Obamacare 'death spiral" already here

WASHINGTON – With the Supreme Court currently mulling the King v. Burwell case against the Affordable Care Act, supporters of Obamacare have warned that a “death spiral” may result if the court strikes down subsidies for health insurance purchased through federally established exchanges.

But the federal health-care takeover law already has caused a death spiral, according to Dr. Lee Hieb, M.D., past president of the Association of American Physicians and Surgeons.

It’s just that she speaks of a different kind of death spiral.

“There’s a death spiral in medicine already because it’s creating shortages of doctors and hospital closures, and that’s a business death spiral the medical community’s already starting to be in,” Hieb said.

A traditional “death spiral” occurs when many healthy people drop health insurance coverage, leaving a risk pool that is smaller and sicker than before. Insurers are forced to raise premiums to continue paying promised benefits to their sick customers. But this premium hike causes remaining healthy customers to drop coverage as well, because they don’t feel it is worth it to pay sky-high premiums for coverage they rarely, if ever, use.

Once these healthy people leave, insurers must raise premiums again, causing even more healthy customers to leave. The cycle continues until only the seriously ill remain in the risk pool, because they are the only ones with an incentive to pay the enormous premiums.

At last, some practical direction for “Surviving the Medical Meltdown.” It’s in Hieb’s “Guide to Living Through the Disaster of Obamacare”

That already may be evident. According to a recent article, premiums rose by an average of 41 percent from 2013 to 2014, the latter of which was the first year Obamacare was in effect. Also, only about 28 percent of Obamacare enrollees are in the healthy 18-to-34-year-old age group. Analysts had originally estimated that about 40 percent of enrollees would have to be in that age group so their premiums could pay for benefits for the elderly and sick.

Hieb, author of “Surviving the Medical Meltdown: Your Guide to Living Through the Disaster of Obamacare,” is concerned about more than just rising premiums and smaller, sicker risk pools. Those problems represent a death spiral of medical insurance, she says. But as a practicing orthopedic surgeon, Hieb worries about the death spiral of medical providers.

She gave a personal example. She once worked in a part of Arizona in which 85 percent of her patients were insured through Medicare. Because Medicare reimburses health-care providers less than private insurance does, providers did not want to live and work there. Many of them moved away, and it was tough to convince new providers to come replace the old ones.

“And so it’s a classic business death spiral where there’s too much work for too few people. No matter what you do, you can’t recruit new people because it’s too unpleasant a work situation, and so people keep leaving, and that’s a death spiral,” Hieb said.

But a provider shortage may be more than just a regional problem in the near future. The Association of American Medical Colleges has predicted a nationwide shortage of 50,000 to 90,000 doctors by 2025.

Another facet of the provider death spiral, according to Hieb, is the closure of hospitals, on which WND previously reported. Hieb blames the economic failure of hospitals on the federal government’s payment cuts to Medicare providers, both under Obamacare and sequestration.

“Hospitals send you a huge bill, but they pay huge dollars to give you that care, so there’s a real problem,” she said. “And again, [doctors] are not getting good value for the money that we put into it. I’m not saying things should cost this much, but they do under this highly regulatory environment, so we’re being regulated out of business. We’re in a regulatory death spiral.”

Dr. Jane Orient, executive director of the American Association of Physicians and Surgeons, agrees with Hieb that a medical death spiral is already under way.

“Hospitals are closing or being absorbed in megasystems,” Orient observed. “Doctors are closing independent practices and retiring or becoming employees. Try to order routine drugs or IV fluids! Huge cost increases, and they’re often unavailable.”

Ever since Obamacare was passed, observers have warned of a potential death spiral, defined in the traditional sense. A June 2014 report revealed that one-half of the death spiral was already under way: Customers newly insured under Obamacare showed higher rates of serious health conditions than other customers.

Last October, FoxNews.com reported that cheap, short-term private policies were gaining popularity as an alternative to the Obamacare exchanges. The story noted that a death spiral could result if enough young and healthy people opted out of Obamacare in favor of those short-term plans.

But ever since the King v. Burwell case appeared on the national radar, Obamacare supporters have been voicing concerns about a death spiral, too. Specifically, they believe a death spiral will result if the Supreme Court strikes down premium subsidies in states that did not set up their own Obamacare exchanges. In such a scenario, premiums would become unaffordable for many customers, and the healthy ones would likely flee the market.

The Obama administration extended subsidies to those getting coverage from federal exchanges even though the law states that it allows those subsidies only for those working with state-established exchanges.

In October 2014, the Obama administration funded a RAND Health study, which found that eliminating the ACA’s subsidies would cause premiums to rise by nearly 45 percent and enrollment to fall by nearly 70 percent.

A February New York Times article warned that the Supreme Court, if it ruled against the Obama administration, would upset the “balance” in the ACA and send the law into a “tailspin.”

Hieb admits that eliminating subsidies in certain states would likely accelerate the insurance death spiral, but she believes Obamacare cannot work anyway.

“Even with all this subsidy stuff going on, young people are not signing up,” she said. “I’m not sure, even if state exchanges are working, if it’s a good deal for anybody that’s young.”

Hieb believes insurance companies initially had high hopes for Obamacare. She thinks they saw the law as a way to get young, healthy people to buy insurance in droves. However, if that was the case, they are now disappointed.

“Young people are not stupid enough,” Hieb asserted. “Individuals could figure out their best economic interest, and what young people decided was, it wasn’t worth doing it that way. ‘We’ll just go uncovered until we get sick and we can’t be denied, so we’ll just wait until we have something bad happen to us, and in the meantime, we’ll pay cash.’ And they’re right. That’s a better economic model than going through Obamacare if you’re 25 years old.”

Without young and healthy people, Hieb believes the ACA will die a natural death. But if the Supreme Court kills the law first by eliminating subsidies in states without their own exchanges, the country may suffer less damage, she said.

“I think Obamacare’s going to collapse of its own ponderous unworkability, but if it collapses of its own ponderousness, it will bring the system down with it,” Hieb said. “Maybe this is a way of getting it to go away without bringing the system down.”

Orient, meanwhile, believes part of the medical system must “melt” away to have any hope of saving it.

“A lot of the system needs to melt down – the 40 percent or more siphoned off by third-party payers,” Orient said. “It’s not just Obamacare, but Medicare and Medicaid price controls and mindless bureaucratic requirements. And of course the government is bankrupt.”

“The question is how to save our people and our country as the empire inexorably collapses.”