IS OBAMACARE THE PATHWAY TO REAL REFORM?
by Don McCanne M.D.
What would real health care reform for the United States look like? Absolutely everyone would be included. Financial barriers to care would be removed. People would have free choice of their health care professionals and institutions. And the system would be affordable for individuals, businesses and the government.
How well does Obamacare (the Affordable Care Act) meet these goals?
By the time Obamacare is fully implemented, about 31 million people will still be uninsured.(1) Most of them will be U.S. citizens, predominantly non-Hispanic, white, low-income, working-age adults, with many of them employed. Blacks and Hispanics will continue to be over-represented among the uninsured. (2) These are individuals and families who most urgently need coverage, yet they will be left out.
What about financial barriers under Obamacare? The silver plans to be included in the state insurance exchanges will be the benchmark plans for reform. They will pay for only about 70 percent of the costs of covered health care benefits, and none of the costs for services that the private insurers exclude. More costs are being shifted to individuals who have significant health care needs, especially through cost sharing such as high deductibles.
It is not only the plans in the exchanges that are increasing the financial burden on patients. Employers also now are shifting more costs to their employees, especially through higher deductibles.(3) Although plans offered through the exchanges will have subsidies for premiums and for out-of-pocket expenses that are based on income, the subsidies will not be enough to prevent financial hardship for many of those who will need care (4).
As far as choice is concerned, most private insurance plans restrict choice by establishing networks of physicians and hospitals that are approved for coverage, while penalizing individuals who obtain care outside of their networks. Would Obamacare improve choice? Unfortunately, quite the opposite. The plans that are being introduced into the exchanges are trying to control premiums by using even narrower networks of health care providers, increasing the probability that an individual’s physician or hospital may not be covered.(5) Employers are now beginning to experiment with these same narrow-network plans – an effort to control costs by taking choice away from patients.
Other nations have been more effective in controlling the escalation of health care costs than has the United States. These nations succeed by using government oversight of health care spending. The United States instead has relied on a fragmented system of public and private programs that have failed to slow the rate of spending increases. Will Obamacare introduce some of these measures that have been effective in other nations? No. Only token attention has been paid to the cost problems, largely through experimental and predictably ineffective measures such as accountable care organizations and bundling of payments. Although there has been some recent slowing in the increase in health care costs, primary due to the recession, Obamacare contains none of the fundamental structural reforms that will be required to slow down our spending increases to sustainable rates.
Is Obamacare an incremental step towards real reform? That is, can we patch the intolerable defects through additional legislation? No. It is not the various policy features that need refinement; it is the fundamental financing structure of Obamacare that is irreparably flawed. It relies heavily on a chronically underfunded public welfare program – Medicaid – that will grow in size and place an intolerable burden on the current willing providers who are already providing care for this population at below their costs. Worse, Obamacare relies most heavily on private insurance plans, both employer-sponsored and exchange plans, when it is these plans that have been so ineffective in controlling spending compared to Medicare (6), while wasting hundreds of billions of dollars on administrative excesses while placing an inordinate administrative burden on physicians, hospitals, and other health care professionals and facilities.
Although Obamacare did include much needed revisions in private insurance regulation, such as guaranteeing everyone the right to purchase insurance regardless of their health status, it did not begin to convert the health insurance industry from a model based on amoral business principles into a model based on altruistic public service dedicated to fulfilling the health care needs of patients. There is no legislation that could convert the inherent business culture of our current insurers and self-funded plans into the public service culture that we desperately need, and still keep the same insurers in charge.
If the Obamacare financing infrastructure is not amenable to patchwork reforms, then where could we turn to achieve the goals of reform? What sort of financing infrastructure will work? The model that seems most suitable for the United States would be a single payer national health program – an improved version of Medicare that included everyone.(7)
How would an “Improved Medicare for All” work? First, absolutely everyone would be covered automatically, from conception through the end of life. Second, financial barriers to care would be removed by making care free when needed. Other nations have proven that deductibles, copayments and coinsurance are unnecessary to control spending, as they provide comprehensive care to everyone at a much lower total cost. No longer would people be deprived of care because they can’t pay for it. Third, under a single payer system, every physician and hospital is covered, and so the patient would have complete choice of where and from whom they receive their care. That choice would include the option of joining an integrated health care system such as Kaiser Permanente.
Finally, a single payer system would bring health care costs under control. Hundreds of billions of dollars in administrative waste would be eliminated. Public administration would enable negotiations to price professional services, drugs and other products optimally – covering all legitimate costs plus fair profits. We would no longer pay too much for some services, especially the high-tech services, while paying too little for other services such as current safety-net functions. Central planning and separate budgeting of capital improvements would ensure that excessive capacity that results in overutilization and higher spending would be reduced, while regions inadequately served would finally receive the health care resources that they need.
Health care has become too expensive for the majority of our population. The average health care cost for a working family of four is now over $22,000.(8) Middle-income families can no longer afford to pay their proportionate share. Financing a health care system that includes everyone requires that the financing be progressive, with each person contributing, based on ability. For that reason, a single payer system would be financed through progressive taxes. That would make health care affordable for each individual and family. It would remove the responsibility of financing health care from the nation’s employers. It would place the responsibility on the government, through the tax system. As the single purchaser of health care, the government would ensure that the health care system would remain affordable for the taxpayers. For those who fear that a government system would curtail essential health care services, we are already spending more than enough to fund comprehensive care for everyone, but our government stewards would start demanding much greater value in our health care purchases.
The chasm separating Obamacare and a single payer national health program cannot be filled in with patchwork legislation. If we want everyone covered, if we want to eliminate personal financial hardship due to medical bills, if we want to have choice of our physicians and hospitals, and if we want to make health care affordable for all of us, individually and collectively, then we are going to have to take the leap. We simply are going to have to replace Obamacare with an Improved Medicare for All.
1. Congressional Budget Office. CBO’s May 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage, May 2013.
2. Nardin, R, Zallman, L, McCormick, D et al. The uninsured after implementation of the Affordable Care Act: A demographic and geographic analysis. Health Affairs Blog, June 6, 2013.
3. Kaiser Family Foundation. Snapshots: The Prevalence and Cost of Deductibles in Employer Sponsored Insurance. November 2, 2012.
4. Kaiser Family Foundation. Patient Cost-Sharing Under the Affordable Care Act. April 2012.
5. Terhune, C. Insurers limit doctors, hospitals in state-run exchange plans. Los Angeles Times. May 24, 2013.
6. S&P Healthcare Economic Indices. Updated May 16, 2013.
7. Woolhanlder, S, Himmelstein, D et al. Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance. JAMA. August 13, 2003.
8. Milliman Research Report. 2013 Milliman Medical Index. May 2013.