Sunday night I was having dinner with friends while the House was preparing to vote on the health care reform bill. At one point during the evening, someone asked me, “So what does it mean if it passes?” I realized that she wasn’t interested in knowing all of the procedural things like the reconciliation bill that had to go to the Senate, etc, etc. etc. Rather, she wanted to know how life was going to change. I also realized that this was not a question that I could be answered quickly. The short answer I gave was that not much will change right away except for some insurance reform. The real changes won’t kick in until 2014 or after. My quick response sparked the loaded question, “So what will things look like in 2014?”
To answer that question, I want to explore some of the possible scenarios that could arise further down the road. I want to state up-front that no one can be entirely sure if any or all of these things will happen. I’m not trying to cry that the sky is falling, but I do want to explore some of the possible scenarios that could occur as a result of health care reform legislation now becoming law.
With this in mind, let’s take a peak into the future. Let’s fast-forward to the year 2015 since this is the year that much of the health care reform bill will likely be implemented. There will be a great deal of change, as both the insurance and health care market places will still be adjusting to the new realities of universal health care. Let’s explore how I imagine our lives will be different.
Coverage: With the expansion of Medicaid and the incentives and penalties in the reform act, it is true that many more people will be covered. The uninsured number will drop from 40 million people to about 10 million people. However, the number of people covered by Medicaid will increase significantly, which will be the cause of much anxiety for state budgets that are already strapped.
Insurance Reform: In the year 2015, things like pre-existing condition exclusions will be considered a thing of the past. That’s great news, right?! Well, sort of. President Obama made it very clear in 2010 that we needed insurance reform. Stories of people being denied coverage for pre-existing condition exclusions, coverage being dropped because someone got sick and other despicable “insurance tricks” were broadcast all over the news. Insurance reform seemed like the one thing that everyone could agree on. But here’s the catch -- what wasn’t widely publicized throughout the health care reform debate is the fact that less than 50% of the people covered by health insurance through their employer would actually benefit from this insurance reform. Here’s why: since most large employers are “self-insured,” these particular plans are not technically “insurance,” and therefore they are not governed by this new sweeping insurance reform legislation. In order to compete in a difficult economy, the large, self-funded employers will likely still engage in many of the same controversial practices that health care reform was supposed to get rid of. That means that the very things that the public railed against and thought would be eliminated…really won't be.
What about premiums? Unfortunately, premiums for health insurance will increase dramatically. This is due to a combination of reform measures that will increase the cost of insurance. This will trigger a mass exodus of medium-sized employers who will switch from offering their employees fully insured plans to offering only self insured plans. This will leave only small employers in the pool of insured business. By 2015, the health insurance companies will be paying an annual fee of $11.3 billion dollars to the government to help finance the expansion of coverage contained in the legislation. So how is this annual fee going to be paid? The insurance companies will simply pass the fee onto their customers in the form of premium increases. With increasing premiums, more and more employers will begin to drop their coverage and choose to simply pay the fine, which will cost significantly less than the cost of the premium. As a result, many individuals will be forced into the insurance market. Many of these people will be forced to weigh the same choice: to buy the coverage or to pay the fine for not having coverage. Of course, we already know that the fine will cost the individual much less than the actually purchase of coverage.
Insurance Companies’ Reactions: With the passing of insurance reforms and the provisions of the bill that allow the federal government to regulate profits of the insurance companies as well as the new “fees” that are placed on health insurance companies, many large insurance companies will begin dropping their commercial licenses. Why, you ask? Imagine this scenario: United Healthcare starts the trend with an announcement that they will begin giving up all commercial insurance licenses and will focus exclusively on the self-insured business. The United Healthcare CEO explains that under the new reform regulations, profitability for fully-insured plans is not likely. He also explains that while this will mean a loss of about 30% of their membership, it will actually increase their profits. Wall Street will react favorably to the United Healthcare announcement and their stock will go up 10%. Upon seeing this, CIGNA, Aetna and Humana will quickly follow the same example. This will leave most states with only the local BCBS plan as an option for small employers and individuals. Now, this is only a make-believe scenario, but can you imagine if it were true?!
Medicare Advantage Plans: With the reduction in profits for Medicare Advantage Plans, most insurance companies will begin leaving this market as well. With such a significant reduction in profits, there isn’t much left to incentivize them to stay in the market. Can you really blame them for leaving? Medicare Advantage plans have become a little like playing Black Jack in Vegas with no payout if you win. If there is no way to win, why play? By 2015, the concept of a Medicare Advantage Plan may be as much a thing of the past as pre-existing condition exclusions.
Health Care Exchanges: We have been told that with the exchanges up and running, things will fall into place, and we will have the ideal market place that was designed to give everyone the same kind of purchasing power and choices that federal employees have. Right? Unfortunately, it doesn’t quite work out this way. Here’s what will likely happen: the large national plans will give up their commercial HMO licenses as there will no longer be anyone left to compete in the exchanges. These exchanges will include the local BCBS plan and in some cases a small local HMO. The lack of competition will mean that the cost savings projected from the exchanges won’t materialize, and premiums will continue to inflate faster than CPI. It’s certainly a far cry from all of the talk about creating more choice and competition, right?
Medicare: Over the next few years, t will become obvious that health care reform is simply not able to control Medicare spending. Medicare costs will continue to increase at a rate that simply isn’t sustainable. To counter this, the new Medicare Czar and the new Commission will begin implementing cost control measures that will not be very popular. The first step will likely be small decreases in the fee schedules that Medicare pays to hospitals and doctors. Next, I imagine that more utilization management and fraud and abuse programs will also begin to sprout up. Finally, when it becomes obvious that these actions are still not going to be enough, the Commission will begin implementing a series of “benefit limitations” that will quickly become recognized for what they are -- rationing. Yes, I said rationing.
Physician Reactions: Doctors across the country will be faced with significant decreases in their income, so they will begin making adjustments to their practices. First, there will probably be a significant limiting of Medicaid. Most doctors will either accept a very small amount of Medicaid or none at all. So at a time where the Medicaid rolls are growing, there will be fewer and fewer doctors who can afford to treat these patients. Not long after this will be the move to limit or eliminate Medicare from many practices. Doctors will begin looking for ways to limit the amount of Medicare they see and many practices will start eliminating Medicare from their practice all together. This will all be the result of a Medicare program with decreasing fee schedules and increasing administrative costs and hassles. Finally, doctors will start developing a second track of concierge-type health care which means that if you have money, you get to see the doctor faster, and you will have access to more testing and procedures.
If the above scenario rings true, it is likely that we will face a severe shortage of American health care providers as a result of this reform. Many doctors will choose to retire early. The number of students enrolling in medical school will begin to decline, as the salary clearly does not match the job description. The reduction in the supply of physicians combined with the increase in demand now that 30 million people have been added to the insured population will put a significant strain on the health care delivery system. And of course, appointment wait times will increase significantly. This will result in an increase in the utilization of emergency rooms across the country which negates much of the expected cost savings projected by the CBO back in 2010.
All of this will lead President Obama, in the last half of his second term, to push for universal coverage in the truest sense of the word. He will argue that the current system has failed us again and that the only answer will be to cover every American with Medicare. In one move, the entire insurance industry could be eliminated altogether. Speaker Pelosi of course will agree with the President, and they will demand that legislation be drafted immediately. Welcome to socialized medicine, folks.
Of course, the aforementioned scenario is all fictitious. Or is it? When you tell yourself that none of this could possibly happen, I would remind you to look back five years. In 2005, the federal deficit was $318 billion dollars and the unemployment rate was only 5%. This was post 9/11, and both figures were considered to be disappointing. Today, five years later, the projected federal deficit is $1.5 trillion dollars, or five times that of 2005, and unemployment rate is projected to be double that of 2005, or 10%. Back in 2005, if someone had told you that the deficit would be five times higher in just five short years and that the unemployment rate would double, you probably would have thought that scenario to be fictitious too!
My last thought to leave you with is this: while I have said all along that something needs to be done about health care, I wonder if this cure will actually end up being worse than the disease?
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