The Dangers of Repealing Obamacare Without a Replacement

There has been talk on the news everyday since 2008, when President Obama was elected into office about healthcare. This discussion has primarily been around insurance. Why insurance? Because insurance is the primary way we pay for doctors and hospitalization today. It’s our payment mechanism. It’s how we either access the care and cure we need and not go broke doing it. It’s how we receive our “healthcare”. However, I believe we then need to look at how health care delivery works in the United States today. I think the fact that we call getting help when you are sick, injured or in a LIFE OR DEATH situation, healthcare. Healthcare is the gym, it’s running 5 miles every other day and not drinking soda for breakfast. Going to the hospital or doctor, taking medications to stay regulated, spending time in a skilled nursing facility, this is Sickcare. This is trying to get back to the point that you can pay attention to your healthcare because you are no longer undergoing sickcare.

Medical delivery (or sickcare which is what I’d prefer to call it) in the US today is very complex because we have multiple parties all fighting for a dollar from the consumer. Remember, to a hospital, you are a consumer. They’ll call you a patient or a guest, but you are their consumer, don’t think about it any other way. You are there for them to make money, period. Hospitals don’t go up like casinos in Vegas all over the country for you to not utilize their facilities. Think about it like this, if you are healthy, exercise, eat right and don’t drink or smoke, you are a hospitals worst nightmare. They may only get you once or twice in your life. However if you drink soda and beer everyday, never exercise and eat fast food for dinner 4 times a week, holy cow, you are the dream! They’ll get you on the hook every 90 days for your diabetes monitoring. You’ll be in for that triple by-pass soon enough. You’ll be there for them to build that new wing dedicated to chronic illness and you’ll be patient zero.

How is it that our “healthcare” system is able to run like this? It’s because we utilize third party payors in this country called, INSURANCE COMPANIES. That’s right! In America today, 60% of the people don’t have $500 in the bank for an emergency, yet they can get a quadruple by-pass that’s going to cost $200,000. They can get their meds that may cost $300 a month cash for less than $40 a month. They can stay in a private room at Cedars Sinai for $10,000 a day, but they couldn’t afford one night down the street at The 4 Seasons in Beverly Hills. They can do this because third party payors get the bill.

We use insurance to pay the bill. So let’s take a quick look at how insurance works. On a macro level, insurance is a risk pool. A bunch of people throw their money into a pot and then use those funds as needed. This pot has money thrown into it every month through premiums and has funds withdrawn by those who need it as they need it. That pot is then managed by and has those funds invested by a management team, this is the insurance company. Now, this is a very basic explanation of insurance, but it’s pretty spot on.

In order for this system to work, there must always be more money being put into the pot than is being taken out of the pot. This makes sense right? If that pot gets to zero, then no one will be able to pay and the party stops. So insurance companies need to make sure this doesn’t happen and the easiest way for them to do this is through managing the risk. They do this through underwriting. If you buy car insurance, they see how many accidents and or speeding tickets you’ve received over the years. If you buy life insurance, they want to see how old and sick you are, because that pool would be diminished if they were selling policies to a bunch of 60 year old diabetics. If you are selling Health Insurance, you want as many healthy, active people on the books as humanly possible. Why? Because that pool of money will be more likely to grow than shrink.

Now there are a few ways a majority of the people in the United States today receive their Health Insurance. The first, through their or their spouse or their parents employer. This is a relatively new phenomenon, new to life, not new to us as a country. This has been the case in the last 40–50 years. It’s current incarnation is actually the result of a temporary wage freeze that took place in World War 2. The freeze didn’t apply to ancillary benefits, so, instead of more money directly, let’s give benefits to attract and retain top talent. Then it took off from their. Doctors in the 50’s decided to start working more with insurance companies and WAMO, here we are today in our current situation.

Employer health insurance counts towards around 50% of non elderly adults and children are insured through their employers today. READ, not 50% of Americans, but 50% of non elderly adults and children. The next largest insurer is the government. Medicare is how most people over 65 receive health insurance. This is basically a pool that we pay into as we work and pay taxes and then have the ability to w/draw from as we get older. It’s a sophisticated ponzi scheme or socialist measure if you want to look at it as such, or you could look at it as providing to the common good. I’m sure people look at is as both! As Medicare insures those 65 and older, Medicaid insures those in poverty. This typically means less than 14k a year for an individual and 18k a year for a family. This isn’t a lot of money and as fewer and fewer institutions actually take medicaid, it’s also lower and lower quality care. In addition to Medicare and Medicaid, the government also insures and some level, a lot of military veterans through the VA.

So far we have addressed Employer benefits and Government benefits. The final group is people who have to buy their own health insurance. This could be anyone from people who work for a small business to entrepreneurs to people recently laid off to independent contractors. It’s actually, a lot of people.

Now that we know the main groups, I think it’s important we discuss insurance is delivered or acquired by the different groups and how the risk is managed by the insurance companies. When an employer decides to provide insurance benefits to its employees they go to the market and shop for rates by different carriers. The group is then underwritten (this is how they determine the risk the group carries) and prices are given. No employee can be denied and everyone pays the same percentage of their salary if any for them or their family. It’s what’s called Guaranteed Issue. On the government side, you qualify for Medicaid by poverty. For Medicare you enroll in what’s called your enrollment period and neither the government or the insurers who provide the supplemental plans can say no if you apply in that enrollment period. They also provide certain guaranteed periods where you can’t be told no. The VA is based on injuries acquired through your service or other factors.

Now let’s talk about buying insurance on your own. Before Obamacare, if you were buying on your own there was no Guaranteed Issue. You were underwritten for your policy, period. If you were a woman who was laid off when she was pregnant, pre-existing condition, we will not take you. However you could apply after the baby! If you lost your job and tried to buy insurance, but you had hemophilia, too bad, so sad, hope you have savings to self insure. This means insurance companies could say yes or no based on an individual’s health. This makes sense from a business and risk pool perspective. If we know that the pool were putting money into is at risk with more sick people and we’re not sick, then we want all healthy people, right? We took the proper measures to insure when we weren’t sick, so why should a sick person get in? This makes sense at the most basic level.

Enter Obamacare. The basic gist of Obamacare was: 1) We would create enrollment periods with Guaranteed Issue periods. If you are sick and laid off, you can get a plan. If you don’t have a plan but come in during the enrollment period, we can’t say no. 2) Since we’ve made an agreement that employers are providing health insurance, let’s add more to that. Any employer that had over 100 people had to provide health insurance. 3) Finally, if you can’t afford the premiums and can prove you make under X amount of money (4 times the poverty level and below in most cases) we will provide you premium assistance. An important note here is that the insurance companies were still responsible for the risk.

Now that we know a bit about how insurance works, specifically how health insurance has been or is acquired today and how our medical delivery systems work in the country work, let’s take a look at how the repeal of Obamacare without a proper replacement could matter to you. First, remember that we need the third party payor system in the country today as long as we have no real public option for receiving medical care. If a day in the hospital will still run 10k and a routine blood test runs $500 that most people don’t have, we need the payor. If we go back to the old way, most people who have preexisting conditions and don’t receive insurance from their employers are going to be uninsured. Most of these people won’t be uninsured by choice, but by force. This is a very real scenario.

Why should this matter to society at large? That’s a good question, forget about it right? They didn’t take care of themselves, they got sick, screw ’em. Well, except for my mom. My mom got cancer after working out 6 days a week since I’ve known her (my whole life), hasn’t taken more than one or 2 glasses of wine in that entire time and has been on a diet for the last 30 years. She’s a quagmire right, outside the norm? How about a buddy of mine who could bench press most humans I know who also happens to be a hemophiliac. He’s outside of the norm with preexisting right? NO, he’s not. There are a lot of responsible people out there who have done the right thing but either because of something they were born with or a factor out of their control would lead to their inability to receive coverage that is needed to pay for our medical coverage today.

Now let’s explain how this affects the rest of us. When one is uninsured they are not going to go to the doctors for many of the necessary preventative and maintenance check ups. They can’t afford it. They may have a pain, let it go. They may see a bump, let it go. They may have a cough, let it go. Then once it’s so bad they can no longer stand they go to the ER. This is the most expensive area of “healthcare” today. They go to the ER and can’t pay. The docs there find out it’s stage 3 cancer and they immediately take into surgery to remove. The person then has chemo they need to take. The ER bill could be in the tens of thousands, the surgery to remove the cancer even more and the chemo, well, we know that. If the patient can’t pay, they’ll go into collections. That may never go paid and how will the hospital recoup that money? They’ll raise the rates on the rest of us (remember, being paid by insurance), suck the insurance companies for even more and the insurance companies will then raise the rates on us to pass the bill.

As long as “healthcare” is commoditized in our country (which I’m not arguing for or against) we need a proper payor system that people have access to. Until we reframe the discussion to address that this is really sickcare and we are all going to get sick, then our discussion is probably going to go in the wrong direction. Until we say that Healthcare is going to the gym and eating correct and medical care is sickcare, we will not have a real discussion with real tangible results in this country. Finally, until we align the interests of the payors (insurance), providers (doctors) and patients, we will not come up with a proper solution. However until that proper solution comes around, we have to work in the confines of the systems we have today. If nothing else was taken from this article today, I hope that you take a long hard look at a repeal of Obamacare and understand how it could one day leave you in a very difficult position, maybe one of life or death or endless medical debt.