A Realistic View of the ACA – Part 1

Judging by his cabinet appointments so far, it is clear that President-Elect Trump is focused on doing the things he said he’d do, getting those things done expeditiously, and [as usual for him] not letting himself get sidetracked by political correctness, criticism, and fear of opposition. One of the most visible “to do” items is “repealing and replacing” the Affordable Care Act [ACA, aka “Obamacare”] — one of the major themes of his campaign, and part of the Republican mantra practically since passage of the Act through some political “shenanigans” [i.e., designed loopholes to enable “reconciliation” to be used to get the bill to a floor vote, which assured passage since the Democrats narrowly controlled both houses of Congress at the time].

I was a “C-Suite” Healthcare executive for most of three decades, and after that I was a Healthcare consultant for about seven years. Among my executive oversight responsibilities for several of the “C-Suite” years was a centralized business office for a ten-hospital, seventy-clinic integrated healthcare delivery system that also included an insurance subsidiary. I say that to say that I have direct knowledge and experience that I believe enable me to write with at least some degree of authority on this subject.

This post is the first of what I currently envision as three parts: Repeal; Replace; and Looking Forward. I’ll begin this first post with an introduction of the series.

Introduction

It’s not exactly rocket science to figure out that the ACA will ultimately collapse under its own weight. The evidence of that has been building almost since its passage, but the accelerating problems of the past two years, capped off with upcoming 2017 options that include not only both massive premium increases and markedly higher deductibles, but an increasing number of failed exchanges and more major providers pulling out of the exchanges that remain, make it obvious that “something has to give” — soon.  The Caduceus image above is a cartoon-style version of the symbol often used for healing and medicine, and it tells the story fairly succinctly — the tails of the two snakes are labeled “Good Intentions” and “Reality”, and at the top, the latter has its fangs in the head of the former.

The unfortunate truth is that this situation was predicted by many people, some within our elected leadership, when the ACA was first passed. In retrospect, anybody should be able to see the wisdom of those predictions.   Just think about the initial promises during the legislative process that resulted in passage of the ACA.  In effect, it was:

I have deal for you … Pass this into law, and within a few years everybody will have quality healthcare coverage, with the average family saving $2,500 per year.  Those who currently have health plans that they like will be able to keep those plans, and their current relationships with doctors and other providers will not need to change unless they want to choose from among the many other options that will be available to them through State and National exchanges. All people who need financial assistance in order to afford a reasonable health plan will obtain that assistance in the form of government subsidies that will partially or fully offset their premiums.  In the long run, this “won’t cost taxpayers a dime” because of the savings that will be achieved through better access [thereby preventing a large percentage of emergency care costs and costs for procedures that can be avoided with better primary care], “elimination of fraud and abuse”, and more competition [which will drive down prices].

Anyone who bought that line is a classic example of proof that P. T. Barnum was right — “There’s a sucker born every minute”.  You don’t need to be a healthcare or finance expert to figure out that you cannot promise unlimited service from providers over whose costs to provide those services you have no control, and at the same time promise that this unlimited service will be “affordable” without risking huge taxpayer costs that the country simply cannot afford.

Repeal

Politically, Mr. Trump will have to get this part done, because any attempts to simply modify the existing ACA to make it fiscally sustainable [which it currently is not] would be throwing logs onto the fire of Democrat Party “See, we told you so” rhetoric. Politics is not the only reason why a repeal is necessary, however. This law’s original 2,300-page version, since expanded through operational policies and additional regulations promulgated under its auspices to the equivalent of tens of thousands of pages, is a bureaucratic nightmare, and its fundamental financial and operational design flaws will ultimately result in it collapsing under its own weight as described in the Introduction above [and “ultimately” is now, with descriptions like “death spiral” already circulating long before the November 8 election].

It is extremely disappointing to me that people in our leadership [all Republicans, of course] who constantly expressed warnings about the situation the ACA is now in were never able to articulate their concerns in a way that “connected” with people.  Had they been able to do that, it is quite possible that the bill would never have become law in the first place — and if politics had pushed it through anyway [which is what happened], it would have been repealed with bipartisan support very early during its implementation. And by now, we would probably already have a better system in place instead of having a replacement process still ahead of us.

It will be interesting to see how this repeal process unfolds — whether Democrats will have the good sense to refrain from filibusters and other tactics [which will only delay, not prevent, repeal], and whether Republicans will at least try [hopefully successfully] to gain bipartisan support for a transition plan to avoid sudden loss of coverage for people currently enrolled in plans obtained through the ACA [such a transition plan will be absolutely essential — I doubt that a repeal will otherwise be possible because I expect that even our Republican President-Elect might veto a repeal bill that does not include such a transition plan or at least a concomitant bill dealing with transition].

An Important Note About “Millions Losing Coverage”

One thing to keep in mind since there are already rumblings [almost exclusively from Democrats] about “kicking 20 million people off their healthcare plans” if the ACA is repealed … Millions of people will believe these claims simply because they don’t understand how the ACA works.  Although there are, in fact, about 20 million people now enrolled through the exchanges set up under the ACA, nobody knows how many of these people have coverage through the ACA because they could not obtain coverage without the ACA.  It would not surprise me if it turns out that only half, maybe less, would not be able to obtain more or less comparable coverage — i.e., they bought through the exchanges for other reasons [e.g., they found it easier to navigate through their options once the initial glitches were ironed out].

In Part 2 …

In Part 2 of this series, I’ll focus on two main points: 1) some of the financial math that would be associated with a relatively simple transition plan for people currently covered under the ACA; and 2) options that are under discussion about a system to replace the ACA.

Thanks!

Charles M. Jones

Author: Charles M. Jones, PE, CPA

[retired — neither license active] View all posts by Charles M. Jones, PE, CPA