By the time most of you read this the outcome of tomorrow’s election will be known. Regardless of who wins America’s health care system is still a wreck and closer than ever to the river catching fire point of no return where revolutionary change is inevitable – and even welcomed by some including me.
Recently a local non-profit hospital announced changes to its health insurance plan as it has every fall for years. With each announcement its employees inevitably pay higher premiums for a higher deductible that covers less. It’s a situation that employees in the private sector are familiar with, at least those that work for companies that are large enough to provide access* to health insurance.
To set the stage of the current benefit situation requires a quick review of recent history. Earlier in the past decade the hospital underwent expansion, adding scores of beds and a complete revamping of the ER. It also went on spending spree, buying up private practices and recruiting doctors to the area to open new ones. I’m not sure what drove this expansion. The hospital sits in one of the poorest areas of North Carolina that has for decades suffered high unemployment and increased dependence on government programs such as Medicaid at a time when payments to providers by Medicaid have been cut. Word was that there was a generation of doctors planning to retire, and that may have influenced the hospital’s plans. But the declining stock market and insurance reimbursement cuts meant that many of those physicians are still practicing today because they can’t afford to retire. In addition, the hospital competes with other rural regional hospitals less than 30 minutes away, plus the cancer, pediatrics and state-of-the-art trauma centers at Wake Forest and Baptist in Winston-Salem less than an hour away. The result of this expansion is a massive overhang of debt, a tiny patient census, plus the massive drain caused by too many providers chasing a decreasing pool of privately insured patients.
The HR department had assembled some of the hospital staff for a benefits presentation. As the changes sunk in the audience turned hostile, shouting at the presenters and demanding that the plan be rescinded. The HR representative took the podium and reportedly said, “Y’all are lucky we provide health insurance at all.”
She had a point. Starting in 2014 the hospital could opt out of providing access to health insurance and pay a penalty for each employee. I’ve looked around to determine what that penalty is (it’s $2k for small business owners for 50 employees or less but I haven’t been able to find it for companies with more than 50 employees), but if the cost of providing access is less than that penalty the hospital could save money by paying the penalty rather than offering access to insurance. Paying the penalty would not only save it the costs of subsidizing insurance, it would also reduce administration expenses because administering the payment of a variable health insurance payment every paycheck is a lot more expensive than simply paying a flat penalty once a year to the IRS. Knowing what I know about back-office operations of large companies, the cost of administering health care is likely a significant chunk of that $2000 penalty per employee, so such a fine would have to be double or perhaps triple the small business tax for it to deter ending health coverage and dumping employees into the public pool.** If I were the CEO of the hospital it’s an option I’d consider as many CEOs of companies are doing. Expect this number to rise over the coming months before the provisions go into effect in 2014.
In an economically depressed area the hospital, being the area’s largest employer has the economic upper hand when it comes to lower-skill staff. But the same is not true of its physician assistants, primary care doctors and highly trained specialists. These people are also employees and notice when their insurance premiums go up, but have a much more mobile, in-demand skill-set than medical assistants, orderlies and the like. Working in a rural setting isn’t very popular among these groups to begin with, which is why rural doctors are supposed to earn more than their urban and suburban peers. When that premium disappears, these highly-trained professionals will disappear too, voting with their feet and moving to more lucrative positions elsewhere. Doctors are human; they get sick and need treatment, and when their co-pays on medicine rise to $50 per prescription per month, they notice it. Rural charm only goes so far and unfortunately can’t be used to pay down $300k of student loans. Doctors aren’t happy with the current system as providers, and when they aren’t happy as patients either you know the system is screwed.
But people have been predicting the doom of the American health care system for at least 20 years since the HMOs appeared on the scene and were supposed to reign in costs, and we all know how well that worked. I have opposed Obamacare since its inception, but the more I examine the legislation the more I believe that it may in the end be “good” for the American economy in the longer term by bringing about the end of the American health system as we know it and allowing us to start from scratch.
The Paranoid wing of the Obamacare Opposition believes this is what Obama intended all along, that expanding Medicaid while cutting reimbursements to doctors and at the same time driving companies out of providing access to health insurance the President would wreck the system to the point where people would be clamoring for a federal government takeover of Medicine. It’s not a bad idea if it wasn’t for the fact that a) it requires a complex game-plan built using information that could only be predicted in retrospect (had Ted Kennedy not died chances are Obamacare would have been much more socialist), and b) the government is broke bailing out
Obama’s well-connected friends the rest of the Economy that the only way to do it is it to kick Zimbabwe off their printing presses and print dollars like the North Korean Army on a methamphetamine binge. Far more likely that Obama handed the task to Nancy Pelosi and Harry Reid so that he could play golf and read glowing pieces on his greatness in Rolling Stone and Vanity Fair, and that the Democrats made sausage out of their hopes and dreams distilled from liberal utopias in the states of New York, Illinois, Massachusetts and California. Since these states are all now circling the drain financially a federal government takeover of the health care system is impossible. It’s a shame because laissez-faire libertarian I may be, I have in the past argued for socialized medicine. The citizens of Japan paid for the birth of the Kid, and since they nearly shot my father dead in a foxhole in the Philippines during the War I’ll consider us even. The Dean’s World’s archives are scrambled so all traces of these arguments are wiped out, but I still believe that prior to the massive federal takeover of the economy caused by the financial meltdown in 2008-09 a sound argument could have been made for socialized medicine. Not so today, and definitely not by me.
Obamacare has forced us to the end of the American health care disaster. Employers will soon quit the insurance access business, forcing people to purchase insurance from the government. For the first time they will know how much they are being paid by their employers since their benefits package won’t contain more than a few worthless baubles and trinkets. Transparency is good. As a contract worker I know exactly what my skill-set is worth, something that a full time employee does not. I can then make decisions about my future that are grounded in reality. Obamacare will expand the rolls of Medicaid, forcing millions into a program that providers lose money on. At my dentist’s office I was paying my bill when the phone rang. The receptionist picked up the phone, listned then told the caller that the office no longer accepted Medicaid patients. There was another pause and the receptionist recommended the caller contact the county health department. The experience of the caller will not be atypical as health care providers “go John Galt” rather than lose money by treating Medicaid patients. This will increase the burden on the states who will then go cap-in-hand to the federal government which is $16 trillion in the hole. By 2014 when Obamacare goes completely into effect it will probably be closer to $24 trillion. Those printing plates at the Fed better be made of titanium because they’re going to be getting a workout. Maybe they can hire the North Koreans to help. Of course by then the Norks will have moved on to printing something of value, like yuan.
The collapse of the American health care system will be nasty, brutish and hopefully short, and we will have President Obama to thank for it. What comes afterward is anybody’s guess but whatever does it has to be better than this mess we are in. For that no matter what happens tomorrow, Obamacare opponents like me will owe President Obama a debt of gratitude as we man the barricades and hoist the flag of revolution over the land.
*Let’s get something straight: Hardly any employers provide free health insurance these days. What they provide is access to group plans which they subsidize to a degree, something that mystifies my European readership (all 3 of them). The tie between access to health care and employment puzzles me too. Why the tie? Why aren’t we tying car insurance or life insurance to employment too?
** It just dawned on me that the cost of the penalty to avoid providing insurance will factor into the benefits offered the employee. Having worked for businesses large and small, I know a thing or two about how jobs are created. When a company decides to hire, it sets a budget for hiring that employee. That budget will include salary and the cost of all benefits. So if a firm budgets $50k for a position, the highest offer it will make to the employee will be Salary + Penalty=$50k or for a small business, $48k + $2K=$50k. So in essence the employee pays the penalty by not receiving the full $50k s/he would if Obamacare not been enacted. Existing employees may also face the prospect of not only having their insurance dropped, but having to pay the resulting penalty themselves. Irony… Mmmm…