RALEIGH — State lawmakers were presented Tuesday with a litany of potential horror stories related to the federal Affordable Care Act. At its worst, Obamacare would sock North Carolina with thousands of job losses, double-digit insurance premium increases, deep Medicare cuts to help pay for the health reform, and insolvent hospitals and medical facilities.
Chris Conover, a professor at Duke University’s Center for Health Policy and Inequalities Research, offered this grim assessment to the General Assembly’s Joint Study Committee on the Affordable Care Act and Implementation Issues.
And Conover was not alone. Mona Moon, executive administrator of the State Health Plan for Teachers and State Employees, said the retirement system would incur $116 million in Obamacare compliance costs by 2017. The ever-evolving law could tag taxpayers with additional costs on state agencies, school systems, community colleges, and universities, Moon said.
Mark Fleming, vice president of government affairs for Blue Cross Blue Shield of North Carolina, said the insurance giant already sees “troubling trends,” including a mix of patients that has been sicker than expected and a program infrastructure that remains a work in progress long after its launch.
Fleming warned of the potential for higher insurance premiums for all North Carolinians as a result.
The cascade of negative testimony caused some Democratic committee members to roll their eyes. Some walked out early on Conover’s harsh evaluation, and Sen. Floyd McKissick, D-Durham, issued an almost plaintive request.
“Is it intended that we will have someone speak and provide us information who actually believes the Affordable Care Act is a good idea?” he said. “Or are we only going to hear from those who are in opposition to the Affordable Care Act?”
State Rep. Verla Insko, D-Orange, expressed surprise at Conover’s contention that the state’s economy would shrink by 90,000 full-time equivalent jobs, and 300,000 full-time equivalent positions would shift to part-time, as employers try to avoid the employer mandate to pay for insurance for full-time workers and other Obamacare-related costs.
“I don’t know that there’s any reason why the Affordable Care Act would cause a reduction in the number of employees unless we had robots doing some of the work,” Insko said.
She also insisted that higher taxes could be an economic stimulus because of multiplier effects of government spending, and that some of the nation’s most robust economies are in high-tax states.
“Unless we face these problems with objectivity and without emotion we’re quick going down the road that could lead us to a real financial problem,” said Sen. Ronald Rabin, R-Harnett. “An economic Armageddon.”
Citing a variety of studies and his own research, Conover provided numerous bad-case scenarios under Obamacare.
“Nearly all families will face at least some higher taxes under the ACA,” he said. “There are at least four losers for every winner under the ACA” once all components are implemented.
Even if the law works perfectly, it will reduce the number of uninsured by only 25 percent, he said. Of the 1.5 million North Carolinians who have no health insurance, Conover expects no more than 200,000 to be insured by the end of 2014 and 400,000 by the end of 2016.
“Relatively minor improvements” in benefits under Obamacare “are more than offset by the sizable cuts in Medicare … to bankroll 40 percent of the ACA’s costs,” Conover said. Continued Medicare cuts in doctor payments “will be devastating” to seniors’ access to health care, according to Medicare’s actuaries, he said.
“Very deep cuts” in Medicaid Disproportionate Share payments to hospitals are planned atop a 75 percent cut in Medicare DSH payments, Conover said. Those payments cover the cost for the uncompensated care of uninsured people.
Medicaid is prohibited by statute from paying more than Medicare for hospital services, so Medicare cuts will drive payment rates for both Medicaid and Medicare to well below the levels that are paid by private insurers, Conover said.
The Medicare actuary predicts that 15 percent of health facilities will be operating in the red by 2020 as a result.
“As these facilities are shuttered or start shedding money-losing services such as emergency rooms, this obviously is going to have adverse effects on access to care for the community at large, not just for seniors,” Conover said.
A quarter of North Carolina doctors do not accept Medicaid patients now due to low reimbursement rates.
“The ACA has put Medicare on a path to soon be paying less than Medicaid does for doctor services,” Conover said. “We can only imagine what’s going to happen to access to care to seniors when Medicare’s payment rates are less than half of the Medicaid levels.”
He said “a significant chunk” of Medicare savings comes from slashing Medicare Advantage plans by $200 billion over the next decade.
That will amount to $13,000 per enrollee in Part C plans and translate into premium increases ranging from $65 to $145 per month for seniors in those plans, who are disproportionately low-income minorities, Conover said. About half of Part C participants will lose that coverage by 2017, he said.
While President Obama promised a $2,500 annual premium savings to the average family under Obamacare, the Medicare actuaries say the law will increase health care spending by more than $600 billion in its first dozen years.
“This amounts to more than $7,500 for a typical family of four over that period. About 100 million Americans including 2-3 million North Carolinians are going to see their premiums go up as a consequence of the ACA,” Conover said. Some individual policyholders already received double-digit increases.
To balance the costs of covering older, sicker people, Obamacare architects said the plan needed young, healthy adults age 18-34 to account for 38 percent of all signups. But only 25 percent of those enrolled have been the “young invincibles.”
As fewer young people than needed sign up this year, insurers will have to increase premiums for 2015 to make up the difference.
“This will simply aggravate the existing problems by making exchange plans even more of a worse deal for young people than they already are,” Conover said.
Obamacare authors set aside funds to cover a lag in young exchange participants. But not enough, Conover said. “It now appears the various funds may be billions of dollars in the hole, leading to concerns in Washington about health insurance company bailouts,” he said.
Moon said Obamacare would cost the State Health Plan $116 million over a seven-year period ending in 2017. That is equivalent to about 2 percent of the plan’s costs.
But that does not include the cost of covering newly eligible plan participants, “which could add significantly to this number,” Moon said. “That might take that 2 percent up to 5 or 6 percent.”
The State Health Plan could raise premiums to adjust for those costs, but, she said, “The cost of compliance for state and local employing units whose work forces include large numbers of newly eligible employees may be significant.”
The State Health Plan already was left holding a $22 million bill after a $5 billion Obamacare-funded early retiree reinsurance program went broke in 2012.
The State Health Plan also could fall under the so-called Cadillac tax — a 40 percent excise tax on high-cost insurance plans that begins in 2018. The plan is under the trigger threshold now.
“However, if the plan’s claims trends increase dramatically, then we could find ourselves in a situation where we may be subject to that tax,” Moon said.
If the federal government reduces or eliminates subsidies to the State Health Plan’s Medicare Advantage plans, “we will see rapid increases in those premium costs,” Moon said.
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.