Single Payer Advocates Can’t Make Up Their Minds About the Problem With the ACA

Ever since the Affordable Care Act was passed, the left  wing critics of it—especially the single payer advocates—have said, wrongly, that it was passed at the behest of the insurance companies and that subsidies in the exchanges are a handout to them. This was never true for few reasons, not least because the insurance companies spend at least a  hundred and forty million or so opposing the ACA. Now, to my great surprise, one of the leaders of the single payer movement in PA, Chuck Pennacchio, has posted an article on Facebook in which he seems to entirely reverse direction without noticing it.

This is Pennachio’s introductio to the article which quotes Aetna President Mark Bertolini “Will the Affordable Care Act (ObamaCare) succeed? Here’s a clue, provided in a speech by Aetna’s CEO, Mark Bertolini. ‘After a transition period, if Aetna cannot earn its cost of capital on exchanges, we will exit the market.’

Why does Pennacchio think that the ACA won’t succeed? Because insurance companies have such low profits they will withdraw from it! In other words, after criticizing the ACA for two because it will boost insurance company profits, now Chuck is saying it will fail because insurance company profits will be too low!!! And he does his without noticing that he’s flip-flopped on the question.

When it comes to the ACA, Chuck turns out to be a (Groucho) Marxist: Whatever it is, he’s against it. If his argument that the ACA is a sell out to the insurance company doesn’t work, he’ll just reverse direction and say the ACA will fail because insurance companies won’t take part in it.

Am I surprised or worried by Bertolini’s speech? Not at all.  I’ve been saying for years that insurance companies are either going to have to totally change their predatory business model (in which they make profits by denying sick people coverage or care) or they will have to leave the business and be replaced by other institutions. Why? Because the ACA makes it impossible for insurance companies to carry out their old business model profitably.

And what might replace insurance companies? It might be consumer organizations (a model that folks in labor are thinking about in PA and elsewhere.) It might also be producer organizations. In fact, the ACA defines a new kind of organization, an “accountable care organization” that is composed of doctors and / or hospitals that provide health care on a capitation (fee for each person) rather than fee for service basis, which means they are spreading the risks of care among a large number of people and thus replacing insurance companies. Consumer and producer organizations are the key to making the changes in how we deliver and pay for health care so that we can improve care while reducing costs. As I’ve been arguing for years, this is the critical step we need to take to make health care affordable for all (and eliminate those long term budgetary problems you are hearing about.)

That we need this kind of transformation is why I’ve always been dubious about single payer. If by some miracle (and that is what it would take) we had moved to single payer, the incentives to create thes new payment and delivery systems would have been much smaller. Indeed the single payer promise to eliminate most administrative costs has always been misguided. What we need in this country is not less administrative oversight of health care, we need the right kind of administrative oversight, the kind carried out by medical professionals themselves with the aim of identifying and eliminating, unnecessary, duplicative, ineffective, counter-productive medical care while encouraging the best practices throughout the country.

Here, for example, is a piece by  Ezekiel Emanuel (Penn professor and physician, policy wonk) which explains why Accountable Care Organizations are likely to drive health insurance companies out of business.

Somehow, Chuck Pennacchio has  missed this development and seems to think that the ACA won’t work if insurance companies don’t offer insurance in the exchanges. That’s never been true.

One last point, if you read the article about Bertolini, he also says health insurance premiums are going to double because of the ACA. I have no doubt that in order to  maintain he profit margins and growth Aetna has had, Bertolini is going to try to  double health insurance premiums. But it’s also pretty clear he’s not going to be able to do that,  both because the growth in health costs has already dramatically slowed and because Aetna is going to have competition in the exchanges. Indeed, if he drives up insurance premiums for a year or two, that will lead to alternatives to the insurance companies jumping in sooner rather later. Bertolini’s warning that Aetna may leave the exchanges is a promise to the stock market that he won’t keep the company in a low profit margin business. And that shows (1) that we were right all along that the exchanges (and other provision of the ACA) will hold down insurance company profits by changing their business model and (2) that we were right to think that alternatives to the insurance companies will arise that compete with them and holds profits down.

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