Why Repeal and Replace Obamacare?

At the time of its conception, the Affordable Care Act (ACA) offered an economic justification. Surely, every step closer to universal healthcare would help reduce incidences of expensive catastrophic illness and eliminate the wholly subsidized emergency room visits of the uninsured. The savings so generated, it was believed, would reduce the per capita costs of healthcare. They would also benefit health providers, allowing them to fund some of the ACA’s administrative costs via taxes levied on hospitals, labs, and medical device manufacturers. Also, the ACA added a 0.9 percent payroll surtax on earnings and a 3.8 percent tax on net investment income for individuals with incomes exceeding $200,000 ($250,000 for couples). In the interest of furthering costs reductions, the ACA encouraged additional savings with various enticements that promoted preventive care, encouraged best practices, discouraged unnecessary treatment protocols, and rewarded better treatment outcomes. In addition, it was hoped that the healthcare exchanges would promote competition between health insurers and lower insurance premiums, thus complementing and abetting healthcare savings. Towards the same end, the ACA capped insurance company profits at 15% or 20% for employer or private based coverage, respectively. Any profits above the cap would have to be returned to subscribers and has resulted in the refund of billions of dollars since the ACA was implemented. And, finally, the universal mandate was expected to secure more business for the health insurance industry and thereby win its support for the many coverage benefits stipulated in the ACA. Unfortunately for the ACA, the mandate did not fully realize one of its corollary expectations, specifically, that it would shift healthcare costs more progressively from the old, the poor, and the sick to the young, the healthy and the rich who were presumed more capable of sustaining them.

Of course, the ACA had a uniquely American and moral justification as well. Nearly every President since FDR has attempted to extend a/o improve healthcare for all Americans. Providing universal healthcare meshes well with one of our Constitutional goals “to promote the general welfare.” Besides, it is simply the right thing to do. Can any society call itself “great” that does not care for its weak and sickly? To answer this question negatively is to deny our Judeo-Christian heritage and one of the fruits of Western Civilization. So why does Congress want to repeal and replace this historically first attempt to move the country closer to universal healthcare?

The argument against the ACA has taken many forms. Considering its financial impact, it was condemned at the start as a costly boondoggle that would bankrupt America. But the non-partisan Congressional Budget Office’s Executive Summary stated “CBO and JCT (joint congressional taskforce) now estimate that, on balance, the direct spending and revenue effects of enacting H.R. 3590 (the numerical designation for the ACA) as passed by the Senate would yield a net reduction in federal deficits of $118 billion over the 2010–2019 period.” Further, the “CBO expects that the legislation, if enacted, would reduce federal budget deficits over the decade after 2019 relative to those projected under current law—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP” (Reference “Subtlety versus Bombast”). After its implementation, the ACA was called a “drain on the economy.” But 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 (Reference “Obamacare Five Years Later”). The ACA was also deemed a “job killer.” But, while manufacturing lost 45,000 jobs in 2016, 593,000 jobs were added in education and health services. In fact, health care has been one of the two fastest growing sectors of our economy (energy being the other major growth sector).

With respect to the ACA’s healthcare benefits, antagonists have claimed that, instead of serving the general welfare of Americans, it actually damages their health. But the health benefits of the ACA clearly show otherwise. Below are enumerated the ACA regulatory requirements that ALL health insurance must offer:
 ➣ No denial/dropping of coverage based upon pre-existing condition/serious illness
 ➣ No lifetime or annual limits to coverage
 ➣ No co-pays for preventive care AND the addition of preventive screening
 ➣ Gradually closing the “donut hole” for Medicare Part D
 ➣ Children can stay on parents plan until the age of 26
 ➣ Coverage for drug and opioid addiction
 ➣ Maternity, new-born , nursery home, and well-baby care
 ➣ Coverage for birth control
 ➣ Coverage for mental health services
 ➣ Coverage for home health care
 ➣ Provision of premiums w/o gender bias that discriminates against women

It seems hard to argue that the ACA does not make financial sense or that it does not serve and improve the health of Americans. So why repeal it? Like previous instances of major legislation, there are significant areas where it can be made better. The ACA is not a perfect piece of legislation. Healthcare costs, as noted above, continue to increase; and non-emergency healthcare is still not available to all Americans. Also, although the ACA is a strong step towards low cost universal healthcare, there are many possible areas of improvements. Even without legislative support, the “innovation center” ACA created within Health and Human Services (HHS) has worked to improve delivery of healthcare and slow expenditures. It has tried to nudge doctors and hospitals away from fee-for-service medicine and toward payment methods with incentives to lower costs while emphasizing quality. In the blog just referenced, I summarized some of these improvements:

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.

In another blog (reference “What Follows Obamacare?”), I summarized a series of initiatives that would further enhance the ACA, some of which have already been undertaken by the healthcare industry. In some areas, Congress could lend its support by providing “financial incentives for the education and development of primary care physicians” and by removing “the ‘charge master’ bureaucracy used by hospitals to peg billing many times more than actual costs (as determined and used by Medicare in its billing).” Many of the new provisions required by the ACA are administered through or provided by primary care physicians. Though these provisions would appear to create upward pressure on premium costs for insurers, primary care physicians actually reduce overall healthcare costs by preventing the catastrophic costs of major illnesses. And the fictional “charge master” prices force these insurers to bid against bloated and unrealistic charges. These artificial prices greatly increase premium costs. While Medicare provides a cost-based floor for determining the price for services, the “charge master” sets a very high ceiling for contract negotiations with insurers. These negotiated contracts explain the inexplicable entries and “discounts” shown on medical bills—for example, a statement charge of $4,641 is given an “insurance negotiated discount” of 40%, resulting in a charge of $2,784.60, compared to a Medicare charge of $149.76 for the same service (amounts extrapolated from an actual statement). The difference in costs between private insurance and Medicare is not only stark but indicative of potential savings. Since insurers’ profits are capped under the ACA, two results appear inevitable: premium costs will continue to rise; and hospital healthcare costs are subject to arbitrary negotiations rather than any common sense balance between costs and profit margins.

Rising costs are largely muted for subsidized enrollees in the exchanges, but they are nevertheless felt by insurance companies and the non-subsidized enrollees. Though small hospitals are emerging with the help of ACA funding, much larger hospitals are using their negotiating advantage to fast becoming the major profit centers in the healthcare industry. They are merging a/o expanding, even absorbing medical practices, satellite facilities, and labs. Some might counter this argument by pointing out the growing number of non-profit hospitals. But the IRS allows these “non-profit” institutions to earn unlimited profits, making them amongst the most profitable of all American hospitals. As noted above, economies of scale do make certain efficiencies more affordable, like team medicine and digitized medical records as noted above. But the concern about corporate sized hospitals is the same with any fast expanding business, specifically, whether excess profits are reinvested in improved operations and services or in management salaries to the detriment of employees and customer service. While hospital profits are soaring, this might be the most opportune time to assure those profits are reinvested in improving healthcare and lowering its overall costs for all Americans. Given the uncontrolled profits of very large healthcare institutions, is there any surprise that healthcare inflation continues to outpace consumer inflation?

Even this cursory analysis illustrates how the ACA has had a positive effect on healthcare costs. It also shows where more can be accomplished. Although the ACA was established as a self-paying system within the Federal budget, it has only slowed down the rising costs of healthcare. While subsidies protect 8 of 10 customers in the exchanges, it shifts the burden of higher costs onto insurance companies and unsubsidized premiums. As a result, employer provided healthcare plans continue to face higher costs, though at a lesser rate than before the ACA. Meanwhile, the future viability of the ACA exchanges is threatened as profit-capped insurance carriers lose money and leave the exchange marketplace. This exodus is a growing concern. For example, United Healthcare, perhaps the largest health insurer in the country, is bailing out of the exchanges altogether after reporting a billion dollar lost. Blue Shield just reported a $400 million dollar lost in South Carolina, but, as the only carrier left in that State’s exchange, has elected to stay in the exchange for now. Of course, this bleak forecast does not tell the whole story; for some states, like California, appear to have thriving exchanges and new innovative carriers competing there for customers. Their success should be mined and emulated throughout the country. So why repeal and replace Obamacare when it could be made more effective?

The answer to that question rests more with our politics than with any lack of imagination. Congress could develop policies that would regulate mega-hospital profits to assure investment in better care. It could enhance competition in the exchanges by supporting the risk corridor. It could invest more in the HHS innovation center to create and promote more efficiency in healthcare delivery systems. It could help relieve healthcare practitioners from the time wasting burden of the large paperwork bureaucracy that state regulations, federal privacy laws, the ACA, and disintegration of healthcare facilities entail. Instead, Republicans seem intent on repealing the ACA or forcing it into a “death spiral. Sixty times the House has voted for repeal. Why? Their pique about being excluded from its formation cannot explain the misinformation campaign and vitriol hurled at this legislation. Perhaps the answer rests in what no Republican has admitted. That 3.8% tax on net investment income (mentioned in the first paragraph) falls heavily on a small minority of Americans who hold hundreds of thousands of dollars in securities. That minority represent the Republican constituency. I think Vox news has answered my question (Reference ACA Taxes).

Since the ACA’s success depends largely on an increase in the number of insureds and the stability of the insurance exchange market, any policy that works against the ACA must address these two factors. Republican Governors, unsurprisingly, have discouraged enrollment in healthcare.gov while Republican Attorney Generals have succeeded in destroying the risk corridor where profitable insurance companies were required to contribute to a loss protection fund guaranteed by the Federal Government. The concept behind the ACA risk corridor was to keep insurers in the market during those initial years while enrollments were allowed to grow to a self-sustaining threshold. Without the risk corridor, insurers who have lost money in the exchanges might not be able to stay in the market. United Healthcare is not the only insurer that has lost money in the exchanges. Recently, it has joined with these other insurers to sue the Federal Government over their losses in the exchange marketplace. Congress has reactively responded by passing a bill that prohibits the Administration from settling this suit or replenishing the risk corridor. In other words, Congress made itself complicit in reducing premium competition in the exchanges. As insurers drop out of the market, premium rates consequently tend to go up along with federal subsidies. As a result, even though enrollees continue to exceed forecasts, ACA subsidies will increase disproportionately. And the impact on the federal budget promises to exceed forecasts as well. In other words, Obamacare is in a race to establish a beach head of enrollees before Republicans can wash Obamacare away. The risk corridor was designed to phase out by the year 2020. At this point the political waves are rising fast—perhaps fast enough to overwhelm the ACA before a replacement option can even be identified.

Disabling the risk corridor is just one example of the counterproductive results of our politics. Another example is the refusal of nineteen Republican governors to accept federal subsidies for expanding Medicaid. Where do you think those eligible for Medicaid went when denied coverage because of their governors’ actions? Well, 40% of them signed up for insurance through the exchanges. These enrollees obviously were low income Americans who were in need of healthcare services—likely desperate because of serious health concerns. As a result, premiums in those states went up across the board by 7%. But it is not only Republicans whose politics display the characteristics of an Australian boomerang. Democrats, cowed by the Republican campaign of misinformation failed to defend the ACA in two mid-term elections. Their lack of support had the same impact as an ACA disavowal and, ironically, contributed to their own campaign losses. Obamacare was placed like an albatross on their shoulders. If, instead, they had touted Obamacare’s benefits and its positive impact on ALL Americans, they would have been in a better position to build on its successes and steer it through the unintended consequences that are inevitable for any large social legislation.

Now that Republicans feel they are in a position to repeal the ACA, how do they presume to replace it? Is there a viable replacement plan and does it preserve the benefits already attained? Well, we have heard only two proposals so far. Both were advocated as far back as 2009 when the ACA was initially debated in Congress. First, Republicans always argued for tort reform in recognition that legal liability often encourages hospitals and doctors to prescribe expensive and unnecessary treatments. In effect, they wanted to advance the safe-harbor provision (that is, “everybody else does it”) to reduce malpractice suits. Democrats fought this type of reform for perhaps no better reason than the political support of the legal community. Second, Republicans have long held the idea that insurance prices would be lowered if only insurers were allowed to sell across state lines. Since states regulate health insurance differently, insurers would likely migrate to those states most amenable to their interests, that is, their profits rather than the quality of their health plans. Republicans advance this type of reform for perhaps no better reason than the political support of the healthcare insurance companies. These proposals can and should be debated, but it must be obvious they do not present a basis for replacing the ACA.

The President-Elect’s statement that he already has a plan that will repeal and replace “Obamacare on the same day, even the same hour, (a/o) the same minute” is absurd. As one Republican Senator has recently admitted, the ACA is too complicated (over 900 pages) to digest and evaluate for reform in less than three months, perhaps in a year. Another Republican Senator added that any replacement could take another two or three years to be phased in. Remember its initial creation took months of dialogue between healthcare professionals, providers, insurers, and economic analysts. If there is no better argument for repealing and replacing Obamacare than what has been presented so far, how can anybody determine where to start with a replacement.

Repealing Obamacare without a comparable replacement will put many thousands of healthcare workers out of a job and do irreparable harm to the healthcare of all Americans and, most especially to the 20+ millions whose only healthcare would be limited to ER visits in dire emergencies. Repealing Obamacare with a two or three year delay in implementation would simply roil the healthcare industry with uncertainty. The result would be confusion and perhaps the realization of a hidden agenda, that is, to encourage abandonment of the exchanges and fatal reductions in enrollment. The House legislation that just passed will likely accomplish this result and bring about the “death spiral” long desired by Republicans. That same legislation also repeals the Children’s Health Insurance Program (CHIP) of 1997 and defunds Planned Parenthood which was founded in 1969. As much as I hate euphemisms, I have to agree with Senator Schumer: this effort to repeal and replace Obamacare is “not about making America great again, but about making America sick again.”

In conclusion, as we deal with a foreign attack on our democratic institutions from without, we must begin to recognize the enemy within. This attack on the Affordable Care Act is really an assault on our democratic system of governance. That system requires debate and compromise. The problem I see with the current debate over Obamacare begins with the suppression of facts. Republicans just passed legislation to remove any analysis by the Congressional Budget Office of any bill authorizing more than 5 billion dollars. This House initiative leaves the issue of repeal’s impact on the budget merely subject to conjecture. Remember the initial argument about whether the ACA saved a trillion dollars or cost a trillion dollars (reference “Subtlety versus Bombast”). Well, we are about to have this partisan debate again, but without an independent arbiter of the facts. Republicans have cleared away any CBO factual analysis that might be critical for ACA repeal or for any significant legislation Republicans want to pass in the future. In place of facts and non-partisan analysis, they support ACA repeal on the basis of slogans and campaign misinformation, like “job killer,” “budget buster,” or “worse piece of legislation in history.”

The problem I see with compromise is a fatal misunderstanding of its purpose in our system. Compromise must be more about “how” than “what.” When legislators sit down to discuss mutual interest or to find common ground, are they merely trying to find out where their self-interests overlap? Or are they trying to determine how to preserve what we value above all else as Americans, that is, the values expressed in our Constitution and the integrity of our nation. The common ground on the ACA, then, can only be the general welfare of all Americans, not merely legal organizations, hospitals, or insurance companies. When America seeks common ground with foreign entities, it more often than not looks for common areas of self-interest. The best international agreements are almost always “win-win” scenarios. But within Congress, only one win is permissible: and that is what serves all Americans and our founding values. If legislators do not envision healthcare in this light, then they do not deserve to be elected. If instead they weigh the ACA’s merits based upon what sector of the economy may fund their respective campaigns, then they are incompetent to hold public office. Worse, if the incentive to repeal the ACA is born of indiscriminate Party loyalty or stubborn unwillingness to change a past antagonist position, I must question any motive so un-American or petty. Why would any public servant ignore the interest of the American people or the founding values of this country in order to serve Party or win a policy debate? In this case winning is not succeeding!

Besides, this is no way to run a democracy.

**Official stats are still being tabulated and are not yet available at this writing.

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