The Healthcare System in the United States of America: pre- and post-Obamacare – PART 1/3

The United States has a GDP of €14,840 bn, with a GDP growth rate of 2.4% in 2015. Over the last 5 years it has spent an average of €7,600 per capita on public healthcare, equivalent to approximately 17% of its annual GDP. Despite being one of the highest spenders on healthcare in the world, the USA repeatedly ranks on the lower end when comparing (developed) healthcare systems across the globe.
This article will introduce the Affordable Care Act, and highlight pre-and post-Obamacare healthcare system statistics.

A snapshot of the US healthcare organization

The USA finances the healthcare system through a combination of state subsidies and grants, public insurance funds financed primarily through member premium contributions, a large private sector of services and insurances, alongside several public programs such as CHIP (Children’s Health Insurance Program), Medicare (for seniors) and Medicaid (for the most vulnerable).

The management of the healthcare system and its financing are relatively decentralized, and each state can create its own rules of eligibility and extent of coverage for the 3 abovementioned state-sponsored programs.

Patients seeking care must do so with one of the primary, secondary or tertiary care providers enlisted with their particular care program/insurer.

The healthcare quality and services in the USA in itself are satisfactory, technologically up-to-date and its array of provisions and treatments are wide. However, the infamous feedback regarding the US system addresses the issue of financing, where high medical bills are the single most common cause for filing for personal bankruptcy in the USA and causing inaccessibility to healthcare. Even those Americans with annual health insurance coverage may still face challenging healthcare costs, for which they require several years to pay back, due to high deductible plans and steep out-of-pocket contributions.

The Affordable Care Act

In 2010, in an effort to put a hold on these extremely high medical bills, the Obama administration introduced the Affordable Care Act (ACA) or Obamacare, named the Patient Care and Affordable Care Act (PPACA) in full. It is aimed at providing universal healthcare, reducing healthcare costs for households, and regulates the insurance funds to avoid patient skimming.

Since 2014, a key turning point within the healthcare system that the ACA affected, is that it mandates all citizens to have a certain level of health insurance. Many exemptions are accommodated, and in fact only 20% of US citizens at the time were without any sort of insurance, risking a possible penalty fee (i.e. an income-based tax) respective of the new mandate.

Beginning 2016 around 90% of the US population is covered by the ACA.

How many were insured before and after 2010

Prior to Obamacare in 2010, approximately 15% of the country’s population did not have insurance coverage, neither private nor public; equivalent to around 47 m Americans.

Experts confidently foresaw a continuing upward trend of the uninsured volumes, if it had not been for the introduction of the ACA.

Currently, around 10.5% still remain without insurance. The non-insured are represented as follows:

  • 7 m non-citizen immigrants
  • 8m from Medicaid gap (the share of the population that does qualify for state sponsored Medicaid nor for Marketplace subsidies in the states that did not expand Medicaid)
  • 7m aged 19-34
  • 4 m otherwise categorized
  • 13m from states that did not expand Medicaid (spread out over the above groups)

How much did the healthcare market cost before and after 2010

Per capita spending in 2010 is estimated around €7,500; in 2015 per capita spending on healthcare was estimated at €7,600.

In 2015 around 17% of GDP was spent on healthcare, which is around the same as was spent in 2010, according to the World Bank.

The graph below, shows the spending curve of the federal government on the key insurance and healthcare payers within the US system. A slightly lower total expenditure was registered in 2014 post-ACA, whilst it covers a much wider pool of patients and an entirely new and additional service, i.e. the Exchange.

Healthcare spending pre and post aca
Healthcare spending pre and post aca

How much was spent by the individual before and after introducing the ACA

The average American family in 2010 spent approximately 6% of their income on healthcare, including insurance premiums; in comparison to 16% spent on transport, 13% on food, 4.5% on clothing, and 34% on accommodation.

In 2015-2016, as reported by the Obamacare Facts website, an American will pay between 2-9.5% of their income, including cost assistance deduction granted to vulnerable groups shopping on the online Obamacare Health Insurance Marketplace. Close to 90% of Marketplace plan members received financial support in 2015.

The average medical debt in 2008 was €1,930. The average medical debt in 2013 –based on debt collection statistics, which in fact underestimate the full medical costs owed as it does not include other financing means- was €880. Even with a 50% increase to account for other financing sources, this is still well below the figure of pre-Obamacare average medical debt.

In 2013, 38% of the debt accrued in the USA was related to healthcare.

A study comparing the premium rates that various age groups (of singles) paid in 2014 compared to 2013, shows that contributions were consistently higher the latter year. A 30 year old male, for example, would have paid 230% more for the same economic-category healthcare insurance package one year later. The same demographic group, when observing the more expensive insurance package premiums, would have seen a rise of 30% in premium prices.

Premiums continue to rise yearly since the introduction of Obamacare and mandatory health insurance; on average by 7.5% for a standard insurance plan according to forecasts for the coming years (substantial discrepancies arise depending on the information source).

In part, this trend is attributed to the new marketplace forces, where insurance providers initially fought for members by offering low premiums and “cheap” deals, which are now slowly being adjusted and hiked up to match the real provider-market costs that the insurances must reimburse.

How did satisfaction rates compare before and after

Survey results of health-insured Americans before the introduction of Obamacare reported a relatively positive satisfaction rate; in 2009 close to 88% of Americans who subscribed to private health insurance voiced satisfaction with the quality, and 62% expressed satisfaction with the cost, of the healthcare they were entitled to.

Two years into Obamacare, in 2012, a different survey institute reported the same rate of satisfaction from the insured with the healthcare coverage of that period.

Impact of insurance regulation before and after

Prior to the ACA reforms, many citizens considered themselves obligated to remain in their current place of employment when the corporate job they were in provided them with secure healthcare benefits. This resulted in a job lock, linked to a loss of potential economic activity and national revenues, and a discouragement to entrepreneurialism.

Furthermore, pre-ACA insurance companies were in their right to refuse inscribing new members if these were considered too risky or had suffered severe health conditions previously.

A new insurance regulation mandates that insurance providers dedicate at least 85% of their premium revenues on care provisions and member reimbursements.

In next blog of this series we will look into the structural organization of the healthcare and insurance programs, such as Medicare, Medicaid, CHIP and the Health Insurance Marketplace.

About Laura Weynants

Performs primary and secondary market research to create Country Deep Dive Reports at TforG. Interviews KOLs and medical sector professionals to build on TforG’s healthcare market expertise and competence networks. Complementing five years of sustainability policy and CSR communication, she now focuses on grasping key medical market trends, structures and opportunities in medical sectors worldwide. Coming from an international background of living in Germany, Spain, USA, UK and Belgium, she has gained a keen insight in international organizations and language skills to perform first hand investigations. She graduated from Sussex University Brighton, UK with a BA English Literature and Sociology and achieved a Master Degree in Sustainability and Corporate Social Responsibility in EOI Business School in Madrid, Spain.