Where health care may be going.

UPDATE: I posted this as much for myself as for others to read. Today, Peggy Noonan weighs in. In case this is behind the paywall, here is her conclusion.

Even though it’s huge, and those who are reporting the story every day are, by and large, seasoned and have seen a few things, no one seems to know how it will end. Because it’s new territory. Does anyone believe the whole technological side can be fixed quickly? No. The president may eventually accept a brief delay in implementation—it is almost unbelievable that he will not—but does anyone think that the economics of the ACA, the content as set out and expressed on the sites, will flow smoothly, coherently, and fully satisfy the objectives of expanding health-insurance coverage while lowering its cost? You might believe that, but early reports of sticker shock, high deductibles and cancelled coverage are not promising. Does anyone think the president will back off and delay the program for enough time not only to get the technological side going but seriously improve the economics? No. So we’re not only in the middle of a political disaster, we’re in the middle of a mystery. What happens if this whole thing continues not to work? What do we do then?

This is the Titanic, folks.

I have watched the failed rollout of Obamacare this past three weeks and wondered where it was going. I have some suspicions. There is a lot of talk about delaying the individual mandate, as Obama did with the employer mandate. Megan McArdle has a post on this today. I think it is too late to fix or delay Obamacare.

With Nov. 1 storming toward us and the health insurance exchanges still not working, we face the daunting possibility that people may not be able to sign up for January, or maybe even for 2014. The possibility of a total breakdown — the dreaded insurance death spiral — is heading straight for us. The “wait and see if they can’t get it together” option no longer seems viable; we have to acknowledge that these problems are much more than little glitches, and figure out what to do about them.

She has already described the insurance death spiral. I think it is here.

Am I exaggerating? I know it sounds apocalyptic, but really, I’m not. As Yuval Levin has pointed out, what we’re experiencing now is the worst-case scenario for the insurance markets: It is not impossible to buy insurance, but merely very difficult. If it were impossible, then we could all just agree to move to Plan B. And if it were as easy as everyone expected, well, we’d see if the whole thing worked. But what we have now is a situation where only the extremely persistent can successfully complete an application. And who is likely to be extremely persistent?

Very sick people.

People between 55 and 65, the age band at which insurance is quite expensive. (I was surprised to find out that turning 40 doesn’t increase your premiums that much; the big boosts are in the 50s and 60s.)
Very poor people, who will be shunted to Medicaid (if their state has expanded it) or will probably go without insurance.

Levin points out: It is now increasingly obvious to them that this is simply not how things work, that building a website like this is a matter of exceedingly complex programming and not “design,” and that the problems that plague the federal exchanges (and some state exchanges) are much more severe and fundamental than anything they imagined possible. That doesn’t mean they can’t be fixed, of course, and perhaps even fixed relatively quickly, but it means that at the very least the opening weeks (and quite possibly months) of the Obamacare exchanges will be very different from what either the administration or its critics expected.

The insurance industry is already reacting to Obamacare and this will quickly become irreversible. This article is from September.

IBM, Time Warner, and now Walgreens have made headlines over the past two weeks by announcing that they plan to move retirees (IBM, Time Warner) and current employees (Walgreens) into private health insurance exchanges with defined contributions from employers.

The article calls it “maybe a good thing” but that supposes the exchanges will function. What if they don’t for a year or more ? What will health care look like in November 2014 ?

What happens next — as we’ve seen in states such as New York that have guaranteed issue, no ability to price to the customer’s health, and a generous mandated-benefits package — is that when the price increases hit, some of those who did buy insurance the first year reluctantly decide to drop it. Usually, those are the healthiest people. Which means that the average cost of treatment for the people remaining in the pool rises, because the average person in that pool is now sicker. So premiums go up again . . . until it’s so expensive to buy insurance that almost no one does.

Will that be apparent a year from now ? I’m sure the administration, and the Democrats, will do almost anything to avoid that. What can they do ? They’ve already ignored the law to delay the employer mandates. It’s too late to delay the individual mandate because individual policies are being cancelled right now.

Health plans are sending hundreds of thousands of cancellation letters to people who buy their own coverage, frustrating some consumers who want to keep what they have and forcing others to buy more costly policies.

The main reason insurers offer is that the policies fall short of what the Affordable Care Act requires starting Jan. 1. Most are ending policies sold after the law passed in March 2010. At least a few are cancelling plans sold to people with pre-existing medical conditions.

By all accounts, the new policies will offer consumers better coverage, in some cases, for comparable cost — especially after the inclusion of federal subsidies for those who qualify. The law requires policies sold in the individual market to cover 10 “essential” benefits, such as prescription drugs, mental health treatment and maternity care. In addition, insurers cannot reject people with medical problems or charge them higher prices. The policies must also cap consumers’ annual expenses at levels lower than many plans sold before the new rules.

But the cancellation notices, which began arriving in August, have shocked many consumers in light of President Barack Obama’s promise that people could keep their plans if they liked them.

The assurance about “comparable cost” is weak but, after all, this is the Huffington Post.

Ignoring for the moment, the issue of pre-existing conditions, what can consumers do?

The growth of cash only medical practices has been an interest of mine for some time. My first post on this is from 2009.

Most family doctors will convert to a retainer-type practice within the next 15 or 20 years, said Dr. Christopher Ewin, president of the nonprofit Society for Innovative Medical Practice Design in Fort Worth, Texas.
‘‘We believe that there is a primary care problem in this country,” said Ewin, a primary care physician. ‘‘We have been working for the wrong employer for way too long — the insurance companies and the government.”
Ewin’s retainer practice, he said, reduces the cost of an MRI from about $1,500 to $500. Laboratory blood analysis that would normally cost $300 through insurance costs $33.
That’s a quote from my 2009 post.

I added another post in 2010. This is one model.

Take DocTalker Family Medicine. This is the Virginia medical practice of Dr. Alan Dappen. Patients can schedule an in-office appointment or even request a house call, but about half of his consults are by e-mail or telephone.

Like an attorney, Dappen bases his consultation fees on the amount of time required. All patients must have an initial face-to-face consultation to establish care. There is no membership fee, but patients who prepay $300 annually receive a discount of about 25 percent. Each five-minute phone consultation or e-mail consultation costs $25. Nonmembers can buy services a la carte for $33.33 per five-minute block after a $150 initial check-up.

The office does not bill insurance companies for services, but most patients can easily file their own claim. Patient records are kept electronically for easy access.

There have been new developments . This from 2013.

The major reform listed in the white paper is unlikely to appear with Democrats in power. What will happen now ?

Here is one suggestion.

But just because millions of Americans refuse to get ObamaCare-qualified coverage doesn’t mean they will be uninsured. There are policies available now that would work very well for the ObamaCare avoiders.

Some of these policies are built on a life insurance platform rather than health insurance — which, incidentally, means they are outside ObamaCare’s long arm of regulatory control.

The customer buys a life insurance policy that pays up to $250,000 upon death, which I believe is the current maximum available for this kind of policy.

Along with life insurance coverage the policy includes what’s called a “critical illness” component. If the policyholder needs, say, surgery, the insurer writes the policyholder a check based on a schedule. Let’s say, for example, it’s $10,000.

I think this may become more important as Obamacare implodes. What about the poor? They always have Medicaid. Until it runs out of money, of course. Dick Durbin, last Sunday, said that Medicare will run out of money in ten years. Now, notice that link is to Daily Kos. They are prominent members of the “no consequences” team.

DURBIN: That’s right. I do, and I’ll tell you why — because Social Security is going to run out of money in 20 years. I want to fix it now, before we reach that cliff.

Medicare may run out of money in 10 years, let’s fix it now. And that means addressing the skyrocketing cost of health care. That’s what ObamaCare is focused on, and yet, the Republicans want nothing to do with it.

Kos, of course, has the real solution.

That solution is for the Executive Branch to use its Platinum Coin Seigniorage (PCS) authority under 31 USC 5112(k) and 31 USC 5136 to mint a single proof platinum coin each year to cover any shortfall between FICA revenues and spending on Social Security and Medicare. If that were done annually in advance, based on short-term projections, then there would be no further depletion of the “trust fund” credits, and no further political issue of Social Security and Medicare insolvency.

There you go. Magical thinking in all its glory.

What is more likely to happen ?

One, I think cash medical practice will grow and, with the failure of Obamacare, the feds will be unable to ban it.

Two, more vehicles like the “critical illness” option in life insurance will grow. This will provide a realistic indemnity program to pay for major illness or surgery.

Three, more doctors will drop out of insurance, or insurance will disappear. Cash practice will return medicine to the era of low overhead and personal care. That will care for the upper middle class and the movement may expand. A big problem will still be student loans. I asked my six medical students last week how many were using loans for tuition. All raised their hands.

A potential for the poor might be large clinics, like we had before Medicare and Medicaid. New graduates could agree to work in such clinics after their training, or it could even be incorporated in training. Forgiveness of student loans could be a large incentive. Also tuition has gotten too high and something must be done. France has free medical education. One of my students has experience with this and said that there is a severe pruning practice. Students with low grades are dropped. When I began my studies in engineering, the professor told us the first week, “Look at the student to your right, to your left, in front and behind you. At the end of the year, only one of you will still be here.” I don’t think that happens any more. Too much tuition at stake.

My predictions may be far too pessimistic but I don’t think Obamacare will be fixable. The employer mandate comes next year. Individual polices are, by and large, money losers for insurance companies. They really don’t want to be in the health insurance business. They far prefer to be “Administrative Service Organizations.” That is, they administer a self funded, as in employer funded, health plan. They determine coverage and “medical necessity” then send the monthly bill to the employer. They supported Obamacare because they expected to send the monthly bill to CMS. Right now they are shedding the unprofitable individual polices. That won’t stop and is not reversible.

We need to be thinking about what comes next. It just might be a market based approach.

I guess I should add that this is not what I would have recommended if I were suggesting reform from scratch. I have several posts on that at my blog. This is what I think will happen.

7 thoughts on “Where health care may be going.”

  1. One thing that we can do is to insist on getting objective procedure codes and create price shopping books so that non-emergency care can shift to the lower cost providers. The problem has been that the CPT code book is under copyright to the AMA. Now we’re starting to switch to ICD 10 PCS whose copyright is held by the WHO and they don’t charge for usage. Unfortunately only inpatient codes are shifting over to ICD 10 PCS and outpatient is staying with CPT so somebody needs to figure out a legal way to get the prices out so that frugal people can get the best deal possible.

  2. Ironically, the original code book, called “Relative Value Scale,” was developed by the California Medical Association in the 1940s. Then, shortly after I began practice in the 1970s, it was banned by the FTC as price fixing. It didn’t set prices at all. It just listed the relative value of procedures. The doctor then decided the value of the RVS unit. At the time, Medicare required that billing be done in RVS units. We all had to xerox the books so we could use the units. So, we were using books banned by the feds to bill a federal program that required their use.

    Somehow the AMA wound up with the rights to use the RVS which became the CPT. I have always been suspicious of the AMA since I was a delegate and attended annual meetings. Other surgeons who were involved in AMA things wanted more surgeons involved but it was always anti-surgeon and focused on GPs. I hasn’t done them any good that I can see.

  3. An update on the future might be found here.

    The family of a woman who vanished from her San Francisco hospital room and was found dead 17 days later in an emergency stairwell is angered by reports that a hospital employee stepped over her several days before the body attracted the attention of investigators, family representatives said.

  4. Will this be what Obama’s terms in office are remembered for? Like Carter’s crashed helicopters, Nixon’s Watergate, Clinton’s sexual antics, and so forth: he’ll be remembered for a law, popularly named after himself, that was the quintessence of folly and incompetence. Given that he is not the legislature, is it fair? Oh yes.

  5. Oh, yes – that and Barry-cades. He who dealt it has to own it, no matter what the public affairs division (also known as the establishment media) will do in his defense.

  6. I’ve changed employers but without pricing their health insurance plan – they hid that from me. So when my former employer’s plan goes away for my family February 2014 (at a monthly premium of $350), the new employer’s plan is offered at $2,800 a month.

    The new company also announced that they would no long offer their employees health insurance after December 2014 because Obamacare would take care of us.

    Needless to say, that increase costs more than the raise I got from changing jobs.

    Am I pissed? I have yet to explain this to my wife who will freak.

  7. My theory is that this is all going according to plan. After all, this is the fastest way to the collapse of all other insurance carriers and get to single payer. So under this scenario it makes it mandatory to award the website development contract to the agency most likely to screw it up.

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