Reg's Blog

Senior and Post-Acute Healthcare News and Topics

The ACA, Funding Resolutions and the Shut Down

For readers approximating my age, a commercial slogan ties to the title of this post: “Is it real or is it Memorex”.  In this current round of Washington political maneuvering and on display dysfunction lies the question;  is the ACA issue real or is it a tool for political posturing?  Is this a real “red line” issue and an issue of such magnitude that a simple continuing resolution for government funding now resides in limbo? Maybe yes and maybe not.

Setting aside the news cycle rhetoric and the political ideologies at-play, merit exists to slow down ACA implementation and re-calibrate.  The problem is that neither party can find a way to address the process and thus, the economic and policy issues operative, without wading hip-deep into political muck.  Truthfully, the ACA issue is worthy of scrutiny and thus, legislative remedy but the timing and the mechanism is not during a budget procedural process.

Dissecting the debate further, removing the fringe and getting at the core, there is logic to explore and facts to review. Non-funding the ACA is a bogus proposition and one that is all but impossible to do.  It is not a stand-alone, singular expenditure like funding another aircraft carrier or a NASA mission.  It is already woven throughout the health care industry.  The issues that remain are whether certain elements need re-thought and arguably, many do.  This isn’t a political point but one shared by most economists (non-partisan), most health policy experts, and even the party leaders on both sides of the aisle.   No matter what the president’s rhetoric is at the moment, his administration delayed the employer mandate and for sound reasons.  The individual mandate deserves the same fate and for the same reasons.

The simplest of all reasons is neither at present, is in workable fashion and likely won’t be anytime soon.  The implementation and enforcement provisions for the requirements exist in only pieces.  Further, the complexity of the mandates (individual and employer) create so many unintended consequences that each deserves a time-out and re-think to address the possible consequences.  For example, the employer mandate created the real consequences of lost work hours and lost jobs – untenable outcomes in a job less recovery.  With this looming outcome and a loss of or reduction in, employer-sponsored health plans the participation goals of the ACA can’t be met and worse, the numbers break ugly quick on additional government resources required to pick-up the slack via Medicaid and subsidies through the exchanges.

A similar course is visible with the individual mandate.  The process is confusing and individuals simply don’t get it.  While the rates look at first glance palatable the reality is, rates plus out-of-pocket costs on the affordable plans don’t equal affordable coverage.  Similarly, rate subsidies are tied to tax credits not direct to income support for most (cash flow timing is markedly different with tax credits).  When viewed against employer coverage options existing, the choice for most is clear – the exchanges lose.  Additionally, Medicaid is full and overflowing.  In a number of states that have recently moved to a Managed Medicaid platform, the transition has created problems yet unresolved in terms of payment, claims adjudication, enrollment and provider access.  Adding to this mess is a certain nightmare, particularly in rural areas or inner-city areas where participating Medicaid providers (especially physicians) are limited and declining.  Worse, the numbers of participants that qualify for the exchanges and ultimately participating appears by estimate, to be far below projections.  If, as I believe and a number of health care economists similarly, the initial participants are folks with immediate health needs and chronic diseases, the costs via premium in year 2 will explode (too many sick people, not enough healthy people in ratio, paying premiums).  Recall, anyone qualifying to purchase insurance on an exchange can do so at any time and not be denied coverage.  There is no penalty to lapse in and lapse out effectively and initially, the “tax” penalty is meager – assuming some methodology of enforcement is available (one isn’t today).  Reality suggests that most who are healthy and presently under or uninsured, will not jump to lower their income via purchasing insurance until doing so is proximal to an immediate need.

If the above reasons aren’t compelling enough to re-think and re-craft the key ACA components, the state of the economy is.  Politics aside, the ACA is anathema to a rebuilding economy that is trying to shift to a different plane.  Large, overarching legislation that is ripe with new entitlements, new taxes, new mandates, and crosses traditional state boundaries with federal intercession creates temporary economic impacts – socially and politically in the immediate, financial beyond.  It is the social and political shifts that are creating a pull opposite to an economy seeking equilibrium.  The fundamental drag or tug is opposite or oppositional to labor, wages, income and consumer spending.  All of these elements succeeding or byproduct of industrial and business growth, capital investment, and production/service expansion.  Point in fact, the ACA addresses more issues in a past or former economy than it does in the shifting current economy.  Hence the flaws in the employer mandate so troubling to many employers.

What we know today of the economy is that its labor norms (employment) are fundamentally different and thus, income and consumption patterns have shifted.  For example, workforce participation rates are significantly down with retirement up and at least for a decade or more, likely to remain at this trend level.  The number of people working at fragmented jobs, temporary jobs and jobs below their former pay and grade has significantly increased and the increase again, is permanent not temporary.  Many of the jobs lost over the course of the last five to seven years are gone permanently.  Government employment is waning and will continue to do so.  This labor shift combined with a wage shift can’t be resolved by government policy.  The shift likewise, in employment and income status and thus, health insurance coverage isn’t adjusted by the ACA – only magnified.  Again, regardless of subsidies and Medicaid expansion, the number of permanently covered individuals won’t shift dramatically and in many regions and states, will shift negatively – more uninsured and underinsured.  Why?  The folks fundamentally “shifted” in the current economy are working, can’t qualify for Medicaid, and regardless of access to an exchange with some or limited subsidy, can’t or won’t afford the “total” cost of coverage (premium plus out-of-pockets costs).  The jobs they lost included benefits and the replacement jobs, without or at a higher cost.  This is the new economic norm and the ACA, unless adjusted, is an adverse factor in the labor market recovery.  Without a labor recovery, the overall recovery will languish.  This is an undeniable fact and one that no political fight or government policy can alter.

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October 1, 2013 - Posted by | Policy and Politics - Federal | , , , , , ,

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