Part one of this series, which focuses on the uninsured rate, can be found here.
The arguments for what would eventually culminate into Obamacare revolved around two main desired goals: improving accessibility and affordability.
In the first installment of this series, we examined the question of coverage, explored reasons for why Texas has such a high uninsured rate, and illustrated that health insurance or enrollment in a government program like Medicaid does not paint the entirety of America’s healthcare picture.
Indeed, a significant aspect of that picture is the latter point: affordability.
The cost of healthcare (a burden felt primarily by consumers and taxpayers) has continually risen at a significant rate over the years. Numbers from the Kaiser Family Foundation show the amount spent on healthcare in America increased by almost 128 fold from 1960 to 2017.
These exponential increases, in the minds of some policy experts, necessitated a government-regulated system intended to decrease the individual cost burden by essentially creating one big cost-sharing exchange that forced the healthy to subsidize the sick and poor.
This was Obamacare.
The program did not go as planned and faced numerous problems — starting right off the bat with the website’s failures during the 2013 rollout.
A 2017 study by the Department of Health and Human Services found that from 2013 to 2017, following Obamacare’s implementation, premiums doubled nationwide. In Texas during that timeframe, premiums increased 82 percent on average — a staggering impact for many individuals and households.
A number of studies have shown that the main driver of those premium increases is the Obamacare insurance regulations — specifically guaranteed issue and community rating — which are popularly known as the “preexisting conditions” mandates. These regulations effectively forced insurers to implement a one-size-fits-all approach to their plans.
While the drastic increase in premiums has slowed or even decreased a bit recently, that has not been the case for those ineligible for the subsidies (i.e. those in the middle-class making 400 percent and above the federal poverty level).
Based on the average subsidy ($500 per month) and the average monthly cost ($600), those individuals just above the subsidy cutoff bear an extra $6,200 burden than those just below.
That is an extreme financial impact for those on the margin, equivalent to an entire year’s worth of money spent by Dallas-area households on food.
On a macro-scale, the Congressional Budget Office (CBO) estimates that federal healthcare subsidies in the Obamacare exchanges, Medicaid, CHIP, Medicare, and the employer market will cost $737 billion this year and reach $1.3 trillion in the next decade.
Chris Jacobs, president of Juniper Research Group and conservative healthcare analyst, pointed to this reality as an area of significant concern in America’s healthcare system.
“We must bring down the underlying cost of care, which involves getting incentives right in the system,” he told The Texan. “Enrollment on the [Obamacare] exchange has gone down — so it’s not that people don’t want insurance, it’s that they’re being priced out of the market because of [Obamacare’s] insurance regulations.”
Jacobs identified a core problem with the incentives, saying, “Everyone does a great job of spending other people’s money.”
He warned against undercutting private coverage — a foundational tenet of proposals like “Medicare for All” — to increase the number of people on public options.
Jacobs again pointed to Louisiana as a cautionary tale.
After the state expanded Medicaid in 2016, an audit found thousands of people enrolled who should have been ineligible based on Obamacare’s criteria for the program — including over 1,600 people with incomes over $100,000 per year.
The negative consequence of that, Jacobs states, is spending taxpayer dollars on individuals who already had coverage — thus further clogging up the government’s closed-off market.
Anne Dunkelberg with the left-leaning Center for Public Policy Priorities has a different view of affordability. Progressives like Dunkelberg view the expansion of Medicaid as a means of reducing costs for states since the federal government foots the bill for 90 percent of the expansion population.
One example she provided was the Cook County Hospital in Chicago.
After the expansion of Medicaid, hospital administrators announced its revenues outnumbered its costs for the first time ever. They attribute that to a vastly higher percentage of their patients being enrolled in Medicaid and an increase in reimbursement revenue.
To this end, a 2015 study found that every uninsured patient using the emergency room costs hospitals about $900 on average to provide treatment. Where Dunkelberg points to Medicaid expansion as a means of alleviating this problem for providers and facilities, conservative analysts are looking to a different method altogether.
David Balat, director of the Texas Public Policy Foundation’s Right on Healthcare initiative and previously a 20-year hospital executive, told The Texan, “The uninsured rate matters because insurance is so expensive.”
Balat sees a problem with insurance companies handling the middleman role of financing between the doctor and patient. This also supplants the doctor-patient relationship, Balat suggests.
He says it’s difficult to discern what a service actually costs since all the patient sees is their copay and the doctor’s prices are inflated by costs incurred from the administrative side of dealing with insurance companies or government regulations — and in the case of Medicaid, the reimbursement rate has a cut-off.
Balat added, “The solution is increasing options and transparency, allowing patients to use their own money, and fostering an environment in which patients have a personal relationship with their provider.”
Essentially, Balat is an advocate for the direct primary care model that is rising in popularity among some providers and patients seeking lower costs outside government and insurer-driven systems.
The Trump administration just issued an executive order to enact guidelines for hospitals and other medical service providers to specifically list their prices, not just estimates.
A big advocate of this move and increased transparency is Cynthia Fisher of Patient Rights Advocate.
Fisher views the lack of transparency in pricing to be the elephant-in-the-room of America’s ongoing healthcare cost issue.
Out of network fees and balance bills (the difference between the provider’s charge and the amount permitted by insurance) can, and often do, result in surprise costs. But after switching to direct primary care providers, Fisher noted, “Employers found they were saving between 30 and 50 percent on healthcare costs for their employees.”
Not only that, Fisher elaborated, but “Employees were no longer in fear of going to the doctor but iteratively taking active care of their health.”
Fisher believes the current incentive structure is fueling the cost problem because, “Insurance companies are paid as a percentage of the total revenue spend of the employer — like a commission.”
Meaning, there is a profit incentive for insurance companies to pay significantly higher-than-market prices to improve their bottom line. Put simply, more money spent on healthcare premiums and deductibles equals higher profit for the insurance company.
In fact, some hospital systems utilize anti-steering rules which prohibit insurance companies from “steering” consumers to lower-cost options — forcing the higher cost on employers and employees alike.
Fisher then pointed to an example of a couple who negotiated a $7,000 birth with an alternative provider and then received an estimate of $42,000 from a conventional hospital right down the road.
“This model is really game-changing,” Fisher emphasized. She also stated she thinks the switch to this cost-saving approach will happen organically because employers and employees are tired of the “broken hospital system.”
A sample of this can be seen in Georgia with America’s largest employer: Walmart.
The Dallas, Georgia Walmart opened its first “Health Center” which lists out specific costs — not estimates — for its services. An annual checkup for an adult costs $30.
Compare that to the $50 to $200 average for the same service without insurance at a normal doctor’s office, and the Walmart model saves a substantial amount.
In fact, the price discrepancy between typical medical care facilities and direct care ones is often startling.
That’s half the cost without the hassle of insurance or government bureaucracy.
The Surgery Center of Oklahoma — which recently operated on The Texan’s own editor — also employs a similar direct care price model.
Some businesses have also opted for the direct primary care approach for their employees rather than the typical employer-provided or Obamacare exchanges. One such place is Rudy’s BBQ, headquartered in Lakeway, which cut its health care costs by 50 percent after switching to a local direct primary care doctor.
Currently, healthcare is in a state of facially private service strictly regulated by a vast bureaucratic machine comprised of big insurance companies and the government — financed by employers, employees, and taxpayers.
Free-market healthcare advocates like Jacobs, Fisher, and Balat promote a direct primary care system as a means of circumventing the burdensome cost and coverage issues plaguing Americans — much like what was in place before the Great Depression.
On the flip side, progressives such as Democratic presidential candidates Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) want to see a “Medicare for All” plan enacted.
Medicare is already estimated to cost $44 trillion over the next 30 years and is heading for official insolvency by 2026 according to CBO estimates.
The healthcare system’s status quo, as in 2009, is being reimagined — except this time the rethinking is occurring both on the political right and the left.
The direction things go will likely impact the accessibility, affordability, and care quality of our healthcare system — the lattermost we will examine in the final installment of this series.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad watching and quoting Monty Python productions.