Saving Obamacare

Obamacare may be changed in the near future, but not by the party that drafted it. Congressional Republicans currently seek to alter the Affordable Care Act (ACA)–otherwise known as Obamacare–by passing into law the American Health Care Act (AHCA)–coined by some as Republicare, Trumpcare, or Ryancare. While Republicare v. Obamacare compared those two bills against each other and which would deliver better care, lower prices, and lower debt to the American people, ideological endeavors should not be limited by just these two bills. Politicians and other experts have other ideas on how to make the ACA more affordable while delivering better health outcomes. Those ideas should be evaluated in the light of day so that the American people know more of the options that could possibly be on the table. While Republicans certainly will not pass more liberal health policy, it is necessary to make these ideas known so that the People can voice support for what they believe will be best for them.

As discussed in Episode 5: Saving Obamacare and The Future of Obamacare, the current law is not perfect. It leaves just under 30 million Americans still uninsured. Premiums continue to increase at rates near before the law. Deductibles remain on the same growth path as well. Young, healthy people are not enrolling in the droves needed to bring prices down. While Republicare v. Obamacare mainly laid out the Republican alternative to the ACA, Democrats and others have ideas of their own on how to reform health care.

The eternal challenge in health insurance is the following: sick people will almost always purchase insurance; they need it to survive. The more sick people who enroll will cause premiums to increase due to those people being so expensive to treat. The more that premiums increase causes young, healthy people to not be as willing to purchase insurance. The fewer young, healthy people who are enrolled in the system causes premiums to increase even further. This scenario is quite intuitively named a death spiral.

The Affordable Care Act’s Pitfalls

The ACA attempts to fight this challenge via the Individual Mandate; Americans must buy health insurance or pay a tax of 2.5% of their household income or $695 (whichever is higher as of 2016).*  The theory goes that people would rather buy insurance than pay a penalty that gains them nothing. In order to bring down the cost of insurance for many people, the ACA offers income-based subsidies to bring costs down to around 10% of household income, and 86% of enrolled individuals are eligible for subsidies.

In reality, 50% of enrollees are spending over 14.5% of income on health care with some paying up to 25% when deductibles and out-of-pocket costs are added.* Thus, the subsidies are not generous enough to make health care truly affordable for many Americans, and they definitely do not bring costs down enough to be competitive with the tax penalty for not having insurance. Furthermore, some of the uninsured population is left in a “coverage gap” by the law meaning that they are not poor enough to receive Medicaid or subsidies and not wealthy enough to be able to afford insurance.

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Thus, with this coverage gap and insufficient subsidies, many Americans opt not to purchase health insurance. Just 28% of the market consists of young people, whereas experts say that the level should be closer to 40% in order to stabilize the market.* Without enough young, healthy people enrolled, premiums continue to rise possibly in that stream of the death spiral. However, some experts say that there is not a death spiral as market enrollment continues to increase and premium growth is the same as the previous five years. Nevertheless, premiums are still growing too quickly, the uninsured rate is not 100%, and insurers are leaving the marketplace with more than 30% of U.S. counties now having a single insurer.

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It is clear that the ACA is far from perfect. Americans needs more competition and lower prices in order to truly afford health insurance. While Republicans have proposed the American Health Care Act (AHCA) in an attempt to fix some of these problems, the nonpartisan Congressional Budget Office finds multiple problems with the legislation. While the bill would lower the federal budget deficits an estimated $337 billion over ten years and while overall premiums could lower 10% by 2026, 24 million Americans would become uninsured, and premiums on poor, older Americans could rise as much as 750%. Thus, the AHCA would be far from perfect as well. While it would grant higher subsidies to younger people and attempt to lower their premiums by increasing those on older Americans, it also removes the Individual Mandate which could lead young, healthy people to simply opt not to buy insurance in larger numbers than under the ACA possibly leading to more of a death spiral. There are other ideas proposed by experts and politicians to truly lower premiums and the uninsured rate.

Potential Solutions

In health care and many other issues, there are both moderate and “radical” ideas (in relation to the U.S. political landscape). Moderates often see either fault in the radical ideas or see those ideas as sound yet near impossible to obtain in reality. They observe the political system and gridlock and determine that fundamental change would be unachievable. As for the radicals, they see fundamental change as necessary to delivering truly optimal policy no matter the political cost or effort.

A moderate idea for fixing the ACA is to maintain its main structure yet tweak the flaws. Since enticing enough young, heathy people to enroll in health insurance is the main challenge in health care and the ACA, there are a few options to combat this problem.

First, the Individual Mandate could be strengthened by increasing the tax penalty. Since the penalty now sits at around 2.5% of income and subsidized premiums sit around 10-20% of income, the penalty could be equalized to the same level as health insurance. While this would certainly cause more Americans to enroll and would likely bring down premiums long term, this would cause short-term financial pain to many Americans especially those currently uninsured in the “coverage gap.” This option is sure to be politically and practically unpopular.

A second option is to fight the other side of the problem. Rather than increase the tax penalty, the law could be altered to increase the amount of Americans eligible for subsidies and the size of those subsidies. While this would certainly cost the federal government and be politically unpopular to fiscal conservatives, subsidizing insurance to more affordable levels would close the coverage gap, enroll more Americans, and bring down premiums long term. This could be financed through either increasing the deficit or taxing insurance companies, pharmaceutical companies, the wealthy, or other groups. This policy change is what has been suggested by the father of the ACA, President Barack Obama.

These policies would encourage more Americans to enroll in health insurance, which in the long term would encourage more insurers to enter the marketplace. The current reality has been rattled by insurers leaving the marketplace after losing billions of dollars being required to insure sick people and not having enough healthy people enrolled to share the costs. Without multiple insurers, the marketplace cannot offer healthy competition which would naturally deliver higher quality and lower cost.

A potential solution to this challenge was included in the original ACA–the version passed by the House of Representatives but not the Senate. The “Public Option” would serve as a government-run insurer (almost like Medicare) in order to provide competition to the marketplace as an alternative to private insurance. Thus, rather than having a single private insurer like many counties now have, the Public Option could guarantee more options and hopefully lower cost.

Not included in the AHCA but supported by some Republicans is another plan to potentially reduce premiums. Currently the ACA mandates that all insurance plans cover “Essential Health Benefits” such as maternity care, mental health care, prescription drugs, preventive care, and more. While Democrats argue that all plans should be required to cover these benefits, conservatives and others counter that such mandated coverage increases premiums and reduces choice. The argument goes that if a person does not wish to have some of those benefits, they should not be compelled to pay for such a plan possibly at a higher cost. Basically if a person desires more benefits, they can pay more for such. If not, they can pay less.

Beyond the patient and plan side of health reform, the companies involved could also be reformed in order to reduce prices for Americans. As mentioned insurance companies are not reaping enormous profits off current law, yet pharmaceutical companies have consistently comprised one of the most profitable industries in the United States. Perhaps infamously drug prices in the U.S. are often far higher than in other countries. Even with discounts obtained by insurers, prices are exponentially higher in the U.S.

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Since elderly people are the most common users of drugs, Medicare (the public insurer of those over 65 years old) purchases many of the drugs in the U.S. While Medicare is an enormous program with expansive potential bargaining power, Congress mandates under federal law that the government cannot bargain with drug companies over prices. While smaller third parties do bargain on behalf of the government, some argue that the government as a whole would be a more powerful negotiator. Giving up that power leaves seniors and other Americans with far higher drug prices.

Thus, one solution to bring down Medicare spending and premiums for all Americans is to allow the government to barter over drug prices. Of course, this alternative will only be possible if lobbyists and corporations somehow loosen their grasp over politicians. As discussed in How To Wage a “Political Revolution,” citizens must demand an end to undisclosed funding of political campaigns and the revolving door of lobbying if there is any hope of achieving merit-based policy. Luckily, citizens have been speaking out for the past few years causing politicians from both parties like President Obama and President Trump to favor government bartering over drug prices.

In order to further use leveraging power over the health care industry, more radical ideas have been proposed by some politicians. Currently, if people wish to purchase insurance as individuals, they have almost no leveraging power as it is them as individuals against the insurance companies. When people group together, such as in a private company, they comprise a larger risk pool allowing them to have greater leveraging power. Politicians such as Senator Bernie Sanders (D-VT) propose that this theory should be expanded nationwide into a single-payer health care system–one with a single government insurer and without any private insurers. This idea is the foundation of every single other developed nation. The green on the map below depicts every country that provides universal health care.

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As argued in Obamacare: Separating Fact from Fear, these single-payer nations deliver higher-quality care at a lower per capita cost. This evidence seems to suggest that national leveraging power against drug companies, medical device manufacturers, and hospitals works to the citizens’ benefit. While some critics fear government bureaucracy running health care, the criticism that government will then be deciding who receives treatment is a bit of a red herring. Americans currently opt not to receive care because of the exuberant cost; this is already a form of rationing, and a single-payer system could allow for those medical decisions to be made between the patient and the doctor.

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While a single-payer system does sound wonderful in theory, it would be crucial as mentioned previously to rid government of corruption first. Government-run health care cannot operate as efficiently as possible if lobbyists and campaign donors have power over the politicians and bureaucrats. Until that time comes with much-needed reform, a compromise policy may be the best alternative.

In the spirit of increasing leveraging power without placing all power into the hands of government, an all-payer system can be established. Rather than eliminating all private insurance, insurers could band together to establish set rates with health providers. This scenario is in contrast to currently where each insurer negotiates individually with hospitals and medical companies allowing for vastly different costs incurred by patients and a lack of transparency. The same exact procedure can be priced at vastly different levels depending on the provider and the insurer.

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While the federal government may not take up radical reform such as single or all payer any time soon, the states are swiftly moving to make change. Maryland and Vermont have begun to implement all payer systems, and they will be the laboratories that determine whether more states or even the federal government should take up such policies.

Conclusion

There are evidently various paths for legislators to take in order to reform health care. While the American Health Care Act may reasonably become law this year, there is nothing holding back future Congresses from instituting some of these ideas. Some ideas are mutually exclusive, yet they all could deliver lower cost and higher quality at a time when Americans desperately need just that. screen-shot-2017-01-27-at-11-48-02-pm

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