Citizen Power is committed to promoting a more equitable and efficient healthcare system. The United States has created the most expensive healthcare system in the world while leaving millions without care and only achieving average outcomes for those fortunate enough to receive health care. Citizen Power believes that the solution to these problems is a universal, single-payer healthcare system.
In March of 2010, President Obama attempted to address some of the institutional deficiencies in our healthcare system by signing the Patient Protection and Affordable Care Act (as well as the related Health Care and Education Reconciliation Act) into law. These two pieces of legislation signaled the most significant shift in the financing of healthcare in decades. Citizen Power agrees with the stated goals of the law: to improve the quality and affordability of health insurance, reduce the number of the uninsured, and lower the overall cost of healthcare. However, in our opinion, the ACA is fundamentally flawed because it is based upon keeping the health insurance industry in the central role of administering healthcare financing.
The ACA fails in three ways:
1) The ACA does not address any of the fundamental reasons for the high healthcare costs in this country.
Healthcare costs have doubled as a percentage of the gross domestic product since 1980 because the market mechanisms that typically would keep prices down do not operate in the context of healthcare. The demand for healthcare services is relatively inelastic, which means that people’s demand for healthcare services, especially ones that have significant life impacts, does not decrease much as the price increases. Healthcare providers can maximize profit by increasing prices well above the cost to them to provide the service. On the other hand, the supply of healthcare is typically limited to a relatively few healthcare networks, which results in less competition between healthcare providers and correspondingly less pressure on a single provider to lower prices. In addition, because of the failure of markets to operate, there is an incentive for healthcare providers to increase capital spending and then to allocate those costs to their customers in order to increase their market presence. This effect is exacerbated by the lack of transparency in the pricing of services. Even if someone wanted to, it would be difficult to shop around and find the best price available.
Although the ACA has some measures in place to lower healthcare costs, their main impact is to slow healthcare rate increases. They largely do not address the failure of the market to maintain reasonable prices. In Citizen Power’s opinion, greater regulation of healthcare costs is the only way to combat increasing prices. Specifically, prices for procedures should be set by regulation for all patients, similar to how reimbursement rates are determined for Medicaid and Medicare patients.
2) The ACA does not cover everyone.
In the first year of the ACA, between 8 and 9.5 million of previously uninsured Americans have obtained access to insurance. This number should increase as more states expand their Medicaid programs. However, this currently leaves approximately 38 million Americans without insurance. Under a universal single-payer system, everyone would have access to healthcare.
3) The administrative costs inflated under the ACA model.
The Centers for Medicare & Medicaid Services (CMS) has budgeted $1.8 billion dollars for exchange operations in 2015. However, this amount is dwarfed by the additional administrative costs that the ACA creates by utilizing a healthcare financing model that includes a central role for insurance companies. Although the ACA caps the amount that insurance companies can allocate to administrative, marketing, and profit at 20% of the total premium, this number is much higher than Medicare’s 3% administrative cost. In addition, the complexity of the insurance system increases costs for the healthcare provider also. According to the health economist David Cutler, 25% of healthcare costs are for administrative functions. Other countries spend no more than 10 to 15% on administrative costs because single-payer systems have fewer administrative needs.
Despite our skepticism that the ACA will ultimately fix our ailing healthcare system, we are currently investigating the operation of the Pennsylvania Exchanges through a grant by The Pittsburgh Foundation in order to identify ways that Pennsylvania could improve upon the current model. Our Phase I report focused on how the current federal regulations are being applied to Pennsylvania and is available here.
Our Phase II report investigated how Pennsylvania’s Exchanges are functioning and made recommendations that would reduce the uninsured rate while simultaneously lowering premiums and out-of-pocket costs to consumers and is available here.
As part of our advocacy, we have also commented upon a proposal by Highmark to shift funding to their healthcare affiliate the Allegheny Health Network here and a number of requests to increase premiums for plans on the Western Pennsylvania Exchanges more than 10% here.