BY FRANK J. CAMPILLO

frank-j-campillo-june-2016

Campillo

The results of our national election sent shock waves across the globe after the unbelievable outcome, which culminated with the Republicans taking over the U.S. government, including the White House, the House of Representatives and the Senate. It has been said that elections have consequences, and now the winning party must deliver on the promises made to the people, regardless of how incredulous the promises may have been.

A cornerstone and promise of the Trump campaign was to repeal and replace the Affordable Care Act, better known as Obamacare.

The ACA has been in place for six years now. It has expanded coverage, and it provides premiums and tax subsidies to millions of Americans, but it has failed in its core objective of making health care affordable.

Just prior to the election, the U.S. Department of Health and Human Services announced that premiums for the marketplace will see increases averaging more than 20% for the 2017 plan year. Also, some major insurers have reduced their ACA participation, and many of the smaller co-ops have collapsed in certain parts of the country. This points toward a system that is struggling, and it is pressuring lawmakers to fix the problems that have emerged since the law was passed in 2010.

The recent ACA’s rate increases and its problems not only gave fuel to Trump’s campaign, but it also provided some logical arguments for repealing and replacing the law.

To address the high cost of health care, the administration and Congress need to understand that premium increases are directly related to utilization of medical services and the cost of the services themselves.

A significant part of any premium rate is an insurer’s estimate of future health care costs in the upcoming year, which is often called the medical trend. Insurers use prior claims to estimate future utilization of services and changes in pricing. Other factors, such as new drugs or new technology coming into the market or price increases built into contracts with providers, are also used to project future claims costs. Most premium dollars go to medical claims, which reflect unit costs (e.g., the price for a given health care service), utilization, the mix and intensity of services and plan design.

The United States has tried to control the high cost of delivering medical services without any meaningful successes. Some reasons as to why the U.S. health care system is so expensive are rooted in the philosophical and practical differences in how the health system provides benefits, in the drug industry’s political clout and our country’s aversion to the notion of rationing.

By contrast, the state-run health systems in Norway and many other developed countries negotiate with drug companies, set price caps on many of the medical services and demand proof of the value of new drugs in comparison to existing ones. 

England controls prices by capping the level of National Health Service spending on drugs each year and requiring the pharmaceutical industry to reimburse the NHS for any spending over those limits. Arguably, both of these systems deliver results that are at par or better than the U.S. health care system and a cost per capita that is far lower than that of the United States.

A key part of President-elect Donald J. Trump’s health plan would “modify existing law that prohibits the sale of health insurance across state lines.” His proposal states, “By allowing full competition in this market, insurance costs will go down and consumer satisfaction will go up.”

However, most insurers are already licensed and sell health plans in most states, and this strategy has not contained or reduced cost.

Regardless of any actions taken by the new administration or Congress, it would be impractical and difficult to completely eliminate the ACA and leave out the millions of Americans that now receive health insurance coverage. The focus should be on fixing those parts that continue to make the system and its premiums, at least in the continental U.S., unaffordable.

While predicting what actions the new president may ultimately take is difficult, as he has basically defeated most predictions and detractors, I would predict that significant parts of Obamacare will be kept in place. We will monitor the developments and will report changes in future articles.

 

— Frank J. Campillo is the health plan administrator for Calvo’s SelectCare and holds the managed healthcare professional designation. He can be reached at [email protected].