The Affordable Care Act: Wait For It

The Affordable Care Act: Wait For It

Much ado has been made about the rollout of the Affordable Care Act.  Its early critics were quick to jump on the first sign of failure: the healthcare.gov website.  Many cried foul and presaged that this debacle was the harbinger of things to come.  I suggest that we step back for a moment and look at this legislation not as a done deal but more as a work in progress. 

As Dr. Moghim points out in his article “Obama SCARE: The Frightening Truth,” there will need to be a “buy in” from the key implementers in order for this legislation to be successful. Both healthcare providers (physicians and hospitals) as well as the clients (the American people) will have to believe this will work in order for it to succeed.  While I do agree with this premise, I feel that the buy in does not need to occur immediately.  I submit that this legislation will move through the stages of disruptive innovation which will ultimately lead to it becoming a successful model for healthcare delivery in the United States. 

There has been a lot of talk about the Obamacare “death spiral” which will occur if not enough healthy young people sign up on the healthcare exchanges.  In an Issue Brief on January 13 of this year, the Department of Health and Human Services reported that 24% of the enrollees in the marketplace were between the ages of 18-34. This is short of the benchmark of 38% that several agree is the level of young people needed to sign up in order to keep premiums low.  But, this is just the beginning of enrollment.  So far this has mimicked what has happened in the past regarding healthcare legislation: the elderly and sick sign up first because they need the coverage while the young and healthy will sign up later toward the deadline in order to avoid a penalty.  What will ultimately determine the financial risk pool will be the mix of people who have signed up before the April 1st deadline. As of February 19th, California has already exceeded its first-year projections.

But, what if the numbers fall short? Will the ACA fall into a “death spiral?” According to the Kaiser Family Foundation, a worst case scenario where only half of the expected young sign up for plans would only have costs outpacing premium revenues by 2.4%.  Likely there would be premium increases in the next year, but this would not be devastating to the long term solvency of the plans.  They also point out that the premiums are adjusted by age: the young pay less than the old even though it is their premiums which cross-subsidize the elderly and sick.  The drawback to this analysis is the use of age as a surrogate for health.  While this holds true most of the time, the risk pool will ultimately be determined by the number of healthy individuals, regardless of age.  

A lot of focus has also been placed on the anecdotal stories of hardship which are being touted by special interest groups as the fault of the implementation of the ACA.  While it is true that some people will be paying higher premiums, for the most part government subsidies will help those who can least afford it.  As Paul Krugman puts it, the people who will be most negatively affected by this legislation are “either very affluent people affected by the special taxes that help finance reform, or at least moderately well-off young men in very good health who can no longer buy cheap, minimalist plans.”

Another huge concern which has been reported by opponents of the ACA is that it would be a “job killer.” There have been many misrepresentations of a report put out by the non-partisan Congressional Budget Office in 2009 which claimed that there would be a reduction in the labor force of about one half a percent (650,000 jobs). What is not usually explained is that the CBO states that the reduction will come from the labor force itself as incentives in both directions will guide people to either work more or less. Those who are working just enough in order to obtain health care coverage will likely stop working if they qualify for a government or government subsidized plan, while others may work more in order to maintain an employer provided plan.  Another often cited report is that of the National Federation of Independent Businesses published in 2009, which states that 1.6 million jobs would be lost.  The flaw in this analysis is that it was actually written before the law was passed and did not take into account that small businesses of less than 50 employees would be exempt from the mandate of employer provided healthcare.  Furthermore, according to the same report, there will be an increase in the need for jobs on the healthcare and related fields which would amount to 890,000 new jobs.

Lastly, opponents of the ACA would like us to believe that it will only add to our deficit in the next decade.  Though their projections are built upon assumptions, the CBO has again reported that a repeal of the ACA would result in a net increase in the deficit over the next 10 years. Part of the design of the legislation is that it be a self-financing and cost-saving measure which will protect our economy from the effects of an out of control health crisis by increasing access, controlling costs and adding value. 

I think that the point that we have come to now is whether we as incumbents are willing to accept this law as the future of healthcare.  I think that the important point is that it is a work in progress.  Already we have seen changes mandated by the White House and passed by the legislature itself.  I feel that this trend will continue as we see which features of the law work and which do not.  One of the good things that I have seen come from these changes so far has been the alignment of physicians with their hospitals.  It will be important that we have physician champions who are involved in the creation of policies and guiding the modifications of the ACA so that all stakeholders will come out on top.  

 

Article written by:  
Kian Modanlou, M.D.
Associate Professor
University of Tennessee, Transplant Surgery
Onyx M.D. Physician Panel 


To read Dr. Moghim's article,"Obama Scare: The Frightening Truth," click here

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Disclaimer: The views expressed in this article are the personal views of Robert Moghim, M.D. and do not necessarily represent and are not intended to represent the views of the company or its employees.




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