The Affordable Care Act is the single most contentious political action of my lifetime since the Vietnam War. It touches everyone in one way or another, and often in profoundly personal ways. Some see it is a godsend and others as an arrow aimed directly at the heart of the American experiment. Some will experience healthcare that is now available for themselves and their families for the first time, while others will experience the loss of a system that had served them well. The story in the Wall Street Journal this week of the cancer survivor Edie Littlefield Sundby, who lost her doctors and affordable care in the middle of a true life-and-death battle, is poignant. It turns out that not only can she not buy insurance that will cross state lines, she cannot buy insurance in California that will cross county lines!
As I highlighted a few weeks ago, the US system is dysfunctional, yet the potential for positive change is rather spectacularly illustrated by work done by Dr. Jeff Brenner in Camden, New Jersey. Basically, he found that 1% of the patients in Camden were responsible for 30% of hospitalization costs. Sometimes called super utilizers, high utilizers, or frequent fliers, these patients have complex medical conditions and often lack social services such as transportation or knowledge about how to use the health system most effectively. By some estimates, 5% of these patients account for more than 60% of all healthcare costs. This is a system that is so dysfunctional that it does not even work for those who are getting the care! There are scores of such opportunities throughout the healthcare system to reduce costs and improve services, so I write not of a bleak healthcare future, just a profoundly changing one.
Peggy Noonan writes compellingly today about the problematical rollout of Obamacare.
They said if you liked your insurance you could keep your insurance – but that's not true. It was never true! They said if you liked your doctor you could keep your doctor – but that's not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it – millions of them! They said they would make insurance less expensive – but it's more expensive! Premium shock, deductible shock. They said don't worry, your health information will be secure, but instead the whole setup looks like a hacker's holiday. Bad guys are apparently already going for your private information.
And now there are reports the insurance companies are taking advantage of the chaos of the program, and its many dislocations, to hike premiums. Meaning the law was written in such a way that insurance companies profit on it.
Today the Manhattan Institute released a report that shows that insurance premiums are going up an average of 41% in 49 states, although there are seven "blue" states where the costs go down. Go figure. New York sees a drop of 40%. The analysis of the HHS numbers shows Obamacare will increase underlying insurance rates for younger men by an average of 97 to 99 percent, and for younger women by an average of 55 to 62 percent. Worst off is North Carolina, which will see individual-market rates triple for women and quadruple for men. Older people acquire a large advantage over younger people in the insurance cost game.
And the rest of the world looks on and wonders what we are thinking. And how can we manage to do this so badly? Not just the roll-out – I mean, they don't understand our whole healthcare system. This weekend my Code Red coauthor, Jonathan Tepper, sent out a note that not only illustrates the confusion and dismay in much of the world about US healthcare policies but also gives us a true Outside the Box lesson in how not to design a healthcare system.
Jonathan is quite special. He speaks about five languages fluently with no accents and is a former Rhodes scholar, a wicked smart economist, and a good writer; and he seemingly works around the clock. While Jonathan is a US citizen, he is quintessentially European, having grown up in Europe, with much of his early life spent in Madrid, at a drug rehab center that his parents founded and directed. He mentions with a smile that his playmates as a young boy were drug addicts. His view of the US has a definite European flavor to it, and as you read this, think about it coming from the pen of a conservative European economist (there are a few!).
I left in the 19 links Jonathan provides as the sources for his thoughts, for those interested in a further deep-dive exploration. It will be interesting to see the comments, all of which I make a point of reading, by the way. If you can take the time to write to me, the least I can do is read.
I started this note in Cleveland, where I finished up a daylong health check-up with Dr. Mike Roizen, which went better than I had hoped. I asked frontline employees all day what they thought of the new healthcare law. I was not hearing happy thoughts, as many are concerned about their jobs. And then I dropped by to see my 96-year-old mother on the way home, and we talked about her healthcare. "I have not seen a doctor for a long time, but it's OK. I think all they do today is just make guesses anyway," she remarked – the state of healthcare from the point of view of the elderly.
The focus tonight is the future of healthcare. Dr. Mike West, CEO of Biotime, is in Dallas for a layover between flights, and we will catch up on the state of stem cell research and on my personal genome, which he arranged to get done – but more on that in a few weeks.
It is odd. We have made such progress on so many technological fronts, and the price of new tech keeps going down – except in healthcare. But then, politicians and lobbyists are involved, which I guess is part of Jonathan Tepper's point.
Have a great week and get some exercise, eat healthy, and invest wisely, because you are going to live a lot longer than you thought.
Your watching my apartment construction completion date keep slipping analyst,
John Mauldin, Editor
Outside the Box
Jonathan Tepper on Obamacare
Please pardon this long email, but after reading endless drivel on Obamacare, I needed to write this.
I'm afraid almost all discussions on the left and right regarding the Affordable Care Act (ACA) miss some very basic things. So I hope this email will explain a few economic ideas and put them into perspective for you, whether you're on the left or right and whether…