Tag Archives: affordablecareact

What we miss when we look only at the cost of healthcare coverage

With the Republicans on the verge of dismantling the Affordable Care Act and Medicaid, much of their focus has been on how much healthcare insurance “costs”. I thought it would be timely to revisit a 2015 analysis in the American Journal of Public Health, “Considering Whether Medicaid is Worth the Cost: Revisiting the Oregon Health Study.” (full text) The investigators performed a cost-effectiveness analysis using data from the Oregon Health Study (OHS), the experiment that began in 2008 when the state randomly selected uninsured participants to apply for Medicaid coverage creating a randomized controlled trial of a social policy. They concluded that Medicaid is in fact a cost-effective program.

The authors’ cost-effectiveness analysis found that the observed benefit of providing Medicaid was $62,000 per quality-adjusted life-year (QALY) gained. As a reference point, placing smoke detectors in homes provides a benefit of $210,000 per QALY.

The study reminds us that health benefits are best understood broadly and over the long term, rather than through a narrow focus on one year’s “cost” in the cost-effectiveness balance.

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The difference between the parties’ health care proposals boils down to how they distribute risk

In a Health Affairs blog post today, two Urban Institute scholars–economist Linda Blumberg and policy fellow John Holahan–state that the fundamental difference between the two parties’ health care proposals is how they propose to share health care expenditures between those currently healthy and those with costly health care needs.

The health policies of the two political parties and their presidential candidates differentiate themselves clearly along the lines of pooling philosophies: the Democrats generally advocate broad-based pooling of health care risk and the Republicans generally advocate more individual responsibility and are willing to accept much greater segmentation of health care risk.

The authors go through the proposals that each party tends to favor, showing that those policies favored by Democrats tend to increase risk-pooling, spreading the risks broadly, as illustrated by key components of the Affordable Care Act.  Approaches favored by Democrats include use of deductibles, co-payments, co-insurance and limits to benefits (so that all individuals experience some risk). In general, these policies increase the financial burdens on the healthy to the benefit of those with costlier health care needs.

Republican proposals decrease risk-pooling (or increase risk-segmenting), placing  health care costs more heavily on those with costlier health care needs. Some of their proposals would pool risk for high catastrophic expenses; others would not. Their approach benefits those who are currently healthy–who significantly outnumber the unhealthy—so their policies have broad short term appeal. But these approaches financially burden those with costlier health care needs, and they “discount the value to the currently healthy of having affordable access to adequate care when and if they develop health problems in the future.”

Health care expenditures are heavily concentrated in a small share of the population: of those not covered by Medicare (below age 65), half of spending is done by about 5% of the population. The low risk (lowest spending) half of the population accounts for about 3.5% of the country’s annual health care expenditures. Screen Shot 2016-03-15 at 9.42.25 AM

The authors conclude:

Risk pooling approaches promote broad access to affordable medical care regardless of income or health status, while the risk segmenting approaches do not and would in fact reduce access relative to current law. Advocates of the latter generally employ terms such as individual responsibility, skin in the game, consumer choice, and market competition, but make no mistake about it: it is all about the risk pool.