By Noam N. Levey
Kaiser Health News, March 24, 2021
When Democrats pushed through a two-year expansion of the Affordable Care Act in the covid-relief bill this month, many people celebrated the part that will make health insurance more affordable for more Americans.
But health care researchers consider this move a short-term fix for a long-term crisis, one that avoids confronting an uncomfortable truth: The only clear path to expanding health insurance remains yet more government subsidies for commercial health plans, which are the most costly form of coverage.
The reliance on private plans — a hard-fought compromise in the 2010 health law that was designed to win over industry — already costs taxpayers tens of billions of dollars each year, as the federal government picks up a share of the insurance premiums for about 9 million Americans.
The ACA’s price tag will now rise higher because of the recently enacted $1.9 trillion covid relief bill. The legislation will direct some $20 billion more to insurance companies by making larger premium subsidies available to consumers who buy qualified plans.
And if Democrats want to continue the aid beyond 2022, when the relief bill’s added assistance runs out, the tab is sure to balloon further.
“The expansion of coverage is the path of least resistance,” said Paul Starr, a Princeton University sociologist and leading authority on the history of U.S. health care who has termed this dynamic a “health policy trap.”
“Insurers don’t have much to lose. Hospitals don’t have much to lose. Pharmaceutical companies don’t have much to lose,” Starr observed. “But the result is you end up adding on to an incredibly expensive system.”
The large new government commitment underscores the disparity between the high price of private health insurance and lower-cost government plans such as Medicare and Medicaid.
The main reason commercial health plans cost more and saddle patients with higher medical bills is because they typically pay hospitals, doctors and other medical providers more than public programs such as Medicaid.
By Don McCanne, M.D.
This article makes an important point. President Biden and his staff, along with Congress, chose the most expensive method of expanding health care – giving more taxpayer funds to the private insurers. There is a bit of sleight of hand here since it is us – the taxpayers – who are paying these higher prices for a health care financing system heavily dependent on private insurers.
Why are costs higher when we use private insurers? The author indicates that private commercial insurers pay more for health care services than government programs, and, by and large, that is correct. But that is a relatively small portion of the higher spending by private insurance, and it does not take into consideration that public programs are more effective at setting appropriate prices – costs plus fair margins – not to mention that they use more efficient financing methods such as global budgeting of hospitals.
But what has been ignored in this article is the major reason that private insurers are more expensive, and that is administrative costs. Those extra taxpayer funds going to private insurers include costs such as marketing of their plans, costs of contracting for restrictive provider networks, administering prior authorization requirements, complex systems of processing claims including denial of benefits, simple administrative costs of operating large corporate entities, and distributing generous profits to their executives and passive investors. Which of these administrative services do you want to continue to pay for through increased taxes?
So these increased costs that the taxpayers are bearing are not just for more health care, but they are a gift to the most expensive and inefficient financing system on earth. Particularly galling is the fact that the administration is presenting this as if it were a gift from the government to the patients, but that government money is provided by us – the taxpayers. Much of it is hidden from view since a large portion of these taxes we pay are disassociated from health care spending. Keep in mind that funds moved into the health care financing system are not available for other important needs such as food, housing, transportation, education, environment, infrastructure, and so on.
A single payer Medicare for All program would fill in our health care financing needs without wasting the hundreds of billions of dollars on these superfluous administrative costs of the private insurers, plus their profits. But they are now talking about making these wasteful expenditures permanent. Maybe they might even add a public option, which would be only one more player in our profoundly inefficient system.
As the title of Noam Levey’s article indicates, the big boost was in buying health insurance rather than simply health care, and it didn’t come cheap. As Paul Starr states, we ended up adding on to an incredibly expensive system. We didn’t have to do that. We can still redirect our course toward an efficient, equitable system for all. After all, it’s our money, and yet progressive taxation makes health care affordable for all since it is simply based on the ability to pay. That is certainly more efficient than playing games with taxpayer subsidies for premiums and cost sharing for expensive, self-serving private insurers.
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