenbaum‘s article,
Planned Parenthood, Community Health Centers, And Women’s Health: Getting The Facts Right, in which she made this statement.

For the millions of poor women who depend on Planned Parenthood clinics, this scenario would mean the loss of affordable and accessible contraceptive services and counseling, as well as breast and cervical cancer screenings and testing and treatment for sexually transmitted infections (STIs). The assertion that community health centers could step into a breach of this magnitude is simply wrong and displays a fundamental misunderstanding of how the health care system works.

What bothered me about her statement was that I recently looked up Planned Parenthood locations in the Cincinnati area and was surprised to find that not a single one was located in one of the six highest poverty communities. Since the Planned Parenthood facilities are not in the community they purport to serve, there are several hospitals that are at least as convenient to get to as the Planned Parenthood centers. If you have to get on a bus to see a health care professional then going to a hospital should logically be your first choice. From a policy perspective if our goal is better woman health care then the money going to Planned Parenthood would probably be better spent on improving community health centers which has the advantage of convenience or improving out-patient services at local hospitals which has the advantage of greater medical resources.