international analysis and commentary

Healthy ironies: the fate of the Affordable Care Act

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Early in the push to enact Obamacare, I had a friendly debate with Judy Feder, a professor at Georgetown University and one of the deans of health policy in America. Our argument concerned the dichotomy between healthcare affordability for the middle class versus the plight of the uninsured – the roughly 15% of non-elderly Americans who lack health insurance coverage. This comprises, for the most part, the working poor.

Judy argued for the prevailing Democratic view: Not only would covering the uninsured lower healthcare costs overall, but also we shouldn’t pass up this opportunity to achieve the moral imperative of healthcare for all that Democrats have sought since President Harry Truman first proposed it 68 years ago this week.

I believed, for tactical reasons, that healthcare reform should proceed in steps: The piece-by-piece approach to building the Great Society of President Lyndon Johnson (1963-1969) had proven far more successful than subsequent grandiose attempts at comprehensive health care reform under Presidents Jimmy Carter and Bill Clinton.  The overriding interest of the American public was ending skyrocketing costs and coverage denials, not creating a new (and expensive) welfare program.  Additionally the latter would be more easily attainable once cost controls were put in place, making it more affordable.

Ironically, it now seems that coverage for poorer Americans – realized through expansion of the Medicaid program – may perhaps turn out to be Obamacare’s only real success. It may also provide the platform for further improvements in affordability and quality of coverage for all other Americans.

Two decades after Truman first called for universal healthcare, Johnson shepherded through Congress the enactment of Medicare (government health insurance for the elderly and disabled) and Medicaid (which covers poor families with children). Medicaid is a joint federal/state program, leaving states to decide, to some degree, how much coverage to provide and how high up the income scale to provide it; in some states only adults with incomes as low as 10% of poverty (or $2,355/year for a family of four) are eligible.

As a result, until now many low-income families and adults have made too much money to qualify for Medicaid and yet too little money to afford private insurance. That has meant that millions of Americans seek healthcare only in emergency rooms – where they cannot be denied treatment – driving up hospital costs that then are shifted to other insured patients and to the taxpayers. It’s not surprising that most experts felt we needed to tackle all these inter-related problems at once.

Obamacare therefore was one of the longest and most complex pieces of legislation ever enacted. The most wide-reaching component was the “guaranteed issue” requirement, which will require private insurers to cover all Americans. It achieves this by imposing the now-infamous “individual mandate”, which quickly became the focus of conservative horror. As most people know by now, the Republican outrage against the mandate was somewhat disingenuous given that the basic idea originated with a conservative think tank and then underpinned the Massachusetts law signed by then-Governor Mitt Romney and which constituted the model for Obamacare – you may remember Romney as the man who spent all last year attacking Obamacare.

There were similar ironies: conservatives raged against making the system more efficient in a way that saved Medicare money, decrying it as defunding the program (though this is an outcome conservatives actually advocate). They labeled the efforts to direct public funding to medical procedures proven to work rather than those that don’t as “death panels.” Their real bête noir, of course, was the expansion of Medicaid to cover the working poor – exacerbated by the fact that this provision was to be funded largely through taxes targeted to the rich. 

Though the Supreme Court unexpectedly upheld the constitutionality of the mandate, it threw conservatives a bone by declaring that the federal government couldn’t require states to expand Medicaid and would have to make expansion optional. This ruling by the Justices turned opposition to the Medicaid expansion into the last redoubt of resistance to healthcare reform, especially for Republican governors with presidential ambitions. They argued and continue to argue that states cannot afford to provide poor people coverage (though they already do, by subsidizing the more expensive emergency room care) and fear that the federal government may eventually abandon the program, leaving states to hold the bag.

Since these states tend to have high concentrations of poor residents and scant Medicaid coverage, roughly 5 million of the 18 million uninsured who could have been covered by the expansion are being denied. And because the law as written anticipating that the working poor would be taken care of under what was originally conceived as the mandatory Medicaid expansion, now that this part of Obamacare no longer stands these Americans are suddenly too poor to qualify for the subsidized insurance policies being provided to uninsured middle class families.

So, where do we go from here?

In all likelihood, Medicaid’s higher coverage levels will slowly spread to more states over time. It took 17 years for Arizona, the last holdout, to adopt the original Medicaid program. Now as then, it ultimately makes economic sense for states to join in and obtain federally-subsidized coverage for their citizens. Such pressures will likely bring almost all states to sign-up – once President Obama, and the Republican governors who hope to succeed him, have left office, therefore putting an end to the political side of the healthcare controversy.

This won’t happen without creative adaptations, however. One example is already at work in Arkansas, where the Republican legislature agreed to expansion only if the state provides private insurance to Medicaid recipients rather than some awful government program. This actually was long the preferred approach of many Democrats, too. At some point, some states will likely even try letting public and private sector plans compete for customers – this is the “public option” liberals advocated for but which conservatives forced out of Obamacare. Again, it will probably take a Republican to pass such a measure – as a way to shame the government for being uncompetitive – and make a once-liberal objective a reality. 

Besides providing insurance coverage to the working poor, Obamacare also aims to lower costs over time for all Americans, by tying payment to performance (as in most areas of the economy). Ideally, a system will emerge where people (or their insurers) pay for health, not for treatment. Such a system requires that the bill-payer ultimately care about the patient’s long-term health, not just the immediate expense. In this regard, Medicaid is expected to lead the way. In our current, employer-based coverage system, insurers know they probably won’t be paying for your poor health 20 years from now. But since investments in preventive care and wellness pay off not just in terms of better health but also of lower costs, I’m betting that taxpayers and legislators on the hook for the long-run will eventually support moving in this direction for Medicaid recipients.

Thus, Medicaid may wind up as the proving ground for the rest of the healthcare reform. Meanwhile, the centerpieces of Obamacare – business coverage for all employees, the Internet-based marketplace for affordable coverage, the fiasco over forcing families out of lower-quality plans, in other words all the provisions aimed at helping the great American middleclass – are foundering. Judy Feder and I might both have had it half-right and half-wrong: Obamacare bit off too much at once – it should have started just with expanding Medicaid as a template for everything that would follow. In this world of healthy ironies, this might even become the Republican platform of the future.