THE AFFORDABLE CARE ACT–OBAMACARE
“The people who are crazy enough to think they can change the world are the ones who do.” – Steve Jobs
“Our healthcare insurance system is a mess. We all know it, those who support Obamacare and those who oppose it. Something has to be done.” Senator John McCain—floor of Senate—July 25, 2017.9
By 2008 a number of insurance companies had instituted policies that, when investigated, troubled Congress and became the topic of exposés and newspaper articles.
People with serious pre existing medical conditions could not buy health insurance. That now seemed to matter.
When insurance companies couldn’t raise premiums they enhanced their profitability by creating large co-pays. It diminished the value of health insurance and was troubling.
When someone in a small business developed an expensive problem, the cost of providing coverage to the company could exceed the value of the premiums of all the workers. In situations like this, for-profit insurance companies began substantially raising their rates. Insurers knew that if the cost of care was high enough the companies would not renew their policies. Aetna spent millions for technology that identified businesses that cost insurers more than the companies took in. Health Net gave bonuses to employees who discovered them. In the process “Aetna shed 8 million enrollees” in the early 1990s.”
Most disturbingly there was a policy the companies called “recission”. When someone got sick their original questionnaire was scanned for minor, mostly irrelevant misstatements. Wendell Potter tells of a man who had an angioplasty for coronary disease. The insurer refused to pay because “he failed to disclose” a history of heartburn. I guess it could have been angina. It probably wasn’t, but it gave the company the foothold they then used to avoid paying $130,000 in medical costs. The case was not unique. When it was detailed in a Los Angeles newspaper letters poured in.
WellPoint, according to Reuters “singled out women with breast cancer for aggressive investigation.” The company (presumably by finding insignificant misstatements in entry questionnaires) earned over a hundred million dollars by cancelling policies for females who had developed breast cancer.
When questioned by a congressional committee, insurance companies CEOs were asked if they would end the policy of recission; and they said “no” they wouldn’t.2
In 2006 Massachusetts passed a health care law that in part became a blueprint for Obamacare. At a time when a Republican, Mitt Romney was governor, Massachusetts extended “affordable”, compulsory, state subsidized health insurance to all its citizens, and it seemed to be working. Vermont followed suit. Some (perhaps Obama) wondered if this could be a model for other states. Problem was, the Massachusetts situation was unique for a number of reasons. When Dukakis was governor (in 1984) the legislature passed a law that helped protect the finances of people who were recovering from a catastrophic event, and that helped make sure hospitals got paid. They established the “Uncompensated Care Pool.” It was funded by hospitals and insurance companies according to a formula, and it had accumulated a pile of usable money. By 2003, the year Mitt Romney became governor, the (now called) Health Safety Net was bringing in $157 million a year. The state had funds they could work with. Mitt also got help from Ted Kennedy. Through some legislative maneuver the state “secured three years of additional Medicaid funding, $1.05 billion.”
Massachusetts happened to be one of 11 states that still had a functioning 2.8 million members strong non-profit Blue Cross and Blue Shield. The company used 90 percent of the money taken in to care for people. There were no shareholders to satisfy. For-profit companies had to compete with the premiums the Blues charged.
Medicare had been in existence since 1965. The bureau that ran the program, the CMS, had 6000 employees and had established payment schedules for “more than 10,000 physician services”. Prices were adjusted … “to reflect the variation in practice costs from area to area.” The presence of an independent agency that was trying to assess the “worth” of a visit or intervention helped keep a cap on costs.3
The Massachusetts program was less comprehensive than Obama care would be. The Affordable Care Act would pay a large part of the insurance premium for people who earned less than 400% of the federal poverty level. Massachusetts made the cut at 300%.
By the time Obama became president in 2009, the ability of medicine to enhance the quality and quantity of most lives had grown and costs had risen dramatically. Over 17% of the national GDP was spent on “health”. A majority of Americans had government or business sponsored quality affordable health care, but many citizens were excluded, and the unregulated private insurance companies had grown powerful and arrogant.
I voted for Barak Obama and assumed he would fix health care. It was part of his platform; he favored the “public option”…like Medicare or Medicaid for those who want it.
The 2008 election gave Democrats a majority in the House and Senate, but Obama believed in inclusion—working across the aisle—compromise. And the Republicans weren’t having it. For some it was because the nation rejected John McCain, a popular white candidate, or because of a perceived loss of status. Others were probably just sore losers. Many assumed Obama viewed the world through the eyes of a black man struggling for a better life for “his people.” And he did. His wife, Michelle grew up in a black, working class household in Chicago. Barak Obama was also the son of a white mother. When she died young Barak was raised by white grandparents. His grandfather fought in the Second World War. Obama had no ancestors who were former slaves, and his father was from British occupied Kenya.
The 2008 presidential election was the most racially and ethnically diverse in U.S. history and that troubled Beltway Republican politicians.6 On the evening of Obama’s inauguration, opposition leaders met and decided they would be against everything that he proposed. The economy was on the edge of another great depression and Barak favored a Wall Street bail out. Democrats voted with him and Republicans didn’t. He used the money to prop up the big banks, and decided to NOT punish their leaders. The heads of the banks then gave themselves millions in bonuses. At the same time they took away homes from people with mortgages who, as a result of the recession, had lost their jobs and couldn’t make the payments. To many it seemed like welfare for the privileged and bleak Capitalism for the common man.
Obama’s popularity declined. It was still his first year in office and he decided to pass a health care bill based on his campaign promises and sought bipartisan support. Republican Senators decided to oppose him, and they forced their fellow legislators to just say no to any legislation Obama proposed. According to Frontline, some thought the bill would be the president’s Waterloo, and that it would allow them to recapture the Senate.
The legislative process took more than a year. The Senate would not pass a law unless 60 of the 100 senators voted for it, and there were exactly 60 Democratic senators. Obama needed every vote if he wanted to pass the bill. The insurance companies didn’t want a public option. They wanted to require everyone to buy insurance. The drug industry didn’t want Medicare to be able to negotiate drug prices. There were ups and downs, protests and an expensive insurance company advertising campaign. Ultimately, to get the needed votes Obama had to “kill” the public option and water down a new, special tax on medical devices and equipment. To obtain the vote of Nebraska’s democratic Senator, Ben Nelson, the federal government had to agree to pay the full price of his state’s Medicaid insurance. Then Democratic Senator Ted Kennedy died, and he was replaced by a Republican. The Democrats no longer had a 60 vote “super majority.” In the end Obama campaigned hard, “expended a lot of political capital,” and Congress passed the current Affordable Care Act. In March 2010 Obamacare became law.1
- The Affordable Care Act got rid of recission.
- The law prevents insurance companies from denying coverage or charging a higher price to someone with a pre-existing health problem.
- Health plans can no longer set a lifetime limit on how much an insurer had to pay to cover someone.
- Insurers are required to offer a minimum package of benefits.
- Preventative health services must be provided without a co-payment.
- Children are allowed to stay on their parents’ policies until age 26.
- In an effort to get enough money into the system, to make it workable, at the insistence of the insurance companies the law required people to buy a policy. It enacted a tax penalty for large employers that failed to offer affordable coverage, or individuals who failed to obtain insurance.
If a state agreed people whose incomes were a little above the poverty line were now eligible for Medicaid. 36 states signed up. As of January 2020, 14 states were still declining the freebie.
Without the extra patients some rural hospitals failed and people went without care. Grace Marie Turner of the Galen institute, one of the loudest anti-expansion voices, thinks putting more people on Medicaid worsens the cycle of dependence and harms the economy. Extra people mean more competition for the available physicians, and she worries about fraud and waste. 10
The ACA, Affordable Care Act, supplemented insurance premiums for people whose earnings were quite low but who didn’t qualify for Medicaid.
It allowed premiums to be sensitive to the marketplace. The only insurer in a state can charge more. In the face of stiff competition companies can offer cheaper rates. Group policy rates are the result of bargaining. The size and average age of the people to be insured matters. High deductibles are permitted.
An older person can be charged up to three times as much as a 26 year old. Tobacco users may be forced to pay twice as much as non users. Prices can’t be higher for a new enrollee who has metastatic cancer and is receiving expensive chemotherapy. Nor can more be charged to the person who has hemophilia (and bleeds easily) or someone who just had a heart attack or a stroke. A person’s “current health or medical history”—their pre-existing condition, can’t affect the premium’s price.
The law’s approach runs contrary to the basic premise of insurance. Companies evaluate risk. They charge more for flood insurance in a zone that is periodically inundated, more for fire insurance for homes in a highly wooded area, and more for earthquake insurance in California. On a societal level it’s not wrong to discourage people whose homes were washed out a few times to stop rebuilding in low lying areas that flood every few years.
But most developed countries don’t risk assess before they decide if they will provide health care. And they don’t invoke an illness penalty. As Atul Gawande put it: A century ago the average American didn’t grow old. When someone suffered a catastrophic event: pneumonia, a heart attack, a bad accident–- many died or were disabled but some walked away unharmed. Modern medicine often rescues people who would have died. We cure pneumonia, pin broken hips, and stent narrowed coronary arteries. Subsequently people may or may not be as healthy as they were, but they now have a “pre-existing condition. Before the Affordable Care Act was enacted they found it difficult or impossible to acquire insurance5
The funds insurers spend for medical care is called a loss. If the company uses 20 percent of the money they take in for executives, payroll, and stockholders, their medical loss ratio is 80 percent.
The ACA, Affordable Care Act, capped the amount companies could keep at 20 percent for individuals and 15% for groups. If a company spent less than 80 to 85 percent of their premiums on patient care they had to pay a fine. (Medicare has an overhead of 3 to 5.2 percent.)4
As Elizabeth Rosenthal, author and editor of Kaiser Health News learned, a higher medical loss ratio didn’t dampen the amount the insurance company paid for patient services. Her book tells the story of a person whose infusions at an influential hospital (NYU) cost the insurance company five times as much as they would have, had the patient received the same treatment at a nearby, presumably equally capable, facility. Rosenthal asked herself why the insurance company was willing to pay so much.
One possible explanation: Hospitals and physicians routinely over charge, and insurance companies pay a negotiated portion of the bill. Then insurers show sick people the official bill and brag about the amount of money the person saved. When insurers pay a higher portion of the bill and their profits fall below 15 to 20 percent they are allowed to hike the price of their premiums. When people pay more for insurance the company takes in more money and gets to keep 15 to 20 percent of the increased revenue.
The establishment of an “acceptable” medical loss ratio perversely rewarded insurers who drive up the cost of medical care and insurance. Health care premiums have risen 25% since Obamacare was enacted.
The law was loved and decried by many. The young and healthy had to purchase insurance and were grouped with people who had pre existing conditions. Their premiums rose and the price increase didn’t seem fair. Over time they had come to believe that cheap insurance was one of their unstated rights.
Two new taxes were enacted: A medical devise tax and a “Cadillac” tax on high priced policies.
The Trump administration is establishing “association health plans.” They still cover pre-existing illnesses but they “allow small businesses, including self-employed workers, (presumably groups that don’t have many people with serious pre-existing problems), to band together by geography or industry and obtain coverage as if they were a single large employer.” The plans “don’t need the minimum benefits required by the ACA and they can drop maternity or mental health coverage.” As the healthy are drawn away from the ACA, the exchange costs go up and the illness penalty returns.7
At 1:30 A.M on the morning on July 28, 2017, a bill that would have repealed Obamacare needed one final vote to pass. The person who cast it was Republican Senator John McCain, a man who had recently learned he had a lethal brain tumor. He came to the Senate chamber, stood before his fellow legislators and voted thumbs down. No!
The repeal of the law failed.
McCain was unhappy with the way Democrats had, years earlier, forced a “social and economic change as massive as Obamacare” through Congress.” “Our healthcare insurance system is a mess. We all know it, those who support Obamacare and those who oppose it. Something has to be done.” He didn’t suggest repairing and saving the Affordable Care Act. But he spoke of “incremental progress, compromise, and chipping away at problems.9 ”
In 2018 congress repealed the law’s requirement that everyone “must “ buy insurance. A federal judge in Texas decided that made the Affordable Care Act unconstitutional. He argued the ACA obliges people to either buy insurance or pay a fine. The requirement was a tax. When Congress repealed the individual mandate the law stopped looking like a tax.
August of 2018 the government started allowing states to take Medicaid coverage away from “people not engaging in work or work-related activities for a specified number of hours each month.”
In Dec 2019 Congress passed a $1.4 trillion spending bill.
It repealed the medical device tax ($20 billion less for health care in a decade) The Cadillac tax ($193 billion saved by the wealthiest citizens in a decade.) The Health insurance tax that was used to pay for the federal and state marketplace exchanges. ($164 billion over a decade.)
The spending bill provided two years of Medicaid funding for Puerto Rico and other U.S. territories, and it barred HHS, the federal health and human services department, from ending auto-reenrollment. They are not allowed to create a coverage gap for people who forget to enroll at the end of each year.
Atul Gawande once concluded that the United States may be the only developed country in the world where people are “unable to come to agreement” on the concept of health care as a right…….on the idea that all should be able to benefit from the medical advances of the last hundred years. Our nation’s health care road remains quite bumpy.
“Our healthcare insurance system is a mess. We all know it, those who support Obamacare and those who oppose it. Something has to be done. We Republicans have looked for a way to end it and replace it with something else without paying a terrible political price. We haven’t found it yet, and I’m not sure we will. All we’ve managed to do is make more popular a policy that wasn’t very popular when we started trying to get rid of it…..
3. https://www.latimes.com/business/lazarus/la-fi-lazarus-healthcare-claim-denials-20180123-story.html
4. https://publicintegrity.org/health/coming-health-insurance-mergers-will-cost-consumers/
7. https://www.valuepenguin.com/how-age-affects-health-insurance-costs
https://www.advisory.com/daily-briefing/2019/12/17/ spending-bill
https://www.healthcare.gov/how-plans-set-your-premiums/ https://stanmed.stanford.edu/2017spring/how-health-insurance-changed-from-protecting-patients-to-seeking-profit.html
The Troubled Health Dollar, Steve Fredman, Virtual Bbookworm, 2012
An American Sickness, Elisabeth Rosenthal, Penguin Books, 2018
7. NY Times Jan. 13, 2017: The Biggest Changes Obamacare Made, and Those That May Disappear By Margot Sanger-Katz
8. Is Obamacare Really Unconstitutional? Nicholas Bagley, J.D. NEJM January 1, 2020 NEJM
9. Senator John McCain—floor of Senate—July 25, 2017. https://www.npr.org/2017/07/25/539323689/watch-sen-mccain-calls-for-compromise-in-return-to-senate-floor
“Our healthcare insurance system is a mess. We all know it, those who support Obamacare and those who oppose it. Something has to be done. We Republicans have looked for a way to end it and replace it with something else without paying a terrible political price. We haven’t found it yet, and I’m not sure we will. All we’ve managed to do is make more popular a policy that wasn’t very popular when we started trying to get rid of it…..
“The Obama administration and congressional Democrats shouldn’t have forced through Congress without any opposition support a social and economic change as massive as Obamacare. And we shouldn’t do the same with ours.”
10. Galen https://galen.org/2013/why-states-should-not-expand-medicaid/