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health care costs

What’s in a Name?

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One of the biggest criticisms of the Affordable Care Act is that health insurance premiums will rise. The cost of premiums has already increased up to 4 percent in the past year. So is the ACA living up to its name? Let’s take a closer look.

Last Tuesday, the Maryland Insurance Administration released rate proposals from insurers for the new exchange in October. In the proposals, from a wide variety of insurers, new plans are the only ones that see a rate increase. This is because insurers are expecting the newly insured people in 2014 to be sicker so they plan to charge more. This also represents one of the major faults of our current health care system — those who are sicker are less likely to have access to care. Fortunately, many of the people who will be buying new plans (about half of the newly eligible in Maryland) will be able to receive subsidies to help pay for care.

Though insurers are saying the additional 12 percent of currently uninsured Marylanders is going to cost them more, the individual mandate was what insurance companies negotiated for in the first place in return for accepting people with pre-existing conditions and giving up recessions of coverage. Plus, the current rate proposals are not just estimates, but they also must be approved by the insurance administration. A major regulatory rule of the ACA (also known as the Medical Loss Ratio) requires 85 percent of group plan costs (80 percent for individual) must be spent on medical coverage or quality improvements instead of administrative cost. If they don’t follow this, they must give customers a rebate.

The newly 32 million people who will be getting health insurance in 2014 may be sicker yes, but that doesn’t mean they won’t be relatively easy to care for. Most of these people don’t have insurance because their job doesn’t provide them with it, not because of deathly pre-existing conditions. Most of these people will most likely be sick with diabetes or cardiovascular disease — two of the most common causes of morbidity and two illnesses that are relatively easy to control with proper medication. This thinking just comes from my experience as an EMT and as a volunteer with Charm City Clinic.

What’s more is that the ACA has provisions that target increases in premiums. For the first three years of the exchanges, the reinsurance program will help pay for the higher cost of newly insured sicker patients and the temporary risk corridors program will help protect inaccurate rate-setting. The law also sets limits on cost-sharing or charging healthy young people more to pay for the sick older people. Previously, the difference had been 6-to-1 but now will be at most 3-to-1. It’s true that some people may start paying more for health insurance, but they are also more likely to receive better insurance too since Obamacare mandates minimum required benefits.

As I’ve said before, Obamacare focuses on access to care rather than cost control, which makes its official name  — the “Affordable Care Act” — very misleading. In addition to increasing medical prices, the biggest obstacle so far for Obamacare is getting the word out about eligibility for insurance and subsidies. The exchanges are supposed to ready to go in October, so pretty soon we better start seeing some kind of major outreach. So much of what Obamacare promises is still just speculation; it’s hard to know where it will end up. But we do know one thing is for certain —  Obamacare gives the opportunity for millions more of the neediest people to have access to care when they otherwise wouldn’t.

Bills, Bills, Bills

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If you have yet to read Steven Brill’s TIME cover story, “Bitter Pill: Why Medical Bills are Killing Us,” you should. It’s long, but it’s worth it. Though the public has been worrying about medical costs since the Great Depression, Brill does a great job illustrating just how expensive medical care is and how Obamacare doesn’t really do much to offset costs. After reading this article I asked myself a few questions. The first was, why are medical bills really so high?

The simple answer is because of the fee-for-service payment system that doctors in the U.S. have fought so long to keep. It’s a method of payment older than our country itself. When doctors would do home visits in colonial times they would charge patients per mile traveled on the horse and buggy. And although doctors don’t directly charge us for the gas to get to work in the morning, we are charged for medical education, administrative costs and other costs that aren’t directly related to one service. Even when you go to a hospital you are charged twice – once from the doctor and once from the hospital. The professional authority of doctors has allowed them to control their own fees for services as separate from the total cost.

This causes the second issue of doctors and hospital administrators dictating prices. Doctors have always charged patients on their ability to pay and not on the quality of service or on effort. For example, surgery costs have steadily increased but the actual effort of a doctor to perform a surgery has decreased. At one time only the doctor would be charged for a surgery because he did most of the work including pre-op care and rehab, now he is still charged at the same rate, but you are now paying technicians, assistants and others who are billed as well. Procedures have been simplified but medical costs remain high and continue to rise.

One of Brill’s main opinions was that an expansion of Medicare could help control costs, yet medical historian Paul Starr argues that it was the third party government programs and private insurers that led to medical inflation in the first place. Because most of the time patients don’t see their bills, the general public is unaware of the true cost. Another reason is that because third-party payers reimburse, hospitals and doctors were encouraged to raise the rates of reimbursement to offset expenses instead of figuring out how to lower costs in the first place.

All of which begs another question: how can non-profit hospitals make so much profit? Hospitals originally started to provide free care for individuals whose families couldn’t take care of them and for a while they served only charitable care. But with the increase of the middle class, patients wanted better rooms and better services so doctors and hospitals began to charge more. Because of surgery and technology, hospitals became institutions with a lot of jobs, people and money floating around. Hospitals are usually governed by an elected board of trustees but when they aren’t affiliated with a university or religious institution, can easily be bought out by a big corporation.

So these hospitals with a non-profit, tax-exempt label get to keep their status even if they are now owned by a corporation and then governed by corporate management. Even many state hospitals have been sold to corporate entities. The other scenario is when a non-profit hospital then buys for-profit entities such as restaurants, rehabs, clinics, nursing homes etc. It seems that the status quo for hospitals is to increase available services and fees, expand buildings and usurp other medical entities, which all drastically raise costs for the patient. At the same time, the hospitals argue this is what patients want — top of the line technology, more services and bigger and nicer buildings. So I guess (certain) patients are getting what they want, and they’re paying for it too.

My last question was, why hasn’t anything been done to stop the medical monstrosity of health care costs? The quick answer is there have been efforts but most have been focused on Medicare and Medicaid, not on the entire system, and none have had an impact. The full explanation is for another time. As Brill notes in his article, Obamacare makes some minor, meager efforts at controlling costs but nothing impressive, mostly because of such strong hospital lobbying.

However much controlling costs is essential to having a more efficient health care system, expanding coverage was always the main priority of Obamacare. But Obamacare is adapting to peoples’ worries, as the administration recently announced they will require insurance companies to report any price increases. With Obamacare we’ve jumped over one hurdle on expanding access to care. Now we can hopefully pave a path to reducing costs.

Image courtesy of: www.helpingyoucare.com