There’s mumblings and grumblings now in the Republican caucus as they realize that anything they do that simply repeals Obamacare rather than replacing it would result in horrifying electoral losses in the House in two years. Thing is, nobody can agree on what a replacement would look like. So there’s been some mutterings about maybe just fixing the problems of Obamacare and calling it Trumpcare, rather than just outright repealing it.
So how could Obamacare be fixed?
1) Bigger risk pools. The problem is that Obamacare is issued on a per-county basis to county-wide risk pools. Thing is, some of your rural counties only have 500 people on Obamacare. One of those people gets leukemia — which only happens to one out of every 5,000 people ordinarily and costs $1,000,000 to cure — and suddenly each of those people is going to see their rates go up by $2,000. Whereas if you had a risk pool of 5,000 people, which on average will have one person come down with leukemia, their rates would only go up by $200 to pay for that patient.
a) Allow insurers to lump multiple counties into the same risk pool in order to keep rare but expensive illnesses from blowing rates out the top of the water.
b) Create a reinsurance pool for those ultra-rare events like the illness that ends up using $10,000,000 worth of care. The reinsurance pool would be nationwide and each insurer would contribute to the reinsurance pool according to how many insured they have. That means, on average, expensive but rare illnesses happening in one county but not nationwide would make all rates nationwide bump up by a few cents, rather than rates in one county bump up by thousands of dollars per year.
Now, what about insurance companies being able to sell nationwide? Doesn’t fix anything in larger states, but for the ten least populated states and territories, each of which has under 1,000,000 total inhabitants, it could allow increasing the size of the risk pool to something more reasonable. However: that would be devilish to regulate. I would say that the only way to make it work would be that the insurance commissioners of the states involved would have to come together into a joint commission to regulate the insurers that are issuing multi-state policies (that is, ones whose risk pool spans multiple states). Otherwise you’ll get situations where insurers are ripping off policyholders and no insurance commissioner does anything about it because none of them have a full view of the insurance company’s operations in that multi-state pool.
Easier to just create a reinsurance pool, IMHO. Getting insurance commissioners to cooperate with each other is worse than herding cats.
2) States not increasing their Medicaid funding to meet the 133% Medicaid cut-off, resulting in too many uninsured:
Change Medicaid to a lump sum granted on a per-qualified-resident basis. For those who are qualified under the law but not granted Medicaid by the state, instead enroll them in Medicare using the Medicaid money that would have otherwise gone to the state. Note that the various taxes that were raised for Obamacare already have sufficient money for 100% of the costs of caring for those patients, so this would not require raising taxes by any more than they’ve already been raised. It would just reallocate the existing Medicaid monies to go with the people who need insurance rather than just giving it to states as a block of money.
3) Narrow networks are causing insured people to lose access to their doctors or to specialists they need: Get rid of the narrow networks. Seriously. Narrow networks are currently being used to cherry-pick patients — the well patients go to the cheapest insurance companies, which have the narrowest provider networks but they don’t care because they’re well. Sick people who need access to better doctors get squeezed out of those plans because those plans don’t cover the doctors they need. Easiest solution: All plans are required to add doctors to their networks upon the doctor’s request and upon the doctor agreeing to take the negotiated rate which must be at or above the Medicare rate, and are not allowed to drop doctors from their network unless they’ve documented fraud on the part of the doctor and dropping a doctor from their network is appealable to an insurance oversight board, either a state-one one or, for those states that don’t operate their own exchanges, a nation-wide one.
4) The 400% poverty rate cut-off for subsidized coverage is too low in some locations where housing costs are really high or healthcare expenses are really high. Especially for older people whose health insurance is already 4x as expensive as for younger people. Answer: Make the cutoff a percentage of income rather than a percentage of poverty level. That is, if you spend more than 33% of your disposable income on healthcare, the excess gets subsidized away. So if you’re in Santa Clara, California, a very expensive place to live, you make $100,000 per year, and your rent is the average of $2,900 per month or $34800/year, and your effective tax rate is 22% meaning your after-tax income is $78,000 /year, your disposable income is $39,600. 33% of that is $13,068. If your family of four is actually paying $18,142 /year for health insurance, which was the average last year for a family plan, you would then get a subsidy of $5,074 to reduce your cost of health insurance to something more reasonable, i.e. you’d be paying $1089/month rather than $1512/month. That $422/month buys a lot of food and clothing for your family.
5) The coverage that you get does not pay for the healthcare that you need due to high deductibles and exclusions:
a) Your out of pocket must be capped at 33% of disposable income, period. Any additional must be covered by the subsidy.
b) Exclusions need to be severely limited to only non-life-threatening things. If for example you are diabetic and need insulin and syringes in order to live, they must be covered under that 33% cap.
c) Healthcare Savings Accounts need to be radically overhauled so that they actually work for people with high-deductible plans. In particular, contributions towards an HSA must count towards that 33% cap, and cannot exceed the cost of the deductible.
6) Some people just don’t have acceptable insurance plans available where they live, period, because insurers don’t feel like selling there, or there’s only one insurer that treats people badly, or whatever:
Medicare buy-in. The caps on out-of-pocket are the same as for private insurance. Medicare buy-in should be allowed across the board, with a requirement that the rates charged must be actuarially sound (that is, the cost of the premiums must cover the cost of providing healthcare plus overhead and reserves).
7) And finally: only sick people are buying insurance, and well people aren’t, which is making the risk pools too small: Levy a fine equivalent to what it would have cost them to buy into Medicare for the time that they were uncovered. Allow wage garnishment (up to 33% of disposable income). Fines go into the reimbursement pool. Suspend the fines if they purchase health insurance and hold it for a year. Yes, there’s a lot of people who would let it slide for a year. After that? If given a choice of spending 33% of their disposable income on Medicare or 33% getting sent to the IRS, most will choose the Medicare.
So that’s my seven step plan to fix Obamacare. Will it get implemented by the Republicans? Of course not. I haven’t the slightest damn idea what they’re going to do, but I do know that when Republicans talk about “fix”, they’re not talking about repairing something, they’re talking about what my vet did to my cat’s balls. So it goes.
– Badtux the Healthcare Penguin
Read Full Post »