By Susannah Luthi
Modern Healthcare, August 8, 2018
Government spending on Obamacare premiums has raced past its per-person spending on Medicaid expansion, and the gap is poised to increase—a trend that has some policy experts shaking their heads over the long-term economic picture and at least one major insurer questioning the sustainability of the individual market.
The CBO’s latest projections from earlier this year show government paying out an average of $6,300 annually for every subsidized enrollee in fiscal 2018. It estimates that number will rise to nearly $12,500 in 2028. In contrast, Medicaid spends $4,230 per non-disabled adult, set to inflate at 5.2% annually to just over $7,000 per person in 2028.
UnitedHealthcare leveraged these numbers for an issue brief criticizing the exchanges as “significantly more costly and less sustainable than envisioned” and touting Medicaid expansion as more stable. The insurer has loaded up on its government business while ramping back its presence on the state exchanges, and in the white paper predicted more instability for the individual market.
The individual market is a very different animal than Medicaid. Its cost increases reflect the volatile reactions to congressional policies and moves by the Trump administration. The 2018 surge in Obamacare subsidies followed President Donald Trump’s cutoff of the cost-sharing reduction payments (CSRs) for low-income enrollees that insurers are still required by law to pay. Insurers priced CSRs into the silver plans that serve as the benchmark for calculating federal subsidies. This spiked silver plan premiums for the unsubsidized enrollees and financial help for the subsidized.
Supporters of the Affordable Care Act defend its subsidy structure as the unbreakable backbone of the law, while critics say tying premium tax credits to silver plans shields insurers at the expense of the government and the unsubsidized.
By Don McCanne, M.D.
The news is that the government subsidies alone per individual enrolled in the ACA exchange plans ($6,300) are greater than the amount that the government is paying for complete care per individual enrolled in Medicaid ($4,230). These numbers are being used by UnitedHealthcare to support their decision to avoid the ACA exchanges and build its business of private Medicaid managed care plans, as being a better deal for the government.
The numbers are distorted since the ACA enrollees who do not receive government subsidies are left out (which would make the government costs per ACA enrollee lower), and they leave out the Medicaid patients with expensive disabilities (which would make the government costs per Medicaid enrollee higher).
But there is a lesson here, and that is that an administratively complex system using private health plans is an expensive way of financing health care. Taxpayer funds are being wasted on excessive administrative functions designed to reduce the financial burden on low- and moderate-income individuals – not only the administrative excesses of the private insurers and the administrative burden they place on the providers of care, but also the addition of the administrative costs of the insurance exchanges themselves.
The low costs of the Medicaid program are another issue. Payment rates were not enough to cover the costs of physicians caring for these patients and so many opted out, impairing access to care because of a lack of willing providers. Thus the private Medicaid managed care plans have moved in. Their business success depends on paying as little for health care as they can. That appears not only to be price concessions that they have negotiated with the providers, but also it seems that they have been successful in reducing the amount of care that patients are receiving, especially specialized services. Patients do not realize that they have been deprived of care if it was never offered to them.
Regardless, our health care financing system is clearly dysfunctional. We could get rid of the exchanges, the private insurers, the private Medicaid managed care plans and all of the other waste and inequities of our multi-payer system by enacting and implementing a well designed, single payer, improved Medicare for all. But then you’ve heard that before.
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