Obamacare, Five Years Later

In September, 2013, I wrote a piece titled “Subtlety versus Bombast” in which I accused both Republican and Democratic parties of so polluting the political discourse “that it is almost impossible to sift out any factual analysis.” The subject of their contentious discourse was the Patient Protection and Affordable Care Act, often referred to as the “Affordable Care Act” (ACA), or, mostly disparagingly, as Obamacare. The Republicans claimed that the ACA would cost one trillion dollars over the span of 10 years. The Democrats countered with their argument that the ACA would save the government one trillion dollars over the same period. Both parties quoted the non-partisan Congressional Budget Office (CBO) to prove their point. After reading the CBO report, I realized that both parties were quoting out of context while distorting the CBO’s actual conclusion: the ACA would result in a net savings to the Federal Government in its first 10 years of implementation with the promise of a positive impact on the nation’s GDP in the following 10 years. In addition, the CBO estimated that there might be as much as half a trillion dollars in non-coverage savings which it did not include in its analysis. The latter savings would depend upon future action by the health care industry and Congress.

Subsequently, in April of 2014, I wrote another blog titled “What Follows Obamacare?” in which I proposed that Congress should “(1) first, assure these non-coverage savings are realized and (2) relook at the structure of our health care delivery system to identify cost effective reforms that Congress might incentivize the health care industry to initiate.” In that blog I delineated what health care insiders had already suggested: what actions the health care industry might undertake and what incentives Congress might provide. Now, five years after the ACA became law, we have some preliminary evidence of the law’s effect:
• Healthcare spending as a percent of GDP has stopped increasing, remaining flat at 17%; and its rate of growth is the lowest in decades at 3.9% per year.
• Since 2011 annual spending per Medicare beneficiary has fallen from $12,000 to $11,200 and is expected to stay at that level through 2020, resulting in an expected annual savings of $160 billion and a further extension of Medicare’s financial ledger balance beyond the eight years projected in 2009.
• Hospital productivity has accelerated as a result of adapting to the new healthcare law which penalizes hospitals for readmissions, discourages the profit making associated with buying and depreciating the latest expensive equipment with minimal consideration of need or effectiveness, and makes attractive the recent surge in hospital mergers which furthers team medicine, best practices, a salaried medical team devoted more to outcome than quantity of services, and, as a result of economies of scale, supports the digitizing of patient medical records for their dissemination to medical teams working in concert to provide better individual patient care.
• Consumers of health care services have benefited in many ways, to include subsidized premiums, competitive pricing of insurance policies, provision of more preventive care, extension of coverage care to students living at home, elimination of insurance companies’ denial of care for various reasons such as pre-existing conditions, and so on.

Specific provisions of the ACA have not only implemented regulatory restrictions beneficial to health care consumers but have also expanded the insurance market, enriching insurance companies with billions in new revenue. Meanwhile the health care industry has become one of the fastest growing segments of the US economy, spending billions in response to the impetus the ACA has given to improve health care in America. But, in spite of these early milestones, America still spends nearly twice as much as other Western democracies on health care (France being an exception, where health care consumes 12% of GDP). The obvious conclusion is that the ACA has been a success, but that more needs to be done. So what is missing in this limited success story?

The missing element is a willingness of legislatures both in some Republican dominated states and in Washington to build on ACA’s success. While the law’s expansion of Medicaid has had a positive impact on the unemployed and working poor, there are still some Republican dominated states that have refused to accept Federal money to fund this expansion, creating a new victim class of uninsured who earn too much to qualify for Medicaid and not enough to pay for partially subsidized insurance premiums. The Republican House of Representatives, meanwhile, has passed legislation to repeal ACA over fifty times. They have threatened to shut down the government and have risked America’s financial stability by refusing to extend the debt ceiling. In spite of these backward-looking phenomena, approximately 16.4 million people have obtained insurance through the ACA exchanges, surpassing the most optimistic expectation of 15 million enrollees. So why have some legislatures, including Congress, taken such a negative position?

I believe the Republican Party has painted itself into a corner. All the negative ads, straw-man criticism, and exotic hyperbole (e.g. death panels, job killer, deficit busting, government meddling in the doctor-patient relationship, and so on) have created an insurmountable obstacle to overcome. The Party’s only response seems to be a doubling down on the rhetoric and continued obstructionist behavior. Is it possible for any politician in America—Republican or Democrat—to admit a mistake or, at least, to adjust constructively to the majority position on any policy that they initially opposed? Apparently, the answer to that question is “no”; for the appearance of being wrong or on the losing side of a policy debate cannot be born in our public forum. Public posture is rated much higher than public policy.

The unbelievable irony of this ACA debate is that it took a Democratic president to initiate and pass a Republican policy. It was Ted Kennedy that convinced President Obama that the Democratic position of a universal state sponsored health care program could never be implemented. Kennedy had come to recognize his mistake in turning down the proposal of a mandated private insurance program run through state exchanges offered by the Republican Senate Majority leader, Bob Dole. President Obama has said that the Republican proposal, initially constructed by the conservative Heritage Foundation, was the least disruptive intervention in the health care structure already established in this country. He never believed that it was the ideal construct. His decision to support it was the very model of pragmatism and compromise that our system of government demands. Republicans could have rejoiced in their victory over the Democratic “big government” solution to American health care provisioning. The Republican proposal was not only more practical, but it emphasized personal responsibility (the mandate), private enterprise (expansion of the private insurance economic sector), and market forces to control price and performance (competitive exchanges). To what purpose have Republicans snatched defeat from the jaws of success? Apparently, their emphasis is on winning at the polls and in the next election rather than in governing. In that pursuit they have been largely successful. Democrats have been cowed into not defending a law they would never have constructed without Presidential leadership. (Witness their reluctance to defend the ACA in the last two mid-term elections.) And “Obamacare” has become a negative acronym in the public domain.

Having stated all of the above, I want to be clear about the future of ACA. There are problems ahead for we are leaning into an unknown and somewhat unpredictable future. We have already witnessed a few blips in the implementation of the President’s new law: the initial rollout of healthcare.gov, the President’s too generalized statement that “if you like your policy, you can keep it,” the law’s inconsistent wording of participant’s eligibility for subsidies through state vs. Federal exchanges, and, of course, the Supreme Court’s ruling that allows states to refuse Federal funds that expand Medicaid. In November, 2013, I wrote a blog that addressed the President’s misstatement (“ACA: Affordable or Not?”). But in that article I concluded “We are at the beginning of a sea-change in America’s health care provisioning system. It’s going to take years to fully stabilize and hone this system, much as it did with Medicare.” I still believe in that conclusion.

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