Health Insurance Exchanges: Good News, Bad News for Physicians

August 25, 2013
Martin Merritt

Initial estimates of new patients through health insurance exchanges are good for physicians, but maybe not so good for healthcare on a larger scale.

USA Today recently reported that people have been signing up for health insurance exchanges for in excess of expected levels.

Staff writer Kelly Kennedy reports that a survey of each of the 50 states yielded 19 states reporting estimates for how many of their uninsured residents they expect will buy through the exchanges. The reported 8.5 million would far outstrip the federal government's estimate of 7 million new customers for all 50 states under the Affordable Care Act (ACA).

In the short term, this is great news for physicians' practices. This statistic means there will be 8.5 million new paying customers. This is even better news for physicians in states which have refused to expand Medicaid to the level mandated by the reform law, commonly termed "Obamacare."

Prior to the law, many states were permitted to set their own limits for Medicaid eligibility. Alabama, for example, reportedly disqualified a family from Medicaid eligibility if the family earned 25 percent of the federal poverty level (about $6,000 per year for a family of four). Under the reform law, states would have been required to expand Medicaid roles to conform to a new national standard of 133 percent of the federal poverty level (about $31,300 per year for a family of four). On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of most of the ACA in the case National Federation of Independent Business v. Sebelius. However, the Court held that states cannot be forced to participate in the law's Medicaid expansion under penalty of losing their current Medicaid funding. Therefore, patients in states which did not expand Medicaid roles to include these "newly eligible" patients are able to purchase federally subsidized private plans through health insurance exchanges, which is the subject of the USA Today article.

This is good news for physicians’ practices, because Medicaid simply doesn’t pay very well (so low in fact, about one-half of all physicians would refuse to accept a new Medicaid patient).) Private plans which are subsidized by the government would almost certainly provide reimbursement rates which are above the rock-bottom rates for Medicaid patients. Open enrollment begins October 1, 2013, and coverage is set to begin January 1, 2014.

Before we all get too drunk on all this free government Kool-Aid, recall that the Kool-Aid isn’t "free." The reform law was enacted because the Medicare trust fund could not afford to pay for all the aging baby boomers set to turn 65 in the next few years.

The idea behind the law was to save Medicare by forcing more healthy Americans into the system through individual mandates, employer mandates, expansion of Medicaid for the poorest Americans, and providing health insurance exchanges for those who are just above the level needed to qualify for Medicaid. But how is this supposed to help save the Medicare trust fund? Obviously, by cutting future Medicare reimbursement rates.  But on what part of "planet crazy" does it make sense for the government to pick up the tab of the cost for all the newly insured, (which was supposed to save the system from failing, because the government is broke)?

In her book, "Your Doctor is Not In," Jane Orient draws the analogy between our nation’s healthcare model and the one created by Ptolemy, which contained multi-layered epicycles to explain the universe. "Wheeling and whirring, the Ptolemaic universe could be turned to predict almost any observed planetary motion - and when it failed, Ptolemy fudged the data to make it fit," Orient writes.

Here, the Obama Administration is so desperate to make the healthcare reform law work, any solution that will keep the wheels whirring, is perfectly acceptable. By the time anyone figures out it is a bad model, the president will be working on a location for his presidential library, and paying for healthcare will be the next administration’s problem.