Original Publish Date: February 7, 2017
As expected, Republicans kicked off the 115th Congress by voting in favor of repeal the Affordable Care Act (aka ObamaCare). Technically, to avoid a Democratic filibuster in the Senate, Republicans used a budget reconciliation measure to cut off ACA funding. So what comes next? Healthcare providers, plans, and patients are busy trying to read the tea leaves about what, if any, replacement is coming and what the changes mean for healthcare.
While it’s not clear how things will unfold, some key clues about what is likely to come can be found in the recent political history of health reform. The 2010 enactment of the ACA was the most significant legislative revision in the 45 years since the enactment of Medicare and Medicaid. These two programs collectively comprise roughly 22% of the federal budget and cover healthcare costs for roughly 40% of Americans. The 45 years since Medicare and Medicaid launched were marked by growing recognition of three unresolved problems with U.S. healthcare: lack of access to care for the uninsured, steadily rising costs, and mediocre quality (as measured by health outcomes and mortality).
In the early 1970s, Massachusetts Senator Ted Kennedy was the first national champion for universal national health coverage to close post-Medicaid gaps in coverage for low-income Americans. President Nixon responded by proposing a precursor of ObamaCare, as President Clinton would do 20 years later. Before President Obama, other administrations limited their efforts to narrower healthcare reforms, such as ERISA (signed into law by President Ford), which established the rights of large employers to manage self-funded employee health plans, EMTALA (signed into law by President Reagan), which established a universal right to emergency care, and Medicare prescription drug coverage, signed into law by President George W. Bush.
As the post-mortem of the ACA is written, its signature achievement was progress on the issue of access. Before 2010, over 15% of Americans were uninsured. Today, that number has been cut almost in half. The beneficiaries were principally low-income, working age people who had fallen through the cracks of healthcare coverage. ObamaCare offered two very different solutions based on income level: Medicaid eligibility for everyone below 138% of federal poverty level and subsidies on the insurance exchanges for mandatory purchases of coverage for those between 138% and 400% of federal poverty level. The basic idea was that the poorest Americans lacked the wherewithal to pay premiums and deductibles, whereas it was reasonable to expect people earning above this threshold to pay “something” so they would have skin in the game.
The Long-Running Medicaid Saga
While critics and fans often lump these distinct programs together when evaluating ObamaCare, the Medicaid expansion and the insurance exchanges tell and portend very different stories ahead. The headline on Medicaid is that the Program expanded from roughly 50 million beneficiaries in 2008 to 70 million today. The ACA was only good news for this group. Democrats celebrate the Medicaid expansion as the resolution of an unaddressed historical gap in U.S. health coverage that had lingered until the expansion. Republicans, meanwhile, see the Medicaid expansion as reckless federal spending on a badly run program. After the Supreme Court ruled that they didn’t have to take the money, eighteen Republican-led states never expanded their Medicaid programs at all. Today, Republicans advocate a roll-back that would cut Medicaid funding to 2008 levels, coupled with a shift to block grant allocation that would leave discretion in state hands.
The political controversy over Medicaid is part of the continuing saga of a key unresolved issue in American healthcare policy. When Medicare and Medicaid were both enacted in 1965, they got radically different receptions. Medicare, which extended federally funded and administered health coverage to elderly Americans, was popular with voters. The uninsured elderly elicited sympathy. By contrast, the country was divided on extending Medicaid coverage to poor Americans. White Southerners feared that Medicaid would be used to force racial integration. Conservatives worried that giving able-bodied, working-age people health coverage would disincentivize them from working their way out of poverty because earning more would mean losing health benefits in the process.
As a consequence, each state was given discretion as to whether to adopt and how to administer Medicaid, with costs being shared with the federal government. It did not become a 50-state program until 1982, when Arizona signed on. Other than pregnant women, prior to the ACA, no state Medicaid Program covered working-age, able-bodied Americans.
If President Trump and the Republican Congress make good on their desire to roll back Medicaid, the consequences will be drastic not only for the 20 million new beneficiaries, but for the states (and the taxpayers where they live). A disproportionate number live in Democratic-led states (California, New York, Illinois, etc.) that are likely to resist a return to the “access” crisis. These states will face political pressure and massive expenditures to assume the cost of Medicaid, at least in the short term until a potential reallocation in the next Presidential administration.
A Murkier Narrative Around the Exchanges
The future is murkier for the roughly 12 million people who obtained insurance coverage on the exchanges under the individual mandate. These were the people who earned too much to qualify for Medicaid or lived in states that didn’t expand Medicaid. In contrast to the unqualified positive nature of Medicaid expansion, the exchange-based coverage was not uniformly popular, to say the least. It was the expense of exchange-based policies that drove Republican political opposition. The theory underlying the exchanges was that by requiring young, healthy people to buy coverage, their premiums would balance out the high cost of care for all of the middle-aged, sick people. The economic model failed, as many “young invincibles” elected to incur a small tax penalty and not buy insurance, and costs spiraled upward, generating frustration for millions of middle-class Americans. As much as the ACA succeeded on the “access” front, it failed on the cost issue. For Americans who had employer-based coverage before the ACA, the net impact of all of the change was paying more for less, as costs went up even as the value of their insurance benefit eroded. The Affordable Care Act made healthcare more accessible, but not more affordable.
On this front, the Republicans intend to remove the individual mandate, which will put an end to an economic model that was not succeeding anyway. The Republican answer to healthcare affordability is more out-of-pocket spending, as patients begin to act much more like consumers and insurance covers a narrower range of services. This approach makes economic sense, but is likely to translate into significant pain for the healthcare industry and patients alike. Many patients may be more likely to forego routine care than to reach into their wallets – translating to more emergency room visits and more unfunded care for hospitals and physicians.
Meanwhile, the same voters who complained about ObamaCare are unlikely to celebrate the brave new world of TrumpCare. It is telling that Republicans are avoiding discussion of “replacing” ObamaCare and talking more about damage control, keeping the focus on a system that remains broken.
So where do we go from here? Can we make America’s healthcare system healthier? The bad news is that our political leaders seem more interested in playing politics than finding compromises that address the complexities of healthcare challenges. The good news is we have two years before the ACA goes away. The path to consensus about possible answers almost certainly begins with a more constructive and less polarized dialogue. Healthcare providers, plans, and patients should use this time to talk potential solutions together.
Harry Nelson is the author of From ObamaCare to TrumpCare: Why You Should Care and the managing partner of Nelson Hardiman, a healthcare law firm.