The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

U.S.:
The Affordable Care Act:
Less Healthcare for More Profit

Apr 25, 2014

In mid-April, President Barack Obama announced that eight million people had signed up for health insurance under government-run exchanges set up under the Affordable Care Act (ACA). An administration spokesperson said that since this result exceeded the administration’s target of seven million, the ACA was a success. “This thing is working,” declared Obama. “The Affordable Care Act is covering more people at less cost than most people would have predicted a few months ago.”

But what the Obama administration did not admit was that only about two million people who took out coverage had been previously uninsured, according to studies done in March and April by McKinsey and Company and the Rand Corporation. Most of the people who signed already had insurance before the ACA went into effect. But they were forced into the government-run exchanges by the health insurance companies that had used the implementation of ACA in October 2013 to cancel the policies of six million people in order to force them to buy more expensive policies.

Two million more with insurance is not even a drop in the bucket compared to the number without insurance. Even when one adds in several million additional people who are now enrolled in Medicaid (the official numbers have yet to be announced) and another three million under 26 years old, who were allowed to be covered under their family’s insurance if they paid an additional premium, it still leaves the vast majority of the uninsured without coverage. The Congressional Budget Office estimates that 45 million will be uninsured in 2014.

It seems clear that most of the uninsured didn’t run out to get coverage under the ACA. They preferred to risk getting hit by a government fine that starts at $95 and could go up to $500, depending on their reported income. Apparently they thought that getting coverage was not as good a deal as Obama claims.

They are right.

Medicaid’s Great Cost Shift

The working poor would have appeared to have the most to gain from the ACA, with the promise to expand Medicaid coverage to those with an income up to 138 per cent of the poverty line.

But the tragedy is just how much this program has been eviscerated for those already on it. During the last recession and state budget crises, most state governments slashed reimbursement rates to clinics, hospitals, doctors and pharmacies. That meant that many more providers stopped taking Medicaid patients, or they announced that they would not take any new Medicaid patients, greatly reducing access for medical care. That already shrunken network is where millions more people on Medicaid are supposed to get healthcare.

By the way, leading the way in imposing these cuts has been the state of California, which has repeatedly been held up as the model for implementing ACA. California already had the lowest reimbursement rates in the country in 2012 when it imposed a further cut of 10%. This cut was upheld by a federal appeals court judge, who dared to claim that the cuts would not impair access!

States have reduced which benefits Medicaid pays. Preventive care, dental work, vision services, and podiatry – are often not considered “essential,” and so are not covered by Medicaid. States such as California, New York, Florida and Arkansas are seeking to limit how many doctor’s visits Medicaid will cover to seven in a year. Sixteen states limit how many prescription drugs they cover in a month. In Illinois and Alabama, for example, it is only four – when it is not unusual for people with chronic conditions to be prescribed many more than that.

And those Medicaid services are also becoming more expensive, especially for those with incomes above the official poverty line, as lawmakers employ what they call “cost sharing.” Most states assess Medicaid premiums on those with an income that is above the official poverty level. They also assess co-pays – including on children – for prescriptions, doctor’s visits, emergency room visits, and hospital stays. These costs prevent people from going to the doctor or getting prescriptions – unless they are really, really sick.

With the advent of the ACA, these costs to Medicaid recipients are increasing. In January 2013, the federal government issued new guidelines making it easier for states to hike out-of-pocket expenses. At the same time, the federal government issued a ruling that now allows providers, like hospitals and clinics, to refuse to see patients on Medicaid who have not paid past charges. This simply lets the hospitals and clinics bar their doors to more Medicaid recipients.

Perhaps the most outrageous aspect is that the government is using its “healthcare reform” as an excuse to cut funding to the very safety net hospitals and clinics on which the uninsured and those on Medicaid have long depended. These budget cuts will only further decimate the little that is left of public healthcare in this country, pushing millions of low wage workers into even more desperate circumstances when they try to find any kind of health care or treatment.

Medicaid provides benefits that are so tiny, they’re a pittance. But the extreme right wing finds even that to be intolerable, because they say these kinds of benefits encourage laziness and sin. This opposition took concrete form when Republican state officials who run half the states refused to extend Medicaid for the working poor in their states – even though it meant turning down millions of dollars in federal funds that would have gone to their states.

The Insurance Exchanges: A Rip-Off

It isn’t too hard to see why tens of millions of the uninsured didn’t buy private insurance on the health care exchanges, despite the threat of having to pay a government fine.

First of all, health insurance premiums are outrageously expensive. A study done by the Obama White House in 2009 found that over the previous decade, insurance companies had increased their premiums between 80 per cent and 150 per cent, depending on the state. Once the ACA was passed in 2010, the insurance companies rushed to increase premiums even faster. A year after the ACA was passed, in 2011, Wellpoint, the second largest insurance company in the country, increased some of its annual premiums by 40 per cent – in one year alone! In 2014, Consumer Watchdog, a consumer advocacy group in California, estimated that premiums had increased on average by 30 per cent from the previous year.

The ACA does offer subsidies that are supposed to offset part of the cost of the premiums for some of the working population. With the subsidies, someone who makes $24,000 per year in their gross pay – that is, before taxes – would have to pay a premium that is equal to seven per cent of their income. That comes to about a dollar an hour. The premium for someone who makes $34,000 per year is equal to 9 per cent of their income, or about two dollars per hour.

But the premiums are just the beginning. Built into the exchanges is a huge amount of confusion. There are four categories of coverage (bronze, silver, gold and platinum), dozens of choices in the same category that competing companies offer, while prices differ from state to state and even region to region. The medical bills with obscure codes are even harder to figure. For example, under the ACA, preventive care is supposed to be free. But hospitals and doctors can charge a “facilities fee” for check-ups and tests.

Behind all the gibberish is the fact that most plans won’t begin to pay for treatment until consumers have forked over thousands of dollars more. An individual with earnings of $34,000 per year, who had a silver plan, that is, the second cheapest plan, would have to pay a deductible of $2,050 before their insurance kicks in and begins to pay the bills. For a family, the deductible is $4,100. After that, the insurance company covers only 80% of the bills, which can leave them paying the other 20%, until they reach their cap on out-of-pocket expenses.

That cap on out-of-pocket expenses is ... $6350 in a year for an individual and $12,700 for a family, not including the premiums they had already paid. And many plans also don’t count the cost of prescriptions toward the cap, either! So, for example, Aetna, Cigna and Humana require that patients with HIV pay more than $1,000 per month for their drug treatments. The same goes for the drugs for patients with cancer, multiple sclerosis, rheumatoid arthritis and autoimmune diseases.

Someone making $34,000 could easily spend half their annual income on insurance premiums, deductibles, co-pays and co-insurance. This means most working people won’t use their medical care, except under the most dire conditions – they won’t be able to afford it.

And when they do try to use it, they could have real difficulty finding a doctor or hospital, because the insurance companies greatly restrict who is in their plan, that is, in-network. According to a recent study by McKinsey and Company, in all but the most expensive insurance policies, the networks of doctors and hospitals covered by the insurance companies are “narrow” or “ultra-narrow.” They are much more restricted than employer-based plans, for example. Not only do appointments with a specialist mean extremely long waits, patients often have to travel long distances – which makes it almost impossible for those who are already sick or suffering from debilitating medical conditions. And, as opposed to employer plans, which offer some out-of-network coverage, under the ACA, when people go out of network, they are not covered, and they can face incredibly high bills.

It is an impossible maze, filled with expensive traps and barriers. Sometimes, consumers have no way to know when they go out of network, since some doctors working in the same hospital may be in network, and others outside the network. Sometimes, as the Los Angeles Times recently reported, a hospital might be in-network, while most of the doctors working there are out-of-network.

Under the ACA, insurance will be extremely costly, more than before. And the kind of medical care all that money buys will remain lousy for those most in need.

Health Benefits Under the Gun

For years, the Obama administration had reassured the public that those who had their own individual health insurance policy could keep it, if they “liked” it – which turned out to be a lie, since millions lost their insurance after the exchanges opened last October. Obama also promised that health care reform would not affect the policies of the 170 million (active and retired) who had employer provided insurance. And he also promised that the law would mandate that employers extend coverage to employees who were not insured.

Those were lies, also. The Obama administration very quickly postponed the employer mandate not once, but twice. But some companies moved quickly to use the ACA to justify dropping coverage anyway. After announcing that they were dropping health care coverage for their part-time employees, big retailers and restaurant chains, companies like Home Depot, Trader Joe’s and Darden Restaurants (Red Lobster and Olive Garden), made it sound like they were doing these employees a favor by supposedly “allowing” them to take advantage of the subsidies under the government-run health care exchanges.

In 2014, several companies began to take advantage of the ACA in another way – by shifting over a million workers and retirees into private health insurance exchanges, modeled after the government run exchanges, with Walgreens and Sears Holdings leading the way. Such corporate bellwethers as GE, IBM and Time Warner also shifted their retirees to private insurance exchanges as a preparation to doing the same thing to parts of their workforce. Under this new set-up, employees have to purchase health insurance on either a private exchange or a public exchange, choosing between different plans and companies, while the companies provides them only a fixed “subsidy” or payment.

This allows the employers to shift an ever bigger part of the cost for healthcare onto their workforce, just like companies had already done by ending traditional pensions in favor of 401(k)’s. And just as investment banks and brokers have greatly profited from the commissions and fees they get for managing and investing the money in 401(k)’s, traditional health insurance companies such as Michigan Blue Cross/Blue Shield and Wellpoint, as well as business consultant groups like Towers Watson and AON Hewitt, are preparing to profit from creating and marketing these new “private exchanges.”

The ACA also gives employers another excuse to slash employee health benefits: the Cadillac tax. In 2018, the government will impose a 40% excise tax on any health insurance premium that the employer pays above $10,200 annually for individuals and $27,500 for families. With healthcare costs rising quickly, most employer plans are expected to hit the cap within the next 10 years. When the costs reach that point, a tax is imposed that is either paid by the employer, if the plan is self-insured, or out of the insurance premiums. Of course, the employer will say they don’t have money to pay the excise tax; then they will argue that employees have to bring the cost down by accepting either benefit cuts or premium and co-pay increases. And many employers are not waiting until 2018 to start demanding this. According to the New York Times (August 4, 2013), public sector workers throughout the country are already confronting demands by public officials to accept big benefit cuts now supposedly in order to prepare for this Cadillac tax.

Of course, to call most employers’ health care coverage “gold plated” or “Cadillac” insinuates that employees are really being pampered with unnecessarily luxurious and costly treatment, which is a lie. Health insurance offered by all employers covers ever less, while costing employees ever more. The share of premiums paid by employees for family coverage has nearly quadrupled since 1999 to $5,300. Since this money is taken directly out of the employee’s check, it is nothing but a wage cut.

Between dropping coverage, shuffling employees and retirees onto private and public health insurance exchanges, and using the Cadillac tax as an excuse to slash benefits, a bad situation is being made worse under the ACA.

A Reform for the Bourgeoisie

No, health care reform, embodied in the law whose full name is the Patient Protection and Affordable Care Act (ACA), neither protects the patient, nor provides affordable healthcare. Nor is it a step toward universal health care, as the Obama administration, its champions and some leftists claim. Health care reform was enacted for one reason: to increase and safeguard the profits of a big part of the capitalist class.

The health insurance companies, which had lost almost 10 million policy holders after the recession hit in 2007, stand to gain millions of new paying customers through health care reform.

They have put themselves in a position to profit from the expansion of Medicaid coverage. Before the expansion even began, health insurance companies, including United Healthcare, Wellpoint and Aetna, were already running managed care programs for about half the Medicaid recipients in almost all 50 states. Under these programs, the states pay the insurance companies a fixed fee for each recipient. The companies take their cut off the top, and dispense the little money that is left for the recipient’s health care. Managed care is really how the insurance companies manage to get their profits from Medicaid and the other plans.

The expansion of Medicaid means even more profits. “Medicaid health plans without exception are seeing reform as a tremendous business opportunity, and they are preparing for the expansion as a choice to grow and expand,” Vernon Smith, a health care consultant, told USA Today (November 12, 2010).

If this weren’t true, then Wellpoint, the second largest private health insurance company, wouldn’t have rushed to buy Amerigroup, a company that specializes in managed care plans for Medicaid, paying five billion dollars in cash in 2012. “We’ve made a big bet on the partnership with the government,” explained Joseph R. Swedish, Wellpoint’s CEO (New York Times, February 4, 2014). What that “partnership” consists of is taking money that was supposed to pay for healthcare for the poor and working poor, and turning it into insurance company profits.

The big health insurance companies also stand to gain huge profits from those who buy insurance on the healthcare exchanges. Perhaps not this year, since the fine for not having insurance is still relatively low, only a couple of million people were “convinced” to buy it. But under the ACA the fine increases sharply year after year. So, consumers will soon find themselves facing “an insurance deal they cannot refuse.”

The subsidies the government provides to supplement the premiums allows the insurance companies to charge outrageously high premiums, which are then underwritten by taxpayers. The cost of these subsidies is expected to mount to at least 965 billion dollars over the next ten years, an enormous transfer of wealth from public to private hands.

Buried in the ACA are other government subsidies for the insurance companies. For example, the government set up a fund to transfer 10 billion dollars to the insurance companies annually over the next several years, supposedly to relieve them of some of their “risk” from participating in the exchanges. And where does the government get this money? It assesses $63 per year from the income of everyone with employer provided health insurance. So, the government takes a little more than a dollar a week from about 155 million people, and turns that money over to the insurance companies.

(There are other government subsidies and guarantees as well, including a program called “risk corridors,” which requires the federal government to absorb a portion of the insurance companies’ expenses.)

Is it any wonder that the average share prices of the top five insurance companies – Wellpoint, United, Aetna, Cigna, Humana – have more than doubled since the March 23, 2010 passage of the ACA? At a time of record stock prices, the Big 5’s share prices have increased almost twice as fast as the Standard and Poor’s 500 index of blue chip stocks. “We continue to believe that public exchanges can represent a longerterm upside opportunity,” said Aetna CEO Mark J. Bertolini, (The New York Times, October 26, 2013).

That’s corporate-speak for: PROFIT BONANZA!

The ACA is also expected to sharply increase sales and profits for the pharmaceutical industry, which had been threatened with declining profits because of expiring patents on blockbuster drugs. One study by the research and consulting firm GlobalData of London estimates that the pharmaceutical industry will reap between “10 billion dollars and 35 billion dollars in additional profits over the next decade.” On the one hand, the expansion of insurance coverage gives these companies millions more paying customers. On the other hand, the health insurance companies were able to successfully block any attempt to reduce their prices through government regulation. The drug companies were also able to maintain the government ban on importation of cheaper drugs from other countries.

The big hospitals and their trade associations are also strong supporters of health care reform, because they also stand to gain by a big influx of paying customers. Mammoth hospitals, including both for-profit and non-profit, always find a way to charge unimaginable amounts of money for even the most common-place items, like $20 for an aspirin, not to speak of tens and hundreds of thousands of dollars for routine surgery. Millions more people on insurance means millions more paying customers that the hospitals can milk for extra profits.

And certainly the expansion of Medicaid will be a boon for gigantic companies, like WalMart and McDonald’s that, together, employ millions of low wage workers. These companies have already shunted off parts of their workforce onto Medicaid. One study found that the Medicaid benefits for workers at fast food restaurants cost the government on average four billion dollars per year. This is a direct subsidy that allows these companies to pay lower wages, boosting their profits at the expense of the taxpayers.

Often referred to as “Obamacare,” by Republicans and Democrats alike, health care reform is really personified by Liz Fowler, who many say was the real author of the reform. Fowler – the former Vice President for Public Policy and External Affairs at Wellpoint, the health insurance company – was made the director of the Senate Finance Committee health care staff by the committee’s chairman, Max Baucus, a Democrat. Fowler was made responsible for putting the law together and shepherding it through Congress. To ensure the law’s implementation, Fowler was then made deputy director of the Office of Consumer Information and Oversight at the U.S. Department of Health and Human Services. Last year, Fowler left “public service” to take an executive position at Johnson and Johnson, helping the drug maker to maximize its profits.

In writing and implementing the reform, Fowler represented the different sectors of the health care industry, all of which stand to get a piece of this reform’s action.

What Kind of Future?

Of course, capitalists profit from health care in every country. The difference in this country is that the capitalist drive for profit is so much more unfettered and free. As a result, in this country we pay more than twice as much per capita for medical care than in any other wealthy country. In return, we get much worse medical care – at least for most of the population. As documented in the National Research Council’s 2013 report, “U.S. Health in International Perspective: Shorter Lives, Poorer Health,” compared to other countries, patients in the U.S. make fewer visits to health care providers; overall there are fewer physicians compared to the size of the population; there is a lower percentage of physicians engaging in primary care; there is worse continuity of care; there are greater delays in care; there are greater financial barriers in accessing care, with Americans facing higher deductibles, co-payments and outofpocket expenses at the time of health care usage; and, of course, lower rates of the population are covered by insurance.

In other words, big parts of the population are literally being starved of health care and treatment. And that is an important reason why, by all measures of people’s health, such as infant mortality and life expectancy, the U.S. ranks dead last compared to the wealthy countries, and at levels that are comparable to those of much less developed countries, like Mexico, Turkey and Slovenia.

The worsening toll in this country is reflected in a real decline in life expectancy among some of the most vulnerable sectors of the U.S. population, a decline that has been documented by numerous academic studies published over the last years. In one such study, (Health Affairs, August 2012), poorer white women had lost five years of life between 1990 and 2008, and white men had lost three years of life – the kinds of drops not seen outside times of war and epidemics. Thus, their life expectancy is descending closer to the level of the black population.

Of course, all those who argue that this country’s system of health care should be “reformed” so that it functions as it does in other countries ignore what is going on in those countries. Under the blows of a worsening economic crisis, the bourgeoisie is in the process of dismantling every part of the social safety net, starting with health care. The monstrous development of the U.S. health care system does not represent some distant Dickensian past, but rather another future, what an increasingly parasitic and sclerotic capitalist class is trying to bring about everywhere.

What is happening in health care is a part of the general offensive of the capitalist class, an offensive that can only be thrown back by the fights of the working class to wrest control of the society from the hands of the capitalist class.