Neoliberals say ACA is Closing Hospitals - Good Grief!

What an exaggeration ... good grief!

The uninsured rate has been cut about half since the ACA took effect in 2012.  We do not yet have all the 2015 enrollment numbers ... the bump in tax penalty is sure to close the gap a little ... but we need to take a closer look at why 33 million have not joined. There is a lot of ignorant biased opinion and junk science out there.

A 2015 report from the non-partisan Congressional Budget Office and the Joint Committee on Taxation estimates that the cost of repealing the taxes levied by Obamacare, and the cost controls imposed by the law, would by themselves increase the deficit by $353 billion between 2016 to 2025.  

Obamacare is not causing a massive closing of rural hospitals. Hospitals are vertically integrating to control risks subject to capitation payment (penalty for poor medical outcomes). Inefficient operators are being bought out and restructured. Doctor and medical testing groups are being acquired, bloated payrolls are being trimmed, doctors are being placed on reasonable salaries without market incentive to run up the billing and medical outcomes are being carefully supervised. A small number of inefficient rural hospitals are merging or partnering with big health systems without diminishing the quality of care.

The ACA is doing exactly what it was designed to do. It’s important to recall that before the ACA, healthcare costs had been increasing for decades at an unsustainable 9% annual rate of inflation and had crowded out 64 million Americans by 2012.

Medicare reimbursement rates were cut. That $716 billion figure (over the period 2013–2022 period) is one you'll probably be hearing a lot about during this election cycle. It's worth understanding where it comes from and what the spending reductions mean for the Medicare program.

By 2010, the average Medicare Advantage per-patient cost was 117 percent of regular fee-for-service. The health law changed how Medicare calculates what hospitals get reimbursed for various services, slightly lowering their rates over time. Hospitals agreed to these cuts because they knew, at the same time, they would likely see an influx of paying patients with the Affordable Care Act's insurance expansion.  Medicare benefits to seniors and the disabled were not cut.

Medical costs (particularly prescription drugs) remain high and the quality of healthcare remains relatively low compared to other developed countries.  But those problems are not resolved by subsidizing inefficient operators, perpetuating unregulated fee-for-service incentives, subsidizing excessive marketing budgets and overpaying executives.

There is no evidence that a large number of rural hospitals are closing.  43 rural hospitals — only 1,500 beds nationwide — have closed since Affordable Care Act took affect: from 3 in 2010 to 13 in 2013, and 12 in 2014.  These are small hospitals in such bad shape and serve so few people that they don't deserve to stay open. Neighboring hospitals are on average about 40 miles away and many hospital systems have established helicopter transport and 24-hour urgent care centers in these rural areas.

I had the privilege of attending the 2015 Catholic Healthcare Association annual gathering … which represents about 27% of our nation’s hospitals … mostly in poor rural and inner-city neighborhoods with the greatest population health risks.  What I learned is that medical costs have stabilized (factoring for a one time bump for increased enrollment), electronic health records are becoming standardized to reduce costs, those with preexisting conditions are no longer denied insurance and the number of uninsured nonelderly Americans went from 64 million (22%) in 2012 to less than 33 million (10%). And, Catholic hospitals continue to manage care for the largest number of poor uninsured people in rural locations and inner-city neighborhoods without managing to go under.

The uninsured in 2015 include immigrant families (7 million), people with incomes less than 50% of the poverty line who should in theory have qualified for Medicaid (4 million) and their children (4 million), young working poor families making less than $25K a year (8 million) and holdouts who don’t mind paying a penalty, absorbing uninsured risks and passing what they can’t pay along to everyone else (10 million).

 Why isn't it working for the working poor you might reasonably ask?

Working Poor adults are employed by temp agencies and small companies (less than 50 employees) that do not offer health insurance, reside in states that did not expand Medicaid, remain ineligible for public coverage and the healthcare exchange pricing is too high.

A reasonable solution is to increase income and tax credits to the working poor so they can afford to purchase insurance and balance the subsidy by taking back some of the Bush II trillion-dollar tax cut transfer to the 1%.

In 2015 1 in 6 Americans got a Health Insurance Marketplace plan for $100 or less and 87% of people who selected a marketplace plan for 2015 got financial assistance. For 2016 7 out of 10 returning Marketplace customers can get a plan for less than $75 a month and 8 in 10 can get one for $100 or less.

So … another more fundamental question is ... why is the exchange insurance so expensive and crowding out the working poor?

The problems reside in the Grand Bargain that Democrats made with Republicans to pass the ACA,

The Grand Bargain was that poor people cannot join Medicare (one of the best run and least cost health insurance programs) and Medicare is not allowed to negotiate price with hospitals and Big Pharma.

The primary stressor on hospital finance remains 33 million uninsured people mostly in States that opted out of Medicaid expansion.  15 States opted out of Medicaid expansion (3 states are still considering Medicaid expansion).  A secondary constraint are stingy State Medicaid plans that unrealistically restrict hospital reimbursement fees for the poor. 

But the primary reason medical costs remain high is that Medicare cannot negotiate price with hospitals and Big Pharma. The solution is to put the public option back on the exchanges and allow Medicare to negotiate price. And provide for a just distribution of income to the working poor. Of course, that is antithetical to neoliberal ideology … which seeks to preserve rules that perpetuate an unjust distribution of income and assets to the 1%, eliminate competition and secure private sector monopoly and oligopoly pricing.  Things that make you go hmmm …

 For what seems like an interminable period of time, the central political debate in American politics has been over the seeming choice between a "free market" and government." The prevailing view is so dominant that the the question typically left to debate is how much intervention is warranted. But the prevailing view, as well as the debate it has spawned, is utterly false. Civilization is defined by rules, rules create markets; and government generates the rules.

This debate hides a larger reality: the necessary role of government is designing, organizing and enforcing the market to begin with. By ignoring these underlying choices, this meaningless debate diverts attention from how these decisions are made and hides the growing influence of large corporations, Wall Street and wealthy individuals over them.  The 1% prefer to spin the narrative to make poor angry white men believe government rules are all about restricting their right to own a gun. 

The critical question to be asked is not the level of investment in public infrastructure ... the critical questions are who makes the rules that constitute a free market and whom are the rules benefiting.

What the deficit scolds do not understand (or perhaps they do) is that if you are in a democracy ... taxes, environmental regulations, public capital investment and modest inflation are means of redistributing wealth.  If people understand the implications ... great! ... that's democracy at work.  

Healthcare is a human right … not a privilege. The supply and quality of public goods are best decided in a transparent and democratic process with a moral compass.