Bad Ideas Made Worse By Unintended Consequences

Stanley Feld M.D., FACP,MACE

I love when someone has great innovative ideas that have a chance to be
effective. I dislike ideas that anyone using common sense can see it is going
to fail.

President Obama is trying to set up health insurance exchanges in all 50
states.

Common sense tells us the exchanges will not work. They are counter to
stakeholders’ vested interests. They are trying to force stakeholders into
doing something they do not want to do. Health insurance exchanges will be
unmanageable. The costs will be uncontrollable. They will lead to waste and
fraud and abuse.

Government’s role should be to level the playing field for all
stakeholders and then get out of the way.

America’s healthcare system needs innovations that inspire the
healthcare industry to be competitive and efficient.

What are the specific problems with health insurance exchanges?

Health insurance exchanges were supposed to be operational by October
2013.  Only preliminary rules have been
published to date.

The states are not anxious to be subject to federal controls that
challenges state rights and drives states deeper into debt.

The federal government is requiring full transparency from the states
while it is conducting all of the setup work in secret.

Federal officials have disclosed little about their plans to the states
or the press. They have been vague about the financing for the health insurance
exchanges.

The Obama administration has stated that if states decline to
participate in health insurances exchanges by December 15^, 2012
(postposed from August 15 to November 15 and now December 15) the federal government
will form its own exchanges for those states.

President Obama sold Obamacare to congress and the American people on
the basis that it was going to save $115 billion dollars in healthcare spending
in ten years. This number was calculated by the CBO on the basis of data
provided by the Obama administration.

The most recent CBO estimate using recent data is that healthcare
spending will increase by $2.5 trillion dollars over the next ten years.

Obamacare does not permit federally operated exchanges to provide
subsidies to enrollees that the enrollees would be eligible for in state
operated exchanges.

This provision was included in the law to encourage the states’ creation
of exchanges. States would then receive additional money from the federal
government.

The administration did not anticipate so many states would refuse to
participate.

Sarah Kliff wrote for the Washington
Post: wrote that there are many other problems
facing the health insurance exchanges.

“After people become aware of benefits, the health exchange faces its
biggest challenge: Figuring out who is eligible for what. In many states those
who earn less than 133 percent of the Federal Poverty Line are eligible for
Medicaid — except if the state has already extended benefits to an even higher
level, as 35 states have for children.”

“There may be different family members eligible for different programs,”
says Sam Gibbs, vice president of sales at eHealthInsurance. “There needs to be
a technology system that can support that activity, and look at multiple
programs for multiple people.”

A state can’t figure out how much an individual earns on its own. For
that, it needs to ping a federal data hub that does not yet exist.

The problems with President
Obama’s health insurance exchanges are worse. The exchange subsidies will vary
by income and family size. A federal agency does not exist that can tell a
family’s current income. It takes the IRS at least a year and a quarter to
determine last year’s income.

Family income can vary
substantially from year to year. 
Families have to pay healthcare insurance premiums based on what they
earned over a year ago. The breadwinners might be unemployed and required to
pay an unaffordable premium.

The federal government does
not seem to have developed its plans for a federally run health insurance
exchange. It looks as if the federal government’s plan was to stick the costs
and administration on to the states even though it promised to pay for the fist
two years.

Its goal was to force
states to do what the federal government wants them to do. Running a health
insurance exchange will be at great cost to the states and state budget
deficits.

The health insurance
exchange development is a mess. The real threat lies in its execution and
implementation.

It will be surprising if
they are operational by January 2014. The cost overruns will be astronomical.
They are already substantial. The unintended consequence will escalate.

In order to pay for the
exchanges President Obama’s administration just announced a 3.5% tax on every
premium sold by a healthcare insurance company. The result will make insurance
less affordable.

The original announcement
was revised. The 3.5% premium tax would only apply in states that did not have
state health insurance exchanges.

 The announcement sounds like a little power
play by the Obama administration.

The healthcare insurance
companies will simply pass the tax on to consumers with increased premiums.

The increase will have no
effect on the profitability of the healthcare insurance industry.

The government should enforce
the new Medical Loss ratio of 80/20. Eighty percent  of healthcare premiums should go to direct
patient care.

The government should not
permit help desk expenses and physician network development expenses to be
charged to direct medical care.

The government should
change the accounting rules. The formula for counting unpaid liabilities as
direct medical care expenses is outrageous. Much of these reserves are medical
reimbursement are the remains of discount fees have been  paid to providers already for direct patient
care.    

There are many other
categories of expenses that should not be included in the 80% of direct medical
care.

The federal government
needs the healthcare industry to adjudicate claims and perform all of the
administrative services for all the government funded healthcare services.
Government accounting for its own overhead does not include the fees charged by
the healthcare insurance industry to provide these services.

There is so much the public
does not know about how Medicare and Medicaid money is spent. If the government
were transparent it would let the people know what the defects are and then
force government to fix them.

Apparently President Obama
prefers to go deeper in debt.

All the stakeholders are
villains and take advantage of the healthcare system. The healthcare insurance
industry is the worst villain. Health insurance exchanges will not cure this.

They will make it worse. 

 

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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