The U.S. health care system is unsustainable but it could be dramatically improved with more efficient care of our sickest patients. Medical spending is rising at twice the rate of income growth. Medical prices are rising at three times the rate of consumer inflation.
The Affordable Care Act (ACA) was sold to the American people as a means to fix those problems and make health care affordable. The vehicle to achieve this is, implausibly, a requirement that we all purchase overpriced health insurance. In addition to stipulating the benefit package Americans are allowed to have, ACA regulations also force insurers to accept all enrollees — including people in poor health. Moreover, the rates must reflect average health in a community rather than individuals’ health status. In insurance parlance, this is what’s known as guaranteed issue/community rating. The law does allow charging some people more based on their age, such as charging people in their late 50s more than the rates paid by people in their 20s. But premiums cannot be higher for enrollees with high medical bills.
How does this work in practice? For Obamacare to work, an army of young people need to willingly pay $3,000 per year in premiums, while knowing they will not even come close to reaching their $3,000 deductible. An average of about one baby is born to women sometime in their 20s. But that’s about the only major expense a 20-something will incur. For their part, hoards of healthy 40-somethings need to pay $4,000 in premiums for a $4,000 deductible they will never reach; and healthy 50-somethings need to pay $5,000 in premiums for a $6,000 deductible most of whom will never surpass. Sounds like a bargain, right? To make health care “affordable,” millions of Americans need to purchase coverage that pays virtually none of their medical bills. In other words, access to affordable care under Obamacare is premised on the idea of that most people necessarily must get a raw deal. That is, most people (who are healthy) must be overcharged to offset the higher costs for unhealthy enrollees, who would otherwise find their coverage unaffordable if charged premiums based on their own health risk.
Average health spending per capita in the United States is around $8,600 annually. But it’s not distributed evenly. About 80 percent of the enrollees are healthy like me. We collectively consume only 20 percent of the health care dollars used; about $2,150 per year on average. However, some people are ticking time bombs. The least healthy 20 percent spend an average of about $35,000 yearly.