Vladimir Makovsky, At the Doctor
By Rob, Healthcare Guru
The common refrain I hear from friends and family who oppose Obamacare is that the ACA caused healthcare costs to spike. The frequent comparison is to the healthcare system under the Soviet Union – a one-payer-pays-all system (in that case, the Soviet state.) To be fair, it was more like a one payer pays some and the rest you have to remedy with medicinal tea and cupping procedures on your back.
In understanding the American healthcare system, I want to introduce the three main tenets of the healthcare insurance market: quality, access, and cost.
Who wants to take a guess at the average life expectancy and infant mortality rates in the Soviet Union during the 1980s vs. modern day ‘merica? I’ll give you a couple seconds. I’ll just brew some tea to help heal my broken ankle in the meanwhile. The life expectancy in the Soviet Union in the 1980s, on average, was 68 and infant mortality was about 25 per 1,000. Recent statistics indicate that the average life expectancy in ‘merica is 79 with an infant mortality of 6 per 1,000.
The biggest cause for this dramatic 16% difference in life expectancy and 76% difference in infant mortality is not that we’re getting healthier. Just look around. Obesity, cancer, and diabetes rates are on the rise and the sedentary lifestyles we lead doesn’t help. The quality of our healthcare providers, technology, medications, procedures, surgeries, etc. is growing by leaps and bounds and quite frankly keeping people who should have perished years/decades ago alive.
But the research and development for this leap in quality has an associated cost. In an ideal situation, every American is insured and pays into a system that is meant to protect you from high-dollar claims when necessary, and in other (hopefully most) years, you don’t derive any value from your premium dollars since you didn’t access the system. The beauty of insurance. What happens when an uninsured person goes to the Emergency Room with a heart attack? The hospital must treat that person, often absorbing the cost.
Of course, to derive quality from the healthcare system, one must first have a means to access it. Access is a broad term, but at its most general, it means that people have a selection of physicians, specialists, hospitals, facilities, prescriptions and healthcare technology to make people well and keep people healthy. From a global perspective, we have among the best access to these healthcare touch points, however there is a big distinction in who is paying for these services once they are accessed.
The primary complaint I’ve heard from friends and family regarding Obamacare is that their healthcare premiums increased far greater than in previous years. Recency bias and small sample sizes are wonderful, i’nnit? The true and complete story is that the national medical trend – consisting of, the year-over-year inflationary, utilization, aging, and cost shifting price increases – has had high single-digit and sometime double-digit percentage increases dating back before the 1980s. This trend increase has outpaced general inflation and workers’ earnings since The Flintstones. In fact, medical trend has decreased from 10% in 2008 to 7% currently.
Of course there are winners and losers, and a medical trend that outpaces inflation and workers earnings is not sustainable long-term, but the context for Obamacare matters. The quality and access that has kept people alive 11 years longer than your previous generation – that costs money. The access to go to the Mayo Clinic to treat a previously incurable condition – that costs money. The uninsured person that goes to the Emergency Room for a heart attack – that costs money, and hospitals won’t eat all associated costs out of the goodness of their non-organic hearts. These costs are displaced and shared with those other constituents in the healthcare market, those with insurance.
Obamacare attempted to tackle two fundamental issues that have caused the long-term near-double-digit trend increases in the healthcare market: people not paying anything into the healthcare system (aka the uninsureds) and that unhealthy people cost more than healthy people (weird, right?). By imposing financial penalties for not having health insurance and making it more affordable for those with lower salaries to have insurance through federal subsidies, Obamacare successfully steered more than 20 million people who previously didn’t have insurance into having a medical plan. A byproduct of having insurance is using it, often in more efficient terms. Previously uninsured people didn’t have a strong incentive of having a relationship with a Primary Care Provider or Family Doctor as they treated each condition in isolation and only when it needed to be treated. Under-the-radar warning signs of high blood pressure or cholesterol or even recommended cancer screenings were not performed regularly as those were a problem for another day. Twenty million more people having insurance means 20 million more people get a jump start on having a doctor-member relationship and preventing a medical catastrophe before it begins.
We now find ourselves in the dawn of a new day with a new leader and a bullseye set squarely on the elimination of Obamacare. The GOP is pushing for the elimination of pre-existing condition exclusions and minimum essential coverage. That will surely lower premiums for the young and healthy. However, in the current iteration of GOP proposals, medical insurers would be able to price plans based on the consumer having certain conditions. It’s like the complete opposite of the Marines’ motto, “No Man Left Behind.” Recent CBO scores project 23 million people losing health insurance under the GOP proposal, which would undo the gains of Obamacare. I can already envision the installation of Russian deli ticket dispensers at the ER, but instead of kolbasa, folks will be ordering kidney stone removals.
It wouldn’t be completely off base to state that an unintended result of Obamacare was to more closely mirror a single-payer system similar to the Soviet one. Obviously, circumstances are different with quality, access and cost issues in the most recent decades, but the fundamental notion of incentivizing all people to participate similarly in the healthcare market is similar. The main distinction between our comrades’ health plans of yesteryear and the current iteration of Obamacare plans is the necessity for our current generation to build a sustainable healthcare market that can strive to achieve the triple aim – high quality, lots of access, and low cost. Otherwise, start loading up on banki – those steaming hot cups of my childhood – because that’s all you’ll be able to afford.