More and more Americans are beginning to see the future and many are beginning to question whether they like what they see. We refer, of course, to the likelihood of the entire healthcare system evolving inexorably toward a single payer paradigm. The Affordable Care Act, not affectionately referred to as ObamaCare, which last month was upheld by the Supreme Court has, buried within the bowels of its nearly 3,000 pages and the additional thousands of pages of regulations that are only just beginning to emerge, an assortment of proverbial poison pills for those who believe in a market-based, private health care system.
Within a relatively few years, perhaps a decade, we believe ordinary everyday medical care will, before you can say, “if you like your current plan you can keep it,” lie in the hands of a single payer — the government. Many on the left will be pleased (and not altogether surprised) while many others will wind up scratching their heads and asking, “just how did this happen?” So, let’s answer that question now rather than wait until private health insurance is but a distant memory.
Here are the drivers that we think will shift the country to a one-size-fits-all, single-payer system. ObamaCare has now added 17 million low-income Americans to the 60 million currently covered by Medicaid. ObamaCare also provides substantial additional federal subsidies through tax credits for everyone earning less than 400% of the federal poverty line (FPL = $92,280 for family of four). This subsidy, in effect, limits premiums for private health insurance, as a percent of income, from 2% at the low end to 9.5% at the high end ($92,280 annual income for family of four). As Chief Justice Roberts observed, “Under the Affordable Care Act, Medicaid is transformed into a program to meet the healthcare needs of the entire non-elderly population with income below 133% of the poverty level” (and it also subsidizes individuals and families earning between 133% and 400% of the federal poverty line) as it provides “an element of a comprehensive national plan to provide universal health insurance coverage.”
While the court struck down the government’s attempt to withhold Medicaid funding from those states that do not accept this new expansion of Medicaid, the court left the expansion itself in place. So now a much larger segment of the non-elderly population falls within the purview of federally funded Medicaid. It is important to understand just how large a population is encompassed within that new 400% of poverty line threshold. Nationally, about 42 million individuals (or 14.3% of the population) are between 300-400% of the federal poverty line.
Additionally, the reader will recall as we opined in last week’s essay that a large swath of private companies soon would probably cease providing health insurance coverage as they begin losing (next year) their grandfathered status, which presumed to protect them from penalties (taxes), which will result in substantial increases in cost. Dan Elling, staff director for the House Ways and Means Subcommittee on Health, put it this way: “There’s a small business owner with 58 employees from Missouri who runs a property casualty insurance business. He would be able to save $300,000 in 2014 alone by dumping his health insurance, and paying a $2,000 penalty (now formally recognized as a tax) under the employee mandate, and ship all this cost to the taxpayer.
Additionally, we believe it is likely that the tax reform that must take place very soon if we are to avoid the proverbial fiscal cliff that everyone recognizes is staring us in the face will probably include a phasing out of the tax deductions (as recommended by Simpson-Bowles) that private companies receive for providing company sponsored health insurance. This will, by definition, throw tens of millions more workers onto the federal subsidy system and/or the new government-constructed, utilitized insurance exchanges which, with the constraints placed on them by ObamaCare, will slowly fail and morph into a federal, single-payer system or a multitude of state-run, single-payer systems as is the case in Canada. Private health insurance is also going to lose more and more customers as the baby boomer generation explodes into Medicare coverage. Our expectation is that over a fairly short period of time everyone will either have been channeled into Medicare because of his or her age, or Medicaid because ObamaCare will have shriveled the private health insurance industry into oblivion.
On a recent segment on Fox News hosted by former Governor Mike Huckabee, ordinary people weighed in on the choices that are confronting them as a result of the loss of Health Savings Accounts and Medical Advantage options. Prior to Obamacare a family could set aside an amount of money from which to draw at their own discretion for that trip to the doctor or to the emergency room. Let us remember the President’s famous statement “Nothing will change. You will keep your doctors, you will keep your health insurance plans.” Both are untrue.
Other individuals are starting to worry about whether their family doctor will remain in practice. Some family doctors have sent out retirement notices or have decided that they are going to go out of the primary care business and specialize in certain surgical procedures where they will be better reimbursed.
The Physicians Foundation commissioned an extensive survey of thousands of medical practitioners to assess how ObamaCare will affect how physicians practice in the United States. The findings are not reassuring. The study found that the emerging reform of health care would have a transformative effect on the practice of medicine in the United States. The Affordable Care Act will, according to the Physicians Foundation, usher in substantive and lasting changes. Among them:
- The independent, private physician practice model will be largely, though not uniformly, replaced.
- Most physicians will be compelled to consolidate with other practitioners, become hospital employees, or align with large hospitals and health systems for capital, administrative and technical resources.
- Emerging practice models will vary by region—one size will not fit all. Large, Accountable Care Organizations (ACOs), private practice medical homes, large independent groups, large aligned groups, community health centers (CHCs), concierge practices, and small-aligned groups will proliferate.
- Reform will drastically increase physician legal compliance obligations and potential liability under federal fraud and abuse statutes. Enhanced funding for enforcement, additional latitude for “whistleblowers” and the suspension of the government’s need to prove “intent” will create a compliance environment many physicians will find problematic.
- Reform will exacerbate physician shortages, creating access issues for many patients. Primary care shortages and physician maldistribution will not be resolved. Physicians will need to redefine their roles and rethink delivery models in order to meet rising demand.
- The imperative to care for more patients, to provide higher perceived quality, at less cost, with increased reporting and tracking demands, in an environment of high potential liability and problematic reimbursement, will put additional stress on physicians, particularly those in private practice. Some physicians will respond by opting out of private practice or by abandoning medicine altogether, contributing to the physician shortage.
- The omission in reform of a “fix” to the Sustainable Growth Rate (SGR) formula (which arbitrarily limits the yearly increase per Medicare beneficiary to the growth in GDP) and of liability reform will further disengage doctors from medicine and limit patient access. SGR is unlikely to be resolved by Congress and probably will be folded into new payment mechanisms sometime within the next five years.
Some 2,400 physicians who responded to the survey indicated ways in which they may alter their practice plans in the next one to three years as reform is implemented.
Key findings of the survey include:
- The majority of physicians responded unfavorably to passage of health reform.
- The majority of physicians believe health reform will increase their patient loads while decreasing the financial viability of their practices.
- The majority of physicians plan to alter their practices patterns in ways that will reduce patient access to their practices, by retiring, working part-time or taking other steps.
- Physician practice styles will be increasingly less homogenous. The full-time, independent practitioner accepting third party payment will largely be supplanted by employed, part-time, locum tenens (substitutes such as nurse practitioners or physician assistants) and concierge practitioners.
We are on the verge actually of having two levels of medical care in America. We will have concierge level medical care for wealthy people who can afford to pay a monthly retainer to the best doctors, go see them when they want to, and have virtually no waiting time. Everybody else could find himself or herself lined up in long lines to see the doctors who are left in practice and it may be quite a long wait. Doctor after doctor is saying that he or she cannot afford to stay in business when the government reimburses them at a rate that is less than what it costs to actually perform the service. You cannot sell a $1.00 commodity and get reimbursed $.50. Those who do buy health insurance while it is still available will find that insurance is going to increase in cost. That means a bigger percentage of their income will go to health care premiums. Could we actually expect anything different? After all, insurance companies work off of actuarial tables with which they calculate the risk involved in the coverage they provide. If they pay out more than they take in they go out of business and then, eventually, no one will have insurance. They have to factor in the risk of keeping on the family policy all children up to age 26, as well as covering all pre‑existing conditions (with the exception of tobacco caused illness) while being prohibited from pricing the greater risk into the premiums they charge. Exchange-approved private insurance companies will also be required to keep all SG&A (Sales, General and Administrative) costs including profit to no more than 15% of premium revenue. The only payer who will be able to keep paying out is apt to be the government.
Where is this all headed? It is headed, we suspect, exactly where the President always intended it to head. That is, toward a single payer system or, less euphemistically, socialized medicine. The President and his Democratic allies in Congress have taken the most advanced medical system in the world and put it on the road to socialized medicine. It is a road well traveled throughout much of the world and it is the main thoroughfare to the world of entitlements. The President and his acolytes have largely achieved what they have wished for. For everyone else, it may soon be time to ponder the ancient Chinese proverb: “Beware of what you wish for.”