As conservatives, we’re never surprised by news that Obamacare hasn’t fixed the nightmares facing the typical American confronted with medical bills. Nor are we surprised when Obamacare only makes them worse. A few years ago, Jim Epstein at Reason predicted the demise of health-sharing ministries at the hands of Obamacare’s subsidized exchanges. The good news is that Epstein was wrong: Membership in health-sharing ministries has only grown as frustration with commercial prepaid plans under the Affordable Care Act continues to mount. According to the New York Times,
[M]embership in sharing ministries has more than doubled over the last six years, to 535,000 from about 200,000, according to the Alliance of Health Care Sharing Ministries.
Epstein attributes this doubling to “Obamacare’s disastrous rollout and the extent to which new mandates would drive up premiums and leave customers seeking out cheaper options.”
The bad news, then?
Obamacare punishes the creation of new health-sharing ministries to meet this growing demand:
Will exploding demand for Samaritan’s services lead other like-minded individuals to form their own health-care mutual aid societies?
Unfortunately, no, because Obamacare won’t allow it. The Affordable Care Act includes language that exempts members of health-care sharing ministries from the individual mandate, but it’s written to insure that that exemption only applies if the organizations they belong to existed prior to the law’s passage.
More specifically, only membership in health-sharing ministries in continuous existence since December 1999 (!) exempts citizens from the individual mandate. Obamacare took a nascent alternative to Americans’ medical-billing nightmares and cartelized it. Thanks, Obamacare.
As Epstein notes, health-sharing ministries are one of the last remnants of America’s once-flourishing network of mutual aid societies,
in which a community of individuals with shared beliefs band together to form a voluntary social-safety net. A century ago, an estimated one-third of American men belonged to mutual aid societies, but most faded away with the expansion of the welfare state.
These mutual aid societies accomplished something now apparently thought impossible by many right-thinking people: the harmonious fusion of social and financial capital. Megan McArdle’s presentation on the tendency of social capital (also called “reciprocal altruism”) to dissipate financial capital among today’s American poor, keeping them poor, is justly famous. But it overlooks that life doesn’t have to be like this, and indeed wasn’t always like this.
Mutual aid societies once functioned as both extended families and actuarial instruments for their members, creating an orderly fusion of social and financial capital where the two supported each other, rather than cancelling each other out. Because organized mutual aid spread social obligations over a membership larger than the biological family, and formalized the obligations into predictable rules, individual members of mutual aid societies no longer found their own capital wiped out from helping one another, allowing poor people to accumulate capital in the long term.
In the shorter term, mutual aid societies provided, even to the very poor (albeit on a modest scale), financial benefits we associate with comfortable middle-class living, such as sick, retirement, death, and unemployment benefits. Perhaps equally important were the non-financial benefits: membership in such societies was how many poor people imposed middle-class morality on themselves. Members encouraged one another in thrift and clean living — in particular, abusing the hospitality of one’s fellow members by requesting benefits for the self-inflicted wounds of immoral behavior was typically disallowed.
Modern health sharing ministries are indeed a last echo of this mutual-aid tradition, as Epstein’s video explains:
Obamacare’s contribution to the demise of American mutual-aid societies is, as Epstein, mentioned, nothing new. As David Beito documents in “From Mutual Aid to the Welfare State,” federal programs have been horning in on mutual-aid societies’ turf since the New Deal. While many mutual-aid societies did struggle financially during the Great Depression, Beito notes that most managed somehow to remain viable.
That is, until Social Security. James J. Davis, general director of the Loyal Order of Moose, “asserted with pride” in 1935 (the same year the Social Security Act passed), “that ‘practically every provision embodied in the Social Security Act has been carried successfully by the fraternal societies of America for years, and all of it without cost to the taxpayer.’” Not surprisingly, then, the advent of Social Security in 1935 quickly began to crowd out mutual aid, leaving the fraternal organizations’ purpose much diminished – think Stonecutters rather than mutual help for even the most poor and marginalized among us.
What Social Security didn’t kill, later government assistance finished off. The Taborian Hospital was established in 1942 in Mound Bayou, Mississippi, by The Knights and Daughters of Tabor, an all-black mutual-aid society, for the benefit of poor black sharecroppers at a time when nearby hospitals often refused black patients altogether. It experienced its first taste of government “help” in 1946, when the Hill-Burton Hospital Construction Act offered states federal grants to build and operate hospitals. As Beito explains, this act “cut deeply into the patient base of black fraternal hospitals.” Increasingly intrusive regulations took their toll, too. The advent of Medicare and Medicaid in the 1960s, with their “lure of reimbursement dollars,” further undermined the ability of black mutual-aid hospitals to support themselves.
The final blow came in 1966, when the federal Office of Economic Opportunity (OEO) authorized a grant to establish a “Delta Health Center in Mound Bayou” in direct, subsidized competition with the Taborian Hospital. By 1967, the Taborian Hospital was gone, its building now property of the federal government as the first inpatient facility “built” by the OEO.
The substitution of a mutual-aid hospital with a federal facility might not sound like a great loss, but it was. The Taborian Hospital, while never able to afford the latest in medical care, offered excellent affordable care to a population that often struggled to afford any care at all. Moreover, the care was personalized, and those staffing Taborian also innovated in providing local black talent an affordable entrée into the medical profession and middle-class respectability.
The Taborian Hospital worked, until government competition decided it wouldn’t.
Like mutual aid, charitable care in medicine became a casualty of federal assistance long before Obamacare. As doctors Glueck and Cihak documented before the passage of the ACA, federal acts from Medicare and Medicaid in the ’60s to HIPAA in the ’90s have made it harder and harder for doctors to provide charitable care to their patients. In particular, Medicaid and Medicare turn giving occasional discounts to needy patients while also accepting Medicare or Medicaid patients into “fraud.” For example:
In the late 1960s, Dr. James Baker of Aberdeen WA charged $8.00 for a standard office consultation. But when a patient on blood pressure medicine came in to have blood pressure checked, Dr. Baker couldn’t justify charging the full $8.00 so he charged a more charitable $4.00 instead.
Because the government had to get the best price, the Medicare bureaucrats informed the doctor that as far as the Medicare program was concerned his fee for his standard office consultation was actually $4.00, not $8. So, the government would pay him or reimburse patients the usual 80 percent, or $3.20.
Oh, yes, and he better try really hard to collect that other 80 cents or the government would conclude that his usual fee was actually only $3.20, and the government would pay 80 percent of that, or $2.56; the formula spirals downward from there.
… If some doctor or hospital was rash enough to treat charity patients for free, the government would conclude that was the usual fee and pay nothing for services rendered to government patients.
Indeed, this seems to be the approach to several charity hospitals that had the gall to continue their charitable mission. They get into trouble when they only give charity to human beings and not to Medicare apparatchiks.
For example, Deborah Hospital, now Deborah Heart and Lung Center, a hospital whose mission from the beginning has been to provide charitable care free of charge to patients, endured a four-year fraud prosecution for accepting Medicare payments while also treating patients ineligible for government assistance free of charge. The worst part of it is that, from the perspective of the aggrieved taxpayer, these prosecutions actually make sense: why should the taxpayer be on the hook for a bill any greater than what those who don’t receive taxpayer assistance are expected to pay?
As medical lawyer Madeline P. Cosman, Ph.D., writes, “… Deborah Hospital was accused of granting incentives for referrals, submitting false claims to the government, unfairly competing with community and other specialty hospitals, and generally flouting White Coat Crime laws … Medicare has no obligation to pay for hospital care that the patient gets as a free gift.”
The “false claims” charge alone carries a $10,000 fine, per incident, plus triple damages. Each patient charge can be prosecuted as a separate false claim. “Deborah’s refusal to violate its free care mandate that defies medical law nearly forced the generous doors and charity operating rooms to close shut. In 2003, Deborah Hospital finally got a reprieve, a waiver enabling them to continue their tradition of not charging copayments.”
Deborah only continues to fulfill its charitable mission because of special pleading. Other would-be altruists, Glueck and Cihak note, have not been so lucky:
[I]n order to keep government prosecutors at bay, doctors and hospitals who have contracts with Medicare or private insurance companies are essentially forced to charge their highest fees so that the government can’t accuse them of cheating.
Obamacare by itself is not where affordable, altruistic healthcare goes to die. Its stifling of health sharing ministries is just one of many instances of federal medical “assistance” penalizing citizens for taking care of each other, instead of passively waiting for someone to take care of them.
This post was originally published on March 25, 2016.