Columns » Ernest Dumas

ACA critics favor profits over people

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Its multitude of critics have two big objections to Obamacare, the health insurance reform otherwise known as the Patient Protection and Affordable Care Act of 2010.

(1) It spends too much money.

(2) It doesn't spend enough money.

If the criticisms sound contradictory, it is because they are. The act greatly expands access to medical care, to literally tens of millions of people, which is costly, but it also takes steps to rein in the perpetually mushrooming costs of medical care. The evidence is that it is already very successful in doing the latter, especially in Arkansas. Obamacare's critics object to the cost of insuring poor people but also to reversing the medical inflation that every year drives premiums and federal health spending upward.

You hear complaints about both the spending and the saving from opponents of the "private option" in the Arkansas legislature. They seem clueless about the contradiction, or else they know it and count on everyone else not catching on.

But such contradictions have been the story of Obamacare from the start.

Let it be said that Obamacare had one giant problem from the outset: the immense complexity of linking insurance to individual and employer tax liability. If you don't want a single-payer system like Medicare, that system has been the only way anyone has dreamed up to achieve coverage for everyone. But the companies hired to create the Internet network for evaluating insurance choices and calculating whether you qualify for tax subsidies for Medicaid or private insurance, and how much of a subsidy, botched it royally last fall. Obamacare critics, though secretly rejoicing, feigned rage at the clumsy rollout.

The most cynical contradiction is the Medicare Advantage scare, which started before Obamacare's passage but has ratcheted up the past month. Letters and op-ed articles about the horrible cut in the federal subsidy for insurance companies that sell Medicare Advantage plans appear in newspapers everywhere; the Arkansas Democrat Gazette published an op-ed last week from a woman complaining that her benefits were going to be cut. Actually, they don't tell you that it is a cut in taxpayer subsidies for the insurance companies rather than a benefit cut for the patients. Rep. Tom Cotton, the Republican candidate for the Senate, raised the scare last week that Obama was cutting your Medicare.

But here is the truth: If they understood the program, every U.S. taxpayer who does not own health insurance stock or a Medicare Advantage policy would be cheering the change — or would, anyway, if they were not told it had something to do with Barack Obama.

The government in 1982 authorized private Medicare Advantage plans, under another name, as an alternative to regular government payments to providers, but few oldsters switched until the Republican Congress in 2003, in the Medicare prescription drug act, made it worth their while. The government tendered a huge subsidy to insurance companies so that they could offer wider benefits and lower out-of-pocket costs to Medicare enrollees, typically through HMOs and PPOs, and still make a good profit. Starting in 2006, oldtimers like me were flooded every winter enrollment season with mail from insurance companies pushing Medicare plans that offered lower out-of-pocket costs and wider benefits — things like eyeglasses and dental work — than we got through old Medicare.

Sure enough, millions switched to the Cadillac private plans every winter and Medicare's costs soared. The theory had been that the HMOs would lower patient spending but, as simple logic told you, if you are going to provide more services and cover the insurance companies' overhead and profits, the program is going to cost a lot more. Taxpayers and regular Medicare enrollees, through higher copays and premiums, are subsidizing the companies and Advantage enrollees.

Three years later, Medicare's commissioners noted that taxpayers and Medicare beneficiaries themselves were supporting much higher spending for Advantage customers than for regular Medicare patients, which was neither fair nor economical.

So the Affordable Care Act reduced the Advantage subsidy, with a net saving for the taxpayers of about $156 billion over a decade, and authorized further reductions as the average patient cost declined. You would think fiscal conservatives would be cheering. You would be mistaken.

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