Sara’s smarter, funnier husband, Loren, is again writing this post.  He is also better than her at Jenga. (But she just beat him at Scrabble.) (By cheating.)

My last post detailed why healthcare reform was financially necessary, from a global perspective.  In short, Americans were paying more for worse outcomes.  Let’s dive into some impacts on individuals.

Everyone American will, at some point in their lives, require health insurance coverage (hint: you are not immortal and will die no matter how much tiger blood you bathe in). The bills from your health care can be far higher than what you can afford.  Treating cancer, for instance, would cost tens of thousands per month.  That’s a spicy burrito.  Should you need expensive medical care, ideally your insurance will pay for enough of it that you won’t go bankrupt.  If you are uninsured, either 1) you will pay out of pocket, or 2) you will have to declare bankruptcy, the hospital will write off the expense, and the taxpayers will effectively have to pay.  An individual not choosing to carry health insurance therefore has personal financial risk, but also has imposed a financial risk on hospitals and other taxpayers.  Neat!

There used to be a third option for the uninsured, they could simply not receive the care and die in the street!  Then the sanitation department could simply sweep up the bodies!  Reagan put an end to this possibility.  He mandated that all hospitals that accept Medicare treat anyone who visits their emergency rooms, by passing the Emergency Medical Treatment and Active Labor Act (EMTALA).  While preventing people from dying on the streets is of course a good thing, it created an enormous liability for hospitals since they must now treat a population of patients who could not afford the care.  This is a large part of why stitches at a hospital can cost $500 a piece – hospitals have to make up the costs somewhere.  These costs get passed on to consumers and to insurance companies, driving up premiums.

main-street
Figure 1. A street where maybe the uninsured used to die.

 

Because insurance companies of course didn’t want to be on the hook for these enormous costs, they would frequently deny coverage for pre-existing conditions.   This left many people unable to get insurance, at any cost, and many others unable to afford it.  In fact 1 in 7 were denied coverage, and about 25% of the population has a pre-existing that could disqualify them (this percentage of course increases with age).    Insurance companies could also rescind coverage retroactively, so if you were diagnosed with a disease workers would sift through your files looking for evidence that your condition existed prior to obtaining insurance.  They would then deny  claims associated with your disease.  Prior to the ACA, there were some 40 million people without insurance in America.  Even if you did get insurance, you likely faced yearly and lifetime maximums.

It is easy to demonize insurers for these practices, and there are cases of truly despicable behavior on their parts.  These practices were the result, however, of a competitive marketplace that did not have adequate consumer protections in place.

So, here is the majority of what the ACA did:

  1. Required everyone to purchase insurance (the “individual mandate”), and required employers with more than 50 employees to provide insurance.  It established “exchanges” so employers and the uninsured could buy into policy pools shared by numerous others.  It provided subsidies for lower income people.
  2. Did not allow insurance companies to consider pre-existing conditions for new policy holders, and did not allow insurance companies to rescind policies.
  3. Allowed children to stay on their parent’s policy until they turned 26.  In was previously up to the individual policy, and therefore varied from 18 up.
  4. Expanded Medicaid for families making less than 138 percent of federal poverty guidelines (or $16,394 for an individual in 2016).
  5. Removed yearly and lifetime maximums.

These individual components are overwhelmingly well liked, even among Republicans.  The exception is the individual mandate, which 3 out of 5 people do not agree with.  Overall, the previous link suggests that about half of all Americans like the ACA, and half dislike it.

The ACA is a burrito, and the individual mandate is the tortilla.  Everyone likes all the delicious ingredients.  The guacamole is made fresh by hand!  They even like all the ingredients combined.  But they don’t like the wrap that holds the whole thing together.  If you remove the individual mandate, insurers have no incentive to cover all these new sick people with pre-existing conditions at a reasonable price.  Then, the cost to consumers would increase, and fewer people would purchase insurance, increasing the cost further, and leading fewer people to purchase insurance, etc.  This is the so-called “death-spiral.”

vegetarian_burrito_at_mucho_burrito_in_vancouver_bc_5665706890
Figure 2.  Eat this healthcare.

If you want to insure all Americans at a reasonable price, while adding consumer protections, you have to do one of four things:

  1. Mandate with serious penalties
  2. Continuous coverage
  3. Financial penalties if one buys insurance after open enrollment to game the system – i.e. premiums increase the longer one delays before buying insurance.
  4. Automatic enrollment into a base package.

In my next post, I’ll examine whether Obamacare is working.