“No one can see a bubble. That’s what makes it a bubble.” That was Christian Bale’s character’s summation of a market bubble in last year’s hit movie “The Big Short,” which chronicled the few investors who saw the signs pointing to the mortgage market collapse. With terrorism, email scandals and race relations dominating the headlines, has a healthcare bubble been filling up quietly behind the scenes?
Since the 2010 passage of the Patient Protection and Affordable Care Act (ACA or Obamacare), the health-care industry has seen record growth and increased revenues. Why? Illness, especially chronic, sadly is a moneymaking business. Illness requires more office visits, more hospitalizations and inevitably more bills. Obamacare halted insurance companies’ practice of rating premiums based on a customers illness history, or as more commonly known, preexisting conditions.
In the 2013 roll out of the Obamacare exchanges, the promised result was that more people would have insurance coverage. Undoubtedly, this part of the law worked. By Jan. 7, 2016, more than 11.3 million Americans had signed up for Obamacare; by March, 20.3 million were covered. A large percentage of these new insureds were high-risk. As NBC reported in April, “Last month, an analysis of medical claims from the Blue Cross Blue Shield Association concluded that insurers gained a sicker, more expensive patient population as a result of the law.”
While bad for insurance companies, this was very good for the bottom lines of the merging large healthcare systems and newly formed physician monolith groups. A drafter of the law admitted the law was founded on the belief that the “consolidation of doctors into larger physician groups was inevitable and desirable.” With consolidation, the dollars have racked up. According to U.S. News & World Report, “from June 3, 2010, to June 30, 2015, the Russell 3000 Healthcare benchmark (an all capitalization index) posted a gain of 176.8 percent.”
So there are profits, but where is the bubble? Joe Cortelli, a health insurance expert from the nationwide consulting group HIG, explains:
“We have done nothing to improve the outcomes of the 10 percent of the population that drives 80 percent of our claims costs. We have merely pumped billions of dollars into these [Obamacare] exchanges masking the real problems. Unless the government can continue to pump money into these exchanges, the end result is not that hard to imagine. It is not a question of how, but when, this will all come home to roost.”