This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
NBER Working Paper 22802
Intertemporal Substitution in Health Care Demand: Evidence from the RAND Health Insurance Experiment
By Haizhen Lin and Daniel W. Sacks
National Bureau of Economic Research, November 2016
Nonlinear cost-sharing in health insurance encourages intertemporal substitution because patients can reduce their out-of-pocket costs by concentrating spending in years when they hit the deductible. We test for such intertemporal substitution using data from the RAND Health Insurance Experiment, where people were randomly assigned either to a free care plan or to a cost-sharing plan which had coinsurance up to a maximum dollar expenditure (MDE). Hitting the MDE — leading to an effective price of zero — has a bigger effect on monthly health care spending and utilization than does being in free care, because people who hit the MDE face high future and past prices. As a result, we estimate that sensitivity to short-lasting price changes is about twice as large as sensitivity to long-lasting changes. These findings help reconcile conflicting estimates of the price elasticity of demand for health care, and suggest that high deductible health plans may be less effective than hoped in controlling health care spending.
From the Introduction
Studying intertemporal substitution is important for at least two reasons. First, with the important exceptions of Einav et al. (2015) and Cabral (2016), most of the literature on health care demand and the effect of insurance on spending has neglected intertemporal substitution, and estimated in a wide range of price elasticities, from as small as -0.2 to as large as -1.5 (for example, Manning et al. (1987); Eichner (1998); Zweifel and Manning (2000); Cardon and Hendel (2001); Bajari et al. (2014); Dalton (2014) and Kowalski (2015, 2016))). Most papers assume that health care decisions are made statically on an annual basis, meaning that there is no scope for future prices to affect current demand. Estimated. However, if there is intertemporal substitution, then patients may respond very differently to a temporary price change than to a long-lasting one. Therefore, depending on the sources of price variation used for identification, one might draw dramatically different conclusions regarding price sensitivities. Accounting for intertemporal substitution makes it possible to separate elasticities with respect to permanent or temporary price changes, and may help reconcile the disparate elasticity estimates in the literature.
Second, intertemporal substitution affects the response to high deductible health plans, which are now common in the American health insurance landscape. Regulators, insurers, and policymakers tolerate the weak risk protection of high deductible health plans out of the hope that they will reduce health care spending. This view implicitly assumes that care foregone in one year because of the high deductible represents a permanent reduction in health care spending. But if patients are deferring needed care, then their spending may be higher in future years, either because deferrable problems become so severe that they must be addressed, regardless of the cost, or because once patients finally do hit the deductible, they stock up on care, retiming deferrable procedures to a year when their price is low. Thus a key question for the effectiveness of high deductible health plans is whether patients intertemporally substitute in their demand for health care. Evidence of intertemporal substitution would suggest that high-deductible health plans may not be as effective as hoped in controlling overall health care spending.
Reconciliation with original HIE findings
We have argued that intertemporal substitution is an important part of how patients respond to nonlinear cost-sharing, causing them to stock up on health care when it goes on “sale,” with especially large anticipatory responses. Neglecting these dynamics can lead to biased estimates of the long-run effect of cost-sharing on utilization. The original RAND investigators, however, argued that intertemporal substitution was not an important part of the response to cost-sharing, and found little evidence for anticipatory effects. Here we reconcile these different conclusions.
The key difference between our analysis and the original investigators is in the timing of when we look for intertemporal substitution and anticipatory responses. They focus on the period around hitting the MDE, before and after. We focus on the end of the coverage year. As Keeler and Rolph acknowledge, it is likely difficult to detect anticipatory effects or pent up demand by focusing on fine timing around hitting the MDE. Households may not know exactly when they hit the MDE (as has been pointed out by the original RAND investigators), and may not appreciate the link between their current and future spending (Einav et al., 2015; Dalton et al., 2015; Abaluck et al., 2015). On the other hand, by the end of the coverage year, most families who hit the MDE will have seen a bill which makes clear their financial position, and it is not hard to understand that in the future, prices will be higher. Indeed, providers may help make this clear. Thus the myopia or limited understanding of the insurance contracts may have made it difficult for the original investigators to identify intertemporal substitution; by looking at the end of the year, we avoid this difficulty.
From the Conclusion
Studying data from the RAND Health Insurance Experiment, we found striking patterns of health care spending over the insurance coverage year. In most months, spending is lower in cost-sharing plans than in the free care plan. But in the last 1-3 months of the coverage year, spending rises quickly in cost-sharing relative to free care, and by the end of the year spending in the two plans is roughly equal. On the other hand, spending in free care is roughly flat over the coverage year, but it is particularly high early in the first coverage year, and it spikes dramatically at the end of the experiment.
These patterns are inconsistent with the standard model of demand for health care, which assumes away intertemporal substitution. Instead they suggest that patients can retime their care, especially for medically deferrable procedures and dental care, to reduce their out-of-pocket expenses in the face of nonlinear cost-sharing rules. To quantify the importance of intertemporal substitution, we estimate how health care spending responds to lag and lead prices as well as current prices. The estimates suggest that short-run moral hazard — the response to a one time, unanticipated price change — is substantially larger than the long-run response.
These results have important implications for health care spending and insurance design. First, they help reconcile some of the disparate estimates of the price elasticity of health care demand, since they imply that health care spending is more responsive to temporary price changes — for example, hitting the deductible — than to permanent price changes, for example, from insurance plan changes. Second, they suggest that high deductible health plans may not be as effective as hoped in controlling health care spending. These plans can reduce health care spending as long as patients do not hit the deductible. But in years when patients do hit it — as they eventually will — the large short-run response means that spending will make up for lost time, as patients stock up on care.
At the risk of over-simplification, we can interpret this complex study to show us that previous conclusions from the RAND Health Insurance Experiment (RAND HIE) ignored the responsiveness of year-end health care spending once hitting the deductible, and that particular increase in spending suggests that “high deductible health plans may not be as effective as hoped in controlling health care spending.”
The primary purpose of high deductibles in insurance plans is to reduce health care spending by insurers, employers and government plans. The tradeoff is that they create financial hardships and impair health care access for patients. But isn’t health care reform supposed to be about the patients?
How much are deductibles really saving? For the 20 percent of people using 80 percent of health care, the savings are negligible since the deductible is met early on for those individuals and thus has no further impact. For the four-fifths of us who use only one-fifth of the nation’s health care, many of us have deductible coverage through Medicaid, Medigap or MA plans, or health savings accounts, and thus are not affected.
So who is negatively impacted by high deductibles? It is individuals who do not qualify for Medicaid nor for ACA subsidies and who often cannot fund a health savings account. This is our workforce and their families. As a percent of our national health expenditures, the amount saved is very small, and may be even smaller than believed based on this NBER study. This seems to be too heavy of a price to pay for such a relatively small savings.
So high deductibles don’t work very well and they harm patients. In contrast, single payer tools do control spending while helping patients. Do we really have to continue contemplating making the change that would finally fix our system? Why not action now?
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
The U.S. Is Standing in the Way of Cheaper Drugs for the Poor
By Jason Cone and Raymond C. Offenheiser
The New York Times, October 27, 2016
In the United States, companies have raised prices on many drugs over the past five years, mostly with little public notice or scandal. Pfizer alone raised the prices of more than 100 drugs in one year. Drug prices have seen double-digit inflation over the past three years, at a time of relatively low inflation in the rest of the economy. Recent research suggests that cancer patients may be delaying use of lifesaving drugs, while there are reports that prisoners are rationed access to hepatitis C treatments — all because of high prices.
But this problem is also international. In poorer countries across the world where our organizations work, millions of people are priced out of medicines that could save lives and relieve suffering. For example, a recent World Health Organization study found that in some 30 countries, hepatitis C medicines were unaffordable for much of the population.
Pharmaceutical companies simply charge whatever they want — or can. They have big budgets to counter image problems from bad press and congressional hearings. And while they claim that high prices are necessary to develop new drugs, it’s just not true. Public funding and subsidies pay for much of today’s pharmaceutical innovation.
Many world leaders recognize that high drug prices are a public-health crisis. Earlier this year, Ban Ki-moon, the secretary general of the United Nations, commissioned a panel of industry, government, academic and civil society experts, including Oxfam International’s executive director, to recommend ways to bring drug prices down to affordable levels and to improve research and development of new medicines in order to fulfill the human right to health.
The panel’s report, released last month, found that today’s system is failing. Pharmaceutical monopolies reap huge profits from high prices, while medicines are unaffordable for too many people. The report called for more transparency and competition in the drug industry and for preserving and implementing existing policies that help reduce prices.
Shamefully, the American government sought to obstruct and oppose the panel, even denying the premise that high drug prices undermine public health.
The Obama administration’s response to the report’s release called the panel’s work “deeply flawed” and accused it of recommending “divisive policies,” which it warned ominously “could have significant unintended negative consequences.” In other words, if we want new medicines and innovations, we must continue to support a system in which the pharmaceutical industry has unlimited power to set prices. Considering alternative pathways is apparently off limits.
These scare tactics not only contradict the United States’ stated global and domestic health priorities, they are also an offense to people unable to afford critical treatment. Worse yet, the American government actively exports this approach to other countries through trade agreements like the Trans-Pacific Partnership, which, if allowed to take effect, will lock in and extend global monopoly protections and high medicine prices for years to come.
Yet to really transform how drugs are developed, governments must lead the charge. There are hopeful signs this might happen. In September, world leaders agreed to address antibiotic resistance in part, by committing to develop new drugs through such new research and development models.
The United Nations panel recommendations, which the Obama administration has tried to attack and discredit, are precisely designed to open new paths to medical innovation that benefit us all. Access to existing and new medicines and treatments should not depend on how much money you have, where you were born or whom you know.
The United States government, especially the next president, must stop defending industry profits and work to reform how we pay for medical research to ensure that all patients’ needs are addressed. High prices of medicines are not inevitable; they are a choice the American government has made. Many lives and livelihoods hang in the balance until that choice changes.
Jason Cone is the executive director of Doctors Without Borders USA. Raymond C. Offenheiser is the president of Oxfam America.
Those of us who have tried so hard for so long to fix our dysfunctional health care system will understand this article. Reform efforts being celebrated today have enhanced the business successes of the medical-industrial complex and especially the insurance and pharmaceutical industries, while patients face more barriers to care through restricted networks, greater cost sharing and exorbitant pricing.
What is missing here? Jason Cone of Doctors Without Borders USA and Raymond Offenheiser of Oxfam America make it quite clear that it is our government that is failing the people while taking care of the industrial special interests.
Perhaps worse, we have a polarized nation with one side opposed to all things government in health care, and the other side celebrating the government’s gifts to the industry even though the welfare of patients is sacrificed in order to accomplish those ends.
In a democracy we are supposed to be able to fix these problems through our elections. But on my ballot for next Tuesday I don’t see any options that could realistically assure us support for the altruistic goals of Oxfam and Doctors Without Borders. It’s not like in two years of campaigning there wasn’t adequate opportunity to advance ideas that would truly make us stronger together as we make America great again. All we got instead was campaign slogans and further polarization on a scale with negative polarity at either end.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Progress reducing uninsured rate threatens to stall
By Ricardo Alonso-Zaldivar
Associated Press, November 3, 2016
President Barack Obama’s legacy health care law has reduced the number of Americans going without health insurance to historically low levels, but continued progress threatens to stall this year, according to a new government report.
The study released Thursday by the Centers for Disease Control and Prevention suggests the law may be reaching a limit to its effectiveness in a nation politically divided over the government’s role in guaranteeing coverage.
The CDC said the number of uninsured people dipped by only 200,000 between 2015 and the first six months of this year, which it called “a nonsignificant difference.” The findings come from the National Health Interview Survey, which has queried more than 48,000 people so far this year.
Since the health care law’s big coverage expansion in 2014, millions have gained coverage each year. Now the pattern appears to be changing.
Experts say Obama’s overhaul deserves most of the credit for 20 million Americans gaining coverage since 2014. But progress has been less and less each year, and now it’s slowed to a crawl.
“It has got to be close to tapped out,” said Dan Witters, director of a major private survey that also follows insurance trends, the Gallup-Healthways Well-Being Index.
The new survey offers a hint that the nation’s historic coverage expansion may have actually gone into reverse during part of this year. An earlier CDC report covering just the first three months of this year found that the number of uninsured had been even lower, an estimated 27.3 million people — or a million fewer than the six-month figure in the latest report.
Another notable finding from Thursday’s report is that the share of Americans in high-deductible health insurance plans keeps increasing. That may help explain widespread anxiety about affordability at a time when overall health care spending is growing at a moderate pace.
The CDC survey defines high-deductible coverage as insurance that requires patients to pay at least the first $1,300 of annual medical expenses for an individual plan, or $2,600 for a family. In the first six months of this year, 38.8 percent of persons under age 65 were in high-deductible plans, an increase from 36.7 percent in all of 2015, the survey found.
Employers started shifting workers and their families to high-deductible plans before Obama took office, and now that’s becoming the norm. Many people are unhappy with the change, and some public-opinion experts say that helps explain the continued low ratings for Obama’s health overhaul, even if it was not the cause.
Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–June 2016
By Emily P. Zammitti, M.P.H., Robin A. Cohen, Ph.D., and Michael E. Martinez, M.P.H., M.H.S.A.
National Center for Health Statistics, November 3, 2016
* In the first 6 months of 2016, 28.4 million (8.9%) persons of all ages were uninsured at the time of interview — 20.2 million fewer persons than in 2010, but only 0.2 million fewer persons than in 2015 (a nonsignificant difference).
* Among adults aged 18–64, the percentage with private coverage through the Health Insurance Marketplace or state-based exchanges has not changed significantly — from 4.8% (9.3 million) in the second quarter of 2015 to 4.8% (9.4 million) in the second quarter of 2016.
It looks like the reduction in the rate of uninsured as a result of the Affordable Care Act may have plateaued. This is not a surprise since it was understood that the design limitations of building on the existing fragmented financing system could never result in truly universal coverage.
A well designed single payer system would have accomplished the goal of universality. We could still reach that goal without increasing our total national health expenditures beyond the current level, not to mention that we would gain the multitude of other benefits of a single payer system.
The Cubs fans stuck with a perpetual loser for over a century, and they finally broke through last night. With the same determination, maybe we could finally achieve the political breakthrough that we need to enact a health care system that actually does include everyone. Next Tuesday could be a start.
Medical students are becoming strong advocates all over the country for expanded and improved Medicare for All. Spurred on by their increasing awareness of the restricted access, unaffordability, and inequities keeping many Americans from necessary health care, they are organizing and making their voices heard about the urgency of real health care reform.
With the co-sponsorship of the American Medical Student Association (AMSA), the Latino Medical Student Association (LMSA), White Coats for Black Lives, and many regional and local groups, a good example of their activism was the Halloween Day event in Boston a few days ago, which they dubbed #TreatNotTrick. Donning their white coats, often with Halloween costumes, they staged a public demonstration and call-in asking Rep.Mike Capuano to co-sponsor the single-payer bill in the House, H. R. 676. Their message is that private health insurance is a trick, and that they just want to treat patients in a fair system of universal coverage of health care for all Americans. (Kirchner, E. Let’s treat our patients, not trick them with private insurance. Common Dreams, October 27, 2016)
The Boston event was part of the Second Annual Medicare-for-All National Day of Action put on by Students for a National Health Program (SNaHP), the student arm of Physicians for a National Health Program (PNHP). Similar events were held from California to Minnesota to Tennessee on no fewer than 33 medical campuses. In Ohio, medical students visited Sen. Sherrod Brown’s office urging him to sponsor a single-payer bill in the Senate. In Philadelphia, they rallied to memorialize the lives lost because of being uninsured or underinsured. Their message is clear—private health insurance is a trick that erects barriers to care. (Ibid)
Today’s medical students, altruistic as so many are, see a medical profession caught up in a medical-industrial complex controlled by large corporations ranging from the insurance industry to the pharmaceutical and medical device industries. The business model prevails—profits and revenue for corporate CEOs and their shareholders call the tune. Medical students are seeing that almost two-thirds of physicians are now employed by big organizations, mostly expanding hospital systems. They see the decline of small group practice and the professional autonomy of earlier years diminished. They see an increasingly fragmented system with erosion of continuity of care amidst frequent changes of insurance coverage, narrowed and changing networks, and patients losing choice of physicians and hospitals. And they hear about earlier retirements and increasing burnout of physicians trying to keep up with the paperwork and bureaucracy of today’s multi-payer, largely for-profit system.
Medical students and their colleagues in other health professions are looking for a simplified system with universal access for all Americans to necessary care based on the principle that health care is a human right. That approach has been adopted for many years, in one way or another, by almost all advanced countries, while the U. S. remains by far the most expensive system with worse access and quality of care than most of these countries.
A sizable majority of Americans have favored national health insurance for many years, usually including about three of five respondents to national surveys. A 2008 survey of more than 2,200 U. S. physicians in 13 specialties also favored NHI. (1) Activist positions for single-payer NHI have been taken in recent years by a growing number of professional organizations, including the American College of Physicians, the American Society of Clinical Oncology, the American Psychiatric Association, the American Women’s Medical Association, the American Public Health Association, and the American Nurses Association. Jean Ross, co-president of National Nurses United, recently had this to say about the rapidly increasing insurance premiums in 2017 under the Affordable Care Act:
The [just announced] premium increases are outrageous and just the
most recent sign of a broken, dysfunctional healthcare system. (2)
Medical students and other young health professionals are right in calling single-payer national health insurance (NHI), or Medicare for All, an urgent need. They are the future of health care in this country. Those of us in older generations welcome their empathy and caring in leading toward health care reform. NHI, as soon as it is enacted, will deliver a better system for both patients and health professionals—one based on a service ethic that will transition over 15 years to a not-for-profit system. It would have simplified administration allowing physicians and other health professionals more time for direct patient care, the essential purpose of the medical profession.
John Geyman, M.D. is the author of The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans
1. Carroll, AE, Ackermann, RT. Support for national health insurance among U. S. physicians: five years later. Ann Intern Med 1481: 566-6-567, 2008
2. Queally, J. ‘Get the insurance companies the hell out’ of our health care system. Common Dreams, October 25, 2016
Anthem is cutting out-of-network health coverage in a ‘bait and switch,’ lawsuit says
By Melody Petersen
Los Angeles Times, November 1, 2016
On the first day of Obamacare open enrollment, a consumer group sued Anthem Blue Cross for attempting to automatically renew policies that no longer cover out-of-network costs for hundreds of thousands of Californians.
A lawyer for Consumer Watchdog said Tuesday that Anthem was “railroading existing members into bare-bones plans” without properly disclosing the change to them in recent renewal letters.
On top of the loss of out-of-network coverage, many of the customers also face big premium hikes.
Consumer Watchdog’s lawsuit says Anthem engaged in a “bait-and-switch” scheme. The group’s attorneys said Anthem should have sent the customers a “discontinuation” notice to properly inform them that they were losing their out-of-network coverage. Instead the insurer sent notices saying the policies would automatically renew if the member takes no action by Dec. 15.
Darrel Ng, an Anthem spokesman, said his company had changed the plans’ design “to mitigate rate increases and keep monthly premiums affordable.”
“The benefit package being offered in 2017 was approved by the Department of Managed Health Care and Covered California and is consistent with federal guidance,” Ng said. “Affected members have been mailed written notice of this change so they can make an informed decision on their healthcare needs during the open enrollment period for the coming year.”
The change, effective Jan. 1, affects policyholders who had signed up for Anthem’s preferred provider organization, or PPO.
In most areas in the state, Anthem is changing its PPO into a so-called exclusive provider organization, or EPO — which means that it will no longer pay even a portion of bills from doctors or hospitals not in its network.
Once again, using the legitimate excuse that they need to keep premiums affordable, insurers are shifting more costs to patients. In this instance, California’s Anthem Blue Cross is no longer going to pay anything for often unavoidable out-of-network health care. They will do this by switching their CaliforniaCare plans from PPOs (preferred provider organizations) to EPOs (exclusive provider organizations).
As an example, unsuspecting patients caught off guard may find that their specialists providing them with essential health care services are no longer covered by their plan.
This is yet one more example of the one-way march to save money for the insurers’ risk pools by further impairing coverage of essential medical services, for the sole reason of protecting the insurer’s business model.
This march began with the advent of the managed care revolution and accelerated since the enactment of the Affordable Care Act – not because of the Act itself but rather because of the failure to enact a model that would control health care costs while removing financial barriers that impair access to care.
The model that would work, of course, is a single payer national health program. The nation’s failure to enact such a program can only lead us further down the insurers’ primrose path – pleasing the insurers while compounding the disastrous consequences for patients. We surely will not actually allow them to lead us all the way to the everlasting bonfire, would we?
7 Tips To Help Avoid Costly Health Plan Enrollment Headaches
By Michelle Andrews
Kaiser Health News, November 1, 2016
With the annual sign-up period for plans on the health law’s marketplaces starting Nov. 1, many consumers are worried about rising premiums, shrinking provider networks and the departure of major insurers such as UnitedHealthcare, Aetna and Humana from many exchanges.
The impact on coverage will vary, but the shifting landscape means that it’s more important than ever for consumers to carefully evaluate the plans that are available in their area and choose the best one for their needs. There are several elements to factor into that decision.
It’s crucial to log into the marketplace and review plan details. Comparing plan premiums and deductibles only scratches the surface of what you should evaluate before selecting a plan this fall. Policy details can make an important difference in coverage and costs, but it may take some digging to uncover them.
Avoid Premium Sticker Shock
Premium increases for 2017 will generally be higher than last year’s rate hikes, though with significant geographic variation. In the two-thirds of states where the federal government runs the marketplace, the average premium increase for the second lowest cost silver plans will be 25 percent next year, according to a recent report by the Department of Health and Human Services. Last year, the comparable premium increase was 7 percent. The average premium, before tax credits, for the lowest cost silver plan will be $433.
About 85 percent of marketplace customers have incomes of up to 400 percent of the federal poverty level (about $47,000 for one person) and qualify for federal tax credits to help pay their premiums. If you are one of these consumers, it may be necessary to switch plans to minimize your share of the premium because your tax credit is pegged to the second lowest-cost silver plan in your area, which often changes from year to year.
Next year, three quarters of people can find a cheaper plan at the same metal level if they come back to the marketplace to shop. Consumers who bought the lowest cost silver plan in 2016 can save an average $58 per month by switching to the cheapest silver plan next year, according to HHS.
People with subsidies “can insulate themselves from premium increases by selecting one of the lowest cost silver plans,” said Caroline Pearson, a senior vice president at the consulting firm Avalere Health.
If you’re currently buying an individual plan but not going through the marketplace, be sure to recheck your eligibility for subsidies. Federal officials estimated earlier this month that 2.5 million people who purchased coverage outside the exchanges have incomes that would qualify for financial assistance.
Look For Hidden Benefits
A close look at plan details may show that coverage is more generous than it appears. Even as deductibles continue to rise, many plans are offering coverage for certain services before the deductible is satisfied. So instead of having to pony up the entire cost of your visit to the doctor or your prescription drug until the deductible is paid off, you may just owe a copayment.
This year, for example, 66 percent of silver-level plans sold on healthcare.gov covered primary care doctor visits before the deductible. Half of plans covered generic drugs before the deductible. (In addition, the health law requires that many preventive care services, including tests and screenings, vaccinations and contraceptives, generally be covered without requiring people to pay anything out of pocket in all new marketplace plans.)
This practice can serve two purposes. Encouraging primary care may save insurers money down the road on more expensive treatment. And exempting some services from the deductible could help make plans more appealing to the relatively healthy people insurers want to attract and who might otherwise balk at policies with a typical deductible of around $3,000.
“Part of it is trying to give people some value even if they’re not high users of health care,” said Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities in Washington, D.C.
Sidestep Automatic Reenrollment
If your plan is continuing next year, you may be automatically renewed, but that may not be your best option. Do some comparison shopping on marketplace plans to see whether there are changes to plan benefits or provider networks that matter to you and how 2017 pricing will affect your subsidy.
If your plan is not going to be available next year and you don’t actively pick a new plan, you may find yourself automatically enrolled in a plan with similar costs and benefits. But that can mean changes in the list of approved drugs or losing access to your favorite hospitals and doctors, among other things.
Pay attention to timing. Enrollment ends Jan. 31, but to have coverage that starts Jan. 1, you must make a choice by Dec. 15.
Check Out New Standardized Plans
Next year, healthcare.gov will join several state-based marketplaces in offering standardized plans that are expected to help consumers make apples-to-apples comparisons between plans at the bronze, silver and gold levels and cut down on confusion caused by a sometimes bewildering array of options. In these “simple choice” plans, the deductibles and annual limits on out-of-pocket spending will be standardized, as will many of the consumer payments for medical services. For example, the standardized silver plan will have a deductible of $3,500 and the maximum amount you will owe out of pocket for the year will be $7,100.
In addition to standardized benefits, many of the plans cover a number of services before the deductible is satisfied, such as primary care and specialist visits, drugs, urgent care and outpatient mental health.
Many standardized plans also rely on copayments (fixed amounts that you pay for a service), rather than coinsurance (a percentage of the cost of the service), to a greater extent than people may see in regular marketplace plans, said Sabrina Corlette, research professor at Georgetown University’s Center on Health Insurance Reforms. Insurers aren’t required to offer standardized plans in most states, but the federal government is promising that the plans will be prominently displayed on healthcare.gov.
Dig Into Prescription Drug Details
Drug coverage is a big concern for many people, but finding plan details can be tough. You can check out a plan’s list of covered drugs through healthcare.gov, but determining what your share of the cost will be can be more challenging. That’s because even though state marketplaces typically only show four cost-sharing tiers online, many plans have five, six or even more tiers. In 2016, 40 percent of silver marketplace plans had more than four cost-sharing tiers, according to Avalere data.
Also, insurers on the exchanges may require that your doctor or other health provider get prior authorization from the insurer before prescribing some drugs for you or demand that you try a less expensive drug before getting a more expensive one, a practice called step therapy, said Pearson.
“If you’re a consumer that has a lot of drug costs or takes specialty medications, actually consulting the plan documents is important, because you need more granularity than is available on the website,” said Pearson.
Check Provider Networks
You will be able to check which doctors and hospitals participate in the plans you’re considering on healthcare.gov. That’s increasingly important as networks continue to narrow and fewer plans offer any out-of-network coverage. An initiative by the federal government to communicate whether a plan’s network is basic, standard or broad in all states using the federal marketplace has been trimmed back to a four-state pilot in Tennessee, Maine, Ohio and Texas.
Use Caution When Shopping Off The Marketplace
If the marketplace plans don’t appeal and you don’t qualify for subsidies, you can shop for individual market coverage off the exchanges, although the number of such offerings has been declining, said Katherine Hempstead, who directs health insurance coverage research for the Robert Wood Johnson Foundation.
Off-exchange plans can’t be too wildly different from what’s available on the exchange, because they also have to cover the essential health benefits and offer plans in metal tiers that cover the same proportion of care as those on the marketplace, among other things. But in some markets, plans may offer different or broader provider networks outside the exchanges, said Corlette.
There’s a potential downside, however. If your income is too high to qualify for subsidies at the beginning of the year, you may qualify for them later if your income drops — for example, if you lose a major client. But that’s only an option if you’re already enrolled in a marketplace plan.
“If you’re enrolled outside the exchange and you have a change in income, you can’t qualify for a special enrollment period to sign up for a different plan,” Corlette said.
By glancing at the section titles (in bold) you can quickly identify seven categories that can result in enrollment headaches if care is not exercised in selecting your health plan. But the article is reproduced in its entirety because under each section there are a multitude of more specific considerations that increase the complexity of plan selection.
The purpose of this message is to demonstrate that, regardless of the source of your insurance, there are so many variables that must be considered each year that it is impossible to select a plan that will best serve your needs when the 80 percent of us who are healthy cannot know whether or not next year will be a year in which we join the 20 percent with very high health care costs.
One of the more important functions of insurance is to protect everyone against potential catastrophic losses in health care, and that is defeated when so many plan variables leave individuals more exposed to these losses, while protecting the insurers against these same losses. It is evermore difficult to justify the very high administrative costs of private plans when they are shifting their risk bearing function onto the backs of their own plan beneficiaries.
Besides, the variables, such as narrowing provider networks and whether or not the plan will even be offered next year, are continually changing, creating instability in insurance coverage. Think back 20 years and hardly anyone now has the same coverage they did then (except those over 85 who have been on Medicare).
The reason for these variables that are creating instability is not to benefit plan enrollees but rather to continually modify the insurance products to match the business model of the insurers. They are supposed to be serving us, not themselves.
We can fix this problem by removing the insurers from the equation. Medicare does need some attention, but it would be far better to fix Medicare and then provide it to everyone. That would eliminate these enrollment headaches. Everyone would be secure with the knowledge that a single payer Improved Medicare for All would eliminate the instability and uncertainties inflicted on us by the private insurance industry.
Sounds Like A Good Idea? High-Risk Pools
By Julie Rovner and Francis Ying
Kaiser Health News, October 31, 2016
One way Republicans say the system could be fixed is by returning to something called a high-risk pool.
The idea is to let all the sick people buy their policies in a separate insurance pool, and then have insurance companies and states and the federal government all chip in to pay for their care and keep their premiums low.
Before the Affordable Care Act, 35 states had high-risk pools.
The federal government had one, too, as a transition to the health law. But none of them worked very well.
The biggest problem? Both premiums and other costs remained too high for many people with health conditions to afford. The federal program ran out of money almost a year before it was scheduled to end.
Sometimes the pools got so expensive for states that they had to impose waiting lists for coverage.
And often, to keep costs down, risk pools set up waiting periods before they started paying bills for the very illness that made people high risk.
Republicans say their new risk pools plan would be better than the old ones. Their plan says it would keep premiums low, and no wait lists would be allowed.
But it’s not clear that the $25 billion in federal funding they propose would be enough, or that states would step in to help fund the pools.
Republicans have repeatedly voted to repeal the Affordable Care Act, stating that health plans are too expensive, They suggest that we replace them with plans that cover only what is needed, leaving many benefits out, and that we reduce regulation by selling plans across state borders, relieving insurers of the requirement that they must sell plans to the sick as well as the healthy. Such plans would certainly have lower premiums, but they would work only for healthy individuals who have relatively few health care needs. What about those who would need much more care?
The Republicans do recognize the need. They suggest that we establish high-risk pools to cover these individuals. Plans in these pools would be very expensive – not affordable for most. They suggest that these plans be partially subsidized by the government, and they have proposed $25 billion in federal funding.
Since the sick would be concentrated in these high-risk pools, many of the 80 percent of us who are relatively healthy could then afford to buy the deregulated, stripped-down plans they propose. So the Republicans can sell their concept based on the fact that these plans would be much more affordable than those currently offered in the exchanges.
But the high-risk pool concept is not new. Many states have experimented with them before, and even ACA included high-risk pools during the transition. But these plans mostly failed for a very obvious reason. Concentrating very expensive patients into a single risk pool results in unaffordable premiums, and our legislators refused to provide the level of funds that would be required to make the programs work. They stripped down the plans, exposing patients to intolerable out-of-pocket costs, and they sharply restricted enrollment in the plans, creating long waiting lists of people in need.
If we created a separate high-risk pool for the 20 percent of us who have greater health care needs, how much money would we need? Well, since they would use about 80 percent of our health care dollars, it would require roughly $2,400 billion of the $3 trillion plus that we are already spending on health care. Obviously the $25 billion that the Republicans propose would not go very far, and people would have to look to other programs to finance their care.
However some of the high-risk patients are already in other programs. Some are covered by Medicare or Medicaid, though the Republicans would convert Medicare to a defined contribution program (premium support), shifting more of the costs to these patients with high needs, and they would change Medicaid into a block-grant program, reducing the federal component of the funding when Medicaid already has serious problems because of its chronic underfunding. Basically, Republicans want to reduce the role of government in financing health care. That can only make things worse for those with greater health care needs.
In a bit of irony, the Republicans are now in a position wherein they can stand on the sidelines and holler about protecting the public purse from the public option proposed by the Democrats, while smugly realizing that it is likely that the public option will turn out to be the high-risk pools that Republicans support.
Ida Hellander, Director of Policy and Programs for Physicians for a National Program, has this to say:
The Democratic Senators are calling on states to create ‘public options’ for their health exchanges because 20 percent of people won’t have a choice on insurer in 2017, and in 2018 it could be higher.
The exchanges open a week before the election, and they want to look like they have a solution.
Clinton herself has said repeatedly that the states can set up public options because of section 1332 of the ACA.
Alaska got down to one insurer that was going bankrupt so it had to kick in $51 million in state funds to keep it afloat. In MN all seven insurers were going to bail until the state agreed to let them limit enrollment. If the state doesn’t put together a public option soon, there will be people eligible for subsidies on the exchanges with no insurance plan to sign up for.
These state options won’t have any of Medicare’s advantages of course. They’ll have to follow all the rules already set for commercial insurers. They serve only one purpose.
The PO is not a ticket to single payer. It is a last ditch attempt to save the ACA. These state-based public options will only survive with giant state subsidies. In other words, we’ll be back to state-based high risk pools, which is what they will quickly turn into.
The intersection of policy and polarized politics makes for quite a scene. The Republicans fight for high-risk pools. The Democrats fight for the public option not realizing that it is really just high-risk pools in drag. The Democrats win by trading off more important public policies, but that is a win in name only. The Republicans get their high-risk pools, adding to their other obfuscated victories (Medicare Advantage privatization of Medicare, Medicaid managed care privatization, privatized Medicare drug benefits, and especially the conservative Heritage reform plan that became Obamacare). That should explain why the mixed aroma of cigars and brandy wafts over from the right side of the Congressional isle.
Need more proof that the liberals keep losing? We have nothing remotely resembling an equitable, efficient, universal single payer system, but the conservatives have almost everything they want.
Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidate for public office.
The Best Way to Save Obamacare
By Jacob S. Hacker
The New York Times, October 27, 2016
The Affordable Care Act has faced a rocky six months. First, major national insurers scaled back their participation, leaving about one in five people buying coverage through health exchanges with only one plan to choose from. Then this week, the Obama administration announced that exchange plans would post an average premium increase of more than 20 percent (though most enrollees would be insulated from the full increase by subsidies for their coverage).
As someone involved in the debate over the Affordable Care Act from the start, I don’t find these unhappy events all that surprising. From the outset, I’ve argued that without a public option — a Medicare-like plan that would be available to all Americans buying health insurance — insurance competition would dwindle and premiums would skyrocket. Now that they have, it’s time to do now what we should have done then: take the simplest route to a more stable and affordable health care system.
Critics of the public option are convinced it’s a one-way ticket to single payer (the government alone provides coverage). History suggests the opposite: The public option isn’t a threat to a system of broad coverage through competing private plans. Instead, it’s absolutely critical to making such a system work.
We’re already heading toward single payer in sections of the nation — only it’s a private plan doing the paying. Next year, five states will have only one insurer in their exchanges, the online marketplaces set up to allow uninsured Americans to buy subsidized coverage. Nine more states will have just two insurers.
The diminishing number of choices doesn’t just hurt consumers; it also makes it harder for regulators to use antitrust tools to push back against this consolidation. Who wants to be the official accused of causing an insurer to leave the exchanges? It’s a perverse equation: As the number of insurers goes down, the leverage they have over regulators goes up.
These problems are what motivated proposals for a public option in the first place. Major parts of the country lacked enough insurer competition to keep costs in line, especially with rapidly consolidating providers. And the proposed alternatives to a public option, like the insurance “co-ops” eventually included in the 2010 law, did not have the bargaining power and reach that a Medicare-like plan would have (and most of them have since gone out of business).
The argument by public-option supporters wasn’t that it would or should replace private insurance. It was that having a public plan as a benchmark and backup was essential to make competition among private plans work. The models we have of successful competing health plans have a public or quasi-public option. That’s true in Medicare, where private plans operate alongside the traditional program. And it’s true in the federal employees’ health system, where a majority of enrollees choose Blue Cross-style nonprofit plans that are overseen by the government to ensure they remain viable.
Having a public plan alongside private plans won’t merely ensure that everyone has a choice. It will also pull more people into the system, creating a broader pool for all the plans. In polls conducted in 2009 and 2010, substantial majorities of Americans said they would feel better about being required to have coverage if they had the choice of a public plan.
A public plan is attractive in part because it can offer a broader network of providers. As exchange plans increasingly move toward very narrow networks, this would be another enormous draw — especially for more affluent consumers who have so far shunned the exchanges.
The public plan can also improve the overall system. Medicare has pioneered innovations in reimbursement, and it has improved hospital quality by imposing new penalties for readmissions. A public option could build on these breakthroughs and extend them to Americans under Medicare age.
The biggest advantage of the public plan, however, is its greater ability to restrain prices. As rapidly as the insurance market is concentrating, medical providers are consolidating faster, driving up prices and creating huge differentials even within regions. Medicare hospital reimbursements vary much less — and they’re typically much lower. As a result, Medicare has experienced slower per-person cost growth than private plans, particularly in recent years.
On the other hand, private plans are much better poised to develop integrated systems that closely monitor outcomes for a smaller circle of providers. Just as in Medicare, public and private plans can complement each other as they compete.
The public option is an ambitious policy. But it’s not hard to explain or advocate for — Americans love Medicare — and it has the potential to build powerful grass-roots support. Pressure from a coalition of left-leaning groups led by the Progressive Change Campaign Committee (a group that fought for the public option in 2009) has encouraged 33 Senate Democrats, including the party’s leadership, to call for a public option. President Obama has started advocating for it again, and Hillary Clinton has embraced it.
Republicans have actually shown how it can be done. Changes in Medicare pushed by President George W. Bush in the 2000s created more competition between public and private plans and guaranteed a fallback public option for prescription drug coverage.
This year, Senate Republicans, providing another lesson, passed legislation that repealed the Affordable Care Act through the budget process, which isn’t subject to a filibuster. (President Obama vetoed it.) If that’s possible under the budget rules, creating a public option should be, too — especially since it could reduce the deficit by tens of billions of dollars a year.
If things keep going as they are, Americans are certain to demand greater regulation of private plans to make them operate more like public plans. Instead, we should make them compete with a public option.
Jacob S. Hacker, a professor of political science and director of the Institution for Social and Policy Studies at Yale, is an author of “American Amnesia: How the War on Government Led Us to Forget What Made America Prosper.”
Jacob Hacker deeply believes in a better America for all of us. As a political scientist, he understands the difficulties of moving the process in that direction. During the health care reform process, he recognized the lack of political feasibility of enacting a single payer Medicare for all program, but, with good reason, he decided that a public option – offering the option to purchase Medicare instead of private insurance – was feasible. In fact, it almost happened. Since so many problems still exist six years after enactment of the Affordable Care Act (ACA), we should listen to Jacob Hacker to see what he has to recommend.
First, let’s go back and look at the process that led up to ACA. The dysfunction in our system had become unbearable – runaway costs, too many uninsured and underinsured, preventable financial hardship and physical suffering continued – something had to be done. The policy and political communities understood the superiority of single payer Medicare for all, but the politics were polarized. It was decided that the feasible approach would be for the Democrats, who were in control, to lead by supporting the Republican proposal of building on the existing system. Although the progressive community initially was disappointed, they decided that the only feasible approach was to join the (ACA) bandwagon, especially when it included the public option that many thought would eventually transform into a single payer system once the public realized how much better government insurance was compared to private insurance. Although the process emasculated the public option, one Senator was able to block it altogether.
Fast forward to today. After six years, the feasible approach has not turned out so well. Yes, many more now are covered, but little realized how much insurers could still innovate, for their own benefit, in a more regulated environment. To make premiums affordable, plans had to be offered with a lower actuarial value – accomplished by increasing the deductibles and offering credits and subsidies for lower income individuals (which left middle income individuals more exposed to medical debt). But many did not realize the rapidity and intensity with which the insurers would jack up the deductibles. And now the policy of high deductibles is corrupting the part of the market they were trying to protect – the employer-sponsored plans. Also they wanted to protect the “gains” of managed care, which really is not much more than negotiating lower rates for provider panels in exchange for granting them exclusivity. Once again, most did not anticipate the rapid move to ultra-narrow networks that serve the insurers so well while impairing access for their enrollees. Higher deductibles and narrow networks can hardly be described as successes of ACA since most people are worse off.
So now we are again facing the same political dilemma. Do we embark on a process to establish single payer Medicare for all, or do we take the politically feasible route of enacting a public option which would fix our system by requiring private insurers to complete with a vastly superior public plan, or so they would have us believe? Well, the decision has already been made. The progressive community is already totally on board with the public option. The tragedy is not so much that on this path we will end up with a public plan that will be only one more feeble player in the dysfunctional market of private plans, but rather that we will, once again, have walked away from single payer, perhaps for decades, because of this meme about lack of political feasibility.
So let’s look more closely at what Jacob Hacker has to offer in his truly sincere effort to cure our health care system.
* From the outset, I’ve argued that without a public option — a Medicare-like plan that would be available to all Americans buying health insurance — insurance competition would dwindle and premiums would skyrocket.
The insurance industry’s control of Congress would prevent a public option that could out-compete the private plans. Our traditional Medicare program is already being out-competed by the private Medicare Advantage plans because Congress has continued to support policies that give the private plans an unfair advantage while rejecting measures that would provide the much-needed expansions in the currently deficient package of Medicare benefits. That’s why Medicare must be improved before we consider it as a program for all of us.
* Critics of the public option are convinced it’s a one-way ticket to single payer (the government alone provides coverage). History suggests the opposite.
Currently we are being inundated with threats from the conservatives that if we enact a public option it will lead to the left’s dream of a single payer system. Yet the progressives have jumped on board precisely because they believe a public option will lead to their dream of a single payer system. Yet Hacker now says that history suggests the opposite. He says that the public option is not a threat to a system of competing private plans. Will the progressives really be satisfied with perpetuation of the current dysfunctional system as long as the few who buy their plans through the exchanges will be able to choose a feeble public option?
* We’re already heading toward single payer in sections of the nation — only it’s a private plan doing the paying. Next year, five states will have only one insurer in their exchanges.
Yes, so many plans have pulled out that there is only one private insurer left in many of the exchanges. But it is sad to see Hacker characterize these lonely private plans as single payer when the highly dysfunctional multi-payer system remains in place. He understands the single payer model better than most, yet his passion for the public option model drives him to play rhetorical games that glibly dismiss the true meaning of single payer (though he may actually be threatening the conservatives with this bastardized form of “single payer”).
* The diminishing number of choices doesn’t just hurt consumers; it also makes it harder for regulators to use antitrust tools to push back against this consolidation.
Politicians and the policy community are fixated on market competition as a means of controlling costs, yet Nobel laureate Kenneth Arrow half a century ago explained to us how markets do not work in health care. The United States has relied more on markets than other nations and we have the highest costs that has only brought us mediocrity. A publicly administered single payer system is much more effective at controlling costs throughout the system.
* A public plan is attractive in part because it can offer a broader network of providers.
Can it? Since the public option is just another player in a market of private plans, it would be funded by premiums rather than taxes. As the provider panels are increased the premiums would have to be increased since they can no longer offer exclusivity, making the public option less competitive, not to mention that broader panels would be attractive to patients with greater needs. Death spiral?
* Medicare has pioneered innovations in reimbursement, and it has improved hospital quality by imposing new penalties for readmissions. A public option could build on these breakthroughs and extend them to Americans under Medicare age.
Current Medicare innovations such as ACOs, MACRA, MIPS, and APMs have not proven to be very effective and are causing grief amongst the health care professionals. Besides, private insurers also adopt Medicare innovations, but only those that have been proven to be effective.
* The biggest advantage of the public plan, however, is its greater ability to restrain prices.
If the differential between public and private prices is too great, providers will reject the public programs in favor of the private. Many physicians will not accept Medicaid payments because of the low payment rates, especially specialists. Having a ticket to a public option is not very helpful if there is no one there to care for you.
* Pressure from a coalition of left-leaning groups led by the Progressive Change Campaign Committee (a group that fought for the public option in 2009) has encouraged 33 Senate Democrats, including the party’s leadership, to call for a public option. President Obama has started advocating for it again, and Hillary Clinton has embraced it.
Point made on the contention that the progressives are jumping on board.
* This year, Senate Republicans, providing another lesson, passed legislation that repealed the Affordable Care Act through the budget process, which isn’t subject to a filibuster. (President Obama vetoed it.) If that’s possible under the budget rules, creating a public option should be, too.
If a public option can pass only by squeaking it through in the reconciliation process, that doesn’t say much for expecting broad support in a divided Congress and a divided nation.
* If things keep going as they are, Americans are certain to demand greater regulation of private plans to make them operate more like public plans. Instead, we should make them compete with a public option.
Uwe Reinhardt has frequently said that a system of competing private plans – like they have in Switzerland – can work if they are very heavily regulated. Yet an OECD/WHO report on the Swiss system revealed that they still have many of the problems that we have in the United States. So keeping private plans in the system is still a problem. Instead of making them compete with a public option, we should get rid of them and establish our own single public plan.
Feasible? Is it really better to just give up and perpetuate uninsurance, underinsurance, high costs, high deductibles, narrow networks, inequities, financial hardships, impaired access, and more physical suffering and even deaths? What’s not feasible about trading all that in for a system that works?
Let’s Treat Our Patients, Not Trick Them with Private Insurance
By Emily Kirchner
Common Dreams, October 27, 2016
This Halloween, medical students are refusing to endorse the horrifying for-profit healthcare system as it exists
A few days ago, I was studying a medical diagram in a coffee shop when a man in his mid-forties walked in. His face was red, he was sweating, he looked upset.
“Please, can anyone help me?” he asked. “My daughter is at Children’s Hospital for seizures and she needs medicine. My credit card is maxed out. I need $16.50.”
A few weeks ago, I was listening to a friend describe a Pennsylvania Insurance Department hearing on proposed rate hikes for marketplace health insurance premiums.
“One insurance company representative actually asked the department to consider the health of the company,” he said. After this hearing, all six insurance firms received rate increases, often more than the rate increases they had requested.
A few months ago, I was standing in the operating room. The attending surgeon was instructing the resident about how to deal with a patient who had insurance difficulties.
“Well, the patient is going to say, ‘My insurance says they won’t pay for it,'” he said. “You say, ‘That’s not my problem. I gave you my advice.'”
Before you dismiss the coffee shop encounter as a panhandler pestering customers, consider that we live in a country where some medications have unaffordable copays, that many people go without needed medicines, and that people often have to make a choice between seeing the doctor and paying their utility bill.
Before you dismiss the big premium increases by pointing to Obamacare’s subsidies, consider that we live in a country where insurance firms helped write the Affordable Care Act, that millions of people remain uninsured despite the ACA, and that copays and deductibles are sharply rising.
Incidentally, the “health of the company” is not the kind of health I give a damn about.
Before you dismiss the attending surgeon’s callous attitude as difficult reality in a changing practice environment, consider that our current inefficient health care system harms patients, that doctors spend hours of their time demanding necessary tests and procedures from health insurance corporations that deny medical care because it threatens their bottom line, and that burnout contributes to hundreds of physician suicides each year.
This picture is horrifying. So horrifying that medical students like me believe that this Halloween is the perfect time to once again focus attention on our fractured health care system.
Our message: Private health insurance is a trick. We just want to treat our patients.
Our demand: An improved, expanded, “Medicare for all” national health program. It’s the only way to provide affordable, quality care for everyone.
Students for a National Health Program (SNaHP) is sponsoring the Second Annual Medicare-for-All National Student Day of Action on October 31, dubbed #TreatNotTrick. More than a few of us will be wearing Halloween costumes.
The actions are co-sponsored by the American Medical Student Association, the Latino Medical Student Association, White Coats for Black Lives, and many regional and local groups.
In Boston, students will host a public demonstration and call-in asking Rep. Mike Capuano to sign on to the single-payer bill, H.R. 676. In Ohio, medical students will visit Sen. Sherrod Brown and ask him to sponsor a Senate single-payer bill. In Philadelphia, students will rally and memorialize the lives lost to uninsurance and underinsurance with a candlelight vigil.
From California to Minnesota to Tennessee, no less than 33 medical schools are hosting campus events, rallies, lobby visits and demanding attention for improved, expanded Medicare for All right before the November elections.
This Halloween, medical students are refusing to endorse the horrifying system as it exists. We will don our white coats and witches hats, publicly and politically demanding the ability to #TreatNotTrick. Join us.
Emily Kirchner is a medical student at Lewis Katz School of Medicine at Temple University. She is a student member of the Board of Directors of Physicians for a National Health Program, and is also active in Students for a National Health Program.
SNaHP – Students for a National Health Program
It can be a perpetual downer to read, week after week, month after month, year after year, about the health care injustices that characterize the most expensive yet most dysfunctional health care system in the industrialized world – ours. That is why it is a very refreshing break to read what our medical students are doing. They are the future of health care in America. We’ll be in good hands.
The Slowdown in Employer Insurance Cost Growth: Why Many Workers Still Feel the Pinch
By Sara R. Collins, David Radley, Munira Z. Gunja, Sophie Beutel
The Commonwealth Fund, October 26, 2016
Issue: Although predictions that the Affordable Care Act (ACA) would lead to reductions in employer-sponsored health coverage have not been realized, some of the law’s critics maintain the ACA is nevertheless driving higher premium and deductible costs for businesses and their workers.
Goal: To compare cost growth in employer-sponsored health insurance before and after 2010, when the ACA was enacted, and to compare changes in these costs relative to changes in workers’ incomes.
Methods: The authors analyzed federal Medical Expenditure Panel Survey data to compare cost trends over the 10-year period from 2006 to 2015.
Key findings and conclusions: Compared to the five years leading up to the ACA, premium growth for single health insurance policies offered by employers slowed both in the nation overall and in 33 states and the District of Columbia. There has been a similar slowdown in growth in the amounts employees contribute to health plan costs. Yet many families feel pinched by their health care costs: despite a recent surge, income growth has not kept pace in many areas of the U.S. Employee contributions to premiums and deductibles amounted to 10.1 percent of U.S. median income in 2015, compared to 6.5 percent in 2006. These costs are higher relative to income in many southeastern and southern states, where incomes are below the national average.
Employee Premium Contribution and Deductible as Percent of Median Household Income
2006 – 6.6%
2010 – 8.4%
2015 – 10.1%
From the Conclusion
But the findings also offer evidence as to why many insured Americans view their health care costs as unaffordable. While growth in employee premium contributions have slowed along with premiums, deductibles continue to proliferate and their annual growth rate exceeds premium growth by a wide margin. Compounding this trend, growth in median family incomes — despite a recent surge — has lagged health insurance cost growth. Middle-income families continue to see a growing share of their household budgets going to health care. Where employees have less generous health plans as well as lower median incomes, the combination is particularly toxic. People with high deductibles relative to income are far more likely to avoid getting needed care than those with more affordable out-of-pocket costs. For those who do get health care, large medical bills can quickly exceed assets.
With all the talk this week about double-digit percentage increases in premiums for plans offered in the ACA exchanges, there is risk that this report my be lost in the background, though, for most Americans, this report is of far greater importance. For employer-sponsored health plans – where most individuals receive their health coverage – the percentage of household income used to pay premiums and deductibles has increased sharply in the last decade – from 6.6% to 10.1%.
To quickly dismiss the concern about premium increases in the ACA exchanges, although the average increase will be about 25%, of the 10.5 million enrolled only about 1.5 million in the exchanges will see the full increase since the others will be protected by premium subsidies. It may also impact the 7 million who buy individual plans outside of the exchanges. That 8.5 million combined is about 2.7% of the population, though most will have the option to shop for lower premium plans. Besides, these increases do not represent health care inflation but are rather due to intrinsic defects with the business model of competing private health plans. Healthier individuals are less inclined to enroll, making the risk pools more expensive, but it is likely that the greater factor was the insurers low-balling the initial premiums in an attempt to gain greater market share (though they will never admit this).
In contrast, about 154 million people – 57% of the U.S. population under 65 – obtain their insurance through their work – a far larger group than those who buy plans on the exchanges. But look at what is happening to them. Their share of insurance costs are consuming an ever larger percentage of their incomes. This financial burden on the typical working family is great enough to prevent them from receiving some of the essential health care services that they should have – impairing access due to lack of affordability.
Note that this is not due to the Affordable Care Act. These individuals and families do not buy their plans through the exchanges, and they receive no public subsidies (except for regressive tax expenditures unfairly benefiting primarily higher income individuals). Rather than blaming the Affordable Care Act, we need to blame legislators and the policy community who insisted that we keep this dysfunctional health care financing system in place.
While rejecting single payer, some of our political leaders are suggesting that we fix what we have – tweak the system until it works. One candidate for president suggests enacting a refundable tax credit of up to $5000 to help pay excessive out-of-pocket health costs, and that would help these individuals. But the problem is that it only pours more tax funds into our overpriced and administratively-burdened system without correcting any of the defects that have made our financing system so dysfunctional. And who pays those taxes? A bit of a shell game, I’d say.
We’ve had a lull in spending, but that was partly due to the recession. The other important factor that has slowed spending is what this report is all about. Regardless of ACA, health care costs are being shifted to plan beneficiaries strictly to protect the markets for the insurers by slowing the rate of premium increases. This has the deleterious effect of slowing spending by reducing the affordability of care and thus reducing access to the care that patients should have. Bad policy.
The solution is really simple. Fund a single universal risk pool with equitable taxes that everyone can afford, and then use that risk pool to pay for all necessary health care for everyone. Why didn’t those single payer people think of that? Oh. They did.
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