A number of Republican health care policy proposals that seemed out of favor in the Obama era are now being given new life. One of these involves Medicare, the government health insurance program primarily for older Americans, and is known as premium support.
Right now, the federal government subsidizes Medicare premiums — those of the traditional program, as well as private plan alternatives that participate in Medicare Advantage. The subsidies are established so that they grow at the rate of overall per enrollee Medicare spending. No matter what Medicare costs, older Americans can be sure that the government will cover a certain percentage of it. That’s the main thing that panics fiscal conservatives, because that costs the government more each year.
Premium support could quiet that fear. Subsidies would be calculated so they don’t grow as quickly, thus protecting the federal government (that is, taxpayers) from runaway spending. There are lots of variants, but there are really two principal ideas.
One of the few things that both Donald trump and Hilary Clinton seemed to agree on is that high out-of-pocket spending, specifically as it relates to the Affordable Care Act, is a problem. One of Clinton’s most popular health care proposals during her campaign was to reduce out of pocket spending to more “manageable” levels for many Americans. President-elect Trump sought to fix this problem by repealing the ACA and replacing it with something better.
Reducing out-of-pocket spending, however, will require some tradeoffs. No easy solution exists, but there are examples out there worthy of consideration. That’s the topic of this week’s Healthcare Triage.
In the win column, we predicted that the Federal Trade Commission (FTC) would block a major hospital merger, and they did just that with Advocate and NorthShore health systems in Chicago. We predicted that the technology-enabled insurance startup craze would be a bust, and Oscar promptly lost a ton of money. Finally, we were correct that employers would become more engaged in healthcare cost management with many adding “frozen carrots,” or financial incentives to drive usage of services that lower healthcare costs.
Our biggest bust was on the PCSK9’s—we predicted these new cholesterol drugs would be blockbusters. Thus far, they have been a total flop. We were also wrong when we predicted wearables would become medically useful treatments. And, to our surprise, there were more setbacks than breakthroughs in continuous biosensors, devices such as glucose monitors for diabetics.
We’re hoping to bat above .500 this coming year. Here are our 10 healthcare industry predictions for 2017:
Proposals to sell insurance across state lines have been floating around for a while. In 2005, Congress considered the first proposal to sell insurance across state lines at the federal level. Many of the candidates running in the recent Republican presidential primary endorsed the idea, including Scott Walker, Marco Rubio, Ted Cruz and Rand Paul. A proposal to sell insurance across state lines is a core component of Republican presidential nominee Donald Trump’s healthcare agenda.
With election day approaching and attention returning to plans that would allow the sale of insurance across state lines, it is worth asking whether these proposals would be effective.
People who warn that President Obama’s health-care law is in dire straits often point to rising health insurance premiums as proof. Sen. John McCain (R-Ariz.) has called premium increases on Affordable Care Act exchanges “astronomically high.” Sen. Ron Johnson (R-Wis.) says premiums have “skyrocketed.”
But are these growing premiums actually high?
A new analysis from the Urban Institute found that the average unsubsidized premiums in the Affordable Care Act exchanges, commonly known as Obamacare, are actually 10 percent lowerthan the full premiums in the average employer plan nationally in 2016.
Nationally, the average employer-sponsored premium was $516 a month, while the unsubsidized marketplace premium was $464. To make an apples-to-apples comparison, the researchers adjusted marketplace premiums to account for the age of enrollees and the different value of the health coverage provided by the marketplace plans.
The exchanges offer health coverage to people who aren’t insured through their jobs, with subsidies based on income. About 11 million people are insured through the marketplaces, compared with about 155 million Americans who receive insurance coverage through employer-provided plans.
Recent news of large insurance carriers pulling out of some states’ marketplaces and hiking premiums in others has raised concerns that offering health insurance through exchanges isn’t sustainable and the health care offered isn’t affordable.
Source: Kaiser Family Foundation analysis of Truven Health Analytics Market Scan Commercial Claims and Encounters Database, 2004-2014; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2004-2014 (April to April).
With 91% of the population now covered by some form of health insurance, and the coverage rate higher in some states, the next big debate in health policy could be about the adequacy of coverage. That particularly means rising payments for deductibles and their impact on family budgets and access to care. This is about not just Obamacare but also the many more people who get insurance through an employer.
As the chart above shows, payments toward deductibles by consumers who have insurance through large employers rose 256% from 2004 to 2014; over the same period, wages increased 32%. The chart shows what people actually paid toward their deductibles and other forms of cost-sharing, not just their exposure as deductibles climbed (which is more typically what studies and data report). Deductibles accounted for 47% of cost-sharing payments in 2014, up from 24% in 2004. During the same period some other forms of cost-sharing fell. Payments for co-pays declined by 26%. It’s no wonder that consumers say in polls that deductibles are their top health-cost concern.
An estimated 11 million young adults ages 19 to 34 currently lack health insurance. Health insurers covet this age group as enrollees for their generally healthy status and lower cost risk. Bringing more of these uninsured young people into the Affordable Care Act (ACA) marketplaces would bring more balance to the marketplace risk pools, which some insurers complain are dominated by less healthy people.
One option for attracting young people being floated in policy circles is lowering premiums for this group by raising the limit on how much more insurers can charge older people relative to young people. The ACA bans insurers from charging people higher premiums on the basis of health or gender, but insurers are allowed to charge older adults up to three times what they charge young adults. This provision helps protect insurers from the greater potential health costs of older adults. Some have suggested that insurers be allowed to increase this so-called age band from 3:1 to 5:1 or higher, or allowing states to set their own age bands.
Giant insurer Aetna announced this week that it was withdrawing from the Obamacare exchanges in 11 of the 15 states it had been doing business, becoming the third major insurance company to scale back its offerings dramatically in the face of heavy losses. The news led to a chorus of “I told you so’s” from critics of the 2010 healthcare law, who have long predicted that it would collapse under its own weight. But they are confusing the growing pains of a new market with the death rattle of a failing one.
It’s important to bear in mind what Obamacare, formally known as the Patient Protection and Affordable Care Act, set out to do. Over the long term, it sought to improve the quality of healthcare and rein in costs — an ambitious effort that may not yield significant results for years, if ever. In the short term, its goal was to extend insurance coverage to millions of uninsured Americans. To do so, it barred insurers from denying coverage or charging higher rates to those with preexisting conditions, required all adults to obtain coverage and offered subsidies to help poorer households pay their insurance premiums.
These changes reinvented the market for individual policies, which serves those not covered by large employer plans or government-run health programs. No longer could insurers minimize their risk by denying coverage to or gouging those with preexisting conditions. The new subsidies also attracted many previously uninsured people who had no track record to guide insurers on their needs and costs.
The result was a hotly competitive market with winners and, yes, losers. The insurance companies that have done well include those with experience serving low-income communities, as well as those in states such as California that have worked hard to bring young and healthy customers into the market. But Aetna and UnitedHealth, which announced in April that it would withdraw from almost all the Obamacare exchanges it had entered, had previously focused on serving large employers, a much less risky and volatile market.
HENRY KOTULA 