Congressional Republicans find themselves in a health care pickle. While the media storm over the Republican efforts to repeal and replace the Affordable Care Act (ACA) would have you believe that there is widespread support for ACA, attitudes are much more mixed. In my March 2017 Commentary, Insurance Is the Problem, Not the Solution, I noted:
The angst among American voters about repealing and replacing the ACA is not so much that anyone is enamored by the ACA as the fact that the Republicans are proposing that Americans move from one insurance system they don’t understand to another insurance system they don’t understand.
In either case, no individual household or family can absorb health care costs as they do for other types of household spending. The political blowback is based on genuine anxiety over burdens being shifted in a health care system that no one can afford.
However, a meaningful number of Americans have chosen to pay the required penalty rather than sign up for insurance. In a recent letter to Congress, John Koskinen, Commissioner of the Internal Revenue Service (IRS), noted that 6.5 million taxpayers paid the individual mandate penalty and another 12.7 million claimed one of the broad exemptions to the rule. (Another 4.3 million returns did not check the box on whether they had health care coverage or not.)3
About as many people sought relief from the individual mandate as took advantage of coverage available under the ACA. One reason may be that you can buy quite a lot of primary care services for the cost of an insurance policy.
The average annual individual health insurance premium purchased during last year’s open enrollment was $4,000 a year for an individual and almost $10,000 for a family of four. The average deductible for these plans is about $4,400 for an individual plan and $8,000 for a family plan. In other words, health care can cost a household as much as $ 8,000 to $18,000 a year.4
Under the current system, Americans either individually or through their business or employer are paying huge amounts to access the American health care system. The Congressional Republicans are struggling because their only option within the current ACA structure is to shift costs or reduce insurance coverage among various groups with little or no impact on the cost of the system itself.
Shifting these high costs rearranges the demand side of the health care equation but does nothing to deregulate and expand the supply and reduce the costs of available health care services. Referring back to my March commentary:
In order to take the pressure off the funding system, health care needs to be completely revolutionized in ways that substantially increase geographic and service access. Examples from other countries point to important benefits from increasing the mix and density of community primary care centers, public primary care centers and hospitals, and substantial reduction in the costs of training health care professionals. Revisions in the licensure designed to increase the number of types of health care professionals and reduce the cost of training them would also have benefits.
We need much deeper restructuring of the delivery system that matches cost and value and increases the capacity of individual decision making along the way.
In point of fact, the supply of health care services is either stagnant or deteriorating. There were fewer hospitals and hospital beds, and only slightly more doctors per capita in 2015 than in 2000.
In 2000, for every 10,000 Americans, the density of these services was 0.175 hospitals (one hospital for every 57,000 Americans), 29 hospital beds, and 23 doctors. As of 2015, for every 10,000 Americans, there were 0.15 hospitals (one hospital for every 64,000 Americans), 24 hospital beds, and 27 doctors (Chart 1).
Perhaps the health care system is restructuring to lower cost approaches to care. However, a cursory look at one indicator, the growth of surgical facilities outside of hospitals (known as ambulatory surgical centers, or ASCs) and urgent care centers, shows no trend toward greater availability. Indeed, there is some indication that these types of health care services are shrinking relative to 2012.
It may take time for supply-side effects of higher demand to kick in. However, a new U.S. Government Accountability Office (GAO) study examining general medical education and its ability to meet future needs concludes that the “locations and types of graduate training were largely unchanged (from 2010 to 2015) and federal efforts (to redress these gaps) may not be sufficient to meet needs.” 5 This study further cites the concentration of health care residents in the Northeast relative to other parts of the country and the striking degree to which rural areas are underserved.
The price rigidity and the increased concentration of medical services, including the extent to which rural areas are underserved as a result of these changes, is made worse by the mergers and acquisitions in the health care sector. Insurers and providers are bulking up to gain economies of scale ostensibly to lower costs. However, given the limitations on health care profitability imposed under the ACA’s medical loss ratio, the only way to expand profit is by increasing the number of insured.
The U.S. health care market is slowly monopolizing. This trend is not good for prices, access to services, or consumer choice. Consumers cannot exercise their ability to select services based on price because a) they never know what the price of a service is, and b) insurers are the preferred negotiator, and insurers’ prices are not available to individual patients.
As a general observation, we need to reverse almost every trend under way in the evolving health care supply system today. The following are some principles that could help provide a foundation to rethinking the U.S. health care system:
These are only a few ideas that emphasize the roles of primary care, competition, and true ability to exercise individual choice. Still, they point in the right direction. The cost of the system must come down.
Moreover, the growing wave of technology based on customized, often genomic-based, medicine will provide high value and often life-saving outcomes to patients but at a high cost. America will need to economize and innovate to reshape the existing health care system in order to make room for these services. Otherwise, these services will either overwhelm the system or, as is the case already in some countries, simply become unavailable.
1 Garrett, Bowen, and Anju Gangopadhyaya. “Who Gained Health Insurance Coverage Under the ACA, and Where Do They Live?” www.urban.org. Urban Institute, December 2016.
2 Greenberg, Jon. “Medicaid Expansion Drove Health Insurance Coverage Under Health Law, Rand Paul Says.” www.politifact.com. Politifact, January 15, 2017. Web.
3 Note that the 6.5 million paying penalties in 2016 is down from 8 million in 2015. See IRS Commissioner John Koskinen’s letter to members of Congress, January 9, 2017.
4 “How Much Does Health Insurance Cost Without A Subsidy?” EHealth. EHealth Insurance Resource Center, October 10, 2016. Web.
5 “PHYSICIAN WORKFORCE: Locations and Types of Graduate Training Were Largely Unchanged, and Federal Efforts May Not Be Sufficient to Meet Needs.” GAO-17-411. Www.gao.gov. U.S. Government Accountability Office, May 25, 2017. Web.
Login in below to access content exclusive to clients of The GailFosler Group.
Not a client yet? For more information on the benefits of becoming a client, please contact us.