Gurney's Inn
September 13, 2017

Health Care Crisis Worsens

Forget the political infighting going on in Washington.

Forget the blame game played around the water cooler – it's OK to realize the Affordable Care Act must be replaced or revamped without sounding like a Trump supporter.

Over 20 million Americans now have insurance thanks to ObamaCare. But it is important to understand many if not most of those people are going to lose coverage if the situation doesn't change. Whose fault it will be provides little consolation.

These are the conclusions of several prominent non-partisan experts who have sounded the alarm about the status quo.

But if you are a hard-working middle class American, whose insurance premiums are not paid for by your boss, you already knew that.

For Americans who make too much money to qualify for federal subsidies, the cost of health coverage is about to soar dramatically, with premiums reaching $2000 a month. At the same time, deductibles, an insidious tool to ease the burden of soaring rates, have risen as well. A recent profile of a Midwestern farmer earning $60,000 showed he paid $24,000 in premiums and had a $14,000 deductible. That meant he paid $14,000 before he received a single cent of reimbursement for medical bills. For the year, he paid $40,000 in medical-related expenses. "When your health insurance [payment] is bigger that your mortgage something is wrong," wrote Mitchell Schnurman, a business columnist for the Dallas News.

The situation has gotten completely out of hand, politicians on both sides acknowledge.

Hard-working Americans with good jobs are struggling with health insurance – and thousands are being forced to drop their plans entirely or pay for a cheaper plan that provides less coverage.

Meanwhile, the poorer the recipient, the less the cost of health insurance. Thus, we have some people who are unwilling or unable to work with no-cost health insurance that in many cases is a better policy than the ones working Americans can afford.

Kicking and Screaming

A recent report by Kaiser/HRET Employer Health Benefits forecasts that the average family health care plan will cost $18,142, up 3.4 percent from 2015. That's faster than wage growth in America.

It has, finally, brought lawmakers from both sides of the aisle to seek bipartisan solutions, even though they come to the negotiating table kicking and screaming.

About 10 million Americans buy individual insurance coverage either on or off the exchanges and get no federal subsidies to help bring down the cost, according to the Congressional Budget Office.

About the same number gets financial assistance for the plans they purchase on the exchanges, according to CNN Money. That's the "affordable" part of the ACA.

According to MONEY, premium tax credits are available to people with incomes between 100 and 400 percent of the federal poverty level. If you make $29,425 a year (250% of the federal poverty level), you'd be expected to pay 8.18 percent of your income in premiums, or $2,412 annually ($201 every month). ObamaCare's premium tax credits can be paid to your insurer in advance to lower your monthly premium on a marketplace plan, or adjusted on your tax returns.

The marketplace calculates your tax credit based on the price of the second lowest cost silver-level plan in your area (called the benchmark plan) and your expected financial contribution, which is determined on a sliding scale based on your annual income.

The ACA website brags, "One in six Americans get a marketplace plan for less than $100!" And therein lies the rub. Some working-class Americans are paying over $1000 a month for a health plan, while millions who work sporadically or not at all get similar health coverage for hundreds of dollars a month less, or at no cost at all.

The health care provider is still charging sticker prices, but the government, and thus taxpayers, make up the difference by subsidizing the program.

The cost of the subsidies was supposed to be generated by the ACA. In 2013, MIT economist Jonathan Gruber, who helped develop the law, said about half the costs are offset by projected savings in Medicare payments to insurers and hospitals. Another quarter was to be offset by added taxes on medical-device makers and drug companies.

It didn't work out that way. "In a general sense, the rich, of course, subsidize the poor. The rich pay more income taxes," he says. "So, yes, absolutely, that's how subsidies are supposed to work," says economist Joseph Antos of the American Enterprise Institute.

So if you're a low-income person getting a tax credit from the US.Treasury to subsidize your health care, a big chunk of that credit is coming from taxes paid by the rest of us – including those of us who have trouble paying for our own health insurance premiums.

Fake News

It is not just the rich who pick up the slack for the poor now being offered health care. According to the Congressional Budget Office the ACA extended the program to cover some Americans with incomes up to 133 percent of the poverty line. That expansion increased enrollment by 10 million but is funded by Medicaid, which ultimately is funded by all of us.

The crisis is fueled by both political parties. Just as Republicans refused to acknowledge their proposed reform plans were riddled with inconsistencies, the liberal press has continued with its onslaught of "fake news" stories.

"There Are No More `Bare' ObamaCare Counties." Margot Sanger-Katz wrote triumphantly in the New York Times (8/15/17), forgetting the entire ObamaCare system was built on having competing HMOs available to everyone to keep costs affordable.

In this case, there were hundreds of counties around the country that at one point did not have single provider willing to step forward. (There are still a dozen states that have only one provider and thus no competition.)

In other words, the fact that a provider offered to step in and offer health insurance was not exactly good news – that provider has a monopoly and is free to charge whatever rates it deems necessary.

Less than two weeks later the Times doubled-down on its self-proclaimed theory that having just one health care provider was a positive development.

"Supporters of the Affordable Care Act achieved a major victory this past week when, thanks to cajoling and arm-twisting by state regulators, the last `bare' county in America — in rural Ohio — found an insurer willing to sell health coverage through the law's marketplace there," Reed Albeson wrote in the lead of a front page article.

"Yet the continuing churn among insurers and the anxiety pervading the industry — stirred largely by President Trump's predictions of collapse and threats to withhold critical government payments to insurers — have obscured an encouraging fact: Many of the remaining companies have sharply narrowed their losses, analysts say, and some are even beginning to prosper," Albeson crowed.

More Than Doubled

One had to turn the page and read to the very end of the article to find out how it was "many companies are beginning to prosper."

"To stanch their losses, many companies raised their prices substantially for this year while narrowing their networks of providers to hold down costs. In Phoenix, for example, a typical plan's monthly premiums more than doubled. Although people with incomes low enough to qualify for federal subsidies were shielded from the brunt of the steep increases, the higher prices prompted Republicans to blame the law for plans that were out of many people's reach. In some cases, companies will seek even higher rates for 2018," Albeson wrote.

Note that the author managed to take pot shots at Trump and the Republicans in Congress though they had nothing at all to do with the developments in the health industry she was writing about. The Times has been a staunch proponent of keeping the ACA in place. But the facts are irrefutable: rates are skyrocketing next year, doubling in some states and rising significantly in almost all of the others. That will force more Americans who don't qualify for subsidies to take less expensive plans with higher deductibles, even while poorer people with less income qualify for better plans.

All of this is not to imply the GOP has a better idea. The GOP's AHCA plan, at least at first glance, did little to reduce premium costs.

According to the Congressional Budget Office, the Republican bill to repeal and replace the Affordable Care Act will leave 23 million more people uninsured in 2026 than if that act, also known as ObamaCare, were to remain in place.

But there are indications millions will lose their plans even if ObamaCare remains the law of the land. Already, the marketplaces are reporting younger, healthier Americans are bailing from the system altogether, refusing to purchase health insurance. More and more middle class Americans are bailing for a more ominous reason: They can't afford coverage any more.

There is considerable evidence, as President Trump insists, that the current system will collapse from its own weight. For the system to remain in place, HMOs that are participating in the program at the current level will have to be available, when in reality many are dropping out of the program.

Defective And Unreliable

It also doesn't take into account that an undetermined number of Affordable Care Act (ObamaCare) purchasers who pay for retail plans will drop out simply because they can't afford the premiums. That means more subsidies, and the states that have to pay a portion are beginning to balk already.

The CBO acknowledges the GOP plan would also reduce the deficit by $119 billion over 10 years, but that provides little comfort for those who are struggling to make ends meet month to month.

The CBO's assessment of the AHCA shows that the deficit would fall and premiums would fall for some Americans, but the report also raises potential concerns, foremost among them that it would destabilize individual insurance markets in some states, leaving unhealthy Americans unable to buy insurance.

The inescapable conclusion is that for-profit health insurance is a product that is "both defective and unreliable," as Dr. Steffie Woolhandler of Harvard Medical School aptly depicted it.

While it is the worst of times for some, it is the best of time for those in the healthcare insurance industry.

"Thanks to what CIGNA called `lower usage' that allow insurers to retain more premium income; profits are once again on a trajectory to set ever-higher profits," Roger Bybee wrote in his essay, "America's Health Crisis Is Getting Worse."

"The writing on the wall could not be clearer: The health insurance industry is not interested in either `shared sacrifice' via lower profits (i.e. lower premiums) or `shared prosperity, through covering the uninsured," Bybee wrote. America's healthcare crisis -- acutely felt by both the insured and uninsured -- is getting worse. It will continue to do so, and even with the ACA in full effect, isn't likely to reverse course.

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