Despite the efforts of a few hardliners in Congress, it looks like Obamacare–the Affordable Care Act–is here to stay. After making its best effort to kill the bill at a fetal stage, the big guns of American healthcare (various medical associations, the American Hospital Association, Big Pharma, the health insurance industry) are now enjoying a billion-dollar tsunami beyond their wildest dreams. Most now support Obamacare wholeheartedly, though whole-hog would be more precise.
The US public, especially the previously uninsured 40 million who either couldn’t afford insurance or because of preexisting conditions ranging from skin cancer to vaginitis had been denied health insurance, breathed a sigh of relief when their insurance cards arrived in the mail.
But not everyone is equally delighted with the Affordable Care Act. This week I’ll review Obamacare’s winners and next week its losers. For an excellent overview, consider America’s Bitter Pill, by Steven Brill, subtitled “Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System,” though at 512 pages you might learn more about the system than you actually wish to know.
Here are the winners. Of course, three of the four were always winners, but now the winnings are mind-boggling.
Winner #1: The Hospital Industry
This industry includes not only hospitals, but also extended care facilities, medical equipment suppliers, and the enormous healthcare systems currently being created as hospitals buy up medical practices.
In order to understand hospital revenue streams, imagine you’re a small business owner, say a florist. Suddenly the government passes a law that requires every citizen to buy flower insurance to pay for their flowers. You’re free to charge whatever you want for your flowers. To test this puzzling system, you increase the price of a dozen long-stemmed roses from $50 to $500. You don’t have to tell your customer about this increase, because you’re now asking for her same $50, calling it a “co-pay.” You submit a claim to your customer’s flower insurance company for the $450 balance due. The insurance company argues that your price is too high, but is willing to settle for $300, which you readily accept.
After a few months, with all the money pouring in, you rebuild your flower shop and acquire a fleet of trucks. You even consider purchasing a several-hundred-acre flower farm in South America. When there’s talk about reversing government-backed flower insurance, you quickly send a check to the lobbyists the floral association has hired.
So who provided this additional $300 per dozen roses that you now enjoy? It’s the result of your customer spending $400 a month on flower insurance or of payments made by the customer and her employer if she has flower-insurance benefits at work. If she’s unemployed and cannot afford flower insurance, the government subsidizes her insurance expenses.
You’re bright enough to know where this money comes from.
To say that dollars are pouring in to hospital systems is no exaggeration. Like your $500 charge for a dozen roses, hospitals charge egregious prices for their services (think of $5,000 for a dozen roses from Northwestern or Rush). Hospital administrators award themselves salaries in proportion to their income streams. Northwestern’s CEO gets $5 million, Advocate’s $4 million, Children’s $2 million. And hospitals endlessly tear down and rebuild their infrastructure. Northwestern is building a $334 million tower and just bought an $80 million office building. In the same neighborhood, Lurie Children’s Hospital budgeted $375 million and for their money gained fewer than 20 new beds.
Winner #2: The Health Insurance Industry
Had the original public option (Medicare For All) not been ditched in order to get Obamacare passed, the health insurance industry would have been driven to extinction by Obamacare. Who would need Blue Cross, Humana, or Cigna if the government were selling health coverage at a fraction of the price of their for-profit competitors?
Instead, Congress passed a law that required everyone to buy an overpriced insurance policy (or “product” as they call it in the industry). They say it’s overpriced because they were fearful of having to cover people with those pesky pre-existing conditions. Instead, the industry was pleasantly surprised when all the healthy people buying insurance never actually used it, one reason being the deductibles have been set so high that people just don’t bother going to the doctor.
So money is pouring in to insurance companies. I’m sure they’re irritated that some has to be siphoned toward hospitals and pharmaceutical companies, but little is being spent on an individual’s day-to-day coverage (doctor’s office visits, emergency rooms) because the high deductible places the financial burden on the patient herself.
Winner #3: The Pharmaceutical and Durable Medical Equipment (DME) Industries
These two are raking it in as well. Big Pharma might be running out of new products as patents on its cash cows (like Lipitor and Cymbalta) expire, but when a new drug is developed the sky’s the limit. Here’s just one example: 42 tablets of the intestinal antibiotic Xifaxan costs $1,400. A small tube of the skin cream Solareze is $800.
Ever on the alert for discovering new ways to screw the US public, start-up pharma companies are buying the rights to drugs abandoned by doctors decades ago, renaming them, and selling them at prices that leave most of us breathless.
Here’s another example: 30 capsules of Doxepin 10 mg, an antidepressant long abandoned by doctors because it made users too sleepy, sell for about $8. If you open a Doxepin capsule and shake out half the powder, so you have perhaps 6 mg left, you’ve created Silenor, marketed as a sleeping pill, 30 capsules of which sell for $328. You’ll never know this price because your doctor will give you a discount card that reduces your co-pay to $25. Your health insurance company knows the actual price and is not at all happy to pick up the $303 difference.
I can’t be such a complete curmudgeon as to not acknowledge the one real, non fat-cat capitalist, Obamacare winner.
Winner #4 Previously Uninsured Who Now Have Health Insurance
Many, though still not all, of the previously uninsured now have health insurance. Before the Affordable Care Act, there were 40 million US citizens who had no access to health care unless they followed George W Bush’s sage advice to wait their turn in an emergency room.
This 40 million was 18% of our population, a national embarrassment, the worst numbers among developed countries. With Obamacare, millions enrolled, with many receiving government subsides to offset their premiums (though many did not—see next week’s Health Tip losers list).
Today just 11.9% are uninsured, mainly minority families living in red states whose ideological governors refuse to accept federal insurance subsidies for their citizens. On the plus side, people receiving subsidized premiums generally get a policy with a more affordable deductible ($250) than those who don’t qualify for subsidies and are compelled to pay full retail for their insurance.
These are the four winners of the Affordable Care Act. Next week, the losers and an interesting middle group, Not Exactly Winners, But Not Losers Either.
David Edelberg, MD