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Arthur Jackson Wheeler, CHC
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WE WOULD HAVE SAVED 60 BILLION DOLLARS REPLACING THE ACA WITH INDIVIDUAL INSURANCE


If the Obama Administration had simply bought an individual health insurance policy for every single ACA participant and paid 100% of the premiums, literally just give it away to each of them, the federal government and “We the People” would have saved approximately 60 Billion Dollars in 2015. In June 2008, Obama introduced the ACA to us and pledged that by enacting it, "We'll lower premiums by up to $2,500 for the typical family per year …”. Can you believe it - $2,500 for the typical family per year?! Prior to enactment in 2009, in a Report to Congress, “CBO and JCT estimated that the gross cost of the ACA would be more than offset by reductions in Medicare spending, increases in revenues, and other changes – such that enacting the legislation would reduce the federal budget deficit over the 2010 – 2019 period.” After enacting the program in July 2012, President Obama publicly doubled down on his original promise, assuring small business owners, “your premiums will go down,” even though this was far from the truth. However, BCS Consultants has discovered a way to make good on President Obama’s promises to the American people by 2020, but only by replacing the ACA with a MEDICARE ADVANTAGE PROGRAM THAT WORKS!

We have just completed a Cost Comparison between the annual Affordable Care Act premiums and tax subsidies - and the benefit costs of the Commercial Individual Insurance Markets for the period 2014 - 2016. The study reveals that the Obama Administration and Congress could have agreed to buy individual health insurance policies for each person, who signed up for the ACA and saved more than 60 Billion Dollars (spending 60 Billion Dollars LESS) in 2015! And, the federal government, to this day, has not finished paying the insurance companies for what the Obama Administration authorized them to pay out in 2015. There are many insurance companies are carrying losses on their books because of this non-payment. Further, this Comparison makes clear that the cost of the premium subsidies, authorized by the ACA (35% of premium in 2015) were eaten up by the increases in premiums that were caused by the ACA legislation itself. And, we can show you that even by just extending the very same Medicare Advantage programs we currently offer eligible MA participants, “We the People” and the federal government would save Billions. And, if we had done so, we could have made available quality health insurance programs for every American, with no out of pocket premium payments, in the “True American” spirit of reform, which is without the caprice of the federal government.

Based on the results of this study and others and the assertions BCS Consultants has been making to the Administration, Congress and the American people for over a year now, we have categorically demonstrated that a skillfully designed Medicare Advantage Program (a lower cost national health insurance program) will save Billion Dollars. This conclusion flies in the face of the quite reasonable and logical assumption that our MA program, covering only seniors, over the age of 65 with commercially insured private health insurance programs, equivalent to Medicare A & B could cost less than Obamacare! Our Cost Comparison proves to us that we were RIGHT all along in what we have been advocating. We believe a well-designed MA program will produce significant cost savings in each of the following areas:

  1. Insurance Premium Reductions
  2. Reductions in Federal Regulations
  3. Health Risk Management
  4. Cost Containment and Well Being

I. INSURANCE PREMIUM REDUCTIONS

The following is a Table displaying the results of the BCS Cost Comparison. We are not statisticians or actuaries, but have derived these figures from the work done by some of the best and most talented actuaries in the country. With respect to this Cost Comparison displayed below, a typical CBO disclaimer is appropriate. “Isolating the budgetary effects of the ACA (or of any complex legislation) is difficult because they are often embedded in the spending for existing programs – Medicare, for example – and broad categories of federal tax revenues.” Although this is true when it comes to our Cost Comparison, we have drawn on data from a myriad of sources, including HHS, CMS, IRS, CCIIO “MLR” Data, “MLR” insurance company filings, NAIC State Supplemental Health Care Exhibit forms, insurance company filings and the Annual Medicare Trust Fund Actuarial Reports to Congress. Much of our findings are sourced from a Landmark study entitled, “2015 Commercial Health Insurance: Overview of financial results” produced by Milliman (March 2017). Reference: https://www.ok.gov/. The original sources of their data which we used are referenced in the Notes below. With the above disclaimer in mind, if we have not nailed these final figures exactly, we are embarrassingly close; way too close for comfort and whatever minor discrepancies there may be in our sum totals, they should be immaterial to the basic calculations (in Billions) and the general assumptions that you are able to make from this Cost Comparison. Our shocking findings are as follows:

ACA and MA Cost Comparison

The ACA figures in this Cost Comparison show you ONLY the two biggest federal expenses for ACA participants, i.e., Earned Premiums Paid and Premium Tax Credit Subsidies. These are essentially equivalent to the payments made by the federal government to private health plans for providing Medicare Part A and Part B covered benefits for Medicare Advantage Program participants for calendar years 2015 and 2016. Risk charges which should be included in the ACA Earned Premium are not separately accounted for on the CIIM Annual Benefits side, but our claim of 60 Billion Dollars in savings, is in fact several Billion below the actual savings derived from these figures. The delta between our 60 Billion Dollar savings claim and the actual savings leaves more than enough room for the addition of reasonable carrier risk charges to be added to the CIIM premium calculations, if necessary, without reducing the 60 Billion Dollars claim in savings. However, please keep in mind that the ACA is substantially more expensive that Cost Comparison with MA and the CIIM shows above. This is due to the ACA expenses, which are NOT summarized in this Cost Comparison. To appreciate the true Total Cost of the ACA, you must ADD the unauthorized Cost-Sharing Reduction Subsidies (CSRs) which accounted for 4.9 Billion and 5.7 Billion Dollars in 2014 and 2015 respectively, and the “3R” risk reduction expenditures which include the Reinsurance Program costing 7.9 Billion in 2014, and the Risk Adjustment Program with carrier transfers totaling 4.6 Billion in 2014, and increasing about 4% in 2015 and don’t forget the Risk Corridor program worth 2.4 Billion and 5.9 Billion in 2014 and 2015 respectively, together amounting to a whopping 8.3 Billion shortfall by end of year 2016, and last but not least, the 3.5% premium fees added to the cost of the products sold on the federal marketplace exchange or the state marketplace premium fees averaging 1.4% which may or may not already be in the Earned Premium already recorded in the Cost Comparison above.

Now with all these expenses in mind, you get a better understanding of the true total cost of ACA and how badly it compares to all of our other government-sponsored insurance programs. This realization is further exacerbated by the fact that much of the 3R’s and Risk Corridor reduction payments are still owed by the federal government to the insurance carriers under court order and remain unpaid to this very day! In the history of the United States of America have you EVER known of a situation where our federal government made firm commitments to pay any obligations to her citizens, to our companies and even to our foreign nation states, that the federal government has not honored? We the People believe and take pride in knowing that the full Faith and Credit of our federal government is sacrosanct! But, in this case, the Obama Administration made the promises to our health insurance companies but never got the funds properly authorized by Congress. When this situation was discovered by Senator Marco Rubio, (R) FL, the Trump Administration ordered HHS to stop making the unauthorized payments to insurance carriers. After several extensions of the CSR payments, it was realized that the ACA participants would actually materially benefit from stopping the subsidies altogether, and the payments were finally stopped. This caused the total required ACA government subsidies in increase, benefiting the participants and costing the federal government several Billion more, but no subsidized ACA participant was disadvantaged. The non-subsidized ACA participants were disadvantaged with higher premiums, the taxpayers were disadvantaged with higher costs and of course the insurance carriers, who were told to pay the benefits out and were promised the money would be reimbursed, lost substantial amounts of money due to the non-payment. The very health insurance companies that jumped into to help out the American people with the ACA when it first passed lost substantial sums of money administering the program in 2014 and 2015. There can be no question that this non-payment situation and their losses further exasperated the insurance carriers withdrawal from the market and fueled the remaining ACA carriers requests for premium rate increases that have amounted to an eye-popping budget busting One Hundred and Five percent (105%) over the four years ending 2017. Is this any way to run an insurance program?

The conclusions that can be drawn from the above Cost Comparison and analysis include:

  1. Our Medicare Advantage per capita costs are substantially LESS than the ACA due to reimbursement programs designed to minimize carrier and participant risk.
  2. Comprehensive Commercial Individual Health Plans per capita annual benefit costs are LESS than Half as expensive as the ACA per capita annual premiums and tax subsidies.
  3. ACA has had a dramatic and deleterious impact on the affordability of Individual Health Insurance in the United States since enactment in 2010.

There are numerous reasons to explain these shocking conclusions. Since we enacted ACA under false pretenses, let's debunk an important myth that still surrounds the ACA; the claim that it lowered the cost of individual health insurance. A definitive study from the well-respected non-partisan National Bureau of Economic Research found that premiums in the 2014 non-group market grew by 24.4% compared to what they would have been without Obamacare. Reference: https://www.forbes.com/. A state-by-state assessment showed that premiums rose in all but six (6) states (including Washington DC). NJ and CA averages are probably distorted here due to anomalous data.

Obamacare Premium Results

Further, this 2014 insurer data shows that premiums for individual market Qualified Health Plans (QHPs), the ACA-compliant plans certified to be sold on the Marketplace Exchanges carried much higher premiums than the Individual Non-QHPs Plans, mostly those plans in existence before 2014, that did not comply with the ACA. Relative to the Non-QHPs, insurers collected more than $1,000 in higher premiums per enrollee and more than $2,300 in higher revenue per enrollee in 2014 after accounting for the large premium subsidy programs for their QHPs. Reference: https://www.forbes.com/. This premium difference, as reflected in the Cost Comparison, is the basis of our 60 Billion Dollar Savings assumption. This is very important because we DO NOT REQUIRE FULL BLOWN QHP’s to keep our people safe from the burden financial loss due to the unexpected onset of illness or injury. ACA did not invent the comprehensive insurance contract and safe and economical programs can be designed in more cost-effective ways to make them more affordable to the ACA participants and the 28 Million Americans we still need to protect!

II. REDUCTIONS IN FEDERAL REGULATIONS

The biggest cause of the huge difference between the Commercial “Individual Insurance” Markets (CIIM) Annual Per Member Benefit Cost and ACA Per Member Cost is federal regulation. Everyone is under the misapprehension that before ACA, health insurance companies did not offer adequate non-group health insurance for sale to the public. This is patently untrue. The CIIM values recorded in the Cost Comparison above are for comprehensive non-QHP health insurance contracts that generally provided for more than adequate financial risk protection against the unexpected cost of personal illness and injury. Such contracts were standard before ACA invented “Essential Health Benefits” which Milliman studies indicate increase premiums by an average of 3 percent to 17 percent depending upon the state. The ACA also requires a “Minimum Actuarial Value” of 60% on all plans, which likely resulted in an additional 8.5% premium increase. There is a “Prohibition of Age/Sex Rating” imposing rules that artificially increase premiums for younger adults, making it less likely to attract those who are more likely to be uninsured. ACA also requires insurance companies to put enrollees suffering from pre-existing conditions into the same pool as other health risks, thereby ensuring adverse selection and unnecessarily driving up the cost of everybody’s health insurance. Milliman predicted that what they term “Risk Pool Composition Changes/Adverse Selection” would cause individual premiums to increase 20 percent to 45 percent in 2014. In addition, ACA Regulations increase in premiums by encouraging high-risk enrollment, early shifts from COBRAs continuation of coverage, early retirement shifts and other so-called gaming techniques with SEPs, etc., all of which contribute to arbitrary increases in health insurance premiums. (Reference: https://www.heritage.org/health-care-reform/report/how-obamacare-raised-premiums). All this regulation makes health insurance less and less affordable by requiring health insurance carriers in the public/private partnership to do things that are not in the best interests of their customers. And, this prevents them from designing contracts on which they are willing to accept the risk of loss. The result is an abrogation of the normal insurance underwriting and risk-taking process, potentially resulting in the requirement for more government subsidization and an inability for insurance carriers to compete with one another to improve their individual insurance market shares. This stifles innovation, restricts free trade and drives up the cost of health insurance and ultimately may lead to a complete government take-over of the True American healthcare system. This is what is happening today with the ACA. Medical socialism has failed in countries as diverse as socialist Great Britain and communist Russia. No one is electing to travel to either of those countries to avail themselves of quality health care. The free enterprise is the only system that will successfully survive a changing environment because it is the only system that enhances our basic human nature to survive, improve our performance and achieve greater success. Socialized medicine will extinguish the benefits of our flourishing free enterprise health care system that produces the many miracles that are now well known all over the globe.

This is not to say that Medicare Advantage is not well regulated by the federal government. On the contrary, it is one of the most highly regulated insurance plans sponsored by our federal government. However, there is a big difference between the CMS’s MA regulation and that of the punitive HHS’s ACA regulation. CMS’s MA regulation is supportive of the vital interests of the senior American public, with the necessity for good government health policy in mind and the interests of the public/private partnership are considered. No enterprise in any business can be completely unfettered and without regulation and expected to do the right thing all the time. Checks and Balances are required. We learned that in government and we see the need for it in business as well. But, there is constructive regulation and destructive regulation. CMS’s MA regulation is, for the most part, a sterling example of the former, just as ACA regulations are a disastrous example of the later in action.

III. HEALTH RISK MANAGEMENT

There is a complete discussion of this aspect of MA Plans on the “Medicare Advantages” Page of this website, Section B.- Capitation Only Required. The Medicare Advantage Program itself and Capitation Reimbursement are both designed to be cost effective. MA currently provides many covered benefits, including prescription drugs to their members. There are benefits that are not covered by Medicare A & B. Likewise MA also costs the federal government less than the fee-for-service Medicare programs. Capitation reimbursement “caps” the federal expense, so it should cost less than the ACA because it puts the risk of loss onto the insurance carrier and simultaneously eliminates the need for the ACA “3R” program costs and all the other bizarre reimbursement and risk adjustment schemes mandated by the ACA. If we design an MA contract for under age 65 participants properly and extend it to everybody, we will dramatically lower the federal cost of health care and maximize the possibility of reaching the 28 Million uninsured Americans with affordable health insurance options. When the health insurance carriers for the Medicare Part C programs take the risk for their own underwriting results, i.e. whether they make any money or not, they will have an incentive to develop favorable contracts with health care providers and effectively compete with one another for the business. Medicare Advantage is the only sponsored health plan, besides FEHP, that allows the companies in public/private partnership to compete with one another, assuming the insurance risks, reducing the cost of health insurance for all the participants in a regulated environment that supports competition and encourages innovation. And, MA has demonstrated success in both areas, while delivering high-quality health insurance to all the participants. This is the fastest growing government-sponsored health insurance program in the United States. The public/private partnership can save their customers more money than it costs them to administer their benefit programs. A PBS Documentary on Medicare Part C Plans uncovered the fact that some Medicare Part C carriers could almost save more money through favorable provider contracts than they had to charge for their administration. The challenge for the government is to pay insurance companies the least (and most reasonable) amount of money possible, but enough money to be enable them to make a profit, and then to motivate the carriers to factor their profit back into the cost they charge the government for administration. This is what the non-profit BlueCross BlueShield health insurers used to do for everybody by Charter. The Obama Administration tried to achieve this condition by requiring minimum MLR’s, but in net true effect of MLR regulation is increase health care inflation by incentivizing carriers to increase provider reimbursement rates in order to justify premium rate increases so they can increase their administrative expenses and profits and grow their companies. This is a total reversal of what the Obama Administration wanted to accomplish and a complete back-fire on their part. We never seem to have anybody that understands the health insurance industry involved in health reform legislation. These MLR Regulations are still in place today.

Capitation reimbursement has been used by the purchasers of health insurance with their insurance carriers, and in turn, by the insurance carriers purchasing health care services from the health care providers. It is a successful cost containment vehicle, if for no other reason than allowing a superb control over the budgetary process. Graham-Cassidy attempted to use it to cap the federal cost of Medicaid. CMS uses it to cap the cost of Medicare Advantage Plans. The result is that most Medicare Advantage program participants do not even pay any health insurance premiums out of their own pockets, because the federal government calculates a capitation reimbursement levels for Medicare Advantage programs that are generally more than sufficient to cover the carrier's cost for the benefits. The reason for this is twofold. First, so as not to disenfranchise MA program participants or prejudice them against signing up for MA Plans, the capitation reimbursement rates for MA programs are calculated to be actuarially equivalent to Medicare Parts A & B programs, to which all MA participants are otherwise eligible and in which they would participate if they were NOT opting for Medicare Advantage. Secondly, since Medicare Parts A & B are generally “fee for service” type reimbursement programs (not capitation), they are generally more expensive than per capita private Medicare Advantage health plans. Consequently, the insurance carriers are willing to accept the risk on the MA programs, without any additional out-of-pocket premiums, because they know they can manage the benefits of the MA programs within the allotted capitation reimbursement levels. If we extend MA to the under age 65 population, nothing says we can’t build in fair sliding scale premiums and tax credit subsidies that will continue to make the programs affordable for most everybody, save for the very low-wage working population, those that are below the poverty lines and the unemployed for which we will have special programs. These special programs should include the Community Health Center network (CHC). For those few of you that know, the CHC now serves as the primary care home for 27 Million Americans, many of whom are never going to be able to afford health insurance. The CHC network employs over 51,000 health care workers in 1,400 communities and is primarily supported by Congress, which just re-authorized CHCF funding for two more years. Special expertise, support, and direction for this program is provided by HHS. This Community Health Center network is truly something for which every citizen should be proud and an example of the way in which True Americans, that believe in our the value of our public/private partnership healthcare system, should deliver essential health care services to “We the People” in the United States of America.

IV. COST CONTAINMENT AND WELL BEING

We spend more money on Medicare than any other health insurance program and, it covers 61.9 million enrollees and costs the taxpayers approximately 700 Billion Dollars a year. Medicare Advantage programs were created and promoted to lower cost of Medicare A & B. This experiment was started 20 years ago and is still working successfully today. How many “Medicare Parts” do we need in this country to cover all the American people? How many Americans does it take to change a light bulb? We already have Medicare Parts A, B, C and D. Why is that NOT enough Medicare Parts to cover our people, especially since all of these programs are “working”; for better or for worse? The most costly program, however, is still Medicare Part A and Part B and despite efforts to the contrary, including the implementation of prospective payment systems, it is still, for the most part, a fee-for-service program which is the costliest type of program we ever operated. As a nation, we have been successfully experimenting with managed care programs now for almost 50 years. We know what we are doing. But we can always “do it better.” Just as we are going to have to change SSI and Medicare eligibility, we are also going to have to change the SSI benefits and the Medicare fee-for-service program administration, in order to save SSI and Medicare and balance the Trust Funds that support them. Promoting Medicare Advantage Plans for those Americans under the age of 65 will be like making a most constructive and meaningful down payment on an acceptable reform of our Medicare reimbursement systems and a the most feasible approach to lowering the cost of health care for everyone in our nation, without threatening the viability of our healthcare system.

Finally, we must recognize the biggest elephant in the room. We all know that there is ultimately only one real solution to effectively lowering the cost of health care in the United States in the long run. WE MUST IMPROVE THE HEALTH OF OUR PEOPLE. This concept is euphemistically being re-branded as the improvement of public health. However, it is more than that. What we really need to do is reduce the severity of our illnesses and decrease the incidence of the necessary health care to treat them on a national basis. This is THE ONLY WAY we are going to reduce the cost of health care and ensure the future success of our nation-state on this planet. Our people must be the healthiest people in the world if we are going to successfully continue to provide our leadership to the rest of the world. To accomplish this daunting and quintessential goal, we must improve our diets, increase our level of exercise and increase our public awareness of healthy (lifestyle) living. We are gradually becoming the most overfed, obese nation of spoiled and privileged children and adults. We drink too much. We smoke too much, and we eat too much. We suffer from loneliness and mental illness and over 50% of our medical treatments are for preventable conditions that we should not be suffering from in the first place. See my webpage entitled Medicare Advantage, Section E. entitled “CMS and Not the States.”

The chart below shows, by age, the incidence of Medicare beneficiaries that suffer from chronic illness. Did you know that forty-eight percent (48%) of All Americans suffer from one or more chronic illnesses? Just look at the obesity all around you. In 2016, we had 57 Million Americans covered by Medicare. We spent 1.1 trillion Dollars on chronic illnesses, and our GDP was 17.9%. In 2030, CMS predicts Medicare will cover 77 Million Americans. The National Health Council expects the 2030 annual total economic cost of chronic illness, for the more than 157 Million Americans (81 Million with multiple conditions), will exceed 4.2 Trillion Dollars. If we continue the way we are going, employers will eventually abandon the private system, and the only alternative will be to nationalize the health care system, the way that the Democrats want you to do it.

Share of Medicare Enrollees with Multiple Conditions by Age

Here’s how I think you can fix this problem. The informed consensus of medical opinion categorically believes that 80% of these chronic diseases are preventable or almost completely reversible with the right combination of health and wellness promotion and medical intervention. For instance, if as a nation, we had been able to eliminate 80% of the cost of treating chronic illnesses in 2016, the Health Care GDP would have been 13%; five percentage points (-5%) less than our actual GDP and just equal to our nearest competitor, Switzerland.

Our States are never going to achieve this kind of savings, which we desperately need to effectively lower the Health Care GDP. In fact, CMS will have a tremendous challenge achieving the level of savings, as it is; but I believe it is possible. Did you know that since 1984, CMS has had the premier Preventative Services Task Force on board, yet only some of their recommendations make it into mandates and covered services for most federal insurance plans? Warren Buffet recently said we are a “rich country and we can get along doing the Wrong thing for some time, but we can’t get along doing the Wrong thing indefinitely." I agree with him. Now is the time for you to do the next Right thing.

How would YOU propose to launch a meaningful program to reform the Medicare fee-for-service reimbursement system and a meaningful cost containment and wellness lifestyle living program to reduce the incidence of serious illness nationwide, if YOU divide the last remaining resources of the last health care program we need in this country, into 50 different state programs run by 50 different state administrators, who by their own admission, are currently ill-equipped to even handle the changes necessary to implement the simple Medicaid capitation reimbursement system suggested by the last Graham-Cassidy Health Care Reform bill? The answer is - YOU can’t! We can’t! And, if we ever have go down that road, we will likely never recover from it unless and until the entire system has to be taken over by the federal government because “We the People” can’t afford it and can’t stand its lack of uniformity and its inability to properly provide for our health care needs. This is probably how most other nations in the world got backed into their universal health care systems, and if we have to go that road, God help us all!

Notes:

1. ACA Aggregate Market Earned Premium - Milliman (March 2017) 2015 commercial health insurance:
Overview of financial results. MA(A M Earn Premium)-31% and 33% of Part A Per Actuary Trust Reports.

2. ACA Advanced Premium Tax Credit Subsidy values from CMS and IRS data and publically avail.Reports,
"Milliman(March 2017)Methodology. MA(A M Earn Premium)-31% and 33% of Part B Per Actuary Reports. "

3. 2015 Effectuated Marketplace enrollment from HHS & 2016 CMS Enrollment Report March 31, 2016.
Medicare Fee-For-Service enrollment from CMS MA Monthly Sum. Contract Reports, Dec. 2015 & 2016.

4. Total Claims Paid for CII Mkt -Part 1, Line 5, NAIC Suplmt. Health Care Exhibit forms, PMPM X 12 x T E.
Medicare Fee-For-Service Total Claims Expend.-Table 11.B1, 2016 &2017 Medicare Act.Reports to Congr.

5. CII Market Total Enrollment-Covered life years of average monthly enrollment-Milliman (March 2017).
Medicare Fee-For-Service Total Enrollment-Table 11.B1, 2016 & 2017 Medicare Act.Reports to Congress.

6. CII Mkt Annual Benefit PM - from Part 1 of NAIC Supplemental Health Care Exhibit forms, PMPM x 12. "
Medicare Fee-For-Service Av.Annual Benefit PM-Table 11.B1-2016&2017 Medicare Act.Reports to Congr.