Mind The Gap: Provide health care and services to the uninsured in NC

The Affordable Care Act, or Obama care, is again a controversial political topic.  Those who oppose the ACA say the law imposes too many costs on business and many describe it as a job killer. [1] After doing some research, it seems to me that opposing the ACA is at the very least a person killer–an expense the state shouldn’t have to afford.

The ACA was enacted in 2010 with the goal of extending health insurance coverage to the estimated 15% of the US population who was lacking it and reducing US spending on healthcare– which is the largest in the world. The theoretical foundation of major requirements imposed by the ACA are well in line to meet these objectives. However, deductibles and premiums seem to have risen in the last few years.

The truth is that we will never know what would have happened had the ACA not been enacted. It may very well be the case that the recent increase in insurance costs is due to reasons other than the ACA. It may even be possible that they would have risen even more without the ACA. It is just impossible to tell whether the law is not working because it was bad policy or because it was not aggressive enough.

The ACA requires everyone living in a state that has adopted the extension to purchase health insurance but it also offers a range of subsidies to make coverage affordable for those with incomes between 100 and 400 percent of the Federal Poverty Line. By reducing the cost of insurance for people in this group, the Act meant to bring younger, healthier people into the medical coverage system. As a result, the average cost of medical bills per person would decrease and the number of people sharing the total costs would increase, therefore allowing insurance companies to offer lower premiums.

Another main provision of the law is that it bans insurance companies from denying health coverage to people with pre-existing health conditions. This provision allows every covered individual to seek and receive preventive care and services for major health conditions. Therefore, by being insured, people with pre-existing conditions would be less likely seek care before their illness had become unmanageable and expensive to treat.

In 2012, North Carolina, among the other 18 states, declined to adopt the ACA, therefore refusing to expand its social safety net for the poor and the elderly as proposed by the act of Congress. Today, the state may be facing a social crisis over the health of its poorest constituents.

Julie Hobbs just got her degree from NC State in Spanish this December and is now working with the Open Door Clinic, a branch of the Urban Ministries of Wake County providing healthcare to uninsured residents of Wake County, the majority of which fall in the so-called “Medicaid Gap”.

The Medicaid Gap is consists of people living in states that did not adopt the ACA and who are not eligible for Medicaid, Medicare or federal subsidies. According to Louise Norris, a journalist specialized in the health care reform issue, in some states the gap consists of virtually all able-bodies childless adults with incomes below 100 percent of the Federal Poverty Line, as well as a large number of parents with incomes below 100 percent of FPL. [2]

When asked about her ability to use her language skills in her current work setting Julie says “As someone who is bilingual, I have a responsibility. I am able to communicate with more people and that means I am able to advocate for more people. No matter the languages spoken by our clients, our providers and volunteers sincerely care for these individuals in the gap between Medicaid and the Affordable Care Act”.

When NC decided to not expand Medicaid in 2012, as many as 400,000 North Carolinians fell into this healthcare purgatory, 100,000 of whom are children. [3]

According to a study by the Kaiser Family foundation, North Carolina has the fourth largest uninsured population in the country. [4] In Wake County, it is estimated that between 90,000 and 95,000 residents fall in this coverage gap. [5]

People in the gap have limited options for healthcare. One of them is going to organizations like the Open Door Clinic where Julie works. “We serve people with no insurance coverage. Many of our clients don’t qualify for Madicaid because of their income, because they are non-disabled, because they do not have children and because they are immigrants.”

Julie talks to the desperately poor and desperately sick and helps them file their eligibility application to use the resources available. Julie says the numbers are dominated by Latino and African-American populations, that the majority are overweight or obese, and many of the incoming applicants have mental health conditions. She says that in many occasions she is more of a therapist than a social worker.

The good news are that students can actually do something about it. Non-profit organizations like Julie’s current employer take contributions in the form of volunteer work and donations.

When asked about the funding sources, Julie highlights the generosity of active Wake County communities. For example, last year, students from Enloe High School raised $140,000 through their annual Charity Ball and donated their proceeds to the Urban Ministries. “The money is the for the whole organization, not just the Open Door Clinic but also our food pantry and crisis support services as well as the Helen Wright Shelter for women”, says Hobbs.

There are alternatives for us to contribute. Julie says that “when a client is listened to and subsequently connected with a service or specialist they need for their healthcare, we are making progress”. Whether you are a conscious warrior with a taste for political activism or whether you are member of a student org and considering a social cause for the fundraiser you are putting together, think about the Medicaid gap and do something about it.

—–

Complementary Notes about the Costs of being uninsured

According to the Kaiser Family Foundation study cited above, research shows that uninsured people are less likely to seek and receive preventive care and services for major health conditions. In the case of the elderly, many may leave health needs untreated until they become eligible for Medicare at 65.

In turn, when they do seek care, eventually, it may be already too late and the cost of treating a developed condition will leave them with medical bills they simply cannot afford.

Research shows that children are also more likely to be covered if their parents are.

In 2016, the national average unsubsidized premium for a 40-year-old non-smoking individual was $299 per month for a plan with moderate monthly premiums and moderate costs and $246 for a plan with low monthly premiums but high costs (recommended for those who use few medical services and mostly seek preventive care). For a family below the poverty line, this amount can represent anywhere between 25 to over 50 percent of their income. A cost that is prohibitively expensive.

—–

[***] For those interested in the theoretical foundations of the argument for making health insurance mandatory, I would recommend to start researching the concepts of Moral Hazard and Adverse Selection in any “Intro to microeconomics” book they get their hands on. If accessible, Chapter 5 of the book Naked Economics by Charles Wheelan is a great place to start.

Students can also take a look at these articles:

http://www.cbsnews.com/news/health-insurance-mandate-the-economic-argument/

https://www.wsj.com/articles/SB10001424052970204124204577152842650354880

Here is my explanation for those unable to access the book:

Moral Hazard and Adverse Selection are terms used by economists to describe misalignment of incentives that arise from the problem of asymmetric information. Making health insurance mandatory is a way to overcome these behavioral, and perfectly rational, responses to situations in which one party to a transaction knows more about the transaction than the other.

In the case of health insurance provision the two parties involved are the person interested in buying insurance and the insurance company.

Presumably, people will want to get health insurance if they think they are likely to get badly ill or suffer from some condition that will end in large medical bills. The adverse selection problem means that only people that are in poor health or who suffer from pre-existing conditions will purchase insurance.

If an insurance company expects to sell insurance only to people with high probability of incurring high medical costs, they will have to raise the premiums they charge in order to cover the high expenses they expect to come from this group of “high-risk” individuals.

If the premiums are raised, relatively healthy people will want to purchase insurance. Only people that truly think they are likely to end with a large medical bill will purchase insurance.

The process is a vicious cycle and in the end the system breaks down and nobody is able to purchase health insurance. Insurance companies will not offer to insure anybody since they will only expect to losses from this business. They will be having to pay the expensive medical bills of everyone they insure because only people that will incur large expenses are willing to pay high premiums for insurance.

The problem of moral hazard describes a situation in which those who purchase insurance start to behave in a riskier way since they now have the guarantee that if things go badly for them, someone else will be paying the bill. If companies expect insured people to like riskier lives and to overlook their health in ways like stop exercising or quit brushing their teeth or begin riding their bicycle without using helmets, then they will charge higher premiums simply because they expect their medical bills to be larger.

But charging higher premiums means that people who were not likely to get in an accident or to get chronically ill are going to drop out of the “insured pool”, which means that the average bill will increase and the company will have to raise premiums again. In this example, the adverse selection kicks in and amplifies the moral hazard problem.

As you can see, adverse selection and moral hazard are not mutually exclusive and they can amplify each other’s’ effect.

By making health insurance mandatory and forbidding insurance companies to deny coverage to people with pre-existing conditions, the pool of insured will have enough healthy people to cover the costs of the sickly people. Companies won’t have to charge exorbitant premiums to cover their costs and the sickly won’t be denied coverage.

Only under this format will companies have a financial incentive to provide this service and will people at risk of becoming very ill be covered.

—–

Sources:

[1] http://www.bbc.com/news/world-us-canada-24370967

[2] https://www.healthinsurance.org/faqs/what-is-the-medicaid-coverage-gap-and-who-does-it-affect/

[3] http://www.ncchca.org/?page=288

[4] http://kff.org/uninsured/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid/

[5] http://www.alliancemedicalministry.org/wake-county-health/

[6] http://www.newsobserver.com/news/politics-government/election/article108242342.html

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s