• The ACA: Love it or hate it, you now have to deal with it

    Jon Cohn put it best:

    I’ve waited more than two years to write this sentence: The Affordable Care Act is here to stay. It survived the Supreme Court and now it has survived the threat of a unified Republican government determined to repeal it. Implementation of the law will present huge challenges, but, for the first time in a long while, the administration and its allies can focus on those challenges rather than on rearguard political fights to keep the program alive.

    There will be no repeal. Of course none of this means that the law is now loved by all. Far from it. Some people believe it is not the way to reform the health care system. Some people have other ideas. And, you know what, some of those ideas are just as worthy and deserving of a trial as those in the ACA. Premium support of a type, more consumer directed health care of a sort, different strategies for Medicaid and Medicare reform: they’re still worth considering. But wholesale repeal and replace with the most conservative version of all of this is not, because it won’t happen any more than will national single payer. We’re not on that train, or not yet anyway. The next stop is the ACA.

    The only realistic, if still uncertain, way forward for those who find flaws with part or all of the ACA (and I am among them) is to argue for incremental change. Instead of repeal and replace, consider revise and rework. I don’t expect the political climate to change such that this suddenly becomes easy. Repeal may be dead, but Kumbaya is not alive.

    Still, for the good of the country and those who need and deserve better and more affordable health care, we really ought to try. The people have shown us that we’re a long way from Waterloo. Isn’t it time we all started acting like it?


    • Agree fully!
      The “repeal and replace” argument has been a huge distraction. There are many things that can be improved about ACA and hopefully we can now focus on improvement rather than repeal.

    • I am most concerned about the 80% medical loss ratio of the ACA.
      As I understand this provision, every policyhlder needs to claim 80 cents of benefits for every dollar of premium paid.
      It seems to me the result of this provision will be continued increases in premiums. The primary reason for this , I believe, is that the days of “I hope to never collect on my policy are gone,” and with it, affordable policies without subsidies.
      Don Levit

      • “I am most concerned about the 80% medical loss ratio of the ACA.”

        My understanding of that regulation differs from yours: what I thought it meant was that insurance companies are required to be at least 80% efficient and can only take a 20% for expensese plus profit. This contrasts with Medicare, which (as I understand it) spends less than 5% of its budget on expenses (and, of course, zero on profit).

        But you are right that:

        “the days of “I hope to never collect on my policy are gone,” and with it, affordable policies without subsidies.”

        The problem is that the very concept of an “affordable policy without subsidies” is completely untennable for anyone making around the median income (or even a lot higher in the US), and that means that you are cutting the majority of the population out of health care. (That health care in the US is insanely expensive just exacerbates this.) You can either provide health care for everyone paid for by a progressive tax of some sort (which is what income indexed subsidies are actually equivalent to), or you can’t provide health care for everyone.

        Yes: it’s “socialistic” to want to provide basic health care for everyone. But it’s horrifically evil to think that not doing that is acceptable.

        • I was told the 80% payback of premiums to each policyholder (family or individual) by an actuary at Milliman.
          We hope to meet with someone at Milliman next week who is an expert on the PPACA. If he is right, then theoretically, if people do not spend 80% of their premiums in medical benefits, then, apparently, they are to be refunded a rebate at year end.
          And, I assume people could use that rebate for anything, including medical expenses.
          Foir example, if a family gets back $8,000, can they spend the rebate on a trip?
          \Don Levit

          • What? The MLR requirements are aggregated across the risk pool. They don’t hold by policyholder. If there are two people in the pool for an $8k premium policy and one spends $0 and the other at least $12.8k (80% of $16k) then neither gets a refund.

            • Austin:
              I just talked with the actuary at Milliman, and you are correct.
              Thanks for settting me straight!
              Don Levit

        • @David:

          My understanding is that care paid for with health savings accounts associated with high deductible plans will not count towards the 80% under the terms of the ACA. Ergo no matter how lean or efficient an insurer is, it will be extremely difficult to impossible for them to meet the 80% threshold since 0% of spending under the deductible will count towards this total. Ergo – high deductible plans are toast unless policymakers make specific revisions to the ACA to address this issue which. I don’t suppose anyone will accuse me of hyperbole when I state that the prospect ACA supporters mobilizing to save HDHP’s is….rather unlikely.

          When I was transitioning between careers and making significantly less than the median income, a high-deductible plan was the *only* plan option that enabled me to remain covered ($50 a month, vs $500+ for COBRA, or $350 a month for a standard individual policy). Significantly less of my money was flowing into insurance company coffers each month, and I was easily able to pay for routine preventive/urgent care with the money I saved each month.

          • Perhaps you could explain something to me. This 80% figure is the percent of plan premium revenue that must be spent by the plan on medical expenses, yes? Since HSA funds are neither revenue to the plan nor spending by the plan, why are they relevant to the MLR? Moreover, why would a high-deductible plan be at a disadvantage in meeting this threshold relative to a non-high-deductible plan?

            Put another way, if HSA funds counted toward medical spending on behalf of the plan, that would permit a plan to be very inefficient with respect to premium revenue and still meet the threshold. For example, suppose the deductible is $8k and the premium $2k. If the deductible is funded by an HSA at $8k (which itself is funded by contributions by the individual and/or employer) then the plan could take the entire $2k as profit, spending none of it on medical costs and it would meet the threshold.

            Surely I’m making some error because this makes no sense to me. What have I done wrong?

            • I think it basically comes down to the fact that the no matter how efficient the insurer is, the administrative costs are going to be non-zero for every policy, whereas the annual claims are going to be zero for in most years for the vast majority of the policy-holders since every non-catastrophic medical expense will be paid out of the HSA, People who design plans for a living seem to think that it will be extremely challenging for HDHP’s to consistently get their expenses below 20% of claims. They may well be wrong, but for the time being I’ll take their word for it.

              For me the admin-cost/claims-paid ratio since I enrolled four years ago is basically infinity, since I’ve paid every penny of my roughly $4K in claims out of my HSA balance. I am not particularly concerned about the high expense-to-claim ratio or the insurer’s profits since my total annual cost per dollar of coverage (HSA contributions + premiums) has been dramatically lower than I could get in a comprehensive plan, but I suppose that’s an irrelevant aside so I’ll conclude by referring you to a report from Milliman that I hope will correct any errors, omissions, or misrepresentations that I have interjected into this discussion.


    • Now that the future of the ACA is secure and full implementation is going to proceed on schedule – in which specific measurements of health system performance, be they related to clinical efficacy or cost-efficiency, do you expect to see the most significant improvements relative to either domestic or international benchmarks, and how many years after full implementation do you expect them to become unambiguously evident?

      The percentage of the population covered will certainly increase, and I don’t want to minimize the significance of that for proponents of the ACA – but on what time horizon should we expect above-trend improvements in, say, infant mortality to materialize? How about rates of obesity, diabetes, cancer survival, stroke survival, etc, etc, etc? I personally think that a great many of these metrics are extremely problematic, but for better or worse they were a staple of the discussion of the pre-ACA health care system’s performance.

      If specific metrics relating to objective end-points are an unfair or invalid set of criteria to evaluate the performance of the ACA upon, what measures would be better?

      • I think those are great questions Jay. I have no answers but it’s important to ask them.

        We talk about the US health care system being shackled by both restricted coverage and perverse delivery systems. It is going to be interesting to see if expanding coverage helps us to change the delivery system.

        I agree that those big population measures like infant mortality are the ultimate measure of success. I’d like to include medical bankruptcy rates in there too. And then there is success in other arenas such as reduced health insurance job lock.

        • The Oregon Health Study will produce early answers to those questions or related ones. In part, it already has. Covered on this blog.

          • My recollection of that data was that it showed an increase in the subjective sense of well-being but no improvement in concrete clinical endpoints or in diseases with real measurable physiological correlates. If that’s true (and I’m sure I’ll be corrected rapidly if it isn’t) all it may tell us is that it’s too early to know what effect expanding Medicaid will have on all of the disease-and-mortality-specific metrics that have been included in discussions of health system performance.

            The results of the Oregon study would be a much more compelling argument for Medicaid expansion if they conclusively demonstrated that transfers through the Medicaid system produced results that were superior to giving persons in the Medicaid-lottery pool private medical vouchers + debit cards with the same actuarial value, membership in a Qliance equivalent for $80 a month (http://qliance.com/medical-services/), or just plain cash. It’s not surprising that giving people access to transfers worth $2500+ (2003 Oregon Medicaid Number) has an effect, or particularly interesting. The data would be much more compelling if it actually established that Medicaid was superior to all other modes of delivering care to the same patient pool in terms of clinical efficacy or cost-efficiency, but to paraphrase Rumsfeld, “You run your multivariate regression analysis with the data you have….”

            I think the study has conclusively refuted the claim that no coverage is better than Medicaid coverage. This isn’t a surprise to me since the idea that Medicaid makes people worse off was always a result of pretending that all people who are uninsured are in medical/social circumstances as difficult as those in the Medicaid pool, which is clearly not the case

    • I am trying to figure out the impact of the new certainty of the ACA upon High Deductable Health Plans. I switched to a HDHP one year ago for the primary reasons of lower premiums, potential tax benefits, and the concept that the consumer can control spending. I assumed that I would be able to negotiate lower cash rates. The reality has been disappointing. Doctors and denstists office staff are geared toward insurance payments. I have never been able to negotiate a cash price that was lower than just submitting the bill to the HDHP insurance plan because the plan imposes service cost caps very similar to PPO insurance. I had a slightly higher medical cost year, but the bottom line was not signifficantly different than if I was still with a PPO.

      My point is this. The premise that HDHPs incentivize consumers to pay more attention to costs and negotiate lower prices is flawed. Combined with the well known conflict between free market competition and the necessity for most health care service, as noted by Kenneth Arrow (Ref. a.), I feel that HDHPs will not be an effective strategy for lowering national health care costs. They are great if your family is healthy and wealthy enough to take advantage of the tax benefits, but otherwise the bottom line is not significantly better.

      a) http://www.newyorker.com/talk/financial/2012/10/29/121029ta_talk_surowiecki

      • Jeff:
        I have heard your story many times. Providers are not set up for cash services when one has insurance. Unless thiungs have changed, people are having to submit the invoice to the insurer, even if not covered under the deductible, just so the insurer can “credit” them the proper amount toward the deductible.
        Then, after knowing the “proper” price, the insured can pay the provider.
        I assume many providers require some type of cash payment, just in case they never hear from the fellow again.
        My little understanding of the PPACA is that high deductible health plans will have a hard time meeting the 80% payback of premiums each year, per policyholder.
        I do understand the PPACA allows for HDHPs, but only for those 30 and younger.
        Don Levit

        • I thought the consensus was that the data established that HDHP’s cut spending because people who enroll in them use less care since they have a financial incentive to, not that those who enroll in them pay less per episode, which is not surprising in a system dominated by third party payers, even though there’s a tiny fraction of providers who operate on a cash basis and/or compete on price at the retail level.

          AFAIK that was the central finding of the RAND study. That – and that fewer interactions with clinicians had essentially zero affect on mortality/morbidity for all but a fraction with chronic diseases that could rapidly escalate into an acute health crisis, like diabetes or high blood pressure.

          What’s puzzling to me is how people who lament the clinical accumen of physicians – overtesting, overspending, poor adherence to EBM protocols, etc – also tend to be staunch opponents of the one plan design that’s been shown to reduce spending and unnecessary care with no effect on outcomes for the vast majority of patients.

    • In the long-run, the only metric that will really matter is the portion of the GDP devoted to the cost of our nation’s healthcare. Secondarily, how many health systems will close over the next ten years without improving our nation’s very inefficient healthcare? Does any one really believe that ACA 2010 will induce a reduction in the cost of healthcare without intolerable rationing? And finally, would justly equitable Primary Health Care that is also equitably efficient be able to attract ethical physicians, if the covered Preventive Health benefits varied unpredictably between all the health insurance plans?

      Currently, I conclude that the immediate effect of ACA 2010 will be to worsen the efficiency of our nation’s healthcare industry. Parkinson’s Law applies, viz., work expands to use the resources available. The world-wide marketplace of resources has changed. Our country no longer has the competitive advantage of being a world creditor since we are now a substantial world debtor. China is our chief stockholder. As a result, the dimensions of healthcare reform are no longer connected to universal health insurance. The real GOAL, then, for healthcare reform should be on its role for promoting our nation’s autonomy within the world-side arena of “human dignity,” “knowledge” as well as its “resources.” The ideals of Senator Robert Kennedy and the Reverend Martin Luther King along with the economic concepts of Professor Elinor Ostrom should apply to the fabric of healthcare reform: uniformly available, justly accessible, equitably efficient and reliably effective – neighborhood by neighborhood and community by community.