America Can’t Afford to Ignore its Health Care Challenge

The Patient Protection and Affordable Care Act (PPACA or ACA) focuses on expanding health insurance access for America’s near poor.  It’s a laudable effort, and yet only one in five Americans currently supports it.  This spring, the Supreme Court will decide questions such as whether the Federal Government can mandate individuals to buy something in the free market and whether it can compel states to expand their individual Medicaid programs.  We are implementing the ACA at a time when we are already borrowing over $4 billion dollars a day to fund our federal government and have no credible long-term plan for funding our safety net.  America’s ability to afford the ACA remains to be seen.

So what can be done, if anything, to get Americans behind this historic and very controversial legislation?

Well, first off, we should get folks excited about the expanded competition we will achieve by using the ACA's regional Health Insurance Exchanges to broker the sale of private health insurance across state lines.  Explaining, and independently rating our nation’s insurance plans on a single website for easy comparison will go a long way towards increasing competition and choice in America’s health insurance industry.  And that will reduce consumer costs.

The ACA exchanges will do for small business owners and individuals under the age of 65 what the “Ryan-Wyden Plan” proposes to do for seniors after Medicare becomes insolvent in 2024.  Both plans follow the principle that having a large, cost-conscious population purchase its health care through subsidized, means-tested exchanges will provide the most health care to Americans for the least public cost. 

Ultimately, these insurance exchanges should be standardized marketplaces for easy comparison – much like what we find in the travel industry.  Variety should be encouraged, but no minimums should be set.  For example, the Exchange website should include “mini-med” insurance plans – plans offered to part-time or low salary workers with caps on lifetime benefits and limited “extras” but very real coverage for a large number of common ailments.  The 1,231 companies incapable of, and temporarily waived from, providing “minimum essential benefit” plans are evidence of how unrealistic it is to mandate minimum standards.

Similarly, mandating that health insurance companies attain minimally acceptable Medical Loss Ratios (MLRs) – the measurement of how much an insurance company spends on administrative costs – in order to participate in the exchanges is a bad idea; but publicizing each company’s MLR on the Exchange website is a good idea.  The MLR should be just one factor in a consumer’s purchase decision.  After all, insurance companies spend some of their administrative money on combating fraud, abuse, and billing errors – something we should never discourage them from doing.  If an insurance company has relatively high administrative costs, then potential customers can ask them why.  If they don’t like the company’s answer, they can purchase a competing plan.

The ACA has some other features worth keeping such as using subsidized high risk pools to insure folks with pre-existing conditions.  At the same time, however, healthier people should have the option of purchasing high-deductible, “catastrophic” insurance, while withholding as much income as they wish in tax-favored personal Health Savings Accounts to pay for their more routine medical care.

Also, most Americans agree with keeping children under the age of 27 on family policies and continuing to prohibit “rescissions.”  Prior to the ACA, health insurers could rescind a patient’s insurance policy if they discovered an alleged misrepresentation in the patient’s initial insurance application, even if that misrepresentation was just an honest mistake or an administrative omission. 

Tackling the high cost of defensive medicine is critical too.  Fortunately, unbeknownst to many, the ACA funds five-year demonstration grants to states to “develop, implement, and evaluate alternatives to current tort litigations” and enhance patient safety by reducing medical errors and “adverse events.”  If we can get real tort reform and reduce medical errors, then waiting five years is worth it.

One clearly needed deletion is the Independent Payment Advisory Board (IPAB).  Medicare spending should not be left in the hands of unaccountable, unelected bureaucrats whose only tool for lowering health care costs is the imposition of price controls on providers.  This will inevitably lead to rationing as providers begin dropping out of the system.  If decisions must be made to limit health care services, then priorities have to be set by Congress, where the legislators have something to lose if they make indefensible decisions.   

Calls for repealing and/or de-funding the ACA will become louder after Republicans likely regain a majority of seats in the Senate this November.  So America would do well to elect a few Republicans ready and willing to craft constructive replacement legislation.  With 77 million baby boomers beginning to retire, America’s future depends on getting this issue right.

Larry Smith
Timonium, Maryland

February 8, 2012