Sarasohn-Kahn: We don’t believe in healthcare for everyone

Obamacare was implemented in 2010 and is now in full swing, but is it the success the US president says or a black hole for money?

March 20, 2015

World Finance speaks with health economist Jane Sarasohn-Kahn on how affordable the Affordable Care Act really is.

Obamacare: the Affordable Care Act implemented in 2010 is now in full swing. But is it the success the president of the US would like us to believe? Joining me down the line is health economist Jane Sarasohn-Kahn.

World Finance: Well Jane, the Affordable Care Act. Is it affordable?

Jane Sarasohn-Kahn: Well, it’s in the eye of the beholder, affordability! The one big thing the Affordable Care Act did was to cover people who had been refused insurance before, with pre-existing conditions. And if you live in the US, and you have a pre-existing condition, you would likely have fallen into financial ruin if you got sicker. Health costs are the number one cause of bankruptcy in the US.

If you’re young, however, and don’t perceive any health risks, it seems quite unaffordable; and you might take the risk of not being insured, or being self-insured and take the penalty.

World Finance: Where’s the money coming from to cover the extra people?

Jane Sarasohn-Kahn: Right: so, it’s $934bn. Almost half of that comes from cuts, or moving Medicare moneys from one pot to the Affordable Care Act. Some of that is moving money from our Medicaid plan – that’s care for lower income American health citizens. Also the penalties for employers and individuals who do not get insured. And finally, revenues from health plans, medical device companies, and pharmaceutical companies.

World Finance: It’s estimated that around 30 million people still don’t have coverage at all; what happens to them, and wouldn’t it just be cheaper if something does go wrong for the government to cover them from the beginning?

Jane Sarasohn-Kahn: It is a political will question. We have not had the conversation in the US that Beveridge had in your country in the 40s, when the NHS was established.

We really don’t believe in healthcare for everyone in the US! If you look at our congress, there is not consensus about that.

As a health economist, my arithmetic tells me that it would be cheaper absolutely to cover people with a basic health plan, and that conversation I think will happen in the next year, two, or three, as more Americans are paying more out of pocket, and understand the true cost of healthcare.

World Finance: So what problems has Obamacare alleviated?

Jane Sarasohn-Kahn: There’s more prevention covered now; there’s more mental health benefits covered, which typically have not been covered. The ACA also mandates that prices are not different for men versus women, and for the sick versus the not sick.

Finally, it’s starting to drive down the big problem we have in the US, which are racial and other health disparities: between rich and poor; black, white and hispanic.

World Finance: People are still opposed to it; is that purely politically motivated then, and what alternatives are they calling for?

Jane Sarasohn-Kahn: President Obama has really created a whole new level of vitriol between people who don’t like him, and people who do like him.

However, the ACA naysayers haven’t offered a really comprehensive solution; except for, maybe, health tax vouchers: premiums, as they’ve done for schools. But that really doesn’t solve our problem of high cost healthcare.

World Finance: A big concern when it came out was that it would cost a lot of jobs; has this been the case?

Jane Sarasohn-Kahn: We’ve had consistent job growth over the last couple of years, since the ACA has kicked in. In fact, last week a Bloomberg review came out on Bloomberg News, and they looked at a poll of employers in the US asking that very question. And it was kind of a big corporate shrug! So far, it’s not made a material difference.

World Finance: So, the goal was to get six million uninsured to be insured. But the cost to businesses has definitely increased to accommodate the rise in costs for those uninsured; so has the incremental cost in mid-to-large size businesses thwarted growth a bit, or at least delayed economic recovery or growth in the US?

Jane Sarasohn-Kahn: It’s really had to parse out the direct effects of the ACA on economic growth.

For now, we’re seeing the lower cost of energy improving consumer spending, we’re seeing home sales going up; we have a lot of positive indicators now.

But again, hard to parse out the impact of these insureds, newly-covered, and the ACA impact on economic growth. So Ill say the jury is out on that so far.

World Finance: Up until Obamacare begin its enrolment, American healthcare was run by multi-million dollar private companies, which sold health insurance policies for the most amount of profit they could make. What’s happened to the insurance industry now, and the knock-on tax effect?

Jane Sarasohn-Kahn: If you look at the insurance industry, the big players, the big national players: United, Aetna, Cigna-Humana; many of the blue cross plans like Anthem; the profits are quite healthy.

From 2014 they’ve been living large based on the ACA new enrolees volume going up, with these newly insureds. And it’s good to remember that the ACA was written heavily in parts by our insurance industry lobby AHIP, and the pharma industry lobby, PHRMA.

Now, the pharma industry isn’t faring so well – not necessarily due to the ACA – but the insurance industry has benefited from new volumes of people coming in.

World Finance: So overall, Obamcare: has it cost the US, or saved it money?

Jane Sarasohn-Kahn: Hard to say. Early days right now, and we are spending upwards of $900bn on it.

We do have to solve the problem which the ACA does not solve, or lowering the cost of care, and changing workflow, and how we deliver care in America. That’s not in the ACA.

However, the private sector, and the way we’re starting to pay more on the basis of outcomes versus volume – that is, paying for everything we do – is going to shift that.

So I’d say, call me in a couple more years and I’ll answer that question.