Tuesday, February 28, 2017

Replacing the Affordable Care Act -- what's so complicated?

Nobody knew health care could be so complicated? Er, except everybody but Mr Trump.  And yes, it's a huge behemoth of a system, but the devil is in the detail.  It's when you throw in all the special interests, political considerations, back-scratching, etc. that it quickly gets complicated.  But before all that happens, there are only three basic choices when it comes to providing medical insurance, and they are easy to grasp.  Choosing among them, though, has become much more of a political choice than an unloaded purely economic one.

Here's what we had before the Affordable Care Act (ACA): private insurance, either from one's employer or purchased individually.  For this to work, of course, just as any other business, insurance companies must make a profit, and that's harder when customers get sick; purchasers actually using their insurance isn't good for the bottom line.  That's why there's so much talk about people with "pre-existing conditions".  These are people who insurers know will cost them money and that's why people with "pre-existing conditions" were essentially uninsurable before the ACA, except as members of large employee pools comprised primarily of healthy people who had to buy in as a condition of their employment.  And that's why insurance companies used to charge women, older people, smokers, and so on more; they were more likely to cost money.  And that's why insurance companies also had policies such as lifetime caps on benefits.  To stay in business, insurers have to make a profit.  It's their reason for being.  This system can work well for healthy people and insurance companies.

The second option is something like the ACA, where everyone, pre-existing condition or not, can buy insurance -- an appropriate thing to point out on Rare Disease Day 2017.  As with auto  insurance, the only way this is financially viable is if everyone is required to buy in; just as good drivers subsidize unsafe drivers, healthy people subsidize people more likely to use healthy insurance.  Thus, the hated "mandate", the requirement that everyone buy in or be penalized on their taxes.  Many detractors of the ACA believe the mandate can simply be eliminated, that a replacement for the ACA can cover as many people, as cheaply, without one.  But, that's impossible. This is the same kind of privitized system that has worked without major snags for many years in Switzerland, for example. There, insurance is compulsory, and insurance companies must offer a basic plan which they aren't allowed to profit from although people can purchase bells and whistles, which is how the insurers make a profit.

The third option is the public option, often these days described as Medicare for all.  Government-supplied health insurance, paid for by tax dollars.  It's cheaper than the first two options in large part because it's non-profit, and the infrastructure required by private insurers to validate or deny claims doesn't exist.  National health has worked well in many rich countries for decades, keeping costs down and providing access to medical care to all.

And that's it.  There's no other "terrific" "cheaper" alternative anyone has thought of that can replace the ACA. The only options are a system that's totally private; something like the ACA with its mandate; and national health.  Unfortunately, this wasn't very well explained when President Obama was working on the Affordable Care Act, and it's not being explained now.  The Republicans in control of Congress aren't going to give us national health; and while it seems that many of them would be happy going back to what we used to have before the ACA, opinion polls are showing that people are less and less happy with that option.  Will Trumpcare be Obamacare renamed, then?  We'll have to wait and see.  

In any case, whatever system we adopt, we've still got problems.  Although the rising cost of medical care in the United States has slowed some with the ACA, at almost 18% of GDP health care spending here is the most expensive in the world, far exceeding that of any other high-income country, most of which have national health care (e.g., source).  In part it's because of the high cost of medical care, the higher use of expensive technology (e.g., MRI's, mammograms and C sections) and the exorbitant cost of pharmaceuticals.  And this is even with limitations imposed by insurance companies to control costs.  In addition, the cost of individual premiums has soared for people who aren't eligible for government subsidies to help cover the cost of insurance, in part, because fewer healthy people have purchased insurance than companies anticipated.  And deductibles and co-pays have risen sharply.  Insurance companies still have to turn a profit to stay in the health insurance marketplace.


Source
And, all this spending hasn't made us healthier than people in countries that spend even considerably less.


Source

So,  even if Trumpcare is as terrific and as cheap as we've been promised, it's hard to see how it will cut the high cost of medical care, and make us a healthier nation.  That is complicated, especially when private profit, rather than public health, is its fundamental basis.

14 comments:

David J. Littleboy said...

It's quite simple, really: health care anywhere (even here in Japan, where per capita expenditures on health care are 1/3 those in the US) is more expensive than most people can afford, so if society is going to provide health care for everyone, the rich are going to have to pay more and the poor have to get subsidies.

The Republicans in the US don't like charging the rich more, so they don't like providing health care to everyone else. Again, a simple thing, really. Obamacare is socialism: it's that or let people die.

(Being a long-term expat in Japan, I like blathering about Japan. Feel free to ignore the following.)

For people who don't get health insurance through work, Japan's mandated (it's legally required that you enroll) "medicare for everyone else" system charges a flat number (a regressive component) plus a percentage surcharge on your income tax bill. (So no one gets a subsidy; folks with less income just get charged less.) And when you go to the doc, you just show your card and it's the same for everyone, wherever their insurance comes from.

The trick to keeping prices down here is that, being a single payer, the government sets the prices for the services it purchases: draconian price controls. And, of course, they negotiate drug prices with the drug companies. The doctors chafe at the prices, but do quite nicely thank you anyway.

Anyway, back when Obamacare was being created, very few people understood how hideously cruel the US system was. Medical bankruptcy is unknown outside the US. "Preexisting conditions", also unknown outside the US. Insurance refusing to pay after the fact, unknown outside the US. (Of course, what is covered is limited and Japan historically has been slow about accepting new drugs and treatments. But it has been getting better of late. (Partly due to Japan Inc.'s support of the electronics industry, there are way more CT and MRI machines than needed.) And, of course, not being able to afford insurance is unknown outside the US.


Anne Buchanan said...

Thanks for all this, David. Yes, the issue of course is your initial premise, that society is going to provide health care for everyone! In the US, we can't even agree on this. I think it's primarily puritanism, racism, government-is-evil-ism, and I-won't-pay-for-them-ism that keeps us from doing it, despite the fact that objectors then end up paying a lot for medical care for those whose insurance they refuse to subsidize/enable. And, medical care ends up more expensive than it would be under a national health plan. But then, we've learned, haven't we, that people don't make economic decisions rationally.

David J. Littleboy said...

" But then, we've learned, haven't we, that people don't make economic decisions rationally."

Well, I think that the Republican dislike of paying for health care for the rest of us isn't exactly irrational: it's perfectly in line with the their "philosophy" of "I've got mine, screw you", i.e. libertarianism. Their main constituency is, after all, the folks who would be net negative under any humane system, i.e. the 1%. (And to be obstreperously off topic, the idea that the Trump supporters who made a difference in the Rust Belt states were "working class hurting from job loss" is quite wrong: it was suburban and rural folks who largely had never voted before. Folks who own quite nice property and are doing quite well. Back in the spring last year, I took a ride out in the distant suburbs of Boston (my parents are interred at a cemetery in Tewksbury). We missed the turn off and got quite lost and saw zillions of Trump signs in yards. (Asked direction of a local: a large white male with lots of tattoos.) Same thing in Swampscott and Marblehead. Yes, most of these folks aren't rich enough to self-insure in the US, but they think they are.)

Oh, well. It's all depressing. And embarrassing. The Japanese figured out that Trump was a problem early on, and have been asking what's this joke since the day he announced his run. Embarrassing. Back in the Gore days, it really was Gore's legislation that created the public internet (as it was his father's that created the interstate highway system). But he got killed for it. Kerry really is a war hero. But he got killed for it. Clinton really is one of the hardest-working civil servants we've ever had in government, but she got killed for it. The Republicans may seem dumb, irrational, mean, and evil. But they're getting away with horrific garbage, and the mainstream press failed to call them on it. (I think it's funny that the NYT, which ran not one but two Clinton hit pieces the Sunday before the election after months of relentless negative reporting is now an anti-Trump good guy.)

Ken Weiss said...

Well, we know that we elected a demagogue, who tapped into the widespread mix of angers and fears and will let some hatchet men run things while he tweets; whatever the mix of constituents, the working class will be, as always, shafted by those in power, who will secure theirs while they can before the backlash. I would argue that rule by a wealthy and powerful elite, whether it be in the Church, military, putative 'communist', business, nobility or whatever reason for their standing, is the way civilizations have basically always been. Democracy where everyone can vote is better in this regard, but we've seen how the system can be--to use Trump's word for it--rigged to keep the wealthy minority from having to share. Health care illustrates some of the problem: the few would have to give up some of their wealth to help cover the many. It's no surprise they resist and perhaps the main surprise is how other countries have managed it.

homolog.us said...

Obamacare is the terminal stage of a centralization process that started with New Deal and reached its peak during Johnson's time. Since then it has been in internal decline, but has been sustained by debt from 1980 onward.

Academia and medical sector have been the biggest beneficiaries of this centralization process, and therefore they are the ones bitching the most about the coming failure of the system.

http://www.oftwominds.com/photos2013/college-inflation7-13.gif

http://www.oftwominds.com/photos07/cpi1978-2004.gif

> Well, we know that we elected a demagogue

He is merely a systemic response to pervasive dishonesty in American university system.
What have the academics accomplished over the last few decades?


(i) The NIH-funded academics led to the US healthcare being the global outlier -

http://www.zerohedge.com/news/2017-01-01/us-healthcare-global-outlier-and-not-good-way

In fact, US life expectancy decreased in 2015.

http://www.nakedcapitalism.com/2016/12/us-life-expectancy-declines-in-2015-unintentional-injuries-rise.html

(ii) The economists among them pushed delusional centralization schemes on people. One example is cash ban, which we suffered from in India.

http://www.zerohedge.com/news/2017-03-02/indian-economy-collapses-demonetization-crushes-small-business

(iii) Since 2008, they scammed the young generation with massive student debt -

http://www.oftwominds.com/photos2016/student-loans5-16a.png


At this point, it is pretty clear that Obamacare, Trumpcare or any other centralization scheme will collapse on its own weight, and so will be the university system and pension promises of the boomers. They only question is how soon, and how long the people have to suffer before the system decentralizes.

homolog.us said...

Here is a good post on Obamacare scam from a liberal blogger -

http://www.nakedcapitalism.com/2016/08/the-history-of-obamacare-2013-2016.html



Another good post on centralization schemes -

http://www.zerohedge.com/news/2017-03-13/solutions-abound-crush-crony-cartels

"ObamaCare was the penultimate flowering of centralization: every self-serving healthcare cartel and racket had a say in the centralized sausage-making, and the results were entirely predictable: highly profitable to the healthcare cartels and rackets, and soaring costs that rendered the program unaffordable."

Ken Weiss said...

Well, I'm not sure what your point is or what you'd want to see instead. We could of course return to the middle ages in terms of health care, but many countries have had viable, supportable, national health care for some time. In some, like Switzerland and (I think) Germany, it is privatized but seems to work. In others, like Canada, Scandinavia, even England, it works. Anything so big and bureaucratic will have its bad side, but far better than nothing.

That private greed, including that of universities, is a negative factor of life these days, is probably obvious. But that means we ought to be seeking some better source of national cohesion, which you seem to denigrate as centralization, and what besides government is the agent to bring that about?

homolog.us said...

> many countries have had viable, supportable, national health care for some time

Most of those countries are small and homogeneous, or had been until recent unpopular surge of refugees. In contrast, USA is large and has several groups at loggerheads with each other. The population of California alone is more than that of Canada, and with at least seven or eight dominant ethnic groups (Europeans, Jews, Mexicans, Vietnamese, Blacks, Chinese, Indians) with different culture, history and interests. The only solution that MAY work for USA is decentralization to state and local levels.

> But that means we ought to be seeking some better source of national cohesion, which you seem to denigrate as centralization, and what besides government is the agent to bring that about?

I do not see any interest in national cohesion among the elites. Many of them are living on government dole at the universities or academic think tanks, and are extremely corrupt. Just to give an example, they hardly protested after finding out that Hillary rigged the entire primary process against Sanders, the more popular candidate.

This self-serving elite class is now shocked to see the rebellion among poor working class joining Trump. The very process of claiming Trump to be illegitimate president is against cohesion, because it is unfair to the people voting him in power.


> We could of course return to the middle ages in terms of health care

That is certainly a possibility, if centralized solution is seen as the only option. A civil war is coming to this country, and people will come to their sense AFTER the destruction brought by the war. No cohesion is possible until then.


Ken Weiss said...

The possibility of internal or, perhaps even worse, international strife over what is afoot in American politics is obvious. We have the problem that the minority of wealthy elites needs demagoguic excuses to rally support from those who, as always, will get the short end of the stick no matter what's been promised. But the see-saw between central and state-located things in the US is to me rather hard to predict. Health care issues are largely affected by the avarice of the health care industries, among other things. If each state felt obliged to care for its citizens (or, more aptly put, if the citizens of each state felt obliged to care for each other), and the idea of 'insurance' were clearly understood, then we might end up with something civilized.

I am not as much of a hot-head as you are (!), and I do agree about the avarice of universities and their parasitism in regard to health related research, but that is typical of how business (the appropriate word for it) is done these days, and NASA and other agencies are as culpable, as are the public media. Personally, I think this is a minor aspect of this particular health-care problem. Also, and of course, it's just anyone's guess, I think centralization will grow rather than shrink in our rapid-communication age, even if nationalism rises relative to internationalism. Thinks like xenophobia are easier among rather than within nations, but civil wars prove anything is possible, and people throughout history have shown they are vulnerable to demagoguery.

homolog.us said...

> I am not as much of a hot-head as you are

I am merely stating the facts, trends and their logical extension. So, I guess facts are hot-headed :)

For example, supporting high-pay of universities by making students go more and more into debt is not only immoral, but is also unsustainable. Similarly, paying insurance companies increasing amount of money to support failing health care system is not sustainable. If people need cheaper care, they should get more doctors from outside USA. It is as simple as that.



> We have the problem that the minority of wealthy elites needs demagoguic excuses to rally support from those who, as always, will get the short end of the stick no matter what's been promised.

I do not think so. This time, the academic class is the problem. The current cycle is quite different from the progressive era of 1890s, when intellectuals rebelled against the wealthy elites to make society more equitable. This time the academics are (willingly) in the pockets of the wealthy class by taking money from various 'non-profit' and other rackets, and supporting policies to deliberately hurt the working class (whom they hate). Therefore, they are thoroughly corrupted. Ask for any 'economic' theory (tax-cut for wealthy, tax-cut for union, public school, charter school, cash for clunkers), and you will find a professor at some college for sale to give you what you want.



> I think centralization will grow rather than shrink in our rapid-communication age

Yesterday the final Brexit vote passed, and now Scotland is also planning to leave Britain. French voters are supporting Le Pen for her proposal of leaving EU. Holland and Italy are following similar course. Does that appear like increasing centralization to you?


> The possibility of internal or, perhaps even worse, international strife over what is afoot in American politics is obvious.

No international strife. Civil war is coming to USA.

Ken Weiss said...

Well, I'm not as pessimistic as you seem to be. The world does go off the rails on a regular basis, with large, tragic consequences. One can hope that the complexity of today's life along with rapid communication and so on, can impede too-serious consequences until sanity returns. At least what I'd call sanity, which is more connection than separation....

Manoj Samanta said...

Here is an example of how academic/credentialed crowd destroys society, but gets scot-free after getting caught.

http://www.nakedcapitalism.com/2017/03/flint-official-escapes-imprisonment-only-has-to-write-apology-letter.html

In various legal situations, the employees of Department of Health and Humanities Services are treated as experts. For example, when they testify against ordinary (i.e. uncredentialed) people in court, their testimony is given additional weight for their 'expertise'. Therefore, it is reasonable to expect them get more severe punishment than ordinary people, but we never see that happening.

Flint is not an isolated case. We saw Merck (and PhDs working in Merck) getting no punishment for Vioxx. Even after such a big criminal action, the chemistry professors and PhDs at the universities continue to describe Merck as a 'good company'. Purdue Pharma continues to push addictive painkillers on people, and started the opiate addiction leading to rising suicides (http://theweek.com/articles/541564/how-american-opiate-epidemic-started-by-pharmaceutical-company).

Those are real health problem of poor people nobody in academia talks about, yet we hear endless garbage on how they care so much about poor people, they want "Obamacare" (an insurance scam).

Ken Weiss said...

Manoj,
I don't disagree that academics have it easy these days in some regards. But the academic system is under constraints that push it in its current directions, and we write about that all the time. But a broader view, I think, is that what you are complaining about is much more a part of our general culture than it is about NIH or university experts and so on. Elite groups are usually small in relation to society as a whole, are privileged, and get away with acts detrimental to others but beneficial to themselves. History doesn't provide much solace about how changeable this is in the long run.

There are people in distress that our society could and should care for, and national (or state or whatever) collective risk and care sharing systems are better I think than letting the helpless help for themselves while the rest help themselves to largesse. It is not just 'the poor' who are unable to cover the immense costs of health care, among other things, in our society. It may never be easy, and always somewhat turbulent, but collective risk and care sharing is an ideal to strive for in my view. Indeed, many of the leading religions assert this, though their members too often seem to think that saying pious words is enough, when action might be costly and put their 'beliefs' to the real test. Government, as the agent of all of society, is one way to approximate sharing, even if government, made and managed by people, will always be imperfect and have its vanities &c.

Anne Buchanan said...

Manoj,

I agree with you in general, but I'm not sure what your solution/s is/are. Yes, the ACA is very flawed, which we know very well because our daughter is on it. But, as I wrote here, there aren't that many options. Private insurance as we had before, which is completely profit-driven and thus leaves millions of people uninsured -- I'm not a fan of that option -- and some kind of national health, which I would prefer. It's obviously more centralized, but it does remove the profit motive incentive for insurers, and covers everyone. So, that would seem to solve one problem but, in your view, create another. The Democrats would surely have preferred a form of national health to what happened to be, given political exigencies, the only viable option at the time, Obamacare, because that was the only plan they could envision pushing through Congress. Yes, it's a plan that enriches insurance companies, and Big Pharma. And doesn't challenge the actual cost of health care. Not good, but that's where we are.

Health care reform has been talked about for decades, of course, getting more and more reliant on the private sector, and thus more profit-driven as time went on, as both parties moved to the right (i.e., became more and more servants of business interests). Even Richard Nixon's proposal was more inclusive than anything that's been proposed by Democrats for decades. So, I'm not sure what your solution is.

Though you mention a solution to the cost of medical care, bringing in more doctors from other countries, which, if I understand you correctly, wouldn't change the system, or even challenge it. And it sounds to me as though you are suggesting we have a class-based medical system, with foreign-trained physicians second-class. Really?

Also, for the record, we blogged about the opiod epidemic some time ago, essentially blaming it on Purdue Pharma and the profit motive. I don't think we are diagnosing things terribly differently, but again, I'm not sure what your solutions are. You say civil war, and you may be right, but I think the system is slow and lumbering, but it will bring down Trump and Steve Bannon, Cromwellian war-monger-in-chief, before that happens. Civil war isn't good for business. Off-shore war is better.