Business News for the Mississippi Delta

Changes in Healthcare

By Wyatt Emmerich

It’s been seven years since Obamacare passed. My how time flies. Time to dust off my thoughts on the American health care system.

First, let’s assess Obamacare. It was supposed to save money. It didn’t. It was supposed to lower premiums. They went up. It was supposed to extend coverage to 20 million uninsured Americans. The actual number is half that much. Young people were supposed to sign up. They haven’t. There was supposed to be a small penalty for not having insurance. Instead it has grown every year, buried inside your tax return. 
Insurance companies were supposed to go broke. Instead they have outperformed the stock market by double. Nobody was supposed to lose their existing policies. Millions did. Dozens of insurance companies were supposed to compete to offer Obamacare policies. Instead, most areas of the country only have one or two insurance companies to choose from. Emergency room visits were supposed to go down. Instead they went up.
The more things change, the more they stay the same.
One prediction about Obamacare has turned true: Once you give millions a benefit, it’s hard to take it away. The biggest benefit of Obamacare was forcing insurance companies to cover everybody, even if many had pre-existing illnesses. The Republicans have already announced they will not change that.
If you can wait until your house is on fire before buying fire insurance, most people will do so. That’s not insurance. That’s government-controlled pricing.
Either you allow insurance companies to exclude people with pre-existing illnesses or you have to force everyone to buy insurance. You cannot have your cake and eat it too.
The old system wasn’t that bad. You had the elderly and the low income covered by Medicare and Medicaid. The more affluent were covered by company policies.
For those who chose to go without insurance, they could still walk into an emergency room and get medical care. Even if they had a long-term illness like cancer, they still got health care. But when the bill came, the hospital could use the foreclosure laws to demand payment.
In reality, that’s not what hospitals did. They almost always negotiated a much lower payment for those without insurance, reducing the bill to a 10th or so of the actual cost, depending on the income and assets of the uninsured patient. Then they received compensation from the federal government for their uninsured losses.
As part of Obamacare, Medicaid was expanded to cover more of the working lower income with the feds picking up the tab. In Mississippi, 300,000 or so people would have been eligible for this expanded Medicaid. A billion more federal dollars would have come into our state. But our Republican leadership said no. The expansion of Medicaid was associated with Obamacare and thus poison to the right wing.
This ideological purity cost our state dearly and is a factor in producing the slowest population growth in 50 years. Working class families moved to states where they could be eligible for government health care.
Meanwhile, federal payments to hospitals for uncompensated care were cut dramatically because the expansion of Medicaid was designed to reduce the need for that. That’s why rural hospitals have closed, University Medical Center is laying off employees, and most hospitals in the state are struggling.
This has caused great damage to our state economy, since in almost every city and town in Mississippi the hospital is one of the biggest employers. It’s one of the reasons our governor has had to cut the budget six times to balance the state budget.
Let’s hope the new Republican national leadership will go back to federal Medicaid block grants to states. That way, maybe Mississippi can start getting its share of federal health care dollars. Unfortunately, we will never get back the $7 billion in federal money we so sanctimoniously turned away over the last seven years.
The fundamental problem with health care in America is the disconnect between the buyer and the provider. If you get Medicaid or Medicare, there is little incentive to shop around for the best deal. The copays are negligible. Nobody has much incentive to save money, so costs go out the roof.
It’s a well-known fact that if you call a doctor and agree to pay cash, you’ll get quoted a cost much lower than the government or insurance rate. That’s the free market at work. But it happens rarely.
Same thing with company policies. You’re in with a group, so your claim doesn’t have any effect on your individual insurance cost. There is no incentive to shop around.
Compare that to car insurance, where the customer buys his own policy. We all know cases where we will just pay for a new bumper ourselves rather than file a claim and risk a premium bump. That’s because our personal claims will have a direct effect on our premiums and we don’t want them to go up. That kind of incentive is completely lacking in the health care field.
It’s all caused by bad tax policy. If an employer pays you in health insurance benefits instead of salary, that health benefit is not taxable. That’s is a huge incentive to get your health insurance through your employer.
The solution is simple: Equalize the tax treatment of insurance premiums for both personal policies or employer policies. You can do that two ways: Either make employer premiums taxable as income. Or make personal policy premiums fully tax deductible.
If you did that, medical insurance could be more like home insurance or car insurance. This would allow market incentives to work. There would be a boom in policy offerings from catastrophic only to zero deductibles. Individuals would be in charge.
Ultimately, I believe we will end up with a two-tiered system: A mandatory government system that is taxpayer supported with long waits and inferior care, and a private-pay system that will be better and more expensive. It will be similar to education in which you have free public schools and more expensive private schools.
The most important thing of all is to never pass a law forbidding a doctor from opting out of the government system. If a doctor wants to go old school and take only private pay patients then that should be his option. We must keep our country free. That’s where the rubber meets the road.
Wyatt Emmerich is the president and owner Emmerich Newspapers based in Jackson.