Republican healthcare policies

Republicans seem to be in agreement that we need to replace, not modify and improve, the Affordable Care Act. Although they haven’t yet agreed on what the replacement plan is, some of the policies that appear in the proposals that have been made public are the same ones that Republicans have been proposing for years even though they have proven to be unsuccessful. Here are the most problematic:

 

High-risk pools

Insurance works best when risk is spread across a large population that has an optimal mix of high utilizers (for example, older folks with a high burden of disease) and low utilizers (the young and healthy). This is why the ACA included a mandate with a penalty to induce low-risk people to join the marketplaces.

To date, 35 states have tried to address this problem by creating high-risk pools. Because people in these pools were, by design, individuals with high health care costs and because there were, again by design, no low-risk people in the pool, the cost of providing care to this group was extraordinarily high. In an effort to keep costs down, high-risk pools instituted waiting periods, annual and lifetime limits, coverage gaps, and other onerous cost containment measures. Despite this, they had very high premiums and deductibles. In 2015, Jean Hall of the Commonwealth Fund reported that “enrollees in state-based high-risk pools faced annual deductibles as high as $25,000 and annual coverage limits as low as $75,000. This doesn’t even deserve to be called “insurance.”

The high-risk pool established in the transition period of the ACA was so expensive that, despite $5 billion in funding, it ran out of money and had to be suspended early. HHS Cabinet nominee, Dr. Tom Price’s plan, “The Empowering Patients First Act,” provides “$1 billion annually for new and on-going qualified pools to be divided among the states.” There is no reason, based on the history of these pools, to think that this is anywhere close to the amount that will be needed. And, more concerning, given how early we are in the process, there is no guarantee that the $1 billion won’t be whittled down to a half billion or even disappear altogether during the give and take of the legislative process. Why go back to this failed policy of the past instead of examining ways to get more low-risk people in the pool? It doesn’t pass the sniff test.

Selling insurance across state lines

Proponents of this policy, such as conservative health policy expert, Sally Pipes of the Pacific Research Institute, state that “increasing competition among insurers will help reduce the cost of insurance.” But she acknowledged in my recent interview with her that there hasn’t been much interest on the part of insurers in selling across state lines in the handful of states where it is legal to do so. I suspect that folks proposing this as a cost-saving mechanism do not really understand the major cost drivers in healthcare. In most states, it is not the state-mandated benefits that are driving up costs. Rather, it is an escalation of the costs of actually delivering the care (both unit costs, such as hospital stays and utilization). Insurers manage these costs, in part, by negotiating with contracted networks of providers (doctors, hospitals, ancillary caregivers, and so forth).

An insurer in a low-cost state (or region) may be able to contract with providers at a cost that is far less than a locale where doctors and hospitals have high charges due to high costs of doing business or lack of competition in a given market. In one plan that I worked with, a dominant hospital essential to providing care in a local community refused to negotiate reasonable rates or even participate in activities, such as case management, in order to keep costs down.

So, although a Blue Cross or Aetna plan may be inexpensive in a low-cost state based on the cost of delivering care when that same company’s tries to sell in a high-cost state, they will have to charge a higher premium and include more cost share because of higher negotiated contract rates.

It is important to remember that people get their care from local providers, not from health plans. Someone in California who buys a plan from a Louisiana insurer that sells low-cost plans in that state is not going to get care from a Louisiana doctor or hospital. They are also not going to be offered Louisiana premiums.

Selling across state lines is a policy that has been tried, but does not work as its advocates hoped because insurance simply does not work the way those advocates think (or hope) that it does.

 

Health Spending Accounts (HSAs)

Supporters of this as a mechanism to keep healthcare costs down believe that everyone should be able to save up enough money to cover the very high deductibles associated with lower cost high-deductible plans. Let people have some skin in the game, they say. But we know from the Rand insurance study in the 1970s that there is a balance between using cost-sharing to decrease unnecessary care and inadvertently causing people to defer care that is critical to their health.

Further, even with a $1,000 refundable tax credit to encourage people to open an HSA, it will take many people years to accumulate enough money in their accounts to cover the expensive care they might need. If you are well off, this is not a problem—you can use your tax-advantaged health savings account and then dip into your regular savings or sell some stock to cover the cost of the high deductible. But if you are low to moderate income and this is the type of insurance you have and you get sick or have an accident, you are one hospitalization (average cost = $10,000) away from a financial catastrophe.

 

What about “modify and improve”?

As with everything in our complex healthcare “system,” the devil is in the details. Before we repeal the ACA, we need to take the time to understand whether the policies being proposed to replace it really make sense or whether they just sound good. More importantly, largely missing from the current discussion is a thoughtful examination of whether “repealing and replacing” is really a better option than “modifying and improving” the ACA.

Patricia Salber MD, MBA (@docweighsin)
Patricia Salber, MD, MBA is the Founder and Editor-in-Chief of The Doctor Weighs In. She is also a physician executive who has worked in all aspects of healthcare including practicing emergency physician, health plan executive, consultant to employers, CMS, and other organizations. She is a Board Certified Internist and Emergency Physician who loves to write about just about anything that has to do with healthcare.

2 COMMENTS

  1. Modifying and improving was the original idea, but was rejected by Republicans. You make good points, but the real reason the ACA was not given the attention it needed to make it a good and viable law had to do with politics, not healthcare. ACA was actually a good Republican law. Healthcare costs were driven by competition in the marketplace, as opposed to being a true entitlement. Republicans had to object to it, however, because it was not put in place by them. It also relied on taxing the wealthy. Finally, if it became successful and popular, people would look to the Democrats as having solutions, as opposed to Republicans. Essentially, the real objection to the ACA has always been one of political power, not about the needs of the people. Perhaps your real question at the end should be, “How do the Republicans save face while actually modifying and improving the ACA instead of trying to impose truly failed policies?”

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