I don’t know about you, but I’m pretty fatigued by politics in our country at the moment. It’s like a never ending episode of Jerry Springer. Both sides yelling at each other with nothing resolved. The latest victim? Healthcare reform.
No need to worry, this article isn’t a political op-ed piece. It’s about what happens now that congress appears gridlocked (again) on healthcare reform. I mean obviously things stay status quo and we continue forward with the Affordable Care Act (also known as Obamacare). But what does that really mean for you and me?
How well is the Affordable Care Act Working?
It’s been a little over 5 years now, so the natural question is; How is ACA doing? Is it working and If so, why do people want to repeal it? To answer these questions lets go back to the basic premise of Obamacare, namely reducing the number of uninsured in the US.
It turns out that the number of individuals in the US without insurance coverage is at an all-time low of 10%. Clearly ACA has accomplished its primary goal. The Affordable Care Act has covered about 20 million previously uninsured Americans. A large portion of these individuals got coverage via the state exchanges or as part of the expansion of Medicare.
Obamacare provided coverage for 20 million Americans
who wouldn’t have otherwise had coverage
Interestingly this accomplishment has gone largely unnoticed by the general public. The presidential election likely plays a large role in that. But beyond politics, another reason has to do with affordability. A recent Kaiser Foundation analysis found that worker contributions to premiums increased 221% from 1995 to 2015. While that increase isn’t entirely due to Obamacare, ACA is playing a major role.
Since ACA was enacted we’ve seen the reversal of a 12 year slowing in the growth rates for Healthcare costs. The affordability issue is
compounded by the fact that for decades healthcare expenditures have grown significantly faster than the US inflation rate. And since healthcare is a $3.2 trillion industry, Americans feel this trend is very real ways.
A recent online survey by Harris Poll, asked more than 2,000 Americans ages 18 and over about their retirement readiness, top financial concerns, and savings priorities for 2016. The results revealed anxiety about a lack of savings — both for retirement and for short-term goals like an emergency fund. What’s most interesting about the results is what held the top spot in terms of financial anxiety — healthcare costs.
Healthcare costs have overtaken our financial psyche above long standing issues such as making our mortgage payments or credit card debt, or even student debt. Think about that for a moment.
If this survey is representative of the average American, healthcare affordability is now front and center in peoples everyday lives. That must mean that affordability is at the center of the healthcare reform activities in congress, right? Think again.
Where do we go from here?
It’s difficult to predict exactly what congress will do about healthcare reform. They just shelved a bill called the American Healthcare Act (AHCA). This legislation was intended to keep the Republican’s campaign promise to repeal and replace Obamacare. However, if you look at AHCA side by side with Obamacare, you’ll find it’s a far cry from an Obamacare repeal and replace. The bill only proposed repealing the individual mandate, ACA taxes, and expansion of Medicaid. The majority of ACA provisions remained in place. Even the repeal of the individual mandate was replaced by something similar.
The American Healthcare Act was really
just a course adjustment to Affordable Care Act
What’s most meaningful about AHCA is what wasn’t in it, namely anything addressing affordability. In fact the few provisions in ACA that dealt with affordability like the Center for Medicare & Medicaid Innovation (CMMI) and the Independent Payment Advisory Board (IPAB) remained unchanged by AHCA.
But in the end the biggest issue with AHCA was a lack of bi-partisan support. It was marketed as a Obamacare repeal and replace, which only conservatives wanted. Liberals, and more importantly the center, simply couldn’t be seen as supporting an ACA repeal, even though in reality AHCA wasn't.
The fact that congress tabled AHCA means that Obamacare is here to stay. At least for now. If things are left on their current course we’ll see current ACA issues continue and likely deteriorate. The most likely impacts of these issues include:
- Fewer Choices on the Exchanges - the exodus of insurers from the state exchanges will continue and likely accelerate. Insurers no longer have a financial or political incentive to continue their participation. They now know the risk profile of the exchange populations and no longer have the promise of financial support from the government. The continued implosion of the co-ops will contribute to fewer choices as well. It’s also unlikely that the current administration will pressure insurers to continue their participation in the exchanges.
- Significant Affordablility Issues - It’s already difficult for many to find affordable options today. The growth trend in healthcare costs show little sign of abating so there’s no reason to expect that affordability will improve. Premiums will continue to rise, there'll be fewer choices on the exchanges, and consequently fewer people enrolling. In addition, the federal costs related to the Medicare expansion will begin to put pressure on budgets at the federal level.
- Declining participation - enrollment has already begun to slow with those who can’t afford their premiums opting out of coverage. The current administration has also issued guidance to the IRS about easing enforcement of the tax penalties associated with the individual mandate. This drop in participation will continue to accelerate as the availability of affordable options declines. It will simply become cheaper to pay the penalty than to pay the premiums.
For all these reasons it seems unlikely that ACA will survive the test of time. It’s also unlikely that Republicans will make another full blown attempt to repeal ACA. Rather, more focused legislation seems likely when timing for broader political support on specific issues is right. Law makers may also begin to embed ACA changes into other seemingly unrelated legislation. For example, we may see a change to the individual mandate proposed within new tax reform legislation.
Regardless, it seems we’re in for slow and painful progress with Healthcare Reform. Reform driven from congress will likely hinge on either public opinion about specific pain points or political back room deals on legislation with embedded ACA reforms. That is until something else shifts in the balance of power in Washington politics.
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