Yesterday, we spoke about how PPACA (Obamacare) has been attenuating the US healthcare cost spiral. Over the past few years, the overall cost growth has dropped dramatically. But, many of us don’t feel the love- because our employers and our insurance companies have been playing the “cost shifting” game. They’ve changed our co-insurance, they’ve raised our deductibles- claiming that when we have ‘skin in the game’, we are more attentive to the costs of our healthcare.

That makes about as much sense as me telling you the moon is made of green cheese. Because our health care system is about as transparent as a four inch slab of lead.

We don’t know the costs for almost anything that is associated with healthcare. We think that an operation will cost $ 5000- and then the (in-network) hospital (without our permission or knowledge) brings in a visiting anesthetist- whose fees are NOT covered by our insurance. Poof. The cost is now $ 7000- plus $ 3000 of the cost is on us, since our insurance company doesn’t cover out-of-network folks.

This is not an isolated care. Try asking how much that heart bypass will cost- and you will find that no one gives us a straight answer.

But, there are other facts we need to understand.

Like how safety-net hospitals have fared much better than expected over the past few years. A safety-net hospital is one supported by the local taxpayers, one that covers the slew of local taxpayers that lack insurance or are covered by Medicaid (which pays only a small portion of the bill that the hospital provides- a much lower percentage than that provided by private insurance or Medicare).

Many of these hospitals have garnered more receipts than they expected since PPACA, because more citizens now have insurance. That means these hospitals now have much lower uncompensated care with which to deal. (Some hospitals actually experienced a drop of 30% in their charity care costs, when these newly insured folks had their bills covered by insurance.)

As a matter of fact, two of the biggest public safety-net hospitals, Grady Memorial (Atlanta) and Jackson Memorial (Miami) no longer exude a financial black hole.  Instead, these two hospitals have amassed surpluses ($30 and $ 51 million, respectively). Broward (Southern Florida) ran a $ 69 million surplus- both from local tax support and that 30% drop in charity care costs mentioned above.

And, yet, there are a slew of (IMHO) incredibly stupid states that refused to expand Medicaid. Yes, I know- it means that all of the US citizenry will be subsidizing the health care for those on Medicaid. But, you really need to consider the true scenario.

When a local hospital runs short of funds to pay the bill, it goes to the state to ante up funds to keep the hospital running.  That situation often means the state finds a way to use more federal funds to cover other programs, so they can move money to pay the hospital what it needs  If you think that doesn’t cost us citizens big bucks, you are badly mistaken. Moreover, if the state refuses to ante up the funds, the hospital will simply close. Which means everyone in the local area suffers, because the overall health care availability often disappears.

And, it’s going to get worse. Because at the start of FY 2017 (remember the Federal fiscal year starts in October of the year before; this means three months from now), Medicaid funding will drop. Because PPACA expected the number of uninsured to have dropped more than it did. (The original concept anticipated only 1 or 2 states refusing to expand Medicaid; not the 22 that did.) Two of the states to take the biggest hit in funds availability are Florida and Texas.

And, let us not forget that the aging of America is going to mean that 1 in 5 Americans will be on Medicare before the next decade ends. Right now, our per person health care cost runs about $ 10K a year; Medicare is running 20% more at $ 12K.  (Please understand a good reason for this higher cost per person is really related to the fact that Medicare covers the cost of dialysis – to the tune of $ 40K per year per patient.)

Which brings us to the final piece of today’s discussion. As I’ve reported before, the original 23 health care coops started to offer lower cost insurance under Obamacare have been folding. We may be down to 7 next year (or maybe 11 will survive). Some of those remaining coops are opting to include larger employers in their census, adding to their population mix of individuals and smaller firms. Because that is a way for them to achieve some scale.

But, if they don’t allow larger employers to be included in their census, these coops will no longer be covering 1 million subscribers, but just 350K. (Notice carefully that the projected 7 remaining coops do have better economies of scale… these 7 plans cover an average of 50K subscribers each; when there were 23, the ones that are- or have finished- folding were averaging only 40 K subscribers.)

These coops have also been saddled with the cuts the Republicans made in their subsidies. Those subsidies were what they counted on when they prepared the rates they offered subscribers for the year. Without those subsidies, instead of breaking even, most of the new coops lost money.

Couple that with another whammy (we’ve also discussed this)- the fact that the Feds won’t cover the payment transfer between insurance companies that have the younger, healthier subscribers to those with older ones for the first few years, as promised. Now, these coops are on the hook for those payments that were supposed to have been made with Federal funds- not the slim profits the coops garnered. Making a bad situation simply terrible.

Stay tuned…