Friday, July 13, 2012

Ten Questions on Health Care Reform

Hello readers!

Knowing what a brilliant and well-informed bunch you all are, I'm hoping you can help with something. Is there somewhere out there a good critical assessment of the specific provisions of the Affordable Care Act?

I don't mean an explanation of why single payer would be better. It would be better, much better, I know! But we also need to be able to talk to people about the law that passed. What is our best guess about how, concretely, it will affect access to health care, and the distribution of costs?

For just-the-facts, you can't do better than the Kaiser Family Foundation -- their comprehensive summary of the ACA is here. And of course there's the Congressional Budget Office's reports, which include estimates of the impact on insurance status. But there are lots of more specific issues it would be nice to have an informed opinion on.

Here are some questions I'd like to see answers to:

1. What happens to people who still don't have insurance? According to the CBO, even when fully implemented the ACA will leave over 20 million people -- 8 percent of the population; 5 percent excluding undocumented immigrants -- without health insurance. (Universal coverage, it ain't.) What about these people's access to health care? What happens when they show up at the emergency room? 

2. How will health insurance costs change? The exchange subsidies cover any premium costs above a certain fraction of income, which ranges from 2 percent for households at the poverty line up to 9.5 percent of income for households at 400% of the poverty line. Above that, no subsidies. There are additional subsidies to reduce out of pocket costs, again phasing out at 400% of poverty. It looks like enough to reduce the costs of insurance for everyone eligible for subsidies, but for people above the 400% FPL line, it all depends on what happens to premiums. There is some language in the law about limits on premium increases, but since that is supposed to happen at the state level, one is entitled to doubts. Anyway, I would like to see numbers -- this would seem like a good way to make the public case for the law, though since the biggest benefits go to low-income people, maybe not.

3. How much will safety-net hospitals be hurt by the cuts in their funding? One of the less-discussed provisions of the law is its deep cuts in support for hospitals serving large numbers of uninsured patients, mainly Disproportionate Share Hospital (DSH) Medicaid and Medicare funding and Graduate Medical Education (GME) Medicare funding (which in practice goes mainly to hospitals with lots of poor patients). Medicaid DSH payments fall by about half under the law and Medicare DSH falls by 75 percentit appears that cuts to GME will further reduce total Medicare payments by close to 10 percent for big-city hospitals. In theory, this will be compensated by many of these hospitals' currently uninsured patients becoming insured, but it's not clear that this will fully make up for the cuts, especially for hospitals that serve large numbers of undocumented immigrants. Which leads to...

4. How will undocumented immigrants be affected? As far as I can tell, documented immigrants will get the same benefits as citizens. Undocumented immigrants will of course get nothing. Since there will be less funding for health care for the uninsured, and since some employers will reduce health benefits, it seems likely that undocumented people will be worse off as a result of the law. 

5. How will employer-provided health insurance change as a result of the law? Since low- and moderate-income workers will have access to subsidized insurance through the exchanges, and since the penalty for employers who don't offer coverage are trivial, it seems likely that many employers will reduce or eliminate health benefits as a result of the ACA. On the other hand, there are subsidies for small employers and a temporary reinsurance program to reduce costs for insuring older workers, which push the other way. Of course even if employer coverage does fall as a result of the ACA (the CBO guesses it will, but just slightly; some people think it will, by a lot; in Massachusetts it hasn't at all), that's not necessarily a bad thing.

6. Will better insurance mean better access to care? Massachusetts' 97 percent coverage is one of the more hopeful signs for the future of the ACA. But living there, I often heard stories about people who got subsidized insurance but couldn't find doctors who accepted it; this is a long-standing problem for people with Medicaid as well. Plans on exchanges are required to have an "adequate provider network," but what will this mean in practice? Is there any way of quantifying how big the gap could be between the number of people who gain insurance, and the number who gain reliable access to care?

7. Was the individual mandate really needed? Liberal conventional wisom is that without the mandate the whole thing falls apart. I've never bought the conventional "adverse selection death spiral" argument, both because when states have implemented community rating (the same price for health insurance for everyone) it has not led to the collapse of their individual health insurance markets, contrary to the death-spiral theory; and because the theory hinges on people who don't buy insurance having lower expected health costs than people who do, which I doubt. Then there's the other argument, that it's not about adverse selection, but about people delaying getting insurance until they have health problems. This is more plausible but I'm skeptical of that one too. Anecdotally, the one time I've been to a hospital in recent years (I was hit by a car while biking to work), the first thing the paramedics asked me in the ambulance was whether I had insurance, presumably to decide where to take me; in that situation the right to buy insurance would not have been a good substitute for already having it. And of course may people want insurance to pay for routine care. But maybe I'm wrong about this. I'd love to see a good case for the need for the mandate that doesn't -- as they all seem to -- just argue deductively from first principles.

8. How do the limits on medical loss ratios compare with the status quo? I recall people arguing that a big sleeper provision in the ACA was the requirement that medical loss ratios (the share of premiums paid to providers) be at least 85 percent for large-group plans and 80 percent for small-group and individual plans. This is already supposed to be in effect; is it binding?

9. Are state level single payer plans (or public options) feasible? Another sleeper provision is Section 1332, which allows states to devise their own plans for using the total subsidies available under ACA to achieve a higher level of coverage. In principle, this opens the way to pass state-level single-payer plans, as in Vermont. Are there non-obvious obstacles to pursuing this elsewhere?

10. What happens to insurance outcomes if states opt out of the Medicaid expansion? Half the ACA's reduction in the numbers of uninsured comes from the Medicaid expansion, and presumably a large part of that is in states where opt-out is likely.

I'm sure there are a lot of other important issues I'm missing -- this isn't my area and I haven't been paying careful attention. What I'd like to see is a good critical assessment of what the ACA is actually likely to achieve, for better or worse. Ideally from a left/progressive viewpoint, skeptical but not implacably hostile. Unfortunately debate on our side has become so polarized that that may be hard to find -- all the people one would normally turn to seem to be either denouncing or defending the law in its entirety. Still, there's got to be something out there, right?


  1. 5. How will employer provided health insurance change as a result of the law?

    It would be nice to be able to statistically track this kind of thing nation wide, but my small business is in the process of "renewing" our medical insurance now. Renewing is an annual exercise of trying to find a carrier who screws you the least while allowing the greatest continuity in primary care physicians across the staff. We change carriers almost every year, but this year is special.

    This year Empire Blue Cross, the largest carrier in the New York City market has essentially said bend over to everyone who is serviced by them ( I use "serviced" here in the same sense owners of mares us it with regard to stud fees): all new plans begin with a $4,000 deductible. This means you pay almost $1,200 a month for your family and you get NO BENEFITS WHATSOEVER until you are out of pocket $4,000. And full coverage does not start until you are $10,000 out of pocket for an individual or $30,000 for a family.

    My take, this a pure rent grab: everyone has to buy this stuff now so dominant players are in the price setters position and with no down side: once they've squeezed the last disposable income from "beneficiaries", if that work has any meaning remaining, the government subsidy kicks in.

    To summarize, just this year they want our rates to go up about 20% and for our office, based on last years usage, ALL COVERAGE IS EXCLUDED because none of us spent that kind of deductable. All hail the oligopoly that will now use the ill and infirm once they are drawn as thin as as a straw to suck money directly from the government.

    1. And then there is this:,0,5878835.story

    2. Thanks for this. This discussion would benefit from hearing more from purchasers of small-group plans.

      That said, the PPACA contains a number of provision which are *supposed* to cover abuses like these. There are specific limits on out-of-pocket costs, and then there is the global limit on medical loss ratios, which should ensure that they can't offer worthless products like this in the aggregate, tho it doesn't of course prevent it in individual cases.

      The question in my mind is how enforceable these regulations will be. The big problem with continuing to rely on private insurance, it seems to me, is not the handout to eh insurance co.s (I could live with that) but the fact that it actually puts a much more difficult burden on the public sector than simply administering an insurance program will be. The law contains a lot of very detailed controls on insurance company practices that if enforced properly would deal with most of the issues you raise. But that they will all be enforced properly seems to ask for an almost superhuman performance from regulators.

    3. Very good comments. With regard to the "supposed" limits that are coming into effect, as I understand it they will kick in next year: thus BCBS appears, this year, in New York, to be trying to clear everyone with significant expenses off its plan. Nice to start life in a tighter regulatory environment with fewer costs.

      The larger issue of the complexity of the imposed system, however, in my humble opinion as a purchaser (business owner), is that actual users of the products are unlikely to be able to access many of the supposed benefits due to the informational asymmetry between carriers and users. This will be an even bigger issue for those forced or subsidized into purchase of individual plans. The combined weight of Oxford, Aetna, BCBS and the others will simply be too much for individuals to impose any real claim.

  2. Please don't think I'm shilling for the insurance companies! They get no sympathy from me. That said, I think the numbers mostly support their contention that they (mostly) are passing along increases in the cost of health care provision--they aren't gaining increasing profit rates with their increasing insurance rates.

    This is one of the feeblenesses of the Romneychusetts and Obamacare forms of health care reform: they increase access semi-directly, but their attempts to reign in health care inflation are almost entirely and severely indirect, by way of the insurance "middle man." Under the federal program, insurance companies must get bureaucratic authorization for significant rate increases and insurance companies are restricted in the amount of their revenues they can keep as profits. The idea is that the insurance companies will, in turn, put the squeeze on providers (doctors, hospitals, pharma, device makers) to slow down cost increases. Maybe that'll work -- how's it played out in Mass? (That's an honest question, not rhetorical, based on good old ignorance.)

    The obvious flaw that comes to my mind is that the insurance companies either can't or won't bother to squeeze the providers hard--they have a legally authorized profit rate (kind of like a regulated utility) and they can always go to their version of the rate board and plead "passing on costs" to raise customer rates in order to maintain profits with or without cost concessions from doctors etc.

    Whereas with a single payer, that monopsonist is definitively in a powerful position to hold down costs, if it so chooses.

    1. PS: I did not mean the second-to-last paragraph to be a prediction of failure, only the explanation of a way that failure to hold down cost inflation might occur.

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  6. Medicaid DSH payments fall by about half under the law and Medicare DSH falls by 75 percent; it appears that cuts to GME will further reduce total Medicare payments by close to 10 percent for big-city hospitals. In theory, this will be compensated by many of these hospitals' currently uninsured patients becoming insured, but it's not clear that this will fully make up for the cuts, especially for hospitals that serve large numbers of undocumented immigrants. Which leads to... James

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