The CBO Health Insurance Status Report: Four Reasons it’s Overly Optimistic

In the Congressional Budget Office’ latest report on the status of health insurance coverage from the 2023 National Health Interview Survey released last week, a cautiously optimistic picture of coverage is presented:

“In 2023, 25.0 million people of all ages (7.6%) were uninsured at the time of interview. This was lower than, but not significantly different from 2022, when 27.6 million people of all ages (8.4%) were uninsured. Among adults ages 18 64, 10.9% were uninsured at the time of interview, 23.0% had public coverage, and 68.1% had private health insurance coverage.
The percentage of adults ages 18-64 who were uninsured in 2023 (10.9%) was lower than the percentage who were uninsured in 2022 (12.2%).
Among children ages 0–17 years, 3.9% were uninsured, 44.2% had public coverage, and 54.0% had private health insurance coverage.
The percentage of people younger than age 65 with exchange-based coverage increased from 3.7% in 2019 to 4.8% in 2023.”

That represents the highest level of coverage in modern history. Later, it adds important context: The percentage of adults ages 18–64 who were uninsured decreased between 2019 and 2023 for all family income groups shown except for adults in families with incomes greater than 400% FPL. Notably, a period in which the Covid-19 pandemic prompted federal government’s emergency funding so households and businesses could maintain their coverage.

“Among adults with incomes below 100% FPL, the percentage who were uninsured in 2023 (20.2%) was lower than, but not significantly different from, the percentage who were uninsured in 2022 (22.7%).
Among adults with incomes 100% to less than 200% FPL, the percentage who were uninsured decreased from 22.3% in 2022 to 19.1% in 2023.
Among adults with incomes 200% to 400% FPL, the percentage who were uninsured decreased from 14.2% in 2022 to 11.5% in 2023.
No significant difference was observed in the percentage of adults with incomes above 400% FPL who were uninsured between 2022 (4.1%) and 2023 (4.3%).”
In 2023, among adults ages 18–64, the percentage who were uninsured was highest among health insurance coverage of any type was higher for those with higher household income but decreased coverage in 2023 correlated to ethnicity, non-expansion of state Medicaid programs: From 2019 to 2023.”
And decreases in the ranks of the uninsured were noted across all ethnic groups:
- Among Hispanic adults, from 29.7% to 24.8%
- Among Black non-Hispanic adults, from 14.7% to 10.4% in 2023
- Among White non-Hispanic adults, decreased from 10.5% to 6.8%
- Among Asian non-Hispanic adults, from 8.8% to 4.4% in 2023.

The New York Times noted “The drops cut significantly into gaps between ethnic groups. The uninsured rate among Black Americans, for example, was almost 8% higher than for white Americans in 2010, and was only 4%higher in 2022. The data points to the broad effects of the Affordable Care Act, the landmark law President Barack Obama signed in 2010 that created new state and federal insurance marketplaces and expanded Medicaid to millions of adults. National uninsured rates have continued to drop in recent years, hitting a record low in early 2023.”

But the report also flags a reversal of the trend: “The uninsured share of the population will rise over the course of the next decade, before settling at 8.9% in 2034, largely as a result of the end of COVID-19 pandemic–related Medicaid policies, the expiration of enhanced subsidies available through the Affordable Care Act health insurance Marketplaces, and a surge in immigration that began in 2022. The largest increase in the uninsured population will be among adults ages 19–44. Employment-based coverage will be the predominant source of health insurance, and as the population ages, Medicare enrollment will grow significantly. After greater-than-expected enrollment in 2023, Marketplace enrollment is projected to reach an all-time high of twenty-three million people in 2025.”

My take:

A close reading of this report suggests its forecast might be overly optimistic. it paints a best-case picture of health insurance coverage that under-estimates the realities of household economics and marketplace trends and over-estimates the value proposition promoted by health insurers to their customers. My conclusion is based on four trends that suggest coverage might slip more than the report suggests:

The affordability of healthcare insurance is increasingly problematic to lower- and middle-income households who face inflationary prices for housing, food, energy and transportation. The CBO report verifies that household income is key to coverage and working age populations are most-at risk of losing its protections. Subsidies to fund premiums for those eligible, employer plans that expose workers to high deductibles and increased non-covered services are likely to push fewer to enroll as premiums become unaffordable to working age adults and unattractive to their employers. As outlined in a sobering KFF analysis, half of the adult population is worried about the affordability of their healthcare—and that includes 48% who have health insurance. And wages in the working age population are not keeping pace with prices for food, shelter and energy, leaving healthcare expenses including their insurance premiums and out-of-pocket obligations at greater risk.
The value proposition for health insurance coverage is eroding among employers, consumers and lawmakers. To large employers that provide employee insurance, medical costs are forcing benefits reduction or cessation altogether. Insurance has not negated their medical costs. To small employers, it’s an expensive bet to recruit and keep their workforce. To government sponsors (i.e. Medicare, Medicaid, VHA, et al), insurance is a necessary but increasingly expensive obligation with growing dependence on private insurers to administer their programs. State and federal regulators are keen to limit public spending and address disparities in their public insurance programs. All recognize that private insurers play a necessary role in the system and all recognize that confidence in health insurance protections is suspect. Thus, increased regulation of private insurers is likely though unwelcome by its members.
Public funding for government payers will be increasingly limited increasing insurer dependence on private capital for sustainability and growth. Funding for Medicare, Medicaid, Veterans and Military Health, Public Health et al are dependent on appropriations and tax collections. All are structured to invite private insurer participation: all are seeing corporate insurers seize market share from their weaker competitors. The issues are complex and controversial as evidenced by the ongoing debates about fairness in Medicare Advantage and administration of Medicaid expansion among others. And polls indicate widespread dissatisfaction with the system and lack of confidence in its insurers, hospitals, physicians or the government to fix it.
Access to private capital for private health insurers is shrinking enabling corporate insurers to play bigger roles in financing and delivering services. Private investments in healthcare services (i.e. hospitals, physicians, clinics) has slowed and momentum has shifted from sellers to buyers seeking less risk and higher returns. Capital deployment by corporate insurers i.e. UHG, HUM et al has resulted in vertically-integrated systems of health inclusive of physician services, drug distribution, ASCs and more. And funding for AI-investments that lower their admin costs and increase their contracting leverage with providers is a strategic advantage for corporate insurer that operate nationally at scale. Unless the federal government bridles their growth (which is unlikely), corporate insurers will control national coverage while others fail.

Thus, no one knows for sure what coverage will be in 2034 as presented in the CBO report. Its analysis appropriately considers medical inflation, population growth and an incremental shift to value-based purchasing in healthcare, but it fails to accommodate highly relevant changes in the capital markets, corporate insurer shareholder interests and voter sentiment.

Paul

P.S. This is an important week for healthcare: Today marks the two-year anniversary of the Supreme Court’s Dobbs decision that overturned Roe v. Wade, ending the constitutional right to an abortion that pushed reproductive rights to states. And Thursday in Atlanta, President Joe Biden and former President Donald Trump will make history in the first presidential debate between an incumbent and a former president. Reproductive rights will be a prominent theme along with immigration and border security as wedge issues for voters. The economy and inflation are the issues of most consequence to most voters, so unless the campaigns directly link healthcare spending and out of pocket costs to voter angst about their household finances, not much will be said. Notably, half of the U.S. population have unpaid medical bills and medical debt is directly related to their financial insecurity. Worth watching.

Resources

Sections in today’s Report

Quotables
Care Management
Hospitals
Insurers
Prescription Drugs
Polling
Technology

Quotables

Re: data privacy: “ … our nation’s health data privacy policy is like the “Suck Zone” – the point at which the tornado sucks you up and you just swirl in it and never come back down. Or maybe it just sucks.”

Julie Barnes Only What Matters on Health Information Policy (mailchi.mp)

Re: spirituality and public health: “In a reimagined clinical and public health system, spiritual factors would be routinely considered in creating person- and community-centered policy and practice. Although the intersections between spirituality and well-being have existed through millennia, a compelling body of empirical research currently allows poli-cy makers to learn from and build on numerous contemporary models of integrated health policies and practices. The approaches identified in this article are merely a starting point for future public health systems. As empirical scholarship increasingly illuminates these connections, public health systems must seek additional ways to recognize spiritual determinants of health as a vital dimension, and extension, of whole-person, whole-community well-being.”

Spirituality As A Determinant Of Health: Emerging Policies, Practices, And Systems (healthaffairs.org)

Re: PE investments in pharma services: “Pharma services comprise contract and outsourced services provided to the biopharmaceutical industry at every stage of the drug development and commercialization lifecycle, from preclinical research, through clinical trials and regulatory approval, to manufacturing, commercialization, and distribution. Although PE investment in pharma services reaches back to the 1990s, the past decade has seen industry trends converge to make the space increasingly attractive, and over the past two years, pharma services has become the hottest area of PE healthcare investing… This growth is being driven by three key trends. First, scientific advancements, including in cell and gene therapy, immuno oncology, and mRNA vaccines, have filled preclinical and clinical pipelines with potentially groundbreaking candidates, driving increased VC investment as well as research & investment by pharmaceutical companies. Second, the pharmaceutical industry’s continued drift toward specialty drugs and biologics has added complexity and costs at almost every stage of the drug lifecycle… Third, recent years have seen significant vertical and horizontal integration among the largest contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs), which has increased competition in the outsourcing market, brought defensive M&A into play for larger players, and pushed smaller players to seek opportunities to scale. Numerous niches within pharma services, including clinical trial sites and consulting services, remain highly fragmented, presenting both vertical and horizontal M&A opportunities.”

Q1_2024_Launch_Report_Pharma_Services.pdf (pitchbook.com)

Re: Medicare Advantage:” There is a solid set of reasons why almost 90% of our lowest income Medicare beneficiaries are now enrolled in MA plans. There are also obvious reasons why those numbers include more than 70% of African-Americans and more than 80% of Hispanics. Additionally, MA has language competency requirements for Hispanic enrollees that do not exist for fee-for-service Medicare.

The most current data about retirement benefits tells us that more than half of Black and Latinx households have no retirement savings at all. That data tells us that average Social Security payments for White retirees are hundreds of dollars higher than the benefits for African American and Hispanic retirees. That MA offers higher benefit levels for all members has created realities that are most obvious to low-income enrollees.

If a low-income enrollee has mouth pain and needs dental work and support, FFS Medicare does nothing to help. If the pain for the patient is real and immediate, that steers them into MA plans with dental benefits and it makes those benefits important to the daily life of those members. That mouth pain is likely to be permanently relevant to that patient.

MA plan satisfaction levels are high, and having those much better benefits across that entire spectrum of services is a reason why higher satisfaction levels exist for millions of people…”

George Halverson Medicare Advantage Has Saved Medicare – The Health Care Blog

Re: Pet care: “Pets these days are just like us. They get birthday cakes, day care and rubber boots to wear in the snow. Their health care is becoming more human, too — for better and for worse.

Decades ago, animal care was relatively rudimentary. Veterinarians usually owned their own clinics, and the options to treat a sick or injured pet were limited. Today, animal hospitals are equipped with expensive magnetic resonance imaging machines, round-the-clock critical care units and teams of specialists in cancer, cardiology and neurology. For pets and the people who love them, the advances are welcome.

But as animals’ health care has changed to more closely resemble our own, it has also taken on some of the problems of the human system, including the biggest one: cost. The price of veterinary care has soared more than 60% over the past decade, outpacing inflation. Private equity firms have snapped up hundreds of independent clinics, in a trend reminiscent of corporate roll-ups of doctors’ offices. Veterinarians around the country told me that they worry this is changing the way that they practice, as they face growing pressure to push costly treatments and order more tests.\

The changed landscape means that even as veterinarians can do more for dogs and cats than ever before, pet owners face sometimes heartbreaking decisions about whether they can afford the care.”

The Morning: Pet health care (nytimes.com)

Care Management

NCHS Report: Telehealth use down: The National Health Interview Survey showed that the percentage of adults who used telehealth dropped from 37% in 2021 to 30% in 2022 and the drop off distributed unequally: In 2021, seniors were the biggest users of telehealth, with 43% of people over 65 using it at some point during the year. IN 2022, telehealth use in that group dropped by nearly 30%, bringing rates in line with younger groups. And existing differences in telehealth use showed more frequent users of telehealth include women, people with college degrees, and urban residents

NHIS – National Health Interview Survey (cdc.gov)

Hospitals

AHA-Insurer Dispute: At the Annual Meeting of the American Hospital Association in DC last week, its all-out attack on “corporate insurance” was a prominent theme. In the meeting recap, AHA CEO Rick Pollack made the influential organization’s case:

“This year, there was special focus on educating policymakers that our health care system is suffering from multiple chronic conditions. These include continued government underpayment, cyberattacks, workforce shortages, broken supply chains, access to behavioral health, and irresponsible behavior by corporate commercial health insurance companies, among others — that put access to services in serious jeopardy.”

Hospitals declare War on Corporate Insurance: Handicapping the Players – Paul Keckley April 22, 2024

“Last Wednesday, FTI released its year-end 2023 summary of insurer-hospital disputes: it reported a 69% increase from 2022 in conflicts where formal negotiations broke down reached based on media coverage in 34 states. The majority of the 86 instances involved Medicare Advantage coverage or reimbursement issues and referral relationships with doctors and hospitals were disrupted, at least temporarily.”

The Holy War between Health Insurers and Hospitals: Intensifying but No End in Sight – Paul Keckley January 23, 2024

Risant Health announces second deal: Oakland, Calif.-based Kaiser Permanente’s Risant Health announced a definitive agreement to acquire Greensboro, N.C.-based Cone Health. Cone Health includes four acute-care hospitals, a behavioral health facility, three ambulatory surgery centers, eight urgent care centers and more than 120 physician practices. In 2023, it announced its first venture, acquiring Geisinger Clinic and subsequently appointing its CEO Jaewon Ryu to lead the new organization Note: NC is increasingly a high profile setting for hospital systems: Democratic candidates for Governor (Stein, Folwell) are challenging HCA’s performance in acquiring Mission (Asheville) and the legitimacy of tax exemptions for its 9 not-for-profit systems. The state hospital association has a new leader as its long-standing CEO Steve Lawler retires, and the entry of non-profit Risant in the mix. Worth watching!

Kaiser Permanente’s Risant signs deal to acquire Cone Health (fiercehealthcare.com)

Insurers

AI Opportunity for Payors: A McKinsey study finds payors can leverage AI and automation to reduce administrative costs by 13-25%, medical costs by 5-11%, and increase revenue by 3-12%.

Taking advantage of the opportunity of AI for payers | McKinsey

Paragon Institute Study: Marketplace Subsidies: “The Affordable Care Act (ACA) provided large subsidies for lower-income people to buy coverage in the exchanges. President Biden signed legislation that increased these subsidies through 2025, making plans fully-subsidized for enrollees with income between 100%- 150% of the federal poverty line (FPL). Enrollees in this income range also qualify for a cost-sharing reduction program that raises plan actuarial value to 94% with minimal deductibles and cost-sharing requirements…” Findings of analysis:

Nearly half of exchangesign-ups during the 2024 open enrollment period reported income between 100% and 150% FPL, qualifying for fully-subsidized, 94% actuarial value plans.
In nine states (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah), the number of sign-ups reporting income between 100% and 150% FPL exceed the number of potential enrollees. The problem is particularly acute in Florida, where we estimate there are four times as many enrollees reporting income in that range as meet legal requirements.
The problem of fraudulent exchangeenrollment is much more severe in states that have not adopted the ACA’s Medicaid expansion as well as in states that use the federal exchange (HealthCare.gov).
Overall, fraudulent exchangeenrollment appears to be a significant problem in nearly half of states. We estimate that fraudulent enrollment at 100 percent to 150 percent FPL is likely upwards of four to five million people in 2024. We estimate, conservatively, that this cost will likely be upwards of $15 to $20 billion this year.

The Great Obamacare Enrollment Fraud (paragoninstitute.org)

AMA survey: Physician Opinion about prior authorization: Based on a survey of 1000 physicians (400 PCP/600 Specialists) about insurer prior authorization (PA) practices:

Delays access to necessary care: 55% always/often vs. 5% rarely/never
PA leads to abandonment of recommended course of treatment: 22% always/often vs. 20% rarely/never

Survey respondents reported they engage insurers for 45 PSs/week/per physician requiring 12 hours of staff time. 27% say their PA requests are always/often denied.

prior-authorization-survey.pdf (ama-assn.org)

Sherlock Report: Blue Cross Blue Shield Plans’ Administrative Costs: PMPM expense growth decreased from 7.8% in 2022 to 5.9% in 2023. This is based on the results of the 11 continuously participating Plans in the Sherlock Benchmarks. An even sharper decline was on a constant mix basis: cost growth declined from 8.7% to 5.6%.1 For context, the U.S. Bureau of Labor Statistics CPI-U price index was 3.4% for the 12-months ended December 2023. The index for Physician Services of Medical Care services declined by 0.6% and Hospital and Related Services increased by 5.6%.

Per Sherlock analysis of BCBS Total admin cost increases for LTM: ’17: +5.9%, ’18: +6.7%, ’19: +6.6%, ’20: +5.2%, ’21: -.4%, ’22: +8.7%, ’23: +5.6%

Blue June Navigator 2024.pdf (sherlockco.com)

Prescription Drugs

NY Times’ Investigative Report: PBMs: The Times interviewed more than 300 current and former P.B.M. employees, patients, physicians, pharmacists and other industry experts, and reviewed court documents and patient records. The investigation found that the largest P.B.M.s often act in their own financial interests, at the expense of their clients and patients. Among the findings:

B.M.s sometimes push patients toward drugs with higher out-of-pocket costs, shunning cheaper alternatives.
They often charge employers and government programs like Medicare multiple times the wholesale price of a drug, keeping most of the difference for themselves. That overcharging goes far beyond the markups that pharmacies, like other retailers, typically tack on when they sell products.
The largest P.B.M.s recently established subsidiaries that harvest billions of dollars in fees from drug companies, money that flows straight to their bottom line and does nothing to reduce health care costs.
The P.B.M.s, which are responsible for paying pharmacies on behalf of employers, are driving independent drugstores out of business by not paying them enough to cover their costs. Small pharmacies have little choice but to accept these lowball rates because the largest P.B.M.s control an overwhelming majority of prescriptions. The disappearance of local pharmacies limits health care access for poorer communities but ultimately enriches the P.B.M.s’ parent companies, which own drugstores or mail-order pharmacies.
B.M.s sometimes delay or even prevent patients from getting their prescriptions. In the worst cases, patients suffer serious health consequences.

How PBMs Are Driving Up Prescription Drug Costs – The New York Times (nytimes.com)

Polling

Keckley: Trust and Confidence in system: In the Keckley Poll conducted November 13-16, 2023 among 817 U.S. adults, 69% agreed that “the health system is fundamentally flawed and needs major change.” This view is held even more among working age adults, women and those in good/fair health and less by seniors and those in poor health

Asked “How much trust and confidence do you have in … to develop a plan for the U.S. health system that maximizes what it has done well and corrects its major flaws?”, a majority aren’t sure about which institutions are more likely to lead. While physicians and hospitals enjoy an advantage over others, none is viewed as THE problem-solver for the health system’s issues.

	A Great Deal	Some	Not Much/None
Insurance Companies	18.4	43.2	38.4
Hospitals	27.4	51.9	20.7
Physicians	32.5	52.9	13.6
Federal Government	14.2	42.4	43.5

Keckley Poll: Which Institution is Best Positioned to Solve the Health System’s Flaws? – Paul Keckley November 27, 2024

Pew: Trust in government: “Public trust in the federal government, which has been low for decades, has returned to near record lows following a modest uptick in 2020 and 2021. Currently, fewer than two-in-ten Americans say they trust the government in Washington to do what is right “just about always” (1%) or “most of the time” (15%). This is among the lowest trust measures in nearly seven decades of polling. Last year, 20% said they trusted the government just about always or most of the time.” Note: trust down from 29% in 2010 to 16% in 2023; 25% Dems, 8% GOP

Public Trust in Government: 1958-2023 | Pew Research Center

Gallup: Impact of Medicaid expansion on attitudes:” In 2023, adults living in Medicaid expansion states were less than one-half as likely to be uninsured (8.3%) than their counterparts in non-Medicaid expansion states (16.8%).

Do you think it is the responsibility of the federal government to make sure all Americans have healthcare coverage, or is that not the responsibility of the federal government? 57% agree (2022 up from 47% in 2010) vs. 40% in 2022 (vs. 50% in 2010) (88% among Democrats, 28% Republicans and 59% Independents)
Which of the following approaches for providing healthcare in the United States would you prefer? 53% private run (down from 61% in 2010) vs. 43% government run (up from 34% in 2010) (Preference for System ‘based mostly on private health insurance’ for private 26% Democrats, Republicans 83% and Independents 50%)

Majority in U.S. Still Say Gov’t Should Ensure Healthcare (gallup.com)

KFF: Affordability and medical debt: “Health care affordability is also one of the top issues that voters want to hear presidential candidates talk about during the 2024 election. This data note summarizes recent KFF polling on the public’s experiences with health care costs. Main takeaways include:

About half of U.S. adults say it is difficult to afford health care costs, and one in four say they or a family member in their household had problems paying for health care in the past 12 months. Younger adults, those with lower incomes, adults in fair or poor health, and the uninsured are particularly likely to report problems affording health care in the past year…
Those who are covered by health insurance are not immune to the burden of health care costs. About half (48%) of insured adults worry about affording their monthly health insurance premium and large shares of adults with employer-sponsored insurance (ESI) and those with Marketplace coverage rate their insurance as “fair” or “poor” when it comes to their monthly premium and to out-of-pocket costs to see a doctor.
Health care debt is a burden for a large share of Americans. About four in ten adults (41%) report having debt due to medical or dental bills including debts owed to credit cards, collections agencies, family and friends, banks, and other lenders to pay for their health care costs, with disproportionate shares of Black and Hispanic adults, women, parents, those with low incomes, and uninsured adults saying they have health care debt.

Americans’ Challenges with Health Care Costs | KFF

Poll: Medical debt forgiveness: Per the NORC-AP poll conducted May 2024, majorities “strongly or somewhat favor” medical debt forgiveness in these circumstances:

Experienced health care fraud, such as being wrongfully billed for services: 66%
Has made on-time payments for an existing loan for 20 years: 59%
Has large amounts of medical debt compared to their income: 56%
Is experiencing financial hardship that is expected to prevent them from repaying their debt: 56%

Majority of Americans favor medical debt forgiveness: AP-NORC poll | AP News

Technology

CB Insights Report: Big Tech healthcare strategies:

Amazonis going deeper into primary and specialized care.
Googleis amassing troves of health data, which could play a role in its biotech bets.
Microsoftis equipping healthcare organizations with AI tools to improve clinical research, drug R&D, and care delivery.
Nvidia’s long-standing hardware dominance positions it to play a major role in the future of mart hospitals.

Big Tech in Healthcare: How Amazon, Google, Microsoft, & Nvidia are looking to transform drug R&D, primary care, and more – CB Insights Research

The CBO Health Insurance Status Report: Four Reasons it’s Overly Optimistic

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