The impact of ObamaCare on doctors and patients, companies inside and outside the health sector, and American workers and taxpayers
Aetna announced in early August that it would not expand into additional Obamacare markets and that it might consider leaving existing markets. It’s just the latest example of the failures of this massive healthcare law.
In an editorial, Investor’s Business Daily declared: “Obamacare is failing exactly the way critics said it would.” The outlet explained that Aetna had already lost $200 million thanks to Obamacare, but had expected to break even in 2016. That didn’t happen, so the company will no longer expand into five additional states and is rethinking whether it will stay in the 15 states it already offers Obamacare plans.
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With Donald Trump’s presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.
Their focus is on a possible “grand bargain” that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law’s insurance exchange structure with their own innovative models.
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“If Hillary Clinton were able to institute a public option, I anticipate it would accelerate insurers’ exit from Obamacare exchanges, making it unlikely that exchanges would ever become profitable, as Medicare Advantage and Medicaid managed-care are. While those programs have bipartisan political support, Republican politicians are fully committed to opposing Obamacare exchanges.
However, a public option administered by the same contractors (subsidiaries of health insurers) which process Medicare claims would be a good business opportunity for insurers. So they should be quite happy to allow Obamacare beneficiaries to shift from risk-bearing plans to a government plan.”
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Narrow networks have changed considerably under the Affordable Care Act, but the trajectory of regulation remains unclear.
Health insurance plans with limited networks of providers are common on the Affordable Care Act’s (ACA’s) health insurance Marketplaces. Recent studies have found that these “narrow network” plans constituted nearly half of all Marketplace offerings in the first two years of coverage, with one analysis concluding that about had the option of buying such a plan if they chose.
Plans with limited networks are not new and are not confined to the Marketplaces. Yet there is reason to believe that they have grown in prevalence partly because of the ACA.
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Competition on the Obamacare marketplaces will decline next year. There will be significantly more places in the country where customers have no choice of health insurance because just one company signed up to sell coverage.
This is the conclusion that health policy experts have increasingly gravitated toward in recent months and weeks, as major insurance companies have announced hundreds of millions of dollars in financial losses on the Obamacare marketplaces.
“Under any likely scenario, there will be less insurer participation in the exchanges in 2017 than there was in 2016,” says Michael Adelberg, a senior director at FaegreBD Consulting who previously worked in the Obama administration helping to manage the marketplaces’ launch.
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CBO projects that the combined federal spending on Social Security, Medicare, Medicaid, and the ACA subsidies will grow from 11 percent of GDP in 2016 to 16.3 percent of GDP in 2046. This run-up in spending will increase annual federal budget deficits and push cumulative federal debt to 141 percent of GDP in 2046 — well past the point that most economists would consider dangerous for the economy. (Spain’s debt is 99 percent of GDP in 2016).
CBO’s base case scenario is also probably too optimistic. CBO’s projection assumes federal revenue will grow from 18.2 percent of GDP in 2016 to 19.4 percent in 2046 (the 50-year average of federal revenue, from 1966 to 2015, was 17.7 percent of GDP). But the projected growth in federal revenue derives from tax provisions that are sure to change in coming years. For instance, under the ACA, a new 3.8 percent tax was imposed on non-wage income for persons with incomes over $200,000 annually and on couples with incomes over $250,000 per year. These thresholds are not indexed, which means more and more taxpayers, and, eventually, the middle class, will pay this tax as their incomes grow naturally with inflation.
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Hospital system Catholic Health Initiatives’ experiment with health insurance has hit the end of the road after a couple years of heavy losses. CHI is “exploring options to sell” its health plan subsidiary, executives said in new financial documents.
The documents, released this week to bondholders, explain that top CHI executives “decided to exit the health insurance business” in May after undergoing a strategic review in March. CHI’s consolidated insurance division, QualChoice Health, formerly known as Prominence Health, has hemorrhaged money since its inception. QualChoice sells Medicare Advantage plans and commercial plans to employers in six states.
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Aetna became the latest health insurer to cast doubt upon its future in the Affordable Care Act’s insurance exchanges after it called off a planned expansion Tuesday and suggested it could abandon that market completely.
A departure by Aetna, the nations’ third-largest insurer, could further reduce the number of choices for customers and eventually push insurance prices higher. Competition by insurers is a key feature of the exchanges, designed to keep a lid on prices, but several insurers are abandoning them because they are losing enormous amounts of money.
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Banning resident Jim Bailey and his wife went in recently for their annual physicals. They came away with hundreds of dollars in charges for co-pays and tests.
Bailey, 78, told me that he feels duped.
“The Affordable Care Act dictates that all annual physicals be provided at no cost to the policyholders — no deductibles or co-pays,” he said. “But that wasn’t the case with us.”
Nor will it be the case with anyone else — even though many Americans believe otherwise.
“There’s nothing in the ACA that guarantees a free checkup,” said Bradley Herring, an associate professor of health policy and management at Johns Hopkins University. “It’s surprising how many people think it’s part of the law.”
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The implementation of major legislation such as the Affordable Care Act (ACA) often results in fiscal outcomes that differ significantly from prior projections. Whenever this happens it leads to many questions, much confusion, and several claims and counter-claims. Rarely is it immediately clear whether the law is working differently than envisioned, or whether the unexpected outcomes are due to inevitable projection errors having nothing to do with the law.
On rare occasion, however, a prior projection proves so far off that its significance must be noted. Two weeks ago my colleague Brian Blase uncovered such a development with respect to the ACA’s Medicaid expansion. Recall that the ACA considerably expanded Medicaid eligibility – an expansion made optional for the states in a later Supreme Court ruling. It turns out that the 2015 per-capita cost of this Medicaid expansion is a whopping 49% higher than projections made just one year before.
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