Tuesday, January 5, 2016

ACA eases extreme financial stress from medical bills, but out-of-pocket costs remain a problem

The Kaiser Foundation and the New York Times have teamed up on an interesting study to measure the number of Americans suffering from financial hardship due to medical bills.

The good news is that by expanding insurance accessibility, ACA has helped steadily curtail the amount of financial stress Americans experience due to health bills.  Insured Americans are much less likely to suffer individual financial stress related to health bills.
The ACA has helped affordability, but we're still
not here yet.

The bad news is a significant portion of Americans between the ages of 18 and 65 with insurance -- 20 percent -- still suffer significant financial hardship. (That's a heck of a lot better that the 53 percent without insurance reporting having problems, but it's a real issue).

Things are getting better, but we haven't reached single-payer nirvana where you can show your provincial ID card and focus on getting well.

The Times and Kaiser go into details in their reporting, which you should read.  However, follow me below the fold for a general overview of the situation.

What the Affordable Care Act has helped with to limit individual financial stress:

1. Subsidies to buy insurance:  Households with income under 400 percent of the poverty line get help paying premiums for qualified exchange health plans.  The subsidies are on a sliding scale and are much more generous the farther down the income ladder you move.

2. Caps on out-of-pocket costs.  For 2016, health plans now must cap their annual out-of-pocket costs at $6,850 for an individual and $13,700 for a family. That's a non-trivial amount, but it sure takes [most] the sting out of a $100,000 bill for a three-month course of chemotherapy.

3.  Subsidies to out-of pocket costs:  For families earning under 250 percent of the poverty line, those out-of-pocket limits get reduced more -- roughly 80 percent for those earning under 150 percent of the poverty line, 60 percent for those earning  between 150 and 200 percent and about 15 percent for those earning 200-250 percent.

4. End of Lifetime caps:  Before the ACA, many insurance policies had lifetime limits to limit the insurance company's liability . Most of these caps were $1 million to $2 million, but major chronic health problems like hemophilia or cancer can exhaust those in a hurry. Arijit Guha, the Arizona State University Student who became famous for a Twitter exchange with the president of Aetna, was on an Aetna student plan with a $300,000 lifetime limit, which his cancer treatments quickly exhausted. Getting rid of these caps has protected numerous people with expensive, chronic health conditions.

5. Medicaid expansion:  If you are under 138 percent of the poverty line, you're on Medicaid (assuming you live in a state in which the legislature is not run by heartless vandals.), which strictly limits, or in most cases, eliminates out-of-pocket-liability.

What the Affordable Care Act hasn't helped with:

1.  The out-of-pocket caps still leave room for sizable out-of-pocket expenses. Sure, a $6,850 bill is a lot more manageable than a $168,500 bill. But that's still a huge challenge for a middle class family pulling in $55,000 a year in income, let alone a working class one pulling down $30,000. Deductibles are, co-pays are still and out-of-pocket expenses are still trending up, though the hard caps the ACA places on them will eventually stop the climb. As the Kaiser report notes, 26 percent of those with high-deductible insurance (more than $1,250) reported problems paying medical bills as opposed to only 15 percent with lower-deductible insurance. What's also notable is that the smaller bills rung up by deductibles and co-pays for routine office appointments and tests are causing problems. Three-quarters of insured people reporting problems with medical bills said that a major problem was cost-sharing like co-pays, co-insurance or deductibles --far more than those complaining about denied claims (26 percent) or out-of-network costs (32 percent).  Notably, about 45 percent of those having problems affording bills who have insurance said they face total bills under $1,000, which is consistent with a number of doctor's appointments and tests adding up, rather than a major hospital stay.

2. The caps do not account for out-of-network care. This is a another big problem, and the one that the ACA may have exacerbated. To keep overall costs down on the exchange plans, insurers like to limit the providers that insured patients can see to those that the insurer has negotiated a good rate with. Narrow networks have become a large part of the ACA exchange plans. However, with all of the overlapping doctors and changing affiliations, it's difficult for patients to know who's in and out of network --- especially when you're under general anesthesia and at the last second your hospital decides to bring in an assistant surgeon who's not in your network. States policies can help with this, but a federal fix is urgently needed.

3. Qualified affordable health plans from employers do not necessarily cover families: People are only eligible for subsidies on the health exchanges if they do not have access to an "affordable" health plan at work. The problem is that affordability is only considered for the employee, not their family. So if an employee has a plan offered to them in which the premiums do not cost more than 9.5 percent of their annual income, but the company doesn't pay anything for the family plan, then that household is out of luck. I haven't seen any work on how much this loophole is affecting affordability, but it's another problem that needs a federal fix.

Overall, then the ACA has helped considerably to limit costs to consumers --if you're insured, you're not racking up astronomical bill, and many more people are insured than they were pre 2014. However, with the framework of the ACA some pretty pressing problems with out-of-pocket costs remain. Notably, many of these problems are (relatively) small enough that would also probably ease if wage growth were to increase -- if you start getting annual 5 percent raises , the math to pay off smaller-dollar balances suddenly becomes a lot easier.

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