The Affordable Care Act and the Healthcare Business Model

I've thought long and hard about whether or not to dip my toe into the quicksand of the Affordable Care Act (ACA), but after a series of events, and some deep thoughts, I've decided to offer a different perspective on the fundamental flaw of the ACA, and its not the web site, although that seems to be quite the FUBAR. Some background and facts as they pertain to my family.  My wife and I are very active people.  We swim and bike and run and hit the gym a few times a week and do a variety of other physical activities.  We don't smoke, we drink a little (have to have at least one vice) and don't take drugs. We have annual check-ups with our medical practitioners, try to eat the right foods and get a good nights sleep.  We are, by all accounts, in pretty good shape.

We are both consult in our respective industries and thus pay out of pocket for our health insurance.  We've been with the same insurance company for years so there is no need for them to do "medical underwriting" on us.  They already have the facts on our medical history from years of seeing our medical bills from our respective doctors.

Yet, just a few weeks ago, I received a letter in the mail from our health insurance company informing me of the cost of insurance they would offer under the ACA.  The monthly premiums quoted to me were more than 150% higher than what we pay today.  You heard me, 150% higher. More than twice what we now pay.  And they make no apologies for this fact.  Given our medical history, which they have on file, the fact we have no children and do not plan to have any, the cost to insure us will more than double.  This is simply outrageous.

To be sure I was not seeing things I went on the CT healthcare exchange to compare costs.  Indeed the cheapest plan would again be more than twice what we now pay.  Its ridiculous.  I keep asking myself, what I am missing?  Is it because of where we live?  Are there that many sick people out there who they [the insurance companies] anticipate signing up that they need that much more money out of my pocket to pay for these new participants?  What gives?  Is this just a land grab by the insurance companies to line their pockets in anticipation of an avalanche of people who, supposedly, will have "affordable" healthcare and will now start visiting their doctors and taking care of their afflictions?

So I did the math.  I looked at the Explanation of Benefits online for the medical services paid for by our insurance carrier.  I added up what it would have cost us to pay, in cash, for the services we received.  And yes, paying in cash would still be LESS THAN paying insurance under the ACA. Thus, for my wife and I, it makes sense to cancel our health insurance policy, pay cash for the services we require and then pay the fine at year end for not having health insurance, as per the ACA.  This would still be cheaper than paying for health insurance under the ACA.  So much for Obama's promise that we will be able to keep the insurance coverage we already have.  We can't afford it anymore!

The ACA does NOT make healthcare affordable.  It simply adds more people, and money, to the pool of shared risk so everyone is paying for the medical care of everyone else.  Those who are young and healthy, who probably can't afford healthcare if they have student loans, pay up!   Expanding the pool of contributors does not make healthcare affordable.  Healthcare will not be affordable until the underlying business models that drive the cost of the services provided by healthcare practitioners are changed.

Examples.

Pharma companies enjoy a 17 year patent window on pharmaceutical inventions.  New Drugs.  This prohibits competition and provides a payback period to pharma companies to recoup their investment in drug R&D.  The cost of drugs to care for some of the major issues in the waning years of one's life are the most expensive.  Ever notice how many TV ads in certain time segments are for pharmaceuticals?  And I am not just talking about Viagra.  Ever hear of the commercials for a-fib (atrial fibulation) drugs? Changing this business model will help reduce the cost of healthcare.

Medical Practitioner insurance.  The cost to insure a doctor and a doctor's practice are astronomical.  In fact, a former neighbor of mine, who was a specialist in high risk pregnancies, closed his practice and moved West because he could not afford the cost to insure the practice.  Whys is insurance so high?  Law suits.  Without tort reform and caps on liability and compensation more and more doctors will choose this path, and more and more doctors will close their practices and seek shelter in corporate health plans.  And without tort reform health care costs will remain high.

Medical devices.  The cost of many devices used in examinations and treatment are astronomical. Some of this goes back to the preceding paragraphs but the manufacturers of this equipment are, again, pricing these devices to recoup their investment in developing, manufacturing, marketing and selling the latest and greatest device.  And hospitals who want to be on the cutting edge of their field want the latest and greatest diagnostic devices.  You see this advertised all of the time. And hence, healthcare costs are high.

I could go on.  Until the cost of healthcare is under control, and the business models of the providers and suppliers who support the existing paradigm are changed, health care will not be affordable, and passing legislation to require mandates on coverage to all will not solve the problem.  It will only enrich the insurance industry.

I know this is a complicated issue.  I also know there are a lot of special interest groups (e.g. insurance lobby) fighting to protect their domains and their position in the food chain, or, in this case, the cash train.  Like everything else in life it all boils down to "follow the money trail".

I am not sure what my wife and I will do yet.  But the ACA certainly has not made healthcare and the cost of health insurance "affordable" for us.