The Future of US Health Insurance

by Eric Wilson
Mr. Wilson is a Principal of Wilson Associates, and president of I Sell Health, Inc., a Chicago area insurance agency. Visit here.

Since before the Affordable Care Act was signed into law in March of 2010, there have been talks about the United States moving towards a Medicare for all program, or a single-payer system, or a government-run health care system or Socialized medicine. In many countries such as Canada, France, and Germany, the government pays for the health care provided by Private companies. Medicaid and Medicare would be United States examples of this. Socialized medicine is when the government pays and provides the services. The United Kingdom operates this way. The US Department of Veterans Affairs (VA) works in this fashion as well.

Before the passage of the ACA there was the talk of a “public option” This would have been a form of health insurance provided by the government that could have been purchased by individuals. The idea was to have a not for profit entity compete with private insurance companies. When it was said and done some not-for-profit insurance carriers were created. Most did not survive for two years.
Medicare For All?

During the 2016 Presidential Campaign, Bernie Sanders (I-Vermont) while campaigning in the Democratic primary introduced “Medicare for All.” His plan design is not really Medicare for all, but a single-payer system. It would expand Medicare coverage and eliminate deductibles. Currently, there are insurance carriers involved in the Medicare system. There are both Medicare Supplement plans which “supplement” what Medicare does not pay for, as well as Medicare Advantage plans, which replaces Original Medicare and is run by private insurance companies. Sander’s plan would eliminate that. Sanders’ plan would be a four-year phase-in plan which would begin with those 55 and over, then move to the 45-year-olds and then 35-year-olds.  Then in the fourth year be extended to everyone. His plan also covers things that are not covered by Medicare, such as dental and vision, which are not covered by most Medicare plans.

The funding for the Sanders’ plan is still kind of unclear on how it would be funded. He proposed many new taxes and tax increases, but all of those taxes proposed would generate revenue for the plan of around $16 Trillion over ten years. The Urban Institute estimates the cost of his plan would cost around $32 Trillion over ten years. In case you are wondering in 2018 federal revenues totaled roughly 3.4 Trillion. Senator Sanders did introduce this bill in 2017. It did not pass.

2019: Here We Go Again
Fast forward to 2019 and here we go again. Rep. Pramila Jayapal (D- Washington) and Rep. Debbie Dignell ( D- Michigan) have unveiled the “ Medicare for All Act of 2019). This bill goes even farther than Sanders’ bill. In some ways similar as it would eliminate co-pays deductibles and include dental and vision care. Senior Citizens, currently on Medicare would also be rolled into this plan. It would leave only two government plans intact. The Veterans Health Administration and the Indian Health service would remain unchanged.

The big changes versus the Sanders’ bill is the transition period would only be two years instead of four. And it would include things such as long term care. In the 2019 house bill proposed there is no discussion on how to pay for it.
Some of the concerns other than how does our country justify the cost of over $30 Trillion when we are already over $22 Trillion in debt. Another key point is, according to USA Today, Medicare will run out of money in 2026. If Medicare were to become insolvent, doctors, hospitals and other healthcare providers would be paid less or only a portion of agreed-upon fees.

We are already seeing some doctors no longer accepting Medicare patients. Medicare pays them less than private insurance. As people get older, they require more medical care. That means more trips to the doctor and the hospital, and more testing for diagnosis. Doctors and hospitals have to be paid a fair wage or they will not accept the coverage. We are seeing a rise of doctors becoming what is called Direct Primary Care physicians. These are doctors who do not accept insurance but charge a monthly subscription for their service. If they are not paid a fair wage, you will see even a bigger shift towards the Direct Primary Care Model.

Selling The Affordable Care Act
Do you remember when President Obama was trying to sell the Affordable Care Act to the American People? Thirty-Six times he said you could keep your health insurance. That turned out to be untrue. After the passage, people had their plans canceled because they no longer complied with the law. Other insurance carriers left the market place because the policy requirements were too great for some of the smaller carriers. Then some doctors and hospitals stopped accepting the plans because the reimbursements were too low. Several million people were upset that they could not keep their plan or their doctor. Many had their insurance plans canceled many years in a row. In the event that we go to Medicare for All, that would eliminate private insurance. Currently, roughly 177 million people have a private insurance policy. In 2017, according to the Kaiser Foundation, 156.2 million people were insured by their employer and 20.5 million had insurance directly through insurance companies. According to a Gallup data poll, 70% of those with private insurance like it. So the idea of that many people affected is a challenge.

In a way to side-step the Affordable Care Act, short-term plans in many states have expanded short-term plans which run for twelve months, and in some states can be renewed twice for a total of three years...
Not only do you lose your private insurance, but then come to the taxes required to pay for it… not just on the rich but on the middle class as well. Then if there is no more health insurance, everyone in that business is out of a job! Think of all the people who work for Blue Cross and Blue Shield, or United Health Care. Those companies would no longer need underwriters, customer service representative or even claims personnel.

Senator Sanders frequently looks towards the Canadian single-payer system as a model for his plan. According to the Fraser Institute, a Vancouver based think tank, Canada’s system forced over one million patients to wait for necessary medical care last year. Which was an all-time record for the country? Long waits and rationed care are not unusual to Canada and other single-payer nations. Rationing is limiting the care one gets or refusing to pay for certain medical procedures. Sometimes you have even greater limits on the terminally ill. Rationing in a single-payer system becomes necessary because health care needs are endless, but resources are not.

The Fraser report noted that in 2017 more than 173,000 patients waited for an ophthalmology procedure. Another 91,000 had to wait for a general surgery and 40,000 for a urology procedure. After receiving a referral from a general practitioner a typical patient waited 21 weeks to see the specialist. In Rural areas that wait time is even longer. A typical patient in Nova Scotia waited almost 39 weeks for the same procedure.

New Short-Term Plans
“Non-Obamacare” plans have grown this year. In a way to side-step the Affordable Care Act, short-term plans in many states have expanded short-term plans which run for twelve months, and in some states can be renewed twice for a total of three years. While these plans are not for everyone, they are a good opportunity for many. Most short term plans are catastrophic in nature, meaning they do not have doctor visit coverage or preventive care coverage, but they do offer lower deductibles and lower out of pocket maximums than ACA plans. They do not cover pre-existing conditions. Many politicians refer to them as junk plans. I would argue that they are true insurance, and offer those who are healthy and do not qualify for an advanced premium tax credit freedom to choose the coverage to meet their needs. Consumers must be aware of the difference between “Obamacare” plans and “Non-Obamacare” plans. Non-Obamacare plans

The Ohio Model
The ideal scenario, which no one is really talking about, but would be similar to what was used prior to the Affordable Care Act, is a system used by the state of Ohio. Ohio used to have an open enrollment period as we have now for those with pre-existing conditions. They were charged about 30% more. Remember that if you had insurance and then got sick, you were NOT canceled by the insurance company, so this was mostly for those who had not had insurance previously.

Every company that did business in the state had to participate in this open enrollment, but there was a cap on how many people with medical conditions each company had to accept. Once a company hit 4% of their business as ‘higher risk business’ they no longer were required to accept clients during the open enrollment. The rest of the year was underwritten business. The insurance carriers did not get hurt by getting a disproportionate number of sick clients and could grow their healthy pool during the rest of the year. With this system, you solve the pre-existing conditions situation and keep the premium costs down by having the sicker people in a different pool of business.

This is a system that could work everywhere. Maybe the numbers need to change a little, maybe it should be a 5% risk business and maybe the cap on an up-charge is 25%, but the framework for a great health insurance system has already been tried and proven successful. Sometimes we do not need to reinvent the wheel and turn the system upside down, we just need to examine what has worked and determine if it can work on a national level. ◊

Source: Eric Wilson