Friday, March 10, 2017

The Perfect Obamacare Replacement

One big promise of Donald Trump and the Republican Party was to repeal the ACA a/k/a Obamacare.  Recently the Republicans introduced their "ACA" or American Care Act.

The Perfect Healthcare Plan

Just in case anyone was wondering, I have the perfect plan in mind.  Just take these ideas, turn them into legalese and send it to Congress.  Then we will have perfect healthcare:
  1. Don't charge me more than I can comfortably afford--I guess no more than cable TV or Netflix costs me each month.
  2. Cover me at 100% for any condition that remotely resembles sickness or lack of health or relating to the body or mind in any way.
  3. Cover me whether or not I choose to buy insurance before this ailment struck.
  4. Make sure I can see any doctor at any time and get any tests or treatments (proven or unproven) that I or my provider of choice (M.D., Chiropractor, Naturalpath, Homopath, Witchdoctor, Esthetician or Mother-in-law) think I need.
That's really all we need, right?  Unfortunately, when worded the way I worded it, anyone with a brain in their head will know that my proposal is impossible.  However, when reworded to
  1. Make premiums affordable and co-pays reasonable
  2. Cover all illnesses
  3. Don't discriminate against those with pre-existing conditions
  4. Allow patients to pick their doctors and cover the treatments ordered
it sounds so reasonable, so right, so much like what we as a county ought to be able to do for our people.

How Much Does Healthcare Cost?

We spend a lot of time complaining about the cost of health insurance, when the real problem isn't the cost of health insurance, it is the cost of healthcare.  The average per-capita cost of healthcare in the US today is over $9,000.  Under the ACA, plans have to pay out 85% of what they collect in premiums or they have to refund the premiums.  While eliminating insurance companies may reduce that 15% figure somewhat, someone is still going to have to push the paper and the paperpushers, whether employed by an insurance company or by the government, will have to be paid.

We don't all spend $9,000--in fact most of us don't have healthcare spending anywhere near that amount.  In fact, according to this study, over half of our lifetime medical expenditures will come after age 65, when we are covered by Medicare, not private insurance.  The study also says that about 8% of our lifetime medical costs are between birth and 19; about 12 percent between 20 and 39 and about 33 percent between 40 and 65.  Put another way, if the average per capita is $9,000 in today's dollars and you live to 85, the average lifetime healthcare expenses, at today's levels, would be $765,000, distributed like this:

  • $61,200 of that would cover you between birth and 19 ($3060.00 per year)
  • $91,800 would cover you between 20 and 39 ($4,590 per year); 
  • $252,450 to cover you from 40 to 65 ($10,098.00 per year); and
  • $359,550 to cover you from 66 to 85, when you would die ($17,977.50 per year)

How Much Does Health Insurance Cost?

According to the webiste above, the average cost of a family insurance plan through an employer in 2016 was $18,142.00.  I daresay few employees pay close to that; employers pay a major portion.  If you assume 15% of that was insurance company overhead, you are still looking at costs of over $15,000 per year, and you know that people are still going to have co-pays and deductibles.

 While the ACA subsidizes insurance for people whose income is below a certain point, the fact that plans  have to cover so much, accept anyone and not charge sick people more, or old people too much more, makes them very expensive for those who do not have subsidies.  My family makes too much for a subsidy.  We have 2 people between 40 and 65, one between 20 and 39 and one under eighteen.  Using the figures above, our average medical costs per year should be $23,256.00.

A search of showed that average Bronze plan offered there would cost $25,000 and the lowest priced one, $18,000--and we'd still have to pay most of our medical bills.  While there are a lot of people out there who make less than we do, neither my husband nor I are high earners.  Those policies would make a severe impact in our standard of living.  Right now, because of employer subsidies, we are paying about half that for better coverage.  

Why Don't Other Countries Pay as Much?

What is the answer?  I wish I knew.  Other countries don't spend as much.  Why? Some reasons:

They Limit Supply

Well, some, like Canada, limit the supply.  I can give you the names of four places within a fifteen minute drive of my suburban home where you can get a $1500 lumbar MRI, and my guess is that most of them can see you this week, if not tomorrow.  In Ontario Canada, the average wait is close to a month.  That can save money in two ways:

  1. The machine has less down time, meaning the per use cost is less and
  2. There are people whose back pain would resolve within that wait time and would no longer need the MRI.  Of course, if you are in pain and trying to pursue treatment, that wait is thirty more days you will be in pain. 

I read somewhere that if you compared American couples who were referred to fertility specialists, with Canadians who were referred to fertility specialists,   after six months twice as many Americans were pregnant.  That sounds like American treatment is much better; however it doesn't mean that at all--the Canadian couples were still on the waiting list, so on average, half those American women who underwent (and paid a small fortune for) fertility treatment really just needed more time.  On the plus side for the Canadians, once they cleared the waiting list, their treatment didn't cost them much, whereas most Americans sustained substantial costs for infertility treatment until coverage was mandated.

They Control Prices or Don't Allow Certain High-Priced Treatments

Many countries set the rates of reimbursement (payment) to doctors and hospitals and for medications.  They consider price when deciding whether particular treatments will be available. That's one reason you will find a wider variety of drugs and treatments available in the US than in many countries--here a drug can be offered for sale if it is proven safe and effective--and for some drugs, "effective" can mean they add months to life of the average cancer patient.  The negotiating power of one government is stronger than the power multiple insurance companies, which is why it is less expensive to buy drugs in Canada than in the US.  

England's National Health Service requires referral by a primary care physician in order to access specialist care and the NHS has waiting lists and a reputation for being an impersonal bureaucracy.  England's system is two-tiered; everyone is entitled to use the NHS system and those who can afford to do so have access to a private system as well.   

What Should Health Insurance Do? 

One big problem I see with any healthcare solution is that different people have different needs.  I'm a middle-income person who is  not living paycheck to paycheck and teetering on the edge.  Reality is that much as I may dislike it, I can afford a $150 doctor's visit. 

Reality also is that there are a lot of people out there who can't--that $150 will throw a major crimp into their lives, make them late on other bills and so forth. 

I need my health insurance to protect me from the major problems, not the day to day normal expenses of life.  Someone living on the edge may choose to forgo necessary treatment because of lack of financial resources; they need a healthcare plan that allows them to see a doctor when needed without worrying about it throwing them into financial ruin.

On the other hand, I've worked a lot of Medicaid fraud cases that couldn't have happened (or would have been a lot less likely) if the "patients" had to pay something out-of-pocket for care.  All of us are more careful about spending our money than spending the insurance company's money or the governement's money.  How do we balance meeting people's needs without encouraging waste?  

My Problem with Both "ACA" Plans

My problem with both the Affordable Care Act and the American Care Act is that they don't address the real problem in any real way.  The real problem isn't the cost of insurance, it is the cost of healthcare.  The Affordable Care Act was clearly an act of cost shifting.  The employer mandate shifted costs from the employee to the employer, if the employer wasn't already providing insurance.  If shifted costs from the individual to the taxpayer if the individual's income was below a certain point.  It shifted costs from the sick to the healthy and from the old to the young.  

Controlling Costs

The sad economic reality is that there are two ways to control costs.  The first is to reduce demand, the second is by government containment.  

The law of supply and demand says that if the supply of something outstrips the demand, the price goes down.  If the price of something is too high, the demand for it goes down--even if people want it.

The cost of houses in my neighborhood fell a few years ago.  Why?  It wasn't because fewer people wanted houses this size.  It wasn't because it cost less to build.  It wasn't because the neighborhood went down.  The price of houses in my neighborhood fell because the cost of insuring them increased substantially.  People's housing budget is limited and the increased cost of insurance meant that fewer people qualified for a mortgage in the amount needed to purchase at what was the going price.  Some people who had stretched to buy when the market was at its highest found themselves strapped to pay both the mortgage and the insurance and had to sell or face foreclosure.

Contrast that with healthcare.  The largest purchaser of healthcare in America today is one that will never run out of money--the government, via Medicare, Medicaid, the VA and Tricare.  While people may choose to forgo small routine medical expenses due to cost, health insurance paid for by someone else pays so many of our expenses that for most middle-income Americans, "I can't afford it" isn't part of the discussion with the doctor.  Lack of purchasers is not going to push the price of healthcare down unless we radically change the manner in which we pay for healthcare AND are willing to see our friends, neighbors, family members and even ourselves do without needed or wanted medical care due to price.

Other countries use the authority of the government to rein in prices.  The government either directly negotiates rates with providers or it sets a global budget and when the money for the quarter or year is gone, it is gone.  This government interference in the market can limit supply, but it keeps the price of the supply lower.  Generally speaking governments that control the price of healthcare also assure that all citizens have access to it, something our government does not do.  

In my opinon one reason we have runaway costs is that we are unwilling to use either system to control costs.  We have such safety net and so much money spent on the middle and upper class that the demand for healthcare is not moderated by price.  I suspect that if you passed a law tomorrow outlawing health insurance that had less than a $20,000/year deductible, the price of healthcare would drop because people would start looking for less expensive doctors, choosing less expensive medications etc.  We aren't willing to do that because many people would be hurt and forced to choose between medication and food.  

We are also unwilling to give the government the power to control prices charged by private businesses.  Because of the high prices we are willing to pay, we have higher survival rates when serious illness strikes.  

So What IS the Perfect Replacement for Obamacare?

Sorry, I'm not smart enough to know the answer to that question, and frankly neither is Donald Trump.  Obamacare has its problems and as a conservative, I have problems with the cost shifting and the way it has hastened our country's move to one with well-paying middle class jobs that provide health insurance and low paying unskilled jobs that not only do not provide health insurance but also do not provide fulltime hours, specifically to avoid having to pay almost  as much in health insurance premiums as in wages.  As a Catholic I don't like the way Obamacare has mandated that employers purchase contraceptive coverage even if they believe it is immoral.  

One idea I have is to eliminate employer-sponsored health insurance.  Why should the managing partners of my firm get to pick my health insurance?  I'm smart enough to do that on my own.  Give me the money and let me do it--and make the premiums non-taxable, just as they are when purchasing through the employer.  

I like the idea of a payroll tax on both employers and employees, for both fulltime and part time employees, coupled with tax credits for the purchase of health insurance or paying healthcare bills.  

What we have isn't working for more people every year.  Obamacare helped more people get insurance, but it hasn't been around long enough to say whether it allowed more people to access healthcare and it certainly hasn't done anything to bring costs down.  

Disease Called Debt


  1. I think you've hit the nail on the head that it is the cost of healthcare, not necessarily the insurance, that is the main problem. I don't have the answer either, but I am quite sure it is not the AHCA.

  2. I think you make some good points, particularly about the fact that if everyone had to go to the private market for insurance, the private market would probably be very different. And transparent pricing would help as well, and logical networks. (seriously, how can my hospital be in network but all of the doctors I might see in the hospital be outside?)

    Of course, I'm a liberal. The UK's system sounds pretty good to me because it does allow for reasonable health care for all without constraining someone from turning to the private market.

  3. Very good analysis of healthcare. Wish there was some system that would make healthcare affordable for everyone; and provide the type of care that is needed at a reasonable cost. A good percentage of our income each year goes to premiums, towards deductibles (high ones), and over-priced medications.

  4. "Put another way: if we compared the life expectancy of Americans on private insurance with that of centrally-planned Europeans, I’d bet that the U.S. would come out on top. And if that’s true, the argument that socialized medicine leads to longer life evaporates." --from the linked article.

    I think this is the crux of it: a ridiculous number of Americans didn't have health insurance before the ACA. Yours truly included. What good is a health care system that, depending on how you skew the numbers, ranks number one if a large portion of your citizens can't access it?

    I also think some of the claims at the beginning are exaggerated. I don't know anyone wanting to see a witch doctor, nonetheless their mother-in-law. :p But I do think that the battling over in and out of network has to stop. It's being done here in Pittsburgh in an effort to establish a monopoly--which is ALWAYS bad for consumers. And with the way our federal agencies are being run now, I don't have much faith in anti-trust laws.

    "I have problems with the cost shifting and the way it has hastened our country's move to one with well-paying middle class jobs that provide health insurance and low paying unskilled jobs that not only do not provide health insurance but also do not provide fulltime hours, specifically to avoid having to pay almost as much in health insurance premiums as in wages."

    I'd be interested to see those numbers. Even before the ACA, a lot of the post-recession unemployment recovery numbers were from part-time workers, not full-time, which the stats we often hear don't usually denote.

    And health insurance is absolutely a large culprit in the reason our healthcare is so expensive. Providers want to be in network and provide the largest possible discount to insurers; it attracts them. So the sticker price is unbearably high in order to facilitate those discounts. As someone who has operated both with and without insurance over the years, I can tell you that sometimes, the uninsured discount that brings costs down to Medicaid billing levels is sometimes smaller than that provided to my insurer. Other culprits include people ONLY going to the ER and not getting preventative care, which happened more often than not prior to 2014.

    I think the getting rid of employer-based insurance is an interesting idea. I haven't ever thought about it before, but off the cuff, it seems like one worth exploring.

    Overall, I think the ACA screwed the middle-class most. Those with jobs that already provided insurance. Especially in regions where there is limited competition. I also think it needs to be tweaked because there are definite flaws--as there are with any bill that's negotiated to heck and back. We've amended our constitution several times and do the same with other pieces of legislation. I don't see what the big deal is about doing it here.

    But the new proposed bill would screw the middle-class even worse. And the low-income crowd? It would push them back into devastation. All so people who have the means to provide and pay taxes and actually open HSAs can save? It seems rigged, unfair, and frankly inhumane to me. Another way to keep people from climbing the ladder--even with hard work--and literally killing them or screwing with their finances to a point of despair.

    I know you're not arguing for the latter. I'm just petrified that we're going to slide backwards here. And mostly it seems like our legislators are making this attempt in an act of vengeance or greed rather than rationale.

    1. How many fulltime jobs do you know of that pay at or close to minimum wage? Pre-ACA, employers avoided hiring low-wage help full time because if they provided their middle-income employees health insurance, they had to provide it to all full time employees. However, pre-aca, "fulltime" was more hours than post-ACA. .

      Yea, I have a problem with all those insurance company discouts. I read other people's medical bills frequently. Last week I reviewed a bunch that belonged to a lady who had neck surgery. There were bills from the surgeon, the hospital, the assitant, the anesthesiolist, and two doctors who I guess saw her in the hospital. Total was over $160,000. The insurance company paid about 11% of her bill, and she paid a few hundred in deductibles. What other business is happy collecting less that 20% of the invoiced amount?

    2. Unfortunately I know of a good few. My perception may admittedly be skewed as until a couple of years ago, I lived below the poverty line (sometimes with pre ACA employer-sponsored insurance) so many of my friends find themselves in this position. Even more unfortunately, many of them work for small companies that are not compelled to provide coverage under the ACA. Of course, there is the issue of only hiring people part time, and then extending over priced insurance they can't afford to be in compliance. Which is why I think the idea of removing employer-sponsored insurance with the contingency that marketplace insurance must go down is so compelling. Employers rarely care more about employees over their bottom line. (Unless there's a union involved, but goodness me, that's an entirely different and also complicated conversation!)

      And agreed. If actual costs are less than 20%, or slightly more as Medicaid tends to get billed more, the sticker price is insanity. You'd think insurers would be happy to take a smaller discount if end prices were identical, but I'm sure there's some complex contingency that I'm missing. I also wonder how many uninsured know they have a right to ask for a discount down to Medicaid billing levels and how much profit is made off of that ignorance.