September 23, 2014 by Tony Novak
Associated Press introduced a new term “health care numerology” referring to the political spin and manipulation of data reported about the results of Affordable Care Act implementation. We will surely get more of this in the coming months and years.
Apparently the 8 million people enrolled of the individual health insurance exchanges previously announced is now actually close to 7 million with another 2 million still questionable, according to CMS.
So what? Why does this matter? Because the “acid test” measurement of ACA is to divide the cost of the programs by the number of people brought into the health care system. The smaller the denominator in this calculation, the less effective the new program looks. Remember that we’ve spent an enormous amount of money building these exchanges and an even greater amount finding creative ways to advertise them.
By my last published estimate, if you look at the amount spent in 2014 for ACA divided by the number of new enrollees, you come up with a cost of $130,000 per enrollee. This figure is high but not out of range with what we originally expected. Sure, there is plenty of room to argue what should and should not be included in the measurement and I am completely skipping that discussion here. But the point here is that if the number of enrollees drops by a couple of million then that cost per enrollee rises dramatically.
I suspect that when it’s all finally settled and we agree on the numbers, the net cost per enrollee for the 2014-2106 time frame will be in the range of $200,000. I’ve never had any doubt that from a purely financial perspective that it would have been less expensive for us as a nation to continue to offer charity care as we did prior to ACA and simply reimburse hospitals for the cost of this care. But that system wasn’t working politically for a whole range of reasons outside the scope of this blog post. So now we’re stuck with the new system – more costly for the 7 million who initially got coverage but still struggling with what to do with the 40+ million who still have no coverage.