The Challenges of Obamacare

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2016-08-18 – I went yesterday to pick up a new prescription. I had a new insurer, so I handed the pharm tech the new card and he went tap-tap-tap on the computer and told me that the generic drug he had filled would not be covered, did I mind if he gave me the name brand (which the insurer does cover), and (oh, by the way) he didn’t have the name brand in stock, could I come back tomorrow (i.e., today)?

Do you follow that?

For some reason the name brand drug is cheaper than the generic, so my insurance company won’t cover the generic. If I want the (covered) name brand, I would have to make an extra trip and come back the next day (today). I don’t know what the price differential is between the generic and the name brand. It could be 45 cents. And I would have paid the 45 cents to avoid the extra trip. But they don’t tell you that information, because: free market.

Usually it’s the generic that’s cheaper and the insurance company will cover the generic and not the name brand—even if the generic is not really equivalent to the name brand drug that your doctor prescribed. Even if the doctor writes a note saying that the generic will not do the job at all, the insurance company will insist that you take the generic. Free market, you know.

Six years ago, Congress passed the Patient Protection and Affordable Care Act of 2010, which we all know as Obamacare—a piece of legislation that has made great strides in getting people insured in this country. Already there are indications that improved access to health care has improved the health of many Americans who were shut out of the system before.

But in order to get this legislation passed, President Obama and the Democrats had to forego a single-payer system. Instead, Obamacare is based on an expansion of the old free-market system of private insurance companies, trying to harness that supposed advantages of competition.

Only health insurers and big pharma only talk about competition and the free market. They don’t really believe in it. They prefer to buy out or freeze out anyone in competition with them. Competition drives down prices. They don’t like that.

Earlier this year, four of the five largest health insurers in the country tried to reduce the field of competition in two mergers: Anthem with Cigna, and Aetna with Humana. The federal government sued to block the mergers as anti-competitive.

Duh.

Aetna’s CEO is reported to have threatened to pull out of Obamacare if the feds opposed the merger. They have now made good on that threat, withdrawing from most of the states where it participated in the Obamacare health insurance exchanges.

There’s more to this, of course.

Companies like Aetna don’t really know how to operate in a competitive environment like the Obamacare exchanges. Obamacare requires that all participating insurance companies must cover a basic set of healthcare expenses, but companies may offer more. These large companies didn’t comprehend that most customers in the exchanges would be pretty tight with a buck (most people with money are employed and get coverage through their employer). They tended to offer Big Mac policies to a Quarter-Pounder market. This meant fewer customers and customers who purchase Big Mac policies tend to need the special sauce. In other words, their customer based was sicker than the general population, so they paid more in claims. They made a bad business decision, so they were losing money. That’s what happens in a free market. But the Aetnas of the world don’t like that. They want a guarantee. So rather than fix their policies, they’ve now decided to quit.

Smaller companies who offered Quarter-Pounder policies are making money.

Here’s another issue. Since the dawn of insurance time, employer-provided health insurance and individual health insurance have been separate. Obamacare did nothing about that. Aetna and the other big insurance companies make billions in the employer market, but this is not shared with the individual market. The whole point of insurance is to have the largest possible pool to spread the risk. But the employer-provided/individual split artificially breaks up the pool. To make matters worse, the individual insurance market tends to be sicker than the employer-provided market (many sick people don’t work or their work is limited). This means that the Obamacare health insurance exchanges are automatically at a disadvantage. There is no reason that these policies should be separate from employer-provided insurance except to continue the privilege of the employer-provided market.

I could go on. But that’s enough for today.

Republicans are probably right about one thing. The free market, competition, and health insurance have a difficult relationship, to say the least. Their remedy is to guarantee profits for their insurance and pharma cronies—the health of the nation be damned.

There is another way. There are many other ways. Obamacare was a big step forward, but we’re not all the way there yet.

* * *

UPDATE: I went back to the pharmacy to get my prescription. It turns out that the name brand is more expensive than the generic, but the insurance company isn’t paying for the generic. The result is that both the insurance company and I are paying more. Unless the insurance company gets a kick back. I don’t know. All I can say is that I don’t get any kick back.

The pharm tech told me that the generic is new, so in a couple of months, the insurance company might be paying for the generic and not the name brand. The drug is a one-time thing, so I won’t be refilling the prescription. You’d think that an insurance company could figure out a way to automatically handle a new drug like this. It certainly happens all the time. They could save a few buck and they could save me a few bucks. But that’s not part of their world view.

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