Image result for healthcareOne reason Hillary lost the election is the perception around healthcare cost. The ACA (aka “Obamacare”) was blamed for the rising costs, and the hope among those seeing their bills climb was that Trump would make good on promises to “rip it out, ” promises he’s already dialing back on now, for good reason. The system isn’t perfect, and here are a few observations about how it’s been received.

  • Some poor are using it and glad to have it.
  • Some wealthy or middle class don’t like paying extra to subsidize the poor. What they see is that their premiums continue to rise and rise with fewer choices and less coverage. They see this as a byproduct of “Obamacare.”
  • Many still prefer to pay the penalty than to pay for insurance (more on that later).

Still, the costs of healthcare continue to rise, usually with less coverage and fewer options. Obamacare was partly created in response to this problem. In some ways it has helped, and it has also created more cost by providing a way for more people to be ensured. It has spread the cost of care to those who are more affluent, many of whom have balked at these cost increases.

Image result for healthcareHere are some pet theories about what’s driving healthcare costs higher (quotes are from this white paper by the National Association of Health Underwriters written in June 2015):

  • Obamacare. Premiums through the open exchange are based on income levels as reported through your taxes. The more you make, the more you pay. It’s a simple formula, with one (smart) caveat: the poor pay a lower percentage of their total income than do those in the middle and upper class, and that’s because a flat tax would be regressive. The poor have a much lower percentage of “disposable” income. Here’s an example of how premiums differ based on income for the exact same “Silver” level plan on the exchange [1]:
    • $50K income = $226 per month in premiums (5% of income). This rate is achieved through subsidies.
    • $75K income = $545 per month in premiums (9% of income)
    • $100K income = $815 per month in premiums (10% of income)
  • Lawsuits. When we compare to other countries, one aspect of our rising costs that other countries don’t bear is our high litigation impacts. Malpractice insurance is an expense that varies based on type of practice and where you practice. New York has the highest litigation rate and cost, and OB/GYNs are one of the most sued types of practice. And yet, malpractice insurance is not a key driver of healthcare costs as seen in several studies: here, here, and here. Malpractice law has led to reforms that improves patient care and mortality rates as seen here.
    • Another article talks about the potential high cost of “defensive medicine,” which means ordering unnecessary tests that might make malpractice less likely. One key point the article makes is that doctors don’t know what these tests cost when they order them. When it comes to healthcare, we have a serious lack of transparency.

It is estimated that medical malpractice adds between $55-200 billion annually, and that medical liability costs and defensive medicine combined account for 7.2 to 12.7 percent of the increase of health care costs.

  • Unhealthy Behaviors and Increased Longevity. Most certainly the American obesity epidemic combined with longer life expectancy is a driver of healthcare costs. We don’t want to be told how to live. We just want to live no matter what we do. This additional cost adds strain to the system. As older people require more care (and more is available for things that simply used to kill you), these costs hit the system. When the poor who are uninsured have illnesses or disease related to poor habits, this adds cost to the system in the form of write offs when the bills aren’t paid.

Research shows that behavior is the most significant determinant of health status, with as much as 70 percent of health care costs attributable to individual behaviors such as smoking, alcohol abuse, and obesity. . .  nearly 80 million Americans (34.9 percent) are obese, according to the National Center for Health Statistics. . . Each smoker costs an employer an additional $5,128 a year in health care costs and lost productivity. Other sources show that smoking is responsible for approximately 8.7 percent of total U.S. health care costs. 

  • Insurance companies. There are several cost increases here: administrative costs for an increasingly complicated system, and a monopolistic trend in some markets. For example, aside from employers that provide coverage, there is only one healthcare provider for the state of AZ among the government-approved providers. Three providers exited this year because Arizona isn’t lucrative enough, probably due to all the retirees. Exiting the system doesn’t prevent them from being a “government approved” healthcare provider. There are no regulations in place that force them to provide services in less lucrative markets. Another cost associated with the insurance companies is cost-shifting. Insurers move expenses from the uninsured or from declined Medicare claims to private paying individuals and companies. This means premiums go up while benefits remain the same or lower.
  • Provider consolidations. As medical practices and hospitals combine, they create a monopolistic hold on pricing, enabling them to set pricing relatively competition-free.

Image result for obamacareAs small business owners, we will have no real choice but to go to the market exchange next year. The sole provider left in our market is significantly more expensive and raising prices by 116%.

Is Insurance even worth it?

Many who are uninsured are banking on remaining in good health, preferring to either self-pay if they need to go to the doctor, or rotate getting coverage every other year to keep their costs down. Even with the increasing cost to opt out, many choose to pay the fee because it’s lower than the cost of coverage.

  • Self-Pay. Without insurance, the uninsured used to just pay for their care as it happened. Some doctors have self-pay prices that are universally lower than the prices they charge to insurance companies. If an uninsured patient couldn’t cover their bills, doctors often would end up writing it off. That was a drain on the system, too, but one the system was already dealing with.
  • Ministry Plans. Based on Christian principles of sharing one another’s burdens, some ministries have crafted coverage plans that involve paying a “share” on a monthly basis and withdrawing to cover expenses that surpass a deductible amount. To be involved in these, you have to agree to their behavior and belief code including things like church attendance (some require a pastor’s approval), a “religious” belief that government doesn’t have the right to force you to buy insurance (this one feels a bit loose but does exempt you from the Affordable Care Act opt-out penalties), and healthy lifestyle choices (no smoking, limited alcohol, and some require you to lose weight).  While these are not a government-approved healthcare system, they are designed to support members of the group in covering each others’ medical costs, kind of like a virtual United Order. There are currently 4 ministry plans out there, the best of which by far is Liberty HealthShare. As costs rise, this is a new trend we can expect to see more.
  • Medical Tourism. If you are a self-payer and you get hit with a big cost, one of your options is to hit the road. Healthcare costs are significantly lower and often on par in other countries like Thailand, Philippines, India and even Mexico. Prescription drugs also cost less in many of these countries. Even after the price of an airline ticket, you could be paying a fraction of what you would pay in the US. Case in point, when we were in the Philippines in 2011, my husband broke a crown at dinner. He walked in to a local dentist near our hotel and got a temporary crown for $18. That was the total cost.

Solutions – A Final Thought

Image result for obamacareHealthcare solutions are usually a push-pull between liberals and conservatives, liberals wanting government-run healthcare, and conservatives wanting it to be completely privatized. At the extreme ends you would have doctors being government employees (on the liberal end) and unregulated frontier medicine (on the conservative end). Our current system is already a mix of both: we have a privatized healthcare system with government regulation. What we need to do is:

  • Smarter regulations that limit the rising cost of prescriptions and care and prevent monopolies from forming by limiting consolidations and requiring healthcare companies to participate in all markets in order to be “government-approved.” [2]
  • More transparency to the cost and effectiveness of healthcare. There is nowhere near enough assessment of how effective various tests, medications, and preventive treatments are. The costs alone are not transparent, given that the “price” of services varies based on who your insurance provider is (meaning, the “price” is whatever they will pay).
  • Better lifestyle choices. We need to continue to provide incentives for these lifestyle choices. I guess if you want to be unhealthy and pay for it, whatevs. It’s literally your funeral. But if you are uninsured, you really need to be living clean since the rest of the country is paying for your care.

Although it’s certainly not true that the US has the best health care in the world, we do have innovations that many other countries do not. While innovation doesn’t happen in a vacuum, it also doesn’t excuse some of the utterly wasteful aspects of our system.

I’ve been wondering why all healthcare is lumped into one plan. There are three different aims or stages to healthcare needs. Why not have different types of insurance for each, some that are government provided or subsidized (through everyone’s taxes) and others that are supplemental? That would segment the costs for each further so that we could create better transparency. The three types I’m thinking of are:

  • Wellness care. This is preventive stuff like routine checkups once a year with a blood panel, gynecological exams and mammograms for women, proctology exams for men, vaccinations for children, and a weigh in for us all.
  • Mid-range sickness care. This should include things like pregnancy, ongoing illnesses like blood pressure, diabetes, hypoglycemia, thyroid, gall bladder, heart medication, etc. Patients who are “well” can afford to play the odds and get a higher deductible for these types of costs.
  • Crisis care. This is for high dollar out-of-the-blue stuff like cancer or HIV or Hep-C. These are financially devastating and often life-threatening.

If we were talking about car insurance, these would not all be the same types of coverage. Wellness is like a maintenance plan you buy for lubes, tire rotation, and all points checkup. Car insurance covers some repairs (mid-range), but only after a deductible amount. And if you wreck your car, yeah, you need that insurance coverage to be great. Likewise with health insurance.

  • What solutions do you propose to the US Healthcare crisis?
  • Do you foresee costs ever coming down or simply rising indefinitely?
  • What do you expect to happen under the Republicans? Do you feel it’s fair to blame rising costs on Obamacare?

Discuss.

[1] I’m using plan Mbetter Balanced Care 9 as a baseline for these numbers.  All other costs of the plan vary based on income also: deductibles, max out of pocket, doctor visits and prescriptions, etc.

[2] Conservatives aren’t going to like that suggestion.