By Jeff Cameron, health care expert, PA Consulting Group
In the simplest terms, the potential net impact of the November Presidential election on the health care industry can be summed up as such - if Clinton is elected she will look to expand the scope of the Affordable Care Act and if Trump is elected he will look to scale it back. The merits of these approaches and the consequences they might have will undoubtedly be aired in the months ahead, but indications are growing that the health care industry is sick now and what ails it may not be able to wait until a new administration is in place.
While not quite the "death spiral" long predicted by those opposed to the ACA, dark clouds are gathering. Start at what constitutes ground zero for how the ACA is eroding the foundation of the health care and health insurance industry structure with a look at the hospital. The hospital was the place where the uninsured went for treatment when an emergency or medical issue arose. Whereas hospitals used to on average get a 15% write-off on costs for treating the uninsured, today under the ACA, they are getting next to zero. Because of this, hospitals are seeing a massive influx of cash and posting significant profits as they no longer need to write off patients who could not pay.
Even with bed utilization on the decline and more workers in hospitals to manage this, for-profit hospital systems are posting some record profits. That is easy to understand since the uninsured are now insured and services are being paid. But at the national level there is a decrease in health care expenditures, which begs the question- who is paying for that national decrease and why? It is the health plans. But as their pay out goes up, these insurers are not getting increased premiums under the plan in return and are struggling to deal with a toxic patient pool entering the exchanges that generally faces more health issues.
The risk we run though this imbalance is in bankrupting the system. New insurance entrants are closing their doors because they cannot operate with the type of medical loss ratios they are being forced to support. Rates are rising, and some of the traditional players - such as UnitedHealth - have gotten out of the game so they don't have these losses in their plans. Health insurers are looking for drastic measures to cut costs or merge due to the increased pressure placed on them by the ACA.
This is only one of the many changes that government reform has placed on the health care system in the past decade. The one attribute they share is that they increase the cost to administer the system. More than half of the co-ops have folded and are now off the market. As the cost shifts to the insurers, one has to wonder in the government believes a $100 billion dollar tax on insurers is a good idea. Clearly there are disconnects between Congress and what is actually happening with the ACA.
So what happened here and what needs to be done before the system collapses?
Simply put, the government, in passing the legislation, didn't assess the population. For evidence of that look no further than the insurance coops. These plans went under first because they didn't have a pre-existing healthy population to absorb the cost of those less healthy that flooded the system under the ACA. No one looked at how this new population would increase the cost. Theoretically, the next population coming in after this initial surge to insurers should bring better balance. But if their entrance is delayed, that oft discussed "death spiral" will become real.
Elections aside and the future of the ACA with it, we need to start taking a holistic view of the impact this legislation is having on the health care industry. And that assessment needs to happen now with attention to some inherent imbalances lest we face a critical care situation even before a new President is sworn in.