The Supreme Court May Have Saved Lives
Here’s the most underreported story of the summer. When the Supreme Court ruled on the Affordable Care Act (ObamaCare) it inadvertently liberated millions of people who were going to be forced into Medicaid. Now they will have the opportunity to have private health insurance instead. What difference does that make? It could be the difference between life and death.
A Congressional Budget Office (CBO) report this week says there are 3 million such people. The actual number could be several times that size. But first things first.
Help me if you can
I’m feeling down.
Imagine that you are the head of a family of three, struggling to get by on an income, say, of $25,000 a year. You’ve signed up for your employer’s health plan because you want your family to get good health care when they need it. But that takes a big bite out of your paycheck — $250 a month.
When you first heard about the president’s health plan, you heard him say that if you like the plan you’re in you can keep it. That was good news. You also believed the whole point of the reform was to help families like yours get health insurance if for some reason you had to seek insurance on your own.
Now get ready for some surprises. The first will be an announcement that in another year or so your employer’s health plan will no longer be available to you. The reason: plain economics. People at your income level will qualify for as good or better health insurance in a new health insurance exchange. And almost all the premium will be paid for by the federal government. Most people like you would rather have higher wages than a health plan that duplicates what you can get almost for free, your employer will reason. So in order to compete for labor, your company will have to give prospective employees the compensation package they most want. And your employer will be right.
Then there will be a second surprise. Under the new rules, if you are eligible for Medicaid, you can’t get private insurance in the exchange. Further the health reform law is designed to force the states to raise the income level for Medicaid. If your state complies, someone with your income will be eligible for Medicaid and you won’t be allowed in the exchange!
Now if you were a resident alien, the rules are different. Since they don’t generally qualify for Medicaid, immigrant families at your income level can get subsidized private insurance in the exchange. But alas, you’re a citizen. So this option isn’t open to you.
Now let’s say you are under the impression that Medicaid is second rate insurance and you remember that your employer promised to pay more in wages once your health benefit is gone. What about using the higher wages from your employer to buy private insurance outside the exchange?
Now get ready for the third surprise. There isn’t going to be any market for private insurance outside the exchange — at least not for you. The insurance companies are going away. The brokers are going away. The market is going away.
Now for the final surprise. The only option open to you under the Affordable Care Act is Medicaid! Why should you care? Because your initial impression is correct. Medicaid is second rate insurance.
In most places Medicaid patients have a terrible time finding doctors who will see them and facilities that will admit them. That’s why so many of them turn to community health centers and the emergency rooms of safety net hospitals for basic medical care. Medicaid enrollees turn to emergency rooms for their care twice as often as the privately insured and even the uninsured. In fact, if you’re trying to get a primary care appointment, it appears your chances are better if you say you are uninsured.
In the future, things are likely to get worse. Here’s the latest from Kaiser Health News:
Sixteen states impose a monthly limit on the number of drugs Medicaid recipients can receive and seven states have either enacted such caps or tightened them in the past two years, according to the Kaiser Family Foundation… Mississippi has a limit of two brand-name drugs. In Arkansas adults are limited to up six drugs a month.
Study after study has found that patients on Medicaid have worse outcomes than patients with private insurance. With respect to cancer care, outcomes are much better if you have private insurance, but there does not seem to be much difference between Medicaid and being uninsured. Health blogger Avik Roy summarizes other studies that find that Medicaid patients do no better and sometimes worse than the uninsured. Additional evidence is supplied by Scott Gottlieb.
But now a rescuer has appeared on the scene. The US Supreme Court has ruled that the federal government can’t force the states to expand their Medicaid programs. If your state doesn’t, then you can enter the exchange and get private health insurance after all. Right? Maybe.
Here is where is gets a little bit tricky, owing to the bizarre structure of ObamaCare. The new health law is trying to get the states to expand Medicaid eligibility to 138% of the federal poverty level ($15,415 for an individual or $26,344 for a family of three). But let’s suppose that, thanks to the Supreme Court, a state doesn’t do anything. It turns out that only people who are between 100% and 138% of poverty can then go into the exchange and get private insurance.
So if your employer does raise your pay and pushes you over that threshold, you qualify. However, while your salary is still only $25,000 you may not be eligible for Medicaid. Here’s the double whammy: You will not be allowed into the exchange either. You will be in a sort of “no-man’s-land” donut hole. And the only way out will be for you to somehow earn more income. Or, lie about it. This may be one of the very few instances where people will find it their self-interest to tell the IRS their income is higher than it really is!
According to the CBO about two-thirds of the states will not expand eligibility above 100% of the federal poverty level. That’s why 3 million citizens will be liberated and will get private insurance instead. Moreover, the subsidies in the exchange are incredibly generous. The most the family has to pay is 2% of their income.
Further, the private plans in the exchange will pay providers about 50% higher fees than the rock bottom payments they would have gotten from Medicaid. This will be a huge relief for safety net facilities that are scraping by on inadequate resources as it is. And it’s a reason why the CBO may have underestimated how many states will find this option very attractive.
ObamaCare is still a Rube Goldberg contraption that desperately needs repealing and replacing. But in the interim, the Supreme Court has done a lot of families a big favor.
Wow, that’s really convoluted! One would have thought that a 2,700 page bill would have prepared for every possible contingency
Like the Beatles.
How about the overestimate that 3 million people will get private coverage? Do you really think someone making between $20,000 and $25,000 can afford to spend 1/5 of their income on private coverage, roughly the average premium costs (without deductibles)?
That leaves about $400 to $500 per person per month for basic necessities. If that’s all you have to live on, the extra $100 by not buying insurance will mean quite a lot. Even so, there’s still another 3 million people that the CBO estimates WON’T buy insurance and will be without coverage.
I agree private insurance is usually better, though I think the CBO overestimates how many people in that income level will buy private insurance. But even if we accept the CBO data, states refusing to expand medicaid may allow 3 million people to get private insurance but they’re also leaving 3 million more without any insurance at all. That’s a net gain in your mind?
I agree, that is convoluted.
Very interesting post. This is a perspective that is being ignored by the MSM.
I found the exemptions and fines associated with not having health care under the ACA interesting. It seems that in many cases it would be cheaper simply to pay the fines.
http://www.kff.org/healthreform/upload/8061.pdf
Great piece, will link to it from my blog tomorrow.
Very nicely done.
A succinct explanation of a convoluted issue. My general concern is for those in the “no-man’s-land” donut hole. How ironic that the current administration wants to help those least fortunate when their laws often do more harm than good.
Are you sure that legally admitted aliens (aliens with green cards) are not eligible for Medicaid? Aliens with Special Status (as we discovered in MA) are not eligible (that includes older, legally admitted aliens who have a waiting period before being eligible) under the Clinton Welfare reform, although I believe the ACA makes them eligible.
I am also less convinced that the market is going away outside the exchanges, for several reasons:
1. our experience in MA is that the brokers have not been replaced. Only a relative handful of non-subsidized members buy in the exchange.
2. It is just possible that groups may form that can select better risks (employers are an obvious example).
3. One scenario that is possible is that large employers keep their active lives on their own self-insured plans and place their retirees on the exchange. if this happens the relative rate level in the exchange may rise (the 3:1 rate compression exacerbates this). Following this scenario, the rates for relatively young lives in the exchanges will become even less attractive, generating more of an assessment spiral. Employers with self-insured plans will (I believe) be insulated from this.
Third comment (regarding Medicaid): Can someone on this blog confirm (or not) my impression that the 100%/95% federal payment for Medicaid members applies only to NEWLY ELIGIBLE members? There are something like 12 million citizens in the US who are today eligible for Medicaid but choose not to enroll; (according to the Kaiser Family Foundation). These lives would not be eligible for the 100/95% subsidy but only the regular 50% subsidy, implying a significant budget strain for the State budget.
I would appreciate any comments from anyone on this blog.
Yes, the ObamaCare Medicaid subsidy applies to the newly eligible. People who were eligible but for some reason had not signed up are not, theoretically, eligible for the federal subsidy.
How one determines this is, of course, a mystery.
There are different types of brokers. Those who work mainly in ERISA world will likey be unaffected. But the law is laying waste to brokers who dealt with individuals. The navigator payments/slush funds offered through the exchanges are designed to do away with brokers who specialize in individual policies.
I wouldn’t expect to see much change in Massachusetts because it didn’t have much of an individual market after the 1990s “reforms.” Most of the companies that specialize in individual policies pulled out. Other states have much more active individual markets. In mine, I know brokers who already have or are moving away from health.
@Linda Gorman,
You are right about the decimation of the broker, however, the alpha houses such as Mercer, Towers, and Aon/Hewitt are hiring consultants like crazy. Consulting fees do not affect the MLR like commissions do.
I agree with David. Is this really a choice between private insurance and Medicaid or private insurance and being unable to afford insurance at all? If it’s the former, you may have a point (private insurance is most likely better than Medicaid), but if it’s the latter, then expanding the Medicaid eligibility is likely beneficial for this population.
@Ian,
Resident aliens are not eligible for the first 5 years, and after that their sponsor is eligible, this is never enforced though.
I agree with you about a market existing outside the exchanges. The creative brokers and consultants will thrive there.
I don’t understand: If ObamaCare will do away with private health insurance companies, why didn’t the feds just enact Single Payer? Enroll everyone in Medicare and collect the respective taxes, which would ensure that everyone could use the doctors, hospitals and clinics of their choice and all providers would get paid! Single payer would make medicaid and all other state plans unnecessary, saving God knows how many billions of our tax dollars. I thought ObamaCare was some ridiculous cluster concocted to pander to the 1% and keep private insurance companies in business. How sad that our government felt it necessary to spend all this money on a plan with no hope of truly serving the citizens of this country when they simply could have expanded a system that’s already in place. I just don’t get it.
@Jennie Do you really think that Medicare is run well? They have a minumum of $20 billion/yr in losses to waste and fraud. It really frosts me when they go before Congress and crow about only having $20 billion dollars in losses this year, because they usually have $23 billion. UGGHHH!