Submitted by Taps Coogan on the 8th of March 2017 to The Sounding Line
“5% of patients account for over 50% of all healthcare costs”
Republican lawmakers in the House released their long awaited ‘repeal and replace’ Obamacare bill yesterday and, to the disappointment of many, it contains several of the same flaws as Obamacare.
There are many reasons why Obamacare was a failure. It reduced competition and made individual healthcare plans unprofitable for insurance companies. Many major insurers exited individual insurance markets, leaving 17% of Americans with only one choice of insurer, up from 2% just last year (here). Americans have been forced to pay for benefits they don’t want or need and have seen their premiums rise and coverage worsen. Obamacare has resulted in 5% (7.7 million people) of the US population getting subsidized health insurance, but that has come at the expense of tangibly worse healthcare coverage for the overwhelming majority of people who pay for their insurance.
At the heart of Obamacare’s problem is its prohibition on insurance companies charging for pre-existing conditions and risk factors. That prohibition is the key driver of the rise in insurance premiums. In a system where only 5% of patients incur over 50% of all healthcare costs (here), prohibiting insurers from charging high need or high risk people more, more than doubles the healthcare cost burden for the 95% of relatively ‘healthy’ Americans.
Furthermore, because a sick person and a healthy person are charged the same amount for insurance, Obamacare incentivizes people to wait until they become sick to buy insurance. If you are healthy, why pay for insurance month after month when you can wait until you become sick or need surgery to start paying the same amount? It would be like letting people buy a warranty on a computer after they have owned it for 10 years or letting them get auto insurance after a car accident. Obamacare tried to prevent this by charging a penalty for not having insurance but the penalty ($695) is a small fraction of the yearly cost of insurance and nothing compared to serious medical expenses. It is no surprise that, of the 44 million uninsured Americans, only about 10 million signed up for Obamacare, a disproportionate number of whom almost certainly had pre-existing conditions and of which three quarters are subsidized.
The GOP healthcare plan maintains the prohibition on insurers evaluating consumers’ health risks and charging for pre-existing conditions. Furthermore, it waters down the penalty for not having insurance. Instead of a $695 penalty per year for not having insurance, consumers would pay a 30% penalty on top of their premium when they do eventually get insurance. That only increases the incentive to delay getting insurance.
These issues all but guarantee that the GOP healthcare plan will suffer many of the same fatal flaws as Obamacare.
Charging for pre-existing conditions isn’t popular but it is an essential part of why Obamacare has led to spiraling costs for healthy people. Instead of prohibiting charging for pre-existing conditions, a better plan would be to ban increases in insurance premiums for people who become ill or injured after getting insurance and maintaining coverage. That will incentivize people to get insurance while they are young and healthy and to maintain continuous coverage.
Republicans in Congress have been talking about repealing and replacing Obamacare for eight years since it passed in 2009. It doesn’t appear from this plan that they have spent much of that time contemplating a better plan. Small wonder Congress’s approval rating (28%) is barely half that of Obamacare.