If you get sick and need expensive treatment, your options are worse than ever.
Getty
For at least half a century, we have been grappling with three health policy problems that never seem to go away: cost, quality, and access to care. Public policy has been actively working, with increasing vigor over time, to solve all three of these problems, yet the situation remains the same.
Over the past 50 years, medicine has advanced. Today we know more and can do more: better medicines, better diagnostic tools, better treatments, and better outcomes.
But given the state of knowledge at a given point in time, let's define quality as “best practice.” Let's define ideal access as “access to best practice.” Let's measure cost-effectiveness as “health outcomes per dollar spent.” These definitions allow us to use consistent criteria when evaluating policy success over 50 years.
So the question is: Are we in a better place now than we were 10 years ago, or 20 years ago, or 50 years ago? I don't know if we are.
Regulatory Cycle
When a social problem is identified, governments pass laws or impose regulations. Inevitably, these interventions are designed to force people to do (or refrain from doing) things that are in their own interest.
But as we pointed out in part 1, highly intelligent and entrepreneurial people in complex systems pursue their own interests by finding ways to circumvent regulation. Over time, they become increasingly successful at circumventing regulation, often creating new problems – perhaps even more serious than the problems the regulation was originally intended to solve.
In response, governments rarely remove the original regulations and instead enact new ones, which leads to more deregulation and more regulation.
In health care, we've been doing this for over 100 years. The result is a system that is completely burdened by regulation and perverse incentives, and where normal market processes solve virtually no problems. We're in the opposite situation to Adam Smith's invisible hand: when people act in their own self-interest in health care, too often others are harmed.
Case Study: Employer Plans
A 1996 law prevented employers from firing new employees or charging them higher insurance premiums because of a pre-existing condition, and then Obamacare (the Affordable Care Act) required all employers except small businesses to offer comprehensive health insurance to all employees and their families.
Here's the problem: Suppose a company hires an able-bodied employee, but later finds out that the employee has a child with costly medical expenses. The company could end up spending hundreds of thousands of dollars a year on medical expenses (perhaps several times the employee's annual salary).
Thus, unfortunate employers are forced to bear the full costs of what is clearly a societal problem but one that they were not in a position to mitigate or remedy.
It didn't take long for employers to find a clever solution: create plans that were attractive to healthy people but not to sick people. Even before Obamacare, the typical employer plan offered cheap primary care and free wellness programs (sometimes including gym memberships), but very high deductibles and high out-of-pocket expenses for people who needed hospital care.
This practice is the opposite of what traditional insurance principles dictate: In a typical insurance market, insureds cover small, easily payable expenses, while leaving the payment and management of larger expenses to the insurance company.
Another example: There are many reasons why an employee may need treatment outside the network of doctors covered by their employer's insurance plan. They may need emergency care while on vacation or treatment that's hard to find. In the past, the employer's insurance company would negotiate reasonable rates for the plan and the employee. Today, many employers negotiate lower payments themselves and leave employees to negotiate their own share of the bill.
These practices send an implicit message from employers: “We don't want to be known as a great place to work, especially when out-of-network care costs are so high.”
In reality, the employer insurance market is like a game of musical chairs: no company wants to be the last one to shoulder the biggest medical costs.
Case Study: Obamacare Exchanges
Perhaps President Obama himself thought that when the Affordable Care Act was passed, people would be able to get a standard Blue Cross plan at an affordable price, regardless of their health status.
Apparently, Blue Cross of Texas thought so. When the insurance exchanges first opened, Blue Cross offered plans that covered enrollees' visits to almost any doctor and hospital stays. Although the exchanges had risk adjustment features, it wasn't enough to offset the costs for all the sick enrollees Blue Cross attracted. Within a short time, the company lost $750 million and exited the market.
The most successful insurer on the insurance exchanges is Centene, which at one time accounted for about a fifth of all plans sold. The company started as a Medicaid contractor, and the plans it offers are very similar to Medicaid, with high deductibles. Centene pays doctors and hospitals just a little more than Medicaid would, and providers that don't accept Medicaid managed care are generally not in Centene's network.
Now, Blue Cross has returned to the Texas insurance exchange, and its plan is very similar to Centene's.
Part of the problem is that these plans look very unattractive, especially to healthy people who don't get subsidies. Perhaps to avoid the embarrassment of having so few people enrolled in President Obama's signature public policy program, Congressional Democrats created a second tier of subsidies that are so generous that someone with an average income today probably pays zero in premiums.
As Beverly Gossage and I wrote in The Wall Street Journal, if you have an average income, buy your own insurance, and are healthy, you have more options than ever before. But if you get sick and need expensive treatment, you have fewer options than ever before. Out-of-pocket costs for these plans can be as high as $9,400 for an individual and $18,800 for a family. Top doctors and medical centers generally don't participate, and if you go out-of-network, the plan doesn't pay you anything.
As with employer plans, insurers in this market appear to be trying to attract the healthy and shun the sick.
What problem did it solve?
Before Obamacare, Texans who were “uninsurable” on the individual market could enter the Texas Risk Pool. They paid higher premiums, but they had a standard Blue Cross plan and could go to almost any doctor or hospital. Their out-of-pocket costs were nothing compared to what they are today on the Obamacare exchanges.
For people who get insurance through work, the situation of those with high medical costs has gotten progressively worse over the past decade.
Obamacare has not improved the quality of health care. In fact, the number of doctor visits per person has decreased in the decade since the ACA was passed. And for people with serious health problems, out-of-pocket costs have increased and many are likely to be unable to get the care they need.
While it is debatable whether the issues of cost, quality, and access are better or worse than in the past, these problems have not disappeared entirely.
