The Affordable Care Act
Take a trip back in time to the White House signing ceremony for the Patient Protection and Affordable Care Act (ACA) in March 2010. A jubilant Vice President Joe Biden turned to President Obama and whispered, “This is a big fucking deal.” And it was. After a protracted and nasty battle with Republican knuckleheads who couldn’t care less that 45,000 Americans die every year because they lack access to health care, the bill squeaked by the House on a vote of 219 to 212. It then passed the Senate through “reconciliation,” a procedure that prevented a filibuster from killing it. In the end, not a single Republican voted for the bill.
Democratic Party politicians manufactured enthusiasm for the ACA even though almost none of them fully understood the implications of the 2,500-page bill. Then-House Speaker Nancy Pelosi said, “We have to pass the bill so that you can find out what is in it, away from the fog of the controversy.”1 But this didn’t stop Pelosi from calling it “liberating legislation” and insisting that they had “passed health insurance reform for all Americans that is a right and not a privilege.”2
The liberal media, with the Nation in the lead, provided left cover for “Obamacare.” Sure, Nation editors would have preferred a government-run, “single payer,” system, but they called for health care activists to accept “reality”: “The Affordable Care Act began life as a compromise—a complicated and frustrating political calculation—and it is never easy to defend a compromise. But failure to do so at this critical stage in the rollout of the ACA will create a crisis not just for health care in America but for the notion that government can and should repair the breaches that threaten civil and humane society.”3
Now, three years after the ACA’s passage, with Obamacare in its first full year of implementation in 2014, the American people have finally found out what is in the bill. It’s no exaggeration to say that most of the proffered reforms are dead on arrival. Enactment of key provisions are delayed until 2015, twenty-six states will not expand the Medicaid program, the gaps in coverage are chasms, and the prices of premiums are inducing sticker shock. And millions will still be uninsured.
What is the Affordable Care Act?
According to its advocates, the Affordable Care Act was passed to ameliorate a crisis in access to health care by making private health insurance more affordable. Given the insurance industry’s penchant for devising ways to deny or render unaffordable coverage to people who need it most, the ACA’s most popular provision is its prohibition against insurance industry denial of coverage to people with “preexisting conditions,” that is, to anyone who has a disease like AIDS or cancer.4
The legislation builds on the existing health care infrastructure—the Medicaid program and employment-based insurance coverage—and creates a new option to buy insurance online through federal and state health insurance “exchanges.” Eligibility criteria are used to sort people into categories that determine the type and cost of health plans available to them.
Medicaid is a joint federal- and state-funded program that provides health care for over sixty million low-income Americans. Due to the ACA’s expansion of Medicaid, experts have projected that the law will add twelve million people to the rolls.5 Under the ACA, states have the option of extending Medicaid eligibility to those with incomes of less than 138 percent of the federal poverty level, that is, $27,310 for a family of three and $16,105 for an individual.6 If all states decided to implement Medicaid expansion, about half of the uninsured would be covered. So far however, only twenty-six states and the District of Columbia have “opted in” to this Medicaid expansion.
The employment-based system of providing health insurance continues under new ACA-required regulations. Large employers, defined as those with more than fifty full-time workers, are mandated to offer employee health coverage or to pay a penalty. Smaller employers (with fewer than fifty workers) are not required to offer insurance.
The plans must contain a comprehensive package of services called the “10 essential health benefits” and include items and services within the following categories: outpatient services; emergency services; hospitalization; maternity and newborn care; mental health and substance disorder services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive screenings; chronic disease management; and pediatric services, including oral and vision care.7 In addition, employer plans can no longer set an annual or lifetime dollar limit on benefits and are required to limit “cost sharing” (employee-paid deductibles and co-pays) to $6,350 per person per year. A job-based health plan is considered affordable if the employee’s share of premiums for the lowest cost coverage that meets the minimum value standard is less than 9.5 percent of their family’s income. Only if it is more than that amount can a worker purchase a plan on the health care exchange.
To enable consumers to comparison shop online for health plans, the ACA authorized billions in federal money to help individual states set up online “exchanges.” To cover Americans whose states did not set up an exchange, the federal government created the website HealthCare.gov. States have either implemented their own health insurance “marketplace” or have let the federal government run it for them. Presently, only seventeen states run their own health care exchanges.
Health insurance plans under ACA are divided into four categories or “metal tiers”: bronze, silver, gold, and platinum. Each “metal” signifies the plan’s “actuarial value,” i.e., the proportion of medical bills insurance will cover:
- Bronze-tier health plans have a value of 60 percent
- Silver-tier health plans have a value of 70 percent
- Gold-tier health plans have a value of 80 percent
- Platinum-tier health plans have a value of 90 percent
Government subsidies to purchase a plan are available to people making between 100 and 400 percent of the federal poverty level (FPL). Individuals with an income range of $11,490–$45,960, a couple with an income of $15,510–$62,040, and a three-member family earning $19,530–$78,120 qualify for a subsidy.8
The ACA’s most controversial provision is the mandate that every person must have some type of health coverage and prove it when they file their income taxes. Those who don’t comply are mandated to pay a financial penalty. In 2014, those without coverage will face a tax penalty of 1 percent of their annual income or $95, whichever is greater, and a per-child fine of $47.50, up to a family cap of $285. By 2016, the penalty, which is added to the individual’s federal income tax, increases to the greater of 2.5 percent of income or $695 per individual. For many, it will be cheaper to pay the annual penalty than to buy insurance.
Officials at the Department of Health and Human Services (HHS) realized that there were legitimate situations in which millions would not qualify for either Medicaid or for subsidies. HHS decided it would be unfair and politically untenable to penalize these individuals for being uninsured, as if that were not enough of a penalty. HHS created a list of “hardship” exemptions from the penalty including:
- Eviction in the previous six months or the threat of eviction or foreclosure
- A utility shut-off notice
- Recent death of a close family member
- A fire, flood, or other natural or human-caused disaster
- A bankruptcy filing in the last six months
- Medical expenses in the past twenty-four months that could not be paid
- Unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
- Residence in a state that fails to expand Medicaid if the individual would have been eligible for Medicaid
Think about this list. These are individuals and families who desperately need mental health services and medical care, yet the Obama administration, instead of enforcing measures that would ensure affordable coverage, is leaving them uninsured and exposed to medical bankruptcy.
The implementation of the ACA in the real world
“This is real simple. It’s a website where you can compare and purchase affordable health insurance plans side-by-side the same way you shop for a plane ticket on Kayak, same way you shop for a TV on Amazon. You just go on, and you start looking, and here are all the options.” —President Barack Obama
The October 1, 2013, opening of the insurance exchanges wasn’t real simple. It was bungled so badly it became prime fodder for late-night talk shows. Jon Stewart, the wickedly funny host of the Daily Show, interviewed a poker-faced Kathleen Sebelius, former secretary of Health and Human Services. (Sebelius resigned in April, 2014.) Stewart joked about HealthCare.gov, “I’m going to try and download every movie ever made and you’re going to try to sign up for Obamacare and we’ll see which happens first.”9
Despite $1.5 billion given to eleven states to help set up their health insurance exchanges and $394 million spent on information-technology services to run HealthCare.gov in twenty-six states, the online websites crashed repeatedly. Obama and Sebelius offered apologies to the millions of frustrated Americans who tried over and over again to apply for coverage online, but it was too little, too late. Obama’s approval rating sank to an all-time low of only 39 percent of voters approving how he is handling his job, while 54 percent disapproved.10
Obama’s assurances aside, shopping online for health insurance cannot be compared to shopping for books on Amazon or flights on Kayak. There is no “1-click ordering” option or a money back guarantee if you don’t like your health plan. You won’t die or go into a diabetic coma if a book never arrives or the flight you buy is cancelled. Access to health care is a matter of life and death. The media rarely report this statistic: 45,000 deaths every year are due to lack of access to health care.11 Moreover, treating medical care like a commodity results in patients getting only the amount of health care they can afford, rather than what they need.
The health care exchanges’ computer architecture is enormously complex, in part, because its construction was outsourced to competing private corporations that don’t communicate with each other. But a more fundamental reason is this: the ACA’s complex eligibility rules for coverage and subsidies required that computer programs must link to multiple government databases. Databases at the Internal Revenue Service (IRS), Immigration and Customs Enforcement (ICE), and other US government agencies are used to confirm income and citizenship or legal residency. For each applicant, the website has to verify demographic information and match social security numbers. Subsidies must be calculated and all of this information has to be uploaded to insurance companies. Most important, back-end systems had to be created for government subsidies to be paid directly to insurers.
The creation of the federal and state insurance exchanges added a staggering amount of administrative complexity to a health care system that is already notoriously bureaucratic and maddeningly incomprehensible. Thousands of “navigators” and brokers were hired to help consumers and small businesses choose plans. Over 12,000 call center workers at seventeen sites across the country field questions about the ACA.12 Another ACA-supported bureaucracy will decide who is eligible to receive “hardship exemptions.”
The ACA not only keeps the multiple-payer, market-based system intact, it takes it to a new level. For the first time ever, the uninsured are being forced to buy a private health plan or be punished with a fine. Obamacare delivers millions of coerced customers into the clutches of the predatory, for-profit health insurance corporations. And despite no longer being able to deny coverage to people with preexisting conditions, insurers have devised new ways to avoid people with health problems.
The first open enrollment period of Obamacare ended March 31, 2014. On that day, as a massive surge of people tried to meet the deadline, the HealthCare.gov website crashed. Politico reported, “The federal website was down for six hours early Monday morning. Then it was up. Then it activated its ‘virtual waiting room.’ Then it blocked newcomers from creating accounts. Then it was working again, with officials reporting more than 1.6 million visitors by 2 p.m. and more than 3 million by 8 p.m.”13
It’s estimated that 9.5 million previously uninsured people have gained coverage since Obamacare was enacted.14 After its initial rocky start, HealthCare.gov and other exchanges succeeded in enrolling more than eight million subscribers, as the Congressional Budget Office predicted before the shambolic program launch. The technical glitches were solved and application errors corrected for one simple reason: the insurance industry wants the $1.1 trillion in subsidy money that the ACA hands over to them.15 This massive transfer of public wealth from the government to the private sector to finance health care is unprecedented. It is part of the ongoing neoliberal assault on publicly funded health care.
Risking it all
The guiding principle that continues to drive the private insurance industry—patient risk—remains at the core of the post-ACA American health care system. Private insurance operates on the actuarially estimated probability that only a certain percentage of sick individuals will require insurance to cover financially crippling medical expenses. The “risk” of that sort of expense is borne, and insurance premiums are based on, the assumption that many more healthy people will pay premiums but not require payouts for any but routine medical treatments. Insurance companies manage risk to avoid what economists call “adverse selection,” which means, in essence, having among their policy holders a higher than expected number of sick people who require expensive insurance payouts. So they divide their policyholders into “risk pools,” rating them according to their likelihood of using their insurance for covered expenses. For profit-making insurance companies, a sweet spot exists when they are able to decrease the size of the “high-risk” pool (i.e., sick people) with higher fees or coverage limits, while increasing the “low-risk” pool of healthy people who continue to pay their premiums. As such, risk pools discriminate and pit people against one another by dividing them into profitable and unprofitable categories. “Risk” undermines social solidarity and the notion that health care is a human right for all. Instead, it promotes a “what’s-in-it-for-me” mentality.
In a true government-run social insurance program, where “everyone is in and no one is out,” adverse selection isn’t a problem. The “risk pool” is the entire population, which renders the segmenting of people into high-risk and low-risk categories irrelevant, as companies aren’t competing for the “right mix” of policyholders. The wealthy and healthy and the poor and sick are part of the same system, with the same rights. Moreover, since a government-run system can be funded through progressive taxation and provide medical care for people who wouldn’t otherwise be able to afford it, it redistributes income from the rich to the poor. Finally, it eliminates the opportunity for “rent extraction” from a parasitic industry whose CEOs are the most highly paid in corporate America, while driving down the high costs that exist at all levels of the profit-driven health care industry.16
Even though the ACA outlawed some of the insurance industry’s most nefarious practices of discrimination against high-risk patients, it hasn’t done away with the industry’s risk management practices altogether. Enrollees are assessed as high- or low-cost, and selling insurance to the young who tend to use fewer medical services than older people is still the goal for insurers. Hence the media hullabaloo urging millennials to purchase a plan. The hashtag #gotinsurance was created to promote Obamacare to this demographic, also known as the “young invincibles.” An ad campaign launched to appeal to college-age men created the word “brosurance.” It’s estimated that seventeen million uninsured young adults are eligible to buy coverage in the exchanges, and that prospect has the insurers salivating.17
Tricks, not treatment
Most Americans, fed up with the brazen discrimination of the insurance industry, supported the ACA’s ending of preexisting condition exclusions, and any reform of the system seemed better than none. But insurers haven’t fundamentally changed their ways: they still favor the young and healthy over the old and sick, and they’ve devised a number of ways to manipulate the system to avoid “high risk” policy holders or to charge more money for coverage. After all, Elizabeth Fowler, the former vice president for public policy and external affairs at WellPoint, in her then-role as the main health policy adviser to Senate Finance Committee chair Max Baucus (D-Mont.), wrote the ACA, and after the bill passed, the White House appointed her to oversee the implementation of the legislation.18 Insurance company executives are experts at gaming rules and creating arcane regulations to exclude or deny health care to beneficiaries, which is exactly what they have done.
Explicitly written into the ACA is the ability to charge the oldest patients three times more than the youngest patients. Most preexisting illnesses emerge as people age, so this provision significantly undermines the protection of those who have health conditions. Another trick is to exclude major university medical centers that provide specialized care to those with chronic illnesses from provider networks. And delivering poor service to policyholders who file numerous claims so they change insurers is another way to jettison costly patients.19
Insurance companies know that restricting drug formularies, dividing medicines into tiers, and requiring patients to pay as much as 50 percent of the cost per prescription, which can easily exceed $1,000 a month, almost guarantees that the chronically ill won’t enroll in their plans. Marc Boutin, executive vice president of the National Health Council, a coalition of advocacy groups for the chronically ill, explained: “The easiest way [for insurers] to identify a core group of people that is going to cost you a lot of money is to look at the medicines they need and the easiest way to make your plan less appealing is to put limitations on these products.”20
Another group that will pay more for coverage is cigarette smokers. President Obama, a former smoker himself, capitulated to insurers who argued that smoking isn’t a preexisting condition and they should be able to impose a “tobacco surcharge” of up to 50 percent higher for smokers. This is discrimination pure and simple. Nicotine addiction, like addiction to other drugs, is a preexisting condition. The insurance industry wants to increase premiums for smokers because they know that on average they have more health problems.
According to the Centers for Disease Control, an estimated 43.8 million people, or 19 percent of all adults aged eighteen years or older, smoke; the majority of smokers are less educated and live below the poverty level.21 So a group at high risk for health problems and who need access to medical care and smoking cessation products will be charged higher premiums if they buy a plan on the insurance exchange. That wasn’t supposed to happen under Obamacare. Smokers, though, can breathe a bit easier for now. Like many other provisions of the ACA, a glitch in the government’s computer payment systems can’t process the tobacco surcharge correctly, and it won’t be applied until 2015.22
Savvy marketing campaigns are in the insurers’ bag of tricks. Campaigns are aimed at healthy groups that they want to cover, and insurers use ZIP codes to identify where young, affluent people live and work. Siva Namasivayam, an executive at SCIO Health Analytics Inc. said, “They [investors] want to attract the right risk, such as ‘entry-level singles’ and ‘healthy baby boomers.’”23
The insurance plans that are offered on the exchanges are best described as “unaffordable underinsurance.” Bronze plans have the lowest monthly premiums but higher out-of-pocket costs. The insurer pays 60 percent of covered health care expenses and patients pick up 40 percent, an incredible financial liability. According to the Obamacare Facts website, a bronze plan is “a good choice for those who don’t plan on using many medical services.”24 Is it possible to plan on not using medical services? Attempting to forecast health care needs is not only ridiculous, it’s also impossible. No one “plans” on getting cancer, having a heart attack, or crashing a car.
Nevertheless, the working class and the poor will overwhelmingly opt for bronze plans because the monthly premiums are the cheapest. Silver plans split covered expenses 70–30 and are considered the “marketplace standard.” Gold plans divide expenses 80–20. This level of coverage “means that families won’t have to worry about health care costs stopping them or their families from getting the care they deserve.”25 Platinum plans have the lowest out-of-pocket costs and the highest monthly premiums and are touted as “the right choice for anyone who wants the best coverage for them and their family and is a smart buy for those who are sick or who have dependents who are likely to use costly health services.”26
On the federal website for Mississippi, the monthly premium for a Bronze 3 plan that doesn’t include vision or dental costs $430. With a $310 subsidy that goes directly to the insurance company, the consumer is left to pay $120 per month. There is a $6,000 yearly deductible and an out-of-pocket maximum of $6,350. Visits to the doctor or a trip to the emergency room (ER) require a 40 percent co-pay. At the top end, the Gold 4 plan costs $643, a $310 subsidy goes to the insurer, and the consumer pays $333 per month. The deductible is $1,000 and the maximum out-of-pocket is the same as the bronze. Doctors’ visits require a 20 percent co-pay and an ER visit is a flat $250.
Recent research into the health plans offered on the exchanges reveals that there are no significant differences in benefits among the metal tiers. Buying a gold or platinum plan doesn’t guarantee a larger network of doctors or hospitals or a more comprehensive drug formulary. The main difference is the co-pay structure and the deductibles.27 The Avalere consulting firm bluntly states, “As exchange enrollees transition from choosing a plan to accessing coverage, most consumers may be surprised to face significant cost sharing and may learn their doctors and pharmacies are considered out-of-network.”28
Promises made, promises broken
Obamacare promised unrestricted choice of doctors and hospitals, but the opposite is the case. Insurance companies have designed plans that force a tradeoff: lower premiums in exchange for a narrow or ultra-narrow network of providers. It’s tough luck if the doctor you’ve been seeing for ten years is not in the network. A McKinsey & Company analysis of 120 silver-level exchange plans found that 70 percent were narrow network plans, in which at least 30 percent of the area’s largest hospitals were not in the plan, or ultra-narrow network plans, in which that number increased to at least 70 percent.29 The insurance industry is desperately seeking to cut its costs and a key way to do that is by restricting access to health care providers and hospitals—especially the best hospitals, such as university medical centers.
Significant “cost sharing,” the industry euphemism for increased patient out-of-pocket expenses, is written into all plans. Cost sharing is problematic because it acts as a barrier to accessing care, especially for people with chronic conditions.30 When people delay going or don’t go to the doctor for a health problem because the co-pay is too high—or because the insurance company pays nothing at all until a huge deductible is met—small, manageable problems become big, complicated, dangerous ones that end up costing more money, or costing lives.
The ACA was supposed to limit out-of-pocket costs, including deductibles and co-payments to $6,350 for an individual and $12,700 for a family, starting this year. Although those amounts are still too high, this was a major insurance reform that would actually benefit millions of people. President Obama explained in a joint session of Congress in September 2009: “We will place a limit on how much you can be charged for out-of-pocket expenses, because in the United States of America, no one should go broke because they get sick.”31 But employers and insurers were granted a one-year grace period that lets them set higher limits, or no limits at all on cost sharing. Recalcitrant insurance companies complained that more time was needed to create computer systems that could calculate out-of-pocket expenses for each policyholder, but they had four years to figure how to do this. It won’t be a surprise if insurers ask for and are granted another extension because capping cost sharing reduces profit margins.
Now that the exchanges are open for business, it’s become clear that insurance is far from affordable even for those who qualify for subsidies. Some will get bare bones coverage and pay high out-of-pocket costs, while others will get “the best coverage” and pay exorbitant monthly premiums. Many plans—especially the stripped down “mini-meds”—still leave people vulnerable to medical bankruptcy, the leading cause of bankruptcy in the United States.32 Under Obamacare, having insurance coverage won’t prevent financial ruin.
Another oft-repeated Obama promise, “If you like your plan, you can keep it,” was also broken. When insurance companies cancelled millions of policies because they didn’t comply with the ACA’s regulation to offer the ten essential health benefits, it became a national debacle. The press was full of stories of how patients were finding coverage options on the exchanges to be more expensive with less care covered than their cancelled plans. After a huge Republican-led outcry, Obama rescinded the regulation. Insurers can continue to offer current plans for at least another year. The fact that many of the cancelled plans were substandard—and that many individuals regularly drop their plans from one year to the next—was lost in the controversy.
But while Politifact declared Obama’s broken promise “the lie of the year” in 2013, the media never asked a better question: “If you don’t like your plan, do you have to keep it?” The answer to that is yes. Once a plan is purchased it can’t be changed or dropped until the next enrollment period, but once you’ve bought insurance certain “life changes” have to be reported to HealthCare.gov. This information could change the coverage or savings you’re eligible for. The list of life changes is long and includes marriage or divorce, pregnancy, or a change in income or residency.33
Discrimination against women was supposed to end with the passage of the ACA. It hasn’t. To placate antiabortion reactionaries and antiabortion Democrats, Nancy Pelosi and Barbara Boxer, two leading prochoice members of the Democratic Party, agreed that current government restrictions on abortion be applied to ACA coverage. The Hyde Amendment, which bans abortions under Medicaid except those necessary to save a woman’s life or in cases of rape or incest, could be extended to all private health policies sold on the insurance exchanges.34 If women want a plan that includes abortion coverage and they receive a subsidy, they must pay a separate out-of-pocket premium for reproductive health services. Forcing women to pay extra for supplemental abortion coverage just in case they get pregnant is outrageous. Unintended pregnancies are by definition unplanned. In addition, insurance companies have to keep meticulous records that payments are kept separate, and the administrative red tape involved could lead insurers to stop offering abortion coverage. No other medical procedure is subject to this onerous restriction.
The Affordable Care Act allows states to completely ban abortion coverage in the exchanges, even if the state isn’t running its own exchange. Antiabortion fanatics across the country have used the ACA to make abortion even harder to obtain. Currently, twenty-four states have laws banning exchange plans from covering abortion in most cases. Michigan passed a measure that bans abortion coverage in plans both on and off the exchanges except when the pregnant woman’s life is at risk.35
As if the restrictions on abortion weren’t enough to turn back the clock on women’s reproductive rights, the ACA also retains federal “conscience” protections for health care providers who object to performing abortion or sterilization procedures that conflict with their beliefs. Obamacare also provides new protections that prohibit discrimination against health care facilities and providers who are unwilling to offer or refer women for abortions.36
Under the ACA, health plans must cover all FDA-approved birth control methods with no out-of-pocket expense. But already women are reporting that they’re still being charged co-pays or told that the method they use is “brand name” and isn’t covered. The Obama administration allowed an exception to the birth control coverage mandate: churches and other houses of worship can choose to exclude birth control coverage from the health insurance plans they offer employees. For-profit employers then sought to have this religious exemption extended to them. They won a significant victory when the Supreme Court ruled, in June 2014, that the Hobby Lobby arts and crafts chain store could refuse to provide insurance for contraception because of its owners’ religious conservative Christian convictions. Although the Supreme Court said its Hobby Lobby ruling was narrowly tailored to the specific case, the decision has provided the opportunity for many other employers to seek exemption from ACA’s mandate. Before the Court ruled, at least seventy-one companies had filed lawsuits against Obamacare’s contraceptive coverage rule on the grounds of religious freedom.37 In the wake of the Court’s ruling, many more employers can be expected to do the same. If more employers win those exemptions, women’s access to affordable birth control will be even further eroded.
The ACA at work
Employer-sponsored insurance covers about 149 million nonelderly people.38 Insurance coverage that workers get through the workplace will be impacted by the ACA in a number of ways that accelerate the trend toward unaffordable underinsurance. One of the most insidious is the so-called “Cadillac tax” which penalizes and creates disincentives for insurance providers, employers, or union health plans to offer affordable, comprehensive insurance plans to employees. Beginning in 2018, a 40 percent excise tax will be levied on all insurance costs in excess of $10,200 per year for single coverage and $27,500 for family coverage.
The Cadillac tax is based on the nonsensical and disproven idea that “generous” health benefits inoculate workers from the true costs of health care, thereby creating what economists call a “moral hazard” that encourages the “overuse” of health care resources.39 As if cancer patients are demanding more chemotherapy and radiation treatments, or others are complaining that they need more colonoscopies and mammograms! This assumes that people using the insurance they pay for drives up the cost of health care and that the only way to slow down spending is to make them pay more out of pocket (to, as it’s said, make them have “skin in the game”). Yet this widely accepted theory falls apart when one considers that other countries whose governments guarantee health care for all cover far more people at much lower cost than the US system does.40
Numerous studies have shown that people who have more generous health plans do not excessively consume health care.41 They go to the doctor when they’re sick. Conversely, the uninsured poor or people with less generous insurance tend to put off care, with the result that treatable conditions become much more serious and expensive problems later. Yet the myth of moral hazard has become one of the most pervasive and widely adopted fictions by both conservatives and liberals in debates over health care reform. Moral hazard also serves to scapegoat union workers who have comprehensive health benefits with low or no co-pays. Unions have fought hard contract battles and given up wage increases to maintain good medical coverage for members. Nevertheless, the ACA codifies the already existing trend of shifting the cost of health insurance onto workers. According to the Kaiser Family Foundation, 10 percent of workers in 2006 were covered by high-deductible plans of at least $1,000. By 2012, 31 percent were, with deductibles that were significantly higher.42 And yet we should pause and ask, what’s “moral” about making it more financially difficult for people to gain access to the care they need? In a rational society, we should want to spend money on health care. We want to spend billions on finding a cure for cancer, multiple sclerosis, new medical treatments, or new medications to manage disease. That’s money well spent compared to the administrative waste in our current system or the billions spent to manufacture bombs and drones.
The imposition of the Cadillac tax virtually guarantees that high deductible, hollowed out plans will become the new normal, because employers want to avoid paying the 40 percent tax. It has already affected major national contract bargaining at corporations like Verizon and GE, and 40 percent of all large employers plan to institute high deductible health plans by 2014.43
The ACA will negatively affect multiemployer health care plans, also called Taft-Hartley plans. Both union officials and management oversee the nonprofit, multi-employer health funds. Employers, usually small ones in the same industry and geographic area, pool their health care contributions to create a single fund.44 These funds are typically used in industries with a temporary or seasonally employed workforce, such as the construction industry. They offer continuous coverage regardless of employment status.
The Treasury Department has ruled that Taft-Hartley plans are equivalent to other employer-based plans, which aren’t eligible for subsidies.45 UNITE HERE president D. Taylor explained, “If workers under Taft-Hartley plans aren’t eligible for subsidies, employers will see little reason to remain a part of such plans down the road. . . . The Affordable Care Act has clearly been devised so that it would make our nonprofit Taft-Hartley plans completely uncompetitive.”46 About twenty million are insured by Taft-Hartley plans, and because of the problem in how the plans are categorized, millions could lose coverage and be forced to buy more expensive plans on the insurance exchanges—or join the ranks of the uninsured.
The employer mandate is another major component of the ACA. The mandate requires companies with fifty or more employees to provide health insurance to every worker who averages thirty or more hours a week, i.e., full time. Employers will pay a financial penalty of $2,000 for each full-time employee who isn’t covered and instead purchases insurance through a federally subsidized exchange. To avoid paying the penalty, dozens of employers, including Forever 21, Home Depot, Lands’ End, Regal Entertainment, SeaWorld, Trader Joe’s, and Wal-Mart have cut workers’ hours to keep them below the thirty-hour threshold. A cut in hours is an automatic pay cut, something few workers can afford in a low-wage economy. Obamacare creates an irresistible incentive for employers to drop coverage and dump workers onto the insurance exchange because it’s cheaper.
The trend of slashing hours to avoid paying a penalty could continue despite the Obama administration’s decision to postpone the employer mandate provision until 2015. A survey by the International Foundation of Employee Benefit Plans found that 15 percent of large employers (with fifty or more employees) and 20 percent of smaller employers had plans to adjust hours so that fewer employees would qualify for full-time medical insurance under the ACA.47
Medicaid: History and problems
One of the more progressive aspects of the ACA was its expansion of Medicaid, the joint federal- and state-administered health care program for the poor. It was initially estimated that the expansion of Medicaid would provide coverage for an additional sixteen million people, but in a perverse turn of events, it will instead leave millions of the poorest uninsured.
The cause of this debacle was the 2012 Supreme Court decision that, while affirming the ACA’s constitutionality, also allowed states to opt out of Medicaid expansion. Democrat-appointed Justices Stephen Breyer and Elena Kagan (an Obama appointee) joined the Court’s conservatives in ruling the Medicaid expansion “unconstitutionally coercive” toward state governments. This loophole in the pro-ACA Supreme Court decision allowed conservatives to impede the expansion of health care coverage under Medicaid. The majority of the twenty-six states that have rejected funds to expand Medicaid are in the South, run by Republican governors or are dominated by Republican legislatures. Not coincidentally, these states also have the highest rates of uninsured people in the country.
This means that people will die. Researchers at Harvard University and City University of New York (CUNY) concluded that between 7,100 and 17,100 deaths could result from the twenty-six states opting out of the Medicaid expansion.48 The federal government will pay 100 percent of expansion costs for the first three years and 90 percent thereafter until 2022, so Republicans’ incessant complaint that states can’t afford to increase Medicaid enrollment is simply not true. The refusal of states to do so will leave millions of poor people, who tend to be sicker, without access to health care. Individuals who reside in states like Florida, Louisiana, Mississippi, and Texas and who earn from $11,490 to $45,960 a year can get federal subsidies to purchase private health insurance. But millions will be ineligible for these subsidies, because they make less than $11,490 but too much to qualify for Medicaid with its current income criteria. Jonathan E. Chapman, the executive director of the Louisiana Primary Care Association, described the conundrum: “If the breadwinner in a family of four works full time at a job that pays $14 an hour and the family has no other income, he or she will be eligible for insurance subsidies. But if they make $10 an hour, they will not be eligible for anything.”49
The unevenness of Medicaid expansion will affect two groups disproportionately: people of color and the undocumented. People of color make up the majority of the uninsured with incomes below the Medicaid eligibility limit, and nearly half of all uninsured people of color with incomes below the Medicaid eligibility limit live in states that are refusing to expand the program.50 Blacks are at the highest risk of remaining uninsured, largely because more are poor and live in the Deep South. Fully 68 percent of poor, uninsured Blacks and uninsured single mothers (of any race) live in the twenty-six states that have refused Medicaid expansion, according to the New York Times.51 In Mississippi, 56 percent of all poor and uninsured adults are African American, though they account for just 38 percent of the population.52 The impact of denying Medicaid to more than five million people who are eligible will be to exacerbate racial disparities in health care.
The undocumented suffer from a double denial: first, Obamacare prevents the undocumented from using Medicaid funds53 except in limited circumstances; second, a large proportion of the estimated eleven million undocumented immigrants live in states such as Texas and Florida whose state governments have refused to expand the program. Federal law also bars legal immigrants who’ve been in the United States fewer than five years from receiving Medicaid. Only emergency Medicaid coverage is available for the undocumented. Despite the pervasive claim that the undocumented rip off American taxpayers for free health care, the vast majority of them don’t have consistent access to medical care.54 And there is no evidence that immigrants are excessive users of public benefits.55
It’s important to note, however, that even if all states accepted expanded Medicaid, there remain serious problems with relying on Medicaid to expand health care coverage. Medicaid, enacted in 1965, provides health care for over sixty million poor people. Most of these are children, pregnant women, people with disabilities, and the elderly who live at home or in nursing care centers. These groups suffer disproportionately from chronic diseases and need access to specialists, diagnostic tests, durable medical equipment, and medication. Medicaid recipients are pejoratively referred to as “high utilizers” of health care. Despite its critical importance, the Medicaid program has serious design flaws that adding millions of new recipients will only exacerbate.
One of Medicaid’s main faults is its “means-test” structure, which subjects all applicants to income tests to prove that they are “poor enough” to qualify for the program. All sources of income must be verified. The problem is that income for many recipients fluctuates, so one year an individual or family might be eligible, but the next, because of a slight increase in income they become ineligible. If income goes up while receiving Medicaid, it’s supposed to be reported and coverage will be terminated. Not reporting changes in income constitutes fraud and can be punished with fines and prison. Millions of people cycle in and out of the Medicaid system, which causes both enormous frustration from having to constantly prove eligibility and dangerous disruptions in care.
The Medicaid program is chronically underfunded and medical care is consistently rationed by cutting the budget and reducing benefits. There’s been even more rationing of care in the last two decades. Entire categories of people have been cut off Medicaid, such as childless adults and legal immigrants.
In response to the economic recession that began in 2008, states took the ax to Medicaid to balance budgets. Benefit cuts have been devastating. California limits beneficiaries to seven doctor’s office visits a year unless a doctor certifies a need for more, and a $15 co-pay was added for those who go to the emergency room for routine care.56 In Illinois, covered prescriptions were limited to four, co-pays for medication were introduced for adults who aren’t pregnant, and non-emergency dental care was eliminated.57 Other states ended coverage of adult day care, eye exams and glasses, dental care, circumcision, and adult acne medicine, as well as limiting adult diapers to 180 per month.
Some states are attempting to introduce monthly premiums and other fees. In Florida, Republican Representative Matt Hudson claimed it was necessary to make “people personally responsible for their own health.” He said, “This is not a budgetary decision—it’s a philosophic stand. Everyone else in society is paying a portion of their own health care, including the military and retirees, so why shouldn’t this segment of the population?”58
Huge cuts in reimbursement rates have led doctors to refuse to accept Medicaid. The problem is most acute in California, which has one of the lowest reimbursement rates in the country and is set to add as many as two million new patients to Medi-Cal. According to the California Health Care Foundation, Medi-Cal recipients already have trouble finding doctors. The foundation’s 2010 study found that just 25 percent of physicians provided care to 80 percent of Medi-Cal patients.59
Medicaid patients find it most difficult to get appointments with neurologists, neurosurgeons, cardiologists, and psychiatrists, according to Manzoor Abidi, president of the Medical Society of New Jersey.60 But even dentists don’t want to provide care for Medicaid recipients. That can be deadly. Deamonte Driver, a twelve-year-old boy from Maryland, had an abscessed tooth. His mother couldn’t find a pediatric dentist who accepted Medicaid. In Maryland, only 900 of the state’s 5,500 dentists accept Medicaid patients.61 Before Deamonte could get an appointment, bacteria from the abscessed tooth spread to his brain. After two surgeries and weeks in the hospital, Deamonte died.
The neoliberal assault on public programs has resulted in the privatization of Medicaid. Thirty-six states and the District of Columbia have enrolled some or all of their Medicaid population in investor-owned, for-profit, managed-care health plans, which last year cost the states and federal government about $108 billion.62 Currently, almost thirty million Medicaid recipients are enrolled in private managed care plans, and with the expansion of the program under the ACA, that number is set to expand.
These private insurance companies get a set rate each month for each patient, and they make profits by denying care, reducing services, limiting provider networks, and delaying payment to hospitals and health care providers. When they can’t make a sufficient profit, they leave the market. In New York, in 2013, Excellus BlueCross BlueShield dropped out of the program to deliver care to the poor and disabled because they said they were going to lose $100 million.63 In Kentucky, the managed-care company Kentucky Spirit pulled out of the state because it had lost $120 million. Incredibly, the company is suing Medicaid for damages.64
Dozens of studies have shown that for-profit health plans pay out a lower percentage of revenues for medical care, waste more on administration, and provide lower quality care; other studies document that managed care doesn’t significantly reduce spending nor improve health outcomes.65 In the end, these studies matter little in the rush to transfer public money for health care to the private sector.
While it’s important to support Medicaid expansion, the problems that plague the program remain. Patients will continue to face serious wait times to access care and shortages of specialists, and hospitals and clinics will struggle with low reimbursement rates forcing some to cut back services or close.
ACA: A brave new world?
The Affordable Care Act hasn’t ended the crisis in the American health care system. All the hoopla and happy talk about the benefits of Obamacare can’t change the fact that what millions of people are now coerced into buying is unaffordable underinsurance. Having insurance doesn’t guarantee access to health care services, as anyone who has fought on the phone for hours with an insurance company knows well. The fighting with insurance companies will not end. Nor will medical bankruptcy.
To be sure, under Obamacare more Americans will have health insurance, but they’ll pay more money for it and receive fewer health care services. And that is exactly the way the health insurance corporations like it.
The ACA is a massive swindle that mostly benefits the insurers who are set to receive about $1 trillion in subsidy money from the American taxpayer. This massive transfer of money entrenches and enriches the insurance corporations. It is a sick example of how crony capitalism rewards the corporations that are the cause of the health care crisis. And how can a major, “historic” reform to the health care system that still leaves thirty million uninsured even be called a “major” reform? As if it weren’t possible to cover everyone!
There is an alternative to Obamacare: a single-payer system. The Expanded and Improved Medicare for All Act, HR 676, is a single-payer bill that eliminates the insurance industry, puts the government in charge of paying medical bills, and guarantees health care to all from birth to death. There are no eligibility requirements, enrollment is automatic, and there are no co-pays or deductibles. The foundation of a single-payer system is the belief that health care is a human right, not a commodity. It is the opposite of Obamacare.
I want to thank Lance Selfa for expert editing, Ida Hellander, MD, Director of Policy & Programs Physicians for a National Health Program for sources and comments, and Andy Coates, MD, President of Physicians for a National Health Program for taking my phone calls and cutting through the complexity.
- David Weigel, “The ghost of gaffes past,” Slate, December 27, 2010, http://www.slate.com/articles/news_and_p....
- Robert Pear and David M. Herszenhorn, “Obama hails vote on health care as answering the call of history,” New York Times, March 21, 2010.
- Editors, “Why the left should defend Obamacare,” Nation, November 20, 2013, http://www.thenation.com/article/177299/....
- See BlueCross BlueShield of Illinois’s list of “preexisting condition exclusions.” There are fifty-six health conditions on the list, http://www.ilhealthagents.com/bluecross-...shield-illinois/pre-existing-conditions.html.
- Samantha Artiga and Robin Rudowitz, “Medicaid enrollment under the Affordable Care Act: Understanding the numbers,” The Henry J. Kaiser Family Foundation, January 29, 2014, http://kff.org/health-reform/issue-brief....
- HealthCare.gov, “What income levels qualify for support?” https://www.healthcare.gov/how-can-i-sav....
- HealthCare.gov, “What does marketplace health insurance cover?” https://www.healthcare.gov/what-does-mar.... According to Don McCanne, a leading member of Physicians for a National Health Program, “Although ten categories of benefits will be required under the plans, the insurers have considerable flexibility in the composition of benefits within each category and will leave out selected benefits that some individuals will need, especially some of the more expensive benefits.”
- Elizabeth Davis, “How does the health insurance subsidy work?” January 26, 2014, About.Com, Health Insurance, http://healthinsurance.about.com/od/refo....
- Comedy Central, “Jon Stewart grills Kathleen Sebelius on Obamacare,” October 8, 2013, http://www.nbcbayarea.com/entertainment/....
- Ashley Kilough, “Poll: Obama ratings drop, Americans say he’s not trustworthy,” November 12, 2013, CNN Politics, http://politicalticker.blogs.cnn.com/201....
- A.P. Wilper, Steffie Woolhandler, Karen E. Lasser, Danny McCormick, David H. Bor, and David U. Himmelstein, “Health care and mortality in US adults,” American Journal of Public Health, December 2009.
- Sam Stein, “White House gears up for health care enrollment,” Huffington Post, December 19, 2013, http://www.huffingtonpost.com/2013/12/19....
- Joanne Kenen and Kyle Cheney, “Obamacare ends with massive surge,” Politico, March 14, 2014, http://www.politico.com/story/2014/03/he....
- Noam N. Levy, “Obamacare has led to health coverage for millions more people,” LA Times, March 31, 2014.
- Congressional Budget Office, “CBO, May 2013 estimate of the effects of the Affordable Care Act on Health Insurance Coverage,” May 2013, http://www.cbo.gov/sites/default/files/c....
- Enrique Diaz-Alvarez, “The backroom deal that could’ve given us single-payer,” Jacobin, December, 2013, at https://www.jacobinmag.com/2013/12/the-b....
- Hannah Seligson, “Will millennials sign up for Obamacare?” Al Jazeera America, September 16, 2013, http://america.aljazeera.com/articles/20....
- Glenn Greenwald, “Obamacare architect leaves White House for pharmaceutical industry job,” Guardian, December 5, 2012, http://www.theguardian.com/commentisfree....
- Kevin Zeese and Margaret Flowers, “Obamacare: The biggest insurance scam in history,” Truthout, October 30, 2013, http://truth-out.org/opinion/item/19692-....
- Ariana Eunjung Cha, “Aids advocates say drug coverage in some marketplace plans is inadequate,” Washington Post, December 9, 2013.
- Centers for Disease Control and Prevention, “Adult smoking in the United States: Current estimate,” June 5, 2013, http://www.cdc.gov/tobacco/data_statisti....
- Obamacare Facts, Obamacare and Smokers, http://obamacarefacts.com/obamacare-smok....
- Anna Wilde Mathew, “Insurers seek balance of risk, reward,” The Wall Street Journal, July 14, 2013, http://online.wsj.com/news/articles/SB10....
- Obamacare Facts, http://obamacarefacts.com/insurance-exch....
- Scott Gottlieb, “In Obamacare, go for bronze health care plans. For most people buying up to gold or platinum plans is a waste of money,” January 24, 2014, American Enterprise Institute, http://www.aei.org/article/health/in-oba....
- Caroline F. Pearson, “Observations as ACA open enrollment closes,” March 28, 2014, http://avalerehealth.net/expertise/manag....
- McKinsey & Company, “Hospital networks: Configurations on the exchanges and their impact on premiums,” December 14, 2013, http://healthcare.mckinsey.com/sites/def....
- Wenke Hwang, Wendy Weller, Henry Ireys, and Gerard Anderson, “Out-of-pocket medical spending for care of chronic conditions,” Health Affairs, November, 2001, http://content.healthaffairs.org/content....
- Robert Pear, A limit on consumer costs is delayed in health care law, New York Times, August 12, 2013, http://www.nytimes.com/2013/08/13/us/a-l....
- David U. Himmelstein, Deborah Thorne, Elizabeth Warren, and Steffi Woolhandler, “Medical Bankruptcy in the United States, 2007: Results of a national study,” The American Journal of Medicine, June 5, 2009, http://www.amjmed.com/article/S0002-9343....
- HealthCare.gov, “How do I report life changes to the marketplace?” https://www.healthcare.gov/how-do-i-repo....
- Susan A. Cohen, Guttmacher Institute Policy Review, “Insurance coverage of abortion: The battle to date and the battle to come,” Fall 2010, http://www.guttmacher.org/pubs/gpr/13/4/....
- Paige Winfield Cunningham, “Michigan joins states banning abortion in Obamacare plans,” Politico, December 11, 2013, http://www.politico.com/story/2013/12/mi....
- National Conference of State Legislatures, “Health reform and abortion coverage in the insurance exchanges,” October 2012, http://www.ncsl.org/research/health/heal....
- Jaeah Lee, “It’s not just Hobby Lobby: These 71 companies don’t want to cover your birth control either,” Mother Jones, April 2, 2014.
- Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured, “The uninsured: a primer: key facts about Americans without health insurance, October 2012, http://www.kff.org/uninsured/issue-brief....
- The concept of moral hazard asserts that if people are insulated from the consequences of their actions, they will take greater, and unacceptable, risks. While the government health care policy focuses on the moral hazard of generous health insurance, economic policy doesn’t seem to worry about the moral hazard of bailing out Wall Street bankers whose risky behavior crashed the economy in 2008! See Malcolm Gladwell, “The moral hazard myth: the bad idea behind our failed health care system,” New Yorker, August 29, 2005.
- Ralph Nader, “21 ways Canada’s single-payer system beats Obamacare,” Alternet, November 22, 2013, http://www.alternet.org/news-amp-politic....
- For a summary of these studies, see Adam Gaffney, “The ‘Cadillac’ health plan is a myth,” Salon, August 16, 2013, http://www.salon.com/2013/08/16/the_cadi....
- Kaiser Family Foundation and the Health Research & Educational Trust, “2013 employer health benefits survey,” August 20, 2013, http://kff.org/report-section/2013-summa....
- Labor Campaign for Single Payer Health Care, A LCSP Briefing Paper, “Watch out: the ACA is coming!: 10 things unions need to look out for when bargaining under Obamacare,” November 8, 2013, http://www.laborforsinglepayer.org/wp-co....
- James McGee, “Union health plans will suffer under Obamacare,” Labor Notes, March 18, 2013.
- Dave Jamieson, “Unions to White House on Obamacare, Taft-Hartley plans: ‘You made the problem, you fix it,’” Huff Post Politics, August 21, 2013, http://www.huffingtonpost.com/2013/08/21....
- Karen McVeigh, “US employers slashing workers hours to avoid Obamacare insurance mandate,” Guardian, September 30, 2013.
- Sam Dickman, David Himmelstein, Danny McCormick and Steffie Woolhandler, “Opting out of Medicaid expansion: the health and financial impacts,” Health Affairs Blog, January 30, 2014, http://healthaffairs.org/blog/2014/01/30....
- Robert Pear, “States’ policies on health care exclude some of the poorest,” New York Times, May 24, 2013.
- Samantha Artiga and Jessica Stephens, “The impact of current state Medicaid expansion decisions on coverage by race and ethnicity,” The Kaiser Commission on Medicaid and the Uninsured, July 3, 2013, http://kaiserfamilyfoundation.files.word....
- Sabrina Tavernise and Robert Gebeloff, “Millions of poor are left uncovered by health law,” New York Times, October 2, 2013.
- In 2009, in a major address on health care to a joint session of Congress, President Obama declared, “There are also those who claim that our reform effort will insure illegal immigrants. This, too, is false—the reforms I’m proposing would not apply to those who are here illegally.” Both sides of the aisle erupted in applause at this xenophobic comment. And then Joe Wilson (R-SC) in an unprecedented, shocking, and racist outburst shouted at Obama, “You lie!” Actually Obama was telling the truth.
- Michael A. Rodríguez, Arturo Vargas Bustamante and Alphonso Ang, “Perceived quality of care, receipt of preventive care, and usual source of health care among undocumented and other Latinos,” Journal of Internal General Medicine, November, 2009, http://www.ncbi.nlm.nih.gov/pmc/articles....
- Wendy E. Parment, “Holes in the safety net—legal immigrants access to health insurance,” New England Journal of Medicine, August 15, 2013, http://www.nejm.org/doi/full/10.1056/NEJ....
- Robert Pear, “As number of Medicaid patients go up, their benefits are about to drop,” New York Times, June 15, 2011.
- Phil Galewitz and Matthew Fleming, “13 states cut Medicaid to balance budgets,” Kaiser Health News, July 24, 2012, http://www.kaiserhealthnews.org/Stories/....
- Phil Galewitz, “Florida pushing new fees for most Medicaid recipients,” Kaiser Health News, May 15, 2011, http://www.kaiserhealthnews.org/stories/....
- California Health Care Foundation, “Physician participation in Medi-Cal,” July 2010, http://www.chcf.org/publications/2010/07....
- Marian Uhlman, “Specialist care waning for people on Medicaid, low pay for doctors means longer waits for patients,” Philly.com, March 26, 2005, http://articles.philly.com/2005-03-26/ne....
- Mary Otto, “For want of a dentist,” Washington Post, February 28, 2007, http://www.washingtonpost.com/wpdyn/cont....
- Jenni Bergal, “Kentucky’s rush into Medicaid managed care: A cautionary tale for other states,” Kaiser Health News, July 15, 2013, http://www.kaiserhealthnews.org/Stories/....
- James T. Mulder, “Excellus to drop health insurance programs for more than 22,000 poor and disabled in CNY,” http://www.syracuse.com/news/index.ssf/2....
- Bonnie J. Austin, “Managed care mandates fall short of curbing California medical costs,” Academy Health, March 2005, http://www.hcfo.org/pdf/findings0305.pdf.