The ACA Continues to Head Towards A Medicaid Style System

Nearly a week after the GOP pulled the unpopular American Health Care Act from a vote on the House floor, Democrats gleefully celebrated the success of the law’s demise.  They should not have.  Because now comes news signalling the ACA is headed towards a system many, many Americans simply will not accept as an acceptable system of care.  A single payer system known as Medicaid.

But first, the latest blow to the ACA…..

Anthem Inc is likely to exit from a large portion of its Obamacare individual insurance markets next year, Jefferies analysts said, nearly a week after Republican leaders pulled legislation to overhaul the U.S. healthcare system. Anthem is one of the few health insurers that still sells plans under Obamacare. Humana Inc, Aetna Inc, and UnitedHealth Group Inc pulled out after reporting hundreds of millions of dollars of losses. Anthem is leaning toward exiting a “high percentage” of the 144 rating regions in which it currently participates, Jefferies analysts said in a note on Thursday after talking to the health insurer. Obamacare, former Democratic President Barack Obama’s signature legislation created by the Affordable Care Act of 2010, has had a tough beginning. The mix of sick and healthy customers has been worse than expected, and premium rates on the individual insurance market went up 25 percent this year. The Republicans’ failure to repeal Obamacare, at least for now, means it remains federal law.

When Donald Trump said after the failed AHCA vote he would let the ACA fail on its own he as partly right.  It probably will.  But the part that will fail will be the ideas it was politically sold on; choice, lower costs and better care.

Who could forget the infamous then President Obama promising that “If you like your doctor you can keep them.”  That promise was broken soon after the law came into effect when over 250,000 Floridians lost their private healthcare.

The pillars the law was built on, again choice, lower costs and better care, are increasingly looking less likely to occur.  For example, in 2015 only one state had a single provider on the exchanges.  By last year that number had ballooned to over five hundred and five states.  Now, with Anthem threatening to pull out after losing billions on the exchanges, the numbers would rise even higher after this year.  Dozens of counties would not even have a single provider on the exchange.

In urban and metro areas this is not so much an issue.  To providers in upper income, urban, relatively young and healthy areas the exchanges are lucrative.  But, in the vast majority of rural and suburban counties in the country, insurers are losing money and lots of it.

The Democratically controlled Congress set up several ways to avoid any of the above issues.  For one, in an effort to help insurers avoid losses on providing care to the sickest in America they set aside funding for co-ops to entice sicker Americans to participate in markets outside the exchanges.  Today, very few co-ops remain as they were set up to be self-sustaining in a few years.  None are and many have thus gone broke.

Secondly, the Democratic Congress put into the law a regulation that would direct taxpayer money to insurance companies to offset their losses in the exchanges.  But, since government funding has not increased due to sequestration and Continuing Resolutions neither has the funding to this subsidy.  As a result, insurance companies have little incentive to continue to lose money on the exchanges.

Third, the promise insurers were sold that any losses they suffered providing “essential benefits” and being forced to cover those with pre-existing conditions with younger, healthier clients were guesses at best.

The Individual Mandate, the tool meant to force younger individuals to buy insurance, has proven to be an inadequate punishment.  This leads into the second failed promise of the law, lower costs.

Insurers have been hammered by losses in many exchanges.  The costs have not been offset by the incentives Congress created and as a result insurers have been forced to pass the costs onto consumers on and off the exchanges.  The one insurance market that has largely been untouched by the law is the employee insurance provided market though the law did try to hit this with the Cadillac Tax.  However, the tax has proven so politically unpopular a bipartisan majority has delayed its implementation until 2020.

Finally, the debate over whether care has improved has changed from “better” care to more people are “receiving care.”  This has largely been a result of the Medicaid Expansion many states have adopted.  According to some estimates over 30 million Americans have received access to care via Medicaid.  Proponents of the law argue it would be even more if not for several states refusing to expand Medicaid like Texas.

The Politics of The ACA

It should be little surprise Anthem made their announcement in early 2017 after the failure of the ACHA.  The party that had railed against the law for the last seven years now controlled every lever of government and could systematically weaken the law through regulatory and fiscal means.  For example, already Donald Trump and Health and Human Services Secretary Tom Price have ordered the IRS to weaken their enforcement of the Individual Mandate.

But it is not just party politics that is driving insurer actions on the exchanges.  The tenor of the debate has changed from one that includes health insurers to one that does not.  The AHCA was unpopular among Americans, but not because insurers were squeezed out of the law’s crafting.

Even Democrats have started to sound different about the law their former President passed.  Whereas once the party faithful and many elected officials defended the law an insurgent campaign led by Bernie Sanders showed just how few in the party really care about their alliance with insurers.  Bernie Sanders advocated a Single Payer system consistently throughout his primary campaign against Hillary Clinton and many of the party’s wealthiest voters responded favorably with their votes.

In turn, the Republican Party led by Donald Trump has shown little love for insurance carriers.  Several times, Republicans have tried to undercut insurance carriers by defunding the subsidy carriers receive for losses on the exchanges and, of course, repealing the entire law and Individual Mandate.

Notably, in Paul Ryan’s bill, he kept some of the key components of the ACA that were popular that were costing carriers a lot of money, allowing parents to keep kids on their insurance until they turned 26 and covering those with pre-existing conditions.  Without a doubt, carriers were not happy about either of these aspects of the law.  They also frowned upon the law’s efforts to repeal the Individual Mandate and the Cadillac Tax.  Both are major disruptors of the insurance market.

Where Does This Leave The ACA?

Anthem’s likely decision to leave the exchanges will lead to fewer choices for consumers, costlier plans as private markets will be the only option in certain areas of the country and lack of access to the care they want.  In many more places, the only option these consumers will have access to (assuming they qualify) is Medicaid.

For many more middle class Americans in these counties, the only option will be pricey private market options with little choice.  That sounds eerily similar to a massive healthcare program for low-income Americans.  Medicaid.

There is a key difference between the ACA and Medicaid however.  Several studies have shown consumers of Medicaid are relatively happy with the care they receive.  That said, many consumers of Medicaid have not had access to the kind of choice many other Americans expect.

In non-urban areas where an insurer may provide an exchange the choices of care are likely to be diminished.  Larger provider networks mean more costs for insurers and in rural or poor, urban areas, insurers are likely to try to cut down on costs.  So, from a cost-benefit analysis for a carrier it makes sense to have a narrow network.

Republican efforts to repeal the ACA without a replacement are shortsighted.  It is why Paul Ryan unveiled the failed ACHA.  Democrats are largely united around defending the law if for no other reason than it brings the nation closer to a Single Payer system.  Republicans, if they truly want to expand choice for all Americans need to understand insurers don’t trust them to fix the system to protect their interests.  Until insurers, the public, doctors, and yes, even Democrats, are brought to the table America will move inexorably closer towards Bernie Sanders dream.  A Medicaid for all, Single Payer system.


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