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ACA Fail Fractal
The Deeper You Get, The More Dysfunction You See

Deductible shock is here. The WSJ reports that many Americans will experience serious deductible increases as the Affordable Care Act plans go into effect:

The average individual deductible for what is called a bronze plan on the exchange—the lowest-priced coverage—is $5,081 a year, according to a new report on insurance offerings in 34 of the 36 states that rely on the federally run online marketplace.

That is 42% higher than the average deductible of $3,589 for an individually purchased plan in 2013 before much of the federal law took effect, according to HealthPocket Inc., a company that compares health-insurance plans for consumers. A deductible is the annual amount people must spend on health care before their insurer starts making payments.

Higher deductibles can, in certain contexts, be useful for introducing some price sensitivity into the system. But that depends on how people go about dealing with them. There are two deep-rooted problems with what remains in many ways an excellent health care system overall: it is too expensive, and not enough people have enough access to it. The cheaper health care becomes, the easier it is to expand access. In a cheaper system, fewer people need subsidies and the subsidies they do need are smaller. Without fixing costs, on the other hand, more and more people, not to mention the government, struggle to pay for our system, and the resources for expanding access shrink as the cost of do so grows.

Unfortunately, the Affordable Care Act puts most of its effort on the wrong end of the problem: access rather than price. That’s one reason the rollout has been going so poorly and in some respects will get worse. Because not much effort was put into cost control, many insurers have taken the one easy step available to them to limit rate shock: restricting provider networks. As a result, people are unexpectedly losing access to doctors they have seen for years.

A reform that put cost first, on the other hand, would recognize that high deductible plans need to be paired with other cost-saving measures, like wider use of nurse practitioners and better policy for retail chains operating as McDoc shops. Many lower-income people would be better able to afford care in that kind of system, and those who couldn’t would be subsidized at a lower cost to the rest of us. And, finally, more of the cost of routine care could be shifted onto the consumer while sparing him the burden of large, unanticipated medical bills.

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  • Bruce

    What’s the deductible on the birth control pills we’re buying for my neighbor’s daughter?

  • Arkeygeezer

    It seems to me that if you will be fined if you do not have Obamacare when you file your tax return, then why file a tax return? The tax system is dependent on people filing voluntarily. The reason they file is to get a refund from tax withholding. Why not let the government keep what they have already confiscated, and avoid the fine by not reporting.
    They do not have enough agents to get all of us. The unregistered aliens already get away with this. Why not us?

    • Corlyss

      “The tax system is dependent on people filing voluntarily. ”

      Yeah. When I worked for IRS 20 years ago, I was amused by the number of former soviet states that sent delegations to the US to study the American tax system. Naturally, the part that charmed them was its “voluntary character” and the fact that most people complied and paid. I dismissed their efforts to learn more about our system. The secret was not to be found in the system; it was to be found in the trusting nature of Americans who did what they were supposed to do. What the new nations wanted was our taxpayers, not our tax system.

      “Why not let the government keep what they have already confiscated, and avoid the fine by not reporting.”
      Because they’ll get you for not filing. It may take them a while. As you say, they don’t have enough agents, but even when I was there, IRS’ goal was to die with more employees than DoD. With the ACA being so heavily tied to the tax system, you can bet that it will get more agents. But in the end, they will get you. IRS kills. You can’t get relief by declaring bankruptcy, so destitution, isolation, and often jail are at the end of that thought experiment.

  • Gene

    For those of us (and I’ll include our host in that group) who would like to see, generally, decentralization and the allowance of actual market mechanisms back into health care delivery, it’s important to watch our choice of language. When WRM talks about “fixing the costs,” of health care, that phrase implies that a “fix” must be imposed by a “fixer,” which most would interpret to mean the government. That, of course, plays into the hands of those (many Americans and 90 percent of those inside I-495 in DC) whose default assumption is that improvement can only occur when powerful entities “control” the system and impose reform. Our language should instead focus on terms like “releasing” (government control), “allowing” (markets to work), and “freeing” (people to choose).

  • Dantes

    I agree. Far too much emphasis on insurance mechanisms, and not enough on providers.

    The government, through the regulatory power of CMS and Medicare/medicaid, has been trying to shoehorn providers into their vision of medical care. Government sponsored monopolies (Accountable Care Organizations) ostensibly run by hospitals, with full employment of physicians by hospitals and mandatory electronic health care record.

    This has been done through preferential reimbursement of hospital based doctors over private practice physicians. As a doctor, I don’t think the hassles we put up with from Medicare…for example, they may withhold payment for Medicare services for weeks because of “computer issues” or other excuses…is an accident.

    There are roughly 500k doctors in the US, and about half are employed…most by hospitals. When a doctor goes to work for a hospital, they no longer answer to the patient. The Electronic Health Record benefits hospitals because they can bill more. It also allows them to monitor and control physician practice with “care protocols” etc. which are designed for the benefit of the hospital, not patient.

    It is easier to control 5000 hospitals than 500k physicians.

    Market forces in medical care are practically non existent, thanks to Medicare irrational pricing rules based on coding. Providers are forever chasing reimbursement based on nonsensical mandates from Medicare, distorting the delivery and efficiency of medical care

    • Kavanna

      The ACA never intended to reform medicine. It changes how it’s financed. A series of less ambitious reforms (real reforms, not the cronyistic extravaganza of the ACA) would have been much better.

      • ExPat_in_Krakow

        Absolutely! Because those ‘less ambitious reforms’ could have been put into law separately, one by one, to allow the public to gauge the effectiveness of each one individually. And they would have been much easier to undo if not effective. And they could even have put into effect on a state-by-state basis, allowing the several states to act as trials or incubators for the remainder. And I could go on and on, but I’m probably preaching to the choir.

  • BrainBrian

    Isn’t part of the cost of medical treatment due to the insurance itself? Prices are much lower than with insurance when doctors don’t take insurance and charge a flat fee for a service.

    • jim kirby

      If you want to find a doc or clinic that charges a flat fee and publishes the price, you won’t find it in this country, though you will in Costa Rica, Mexico, Brazil, India, Thailand, Czech Republic and Hungary. Your cost will vary from 1/9th to 1/3rd what the information-hiding medical industry charges here. And you can often buy prescription drugs much cheaper over-the-counter. Here it costs you a fortune for a pill if you have to see a doctor first.

  • vic

    American healthcare is plagued by opaque and predatory pricing. The list price of a procedure or doctor visit is priced in a way that has no bearing on reality. All third party payers negotiate a substantial ( up to 90% ) discount on the list price or alternately ignore it in its entirety and just pay what they feel is right. The only group that is billed ” list” price is the uninsured. This leads to both price inflation and medical bankruptcy. There is no such thing as a market based price. Lasik surgery and cosmetic plastic surgery, where there is no third party payer, have responded to market mechanisms and consequently prices keep coming down. As WRM correctly says the # 1 problem is cost. A very simple step- insisting on full disclosure re price before service is undertaken AND a reg/law stipulating that providers/ hospitals cannot give discounts greater than 10 % to insurance companies etc, would result in market mechanisms forcing prices down. THEN we can talk about access, not before. In the current system the third party payer actually creates market distortion by the following mechanisms. 1. It is not insurance but prepaid healthcare that we are purchasing. As I, as a consumer, have already ” prepaid”, my natural incentive is to get back as much or more of what i contributed , ie overutilisation. 2. Prepaid means that insurance company administrative costs and profit are built in, further escalating costs. 3. Given the trend towards high deductibles, in effect, the only service being provided me by the insurance company is that they bring the distorted list price back down from stratospheric to the merely high. So I am paying a premium of upwards of $ 15000 for the privilege of allowing the insurer to bring down a fake price to a more reasonable number. The ACA thus solves nothing at all

  • RightyFeep

    The first – the very first – step that needs to be taken is to unhook the prepaid medical plan aspect of health insurance from the actual insurance component, generally reflected by high deductible plans. These are two different animals, and need to be approached differently.

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