Friday, August 30, 2013

A Discussion About Obamacare


During a recent bridge tournament I enjoyed dinner with several of my teammates and friends. I have no idea exactly how it happened, but the talk turned to Obamacare. The initial statement tossed out to the table was something to the effect that “Obamacare will bankrupt the country.” Since at least two of the seven sharing dinner did not agree at all with that statement (including yours truly) the result could have been (1) a heated argument between opposing sides, (2) those who did not agree chose to remain silent, or (3) an interesting discussion where both sides might learn from the other.

I stepped into the breach and asked why the person thought that was true. His answer included the current deficits and health care costs that continue to increase uncontrollably. I agreed those issues were major problems, but suggested they were attributable much more to Medicare and Medicaid than to the Affordable Care Act, aka Obamacare.
I suspect it was in part the fact that I agreed there was a problem that allowed us to explore the sources of the problem and solutions that might work. It also allowed those who were small business owners to educate the rest of us on how they will have to respond to the law.

The first charge against Obamacare was that more people would be insured and therefore the costs would increase. I used my own situation as an example to suggest why that wasn’t quite accurate. I carry a high-deductible policy, which, unless I become very ill, will never pay me a cent. The benefit I reap even if no medical catastrophe arises is that the insurance company negotiates the cost of my medical care. I am not stuck paying the full “sticker” price for the services I use.

There are three major systemic problems with the roughly 1 in 7 Americans who are uninsured. First, partly because they have no insurance, they skimp on preventative care. They roll the dice and hope they don’t come up snake-eyes. Second, if they do get a bad roll of the dice, they tend to utilize the most expensive medical care option, the emergency room, because they will not be turned away. Lastly, because they are uninsured, they are charged “full-rates.” That is, they do not have an insurance company between them and the provider to negotiate fees.

Obamacare addresses two of the three problems. People currently uninsured will be able to obtain insurance that provides preventative care, and the insurance companies will negotiate on behalf of their policyholders. These are serious problems. Over 60% of personal bankruptcies are caused by medical issues (that includes medical costs and loss of work). Unfortunately, because universal coverage is not provided under the Affordable Care Act, not all uninsured will choose coverage. However, even if only half become covered, it will make a significant improvement.

The Affordable Care Act does not solve the problem of insufficient providers. Over the short term, it probably exacerbates the situation. Newly insured, just like people who become eligible for Medicare, have accumulated health issues that they want to immediately take care of. The provider shortage, I said, was largely caused by state licensing requirements issued by boards run by doctors. They act as a semi-closed society to keep out lots of qualified foreign-trained doctors, in order to keep fees high. Doctors are not unique; every profession does this, including my own: actuaries had a series of difficult exams, and I didn’t ever use most of the information covered by the exams, but it was a barrier to entry.

Someone objected that Obamacare would ration healthcare similar to the problems in Canada that cause Canadians to come to the U.S. for treatments. I said that if we were to control healthcare costs we would need to ration it. In my opinion we spend too much on extension of life without quality and too little on preventative care. Until we as a country have a serious discussion about those issues we wouldn’t get to the root of the problem. We could argue about how to make those decisions, but no one would disagree that we need to make them IF we choose to rein in costs.

One of the small-business owners said he had to change his staffing levels because of the costs of Obamacare. To stay competitive, he eliminated several permanent part-time positions and created a small number of full-time positions.

I acknowledged any major change would cause dislocations. Large corporations had already gone through their own staffing changes to reduce costs. Regardless of whether those changes were accomplished in order to maintain competitiveness (the corporate view) or to increase profitability (labor’s perspective), for the last twenty years corporations have moved people from benefit-qualifying positions to those without benefits. The most aggressive were now making many of their workers on-call, and expected them to be available regardless of how many hours they actually got to work.

The great thing about this conversation was it was a conversation. All of us sitting around the table are affected by and concerned about healthcare, but none of us were experts. (I had the most comprehensive background in healthcare costs and financing from my years of creating and determining costs of health care plans; the small-business owners knew what they were doing to accommodate changes.) At the end of the discussion we had all learned something we didn’t know before, and we did it through civil discussion.

If seven people from various economic and cultural backgrounds can accomplish that much over dinner, why can’t Congress?

~ Jim