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Senate GOP Healthcare Plan – Comparing Two Iowa Counties’ Health Insurance Premiums

The 2017 blizzard continues this summer, not with blowing snow, but with political maneuvering taking place in Washington on ‘healthcare reform.’ For the record, it is really not ‘healthcare’ that is being addressed by the Republicans, but a ‘health insurance’ makeover – specifically for non-employer coverage purchased by individuals and Medicaid (for low-income Americans).

Real ‘healthcare’ reform would aggressively attack the root causes that make insurance grossly expensive. Instead, the political insanity continues by focusing on the symptoms of the core problems – the exorbitant health insurance premiums we pay. In lieu of reducing the enormous waste built into American healthcare (waste that is an unnecessary cost to many of us but an entitled revenue to entrenched players in the healthcare arena) we continue to confront the never-ending battle downstream of “who should pay and how much?” This problem will continue to persist because of the unwillingness to confront the brutal facts about waste. Einstein’s definition of insanity fits this issue remarkably well.

But I digress…

After Senate Republicans test-launched their trial balloon on June 22, also known as the Better Care Reconciliation Act (BCRA), we now have a better understanding of the impact it will have on each state regarding insurance premiums, the number of those who will be insured and uninsured, and, to a lesser extent, the financial tension on state budgets. Additionally, insurance companies, health providers and other stakeholders have watched with bated breath on how their business world will be impacted by political alterations to health coverage.

After scoring the BCRA, the most notable news coming from the Congressional Budget Office (CBO) report was the projection that 22 million people would lose health insurance by 2026, in addition to millions more seeing increased out-of-pocket costs. (The Urban Institute projects that Iowa will have 232,000 more uninsured by 2022.) The national increase in the number of uninsured equates to the combined populations of Kansas, New Mexico, Nebraska, West Virginia, Idaho, Hawaii, New Hampshire, Maine, Rhode Island, Montana, Delaware, South Dakota, North Dakota, Arkansas, Vermont, Wyoming and the District of Columbia. Given the recent backlash to the CBO score, Senate Republicans have delayed their vote on this legislation until sometime after the holiday break.

A new Kaiser Family Foundation map compares county-level projections of premiums and tax credits for marketplace enrollees under the Affordable Care Act (ACA) in 2020 with estimates for the BCRA. Both the ACA and BCRA include tax credits that factor in family income, local cost of insurance and age. Eligible enrollees pay a certain percentage of income towards the cost of a benchmark plan, while tax credits cover the remainder of the premium. Further assumptions of the map are explained in the Kaiser link above.

Using the Kaiser map, the following slides suggest that coverage losses would be borne disproportionately by people with low-and-moderate incomes and by older people who purchase their own coverage – prior to becoming eligible for Medicare.

As an example, under the ACA, a 60-year-old enrolled in a silver-level marketplace plan in Polk County with an income of $20,000 has an average premium of $8,600. His tax credit covers all but $950 of his costs. Under the BCRA, the premium for this same person would be almost $3,000 higher than it is under the ACA. And, even after receiving the tax credit, he would be paying $2,340 – an increase of 246 percent over the ACA plan. If he lived in Appanoose County, he would be paying $3,520 more under the BCRA plan versus the ACA plan – an increase of 371 percent.

Below are two other summaries of how people compare based on age (27, 40 and 60), income ($40,000 vs $60,000) and location (Polk and Appanoose counties). Generally speaking, the comparisons suggest that as income increases, the younger people will pay less premium under the BCRA when compared to being enrolled in the ACA. Older enrollees, especially those in higher-cost counties, will pay more under the BCRA plan.

Below is the comparison for individuals earning $40,000.

Below is the comparison for individuals earning $60,000.

As the summer continues to heat up, so too will the blizzard of activity toward fixing the symptoms of a much bigger problem.

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Diving into the High-Risk Pool

R-I-S-K is a four-letter word that we experience in our daily lives with nearly every decision we make – whether it be driving a vehicle, eating unhealthy food, using tobacco products or boarding an airplane. Often, we don’t even think of these activities as being linked to safety or well-being risks.

High-Risk Pools

One key element to repealing and replacing the Affordable Care Act (ACA) is also related to risk – covering people with pre-existing medical conditions. In the days, weeks and months ahead, chances are you will be learning more about high-risk pools and how they can help mitigate the impact of high-need, high-cost individuals enrolled in the non-group health insurance market. High-risk pools are typically created by state legislatures with regulatory oversight by state insurance departments. They provide a safety net for the “medically uninsurable” population who have been denied health insurance coverage due to a pre-existing health condition.

The recently-passed Republican House bill known as the American Health Care Act (AHCA), was designed to dismantle the Affordable Care Act (ACA) and shift power to states to set important health insurance rules. One contentious provision of the bill allows for states to obtain a waiver to let insurers return to their pre-ACA practice of charging more to customers with pre-existing medical problems.

It is important to note that population healthcare is highly concentrated. In the U.S., the healthiest 50 percent of the population accounts for less than three percent of total health costs, while the sickest 10 percent account for about two-thirds of population health spending.

In December 2016, the Kaiser Family Foundation estimated that 27 percent of adult Americans under age 65 have health problems that would likely make them uninsurable in an individual market lacking the ACA’s protection. Many of these individuals have access to employer-sponsored plans (or Medicaid) that provide protection to pre-existing conditions. However, for those who don’t have access to these plans, finding coverage at an affordable cost is similar to finding a unicorn in a reputable zoo.

Avalere recently projected that 2.2 million enrollees in the individual market today have some form of pre-existing condition. The AHCA allocated $23 billion ($15 billion over nine years and $8 billion over five years) to assist individuals with pre-existing conditions through high-risk pools. Avalere projects this amount will only cover about 110,000 individuals with pre-existing conditions, about five percent of those eligible.

The AHCA created another $100 billion over the next nine years, beginning in 2019, for the Patient and State Stability Fund – a program designed to provide flexibility to states to ensure stability within the insurance markets. This amount attempts to entice insurance plans to participate and offer lower premiums. However, according to Avalere, if this money was allocated to exclusively cover individuals with pre-existing conditions, only 600,000 individuals would be covered (27 percent of the 2.2 million enrollees with health problems). Most high-risk pools around the country have historically suffered financial hardships because the funding is often insufficient or poorly operated.

Before the ACA became law in 2010, high-risk pools existed in 35 states, and enrollees paid 150% to 200% above the standard non-group premiums. Additionally, according to Kaiser, 33 states with these pools included lifetime limits that capped the exposure of insurance carriers, with most limits in the $1 million to $2 million range. To ensure financial ‘integrity,’ many states also imposed waiting periods in these programs before insurance would cover medical claims considered to be pre-existing.

The Republicans in the U.S. Senate are now center-stage in this healthcare reform spectacle, making preparations to craft their own solution to repeal, replace or repair the ACA. They, too, will need to confront the high-risk component that is inherent in the insurance market. With this high-risk issue, will we find the high-reward results desired by many?

This discussion will continue to play out in the next weeks and months ahead…

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An Economic Dilemma – Healthcare Jobs vs. Costs

There’s a growing paradox in our healthcare world: Since the Great Recession hit in 2007, 35 percent of the nation’s job growth has come from the healthcare sector. In the year 2000, healthcare employed 1-in-12 Americans, but now employs 1-in-9, thanks partly to the 2010 Affordable Care Act (ACA). Jobs are critical for any thriving economy, but it appears the U.S. economy has become increasingly dependent on one sector that has proven to be both highly inefficient and dysfunctional.

The dilemma? Maintaining affordable healthcare is not compatible with the health service sector’s job growth strategy.

A recent article in Health Affairs, “What’s Behind 2.5 Million New Health Jobs?” reported that from 2007 through 2016, there was about a 19 percent growth in new healthcare jobs. From this, hospital jobs grew by 11 percent, nursing and residential care by 12 percent, and ambulatory care by 30 percent.

More than half of the $3.4 trillion we spend on healthcare in this country is spent on labor, much of it on those who provide care. However, a growing segment of healthcare jobs come from our increasingly complex ‘system’ that can be described as an administrative nightmare. Data-entry clerks, revenue-cycle analysts and medical billing coders provide busy backroom work to a multitude of payers concerning the procedures that were performed on behalf of patients. Put another way, for every U.S. physician, there are 16 other healthcare workers. Half of those 16 are in administrative and other nonclinical positions. This is becoming a monster of a problem.

According to a report by Organization for Economic Cooperation and Development, administrative costs in the U.S. healthcare ‘system’ are the highest in the industrialized world. While the average global administration cost average is 3 percent, it is almost three times this amount in the U.S. (8 percent).

In Iowa, the Iowa Hospital Association (IHA) serves the advocacy role for 118 hospitals. From this, IHA conducts a frequent report to validate the economic impact hospitals have within their communities, which is presumably performed to counter public concerns or scrutiny about hospital behaviors and outcomes. We are often reminded that “hospitals are the economic engines that employ thousands of Iowans” and “create an enormous economic impact across the state.” In short, hospitals are a vital ‘jobs program’ that provide an economic “multiplier” effect to our communities.

On the surface, the presence of hospital jobs is extremely beneficial to having healthy and productive communities. After all, it does provide a boost to the local economies. But portraying hospital jobs as the “economic engine” in communities may be somewhat disingenuous – if not grossly misguided.

Salaries and benefits for healthcare jobs are essentially funded by those who pay taxes, higher-health premiums and higher out-of-pocket medical costs – all of which consequently result in stunting the growth of take-home pay from other parts of the economy. Having additional healthcare jobs creates a financial void. It reduces monies Americans have available to pay for groceries, mortgages, college tuition and other discretionary items that benefit families – including philanthropic causes. Equally important, local, state and federal governments are hard pressed to find additional money to pay for other critical functions that profoundly affect our communities and the future of our country – namely, our infrastructure and STEM (Science, Technology, Engineering and Math).

The problem with linking healthcare jobs with economic growth is perplexing. If having more healthcare jobs is the end goal because it creates more wealth within our communities, then maybe we should spend more on healthcare and allow the jobs component to flourish. Unfortunately, it’s not that easy. There is an opportunity cost, or trade-off, that will rob other (more efficient) alternative resources within our economy.

Instead of measuring the economic value of healthcare by counting the number of jobs it creates, how about accurately measuring the commensurate value in the outcomes we receive from the jobs we have financed? If we don’t receive greater ‘value’ from the care provided, then why create more jobs – or keep the existing jobs? The arguments made by the healthcare sector, therefore, should not be about job creation and growth, but rather, whether we are using our limited financial resources wisely. If not, we should put those resources to better use. I’m not an economist, but this should spark a basic economic discussion.

Rising employment in healthcare does not correlate with the goal of improving our health and economic well-being. In healthcare, unlike many other sectors of our economy, there are tradeoffs with the amount we can afford. It’s no surprise that the healthcare sector’s lobbying efforts are formidable. According to the Center for Responsive Politics, a nonpartisan research organization, healthcare companies spend millions annually on lobbying efforts to influence government officials and legislators, with the American Hospital Association (AHA) ranking second highest among all healthcare lobbyists (behind the American Medical Association) and fifth highest among all lobbyists since 1998 – a total of $332 million spent by the AHA. In 2016 alone, the AHA spent over $22 million to ‘educate’ public officials. Other health-related organizations, such as Blue Cross and Blue Shield Association, the pharmaceutical industry and the AMA appeared very high on this Top Spenders List.

Despite the U.S. healthcare system being the most expensive in the world, the Commonwealth Fund reports the “U.S. underperforms relative to other countries on most dimensions of performance.” In America, we pay world-class prices for care that cannot be substantiated due largely to lax reporting requirements.

The healthcare sector’s primary purpose is not to be a jobs program, but rather, to safely deliver high-quality care to patients in our communities – and, do so responsibly, efficiently and transparently.

What are your thoughts?

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