The Smart Money: The ACA revisited

Posted Monday, November 4, 2013 in Analysis

The Smart Money: The ACA revisited

by Gina Hamilton

There is no question that the Affordable Care Act's rollout has been a mess.  A poorly designed website, questions about whether people could keep policies they have, and more issues, have plagued the ACA before it really even got started.

The majority of the problems the website has experienced appear to be bad coding.  President Barack Obama declared that there is "no excuse" for the problems, and has apologized, as has Secretary of Health and Human Services Kathleen Sebelius.  The website is being redeveloped, but as late as Monday morning, the home site,, did not pop up when we typed it into the address bar, and although we technically were able to get around that and create an account, it was incredibly slow and time-consuming.  And after it finally verified our identity, it seemed to stall. 

Yes, the website is complicated and has a lot of moving pieces, but so do many other websites, and they don't seem to be plagued with the problems that seems to have. Very likely, a couple of teenagers in Silicon Valley, after rolling their eyes at the idea that we would want to build a website (a website? really?) could have knocked it out in a couple of hours. 

Still, the website is not the health care plan. And the health care plan has issues of its own that are still unresolved.

The first issue is the number of people who will still be uninsured after the ACA goes into effect in January.  In Maine alone, that number is expected to be about 130,000 people, including people who could have been added to MaineCare rolls if Gov. Paul LePage had not vetoed the legislation to accept federal funds to do so, and people who run very small businesses and are exempt at least for the first year.  The ACA will only work with a high level of compliance, because otherwise, those who are uninsured will still seek urgent care from the most expensive health care source on the planet - the American Emergency Room - and will not receive preventative or chronic health care, causing their health care costs to spiral upward down the road.

And without insurance or means to pay, the hospitals pick up the tab and pass the costs along, which means that the uninsured's health care costs are ultimately covered by policyholders and taxpayers anyway, for poorer outcomes.

The number of people expected to be uninsured in Maine is a tenth of the population, so the numbers don't work to "bend the arc" of cost increases in health care here.  But the uninsured are only one reason why health care costs are going up, and the ACA doesn't do anything to address the other issues at all.

The first issue is that the cost of health care "stuff" - everything from medicine to syringes to MRI machines - is much higher than the cost to manufacture it, market it, ship it, research it and develop it, and even provide a healthy profit to the company's shareholders.  The 11 largest drug manufacturers in the U.S. took profits of $711 billion in the ten-year period ending in 2012, costing the average American 62 percent more in pharmaceutical drug costs over the same period.  Americans pay 40 percent more for drugs than do Canadians, and 75 percent more than the Japanese. We pay three times the amount the Danish spend.  The amount American hospitals spend on items - both large and small ticket - are similarly disproportional.

The second issue is the overuse of resources.  Americans spend a lot more time at the doctor's office, getting tests done, and so on, than do most people on the planet.  Part of this is an aging population, part of it is the insidious new practice of allowing drug manufacturers to advertise their products on television and radio and in print, and part of it is doctors nervously sending people for unnecessary tests to stave off malpractice claims.

The third factor is insurance companies themselves.  Insurance companies have significant overhead that doesn't go to patient care.  Some of that will decrease as the ACA goes online, and certain practices - recission, by which people can be denied care even if they've been paying premiums for years, and denial for preexisting conditions - will be banned by the Affordable Care Act.  Some 13 percent of every dollar paid in premiums goes toward overhead in private insurance companies, compared to about 4 percent in Medicare.

Finally, there are unscrupulous companies taking advantage of patients and ordering items they don't need - like scooter wheel chairs - with the promise that Medicare will pay.  This fall, one of those companies was put out of business for fudging patient records to help get Medicare to pay for scooters. Fraud is a concern, and isn't fully addressed by the ACA, either.

The ACA, based as it is on a private insurance model with public subsidies, isn't likely to address many, if any of these issues.  What must happen in order for the system to work as advertised is that the federal government must take a lead role - since it will be picking up a good portion of the bill through subsidies to low and moderate income Americans, as well as to Medicare recipients - to set price or profit limits on all companies doing business through the ACA.  This is not yet part of the plan, but it will be necessary if we hope to bring costs of the health care system down to the same level as other first world countries.

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