The Impact of the ACA

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I’m going to take a bit of a risk this week and talk about Obamacare. The Affordable Care Act, a/k/a Obamacare, was signed into law in 2010. This “reform” of our healthcare system remains an emotional flashpoint for many on both sides of the aisle, but at the same time is often misunderstood. If we can, I’d like to set aside the emotional baggage that surrounds the law for a moment and try to take a look at the actual impact that Obamacare has had on our country and our industry since it was passed:

  • About 20 million more Americans have insurance coverage because of the ACA. We know two things about people being insured: First, they are much better able to pay for healthcare than uninsured people. Second, the data tells us that insured people use significantly more healthcare resources than uninsured people. Insuring more people creates more paying customers for healthcare providers, including those in the DMEPOS industry.
  • The increase in the number of people with insurance is primarily because more people are on Medicaid. Prior to the ACA, about 13% of Americans had insurance coverage through Medicaid. That figure has since grown to 21%. An additional effect has been that nearly 7 in 10 people on Medicaid receive their coverage under MCOs (managed Medicaid plans that are run by private insurance companies) rather than under state-run plans. The proportion of Medicaid enrollees using MCOs has doubled since the passing of Obamacare.
  • Intriguingly, the mandates requiring individuals to have health coverage and businesses with more than fifty employees to provide it really didn’t have much of an effect. The percentage of the population insured through employer sponsored group plans has actually declined from 54% to 49% since the coming of Obamacare. Most of this decline came about because more people reached the age of 65 than reached the age of 18 during that time period, which led to a swelling of the Medicare rolls. The remainder is probably due to a shift of the working poor from employer plans to Medicaid. A slightly larger proportion of people got insured under individual plans after the ACA, but it was a relatively small impact.
  • Just like with Medicaid, there are more privately managed Medicare plans today, too. One-third of Medicare beneficiaries are opting to be covered under Advantage plans, which is about fifty percent more than prior to Obamacare.
  • There is, and has been, much dialog about shifting healthcare from pay for volume to pay for performance, with many efforts to evangelize for that objective. Despite this, it mostly remains an unfulfilled aspiration. Almost all healthcare reimbursement is still pay for volume. The pay for performance crusade is aimed at reducing the overall costs for healthcare, and it does remain a promising idea for the future. However, to date, it has gotten relatively little traction. Advocates of pay for value plans like to proclaim that more than a third of healthcare payments already fall under this payment structure. This is deceptive, as most of the actual reimbursements made under those types of arrangements are, in fact, fee-for-service with a tiny element of pay for performance. The shift to MCO in Medicaid, which does lower costs, is probably the biggest side-effect of the ACA impacting costs. Unfortunately, this is generally achieved by rationing through inconvenience. That’s one way to bring down costs, but it’s got to be one of the least desirable ways to do it.
  • Taxes were higher after Obamacare, but they’ve now been lowered, so that probably shouldn’t be a part of the discussion anymore.
  • There is more money spent on regulation and compliance today than prior to Obamacare.
  • Many young people stay on their parents plans until age 26, which is a popular provision of Obamacare.
  • For a relatively small group of people, pre-existing conditions are no longer a barrier to insurance coverage because of the ACA. This is often misunderstood, since people with pre-existing conditions have been protected for at least a decade prior to the ACA. As long as those people carried health insurance continuously, they had full protection for pre-existing conditions long before the ACA came into being.
  • There are many other provisions of the ACA that impacted narrow bands of people or narrow industry segments.

There were two major problems that led to the ACA in the first place – (1) there were far too many uninsured people in America, and, (2) healthcare costs were too high and increasing rapidly.

The law has driven significant progress toward solving the uninsured problem by reducing the ranks of people without insurance by 20 million and shifting the burden of paying for their healthcare from private healthcare providers to the government. On the other hand, Obamacare has largely failed to deliver results with respect to lowering costs, outside of working around the edges to slow cost inflation in some areas.

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