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Archive for April, 2010

Health reform bill’s delayed implementation will spark another round of reform

The Patient Protection and Affordability Act was enacted largely in response to a perceived crisis in health care in the U.S. That sense of urgency propelled the reform train forward over objections that the nation’s medical care system would be effectively deprivatized to a greater extent than it was by Medicaid and Medicare more than four decades ago.

But most of the law’s provisions don’t take effect until 2014 and thus don’t provide an immediate solution to what’s seen as an immediate problem. Premium rates in the individual health insurance market — which covers only about five percent of working age Americans but provided much of the impetus for the Act’s enactment — are rising in response to higher underlying medical care costs.

Between now and Jan. 1, 2014 when health insurance purchasing exchanges are set to begin operating with the expectation they will provide increased power to individuals and small businesses to bargain for lower rates, both can expect to see their premiums rise above levels many complain are already unaffordable in a presently busted boom and bust economy.

What this means is health insurance reform isn’t over — because the crisis isn’t over. Expect another round of omnibus reform as the distress in the individual and small business market continues and grows amid concern that the underlying medical cost drivers haven’t been adequately tamed. This will clearly affect the political environment. Policymakers won’t be able to satisfy constituents by telling them to wait until 2014 to see if things get better.

The cost drivers of the health insurance crisis

The health insurance crisis is essentially a health care cost crisis. Two articles in today’s Sacramento Bee provide insight. One spotlights hospital costs and the tensions they stoke between hospitals and insurers that pay their bills.

Another profiles Dr. Walter Bortz, a professor of medicine at Stanford University. Bortz criticizes the demand side of the health care cost equation, proclaiming the simple truth that rising health care costs can be contained with healthy lifestyle choices rather than more and more treatment once we become ill due to poor diet and lack of exercise.

Bortz’s profile reflects the philosophical divide between advocates of healthy lifestyle choices like himself and a medical industrial complex dependent upon treating people for costly, chronic conditions for the health of its own top line. Medicine as currently practiced in the United States is “a whorehouse” in Bortz’s blunt assessment.

The take away from these articles is we are being forced to choose the preventative lifestyle cost control measures Bortz advocates because our economy can no longer absorb the cost of providing “sick care” as it’s called by some. No amount of adversarial finger pointing between payers and providers can alter that fact and only portends the coming meltdown of the current paradigm.

Interim high risk pool may not significantly reduce ranks of medically uninsured

High risk health insurance pools to cover Americans with pre-existing medical conditions who fall short of medical underwriting standards of individual market insurers and managed care plans must be in place within 90 days of the March 23 enactment of the Patient Protection and Affordability Act.  That mandate was put in place by H.R. 3590, Subtitle B, Section 1101.

Going forward, several aspects bear watching.  Among them is how states — the majority of which already have high risk pools in place — implement the pool in their jurisdictions and conform their existing high risk pools to the new federal requirements.

In the interim before the high risk pool mechanism ends Jan. 1, 2014 and health insurance purchasing exchanges that must accept all applicants regardless of pre-existing medical conditions start up, a key question will be the number of people who actually sign up for high risk coverage.  The number in large part will be driven by the size of the premiums.

California’s high risk pool, the Managed Risk Medical Insurance Program (MRMIP), is required by statute to set premiums 125 to 137 percent of standard market rates and has an annual coverage cap of $75,000 and a lifetime limit of $750,000.  Currently the program covers just 7,100 Californians — a tiny fraction of the 1 million potentially medically uninsured Golden State residents projected by Harbage Consulting in 2008.

MRMIP has been limited on the supply side by enrollment caps due to limited funding and on the demand side by relatively high premiums.  HR 3590 requires premiums to be established at a “standard rate for a standard population” that can vary based upon age, an important factor considering a large segment of medically uninsurable are between 50 and 64 years old.  For the oldest members of the pool, premiums are limited to four times those charged the youngest members of the pool.

Standard rates however are on an upward trajectory as evidenced by a sharp increase being implemented for indemnity-based policies by California’s dominant player Anthem Blue Cross.  Those rates if ultimately approved by the California Department of Insurance would be as high as those previously charged those in the MRMIP pool.  For many, they would likely prove unaffordable.  Particularly in a tepid economy that some economists predict won’t fully recover until the high risk pools are slated to end in 2014.

The upshot is HR 3590’s temporary high risk pool may not make much of a dent in the number of medically uninsured not covered through employment-based insurance or government insurance programs.

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