The U.S. Census Bureau is finding new waves to measure poverty. Since 2011, they have been using a new method called Supplemental Poverty Measure (SPM). This new measure takes into account various safety net programs.

The SPM now takes into account the hundreds of billions of dollars given by the federal government to the needy including food stamps, cash assistance programs, Medicaid, Medicare, and ObamaCare. It makes adjustments for major expenses such as out-of-pocket medical spending, income, and taxes.

The significance of these new measures can be seen by noting that the new measure of out-of-pocket medical spending alone added 10.5 million people to the ranks of the poor in 2016. With this new SPM, we can see that poverty rates have declined for children, non-elderly adults and the elderly since the inception of ObamaCare.

Chris Conover, Duke University healthcare economist, helps us unpack the details of the new measure. He notes the new measure accounts for the benefits provided by Medicaid and Medicare by subtracting out-of-pocket medical expenses from income to determine the net amount available to spend on necessities such as food, clothing, shelter, and utilities.

Compared to the traditional poverty measure, the SPM reduces the measured poverty rate among children. The reason for this is that most children’s medical expenses are covered by Medicaid or the Children’s Health Insurance Program (CHIP). This is seen in the below graphic:

However, the new SPM also notes increased poverty among the elderly. The elderly are covered by Medicare, not ObamaCare. Medicare has an actuarial value of 80% – that means 80% of the costs are covered by the federal government. The remaining 20% must be covered by the individual. Although many elderly purchase supplemental plans to cover this 20%, these policies increase out-of-pocket medical costs. Since the SPM measures these costs, it reflects higher numbers in poverty.

The impact of these out-of-pocket medical expenses can be seen in the last two bars on the far right of the above graphic. The difference is roughly 40% – and this single factor accounts for an increase in the measured poverty rate from 10.7 percent to 14.0 percent in 2016. 

The Impact of ObamaCare

The poverty rates among children, non-elderly adults and the elderly have declined since 2010 when ObamaCare was passed by Congress. Is this due to ObamaCare or in spite of ObamaCare?

The economy has grown, albeit slowly, since the recession of 2008. This is certainly one reason for declining poverty rates since 2010. But Conover found some surprises when unpacking the numbers.

• For children and non-elderly adults, the decline in poverty rates was unaffected by out-of-pocket medical expenses
• For the elderly, poverty actually increased when using SPM but excluding out-of-pocket medical expenses

How to explain these findings?

ObamaCare had a limited effect on the elderly. It was not meant to alter Medicare. Many seniors gravitated to Medicare Advantage Plans to lower their healthcare costs but ObamaCare actually tried to restrict these plans. Despite these restrictions, these plans grew from 11.1 million in 2010 to 17.6 million participants by 2016.

The “donut hole” that affects Medicare drug plans saw a gradual closing that helped some. According to the National Committee to preserve Social Security and Medicare, “since passage of the ACA in 2010, more than 9.4 million people with Medicare have saved over $15 billion on prescription drugs.”

So it is unclear just how much ObamaCare has actually impacted poverty. But it certainly is clear that the new Supplemental Poverty Measure has improved our ability to measure the number of Americans living in poverty.

I’m sure the architects of ObamaCare had good intentions. They never would have considered that this new healthcare legislation might actually lead to an increase in deaths. In fact, I’m sure they assumed the opposite.

But well-intentioned legislation often has unintended consequences.

New Study Results

The Wall Street Journal reports the findings of a new study in the Journal of the American Medical Association Cardiology suggests regulations in ObamaCare could be responsible for an increase in deaths.

A little known provision of ObamaCare included monetary incentives and penalties designed to induce changes in healthcare delivery and lower costs. These experimental payment models were rolled out nationally without careful study and the result is unintended side effects.

One example is the Hospital Readmissions Reduction Program, which penalizes hospitals with above-average readmissions for Medicare patients. Since readmissions drive up spending, the goal of the penalties is to encourage providers (hospitals and doctors) to take measures that reduce repeat hospitalizations. Examples would be providing patients with clearer discharge instructions and coordinating with primary-care physicians.

Hospitals are compared with national averages and cited if their 30-day readmission rate exceeds the average. Therefore, hospitals can actually be penalized even if they reduce readmissions. The penalties are assessed by reducing Medicare payments. A wide variety of medical conditions are monitored including knee and hip replacements.

Proponents of ObamaCare have touted data showing that readmissions have fallen since the penalties took effect in 2013. That’s not surprising if hospitals lose money. But the real question is what impact this has had on the patients.

The JAMA researchers examined the impact on quality of care. Their study of 115,245 Medicare patients hospitalized with heart failure looked at patients in the four years prior to and the first two years following implementation of the program. They found that the 30-day readmission rate decline to 18.4% from 20% after introduction of the penalties. But the 30-day mortality rate increased from 7.2% to 8.6% – which means about 5,400 additional deaths per year!

In other words, fewer patients were being readmitted but many more were dying.

The researchers speculated on the reasons for this increased mortality and hypothesized hospitals may be trying to “game the system.” Possible strategies included:

• Hospitals delaying readmissions beyond 30 days to avoid penalties
• Increasing observation stays to lower in-patient admissions
• Shifting in-patient care to emergency departments
• Hospitals with above-average readmissions are more likely to care for low-income patients with complicated medical cases – higher risk patients

The JAMA researchers concluded that, “like drugs and devices, public health policies should be tested in a rigorous fashion – most preferably in randomized trials – before their widespread adoption.”

The Wall Street Journal editorial board says, “Sounds like good advice, but not the sort that ObamaCare architects and masters of the economic-planning universe like Peter Orszag and Jonathan Gruber are inclined to take.”

As surgeons we are always looking for ways to do surgery through smaller incisions that will allow faster recovery. But we must always measure these new procedures against the high quality gold standard of the conventional procedure. Speed of recovery is never an improvement if the quality of outcomes is sacrificed.

The lesson here is clear. New government programs in healthcare must not only meet economic goals but must also maintain the same high quality medical standards established by the present system. Lower costs are never worth the price of more deaths.

Fake news is at it again. If you’ve followed the mainstream media accounts of this year’s ObamaCare enrollments, you’re probably confused by my headline.

My local Orlando Sentinel reported today “ObamaCare signups jump after holiday.” The article speaks of praise for the pace of enrollments this year. The Hill, a Washington, D.C. newspaper covering political news announced “ObamaCare enrollment strong in third week of sign-ups.” Is this really true?

Downward Trend Continues

Chris Conover, Duke University healthcare economist, gives us the real story in a column written for Forbes. He notes the reporter for The Hill was correct in saying, “the pace of sign-ups has exceeded last year: In the first 26 days of last year’s open enrollment period, 2.1 million people signed up compared to the 2.3 million people who signed up the first 18 days of this year’s period.”

The problem is perspective. This year’s sign-up period is six weeks shorter, ending on December 15^th. That means people have about half as much time to sign-up. With this perspective you can easily calculate that the pace of enrollment needs to double last year’s just to equal the total enrollment of last year.

Conover explains: “In reality, ObamaCare exchanges have performed badly since year 1; what is happening in this fifth open enrollment period is merely a continuation of that trend.”

As of the 25^th of November, to exceed last year’s enrollment, the daily rate of sign-ups has to be 2.9 times as fast as the rate we’ve observed thus far this year.

This trend can be depicted in two ways: Actual v. Projected Enrollment and Year-Over-Year Changes in Enrollment.

Actual v. Projected Enrollment

The Congressional Budget Office (CBO) each year predicts the number of Americans who will enroll in ObamaCare. By comparing the projections of the CBO to the actual number enrolled, we can easily see the trend:

The figures in red above reflect actual paid enrollments, not gross enrollments, since those who do not pay are dropped from the plan. Paid enrollments fell 32% below gross enrollments in year one, improved to 20% below in year two, and slipped to 21% below in year three. No data has been released on slippage below gross enrollments in subsequent years so 20% has been generously used in the above graphic.

The CBO projections of 2012 have since been modified to bear closer relationship to reality. This year the CBO projects 9.7 million paid enrollments in 2018 or 63% below where CBO once thought we would be in 2018.

Year-Over-Year Changes in Enrollment

Conover says an even clearer picture emerges of the real trend in ObamaCare enrollment when you compare year-over-year enrollment changes as seen below:

The downward trend in ObamaCare enrollment is clearly seen here in a steady decline in actual paid enrollments since the first year. Enrollment actually turned negative in year 4 and is projected now to decline further in 2018.

Conover summarizes: “The bottom line is that it is misleading at best and delusional at worst to claim that enrollment in the fifth ObamaCare open enrollment period is strong. It is quite the opposite, just as it was last year (but this year things likely will be even worse). Maybe by next Thanksgiving we’ll have gotten rid of this turkey.”