Belmont Club

Murphy Versus Obama

HHS Secretary Kathleen Sebelius has made much of the claim that 2 million people have enrolled, in some form or other, in the Obamacare program. She has hailed it as a success and declares the worst of its rocky rollout is over. But data from 17 states — the only data that is publicaly available — suggests that only half of enrollees have actually paid a premium. For this reason some providers, like Health Tennessee are extending the payment deadline to January 10 to allow the paperwork to catch up with the expectations.

The uncertainty over who’s paid — or even who’s enrolled — is now having practical repercussions as people with heightened expectations come face to face with database air gaps and monetary reality. The Daily Mail describes how people who think they have enrolled in Obamacare are finding that nobody knows anything about it.

Hospital staff in Northern Virginia are turning away sick people on a frigid Thursday morning because they can’t determine whether their Obamacare insurance plans are in effect. …

She was leaving the building without getting a needed chest x-ray.

‘The people in there told me that since I didn’t have an insurance card, I would be billed for the whole cost of the x-ray,’ Galvez said, her young daughter in tow. ‘It’s not fair – you know, I signed up last week like I was supposed to.’

The x-ray’s cost, she was told, would likely be more than $500. …

It’s unlikely that a valid insurance card would have changed Galvez’ fortunes, however.

Her Carefirst plan, identified on the Obamacare website as BlueChoice Plus Bronze, carries a $5,500 per-person deductible for 2014 – an amount she would have to pay out-of-pocket before her coverage would apply to medical expenses. …

A similar situation frustrated Mary, an African-American woman small businesswoman … ‘I had chest pains last night, and they took me in the emergency room,’ Mary said. ‘They told me they were going to admit me, but when I told them I hadn’t heard from my insurance company since I signed up, they changed their tune.’ … a nurse advised her that her bill would go up by at least $3,000 if she were admitted for a day, and her doctor told her the decision was up to her.

If Mary didn’t have a heart condition before she entered the hospital she probably has one now. Many people, especially the poor are susceptible to misunderstanding the fine print. Perhaps there was something a “navigator” hadn’t told her. Other supporters of Obamacare are making similarly rude discoveries.

The 41 employees of Extreme Dodge in Jackson, Mich., are very familiar with trade-ins, but this year they’re learning about trade-offs as they come face to face with the new realities of health care. A few workers say they’re getting a great deal, but most have a severe case of sticker shock.

“I feel like I’ve been taken to the cleaners,” said Neal Campbell, a salesman.

Glitches of the sort being experienced in the Northern Virginia hospitals may eventually be fixed. But the money woes of the middle class cannot. Arithmetic dictates that Obamacare will need new sources of money to keep it going. According to Heritage the taxes soon slated to hit wallets are the Individual Mandate Tax, Health Insurer Tax, Reinsurance Tax, and coming soon the Employer Mandate Tax.

By law, the employer mandate was supposed to begin in 2014, but the Obama Administration delayed enforcing it until 2015. The employer mandate forces employers with 50 or more full-time employees (defined as those working 30 hours per week) to offer government-approved health coverage or pay a penalty. The penalty varies—either $2,000 per employee after the first 30 workers, or $3,000 per employee receiving subsidized coverage in the exchange, whichever is less.

There’s no help for it. Expenses must equal revenues. More expenses, more revenues. Jeffrey Young writing in the Huffington Post in the late summer of 2013 described the economic assumptions of Obamacare. It hoped to get 7 million enrollees, 38% of whom must be young to break even.

The White House believes that Obamacare can connect 7 million people to health benefits next year and that 2.7 million of those must be young, healthy adults with low medical costs to offset the expenses of the older and sicker people expected to flock to the health insurance exchanges. The battle will be won or lost not in the halls of Congress, on cable news programs or through television advertisements, but block by block in communities where the need is greatest and the prospects for success the highest, the officials said.

Avik Roy at Forbes says this is the crucial number. “The most important thing CMS won’t tell us is the proportion of healthy people, as opposed to sick people, who are signing up for exchange-based coverage. If too many sick people sign up, and not enough healthy people, the average health spend per enrollee will increase, leading to higher premiums that are increasingly unaffordable for average Americans.”

The Kaiser Family Foundation also argues the demographics of Obamacare will make or break it. Without the young and middle class paying up, where will the money come from? Most insurers are operating on the assumption that they’ll be able to pay for the sick with the healthy.

In setting their premiums for 2014, each insurer had to project who they thought would enroll. Some insurers may have been optimistic, assuming proportionate enrollment of young people. Others may have been pessimistic, and set their premiums somewhat higher across-the-board as a result. Because the ACA includes a risk adjustment system that transfers funds from individual market insurers in a state with younger and healthier enrollees to those with older and sicker enrollees, what really matters for next year is the demographic composition of actual enrollment in total in each state compared to what insurers as a whole projected. In the future, the goal remains to get a proportionate mix of enrollees by age in a given state.

The data suggests the insurers will be cruelly disappointed. The healthy ain’t coming to the party. In California, one of the few states for which demographic data is available, the goal of pulling in the young invincibles is already failing.

For example, 10,387 people between the ages of 55 and 64 enrolled in Obamacare insurance in California in October, which was a whopping 34 percent of all individuals enrolled in that month. But that age group comprises just 11 percent of the state’s overall population.

In second place, 22 percent of the total number of individuals enrolled were adults between the ages of 45 and 54, who only represent 14 percent of the state’s total population.

This suggests that many of Sebelius’ 2 million enrollees have not only not paid, but are also old and infirm.  They will get a health card from Obamacare, but will they get healthcare?  The Weekly Standard notes that hospitals Obamacare contractors are already behind on their payments to the hospitals.

The contractor building the financial management system for is being blamed by a Houston hospital for delayed Medicare reimbursements that have caused the hospital to miss payrolls for weeks.

The hospital is strapped for cash not because its not making money, but because Leday says a new Medicare payment facilitator named Novitas Solutions is taking too way long to pay out Medicare claims to the hospital.

Leday says he’s owed nearly $3 million in payments from Medicare and can’t make payroll.

Ultimately healthcare means a patient getting effective treatment.  It’s not a healthcard or piece of paper saying “Obamacare”. The healthcare system is an interlocking set of markets designed to deliver that outcome. Obamacare has disrupted the old but it hasn’t replaced it with the promised upgrade.

Not only has Obamacare not yet delivered a fully functional front end, it’s backend does not seem to have been built.   The insurance companies who have signed on to it are finding themselves stuck with an army of uninsurables and avoided by the young and healthy who alone can make the risk pool viable. This creates a drought of receivables that in turn disrupts payments to providers who “can’t make payroll”.

It’s a shambles. Unless its fixed hospitals will drop out, patients will go untreated, people will lose coverage and people will go broke. Thomas Sowell asks “what kind of man would blithely disrupt the medical care of millions of Americans, and then repeatedly lie to them with glib assurances that they could keep their doctors or health insurance if they wanted to?”

Who? Why a man who thought he had the answers; who imagined every change he made would be for the better when in fact he had a half-baked system whose fundamental assumptions are now going terribly wrong.  Making things happen was always harder than promising to do it. Campaigning is one thing. Governing is another.

The present health care system is broken and needs reform. But what those who sought to fix it forgot was that while you could make things better you could also make things worse.  The devil is in the details and in the arithmetic. So far in 2014 the score stands The Devil 1: Obama 0.

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