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Crisis response

SoVaNow.com / July 31, 2013
Last week The Sun published the sort of story you see from time to time, about a family going through a health care crisis and ending up neck-deep in bills. The child in question, a 12-year-old boy from McKenney, lost an eye in a BB gun accident. (It turns out everything your mother told you about BB guns isn’t a myth). The boy’s aunt held a garage sale over the weekend in South Hill to raise money for his medical expenses. One hopes and prays the fundraiser was a success.

Only in America, it seems, do we pay for personal health crises with bake sales, car washes and anonymous donations. Not that there’s anything wrong with the help: the charity of neighbors is one of the best features of small-town life. But when trouble strikes, more often than not the kindness of friends and strangers won’t be nearly enough.

Last year our two local hospitals — Community Memorial in South Hill and Halifax Regional in South Boston — provided nearly $33 million in charity and unpaid care. You need not shed any tears for either hospital — both made healthy profits for the period in question — but it must be conceded that this is an utterly crazy way to pay for medical care. Every other country in the advanced world has a system for spreading costs around so individuals aren’t crushed when catastrophe strikes. None of these other national health care systems is perfect, but there’s plenty of reason to believe they work better than ours.

America’s approach for shouldering the costs of health care rests on two pillars — public and private insurance. The public system includes Medicare, the single-payer system for the elderly, plus programs such as Medicaid and FAMIS (a Medicaid offshoot) that cover the poor, disabled and the young. Most everyone else gets their insurance through private, for-profit providers, either through their workplace or via the individual market. This arrangement leaves many people with no insurance whatsoever. In Virginia the gap is about 1 in 7 people. It’s a huge problem.

In a couple of months, many Americans will get their first real taste of the Affordable Care Act, which Congress passed in 2010 to bring universal coverage to the United States. October 1 marks the date when the law’s new health care exchanges open for business, although lesser provisions have been in place for a few years. Most people know the law only by its moniker — Obamacare — and are confused by most of the rest. This is understandable; the health care industry is massive and complex, and the ACA represents the biggest reform in almost 50 years.

The law’s origins go back to the 1990s, when Bill Clinton introduced his own plan for universal coverage and the opposition went nuts. (The latter ended up winning that battle.) Conservative critics, sensitive to the charge that they weren’t offering a viable alternative, came up with their own ideas for extending coverage to the uninsured. As developed by the Heritage Foundation, a conservative think tank, this counter-proposal had several basic tenets: everyone should be required to purchase insurance if it wasn’t available through work or through programs such as Medicare and Medicaid; those who ignored the coverage requirement should pay a financial penalty; the government should offer subsidies to people who were unable to pay the price on the private insurance market; marketplace “exchanges” should be established to foster competition among insurance companies; and insurers would no longer be able to exclude their sickest clients or price them out of buying a reasonable policy.

In 2006, these ideas got their first real workout with passage of Massachusetts’ health care reform law, dubbed “Romneycare,” after then-Gov. Mitt Romney. The framework ended up working pretty well, even though much of the cost was borne by the federal government. (Massachusetts used its federal Medicaid revenues to finance its new program.) The percentage of uninsured residents fell under 2 percent, the share of businesses offering health coverage rose steadily, and the law was popular — then and now. The rest of the country is about to find out why.

I won’t attempt to rehash the specifics of Obamacare, because its provisions go on and on and people will be affected in different ways. (Sort of like with the insurance policies that exist now.) For individuals who already have coverage through their employer, the impact of the new law is pretty much nil. Nothing in it compels existing policyholders to participate, and contrary to what you may had heard, insurance costs are not soaring out of control in most instances. (The Kaiser Family Foundation pegged the 2012 increase in employer-based coverage at 4 percent, the lowest rate of inflation in years. Kaiser has not yet come out with its 2013 findings.) Before folks send in letters claiming that the law is driving up costs for everyone, consider the Wall Street Journal’s June 18, 2013 report that “U.S. consumers’ health-care costs fell in May for the first time in almost four decades, the latest evidence that government policies and an expansion in generic drugs are holding back prices.” (You can Google the headline, “Medical Costs Register First Decline Since 1970s”.)

So what about the uninsured? That’s who the law is intended for, anyway. In Mecklenburg County, there are roughly 4,000 people who don’t have any insurance. Let’s consider a typical example, a family of four: the husband drives a truck, the wife is a childcare provider, they have two kids, and together their household income is around $58,000 annually. The mom and dad are 40 years old, the kids are in their early teens, and no one in the home smokes. (By the way, this estimate of household income is substantially higher than the 2011 Mecklenburg County median of $36,327. I’m figuring the truck driver makes $40,000 and the day care provider makes $18,000, which is in line with what the Virginia Employment Commission says is realistic for the area). If the couple purchased a family policy with a $1,500 deductible and 30 percent co-insurance, their monthly premiums might be around $370 a month. (I got this figure off the Anthem website.) If any member of the family were in bad health, all bets would be off.

With the advent of health insurance exchanges, the same family can compare insurance prices over the Internet, or, if they’re uncomfortable with that process, call up their local insurance rep for help. (Either way, consumers benefit from the increased competition that the exchanges will create among providers.) Using the price calculator on the Kaiser Family Foundation website, the estimated cost of a Silver-level plan (one paying 70 percent of medical expenses) would be around $383 a month, with tax subsidies included. That’s much lot different from the $370 premium for the hypothetical Anthem plan mentioned above, although it’s hard to make exact comparisons. Each way, the family in question would pay about 8 percent of their income towards health care — although the household would be much less exposed to “rate shock” if someone fell ill in the future.

Kaiser cautions that premium calculations “cannot necessarily be compared to what people are paying now” because we haven’t yet seen what kind of policies the insurance companies will end up offering on the exchanges. It’s a fair point that applies in both directions. What we can say with some certainty, however, is that the exchanges will offer coverage that’s far better than what you see with some of the policies floating around — especially high-deductible plans that aren’t much better than having no insurance at all. Let’s go back to our family of four: if their household income is $40,000 (much closer to the county average), then a Silver plan would cost only around $165 a month — with federal credits that would offset the cost of insurance. That’s roughly what a catastrophic plan with a $7,500 deductible and 50 percent coinsurance might cost for this same family. A policy like this doesn’t give a family much protection, unlike a Silver plan paying 70 percent of costs. Indeed, if anything did go seriously wrong, our test family would need dozens of bake sales to get out from under the mountain of debt they’d be buried under.

Far from being a free ride for anyone, the Affordable Care Act requires everyone above 133 percent of poverty level to pay into the system to spread the costs around more fairly. (The law is designed to cap individual health care expenses at 8 percent of income). In theory, at least, the law should be more efficient and more fair than what we have now: currently, hospitals, physicians and other providers pass on their costs to everyone else whenever a patient can’t (or won’t) pay his bills. Of course, there is one group that is exempt under the ACA from paying a significant share of income for health care: the very poor, who don’t have much income to begin with. This group is supposed to be covered by an expansion of Medicaid, which is the aspect of the new law that has run into the most political trouble. That’s a whole ‘nother story: perhaps for next week.

In the meantime, you can get a sense of what the cost of insurance might be on the health insurance exchanges by visiting http://www.healthcare.gov (the Kaiser Family Foundation website offers a price widget that’s also very helpful, at http://www.kff.org/interactive/subsidy-calculator). In a world where all too many people have to struggle to pay the essentials, the notion of medical care that doesn’t have to cost an arm and a leg is naturally appealing. In the next few months, we’ll begin to find out if Obamacare is up to the challenge.









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