Sick Business

Paul Ware write: I was recently hospitalized for a couple of days in a Middle Eastern country after an accident. I won’t bore you with the details (clearly I survived) but I admit it had its scary moments. One thing I did not have to worry about was medical insurance. Even though I had to pay up front and claim on insurance afterwards, I knew that I would be getting (at least some of) it back. Interestingly, had I been a native of that country, medical care would have been free.

I had no problem with the quality of care I received. It’s nice to think that my U.S. dollars bought me better service, but I don’t have the data to back that up. In the United States we have what the rest of the world considers a strange attitude towards healthcare. We have the constitutional right not to have soldiers quartered in our houses but not to be vaccinated against infectious diseases. Healthcare is considered to be something you earn. For example, although the soldiers may have to sleep outside, they do get lifetime access to medical care, as needed, in recognition of their service. So, interestingly, do veterans of the National Oceanic and Atmospheric Administration. Similarly, since 1965, older Americans are considered to have earned the right to Medicare, with premiums ranging from nothing to several hundred dollars a month, depending on how much money they have paid into the system over the years.

But although the principle may have been eroded over the years, the idea that “just anyone” can get health insurance is still anathema to many Americans and I know this article will annoy some. Consider though, that losing access to decent healthcare is one of the worst effects of the downturn in the oil and gas industry for many Americans. Many younger geoscientists and engineers, are wondering whether they will get a job while more experienced “elders” occupy the desks they covet: why don’t they, like, retire and visit Machu Picchu?  Why, indeed?

Cartoon courtesy of the New Yorker

I wrote recently that the employment situation in the oil and gas industry should start to ease after 2019 as surviving Baby Boomers retire in greater numbers. Why “after 2019?” The Baby Boom was from 1946 to 1964. Half those babies (37 million) were born by 1955. Medicare eligibility starts at 65: you do the math.

By the way, despite the cartoon, the practice of senicide among the Inuit has not been practiced since the 1930s.

Published as “What Aetna’s Withdrawal Means for Obamacare” By James Surowiecki, New Yorker

Few companies are as unpopular as insurance companies, and no tears were shed for the insurance giant Aetna when, a couple of weeks ago, it announced that it had lost more than four hundred million dollars on Obamacare policies since the Obamacare exchanges were set up, in 2014, and was going to pull out of most of them. The news, which followed similar announcements by United Healthcare and Humana, was greeted with talk of “whining” insurers who “put profits before patients’ health” and are “willing to deny care to make a few extra dollars.” But the recriminations are misplaced. Aetna’s decision reflects an awkward reality: the jerry-rigged, politically compromised nature of Obamacare has made the program unstable, and unable to live up to its lofty promises.

It’s not that Obamacare has failed. As Larry Levitt, a health-care analyst at the Kaiser Family Foundation, told me, “The main goal of the law was to reduce the number of uninsured people, and twenty million more people are covered today because of it. It’s hard to call that a failure.” The reforms that Obamacare put in place have guaranteed access to insurance for people with preëxisting conditions, and have done away with caps on how much insurance companies will spend. Access to health care is less precarious than it used to be.

Still, we’re a long way from the future that Barack Obama envisaged when, in 2009, addressing the American Medical Association, he called for “comprehensive reform that covers everyone” and provides “affordable health insurance to every single American.” Some thirty million Americans remain uninsured. Participants in the A.C.A. marketplaces are less numerous, and sicker, than anticipated: 8.3 million fewer people enrolled through the exchanges this year than the Congressional Budget Office had projected. As a result, insurers in much of the country are fleeing the marketplaces. Kaiser estimates that between twenty and twenty-five per cent of U.S. counties may have only one insurer offering coverage in 2017; there’s already a county in Arizona with no Obamacare insurer at all. And the insurers that remain in these markets tend to offer an increasingly narrow network of health-care providers.

Lack of competition is a recipe for high premiums or low benefits (or both), further deterring younger, healthier people from buying policies. Which means that the risk pool gets still older and sicker, which means that more insurance companies lose money and leave the market, which means that competition is reduced even further, which means: see above. The U.S. could well end up with a two-tier insurance market, in which people lucky enough to get insurance through their employers will get much better coverage and wider options than those on the individual market, even when both groups are paying the same amount in premiums.

Obamacare is being hobbled by the political compromises made to get it passed. The program’s basic principles were the right ones: everyone would be able to get insurance, regardless of preëxisting conditions, and everyone would pay the same price for a given policy, with upward adjustments made only for older people and smokers. In short, insurance companies were prohibited from managing risk by charging healthy, low-risk people less than frailer, high-risk people. Since managing risk is typically key to how insurers make money, it would have made sense to leave them out and just enroll everyone in a government-run program like Medicare. Politics, of course, ruled that out. Shoring up the private-side approach would require penalties stiff enough to get young, healthy Americans to buy health insurance, but politics ruled that out as well.

Conservatives point to Obamacare’s marketplace woes as evidence that government should stop mucking around with health insurance. In fact, government hasn’t mucked around enough: if we want to make universal health insurance a reality, the government needs to do more, not less. That doesn’t require scrapping the current system: the Netherlands and Switzerland both demonstrate that you can get universal coverage through private insurers. But their examples also show that to do so we’d need to make it much harder to avoid buying insurance, and we’d need to expand subsidies to consumers.

Alternatively, we could implement the public option, which Obama himself called for in that 2009 speech: a federal program, modelled on Medicare, open to anyone on the individual market. The public option would guarantee that there was always at least one good choice available in the marketplace, and would provide competition for private insurers. If it used the government’s bargaining power to hold down costs and expand access, it could offer good benefits at a low enough price to attract younger, healthier patients.

There are solid arguments for both of these models. Either would work, if there were a shift in the political mood and it were given a shot. Even if nothing is done, Obamacare will continue to limp along, probably turning into something akin to Medicaid. But the departure of big insurers like Aetna has made it clear that, if we don’t do more to help cover people in the individual market, the program will never make good on its original promise of truly comprehensive reform. So don’t hate the players; fix the game. ♦