Health Care Costs Are Going Down
March 25, 2013
Scott Lyon, Senior Vice President
Small Business Association of Michigan
Hearing this was a surprise to me, but it must be true. Along with fellow SBAM staff members Dave Jessup and Mike Marzano and a handful of SBAM Board members, I spent last Sunday – Tuesday in Washington as part of the National Small Business Association’s (NSBA) annual Washington Presentation.
The Washington Presentation is two days chalk full of meetings and Hill visits. “Health Care Costs are Going Down” was heard time and again from President Barack Obama, who made a surprise visit to one of our sessions; Alan B. Krueger who is the Chairman of President Obama’s Council of Economic Advisers and a member of the Cabinet; Senator Debbie Stabenow and staff from various Democratic members of the Michigan House delegation. Interestingly enough, I didn’t hear this bit of good news from the Republican members of the Michigan delegation whom we visited.
When the opportunity arose, I asked Mr. Krueger to expand on his statement that health care costs are going down, recognizing that this is not what we are seeing in Michigan or across the country. His answer was interesting, if not enlightening, in understanding how “spin” works in Washington. It turns out what he really seemed to be saying is that via the Affordable Care Act, some Medicare costs are decreasing as the rates that are paid to providers are pared back and the health care costs the rest of us pay are increasing, but at a slower pace than in past years. Only in Washington math is a slower rate of increase, a decrease.
Speaking of health care costs, have you been “ringing the alarm bells” for your group customers so that they are not surprised come 2014? There are a lot of moving parts to the Affordable Care Act, and how it will impact businesses that still offer group health insurance is nearly impossible to predict, but what is not hard to predict is the trend in which things seem to be moving. Consider just these components:
- 3:1 rate bands and pricing pressure on the younger end of the band
- Michigan Health Insurance Tax
- Affordable Care Act tax on health insurers, prescription drugs, and durable medical equipment – we believe that the taxes will all be passed through to the end user
- New coverage requirements for preventive care and Essential Health Benefits
- 3.5% charge to carriers for putting a plan on the Health Insurance Exchange
- Affordable Care Act reinsurance program – essentially another cost shift from the group side of the business to the individual side, coupled with what looks to be Michigan premiums propping up some other states (it is likely that Michigan will be a “donor state” in that the dollars generated in Michigan and sent to Washington will be returned at a rate of between 62% and 65%).
Back to Washington and then on to Michigan: Despite efforts by some in Washington, it is hard to imagine that anything much might change legislatively between now and 2014 with regard to the Affordable Care Act. Senate Democrats will see to it that anything that might come out of the House, which would provide some relief to the cost pressures, will never see the light of day. Senate Ds are convinced that the Affordable Care Act is the right direction for our country and that the ACA will ultimately lower costs and increase enrollment in health plans.
Closer to home: Members of the Michigan House and Senate are now on Easter break for the next two weeks. As you probably know, the legislature left with two major proposals from Gov. Snyder, supported by SBAM and other members of the business community, unresolved. These two measures are a State Federal Partnership Health Insurance Exchange and the expansion of Medicaid.
Health Insurance Exchange – The first thing to remember about the Exchange is that it has been renamed the Marketplace. If you missed this bit of news over the last couple of weeks apparently the word Exchange does not translate very well or maybe at all into Spanish and therefore has been renamed. More importantly, last week the Michigan Senate failed to gather enough votes to accept the $31 million offered by Washington to build the infrastructure. This follows the Michigan House’s failing to pass required legislation a year ago that would have allowed for a State based Exchange. As a result, it looks more and more likely that we will have a Federally Facilitated Exchange/Marketplace here in Michigan. Failure to pass the required legislation means that all decisions regarding the operation of an Exchange/Marketplace here in Michigan will be made in Washington – including decisions regarding the interaction of agents with the Marketplace. This is not what SBAM has lobbied for, nor is it the direction that the Michigan Health Underwriters pushed for. As deadlines come and go, this game is in its final minutes, but may not be over just yet. Who knows, maybe someone has a 3-pointer to save the game.
Medicaid Expansion – The Small Business Association of Michigan (SBAM) supports the broadening of eligibility criteria to participate in the Medicaid program so that people under 138 percent of the poverty level can be covered. SBAM may be considered a surprising voice in support of this effort. However, we’ve been at the intersection of small business health insurance coverage and public policy for many years. We had something of an organizational epiphany about a decade ago when we came to realize that the uninsured really matter to business. The reality is that people go to our health care system and they get care, and if they can’t afford it, they still get care, but it’s uncompensated.
Uncompensated care actually gets passed along to those who can pay. It’s called cost shifting and it has been happening for a very long time. It has found its way into the base rates of health insurance for small businesses all across the state.
It is a terrible business model to take a growing burden of people who come to the healthcare system without compensation and shift it to a shrinking group of people – small business owners – who can still afford to pay for health insurance. We support expansion of Medicaid because we believe it ultimately can reduce the sort of piling on effect that has been happening to paying customers for many years.
Currently, Michigan hospitals end up providing more than $880 million a year in uncompensated care to patients who are unable to pay. These costs end up being shifted to people who have insurance, employers who pay for it for their workers, and taxpayers.
We believe that opponents of expansion are approaching this issue from two sincerely-held, but misinformed perspectives. First, that Michigan’s participation in Medicaid expansion somehow confers approval or acceptance of the Affordable Care Act. SBAM opposed passage of the Affordable Care Act and rooted for the U.S. Supreme Court to overturn the law. But that didn’t happen. President Obama’s re-election ensures that the Affordable Care Act will remain the law of the land until at least 2016. We don’t like it, but we’re realistic enough to accept that we have to work with the hand we have been dealt.
Second, there is concern that expanding Medicaid eligibility puts Michigan on the hook for a large amount of future financial liability. But as Gov. Snyder has stated, Medicaid expansion would save the state $200 million a year initially, as more people who receive health care and mental health services from state-funded programs get covered through money from the federal government instead. The governor has proposed putting half of the money saved into a health savings account that would help cover the state’s increased share of costs when the federal government scales back its funding for the Medicaid expansion. If the federal government does not keep its commitments in the long term, then the state will be scaling back the eligibility. This has happened before and can happen again.
Medicaid expansion makes good business sense for Michigan’s government, its businesses and, most obviously, its uninsured – because getting coverage for the uninsured matters to business.