Part VII – Fixing Obamacare. Restructuring the way we finance our Health Care System

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Health care reform is complicated, and given the current state of affairs; I doubt a solution to our health care crisis will happen anytime soon. However, we should be ready when the time comes, when change is politically possible.

The ACA was a great first step towards reforming our health care system, it isn’t perfect, but most of the provisions under the ACA are worth keeping. If we want ALL Americans to have affordable, quality health care some amendments to the ACA are necessary: 1.) Eliminate the premium subsidy tax-credit and, 2.) Expand Medicaid to everyone under 400% of the federal poverty level and open up Medicaid for everyone else to compete alongside private insurers (please read Part VI- Fixing Obamacare).

Affordable, quality health care for all Americans is of vital national importance, how we pay for it shouldn’t   be an issue. Is what I WAS going to write, until I realized that, in fact, one way or another, through higher premiums, taxes, or government subsidies, we already pay for it (the definition of IT being basic health care for the “ALL” American). A more accurate question might be – how do we restructure the financing of our health care system so that everyone has access to comprehensive health care?

Our current financing method involves a combination of private and government “funding.”  Approximately 60% of Americans are covered under private insurance in the form of employer-sponsored health plans and individual health insurance; 40% are covered under government sponsored health care, mainly Medicare and Medicaid.  Surprisingly, the Government funds nearly two-thirds (64.3%) of U. S. health care costs. Our “two payer” financing system has added layers of bureaucracies, redundancies, waste and inefficiencies, not to mention greed and corruption. No one “payer” has the leverage to control the cost of health care, and “risk” is not equitably distributed between the two payers (private insurers can cherry pick all the good risk). The solution is to transition our “two payer” system into a “single payer” system, and the individual health insurance marketplace is a logical place to begin.

Private health insurers have been failing the individual health insurance marketplace for the past two decades (see Part VI) hence the public demand for health care reform and the 2010 Affordable Care Act (ACA) or Obamacare. Under the ACA, 11 million consumers enrolled in private health insurance and about 90% of those received (needed) a premium subsidy tax-credit to make private health coverage reasonably affordable; approximately 12 million people enrolled in the expanded Medicaid program.  In all, 23 million consumers enrolled in these new coverage options and uninsured rates dropped to historical lows. Yet, millions of Americans —27 million in 2016—remain without health coverage; meanwhile private insurers continue to compound the problem by dumping unprofitable regions, raising rates and ditching providers. The individual health insurance marketplace would be better served by a “single payer” system and here’s how that would work:

  • Essentially everyone is eligible to enroll in Medicaid. Anywhere, anytime. No restrictions.  
  • Consumers with household incomes of less than 400% of the federal poverty level will not have to pay for their health care. Consumers making over the 400% threshold will be eligible to enroll in Medicaid. When they do, they will automatically be assessed an “annual dues” of 3% of their household income (currently Americans pay between 24% and 9% of household income for health coverage).
  • Consumers will continue to have the choice to enroll in a private health plan. But, it’s doubtful that private insurers could compete with Medicaid and they’d likely be relegated to boutique status – plan design and premiums would not be regulated.
  • Everyone is covered with comprehensive health care under the guidelines by the ACA’s 10 essential health benefits – No complicated insurance policies, no government mandates, no IRS compliance, no Dept. of Labor regulations, and no unnecessary insurance overhead
  • The IRS collects the “annual dues” of 3% via income tax, transfer the funds over to the Centers for Medicare & Medicaid Services (CMS), which in partnership with state governments administers the health coverage plans.

Immediate impact:

  1. 37 million more Americans with health care coverage (27 million people currently uninsured plus the 10 million currently on Obamacare and receiving the tax credit) under Medicaid coverage.
  2. A “single payer” system under Medicaid that would stabilize and standardize our health care system, regulate the cost of health care and finally put consumers first the individual health CARE marketplace.
  3. A significantly improved and expanded Health Care Infrastructure. The expansion of health care to all Americans would require many more participating medical facilities and providers. This will come as at a cost – but think of it like a war – a war on illness. We have spent a trillion dollars on wars in the Middle East; we can find the money to make America healthy again.  
  4. Restructuring our health care system into “single payer” financing would be a financial boon for the health care consumers that would free up spending in other parts of the consumer economy.  
  5. To finance the expansion of health care to 37 million more Americans (a 50% increase to current Medicaid population*) would require an additional $287 billion. Which we already pay, one way or another, through higher premiums, taxes, or government subsidies. (* According to the Kaiser Family Foundation there are 74 million low income Americans currently covered by Medicaid at a cost of $574 billion).

While $287 billion sounds like a lot of money, it really isn’t, especially for something so significant to the Nation’s wellbeing. To put that number into perspective, $287 billion is just 8% of the $3.5 trillion US National Health Expenditures; it’s just 2% of the US Gross Domestic Product (GDP) and 24% of the discretionary Federal Budget.

But, and it’s a big but, by comparison that number is still twice as high as it should be. What we do know is that the USA has the highest cost health care with the worst medical outcomes in the entire developed world. Our health care expenditures account for 18% of our Gross Domestic Product (GDP) and our annual per capita cost is $6,000 – both figures are approximately double that of other developed nations.

We’ve got to get our health care cost under control. The “single payer” system will not work if all we do is hand over a blank check to health care providers. To get our health care cost in line with that of the other developed nations was must institute a more robust form of COST CONTROL AT EVERY LEVEL OF OUR HEALTH CARE SYSTEM. With the leverage of a “single payer” system, it would be possible to “negotiate”  

  • According to the U.S. Census Bureau, the average household income was $74,000 in 2014, the latest year for which complete data is available. However, this doesn’t tell the whole story. Depending on your family situation and where you live, average household income can vary dramatically. In 2016, the average annual premiums for employer-sponsored health insurance are $6,500 for single coverage and $18,142 for family coverage.

In our next issue, we’ll justified regulated health care cost controls and expand our “single payers” system.

 

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Craig B. Blankenhorn has been in the Health Insurance for 17 years. He started his career with Kaiser Permanente in 1996. He joined MJC Employee Benefits in 2001.

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