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How to fix Obamacare

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The problems with the Affordable Care Act (ACA or Obamacare) federal web site are well known. It appears that major improvements have been made to this web site and some states such as Kentucky, Washington state and California have state-based web sites that function reasonably well.

More fundamental problems remain, however. The original goal of ACA was to offer health insurance to all Americans, specially those who do not have or cannot get insurance.

The way the law was written, however, has created a number of side effects. Some of the problems may be labeled as unintended consequences of the law. But, other issues are inherent in the way the law was formulated and are essentially intended consequences.

Some complain about the requirement on all Americans to buy health insurance. Such a requirement is probably necessary to make the law viable. The only alternative is to provide insurance coverage to all automatically, a policy that would be considered un-American! In the U.S., there is an insistence on personal responsibility and nothing is supposed to be free. Besides, the Supreme Court has already sanctified this requirement.

The biggest problem currently seems to be cost. Calculating costs involves a complex set of conditions. Each state has its own policies. But, in general, if the person's income is less that a certain amount, a person may be eligible for Medicaid. This limit is significantly higher than the previous income level for qualifying for Medicaid. Thus, a lot more people will be eligible for Medicaid.

If a person's income is above the Medicaid level, then he or she could qualify for a subsidy. As income rises, the subsidy will decrease. The subsidy applies both to the monthly premium and the out-of-pocket expenses that can often run into thousands of dollars.

The other rule is that if someone qualifies for Medicaid, one cannot get a subsidized plan. Since Medicaid coverage is often inferior to regular insurance, there could be a big difference in the services available at the borderline of Medicaid eligibility. Specifically, since Medicaid reimbursement rates for hospitals and doctors are much lower than standard reimbursement rates, fewer doctors and facilities are available for Medicaid. Also, the services might be inferior.

Another problem with the law is that it allows each insurance company to have its own network. Thus, many people may have to change doctors and if a surgeon belongs to one network and his colleagues belong to a different network, then they can no longer collaborate in the treatment of patients. One fix for this problem might be to expand networks or eliminate them altogether. Eliminating networks will go a long way to resolve such problems. In effect, one can go to any doctors who agrees to a certain reimbursement rate.

Eliminating networks will be practical only if there is a standard reimbursement rate for each procedure or service. Beyond the fee-for-service approach, "The ACA has built upon a new trend that is replacing straight fee-for-service payments with new payment methodologies based on outcomes, such as bundled payments."

Whether a fee-for-service model is used or not, standardized reimbursement rates will be critical in eliminating networks. Medicare and Medicaid already have such standards. But, the ACA makes no provisions for the standardization of medical costs. As a result, the skyrocketing cost structure of American medicine will continue.

Whether cost standardization is accomplished through legislation, ACA rules or negotiations with providers, it is the key to reducing costs. Charges of hundreds of thousands of dollars for common medical procedures are quite common in the United States. Medicare and Medicaid reduce these rates considerably. But, for those not on Medicare or Medicaid, there is no fundamental way to reduce costs currently.

One option for reducing cost would be to provide a Medicare-for-All option under ACA. Such a "public option" was widely discussed while the ACA legislation was being debated. But, there is nothing preventing the reintroduction of such an option now or in the future. Since the cost of services under Medicare is significantly lower than commercial costs, such an option would potentially provide a much cheaper option. Of course, a viable procedure for funding such a plan would have to be devised.

A more limited version of such a public option would be to offer it only to those whose age is in the range 55 to 64 since Medicare is already available for those who are 65 and older. There would be a strong incentive for such a plan if one considers what happens to those above the age of 55 who qualify for Medicaid.

According to the Medicaid rules, if someone above 55 dies, all his or her assets could be seized by the Government to pay for the cost of care received under Medicaid. Thus, the subsidies under Medicaid after age 55 are not free. These subsidies are really a loan that would have to be paid back from assets after the person passes away.

Thus, a couple who were both 62, decided to marry so that their combined income would qualify them for a subsidized insurance plan and to avoid Medicaid. Thus, ACA sometimes imposes certain social engineering actions on people that should not be forced. If the Medicare-for-All was available for people above 55, such impositions would be eliminated.

Finally, there is a movement in California and Vermont, to introduce a single-payer system in 2017 which is the date that ACA allows a state to apply for an "innovation waiver." The goal of the California effort is to cover all Californian, while ACA will leave many still without essential health insurance.

It should be noted that most legislative efforts do not produce perfect results on the first try. Like most other structures, laws also need to be modified and improved to reach a level closer to perfection. But, the recent Republican efforts to simply defund or retract ACA is not a solution. A gradual evolution of the law holds a much better promise.

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