Month: October 2016

Is Obamacare Affordable?

By Mark A. Kelley, MD |10/13/16

The upcoming election has dominated the media lately. Health care is not far behind with reports about Obamacare, health insurance and drug costs.

What’s behind the headlines?

Obamacare—too expensive?

The Affordable Care Act (ACA, Obamacare) was designed to expand health care coverage for those without insurance. Under the ACA, the federal government subsidizes the insurance for those who cannot afford it.

There have been a few surprises since the ACA was implemented. The newly insured folks have had more health problems than anticipated. This has driven up total heath care costs. Insurance companies had subsidies to cover these losses, but they will soon expire and the losses will increase. As a result, some major insurance companies, such as Aetna and United Health, have pulled out of the ACA.

Some policy experts think that the costs of ACA will go down. The theory is that as newly insured sick people receive medical care, their health will improve and they will need fewer services. No one knows if this will happen. Even President Obama admits that the ACA “has some problems”.

Rising Costs  

Aside from the ACA, other health care costs have been rising. A major driver has been the price of prescribed drugs. A second factor is the cost of expensive technologies especially electronic health records, mandated by federal law. These systems can improve communication but do not reduce costs.

These and other factors have created health care “sticker shock”. Employers are seeing their insurance costs accelerate. To reduce premiums, most employees have an annual insurance deductible, averaging over $1000. Prescribed medications often fall into the deductible. For example, someone who once paid a $20 co-pay for a drug must now, with a deductible plan, pay the insurer’s cost. The price can be ten times the cost of the co-pay. That can be an economic disaster for a patient on many medications.

Corporate Scandal

The recent uproar over the “Epipen” may be the last straw for the American public. The Epipen provides a life-saving injection for patients who suffer severe allergic reactions. The price of this product skyrocketed without any new enhancements. In effect, the company used its monopoly to extract extraordinary profits from families who need this “rescue drug”. This maneuver enraged the public and created distrust of the pharmaceutical industry.

The Flaws in the System  

These reports reflect significant flaws in our health system. Unlike most developed countries, we have few price controls for prescribed medications. We are also more liberal in approving new technologies and devices. Finally, in our private insurance system, insurers pass increased costs to employers and patients so there is no brake on inflation. This makes health care prices difficult to understand and to justify.

Employers are losing patience with rising costs of health care. One alternative is to providing employees with a “defined contribution” i.e. a fixed dollar amount for health insurance. This is how 401K-retirement plans work. Most employers can no longer afford pensions. Instead they provide a fixed amount for the employee to set aside for retirement. How the employee uses the money is up to them.

“Public Option” on the Horizon?

Many policy experts believe that we are headed for a “single payer” system. This means that health insurance would be provided and regulated by the federal government. We already have such a plan—it’s called Medicare.

Medicare controls prices, eligibility and coverage rules. It has kept medical inflation low for the past five years and its payment is accepted everywhere. Medicare is not free. It is supported by taxes and premiums and is very popular with its beneficiaries.

Will “Medicare for all” ever happen? The American public is becoming restless for such a change and politicians have noticed. For years, there have been political discussions about a “public option” similar to Medicare. Now, the federal government pays for almost 50% of our nation’s health care costs. That figure is rising as more “baby-boomers” enroll in Medicare. Some policy makers think that a national health insurance plan is inevitable.

They may be right. Studies and polls show that the majority of physicians and voters favor such a system.

That may be the most significant news of all.