Monday, March 17, 2014

The Affordable Care Act Unmasked

I was having a discussion with a friend of mine recently and as is usually the case during a conversation between a recovering health insurance professional and a registered nurse the topic turned to health care, health insurance and the Affordable Care Act.

I told my friend my ideas about lowering expenses and costs associated with health care in the United States and she encouraged me to write these ideas down in hopes of opening dialogue among folks who have interest in this concept and who may be able to communicate these ideas with someone in a position to possibly consider taking a more effective approach at resolving the issue of the high cost of health care and health insurance in America.

Some may think my ideas are silly, foolish, immature, stupid, etc…and that's fine. I'm not trying to convince anyone of anything. I'm simply spreading information in hopes that people will see that regardless of your feelings on our health insurance and health care systems, our government has failed us.

Okay, so hear we go.

First of all let’s define some terms because the government and the supporters of the Affordable Care Act (ACA) have failed miserably in this regard, which has Americans using terms improperly.

First and foremost we must all understand that there is a night-and-day difference between “health care” and “health insurance.”  Health CARE is not health INSURANCE which means the Affordable CARE Act is a grossly misleading title - the ACA is actually a mandatory/compulsory Health Insurance Act, but I'll get to that.  For the sake of this discussion we will keep the definitions simple.
  • Health care - the provision of care to a patient by a medical professional 
  • Health insurance -  an insurance product that provides insurance for health risks
  • Health insurance company - a company that sells a health insurance product
  • Insured – one who purchases insurance
  • Patient – one who receives care
Now open your mind. 

At present, depending on who you believe, there are anywhere from 14 million to 43 million Americans without health insurance.  And while the ACA has enrolled approximately 5million new insurance customers (a significant percentage being tracked straight into the Medicare plan) the problem of an underinsured population still exists and will exist until the government works WITH all stakeholders in the health insurance and health care industry to solve the underlying problems; because while there are 5 million enrollees in the government plan, more than six million have lost their coverage since January 1, 2014.  

So what are the underlying problems?  There are a few.

First there is fraud.  According to the FBI, health insurance fraud is running right at $80,000,000,000 per year.  Eighty BILLION dollars. This fraud is perpetrated by patients, health care providers, health care facilities, drug companies and medical supply companies, etc… which leads to a trickle down effect.  Here’s how.

If an insurance company is paying fraudulent claims it negatively effects their bottom line in the form of greater losses and assumption of more risk which could lead to the need to hold more cash in reserves to pay claims.  In order to do so the insurance companies are forced to increase premiums to meet their financial obligations - which forces people to pay more premiums or lose coverage… and they end up hating insurance companies labeling them "evil" or "greedy."

Do you see the irony?   These “ greedy, evil” insurance companies that continue to raise rates are simply responding to being stolen from.  And while insurance companies continue to get fleeced for billions, expenditures for health care exceed our national rate of inflation – a negative financial “double whammy.”  And the ACA does nothing to solve this problem.

Another main factor of increasing health care costs is increasing fees charged by doctors and facilities. You see people are ignoring the increasing power that doctors and facilities have over insurance companies.  It is the proverbial financial tail wagging the dog.  They have operated unchecked for decades and now we’re paying the price.

An economist from Princeton University stated, “Everyone is beating up on the insurance companies but (they) may be shooting at the wrong target.”  Warren Buffet said, “Insurance is not the problem,” and Paul Ginsburg said, “…no one has focused on the providers' power to get higher rates from insurers.” There are reports that fees charged by physicians and facilities are increasing at a rate more than twice that of our annual rate of inflation; and again, the ACA does nothing to solve this problem.

So the main factors driving health care cost increases which lead to higher rates for health insurance is abuse of the system and greed - and not necessarily by insurance companies.   These abuses cost the system and its end users tens of billions of dollars per year.

And who’s to blame?  WE ARE; but it’s much easier to blame the insurance companies because no one understands insurance which is why when a president irresponsibly tells you that the insurance companies are to blame you don’t understand or appreciate the depth of his irresponsible and callous disregard for the truth.  The president and his colleagues are lying to us when they tell us the government can create a better and more efficiently operating health care/health insurance plan than the private sector.  Why?  Because they don't have a dog in the fight.  Whether or not they succeed or fail WE will pay the bill; and if they fail they will blame someone else for failure - probably the insurance companies (which is pretty much what they're doing already).

Just so we're clear on the role of insurers I think a quick sidebar might be in order regarding the role of health insurers. Health insurers have certain obligations and do certain things.  Here are the top obligations:  
  • Underwrite health risks / assume risk transferred by insureds
  • Generate revenue; turn a profit
  • Sell patients to doctors and hospitals
  • Sell doctors and hospitals to patients
  • Provide a platform to receive premium payments and pay claims
Assuming health insurance companies should be altruistic and benevolant entities is misguided.  Insurance companies are in business to make money and they try to build their products to maximize profits and minimize premiums to claims ratios.

And while we're on topic, it is not out of the ordinary for a health insurance company to run at a 75% loss ratio ($0.75 of every dollar goes toward claims) which means the remaining 25% of premium dollars pay for operating costs. Would people call YOU greedy if you demanded a raise from your boss because 75% of your paycheck went toward paying off debt leaving you with 25% to pay for food, rent/mortgage, utilities, gasoline, insurance, etc… if a significant portion of your debt was due to people stealing from you? 

Enter the Affordable Care Act.

Al Gore had his “Inconvenient Truth” and now Obama has his “Convenient Lie.”  I will be brief on this but I will give my honest and brutal opinion. The Affordable Care Act is an abortion of legislation that adds another layer of governmental interference to a problem that the framers have completely failed to solve because they have completely failed to address and understand the underlying reasons as to why Americans are uninsured or are struggling to pay their monthly health insurance premiums.

You see, the government thinks that the reason why Americans can’t afford insurance is because insurance companies are evil, uncaring, unfeeling, heartless money-grabbing whores;  but the same can be said for any number of industries such as banking, entertainment, sports, fast food, candy/soda, clothing, cosmetics… and the list goes on. 

Throughout the rollout of the ACA the government repeatedly demonized insurance companies, bad-mouthed their underwriting practices, verbally assaulted their policies and tried to convince America that the insurance companies deserve to shoulder the blame for the predicament in which we find ourselves. Forget about insurance fraud, insurance and health care abuse, public assistance abuse, etc…the government has put a lot of effort into convincing the minions that insurance is expensive because of the greed of insurance companies, and this just isn’t true.  I think it was Lenin who said, "A lie told often enough becomes the truth."

Think about this: insurance companies are in business to make a profit but when people defraud them of $80 billion each year it makes it hard to do so, so they have to take measures to hedge against the financial crimes perpetrated against them.  So blame them if you must, but understand their position.  Insurance companies raise rates because we force them to do so, but the ACA supporters tell us it's the insurance companes' fault that rates are increasing - and the government telling us that it’s the insurance companies’ fault that they are defrauded of $80 billion a year  is like saying that a woman who dresses provocatively deserves to be raped.   The argument is so fundamentally flawed that if it weren’t so tragic it would be laughable.

Why is the government selling the ACA this way? Two reasons.  The first reason is because the worse they make the insurance industry look the better the government looks; and the second is because the government doesn’t understand the problem which means the trillion-dollar solution they’ve given us is a non sequitur. But let’s blame the insurance companies… Deflecting responsibility is a move invented by the government and they used it to perfection to pass the act and they continue to use this move in support of it; but Americans are becoming wise to this tactic.
Basic ACA review.

As we all know, the ACA places a legal requirement on Americans to obtain health insurance – either through their employer, individually or in the newly created health insurance marketplace.  If they don’t they may be fined indefinitely and increasingly. It mandates that insurance companies have to insure people regardless of health condition, it provides minimum levels of coverage and attempts to “level the playing field” based upon gender and age.  It also places requirements on businesses to provide health insurance for their employees.  Good stuff, for the most part.  

BUT, it also gives businesses an “out” in that they do not have to provide insurance for part-time employees which has lead a large number of businesses to cut back hours on employees, effectively giving them a pay cut AND forcing them to pay for 100% of their health insurance. Furthermore, some businesses have found that paying the fines is less expensive than providing insurance.  (I'm purposely not addressing "gender equity" and "age-based premium equity" - another blog, another time)

Also, non-partisan reports are that between six million and seven million people have actually LOST coverage due to plans being non-ACA compliant or through employers cancelling their employer-sponsored plans. Couple that with the fact that there are thousands of people who have gone on to the government site, signed up for cover and either have not paid their premium OR the insurance company of the plan they've chosen has no record of their enrollment or their payment and you can see that the ACA is inherently flawed.  And for those of you who argue, "Things have to get bad before they get better,"  I say, "BS!"

This particular aspect of the ACA proves that the government that created, supported and backed the plan has almost no grip on the reality of its effects on Americans who –unlike them – have to show up to work each day and work to pay for their own health insurance one way or another.  The ACA is the government’s attempt to force a pseudo-social program through a private sector delivery system coupled to a government-run management platform using negative reinforcement while attempting medical homogeny.  And, AGAIN, it does not address the problems. 

So now that we have our context out of the way lets look at my solution.

Since fraud and abuse are two of the major underlying problems – and the experts agree that the insurance companies are having their collective hands forced – is the solution to inject 43 million new patients into a broken system or should the solution seek instead to be an actual SOLUTION and not an expensive sociopolitical experiment?  I vote for an actual solution.

Let's set this up using a silly and simple example.  If you’re driving down the road and you get a flat tire you would be more likely to:
  • pull over, change your flat tire then have the puncture repaired or the tire replaced; OR
  • abandon your car and buy a new one
I would assume that most responsible adults would get out and change their tire.  You see, there is nothing wrong with your car - you just have a flat tire.  So you fix the flat and you’re back on the road.  Well, there’s nothing wrong with our health insurance and health care systems - we just have a breakdown in one of the major elements.  We don't need new systems, we need to fix the ones we have… and the ACA doesn't do it.

Fact:  The United States has one of THE BEST health care systems in the world.  Perhaps not THE best, but definitely one of the best.  People come from all over to get health care here; most of the time paid for by our tax dollars.   

Fact:  The US has one of the most abused systems in the world.

And as far as access goes, if you are inside our borders – regardless of your citizenship – and you need to see a doctor, you have access.  The US has exceptionally easy access to doctors and providers. These are not points that can be argued.  If you say our health care system is bad and there is no access you are wrong.

So we have exceptionally high quality of care and we have arguably some of the easiest access to that care but we are sitting around complaining about affordability while doing nothing to stop the root cause of escalating costs.   And our government thinks a new plan will solve the problem.  I have news for you – it, alone, will not.


My solution is very basic and will probably draw some ire for its simplicity and perceived basis in fantasy but I’m putting it out there.  My solution is obvious and simple:  We eliminate systemic abuses.

See?  Simple.  So how do we do this?

Well, Obamacare is going to cost us $1,500,000,000,000, and economists and experts agree that in spite of its best efforts health insurance rates will continue to go up and no one has in any way, shape or form addressed the cause of these increases;  and until systemic abuse is reduced or eliminated costs will continue to go up with or without the ACA.  Putting $1.5 trillion into a broken system is a very bad idea.

And let me say this:  The ACA is not a bad idea because it’s “social medicine” or “national healthcare” becuase it is neither of those.  The ACA is a bad idea because it is built on a fundamentally flawed concept that in order to make health CARE affordable we must make health INSURANCE compulsory.  If you take away one idea from this please let it be this one:

You see this is NOT an affordable CARE act – this is a mandatory insurance act; and again – health care is NOT health insurance.  Repeating – this is NOT an affordable care act, it is a mandatory INSURANCE act.  Make sure you understand this as we move forward.

My idea for a solution is as follows:
  • First - instead of spending $1.5 trillion on a flawed social experiment, we come up with a realistic amount of budgeted tax dollars to expand funding to the FBI and create a no-nonsense anti-fraud team that will work inside insurance companies to set up systems to prevent insurance fraud, track down the fraudsters and recoup money. 
  • Second – work with tech companies to create a technologically advanced reporting system for ALL stakeholders to eliminate fraud in all aspects of health care.  Obama is spending billions creating a “data hub” which is ridiculous.  I propose re-directing spending to upgrade the MIB and develop a claims reporting, filing, payment, UR, platform that – like the MIB – will be universal in scope for all insurance stakeholders; which means all stakeholders can communicate across a unified platform to track claims by patients, reporting by doctors, etc…We work toward biometric coding for ID cards, streamlined reporting of claims, caps on incentives offered to providers/facilities who test drugs, etc… and we put in place penalties for non-compliance by all stakeholders not just the end users.
  • Threatening people with penalties and enticing them with tax credits that they may or may not qualify for is ridiculous.  Businesses should receive more credits, concessions, benefits, etc… for providing plans for their employees, period.  As it stands, businesses are encouraged to cut back on full-time employees and do away with plans. Encouraging people to buy expensive crap that is always going to be crap that will increase in cost is moronic - penalizing them for not doing so?  Idiotic.
  • Next.  The government should encourage insurance companies to work with tech companies to continue to push and fund these advances in order to stay out in front of fraud and abuse.  Perhaps tax breaks, perks or subsidies that reward and support insurers who reduce fraud and save policyholders money.  “What?  Give insurance companies MORE money?”  Yes.  Money they will spend making their products better – which benefits insureds/patients.
  • We re-tool the FDA to streamline the introduction of new meds and new technology.  This hastens the product to market, lowers costs on the front-end, lowers the price tag on the back end and (God forbid) helps America keep pace with the rest of the world in medical advances available to patients – which might mean Americans get healed faster instead of treated longer, which does what to long-term health care costs?
  • The government and private insurers work together to develop a national UCR fee schedule so that all doctors, all hospitals and all medical supply companies are playing from the same sheet music.  We legislate fees and reduce or eliminate balance billing inside any and all insurance contracts.  If a doctor contracts with an insurer he/she is bound by the contract and the reimbursement rates and he/she cannot balance bill any patient at any time under any circumstances. If you provide a service inside the terms of an insurance contract you are bound by that contract – period.  If people are cash patients this rule does not apply.  This means that doctors, hospitals, patients and insurance companies all play by the same rules and when you ask, “How much is this going to cost me,” a billing specialist should be able to tell you a cash price and an insurance price.  Anti-competitive?  Nope.  Let doctors, providers, facilities and insurers compete based upon service and quality of care so that their financial success is based upon the results they get not the amounts they bill.  Even Warren Buffett said, "We are paying for procedures not results" and this needs to stop.  Further to this, fewer bills go unpaid, fewer people go to collection, less debt charged off, etc… and doctors who sign contracts know exactly what they will be paid and customers know that the law is on THEIR side regarding the financial aspect of their treatment.
  • And with regards to underwriting, pre-ex, etc… if the government worked WITH insurance companies toward this systemic solution and they did help them reduce their exposure to fraud, the insurance companies might not be so hesitant to voluntarily yield to requests by the government to modify coverage terms, and (and go with me here) with an $80 billion reduction in fraud the insurers might be able to affordably expand coverage, remove restrictive terms and negotiate more competitive and consistent contracts with providers. 
  • Finally:  Health care services will be paid for by users either with insurance or cash money.  If you are a cash-patient you are on your own BUT you can BE a cash patient.  You should not be forced to buy something you don’t want or need, but if you receive care you WILL pay for it one way or another.  Either you have insurance, you pay for services at the time services are rendered, you work out a payment plan with the provider or have your wages garnished.  Bankruptcy will not remove medical debt.  Exceptions, of course, for true indigents.
See?  None of these solutions involves creating a trillion dollar boondoggle.  They all focus on the abuse and fraud that has created our expensive system.  They focus on introducing solutions not adding an additional layer of problems.

If we could come up with a strategy to reduce the amounts paid for fraud and systemic abuses and work toward paying for consumption and stabilizing costs we could put billions and billions of dollars each year back into our own pockets without spending hundreds of billions each year to further populate a system that is broken! But we have to understand that everyone has to stop pointing the finger of blame and start taking personal responsibility to solve the problem.

If we are to provide affordable health insurance and affordable health care then we must do so by understanding that the problem with affordability is not a product problem, an access problem or even and affordability problem:  it is a systemic problem and any solution needs to target repairing the system and not rebuilding the products made expensive by it.    

The ACA (in its present form) is not the solution to the problem – it is an extension of the initial  problem masquerading as a solution.  And while the government is to be commended for spending time addressing the issue I think they really need to admit that the ACA is a cop out.  It is nothing more than the appearance of progress.  The sad news is our government doesn’t understand this and because they don’t understand this they lie to us and send us the bill.

Please understand this:  I believe that everyone should have health insurance BUT I am against the ACA in it's present form; but being against Obamacare doesn't mean one is against affordable access to health care and health insurance.  It simply means that I do not agree with the argument that to make health CARE affordable we make health INSURANCE compulsory and use financial penalties to enforce compliance.  It's anti-competitive and adversarial.

There you have it.  My insurance rant on what I would suggest as solutions to fix the system instead of simply covering up the problem and convincing everyone that the issue of affordability is the insurance companies’ fault when in fact it is OUR fault.  I have specifically left out other aspects that affect our health care systems such as an aging population and a population that is fatter, lazier and sicker than ever before…

Regardles, it's my opinion that making something affordable should focus on reducing or eliminating factors that contribute to unaffordability and NOT on adding more factors that contribute to unaffordabiity - which is what the ACA does.

Again, I believe with all my heart that every American should have health insurance.  And I also believe that if the system can be fixed then there is room for the ACA and private-sector insurers without the need for mandatory compliance or penal provisions.  We need to create a system that is affordable that people want to be a part of and we CAN create a system that is affordable and fair for everyone; but it’s going to take more than just an improperly labeled, emotionally marketed, ineffective law to do so.  And it’s going to take more than a catchy slogan or a warm feeling of hope and change.  It’s going to take WORK.

Work that can’t be farmed out to day laborers.  Work that can’t be sent overseas.   And the work that needs to take place is the work that we elect officials to do – so we must force them to work and get this done or fire every last one of them.