Will the Senate Health Bill Really Bend the Cost Curve? (P2)
In Part 1 we looked at how HR 3590 can bend the US healthcare cost curve, and found some expected and some surprising answers. While deficit neutrality is a healthcare reform Holy Grail, from a personal perspective my first question is “It’s deficit-neutral for whom?” The answer to that, of course, is for the government, not you. Yes, the bill includes some good subsidies for the poorest among us, and subsidizes even those up to 400% of the poverty level. That still doesn’t prevent over-sized US healthcare costs from continuing to bankrupt the majority of Americans, as we saw explicitly in an earlier post. So beyond subsidies, what does HR 3590 do to bend your healthcare cost curve?
Let’s start in 2010, when some of the consumer protections go into effect. The ban on annual and lifetime benefit limits means you no longer get stuck with the bill when costs of your care exceed your insurer’s pre-determined maximum pay out. That’s good. With premature babies, spinal cord injuries, cancer or a host of other health issues it’s easy to get north of the typical $100-200,000 annual or $1-2 million lifetime maximum with US super-sized healthcare prices. Now the focus is on limiting your financial liability instead of your insurer’s. Verdict: Lower
Age- and tobacco-related premium variation are also reined in, at a maximum 3:1 age ratio and 1.5:1 tobacco ratio. This means a 60 year old can only be asked to pay 3 times what a 20 year old would for the same policy, and a smoker can only be charged 1.5 times the premium for a non-smoker. That’s good news for those no longer in the youth category or who use tobacco. It’s not as good for the young and non-smokers, as they will see premiums go up to support these relatively low premium ratios. Hey, we all age, but I’m not a big fan of subsidizing someone who chooses the health issues that derive from smoking. Verdict: Mixed
As fair access is delayed until 2014, what about the interim risk pool solution for those with pre-existing conditions? Will it make coverage more affordable for those not in perfect health? Unfortunately no, it just provides potential access to coverage. If you have coverage but your insurer included a rider (read: we don’t cover that) on any pre-existing condition, you are still stuck with all those expenses. Similarly, until the exchanges and the co-op, private, and public plans available within them go into effect, there are no subsidies available to buy insurance. Verdict: No Change
Which way will our healthcare premium costs bend over the next 4 years? AHIP has told us they will go up, and based upon the nearly 30% increase in my premiums for 2010, I’m not looking forward to what “up” means in the future. Until 2014, the federal government does require health plans to clearly explain on their websites why they are raising their rates. I’m sure that will stop them. Cue Mr. Bill: “Oh no!” Here, let me write it for them: “Due to prevailing market conditions, we are forced to raise our premiums to match the quality care we make available to our valued members.” Next. Otherwise the government will just be tracking trends through 2014 to see what rates do. Let’s see, when you enforce some consumer protections and offer no competition or strong oversight, what do you think rates will do? Look at history, HHS! Verdict: Significantly Higher
Now, once the real market reforms go into effect in 2014, what happens? Let’s do some fuzzy math:
- Current grandfathered private health plans (1,300 insurers x (?) plans)
- New private health plans, including inter-state and national policies x (?)
- New state-based co-ops x 50
- S-CHIP x 50
- Expanded Medicaid x 50
- Potential state-based semi-indigent plans x 50
- Reformed Medicare
- Public option
That’s a bare minimum of well over 1,500 different plans, all in 50 separate state-based insurance exchanges. I have never once suggested to a client that the path to efficiency and effectiveness was to increase the redundancy and complexity of his operations (redundancy exception: IT infrastructure!) You the taxpayer will be paying for this bureaucratic nightmare, through plan administration costs, provider administration costs, and the increased danger of going out-of-network for care. As for competition, well, the weak public option is one plan against 1,500+ private ones. Will it bring premium costs down? Not in its current state. Verdict: Higher
By now I think you get the picture. HR 3590 will not bend your cost curve in a desirable direction other than sparing you from paying inflated cash costs the rest of your life because you’ve maxed out your plan benefits. It does increase your access to care, which will hopefully be higher quality thanks to provisions we covered in Part 1. Just don’t get excited about deficit neutrality.
Note: Taxes were deliberately omitted from this discussion, as they have been covered elsewhere and affect a predominantly wealthy sliver of the population.
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