By the time I had printed out a copy of the just released Congressional Budget Office (CBO) cost estimate of the GOP proposal to “repeal and replace Obamacare” my inbox had filled up with draconian headlines and alerts:
- CBO Sees 24 Million More Uninsured, $337 Billion Deficit Cut in Coming Decade with GOP Health Plan
- Health Bill Would Add 24 Million Uninsured but Save $337 Billion, Report
- The CBO Deals Paul Ryan’s Health-Care Plan a Major Blow
A complete reading of the 27 page report paints a more complicated picture but does urge caution as the House of Representatives moves to debate, amend and attempt to pass the American Health Care Act (AHCA).
To reach the cost estimate, the CBO had to begin by making a set of assumptions.
1. Health care is an entitlement – just like Social Security and Medicare.
2. The nation’s health care eco-system is a permanent fixture that cannot be evolved and made more cost-effective.
3. Health insurance is and should be the future primary source of payment for an individual’s health care.
4. The non-group insurance market place will see a smaller portion of premiums returned as benefits to insured individuals – resulting in higher out-of-pocket expenses for the insured.
5. Higher out-of-pocket expenses are, by definition, bad for the insured individual.
6. Absent a government mandate and associated tax penalty, about 14 million Americans will choose to go without health insurance.
7. Absent a government mandate, many employers will stop offering health insurance to their employees.
Everyone in business knows step one in making a go/no go decision on any proposed project or product rollout is to validate the underlying assumptions. If even one of the assumptions is proven to be invalid, then the rest of the analysis is immediately called into question.
The project cannot be green lighted until all of the assumptions are deemed valid – either by addressing the flaw in the proposed project that invalidated an assumption or by proving the assumption, itself assumed the wrong input or outcome.
Below I’ve made a quick pass at whether the American Health Care Act should be “green or yellow lighted” – based on CBO assumptions.
Health Care Is an Entitlement
Let’s give the Democrats their due. Regardless of its flaws, the Affordable Care Act of 2009 firmly established health care as an entitlement due every American.
Other entitlement programs – i.e. veterans’ benefits, government pensions, Social Security and Medicare all require some prior contribution by the individual beneficiary. The beneficiary is said to have “paid into the system”– before receiving a specific and defined benefit.
For example, in Social Security there is a legally defined, published maximum benefit paid monthly regardless of how many additional dollars the recipient may have (or is) paying in Social Security taxes.
Payroll taxes (Medicare, Social Security etc.) deducted from your wages are deposited into a trust fund to be used to pay your benefits in retirement. Congress considers these benefits to be “earned”.
Contrast the new health care entitlement. It is paid for entirely by current income tax payers, in addition to taxes paid for their own future Social Security and Medicare benefit (or taxes on these benefits), and by future tax payers (borrowing). Borrowing that is moving the nation ever closer to the “fiscal cliff”.
There is no dedicated new funding source to pay for this new entitlement.
The taxes – now suggested for repeal by the GOP bill – are a mirage. They “move the chairs around on the deck of the Titanic”. The tax paid in column A is credited back in column B or passed on in higher health insurance premiums. There’s no new money except borrowed money!
Show Us the Entitlement Money
Republicans in the House of Representatives need to affirm healthcare is an entitlement and then develop a new funding source to pay for it. They are, after all, the “party of fiscal responsibility. Or, they’d like to have us believe they are?
The GOP (Study Group) should recognize that voters’ theoretical – i.e. gut reaction – to the idea of “government controlled health care” (2010) and their opposite reaction to getting a new health care “benefit”(2012) are both rational.
Voters are afraid of government mandates but will punish anyone who tries to take away a benefit bestow by those mandates once they’ve experienced it.
In 2016 voters supported “repealing” the higher cost of Obamacare era insurance premiums, co-pays and deductibles. They did not vote to give back the additional benefits received from Obamacare!
Accepting that a new entitlement exists does not mean the entitlement cannot be changed. The fact is that there are too many mandates, rules, and required benefits under the current law.
But any change made must demonstrate that is a fairer, better deal for a majority of Americans. Most Americans must be able to see and feel – experience – that the change is a better deal and be willing to pay for it, directly, or it is not going to work in practice.
Health Care Eco-System is Static
The CBO analysis completely misses the most compelling problem. Their analysis assumes the current structure is here to stay and that all reforms will be made through and not to the existing health care delivery model.
That assumption is incorrect.
The cost of health care services, drugs, appliances and anything else associated with the delivery of health care in America today must be changed – lest it bankrupt the nation.
The government is consumed by the question: How to pay for insurance premiums covering the unaffordable existing health care model?
At the same time, the American private sector (the consumer) is already experimenting with new models – more efficient and less costly.
Twenty of the nation’s biggest employers are banding together to create the Health Transformation Alliance aimed at using modern technology to control the rising cost of employee health care benefits. These employers, including American Express, Verizon and IBM (Watson) all understand the power of information to spearhead innovation.
These major employers are making an investment in reform because they remain committed to maintaining health insurance as a necessary employee benefit – calling into question, as well, the CBO’s 7th assumption.
These two CBO assumptions are incorrect. That means the 10 year projected cost estimate is reduced to pure conjecture.
14 Million More Uninsured in 2020
Not even the CBO “believes” this assumption.
Instead, they argue that an expanded range of choices in insurance products available to younger Americans – after the expiration of government mandates – will actually attract more young and healthy Americans to the non-group insurance market after 2020. This will positively impact the ratio of younger/to older Americans involved in the market place.
CBO projects a 10 percent reduction in overall insurance premiums as a result.
But – and here I agree with the CBO – the American Health Care Act – needs to be improved for older Americans still too young to qualify for Medicare.
These are people whose income exceeds the ridiculously low federal poverty guidelines – making them ineligible for Medicaid – who cannot afford health insurance premiums of $12,000/yr or more – that are only slightly reduced through $4000 “tax credits”.
Some of these people are, also, sicker and more expensive to care for.
A Roadmap for Dialogue
To their credit, the CBO has done an extraordinary job of laying out the challenges not just to the current House AHCA proposal but to the underlying problem of health care delivery costs, as well.
How much better off would the nation be if Congress – both Republicans and Democrats – were to embrace the cost estimate as a starting point?
“What-if” the ACHA were viewed as a bi-partisan starting point from which our health care eco-system is encouraged to evolve?
- “What-if” Medicaid could be reformed and modernized into an attractive, affordable option for some middle-aged, middle income Americans as well as those too poor to pay health care?
- “What-if” members of Congress were to work with all the stakeholders (from the President to the smallest tomato grower) to examine, question and rethink each CBO assumption?
- “What-if” Congress started a discussion that engages provider, payer and patient in a singular effort to achieve better quality and lower cost health care for all – i.e. those who must rely on the health care entitlement and those who must pay for it?
But, as the CBO report cautions, it’s not possible to put such far-reaching improvements into place by 2020 as the AHCA requires.
Congress must learn from its past mistakes. Reforming the healthcare entitlement must be both bi-partisan and implemented over a 10 year time horizon that allows for intermittent adjustments as circumstances require.
Photo at US Capitol by Author — March 2,2017