ACA Is a Crisis We Must not Waste

Under the Affordable Care Act (ACA), premium subsidies of health care insurance are available to low income and some moderate income families.  ACA’s plain wording says the subsidies are available to states that operate their own exchange.  ACA was intentionally structured in that way to induce states to operate a health insurance exchange.

Subsidies are being paid to consumers from exchange-less states.  That was the alleged violation of law that led to a court challenge now in the Supreme Court’s hands.  If the Court agrees that the plain language and intention of Congress bars subsidies for those from states reliant on a federal exchange, then it will likely decree that subsidies must be brought into alignment with the ACA’s wording. That would probably remove an average of $3,300 yearly in subsidies from 6.4 million purchasers from 32 states.

Initially, the price of insurance will stay the same, but because some consumers will need to pay all of it, not just the unsubsidized portion, the effective price to one-time subsidized consumers will be higher, perhaps much higher.

The relatively healthier consumers (typically younger consumers) may conclude that they should gamble on maintaining their health and pocket the higher premiums until they actually need medical care.  Since pre-existing conditions are no barrier to buying insurance, they can always sign up for coverage at a later date.  In the interim, the saved premiums can address other matters such as student loans.  The loss of relatively healthy subscribers can be devastating because the relatively healthy are essential in the insured risk pool.  Only they can offset the high medical costs incurred by insureds who are sicker and those with pre-existing conditions.  The premiums of healthy peoples help in defraying overhead costs will be missed.  As relatively healthy leave the insured pool, the premiums for those remaining must increase.

The loss of subsidy will push ACA health insurance beyond reach for some low income consumers.  If their income drops low enough, they can obtain Medicaid coverage.  However some may earn too much to qualify for Medicaid, yet not enough to afford unsubsidized ACA coverage.  That group would be relegated to the same emergency room and indigent medical care they relied on before ACA.  That will increase the uncompensated costs for emergency room and hospital care, and ultimately it will show up in ACA insurance premiums.  The loss of premiums from low income subscribers will also reduce their contribution to overheads, and that will nudge premiums up.

Many people (mostly self-employed) who do not qualify for subsidies find their health insurance rates are markedly higher than before ACA.  If they have not ditched coverage, they have had to make sacrifices in other areas.  The higher premiums come from the wider and costlier scope of coverage under ACA.  Through their taxes they will be assessed for the $849 billion in subsidies that ACA plans to consume over the 2016-2025 period.

After the now-unsubsidized relatively healthy and low income subscribers drop out of ACA coverage, the price of coverage will increase, perhaps pushing unsubsidized “typical families” to  drop out but more likely fueling their anger at government for using them in a stylish social engineering experiment.

As health insurance premiums increase from these factors, it will cause successive rounds of departing consumers, and those will accelerate the price-increase whirlpool that destroys the viability of ACA.  About 8 million are estimated to leave ACA coverage by next year of subsidies are withdrawn for the 32 states.  Before ACA’s collapse, voter anger will be sufficiently evident that Congress must move carefully, but it had better leave time for all to read the legislation.

A band aid vote could change the language to permit subsidies regardless of whether a state has an exchange.  That would not improve consumer tolerance for being pushed around.  Nor would it improve ACA affordability, nor would it address serious issues in American healthcare.

Consumers want the right to decide for themselves and their employers where they sit in the tradeoff between healthcare coverage and costs they will pay.  They also expect the government to design plans and negotiate in their favor, and not to their detriment. The scope of healthcare coverage should be decided by the consumer and the insurer.

In a revamped ACA, there should be no influence from arrogant consultants such as Jonathan Gruber who was paid $400,000 by the White House to play “an important role in crafting the idea behind the series of exchanges, subsidies and taxes that form the law’s centerpiece,” and who then expressed his contempt for the plan by blaming “the stupidity of the American voter” for the passage of ACA.

If there are to be subsidies (including coverage for a pre-existing condition or help to a low income family), subsidies should be means tested and apply to only basic health care insurance.  Not everyone needs extreme reproductive procedures or a lifetime of talk therapy – nor should they be forced to include those in a basic healthcare policy.  Healthcare subsidies should not be administered by the IRS.  Healthcare is too important for its administrator to be mired simultaneously in cyber-breaches, extreme overwork and blatant partisanship.

Government health coverage plans (e.g. Medicare or Medicaid) should negotiate with health service providers for most-favored rates no higher than those charged to other governments, especially for new-fangled pharmaceuticals.  This requirement will make prices fairer for US consumers and taxpayers and will prevent the use of political acquiescence toward over-pricing as a tool to buy backing for partisan legislation.  (See the White House deal with Big Pharma during ACA passage).  Most-favored rates must be valid also for insurers and individuals. That will help prevent government-induced hospital cost-shifting.  The cost shifting falsely makes the government look efficient and at the same time fuels unaffordable rack rates for individuals.

There have been plenty of changes made to ACA since enactment.  Regardless of how faithful the Supreme Court decision is to the plain language and intent of ACA, the decision marks an opportunity to fix the flaws that irritate voters.  Allow voters to choose their own scope of coverage, pick their own tradeoff between coverage and cost.  Rein in subsidies and conduct competent, US consumer-friendly negotiation for prices.  Halt forcing hospital cost shifting that damages individuals.  Finally, use the opportunity to turn this crisis into a pro-consumer overhaul.

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