Beyond Structured Settlements

"ObamaCare is Slowing Health Inflation"

"[T]here are three kinds of falsehoods, lies, damned lies and statistics" according to the late Arthur James Balfour, a former Prime Minister of the United Kingdom, as quoted in the Manchester Guardian,  June 29, 1892.

Consequently, when the Centers for Medicare & Medicaid Services (CMS), one the federal government agencies most responsible for Patient Protection and Affordable Care Act (ACA) compliance and administration, publishes new statistical data suggesting "ObamaCare" is helping reduce health care spending, one would expect that statistical data to be reviewed sceptically, if at all, by Republicans.

Surprisingly, however, the Republican-friendly Wall Street Journal featured an oped article (subscription required) this past Monday written by Jason Furman, Chairman of the White House Council of Economic Advisers, and titled "ObamaCare is Slowing Health Inflation".

Furman's article highlights the new CMS statistical data which he attributes, in part, to the ACA: "From 2010 to 2012, health spending grew at an annual rate of just 1.1% in real per capita terms—the lowest rate in the 50 years we have been collecting these data, and a small fraction of the 6% rate that inaugurated the past decade."

Furman also claims "[t]his historic but largely unheralded slowdown in health spending ..... is helping to boost employment, lower deficits and bolster wage growth as the job market strengthens."

Furman believes lack of public attention to lower health care inflation results from the perception it is merely a "transitory byproduct of the Great Recession". As the economy continues to recover, however, he maintains other factors, including the ACA, are contributing to this good news.

Furman's article also challenges critics who claimed the ACA would be a "job killer." He maintains the 7.9 million private jobs added to the U.S. economy since 2010 should by themselves disprove this claim. Furman also references a 2010 study, co-authored by economist David Cutler, which estimates health-care reform could boost job growth by 250,000 to 400,000 a year later this decade and result in higher wages as the anticipated slowdown in healthcare costs are passed through to workers.

As additional evidence of the ACA's positive economic impact, Furman highlights Congressional Budget Office (CBO) projections. CBO has reduced its estimate for Medicare and Medicaid spending in 2020 by approximately 10% since its earlier 2010 estimate, according to Furman, and has also projected the ACA will increasingly contribute to deficit reduction.

"Correcting Misinformed Conservatives"

Furman was not alone this week in publicly proposing ACA reforms are working. In a January 6 blog post , liberal political columnist Jonathan Chait summarily quotes the following health care experts to support his contention that "since Obamacare’s passage, conservatives have gone from arguing that Obamacare will absolutely cause health-care costs to rise to insisting that the decline in health-care costs has absolutely nothing to do with Obamacare":

“The ongoing slowdown in the health-care growth rate defies historical post-­recession patterns and is likely to be ­sustained,” concluded Price­water­house­Coopers in June. “It appears that the reforms will stick and health-care exchanges and other policies will bring competitive pressure to markets,” says Randall Ellis, a professor of health-care economics. “Although the proof for this point of view is not yet definitive,” reports the Health Affairs blog, “the depth and breadth of change suggest that significant transformation in the nation’s delivery system is under way.”

Chait acknowledges: "[i]t's possible the slowdown [in health care inflation] is mostly or even entirely coincidental. But the evidence is certainly consistent," Chait continues, "with the premise that Obamacare’s payment reforms have prompted the changes occurring in American medicine. I have yet to see any conservatives anywhere open themselves even to the remote possibility that Obamacare’s cost controls might not fail."

By publishing Furman's ACA oped featuring CMS statistical data, The Wall Street Journal may have initiated a new Republican paradigm for ObamaCare.

For S2KM's complete reporting about the ACA, see the structured settlement wiki.

Affordable Care Act - 4

The Patient Protection and Affordable Care Act (ACA) represents a comprehensive expansion and restructuring of the United States health care system whose most important and controversial provisions for personal injury settlement planning, including the individual mandate and elimination of pre-existing condition restrictions, will become effective nationally on January 1, 2014.

Among the most fundamental and contentious ACA issues are whether, when and how the ACA will reduce health care costs.

In their Spring 2013 NAELA Journal article titled "Medicare’s Future: Letting the Affordable Care Act Work, While Learning From the Past" (see Affordable Care Act - 3), authors Alfred J. Chiplin Jr. and Bethany J. Lilly analyze various ACA cost-saving components.

Overtime, the Chiplin and Lilly believe the ACA's spending and cost-containment provisions should at least slow the health care spending curve. As this New York Times article points out, there is mounting evidence to support Chiplin and Lilly's belief that a sustainable slowdown in health care costs is possible. 

Health Insurance Exchanges

Chiplin and Lilly acknowledge ACA implementation will be a tough but doable challenge so long as we "let the tools of the ACA work". Among the implementation challenges they highlight are the new health insurance exchanges , which states are authorized to establish for individuals and small businesses. 26 states have refused to establish an exchange, thereby defaulting to a federally-facilitated exchange.

Based on conflicting actuarial projections, many insurance experts and commentators have predicted these insurance exchanges will produce higher insurance rates, especially among younger, healthier participants. Under the new ACA requirements, insurers who participate in the exchanges are not permitted to refuse individuals. Price variations and the right to rescind coverage are restricted and annual and lifetime limits are eliminated. Individuals can select one of four comparable plans (bronze, silver, gold, platinum) with few out-of-pocket expenses.

California Exchange Report

On May 23, 2013, Covered California, California's new insurance exchange, published a Report ("Health Plans and Rates for 2014: Making the Individual Market in California Affordable") that identified premium rates submitted by the participating health insurance companies. Surprisingly, these premium rates appear to be significantly less expensive than most forecasters projected.

"We’ve hit a home run for consumers,” announced Peter V. Lee, the executive director of the California exchange.

Many ACA proponents agree. For example, in his May 24, 2013 New Republic article ("California will be Spared the Obamacare Apocalypse: No Sticker Shock Here - Just Affordable Insurance Premiums"), Jonathan Cohn writes:

"Based on the premiums that insurers have submitted for final regulatory approval, the majority of Californians buying coverage on the state's new insurance exchange will be paying less—in many cases, far less—than they would pay for equivalent coverage today. And while a minority will still end up writing bigger premium checks than they do now, even they won't be paying outrageous amounts. Meanwhile, all of these consumers will have access to the kind of comprehensive benefits that are frequently unavailable today, at any price, because of the way insurers try to avoid the old and the sick."

Conservative Reaction

Perhaps predictably, the conservative political reaction to the California insurance exchange report was dramatically different as evidenced by these headlines:

• "Rate Shock: In California, Obamacare to Increase Individual Health Insurance Premiums by 64-146%" - May 30, 2013 Forbes article by Avik Roy.
• "ObamaCare Bait and Switch" - June 3, 2013 editorial in the Wall Street Journal.
• "Obamacare is Raising Insurance Costs" - June 3, 2013 op-ed article in the Wall Street Journal by Daniel Kessler.

Both Wall Street Journal articles predicate their analysis and conclusions on Avik Roy's article.

How can the same California insurance exchange report produce such radically different interpretations?

Proponents' Rebuttal

Jonathan Chait, an ACA proponent, provides an answer in his June 5, 2013 blog post titled "Is Obamacare a War on Bros?":

"Roy compared California’s plans to the teaser rates available on ehealthsurance.com. Those teaser rates turn out to bear little resemblance to actually available health-insurance rates — they exclude swaths of potential consumers for even minute health problems. Possibly the most misleading part of Roy’s astonishingly dishonest screed is the entry point for his pseudo-investigation...These columns keep citing a healthy 25-year-old man as if they are offering up a randomly chosen example of how the exchanges will work. Healthy non-smoking 25-year-old males have very different health profiles than the average person."

Chait's comments echo similar criticism of Roy's analysis by Ezra Klein in his June 1, 2013 blog post titled "The Shocking Truth about Obamacare's Rate Shock":

• "I ran the same search Roy did.....Click to buy the plan and eventually you’ll have to answer pages and pages of questions about your health history. Ever had cancer? How about an ulcer? How about a headache? Do you feel sad when it rains? When it doesn’t rain? Is there a history of cardiovascular disease in your family? Have you ever known anyone who had the flu? The actual cost of the plan will depend on how you answer those questions.”
• "Comparing the pre-underwriting price of this plan to those in Obamacare’s exchanges is ridiculous. The plans in Obamacare’s exchanges have to include those people. They can’t turn anyone away or jack up rates because of a history of arthritis or heart disease. ...They also have to offer insurance that meets a certain minimum standard."

In a follow-up to his May 24, 2013 New Republic article (cited above), Jonathan Cohn added his own rebuttal ("Anatomy of a Bogus Obamacare Argument: How an Irresponsible Forbes Writer Distorted the Debate") to Roy's article:

"Writers like me who have supported the [ACA] treated [the California exchange report] as a big deal. But I would like to think we were candid about the downsides....and noted that California was just one state—and, in some respects, a best-case scenario, because its officials are committed to the law’s success and enjoy broad support from corporate, medical, and consumer leaders. We also noted—as we had noted before—that some young and healthy people would have to pay more. Again, a health insurance system that no longer discriminates against the old and sick can no longer discriminate in favor of the young and healthy. We also acknowledged that getting the insurance bids is just one step in the process. As many of us have written, plenty of things could go wrong with Obamacare—and at least a few of them surely will."

ACA and Settlement Planning

The future of the ACA - and whether, when and how it will reduce health care costs - remains uncertain in the context of continuing political debate and threats to prevent its implementation. However, as key ACA provisions, including the individual mandate and elimination of pre-existing condition restrictions, are set to take effect January 1, 2014, settlement planning and structured settlement stakeholders should prepare themselves for a vastly different professional landscape.

For S2KM's complete reporting about health care reform and the ACA, see the structured settlement wiki.