31 Jul Repeal and Replace – Doesn’t Fix the Problem
I recently read a synopsis of the Republican House bill to Repeal and Replace Obamacare (here is a great explanation of what stays and what goes).
As I read through the proposed changes, I was unclear what issues the Republicans were attempting to fix. They have had 6 years to rally the troops and deliver meaningful reform to the current healthcare debacle. It is clear that no one on the Republican side wanted to deal with the fact that healthcare is hard.
As an employee benefits consultant who deals with this legislation every day, I have some pretty defined ideas about the successes and failures of the ACA.
One of the major failures that I repeat to my clients when they ask about the ACA was the fact it did not touch cost of care. The ACA did a respectable job of giving access to more Americans. It really helped the lower income single parent struggling to provide for their children. And for those who qualified for subsidies, it masked the growing premium rates well.
The one thing the ACA and the new Republican bill – The American Health Care Act – fail at is reigning in the escalating cost of services. Both of these pieces of legislation look to insurance reform to fix a system of broken pricing.
So why are the costs going up? I think the easiest answer is because they can. The medical pricing system is broken. True costs are hidden and for-profit companies have a mandate to charge as much as they can. This fact coupled with the American belief that unfettered access is paramount and expensive is better has given the big three – Hospital systems, Pharmaceutical companies, and Insurance companies access to a larger and larger chunk of American’s money.
Think about increasing premiums this way. Currently, insurance companies are required to spend $.85 of every dollar in premium collected on claims. That leaves $.15 for the insurance company for every dollar collected. If they collect $1, they have $.15, but if costs go up, and premiums go up to cover the costs, and they collect $3 for the same service, then they have $.45- and didn’t do any more work! Now that is the way to increase your bottom line!
What is the answer to fix this? That is where everyone diverges. It gets tricky and complicated. Do we go with a governmental system where Medicare sets the rates for all procedures (single payer)? This would be fairly catastrophic to the for-profit hospital systems that dominate the landscape. Or do we go the opposite way and make it a truly free market? This would allow hospitals to compete directly against each other and do away with inefficiencies in the existing system. Do we change how insurance companies split the cost with us to make us better consumers? Do we make doctors have a hand in not only finding the best treatment but the best value treatment…..?
I don’t have the answers. The problem is no one in Washington is even asking these questions. Congress had a chance. They looked at the rampant drug price escalation (Martin Shkreli and Epipen), held hearings and pontificated about how terrible it was to take advantage of the American people. But other than this public display of finger-wagging, nothing was done.
The hard truth is that until we as a nation figure out what we want from our medical delivery system no amount of insurance reform is going to create a better system for everyone.