08 Mar The Impact of Obamacare’s Replacement on Hospitals and Physicians
The bill the House Republicans put forth on Monday, The American Health Care Act (AHCA), to replace Obamacare probably has former Obama administration officials chuckling and should have Republican lawmakers cowering. It is highly unlikely this bill will pass in its current form.
This isn’t a political commentary and is intended to highlight the harsh realities of health insurance and how it affects hospitals and physicians. What both sides of the political spectrum should be learning is that there are no easy fixes.
Where does it leave hospitals and physicians? For hospitals, I suspect ultimately more uninsured patients. The eventual freeze on Medicaid expansion scheduled for 2020 could be a disaster but will likely be addressed after the mid-term elections in 2018.
Both hospitals and physicians would likely be adversely impacted by the elimination of mandated employer coverage as this would drive more employees to the individual marketplace – which the proposed bill does little to fix.
The impact on physician practices will probably be minimal because as long as high deductible plans prevail they will continue to struggle to collect high co-payments and deductibles.
Let’s examine some of the key components of the proposed bill.
Individual Mandate
While the hated individual mandate and related penalties go away, they are replaced with increased premiums for those who have a lapse in coverage. It seems to me that the resulting proposed 30% increase in premium results in a “penalty” that could be significantly greater that the $695 minimum under current law.
Competition Across State Lines
Allowing competition across state lines sounds good until you consider the realities of each state’s insurance laws. Without a set of national regulatory standards, will insurance companies attempt to jump through the hoops of 50 different state insurance commissioners to enter new markets?
There is plenty of precedent for the federal government to force states to standardize laws – national seatbelt, drinking age and drunk driving come to mind. While I’m not advocating any of this, the harsh reality is competition across state lines in the health insurance marketplace sounds good, but is a tough nut to crack. That’s likely the reason it isn’t in the proposed bill.
Premium Costs
Premiums will likely be going up, not down, especially for the older pre-Medicare population ages 50-64. The proposed premium gap increases to 5X the lowest rate for this older age group. This probably gets premiums up close to the confiscatory rates before Obamacare — and with less coverage.
Narrow Networks
The proposal doesn’t address inadequacy of physician networks to fix the broken promise “you can keep your doctor.” In many states the only plans available in the individual market are HMO plans, which many providers eschew because of low reimbursement rates. I see nothing in the proposed bill that would fix this and, as with competing across state lines, absent some sort of national standard on the adequacy of physician networks, this is unlikely to change.
Reversing the Collapse of the Individual Marketplace
The collapse of the individual marketplace in many states isn’t addressed. While increasing the premium gap from low to high from 3X to 5X and the 30% “penalty” if coverage isn’t maintained are proffers to the insurance industry to remain in the individual marketplace, this is not required and far from guaranteed. Will those insurers who have exited unprofitable markets come back?
While insurers cry poor over losing money in the individual marketplace many are reaping huge profits from Medicare Advantage, Medicaid Expansion and the employer marketplace. Isn’t this just cost-shifting under another name? If the goal is to provide health coverage to all then shouldn’t the overall pool be aggregated? Without an incentive I don’t see insurers rushing into previously unprofitable markets. Why not force insurers to participate in the individual marketplace by tying it to their participation in Medicare Advantage and Medicaid expansion programs?
Next Steps
This bill is a long way away from serious consideration and both sides of the political spectrum are unhappy with many of the proposed provisions. It will be an interesting debate to watch.