The Uncertain State of Health Care Reform

“Wait a minute, I thought this was all Obama’s fault.”
One of the best commentaries we have read about the condition of our health care industry was published earlier this year in The Harvard Law Record. My thanks to a professional colleague, Lisa Berry Blackstock of Soul Sherpa, for forwarding it to us. Click here to read it. These are some of the key issues in the struggle to achieve lasting health care reform:

  • Health care in the United States is big business and corporate stakeholders aggressively protect their interests. During the legislative process that resulted in the enactment of the Affordable Care Act in 2010, over 4,500 lobbyists were hired, more than 8 for every member of Congress. The industries that spend the most on influencing and lobbying are pharmaceuticals and insurance.
  • Industries that are not subject to price controls continue to charge whatever they can to enhance shareholder value. In particular, the pharmaceutical industry is expert at this. For example, Chicago–based AbbVie manufactures Humira, a wonder drug for auto-immune disorders. Humira accounts for 60% of AbbVie revenue and is the top selling drug in the world. AbbVie sells weekly dosages of Humira for $411 in Switzerland, $681 in the UK and $1,335 in the United StatesI’m not making this up.
  • With a business environment that operates largely without price controls and a political system that is influenced strongly by vested interests, it is not surprising that the United States spends substantially more on health care than any other country. Our per capita health care cost ($9.086) is 44% greater than second place Switzerland ($6,325).
  • The Affordable Care Act continues to be a controversial work in progress. Earlier this year, United Healthcare and Aetna decided to exit most health insurance marketplaces. For 2017, United will limit its participation to as few as three states. Aetna will maintain a marketplace presence in only four states. This will have a profound impact on consumers who will shop for insurance in the marketplace when it reopens November 1st – there will be fewer products and choices.

The United and Aetna decisions
These insurers have cited operating losses from marketplace activities – $1.1 billion for United since 2015, and $430 million for Aetna since 2014 – as the reason for withdrawing from most state marketplaces.

Not mentioned in the United and Aetna press releases about marketplace losses were company-wide earnings from operations for these periods: $23 billion for United and $12 billion for Aetna (source: SEC filings).

And not discussed at all was why losses of this magnitude were incurred. Of course, there was initial uncertainty about the insurance cost of (1) the ACA mandate to eliminate coverage exclusions for pre-existing conditions; and (2) the health care needs of people who deferred seeking care for years because they previously could not afford the cost of health insurance. But that was four years ago, in 2012. Insurers have had three annual premium rate setting cycles since then to price their products more appropriately. Why are they still losing large sums of money in the ACA marketplace?

The future of the Affordable Health Care Act
Clearly, deficiencies in the ACA have emerged over the last six years. The results of the November elections will determine whether Congress will try to improve what we have currently or tear it down completely and start all over again. But anyone who suggests that the ACA has been a complete disaster is not well informed. More balanced perspectives have been presented by Drew Altman of Kaiser Family Foundation and Dana Milbank of the Washington Post.

The future role of private insurers
Proponents of a single payer system are viewing with particular interest the United and Aetna decisions to curtail their insurance marketplace participation. Private insurers cover over 160 million people in the United States. If the insurance industry cannot be counted on to remain committed to the insurance-driven system that they lobbied aggressively for in 2009-2010, it is reasonable to question the role this industry should have in future health care reform.

Interesting times lie ahead.

Rick Pugach

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