If you are having trouble following all the discussions and ramifications of repealing and replacing Obamacare, join the club. When public policy debates get confusing, it is helpful for us to go back to discover how we got to the current situation. Since our primary interest is how this will impact Arkansas, here are some of the facts:
• The number of people covered by Medicaid in Arkansas has increased from 692,000 in July 2013 to 976,000 in April 2017. Some estimate that it is now more than 1 million people.
• Most of this increase was due to Arkansas deciding to expand Medicaid coverage. About half the states decided to do it and half did not, but Arkansas was at the time the only Southern state that chose to expand Medicaid under Obamacare. It was done under a Democrat as governor and a Republican legislature.
• The cost to provide health insurance for these 976,000 is about $2.1 billion a year. So far, the federal government has funded 95 percent of this expansion, so Arkansas is paying $100 million for its 5 percent and the federal government is paying $2 billion for its part.
• The federal government's share is going to start shrinking down to 90 percent by 2020, or in three years. At that time, assuming no increase in health-care coverage costs, Arkansas' 5 percent will become 10 percent, and our $100 million will increase to $200 million.
Under the Senate's version of the repeal and replacement of Obamacare, the 90 percent would drop down to 75 percent by 2023, some six years from now. At that point, Arkansas' $100 million could become $500 million for 25 percent of the costs. That again assumes no increase in health-care costs.
Arkansas' poverty rate is 17.9 percent of the population, the fifth-highest rate in the country. But with 975,000 covered in a state with almost 3 million people, roughly one-third of every man, woman, and child in Arkansas is covered by Medicaid. How is this possible when Medicaid is primarily for children, the elderly, the disabled, and, now with expansion, those with up to 138 percent of the poverty level?
The answer is in what Medicaid covers. In fact, it paid for more than half of the state's births last year. For anyone who has had a baby recently, they know it is not inexpensive. Unless maybe someone else is paying for it.
More facts:
• Medicaid also paid more than $800 million in nursing home costs last year, which represents just under 40 percent of its total costs. Obviously those in nursing homes often require expensive care due to their ages.
• These costs do not include Medicare. If you include those, the numbers swell. Sharif Omar, the CEO of Northwest Health, says two-thirds of their hospital's patients are covered by either Medicaid or Medicare.
Obamacare is clearly collapsing around the country, with more and more insurers pulling out after sustaining hundreds of millions of dollars in losses. For these insurance companies to sustain these losses and still stay in business, they have to recover the money somewhere. The thought occurs that much of those costs are not just paid by the government, but by everyone else that pays for their insurance. It could easily be that those higher deductibles result in shifting more of the costs to patients from insurance companies so that insurance companies can fund the hundreds of millions of dollars of losses from Obamacare.
Another problem with Obamacare is you don't have to buy insurance until you get sick. Whoever came up with that idea certainly did not understand how insurance works. Think of how much it would cost to pay for homeowners' insurance if you didn't have to buy it until your house caught on fire. The idea behind insurance is to create a pool of money, with everyone paying in, so that those who really need it have money to cover their expenses. In a typical medical insurance pool, as many as 50 percent of those covered might have small claims, as low as $500 per year or less. But a very small percentage of those insured might have over 25 percent of all the claims. This type of insurance works well. But it can't work if you allow people to only buy insurance when they get sick.
Obamacare tried to force people to buy insurance by imposing a nominal penalty if they didn't buy it. We now know that didn't work. So what would work? The House version of the reform bill would require those who don't buy insurance up front to pay more for it when they buy it later, presumably when they are sick. The additional cost would be as high as 30 percent, giving people an incentive to buy it initially. The Senate version would require that if you didn't buy it up front, or you went without insurance for as many as 63 days in the previous year, then there is a six-month waiting period before you can buy it. During that time you would be uninsured and you would bear the medical costs. In either of these ways, those who choose not to buy insurance have to shoulder the extra costs, and they couldn't shift those costs on to those who chose to buy insurance as, well, insurance against health problems.
Whatever happens with the health-care legislation, Arkansas is confronted with how to come up with either tens of millions or hundreds of millions of dollars in extra money each year to pay for its Medicaid expansion. When deciding, we hope the decision factors in how much of a health-care system the state can actually afford and sustain.
Editorial on 06/28/2017