Obamacare: Is It Affordable?

In August 2014 I shared my thoughts about healthcare reform as seen through the Patient Protection and Affordable Care Act, commonly referred to as the Affordable Care Act or Obamacare.

The law, adopted under the guise that they had to pass it to see what was in it, seemed to promote health insurance rather than health care. Insurance premium subsidies for individuals were much more generous than those for potential out-of-pocket (deductible and co-pay) expenses should one get sick.

After two years it’s clear the name “Affordable Care Act” is a misnomer.

President Obama continues to tout this legislation for prevention of bankruptcy for the sick. That interpretation depends on how you look at it, and is open for debate.

An hourly salary of $11.05 with a 40 hour work week yields approximately $24,000 in gross annual income. In Hall County, Ga., an individual Silver plan for 2016 purchased from HealthCare.gov comes with annual out-of-pocket expenses of up to $4,700-$5,200.

A personal budget of $1,680 in mandatory payroll deductions for social security and Medicare, $8,000 for shelter, a $2,220 minimum health insurance premium, $1,200 for gasoline (50 gallons/month @$2.00 each), $1,800 for phone and internet plus $3,900 in groceries leaves $5,200 for income taxes, essential clothing, car insurance and repairs, and possible healthcare out-of-pocket costs.

In its infancy everyone recognized the HealthCare.gov website to be user unfriendly. I found two very positive 2016 updates. Demographics could be changed without starting over completely (state). Network participation of a hospital, doctor or medication could be determined before picking a plan; green checks for yes and red Xs for no are hard to confuse. The terrible twos are better as far as the website goes, but other issues remain.

The Affordable Care Act made no attempt limit the bureaucratic process through payment reform. As such, a third party continues to act as mediator, writing checks to healthcare providers. How does the third party know what it is purchasing? What benefit does your premium purchase?

8 thoughts on “Obamacare: Is It Affordable?”

  1. Although we have a long way to go in navigating health care reform, there is progress in some areas that we can celebrate. Although premiums and out-of-pocket expenses for health care continue to be a challenge within a monthly budget for families, as well as for employer-sponsored plans……there is an ACA benefit of more people being protected from that $70,000.00 hospital bill for a catastrophic major medical incident, such as an automobile accident or a heart attack, or coverage for a portion of the cost for a life-saving drug. Another benefit of ACA is mandates that insurance providers must spend at least 80–85% of premium dollars on health costs and rebates must be issued to policyholders if this is violated. The intent, I believe, was to reduce claim denials and to prohibit insurance companies from using premium revenue for corporate purposes that do not relate to serving their paying customers. As a person with a chronic cancer, of course I am grateful that pre-existing conditions cannot be used as an excuse to deprive a consumer of the opportunity to be insured. This is certainly something I celebrate daily!
    Thank you for the forum to discuss these issues with diversity of opinion, curiosity and ideas.

  2. This article in Money Magazine written by Mark Miller, has useful information about Medicare coverage for Emergency Room visits. An “observation status” where you are not sick enough to be admitted, but too sick to go home could cost you a tremendous amount out of pocket, which will not be covered by insurance!

    MONEY | Thu Sep 29, 2016 | 9:00am EDT

    By Mark Miller | CHICAGO
    In-patient or not? Medicare requires hospitals to tell you…

    You are in the hospital for tests after experiencing dizziness. You are nervous about what the tests will show, but at least you do not have to worry about hospital bills – you have Medicare, so you can relax about healthcare coverage. Or can you?

    Not if you are in the hospital under “observation status” – a Medicare designation applied to patients deemed insufficiently ill for formal admission, but still too sick to be allowed to go home. Observation status can result in thousands of dollars in higher costs – especially if you need post-hospital nursing care.

    Medicare covers care in skilled nursing facilities, but only for patients who were first formally admitted to a hospital for three consecutive days.

    Federal data shows that the number of Medicare patients classified as under observation has jumped sharply in recent years, and it has stirred a great deal of pushback from Medicare enrollees and advocacy groups. A new law – the Notice Act – requires hospitals to at least notify patients if they stay in the hospital more than 24 hours without being formally admitted. Patients will receive the warnings starting in January, but advocates argue the new protection does not go far enough.

    “It does half of what we would like to see,” said Toby Edelman, senior policy attorney at the Center for Medicare Advocacy. “The notice should also allow patients to appeal their status.”

    Hospitals have been motivated to use the status to avoid costly penalties from Medicare for improper admissions under a well-intentioned effort by Medicare to control costs through a program that audits hospitals for possible overpayments. The program began during the George W. Bush administration.

    The number of patients cared for under observation status doubled to nearly 1.9 million in 2014 compared with 2006, according to figures from the Centers for Medicare & Medicaid Services (CMS). The majority (54 percent) were for observation stays of less than 24 hours; another 38 percent of the stays were 48 hours or less, CMS reports.

    FACING HIGHER COSTS

    The new notifications will require hospitals to inform patients orally and in writing if they are on observation status for more than 24 hours. The written notification, developed by CMS, is called the Medicare Outpatient Observation Notice (MOON). The MOON also explains the cost implications of receiving hospital services as an outpatient.

    The costs of observation status can affect any enrollee on traditional fee-for-service Medicare. (Beneficiaries using Medicare Advantage, which provide all-in-one care, will also receive the MOON, but some Medicare Advantage plans will cover a stay in a skilled nursing facility without first requiring that patients have a three-day inpatient hospital stay.)

    Medicare normally covers up to a maximum of 100 days of care in a skilled nursing facility following a hospital admission – it pays 100 percent for the first 20 days, and patients are responsible for a daily $161 co-pay for the next 80 days. But patients leaving the hospital for a nursing facility after an observation pay the full cost out of pocket.

    RISING NURSING HOME COSTS

    The cost of skilled nursing care is substantial, and rising quickly. This year, the national median monthly cost of a private nursing room is $7,698, according to a Genworth survey, and it runs much higher in states such as New York ($11,330 per month) and California ($9,338).

    Medicaid would cover the stay if the patient meets the program’s low-income requirements (a status called “dual-eligible”). A commercial long-term care policy might provide some coverage, although many of these policies have “elimination” features (deductibles) that require patients to pay the first 90 days out of pocket.
    Some – but not all – Part D drug plans will cover some of these prescription drug costs.

    A broader fix to the observation status has garnered broad support from organizations ranging from AARP to the American Medical Association, elder law groups and Medicare advocacy groups. Legislation that has bipartisan support has been introduced in the U.S. House and Senate that would require that time spent in observation be counted toward meeting the three-day prior inpatient stay that is necessary to qualify for Medicare coverage.

    “The bill is simple,” said Edelman of the Center for Medicare Advocacy. “Count the time in hospital, no matter what. If you are in the hospital for three midnights, you have met this requirement.”

    (The writer is a Reuters columnist. The opinions expressed are his own.)

    (Editing by Matthew Lewis)

    1. Thanks Sally. I have been covered by employer group health insurance for the last 35 years and not so familiar with the minutiae of Medicare & the ER.

  3. 85% of North Carolinians expecting health insurance through Obamacare will only have one choice of provider in 2017. BCBSNC has not pulled out even though it continues to suffer massive losses. 30+ percent premium increase in 2016 for North Carolinians has not stemmed the bleeding. It will be late October before the 2017 premium increase percentage will be available. First Obamacare gave the participants affordable premiums and unaffordable deductibles resulting in health insurance coverage but not access to affordable health care. Now the ever increasing premiums will make both the premiums and the deductibles unaffordable. . The result is that the non-group market is more broken now than it was before the law was enacted.

  4. I agree that urgent reforms are needed for the Affordable Care Act: cracking down on excessive drug prices, increase subsidies for lower income families especially those with children, incentivize adoption of healthy behaviors e.g. stop smoking or weight control, incentivize disease management for chronic conditions like diabetes, and lower out-of-pocket costs. How much profit should health insurance companies make selling policies to low and middle-income Americans?

  5. Pundits opine that all health insurance should be only for medical catastrophes such as a motor vehicle accident, cardiac bypass surgery, hip replacement or malignancy. Everyone recognizes these illnesses to be both medically and financially catastrophic.

    Most Americans do not consider surgery for appendicitis, gallbladder disease or a torn knee cartilage to be catastrophic illness nor do they categorize a broken wrist or ankle with that phrase. Although the illnesses are ones from which people make a complete recovery often rapidly, for many Americans, even who have health insurance, they will be financially catastrophic.

    Bronze plans purchased on Affordable Healthcare Exchange have an out-of-pocket of $6,850in 2016. Silver plans in Hall County, Georgia for a single person earning $24,000 have a out-of-pocket ranging from ~ $4,750 – $5,200 in 2016. These amounts may well be the individual’s responsibility for any of the illnesses I have detailed.

    This out-of-pocket responsibility represents a small government subsidy; there is none at ~$28,000..

    On May 25, 2015 The Washington Post published a report with facts relevant to the magnitude of these emergency expenses. The problem is that only 54% of Americans are prepared to handle a $400 emergency; the remaining 46% would have to use a credit card, ask family or friends to help, or risk bill collectors. Only 34% of people earning less than $40,000 can manage the $400. For more than half of Americans ~$5,000 is a financial catastrophe.

    An individual might be better off with a $70,000 motor vehicle accident bill than with a $5,000 partial responsibility for a less serious illness. The healthcare facility will work very hard to qualify the motor vehicle accident victim for emergency Medicaid.

    The Affordable Healthcare exchange out-of- pocket maximum would not have been affordable for most of my patients.

  6. Patty Lee asks how can commercial insurers make money or at least not loose money. A simple algebraic equation must balance.

    Healthcare expenditures = 80%(Insurance premiums) + User out-of-pocket payments

    If expenditures are more than the total on the right side of the equation, insurers loose money. Press reports are that commercial insurer metal-plans sold on federal and state exchanges have lost money in 2014,2015 and to date in 2016.

    By law commercial insurers premiums have an eighty/twenty split. Only 20% of premiums can purchase rent, technology, executive salaries, taxes and advertising.

    Premiums are paid by each insured person. Deductible and co-insurance payments are collected only from users. I view insurance premiums analogous monthly deposits into a savings account; from 1970 until 1990 my expenditures equaled my premiums although the expenditures were in 1983 and 1985. The majority of Americans do not understand this concept.

    I have always thought the Affordable Care Act is about insurance, not the purchase of healthcare. Why else would someone earning $16,000 be labeled “insured” with a policy stipulating an annual out-of-pocket responsibility of $6800 primarily as deductible? The premium is entirely government subsidy. To anyone other than a disinterested outsider, a policy with this out-of-pocket for this person certainly represents “under-insurance”. Why else would the premium subsidy for a silver plan for a single person not fade out until an income of ~$44,000 when that for out-of-pocket expenses fades out at ~$28,000? Premiums have been are artificially low for, I think, the political gain of incumbents.

    I have not seen press reports that insurers have lost money on the Medicaid expansion .
    For reasons not intuitively clear to me actuaries were anticipated to need several years to learn their costs related to people purchasing metal plans on healthcare exchanges. To that end the law provides two types of reinsurance for companies offering plans on these exchanges. First, those companies turning a profit were to give them to companies who lost money. No one has made money. Second, the law created a “risk corridors” treasure trove of money to be used in 2014,2015, and 2016 to make companies loosing money whole. I am informed by multiple press reports that companies loosing money are receiving $0.13 on the expected dollar. Commercial insurers have withdrawn offerings for 2017 from markets in which they have suffered losses. In 2017 Georgia premiums will increase a weighted 33% and increases in Tennessee are rising as much as 67%.

    It’s out-of-pocket ceiling already makes Obamacare plans “catastrophic insurance”. Only if premiums increase or expenses decrease will the equation balance. Premiums are rising this year. I have thought for several years that provider payments from the risk pool of commercial or government insurance will migrate down toward Medicare rates. Competition does not work in healthcare. The country will find out if Medicare rates actually cover a provider’s costs and a personal paycheck. CMS says they do. Among providers some disagree.

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