Tag Archives: obamacare

You hate your health insurance company for the same reason you hate your cable company

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It’s not all their fault.

According to a recent Harris Poll, health and life insurance companies are among the least-trusted companies in the US. Just 7% of the surveyed 2,250 adults told Harris they trusted their health insurance company, while 10% said the same of life insurance companies…

…The health and life insurance sectors narrowly beat out telemarketing and social media companies, with a 6% approval rating; oil companies with 4%; and tobacco companies with an abysmal 3%.

Insurance Business America, June 16, 2015

Ouch.

I spent four years working at Anthem Blue Cross and Blue Shield, most of which was spent answering calls from members. As the face of the company, I felt that mistrust directed right at me. I was often the bearer of bad news, and people tend to shoot the messenger. And, in a way, that’s also what health insurance companies are: the messengers of bad news about our healthcare system.

(Side note: Please be kind to the people answering the phone. They are at the bottom of the totem pole, and they’re not the ones making the decisions. They have highly stressful jobs, and they’re really trying to help you as much as they possibly can.)

Is that mistrust of the health insurance industry justified? Yes and no.

Running a health insurance company is an endless series of tradeoffs and competing priorities. There’s no way to please all of the people all of the time, and that holds especially true in this industry.

So, here are a few things to consider that you might not have thought about.

1) Health insurance plans and premiums are tightly regulated. Each state has a department of insurance that must approve all health plan premiums based on their actuarial value and claims experience. Setting these amounts is really just a question of math, and that’s why actuaries are so valuable. Not only that, but insurers are required by law to keep a large amount of cash reserves on hand to pay claims. Different insurance companies offer different sets of plans, but the fundamental rules remain the same. And, with the Patient Protection and Affordable Care Act, insurers must pay out at least 80 percent of their premiums out in claims or send their customers a refund for the difference. So, that leaves the other 20 percent for shareholder profits, buildings, technology, marketing, employees, and everything else. Note that these ratios are based on the premiums and claims for an entire group and not just you as an individual.

2) You’re probably not the primary customer. If you have an employer-sponsored health plan, your employer chooses your plan. They have many health plans competing for their business, and one of the primary concerns (if not the primary concern) is price. Health insurers offer a variety of plans that are more and less comprehensive, but employers will understandably gravitate toward plans that cost less. The plans that cost less are going to be less generous with benefits because of what I mentioned before about actuarial value. So, if you are dissatisfied with your benefits, it’s not because the health plan didn’t offer a more generous plan; it’s that your employer didn’t want to pay for it. Even if you buy your own health insurance, you undoubtedly face these same cost pressures and need to strike the right balance between paying premiums and paying potential medical bills that the insurance doesn’t.

3) Your health insurance company is kind of like a TV provider. You have probably seen TV networks or local stations getting dropped from cable (or satellite or streaming) subscriptions or warning you that they are about to be dropped. Ultimately, the TV network is having a contract dispute with the cable provider. In order to keep carrying the channels you want to watch, your cable provider has to pay up to the networks. When contracts are up for renewal, there are often disputes about how much the provider has to pay. And it’s exactly the same thing with health insurance companies getting into contract disputes with physicians and hospitals over reimbursement rates. If the health insurance company has to pay higher reimbursement rates to physicians and hospitals in order to keep them in the network, they have to pass that increased cost along to its customers in terms of premiums. I had to answer a lot of questions about these network disputes with people worrying that their doctor or hospital was about to go out of network, and the only thing I could explain was that they’re having a dispute about money. As long as there are multiple sources of revenue, physicians and hospitals can play them off each other as they seek higher reimbursement rates.

At the top of this post, I said the mistrust wasn’t all their fault. With perhaps a few exceptions, they are following the law, and they have lawyers and compliance officers to make sure of it.

Yet some of the mistrust by consumers is well-deserved, and that mistrust should be directed at their political activities. Private health insurance companies simply can’t fix the medical arms race and skyrocketing reimbursements on their own, and that’s because there are multiple insurers. Health insurance companies spend large amounts of money on lobbying and advertising to resist regulations unfavorable to them or being legislated out of existence altogether.

There is one solution that really can help, and that’s a single-payer system. If the government were the sole source of revenue for healthcare providers, then that would be a monopsony. And monopsony power can drive down costs. They would have to accept what the government reimbursed or stop practicing altogether. (Yes, shortages are a real danger of monopsonies that we would have to consider.)

It’s already rare to hear about providers no longer accepting Medicare, even though the reimbursement is lower than from private insurance, because so many patients are on Medicare. If every patient of every age were on Medicare, then that would decrease physicians’ and hospitals’ leverage even more.

Only a single-payer system can truly address the exorbitant prices for medical services in the USA. Insurers have been unable to contain these costs for the reasons I described earlier, and the result is that even insured patients are paying higher and higher medical bills while their employers pay higher and higher premiums.

Although private insurers aren’t the primary cause of the cost problem, they need to get out of the way of a solution that could really contain costs.

Democrats hammer Republicans on lawsuit seeking to void Obamacare (without mentioning it by name)

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Senators Joe Manchin (D-WV) and Joe Donnelly (D-IN) are in close re-election dogfights in red states, and Republicans recently filed a lawsuit that just might help them keep their jobs.

Manchin’s and Donnelly’s opponents (Patrick Morrisey and Mike Braun, respectively) have voiced their support for a lawsuit filed by 20 Republican state attorneys general seeking to void the entire Patient Protection and Affordable Care Act. The patient protections in the name include prohibiting health insurance companies from discriminating against patients with pre-existing health conditions.

Donnelly and Manchin are calling them out on it without explicitly mentioning PPACA: a law whose actual provisions are popular with voters even though its name and especially its nickname (Obamacare) are not.

 

 

Link

The GOP’s “solution” to the high cost of health insurance is to make health insurance worthless.

Short-term plans can turn away people with preexisting conditions, including asthma and acne. They can charge older or sicker people prohibitively expensive premiums.

Or they can enroll such people at what looks like a bargain-basement price and then refuse to pay for any care related to preexisting illnesses — including illnesses that enrollees didn’t even know they had when they enrolled, such as cancer or heart disease. Some plans have dropped consumers as soon as they got an expensive diagnosis, sticking them with hundreds of thousands of dollars in unexpected medical bills.

Unlike Obamacare plans, short-term plans also are not required to cover any particular benefits, even for the relatively healthy.

A Kaiser Family Foundation review of short-term plans offered around the country found that most did not cover prescription drugs, and none covered maternity care. Preventive and mental-health care are also frequently excluded.

Catherine Rampell, The Washington Post, 8/3/2018

Worse yet, they can throw the markets for real health insurance into chaos.

This parallel system of insurance will siphon off healthier, younger, less expensive people from the exchanges. That will leave behind a pool of sicker, older, more expensive people, which will drive up premiums on the exchanges.

Between this and repealing the individual mandate, Republicans are actively sabotaging Obamacare to make it seem like a failure.

Did Aetna use its participation in the exchanges as leverage to get its merger approved?

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Last year, Aetna ran into some headwinds at the Department of Justice in getting its proposed merger with Humana approved. 

So they resorted to a particularly unsavory trick: pulling out of the ACA exchanges, even in places where it was profitable for them to stay in. 

Despite their insistence to the contrary, a federal judge found Aetna used its exchange participation as leverage against the Obama administration to get its merger approved.

As you might remember, insurers pulling out of the exchanges was a major source of embarrassment for Obamacare.

What happens to Pence’s HIP 2.0 if Obamacare is repealed?

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I’ve written previously about the Healthy Indiana Plan started by former Indiana governor Mitch Daniels and updated to version 2.0 under Governor and Vice President-Elect Mike Pence as Indiana’s unique take on the Patient Protection and Affordable Care Act‘s Medicaid expansion.

In short, I’ve never been the biggest fan of Pence (to put it mildly), but I gave him credit where was due for finding a way to expand access to health care in Indiana even when it meant negotiating with his political rivals in the Obama administration.

But the Obama administration is about to come to an end, and the incoming Trump administration has made repealing and replacing PPACA (more commonly known as Obamacare) one of its top priorities in its first 100 days, which might cause as many as 21 million Americans to lose their health coverage.

Senate Democrats will have enough votes to filibuster any bill to repeal Obamacare, but just as Democrats got the fix-it bill through the Senate in 2010 via the budget reconciliation process to avoid a GOP filibuster, Republicans will probably not shy away from using the same tactic.

So, assuming Republicans go this route, what will happen to one of Pence’s signature achievements as governor of Indiana? After all, HIP 2.0 relies on the federal funds for the Medicaid expansion in the Affordable Care Act.

That’s going to be an awkward conversation.

Results on the Obamacare experiment are mixed

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We’ve seen a spate of bad news about the Patient Protection and Affordable Care Act (otherwise known as Obamacare) recently.

Insurers are leaving the exchanges. For those insurers who remain on the exchanges, premiums are on the rise. In Arizona, monthly premiums for a 40-year-old non-smoker on a “silver” plan will increase from $207 to $507 (that’s a 145% increase) in 2017.

Ouch.

Not surprisingly, Republicans have seized on this.

So is the sky falling? Is Obamacare “hurting the families it was supposed to help” as John McCain charged?

Talking about unsubsidized premiums on the exchanges is misleading

Let’s take the extreme case in Arizona of a 145% increase. What opponents of Obamacare don’t account for are the tax credits that most people on the exchange receive to help them cover the cost of care. After all, that’s why people buy individual health insurance on the exchanges in the first place…because it’s the only way to qualify for these tax credits based on income.

So, after tax credits, that same customer (assuming he earns $30,000 per year) will pay $207 in 2017: exactly the same as in 2016.

Table 1: Monthly Silver Premiums

for a 40 Year Old Non-Smoker Making $30,000 / Year

2nd Lowest Cost Silver Before Tax Credit

2nd Lowest Cost Silver After Tax Credit
State
Major City
2016
2017
% Change
from 2016
2016
2017
% Change
from 2016
Arizona Phoenix $207 $507 145% $207 $207 0%
NOTES: In areas in which the two lowest-cost silver plans have the same premium, the next lowest-cost silver plan is used as the “second-lowest” silver plan. In some cases, a portion of the second lowest-cost silver plan is for non-essential health benefits so these values may differ from the benchmark used to determine subsidies.

SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. For more information see “Early Look at 2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces” Jul 2016.

So, sure, if you don’t qualify for tax credits, you would not want to buy this plan on the exchange. But, if you don’t qualify for tax credits,  there’s not much point in going on the exchanges to begin with.

How did this happen?

First of all, if you want to understand why the Patient Protection and Affordable Care Act was destined to raise unsubsidized health insurance premiums for healthy people, you can read my explanation here. In short, Obamacare asks healthy people to subsidize sick people so that they can access health care.

But the exchanges have been up and running since 2014. Why the big jump between 2016 and 2017?

Table 2: Total Number of Insurers by State, 2014 – 2017

Total Number of Issuers in the Marketplace
State
2014
2015
2016
2017
Arizona 8 11 8 2
SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. For more information see “Early Look at 2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces” Jul 2016.

NOTES: Insurers are grouped by parent company or group affiliation, which we obtained from HHS Medical Loss Ratio public use files and supplemented with additional research.

So, six of the eight insurers on the exchange for Arizona dropped out for 2017. In most industries, less competition means higher prices. So, on the surface, that would seem to explain it.

But health insurance is not most industries. The more insurers (payers) there are, the more leverage hospitals, physicians, and other health providers have to demand higher and higher reimbursement because, if one of their insurance contracts is terminated, they can fall back on their other contracts. Also, health insurance premiums are heavily regulated and must be approved by state departments of insurance in advance. In addition to the historic regulations in each state, Obamacare added a new rule that insurers must maintain medical loss ratios of at least 80 percent…meaning they must spend 80 percent of their premium income or more on paying claims.

The insurers who dropped out cited concerns about the health risks of the populations insured on the exchanges. In short, the beneficiaries were sicker as a group than the insurers had predicted, which is a phenomenon known as adverse selection. Too many young, healthy people are opting to go without insurance and simply pay the penalty, effectively turning the exchanges into a heavily subsidized high-risk pool…something even John McCain advocated when he campaigned for President in 2008.

Is private health insurance a good way to finance health care?

Despite all of the Republican protests, PPACA was designed to be a compromise between Democrats and Republicans to reform the health insurance system without eliminating private insurance. It was modeled after the health reform law that Mitt Romney signed when he was governor of Massachusetts (commonly known as RomneyCare). It’s debatable how well RomneyCare worked in Massachusetts and how good a model it was for federal policy.

I believe the only way to truly correct what is broken in U.S. health care is by burning down (metaphorically) the private health insurance system and moving to a single-payer system financed directly by the Treasury (that is, by taxes). Here’s why:

  • Only single payer can solve the adverse selection problem. Although there is a penalty for not carrying health insurance under the Affordable Care Act, many people — especially young and healthy people — have opted to remain uninsured and pay the penalty because it’s cheaper than buying even subsidized insurance on the exchanges. But, with a single-payer system, every American would be automatically enrolled, and risk would be spread broadly among them. It would not be possible for anyone to be uninsured.
  • Single payer reduces the cost of health care itself. Health insurance premiums are a function of the cost of health care. A system with multiple payers adds layers of administrative complexity for health providers just trying to get reimbursed for the care they provide. Whether it’s managing multiple insurance contracts, hiring collection agencies to chase down payments from patients, or writing off uncompensated care, these costs get passed on in the form of demands for ever higher reimbursement from private insurers with the threat that they will go out of network if their demands are not met. In my hometown of Indianapolis, our largest insurer (and my former employer) Anthem Blue Cross and Blue Shield initially offered health plans on the exchange with “narrow networks,” to reduce costs but later backed off when subscribers were unhappy. With a single-payer system, no provider would dare go out of network because there would be no other source of income to fall back on. That’s the power of a monopsony to reduce costs. It would also eliminate the uncompensated care problem because everyone would be covered.
  • Single payer covers everyone, without exception. The goal of universal health coverage in the United States has been frustratingly elusive. The Affordable Care Act has reduced the uninsured rate from 16 percent to 8.6 percent, which is a tremendous achievement. But 8.6 percent still adds up to 27.3 million people, and that’s 27.3 million too many. Plus, many of the insurance plans offered today, including on the exchanges, have high deductibles and out-of-pocket limits, putting beneficiaries at great financial risk even though they are technically “insured.”

What else can be done?

With that said, a single-payer system doesn’t seem politically feasible, and repealing the Affordable Care Act like the GOP wants to do would put us right back where we started before 2010…including all of the serious problems that went with it. So, what can realistically be done to address the very real problems on the Obamacare exchanges?

  • Substantially increase the penalty for going without insurance. It wouldn’t be popular, but changing the financial calculus could bring more healthy people into the risk pool, which would in turn reduce insurance premiums by spreading risk more broadly. If the penalty were higher than the cost of insurance (or at least not dramatically lower), there would be little to no incentive for remaining uninsured. The higher the penalty, the lower the premiums.
  • Crack down on special enrollments. The exchanges offer special enrollment periods — intended to enable people who have had life changes like a job loss or a change in marital status — to enroll outside of the annual open enrollment period. Insurers have suggested that people have been abusing these special enrollment periods…waiting until they get sick to buy health insurance off cycle instead of enrolling during the open enrollment period.
  • Sweeten the deal for young people. To get more young people (who tend to be healthy) into the pool, they need to be enticed. Perhaps an extra tax credit for people under 30 could change the equation, at least for some. Alternatively, changing the 3:1 age banding requirement (meaning that the oldest person in the pool can only be charged three times as much as the youngest person in the pool) to something more like 5:1 could encourage more young people to enroll since their premiums would be lower.
  • Reduce the cost of care. Despite the spike in premiums on the exchanges in some states, the Affordable Care Act is working to slow the growth of total health care spending…actually exceeding expectations. If we can mitigate the adverse selection problem by getting more young, healthy adults into the risk pool, premiums will follow suit.obamacare-total-spending

 

 

Health insurance can literally be a life-or-death issue

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Health insurance is not health care (and just because health insurance premiums rise does not necessarily mean health care is more expensive), but health insurance is a crucial mechanism that we use to finance and access health care.

And, in some cases, not having health insurance can be the difference between life and death. Just take a look at the results of two studies  published in the August issue of the journal Cancer comparing survival rates for men with two forms of cancer based on insurance status.

From the first study, regarding glioblastoma multiforme, an aggressive type of brain cancer:

Among the 13,665 adult patients in the study cohort, 558 (4.1%) were uninsured, 1516 (11.1%) had Medicaid coverage, and 11,591 (84.8%) had non-Medicaid insurance. Compared with patients who were uninsured, insured patients were more likely to be older, female, white, married, and with a smaller tumor size at diagnosis. Accelerated failure time analysis demonstrated that older age (hazard ratio [HR], 1.04; P<.001), male sex (HR, 1.08; P<.001), large tumor size at the time of diagnosis (HR, 1.26; P<.001), uninsured status (HR, 1.14; P =.018), and Medicaid insurance (HR, 1.10; P =.006) were independent risk factors for shorter survival among patients with GBM, whereas radiotherapy (HR, 0.40; P<.001) and married status (HR, 0.86; P<.001) indicated a better outcome. The authors discovered an overall yearly progressive improvement in survival in patients with non-Medicaid insurance who were diagnosed from 2007 through 2011 (P =.015), but not in uninsured or Medicaid-insured patients.

Rong, X., Yang, W., Garzon-Muvdi, T., Caplan, J. M., Hui, X., Lim, M. and Huang, J. (2016), Influence of insurance status on survival of adults with glioblastoma multiforme: A population-based study. Cancer. doi:10.1002/cncr.30160

Translation: patients with private insurance lived the longest with this form of brain cancer. In terms of surviving glioblastoma multiforme, Medicaid did not seem to make a difference compared to being uninsured.

And the second study, regarding germ cell testicular cancer:

Uninsured patients had an increased risk of metastatic disease at diagnosis (relative risk [RR], 1.26; 95% confidence interval [CI], 1.15-1.38) in comparison with insured patients, as did Medicaid patients (RR, 1.62; 95% CI, 1.51-1.74). Among men with metastatic disease, uninsured and Medicaid patients were more likely to be diagnosed with intermediate/poor-risk disease (RR for uninsured patients, 1.22; 95% CI, 1.04-1.44; RR for Medicaid patients, 1.39; 95% CI, 1.23-1.57) and were less likely to undergo lymph node dissection (RR for uninsured patients, 0.74; 95% CI, 0.57-0.94; RR for Medicaid patients, 0.76; 95% CI, 0.63-0.92) in comparison with insured patients. Men without insurance were more likely to die of their disease (hazard ratio [HR], 1.88; 95% CI, 1.29-2.75) in comparison with insured men, as were those with Medicaid (HR, 1.58; 95% CI, 1.16-2.15).

Markt, S. C., Lago-Hernandez, C. A., Miller, R. E., Mahal, B. A., Bernard, B., Albiges, L., Frazier, L. A., Beard, C. J., Wright, A. A. and Sweeney, C. J. (2016), Insurance status and disparities in disease presentation, treatment, and outcomes for men with germ cell tumors. Cancer. doi:10.1002/cncr.30159

Translation: men who had private insurance were 88 percent more likely to survive germ cell testicular cancer than those who were uninsured, and the men who had Medicaid were 58 percent more likely to survive than those who were uninsured.

In both studies, patients with private insurance tended to be diagnosed earlier on the disease progression than uninsured and Medicaid patients, and this was shown to be important to a patient’s survival.

Arguments for the left and right

There is fodder here for both sides of the political aisle. On the one hand, liberals can point to the 58 percent increase in survival rates among Medicaid patients compared to those who were uninsured. And they can also point to the researchers’ acknowledgement that many of the Medicaid patients were likely to have been uninsured until just after being diagnosed with cancer. Clearly having Medicaid was better for these patients than having no insurance at all.

And yet, on the other side of the aisle, conservatives can point to the results of the first study that, despite all the tax dollars spent on Medicaid, it did not seem to make a difference in survival rates compared to having no insurance at all. Even with the second study, the right can point to the far superior outcomes of patients with private insurance compared to those with Medicaid, even while acknowledging that Medicaid was better for those patients than being uninsured.

Underlying issues

So, what’s an objective observer concerned about health policy supposed to make of these results? I have a few suggestions.

  • Private insurance probably improves access to care because reimbursement rates for physicians and hospitals are much higher than Medicaid. Many physicians will not accept Medicaid patients due to the very low reimbursement rates. Medicaid can also have issues with the timeliness of reimbursement, depending how much funding is left in a given state’s Medicaid budget. Even the physicians who do accept Medicaid might be less inclined to proceed with aggressive cancer treatments for their Medicaid patients than they would be for their patients with private insurance. The germ cell study found that Medicaid and uninsured patients did have a different treatment path from patients with private insurance, but this might be because they were also diagnosed later.
  • Medicaid isn’t as good as private insurance, but it’s better than nothing. Particularly for the germ cell cancers, Medicaid patients had much better outcomes than uninsured patients even though they did not fare as well as the patients with private insurance. Medicaid certainly has its administrative and funding/reimbursement challenges as a government bureaucracy reliant in part on state government sources, but does anyone seriously believe this is causing the cancer patients in their population to die in such large numbers? I’m all for innovations to make Medicaid as efficient as possible so that it can serve these populations as effectively and cost effectively as possible, but the idea that is it a hindrance to care for people who can’t afford private insurance is simply not borne out by the evidence. One learning point from these studies for Medicaid plans is to do more to encourage their populations to get cancer screenings so that these cancers can be caught earlier, but that doesn’t fully explain the insurance disparities.
  • These comparisons don’t represent realistic policy choices. I don’t know of anyone on either side of the aisle who has proposed putting the Medicaid population on private health insurance plans like the ones employers offer to their employees. Republicans would balk at the high cost to taxpayers, and Democrats would balk at the high levels of cost sharing for poor people who can’t afford it as well as the involvement of private insurance companies in general. Sure, some private health insurers have contracts with state governments to administer managed Medicaid plans, but those plans still don’t reimburse physicians and hospitals the way private plans do. They’re not equivalent. Even the private health insurance plans that are available on the exchanges for people a little higher up the economic ladder than Medicaid patients tend to have lower physician and hospital reimbursement rates than most employer-sponsored or individual plans outside of the exchanges. Considering how many Medicaid patients are covered by managed Medicaid plans operated by private insurance companies, one would think these private insurers would be able to close the gap between their regular insured and their Medicaid patients. Given the very real policy implications being debated in state legislatures today, it would be interesting to learn if there are real disparities between managed Medicaid and traditional Medicaid patients, but so far that research is lacking.
  • Medicaid is not Medicare, and it’s especially not single payer. Some on the left, like Senator and former presidential candidate Bernie Sanders, have been calling for a single-payer system that would essentially be “Medicare for all.” Medicare’s reimbursement rates are lower than private insurance but higher than Medicaid, and Medicare have the same payment timeliness issues that Medicaid does because it’s funded entirely by the federal government without involvement of state governments. Unlike Medicaid, physician participation in Medicare is already nearly universal (although I don’t know of too many pediatricians who take Medicare patients today because most Medicare beneficiaries are over 65). Eliminating private health insurance and moving to a “Medicare for all” system regardless of age would bring those pediatricians and the few outliers from other specialties into the Medicare fold because there would literally be no other source of income for them if they intended to continue practicing medicine at all.
  • Achieving equally bad outcomes would be a pyrrhic victory. I’ve seen bumper stickers from conservatives that read, “Liberals want misery spread equally.” It’s a concern worth addressing. If we address these disparities by merely reducing the survival rates of people who currently have private insurance, things will be equal, but no one will be better off. For germ cell testicular cancer, the research tells us that taxpayer dollars spent on Medicaid are quite literally saving lives for people who would otherwise be uninsured. But it’s very important that we understand the complex reasons why the Medicaid population is experiencing these disparities compared to the population with private insurance and address them. My health economics professor from graduate school would say that we need to build a better model.

The elephant (or donkey) in the room: Part 2 on the fiscal crisis facing Medicare and Medicaid

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In Part 1, I wrote about the extent of the trouble that the United States finds itself in when it comes to financing Medicare and the “dual eligibles” who also receive Medicaid benefits for the future. (Social Security is a problem too, but Medicare and Medicaid are even more pressing.)

Now that we’ve established just how deep the hole is, let’s talk about how we got in the hole in the first place.

How we got here

Medicare and Medicaid were created by the Social Security Act Amendments of 1965. Although you might understandably think of these as just do-gooder progressive programs from President Lyndon Johnson’s “Great Society,” part of the motivation for creating Medicare was a push from the business community for a bailout from their retiree health benefit plans.

For the arithmetically impaired, 1965 was 50 years ago. So, unless you’re old enough to be eligible for AARP membership (I’m not), you weren’t around for what life was like before the first enrollees joined Medicare on July 1, 1966. And, chances are even if you were around back then, you were just a kid or maybe a young adult. As of the time of this writing, there are only seven living Americans who had reached age 65 before the Medicare program took effect. So it’s a little hard for the rest of us to imagine life before Medicare.

Before Medicare, most older Americans did not have health insurance coverage. As a result, poverty rates among the elderly were high, and access to health care was poor. According to the U.S. Centers for Disease Control and Prevention (CDC), in 1960, the average life expectancy at age 65 was 14.3 years. In 2010, it was 19.1 years. Those extra 4.8 years of life can be attributed at least in part to Medicare, and those extra 4.8 years of life are also one reason why Medicare is in so much trouble.

Among the minority of the elderly who were fortunate enough to have health coverage before Medicare, most of them received that insurance as a retiree benefit through their former employers. Even then, rising health care costs and life expectancy due to technological advancements were costing these companies plenty.

Strange bedfellows

If there were any group you would think of as supportive to Medicare, it would be physicians, right? After all, they get nearly 1/3 of their income from government sources today.

Physician income by source, 2004

Take the red pill: Share of physician’s outpatient revenues from various payers, by physician specialty, 2004. Box identifying the line bars: Medicaid (blue), Medicare (red), Other Government (yellow), Private Insurance (light blue), Out-of-Pocket (purple).

Source: Lasser, K. E., Woolhandler, S., & Himmelstein, D. U. (2008). Sources of U.S. Physician Income: The Contribution of Government Payments to the Specialist–Generalist Income Gap. Journal of General Internal Medicine, 23(9), 1477–1481. doi:10.1007/s11606-008-0660-7

But this was not always the case. Indeed, the American Medical Association was so scared of Medicare (because they thought they would lose money) that they hired screen actor Ronald Reagan to record some scary speeches that demonized Medicare as “socialized medicine” in order to sway public opinion. (That’s where the phrase originated.)

Despite the opposition from the AMA, Medicare became law anyway. The program has ironically been a huge boost for the pocketbooks of physicians.

Inaccurate forecasting

It would be impossible to overstate just how disastrously wrong the initial budget forecasts were about Medicare’s costs, but it was about like predicting mostly sunny skies with a 20% chance of rain showers in New Orleans on the day Hurricane Katrina hit.

In 1965, the House Ways and Means Committee estimated that the hospital insurance program of Medicare – the federal health care program for the elderly and disabled – would cost $9 billion by 1990. The actual cost that year was $67 billion.

In 1967, the House Ways and Means Committee said the entire Medicare program would cost $12 billion in 1990. The actual cost in 1990 was $98 billion.

Editorial, The Washington Times, November 18, 2009

In Part 3, I’ll explore why Medicare has blown away its initial costs and what can be done to fix it.

More good news for Obamacare – and bad news for those who want to repeal it

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The number of uninsured people in the United States has dropped by the millions thanks to the Patient Protection and Affordable Care Act of 2010.

Just how many depends on how you count and who’s counting. Whether the number is 9.7 million (according to the Gallup-Healthways Well-Being Index) or 16.4 million (according to the Obama administration), that’s still millions of people who have been able to get health insurance who didn’t have it before.

So, for all of the Republican rhetoric about repealing the law, they will have to deal with millions of people who would lose their coverage altogether.

Be careful what you wish for, Republicans

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If the King v. Burwell decision goes in favor of King to eliminate the Obamacare subsidies in states that have not set up their own exchanges, you would think Republicans would be overjoyed. Instead, they’re divided and scrambling to find a fix…at least temporarily. This is the part of the law that people LIKE. If the subsidies in the federal exchanges are eliminated, then millions of people will lose the help they needed in order to get insurance. And then the exchanges would turn into an adverse selection death spiral.

This would not really be an issue in the first place if Republican governors and state legislatures in 34 states had just created their own exchanges with the federal money provided to do so. Instead, they chose to play politics and rebel. And now, if the Supreme Court rules in favor of King, they will be accountable to their citizens for the loss of subsidies.

The ruling is certainly far from guaranteed for King, as Yale Law professor Abbe Gluck explained very well.

But if King does win the case, Republicans can’t agree on a strategy for what to do next: do they provide some temporary fix to extend the subsidies until after the 2016 election, or do they just cut them off completely? A few million people losing the health insurance that Obamacare afforded them — based on a technicality — could make for some unpleasant town hall meetings for Republican legislators in red states as well as the 2016 GOP candidates for President.