Costs and Affordability of Care

In this second post assessing the track record of the Affordable Care Act (ACA) five years after its enactment, we now look at its impact on containment of health care costs and affordability of care, two of its principal goals. In the last post, we noted that up to 11 million Americans have gained access to care though the exchanges, but pointed out the many limits to these numbers; the Obama administration now claims that an additional 10 million have been enrolled in Medicaid or the CHIP children’s health program since the start of the ACA. (1)

The ACA has accelerated a number of trends that were in place before its enactment, including consolidation of hospital systems, purchase of physicians’ groups by hospitals (and sometimes insurers), narrowing of networks of hospitals and physicians by insurers, shift of costs to patients through higher deductibles and co-payments, and an ongoing drive to game the system for higher profits. It is now clear that there are no significant ways that the ACA can contain costs, which are driven by increasing prices without any price controls.

Starting with the price problem, here are some of the continuing problems:

• Expanding hospital systems lead to higher prices as they gain market share and have less competition (2); in his recent book, Steven Brill has described the many ways that hospital billings are generated without transparency. (3)
• A committee of the American Medical Association, the Relative Value Scale Update Committee (RUC) continues to recommend reimbursement values for physician services to the Center on Medicare and Medicaid Services (CMS), which usually accepts them (4); that process is filled with conflicts of interest on the physician side (5); over the last five years, prices of a primary care physician visit have gone up by 20 percent, 29 percent for specialist visits, and 43 percent for outpatient surgery. (6)
• Insurers still have wide latitude to set their own premium prices, with little restraint by state regulators, even as they shift more costs to patients through higher cost-sharing; insurance premiums in Alaska and other rural areas are three times higher than other parts of the country (7); insurers are also increasing co-insurance requirements for specialty drugs (such as those for cancer or rheumatoid arthritis), with these rates now over 50 percent for bronze plans and 41 percent for silver plans. (8)
• Drug companies inflate their costs to bring new drugs to market as a way to set higher prices, as summarized in a 2014 article by experts on this problem. (9)

Drew Altman, president and CEO of the Kaiser Family Foundation summarizes the price problem in this way:

It’s striking that while price is such an important reason our system appears to cost so much more than others, efforts to reduce the high prices of medical care are not a meaningful part of current cost-reduction efforts.(10)

So does the ACA contain health care costs? Not surprisingly, since prices keep going up, the answer is no. But we need to ask a more telling question—whose costs are we talking about? Many focus on the costs of insurance premiums, which indeed may go down for many (for less coverage and higher cost-sharing) or annual national health care spending (which has moderated somewhat in recent years, mostly as a result of the recession and many foregoing visits to the doctor) (11). But the real question is the costs of health care, especially out-of-pocket costs for patients. And here, patients’ costs continue their upward spiral, for some of these reasons:

• For those with employer-sponsored insurance (ESI, which is exempted from the provisions of the ACA), most will pay more because of cuts in benefits, higher cost-sharing, and having to pay a larger share of premiums; some employers have dropped coverage or shifted employees to the exchanges. (12)
• While many low-income people have fared better in states that have expanded Medicaid under the ACA, those in the 22 non-expanding states have done much worse; many of these states have very restrictive policies for eligibility and coverage; some have established private Medicaid programs, which the CBO has found to cost 50 percent more than public Medicaid programs. (13)

As for affordability of health care, despite its name, the ACA also fails to meet that goal, despite subsidies that many receive to purchase insurance. These measures make the point:

• According to a recent Gallup poll, 22 percent of people now say that the cost of care has led them to delay treatment for a serious condition, the highest percentage since 2001. (14)
• A study by the Commonwealth Fund has found that almost 10 percent of median household income now goes to insurance premiums and deductibles, not including other cost-sharing requirements; a recent poll by the New York Time/CBS found that 46 percent of respondents have trouble affording health care. (15)
• Pew research has shown that 55 percent of American households are savings-limited, able only to replace less than one month of their income through liquid savings. (16)
• An estimated 43 million Americans now have an account in collection for medical debt, which makes up 52 percent of collection accounts on credit reports. (17)

Looking forward, the picture is not promising. Already, a recent tracking poll by the Kaiser Family Foundation has found that 41 percent of those without health insurance cannot afford health insurance under the ACA. (18) If the U. S. Supreme Court rules against subsidies in states with federal exchanges, a Rand study projects the cost of unsubsidized premiums could increase by almost one-half, and that 70 percent of consumers would cancel their policies (19), while a new study by the Urban Institute estimates that more than 8 million people will lose their insurance. (20) As for longer-term costs to the government and taxpayers, the CBO projects that the federal government will end up paying $50,000 for every person getting health insurance under the ACA. (21)

In our next post, we will look at the impact of the ACA on quality of care.

Adapted in part from my new book, How Obamacare Is Unsustainable: Why We Need a Single Payer Solution for All Americans. Friday Harbor, WA. Copernicus Healthcare, 2015.

References:

1. Sullivan, P. Medicaid rolls grew by 10M under Obamacare. The Hill, February 23, 2015.

2. Pear, R. F.T.C. wary of mergers by hospitals. New York Times, September 17, 2014.

3. https://www.nytimes.com/2014/09/18/business/ftc-wary-of-mergers-by-hospitals-.html?_r=0

4. Brill, S. America’s Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Health Care System. New York. Random House, 2015.

5. Holzer, B. Physician, pay thyself: industry holds sway over Medicare rate decisions. Public Citizen News 34 (6): December 2014. https://www.citizen.org/pc_news_issues/2014/current/files/assets/basic-html/page1.html

6. Rosenthal, E. Patients’ costs skyrocket; specialists’ incomes soar. New York Times, January 18, 2014 https://www.nytimes.com/2014/01/19/health/patients-costs-skyrocket-specialists-incomes-soar.html

7. Editors, Out of pocket, out of control. Bloomberg View, February 16, 2015 https://www.bloombergview.com/articles/2015-02-16/after-obamacare-health-care-reform-needs-to-curb-costs

8. Rau, J. Alaska health plan premiums, highest in nation, are triple those in Phoenix. Kaiser Health News, January 15, 2015. https://kaiserhealthnews.org/news/alaska-health-plan-premiums-highest-in-nation-are-triple-those-in-phoenix/

9. Pearson, CF. Exchange plans increase costs of specialty drugs for patients in 2015. Avalere, December 2, 2014. https://avalere.com/news/exchange-plans-increase-costs-of-specialty-drugs-for-patients-in-2015

10. Light, DW, Kantarjian, H. Cancer Rx: the $100,000 myth. AARP Bulletin, May 2014, p. 22. https://pubs.aarp.org/aarpbulletin/201405_DC?pg=22#pg22

11. Altman, D. High health-care prices: more talk than action. Wall Street Journal, January 12, 2015 https://blogs.wsj.com/washwire/2015/01/12/high-health-care-prices-more-talk-than-action/

12. Leonhardt, D. The health-cost slowdown isn’t just about the economy. New York Times, December 5, 2014 https://www.nytimes.com/2014/12/06/upshot/the-health-cost-slowdown-isnt-just-about-the-economy.html

13. Appleby, J. Expect to pay more for your employer-sponsored health care next year. Kaiser Health News, December 20, 2013. https://kaiserhealthnews.org/news/expect-to-pay-more-for-employer-health-care/

14. Healthcare-NOW! Single Payer Activist Guide to the Affordable Care Act, 2013, p. 10.

15. Ibid # 5.

16. Rosenthal, E. Insured, but not covered. New York Times, February 7, 2015 https://www.nytimes.com/2015/02/08/sunday-review/insured-but-not-covered.html

17. Pew Charitable Trusts. The precarious state of family balance sheets. January 29, 2015.

18. Hillebrand, G. Consumer advisory: 7 ways to keep medical debt in check. Consumer Financial Protection Bureau, December 11, 201 https://www.consumerfinance.gov/blog/consumer-advisory-7-ways-to-keep-medical-debt-in-check/

19. Carey, MA. A quarter of uninsured say they can’t afford to buy coverage. Kaiser Health News, November 21, 2014. https://kaiserhealthnews.org/news/a-quarter-of-uninsured-say-they-cant-afford-to-buy-coverage/

20. Appleby, J. Supreme Court insurance subsidies decision could trigger price spikes. Kaiser Health News, February 26, 2015.

21. Ehley, B. If SCOTUS rules against Obamacare, health costs will soar. The Fiscal Times, February 15, 2015. https://www.thefiscaltimes.com/2015/02/15/If-SCOTUS-Rules-Against-Obamacare-Health-Care-Costs-Will-Soar

22. 21. CBO report: Obamacare to cost government $50 K per person. Newsmax, January 27, 2015. https://www.newsmax.com/Newsfront/CBO-report-Obamacare-50K/2015/01/27/id/620979/