Health Plans’ Mastery of Obamacare Poses Challenge To Repeal

electronic-medical-record(A similar version of this Health Alert appeared at Forbes.)

Can Obamacare still be repealed? Well, that depends. If the politicians will legislate according to the people’s preferences, Obamacare is a jump-ball.

According to the Kaiser Family Foundation’s latest tracking poll, 43 percent have a generally favorable opinion of Obamacare, while 42 percent have a generally unfavorable opinion. Further, 22 percent claim Obamacare has hurt them or their family directly, while only 19 percent claim it has helped. That leaves more than half who do not think Obamacare has directly affected them.

Perhaps the 25 million who have become insured or dependent on Medicaid after Obamacare rolled out will confirm its success. Actually, there has been no improvement in access to care due to Obamacare. The Commonwealth Fund reports that 35 percent of adults delayed medical care because of cost last year – versus 37 percent in 2005. Further, the proportion of adults ages 19 through 64 who had a medical problem but did not visit a doctor or clinic was 22 percent in 2003 and 23 percent last year. Thirteen percent did not receive needed specialist care last year – the same percentage as in 2003.

Basically, when it comes to access to care, Obamacare has returned us to the status quo from before the Great Recession – at great cost to taxpayers. And that is only the picture in broad strokes. Very few people account for most medical spending, and those very sick people are doing poorly in Obamacare plans. A politician who offers a compelling plan to restore prosperity, as well as repealing and replacing Obamacare, should not face overwhelming odds convincing Obamacare beneficiaries.

The real obstacle to advancing an alternative to Obamacare will be interests in the health sector, which has mastered Obamacare remarkably. The latest evidence is the first quarter earnings reported by UnitedHealth Group and Hospital Corporation of America, both of which Forbes colleague Bruce Japsen describes as having had the “best Obamacare quarter yet.”

UnitedHealth Group posted revenues of $36 billion, 13 percent more than Q1 2014. The stock jumped 3.6 percent on the news. Every part of the firm’s domestic business did better than expected: Medicaid, Medicare, employer-based benefits and Obamacare exchanges.

Growth in health plans’ Obamacare exchange and Medicaid business is to be expected. However, the continuing success of private Medicare plans (called Medicare Advantage) continues to surprise, because Obamacare was supposed to cut their payments. Snatching this victory from the jaws of defeat was the real test of health plans’ mastery of Obamacare, and they have done it.

Further, they are keeping medical claims under control. Obamacare supporters continually remind us that Obamacare forces insurers to give rebates to customers if they make too much money, and that this is causing them to lower overhead and profits. Financial analysts roll their eyes at such claims. UnitedHealth Group’s ratio of medical spending to premiums dropped from 82.5 percent to 81.1 percent, but that did not come out of overhead or profits.

As a result, UnitedHealth Group and other health plans are a far greater obstacle to repeal than Obamacare beneficiaries are. A successful alternative reform would have to convince them that the potential reward is higher than the risks. Here’s what that would look like:

First, people recognize that Obamacare induces insurers to enroll healthy people and shun sick people, making health plans less popular than ever. An alternative reform that improved the incentives for health plans to seek out sick people would be achieved through superior risk adjustment, whereby plans which over enroll healthy people reimburse plans that over enroll sick people.

Second, both Obamacare beneficiaries and the general public recognize that the health insurance exchanges are frustrating experiences that cost a lot of money. Scrap them and let people buy health insurance from brokers and agents, either on line or in person. This will make the purchasing experience less painful and should benefit insurers.

Third, convince insurers that Obamacare is bad for the economy. Obamacare’s taxes have harmful incentives, including reducing working hours.  An improved system of tax credits for buying health insurance, which would not phase out so steeply as incomes rise, would motivate people to work more hours. Health care a superior good: The more income people earn the more health care they want. So, health plans should welcome such a reform.

Convincing health plans that there is a better future than Obamacare is not an easy lift. Neither is it impossible.

Comments (14)

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  1. Perry says:

    The healthcare sector(hospitals, insurance companies) helped write Obamacare. The American Board of Medical Specialties who is in charge of board-certifying doctors made sure it had its input to forever imbed board certification with practicing medicine and being paid by third parties.
    The Trial Lawyers helped ensure no malpractice reform was included in the ACA.
    If anyone wants to repeal or revise Obamacare, they are going to have to get by these powerful lobbies first. Meanwhile, patients and physicians will continue to be forced further apart by these special interests.

    • Thank you. I have yet to identify one segment of the health sector which is harmed by Obamacare. Individual physicians in private practice, yes, but Marcus Welby, MD, is an artifact of a bygone age, I fear.

      • Perry says:

        Physicians will now be essentially government employees without the benefits. And I don’t think patients will benefit, either.

      • Eric Potter MD says:

        “I have yet to identify one segment of the health sector which is harmed by Obamacare.”

        I will try to be respectful, but are you serious?

        Harmed groups:
        1) Patients
        2) Physicians
        3) Physicians with a conscience
        4) Poor
        5) Elderly
        6) Tax payers

        Harmed Values:
        1) Freedom
        2) Life

        Any short term benefit that might be construed will crumble with the government/big business control of healthcare over time. Taxpayers will foot the bill.

        • Thank you. I did mention physicians as the exception in my comment. The other parties you mention have also been harmed, but I don’t include them in the “health sector”, by which I mean the large institutional players with DC offices that have revolving doors to the agencies and Capitol Hill.

          We agree fully once the term “health sector” is clarified.

  2. Bob Hertz says:

    A lot of good points,thanks, but two points do not totally ring true.

    a. The popularity or unpopularity of the ACA is hard to gauge.

    Some older persons think that Medicare has been cut back to fund the ACA.
    That is not true ( I sell Medicare Supplements), but the Republicans got a lot of traction on this myth in 2010.

    Also, there is frankly a racist element that will oppose anything with the name Obama in it. See the enclosed comment on Kentucky:

    b. Risk adjustment – You propose a scheme like Germany’s, where plans with healthier enrollees compensate other plans with unhealthy enrollees.

    I cannot imagine a US Congress enforcing this (even if they should). Where would health plans get their profits?

    • Thank you and I agree that framing an issue can shift people’s answers. But I don’t think that 29% of Kentuckians favoring Kynect is a big thumbs up. And the article you link to does not suggest racism.

  3. H.D. Carroll says:

    Actually, the ACA does have risk adjustment mechanisms built into them, at least for a while. Both the Risk Corridor and Risk Adjuster portions of the “3 R’s” (the other is the transitional Reinsurance program) apply prior to the MLR requirement. It is now going to be very difficult for a carrier of any size in a particular state to actually reach “excess profit” as defined by the MLR, and have to pay a rebate. That having been said, the carriers can attain higher $ profits by increasing rates (to the extent they can get them past the regulators), since an 80% loss ratio on a higher figure means the 20% available for expenses and profit pushes the dollars up as well.

    • Yes, it does have risk mitigation but not good enough, apparently. (I use the term “risk mitigation” so as not to confuse with “risk adjustment” as defined by ACA). Medicare Advantage appears to do a better job of risk mitigation.

  4. Bob Hertz says:

    I grant you, John, that the racism comment was my idea. It is my belief that some Americans will oppose
    anything with Obama’s name, out of resentment that he won two elections.

    This is tricky, because a lot of Obama’s programs are very flawed, and anyone can legitimately oppose them even if they were called BidenCare.

    But there do seem to be people who like the exchanges and yet still tell pollsters that they dislike ‘ObamaCare.’ Why do they say this? I vote for racial resentment. I sure could be wrong.

    Actually the largest number of persons harmed by the ACA are probably in the small group markets, and they are not necessarily very prominent in these polls.

  5. Bob Hertz says:

    To Dr Potter:

    I appreciate your comments, but let me challenge a couple of categories:

    a. the poor are not harmed by obmancare. 10 million plus poorer persons now have Medicaid, which is wildly imperfect but still better than pure charity care (I have a child on Medicaid, I see great improvement for him)

    b. Patients have been shoved around by insurance companies for 20+ years. Obamacare did not improve this much but sure did not create the problem.
    The same is true for physicians.


  6. Drennan Lindsay says:

    With a poll about people’s favorability feelings about ObamaCare, I would be interested to know to what extent those polled have actually used ObamaCare. Someone who had one appointment with their regular doctor will hardly feel the same way as someone who needs serious tests and several visits or someone who needs an operation. What about someone who gets sick on a trip and discovers that they are not covered outside their home location? Or the Medicaid patient who cannot find a physician who will accept Medicaid patients?

    • Thank you. That’s the thing. Polling a random sample of the general public doesn’t tell us much. Polling people who actually need care tells us that Obamacare has not achieved much of an increase in actual access.

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