Fumbling Toward Health Care

In the early 70s, I worked for a short time (about a year) at a free clinic in the Midwest. Its mission was to provide health services at no cost to people who could not afford to pay and who could not afford or qualify for health insurance. The clinic was loosely affiliated with a now-defunct civil rights organization, the Medical Committee for Human Rights. It seems that little progress has been made in the years since then to improve the delivery of health care services to all.

As health care policy was being debated back in 2008 and 2009, I belonged to the camp of those who favored a single-payer system. I was never optimistic that such a sensible idea would ever be adopted by our fractured Congress. Sure enough, the single-payer approach was jettisoned early on. Instead, the bill that Congress passed in 2010 was essentially in line with the Republican approach of constructing a system that, above all, preserves the health insurance industry. The Patient Protection and Affordable Care Act (ACA) was quickly and derisively labeled “Obamacare” by Republicans who refused to admit that they had actually won the health care debate.

The legislation that created the ACA achieved its prime directive, which was to ensure the health and vitality of insurance companies. Through a confusing and needlessly complicated scheme of tax credit subsidies, the ACA expands access to health insurance. Improving access to health care is a secondary goal. The ACA falls short of ensuring “universal health care”—an ideal that was ditched early in the debate along with single-payer financing. Nevertheless, the ACA has increased the number of people who have access to health care through private insurance or Medicaid—the estimated increase in coverage is between 5.8 million and 12.8 million people.

Access to health care cannot be considered in the abstract, separate from an evaluation of the quality of health care services. In a 2009 report, Elizabeth Docteur and Robert A. Berenson observed that, when comparing the quality of health care services, the “stark difference” between United States and other countries is that close to one-fifth of the U.S. population under age 65 is uninsured. The Institute of Medicine estimated that 45.7 million people in the United States lacked health insurance in 2009 and concluded that the uninsured have worse health and higher mortality than the insured population. Among countries in the Organization for Economic Co-operation and Development (OECD), the United States ranks below average in life expectancy at birth and also below average in life expectancy at age 65.

We in the United States are paying too much for just about average health care, largely because we are paying to keep the insurance industry profitable on top of paying to keep ourselves relatively healthy. An estimated 25 percent of the cost of health care in this country is associated with administrative costs. Also, we are simply overcharged for medical services and pharmaceuticals compared to the prices charged in other countries for the same medical procedures and drugs.

Charges for drugs, hospitalization and other health services are outrageous because prices are not constrained by meaningful competition. Because most of the costs are paid by insurance, the prices of medical procedures are effectively hidden from view. We have no opportunity to make decisions about where to go for a medical procedure based on cost or quality as long as the information remains unavailable.

For people who lack health insurance, the situation can be much worse. Not only is price information unavailable or unintelligible, the uninsured lose out on the power of insurance companies to negotiate discounts. The uninsured are then charged the (higher) “list” price, instead of the discount price that the insurance companies pay.

If I had reliable information that two doctors provided the same quality of service and that the price charged by one doctor was twice what the other one charged, I could choose to go to the doctor who charged less. In theory anyway, the average price of health care services overall would decrease through the competitive force of thousands of similar choices every day.

Price competition motivates the practice of “reference pricing” recently approved by the Department of Health and Human Services (HHS). Under this pricing scheme, health insurance companies pay a specific amount for certain procedures (a “reference price”). If the patient chooses to go to a different doctor who charges more for the procedure, then the patient would have to pay the difference. If most patients instead choose a doctor who charges the reference price, doctors who charge more would be given an economic incentive to reduce their price.

While allowing the practice to proceed, HHS is “monitoring the effects of reference pricing on access to quality services and will work to ensure that financial protections for consumers are not undermined.” The practice of reference pricing—at least for now—has been determined to be consistent with a key consumer protection provision in the ACA under which most insurance plans have to pick up the entire cost of health care after a patient hits the annual out-of-pocket limit (currently $6,350 for single coverage and $12,700 for a family plan).

To prevent reference pricing from being gamed by insurance companies to limit coverage, HHS will require that insurers “use a reasonable method” to ensure that patients have “adequate access to quality providers.” Presumably a reasonable method would include reliable measures to assess the quality of care delivered by different providers as well as systems to allow patients easy access to the information.

HHS is seeking public comment on the application of the out-of-pocket limitation to the use of reference based pricing and on standards that insurance plans should be required to meet to ensure that patients—at least those who have health insurance—have “meaningful access to medically appropriate, quality care.” The deadline for comments is August 1, 2014.

Millions of people still lack access to health care because health insurance is unaffordable for them. Many of these people would be covered under the expansion of Medicaid that was envisioned by the ACA, under which Medicaid eligibility would be broadened to include those whose annual income is up to 138% of the poverty level. [The text of the ACA says 133%, but the law also calls for a new methodology of calculating income, which makes the effective minimum threshold 138%.] For all those with income above the poverty level, the ACA provides premium tax credits to help make private insurance affordable.

Although they are not required to participate in the Medicaid program, all states do. To receive federal funds, participating states must cover certain groups of people, but beyond those requirements, the states have wide discretion to administer the program and extend coverage to other people in need of medical services. The ACA expanded Medicaid by requiring participating states to cover people who have incomes at or below the poverty level and who were not previously included in a mandatory coverage group.

Shortly after the ACA was enacted, however, twenty-six states filed a lawsuit in federal court challenging the Medicaid expansion provisions of the law (National Federation of Independent Business v. Sebelius). The case made its way to the Supreme Court, where, in June 2012, the Court rendered the Medicaid expansion optional for states. Federal matching dollars supporting other parts of the Medicaid program cannot be withheld if a state chooses not to implement the ACA expansion. As of this year, twenty-four states have chosen not to participate in the Medicaid expansion, effectively denying access to health care for millions of Americans.

Because the ACA envisioned that the Medicaid expansion would cover people below 138% of poverty, the legislation did not provide premium tax credits for people whose income is below the poverty level. In the twenty-four non-participating states, the Court’s decision sanctioned political choices at the state level that opened up a gap in access to health care for those people who are not covered by a state’s Medicaid program and whose income is below the level necessary to qualify for a subsidy to purchase insurance. In total, about five million low-income adults fall into the coverage gap. Twenty-two percent reside in Texas, where Medicaid eligibility is limited to households with income less than 19 percent of the poverty level (or an annual income of less than $3,760 for a family of three in 2014).

For the people in the coverage gap, access to health care is effectively denied, because, like the men, women and children that we served forty years ago at that Midwestern free clinic, they cannot afford to pay for health services and cannot afford to buy health insurance.

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