October 11, 2015

Comments on the Health Insurance Legislation Passed on March 20

I have been asked by many people to comment on the health insurance legislation which was approved by both houses of Congress last night. I waited until now, although the legislation filled 2,562 pages, so I cannot comment on all of its implications.

This legislation stopped being about health care reform, and eventually stopped being about constructive health insurance reform a while ago. It essentially got enacted to prove that the Obama Administration could get something significant done. As a political accomplishment, it is a landmark. As a positive step toward fixing what is wrong with our health care system, I can only say that the President’s wish that he be the last President to have to address health care will not get fulfilled. This legislation will require significant rework in most areas for a long time.

In every bad piece of legislation, there are good components, and this is no exception:

  • There are specific areas of focus on prevention, and I commend leaders like Senator Harkin for being thoughtful in getting prevention on the agenda, and making meaningful progress on it.
  • There are some small steps to improve the supply of doctors and nurses and other health professionals, and these are welcome.
  • Closing the “doughnut hole” drug coverage for senior citizens was a good idea, because a deductible that kicks in at $3,400 was a great idea in theory, but a problem in practice.
  • The legislation begins to address the long term care problem, which will become more significant as we all age.

What’s fundamentally wrong with the legislation? It taxes many people to extend insurance coverage to 30 million Americans without addressing the fundamental flaws in the system that caused them and others to be without coverage in the first place. The problems of uninsurance and underinsurance result from excessive costs which are passed on in higher insurance rates. This legislation, by guaranteeing coverage and preventing insurers from terminating it when people get sick, will make the costs even higher and will create a vicious spiral in which in which rates go up, more people need subsidies, and taxes go up to cover those who cannot afford coverage. In particular, the likely consequence of guaranteed coverage, regardless of current medical conditions, is that people who do not want insurance coverage will wait until they get sick to apply. The penalty for that behavior, which undermines the financial model for this system, is far too low, and does not even go into effect until 2014.

The ways to break this spiral are also bad:

  • The rate of cost increases can be reduced by reducing what insurance companies pay doctors and hospitals, but that will drive doctors out of the profession, and cause hospitals to charge more to those not securing government or state-regulated insurance, like self-insured employers and individual policyholders.
  • The government and private insurance companies can start reducing what is covered and ration care, which is politically almost impossible to imagine. This legislation is testimony to the government’s inability to deny coverage for everything every vocal interest group wants.
  • The doctors will either cram more patients into an already crowded schedule, which reduces care quality for everyone, or they will delay seeing people longer, or they will simply drop service for patients who have Medicaid or other state insurance plans for low-income people. Those individuals, who have insurance coverage, will get treated in emergency departments and drive significant cost escalation.

In effect, this legislation has the perverse effect of taxing many Americans to give more insurance coverage to people who will have inadequate access to the right kind of care. We will be taxes heavily to enable more people who will have insurance cards to go to emergency departments. The insurance will pay far more than if they had the right kind of care.

I would make one other prediction: the very wealthy will drop out of the traditional insurance system altogether and access what will be a booming growth industry, concierge physician practices in which the patient pays a flat annual fee to be given a guaranteed high level of service. Our health care system will end up having a gap between the service offered the rich and the poor far greater than what exists today.

What proponents of this legislation never understood is that health insurance access does not guarantee health care access. In the 8th Ward of Washington, DC, one of its poorest areas, there is one urologist serving a sizable population. According to multiple studies done relative to that population, over 90% of the population has Medicaid or some other form of insurance coverage.

With the passage of this legislation, the percentage of the population with some form of insurance coverage increases to closer to 100%, but there will still only be one urologist, and, therefore, a large part of the population will end up going to the emergency department at the most convenient hospital to get care. The legislation does nothing to improve health and, even if it improves the broad supply of doctors, will probably do nothing to get more doctors into the 8th Ward. The 8th Ward problem is representative of a problem that exists in many parts of the country, and this legislation does little to address it.

Last year, Connecticut enacted a flawed piece of legislation over the Governor’s veto. Like this legislation, the battle to pass it was really a political battle in which the Democratic majority won. The good news is that the Democrats in Connecticut are earnestly working to try to do something good to improve health and health care, and work around the flaws in the legislation, and may eventually figure out how to rework this legislation to turn it into something good. Let’s hope that the same process can play out in Washington.

There will be many more chapters to this story.