My op-ed on high insurance exchange was published by the Providence Journal and included below in this blog.  As we approach the 50th anniversary of Medicare, I wanted to reflect on its first year of implementation and enrollment of beneficiaries and compare it with the health insurance exchanges.  In summary, Medicare signed up 99% of its beneficiaries, within 9 months of President Johnson signing it into law, and did so at a cost of $45 per beneficiary (inflation adjusted).  A tough act to follow.   The exchanges have a long way to go and it is just the right time to start to consider how to increase the rate of enrollment for the 40 million Americans still without health insurance.  Please see more in my op-ed published in the editorial pages of the Providence Journal below.

Lessons of R.I.’s high exchange costs

January 26, 2014 01:00 AM

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BY DWIGHT MCNEILL

The enrollment numbers for the health insurance exchanges under Obamacare are in, and they do not paint a pretty picture. The Congressional Budget Office’s projections for enrollment were 7 million for the exchanges and 9 million for Medicaid. The actual numbers are considerably lower at 2.1 million for the exchanges and 4.4 million for Medicaid. Additionally, about 3.1 million young adults got coverage through Obamacare’s rule forcing insurers to cover dependents up to age 26.

Part of the shortfall is from the technology fumbles of getting the website up and running. But a large part of it may be because of the baked-in complexity of the reform itself.

In Rhode Island, the HealthSource RI exchange surpassed its very modest goal of insuring 10 percent of the state’s 55,000 uninsured. But other goals did not fare as well.

The cost of the exchange is very high. Given Rhode Island enrollment and costs to date and projected over the next few years (in order to spread infrastructure investments over time), the administrative cost as a percent of the total cost, including insurance premiums, is more than 15 times that of Medicare at 2 percent and three times that of private insurance (at 10-plus percent). Note that in addition to enrollment, Medicare and insurers also pay huge volumes of medical bills.

The goal of a market-based system is to use the power of competition among insurance suppliers to drive better quality at lower cost. Since Blue Cross and Blue Shield of Rhode Island is the only private insurer in the state’s exchange, this major reason for an exchange is forfeited.

How can the exchange costs be reduced? The cost of operating the Rhode Island exchange will shift from the federal government to the state in 2015. The projected yearly operating cost is about $23 million.

Three possible solutions:

•Run the exchange more efficiently. I suspect that the complexity of Obamacare and its reliance on the existing private insurance system necessitates these high costs.

•Since there is only one insurer in the exchange, perhaps it should do the enrollment, as it does for its core business.

•Divert the cost to other (out-of-state) taxpayers by shifting the exchange responsibility to the federal government, as have 23 other states.

These solutions would reduce the cost to state taxpayers and businesses but would not solve the underlying cost drivers.

The results of the experiment to use exchanges to get people insured are accumulating, and it is becoming increasingly obvious that modifications to Obamacare must be considered. The Affordable Care Act, Section 1332, supports “innovation waivers,” starting in 2017, for states to try new ways to achieve the same goals for coverage and comprehensive and affordable benefits. Some states, including Vermont, Hawaii, Oregon, New York, Washington, California, Colorado and Maryland, are viewing a single-payer system.

Medicare is a single-payer system, and is supported by the vast majority (96 percent) of seniors. When it was implemented almost 50 years ago, it signed up 99 percent of those eligible for benefits within nine months of President Johnson’s signing the bill into law.

The enrollment process had simplicity “baked in” because Social Security knew those who were eligible. The cost to enroll them was a mere fraction ($45 per enrollee) of the cost of the exchanges (estimates run from $1,000 nationally to $5,000 in Rhode Island per enrollee).

Additionally, the annual growth rate of Medicare spending per capita is projected by the CBO to be substantially lower than private health insurance spending between 2012 and 2021 (3.6 percent vs. 5 percent). And over the last 50 years, Medicare has transformed health care delivery and finance with reforms such as a prescription drug benefit, hospital diagnosis-related groups, quality measurement and transparency, and much more.

Prior to the implementation of the health insurance exchanges, there were 55 million Americans uninsured. In 2014, over 40 million remain uninsured. And it is very unlikely that most of these people will ever get health insurance.

Given the impasse in Congress, any consideration of policy modifications to improve access for the uninsured in the foreseeable future is unlikely. It is up to the states.

Rhode Island should join other leading states to address innovative ways to provide insurance more effectively and efficiently. It should not defund its exchange because, at the moment, it offers the best route to lift people out of the risk of not having insurance. But, it should set in motion a process to reincarnate the inevitable solution to health insurance, a single-payer system.

Dwight McNeill, of Little Compton, is visiting professor of health policy and population health at Suffolk University.