After a few months respite from our now four-year commentary on health reform in the United States, we return with inspiration taken from the nation’s focus on Dr. Martin Luther King, Jr.’s “I Have a Dream” speech that concluded the Jobs and Justice March on Washington in August 1963. How much the nation has changed in 50 years was clear as Barack Hussein Obama, President of the United States of America, came to the anniversary microphone. How little the nation has changed in 50 years becomes clearer as middle incomes falter, and the divide between rich and poor widens.
We were reminded that Lyndon Baines Johnson, in the years following Dr. King’s speech, challenged a prosperous, post-war American generation to engage in a War on Poverty. Yet, five decades later, the poor are a political footnote, and Johnson’s Democratic Party successors voice stabilization of the middle class as the goal of government in an economy which challenges broadly distributed prosperity at every turn.
At almost eighteen percent of the American economy, and with personal meaning for every individual, health care is an enormous part of our national, political and economic experience. Commenting on the fiftieth anniversary of King’s speech in the Washington Post, Matt Miller reminded readers that in 1963, health care consumed barely five-and-a-half percent of our economic output.
In the years since the speech, health care has given us enormous benefits — at extraordinary cost. If King sought economic investment in our people, health care emerged to dominate the answer, crowding out other choices.
Contrasting our levels of health care spending with other industrial nations, this lost “opportunity cost” is roughly $1 trillion annually, potential funding for the jobs we don’t have, schools that underachieve, and the colleges we increasingly can’t afford. In his article, Miller insightfully noted, “Getting serious about justice means getting serious about health care costs.”
Now that the celebrations of August are behind us, we find ourselves on the cusp of fully implementing the Affordable Care Act (ACA), or as it is colloquially known, ObamaCare. Many provisions are already in place, and we now enter a steady march toward the official beginning on January 1, 2014. Our contemporaneous commentaries have reported on the law’s progress over the years since 2009, first through Congress, then through the Courts, and ultimately through the election season of 2012.
Now, as implementation looms, the ObamaCare debate recalls other visions from the 1960s. In 1965, Barry McGuire recorded The Eve of Destruction. In the forms of the day, it went viral, and was heard again and again as the darkness of deceit, violence and hate played out at home and abroad. The 2013 voices of doom, labeled aptly by E.J. Dionne as “The Armageddon Caucus,” echo McGuire’s words, framing the health care debate with increasingly apocalyptic terms.
By contrast, in early 1968, Hair burst onto the Broadway stage. The original cast recording, and the even more popular Fifth Dimension, 1969 version, introduced a generation to The Age of Aquarius combined with Let the Sunshine In. While ObamaCare falls somewhat short of the New Age, it is the most overt manifestation of the hope the forty-fourth President brought with him to the White House.
Are we entering darkness or light? Are we facing a deepening evening or the lights of dawn? Welcome to ObamaCare 2013, the continuing debate.
Our trusted series of public opinion polls by the non-partisan Henry J. Kaiser Family Foundation reported again in August that fifty-one percent of the people don’t have enough information about the ACA to understand its impact on them or their families. Among those most likely to be affected (those with lower incomes, minorities, the young, and the uninsured) the information deficit rises above sixty percent.
More than forty percent of Americans believe, inaccurately, that the law has been repealed or is otherwise not in effect. While the public tilts mildly negative on overall opinion of the law, it holds strongly a contradictory view, in that fifty-seven percent of those polled do not agree that government should cut off funding to halt implementation.
Our goal in this series has been to meet the need for information and to bridge the understanding of a critical public policy discussion with the sometimes bewildering complexity of health reform. As implementation nears, we will attempt to bridge that gap again by considering the ACA through the lens of the broader economy and society, the evolving nature of our political system, and finally the law itself.
Much is written daily about the evolving international economy and its weakening of the American middle class. In retrospect, perhaps the generation of post-War economic domination by the United States was an anomaly in the broad sweep of development. Learned voices in this debate exceed our insight, but we can comment on how certain particularities of the American economy in the past seventy years influenced the creation of the health insurance system as it exists today.
The growth and distribution of wealth is important to the health care debate because of the opportunity cost noted earlier. It is specifically influential, however, because the unique circumstances of World War II led the United States to build its health care insurance system by linking it to employment. The brief version of the story is that a health insurance “fringe benefit” was ruled outside wartime wage controls. To attract workers, many of them women, many employers added a health insurance benefit to workers’ cash compensation at a time of high demand for labor. From 1945 to 1980, American workers, unionized or not, experienced a steadily strengthening health care benefit, eventually encompassing their dependents, as a complement to wages from the job.
Indeed, among firms with 200 or more employees, over 98 percent provide health-insurance benefits in 2013. However, the linkage of health care to employment status has led, in recent decades, to increased numbers of uninsured as smaller firms have grown and unionization has declined. In addition, across the economy, the rate of health-insurance-premium increases has suppressed wage growth. The number of firms providing coverage has reduced, the comprehensiveness of the coverage has declined, and the share of costs paid by employees has increased.
The costs of our health care system have been a major cause of a flattening wage distribution since the early 1980s and the competitive restructuring of the economy has weakened the stability of health care financing overall. This can be seen, in the end, as an outgrowth of the unique, American linkage of health care coverage to one’s job, born in the midst of a world war fought seven decades ago.
Given this linkage between jobs and health insurance in the United States, it’s no surprise that a flash point in the ACA-implementation debate would be related to employment. In addition to the provision allowing firms with under fifty employees to purchase coverage through the newly created health insurance “marketplaces,” the law requires that firms above fifty full-time workers provide health insurance coverage for their employees or pay a penalty. That penalty would then be allocated to help cover public subsidies that workers would receive when obtaining coverage on their own. In the language of the debate, this is called “the employer mandate.”
The controversy has centered on larger firms, often in the food service industry, that employ large numbers of low-wage workers. Under the law, full-time workers are defined at thirty hours per week. Prominent employers countered this provision in the law by threatening to reduce the number of hours of work for each employee in order to avoid either providing the insurance or paying the penalty. The Administration, deflecting the controversy, decided to delay implementation of the penalty until 2015.
Perhaps revealing their intent to further suppress employee compensation regardless of the ACA, several high-visibility firms have continued with their threat even though there is currently no penalty to be paid. Reducing costs, blaming ObamaCare and counting on the public having little information about the details of the debate is a winning combination in segments of the real economy.
This brief explanation of a relatively obscure detail of the ACA opens our consideration of a second pillar of the current state of the ObamaCare debate: the evolving nature of our political system
ObamaCare is built on the framework of our existing health care financing arrangements. It retains and improves our public coverage through Medicare and Medicaid, and uses administrative structure, subsidy — and eventually tax penalties — to enable the nation’s private insurance companies to eliminate their risk-avoidance practices through the creation of broader insurance pools. The concept descends directly from a generation of Republican policy proposals which culminated in Massachusetts under Governor Mitt Romney’s leadership.
Had ObamaCare been implemented in the politics prior to 2008, the answer to its interaction with the complexities of existing workforce coverage would have been mitigated by routine technical amendments to the law, adjusting timing, subsidies and requirements to conform with practical experience — but we are now in a wholly different phase of political history.
While Democrats have evolved their coalition of interest groups and increasingly diverse demographics, the internal balance among Republicans has been fundamentally altered. An anti-government, libertarian, fundamentalist and nativist coalition has emerged as an insurgent core, especially in the House of Representatives. In a pre-2008 world, the problems with the employer mandate could have been negotiated to the point of implementation with few outside of the Beltway being any the wiser. Now, however, opposition to Obama-Care aligns with the potential for a full government shutdown in fall 2013 as Dionne’s Armageddon Caucus looks upon the ACA, if not the very notion of using public tools to offset private risk, as an existential battle for the soul of the republic. Rather than offering an alternative to the ACA, Washington Republicans have largely abandoned the goal of advancing a health care policy alternative.
The picture among the states is somewhat mixed. As we write, roughly half of the states will implement the Medicaid expansion outlined in the law, but made permissive by the Supreme Court. Recent decisions in Michigan add to a small but growing number of Republican led states, aided by the Obama administration’s negotiating flexibility, to take advantage of federally funded Medicaid expansions.
While opposition to ObamaCare has served to energize the Republican Party’s realignment to a newly defined conservatism, it now confronts the Party’s loss to a second term Obama Presidency, its increasing distance from the nation’s diverse population realignment, and myriad practical tests of governing in Washington and the states. For the Democrats, the ACA has not yet reached legacy terms for Obama, but the 2014 implementation further solidifies its place in the laws of the land.
Our third theme, after the economy and politics, is the status of the law itself in these final months of 2013. The first day of October begins a six month initial open-enrollment period to purchase insurance coverage through state-based or national “marketplaces” referenced above. To many people, this is ObamaCare and presents the critical test of initial viability.
To be sure, many of the law’s provisions are already in place. We have written previously about the benefit to young persons who can now remain on their family insurance policies through age 26; about the rebates already paid to persons reflecting the degree to which insurance companies haven’t met a standard that eighty percent of premium costs must be allocated to health benefits; and about the declining size of the “doughnut hole” in the Medicare drug benefit. Dozens of additional provisions have already taken effect, and the actual experience with Medicaid expansion will be recorded during 2014.
The administration signaled the importance of the October 1 launch with an all-hands-on-deck strategy among Democratic leaders. Former President Bill Clinton, christened the “secretary of explaining stuff” by President Obama, launched the fact-based component of the roll out in a lecture at his library in Little Rock on September 4. While President Obama’s personal role will, no doubt, be influenced by the timing, results and aftermath of the Syria chemical-weapons debate which is unfolding as we prepare this commentary, the First Lady, along with Vice President Joe Biden, Jill Biden, and numerous celebrities, political and interest-group leaders will support with personal appearances the “ground game” tactics which were the mark of electoral success in 2012.
The simple success metric will be numbers of persons signing up for coverage. Announced White House targets for this initial implementation phase are around seven million enrollees, of which between two and three million should be younger beneficiaries broadening the health care risk of the newly insured pool. California, with a favorable political structure and large numbers of lower-income uninsured persons will be a prime testing ground. Florida and Texas present huge demographic opportunities, but with more hostile political environments. New York may present a sleeper opportunity for the sale of ObamaCare. It is a state with generally high insurance coverage, but also with a uniquely high individual insurance cost base. Some projections indicate that the average policy cost may drop in New York State by fifty percent under the ACA.
Beyond politically motivated hyperbole, the initial enrollment period faces three immediate challenges.
Will potential enrollees be sufficiently motivated to enter the process? While the tax penalty of the ACA’s “mandate” phases in gradually over several years, the likely initial test of interest will be influenced by substantial media campaigns which will begin in October and the “boots on the ground” army of navigators supported by the law or the health care community.
A key issue will be around the price of coverage. While opponents of the law have advanced stories of exorbitant premium levels, several analyses, most recently by the non-partisan RAND Corporation, have affirmed more modest levels. For the individual applicant the test will be between the benefits of coverage, the level of subsidy (which could exceed $5,000 per family), and the limits on available personal resources with which to make the purchase. In earlier times, it could be expected that Congress could work around the edges of these limits to ultimately bring the numbers into alignment. Given the post-2008 political world, that assumption is far less certain.
Finally, will the technology of enrollment work, assuming a period of glitches routine to any new information process? Applicants will be presented with an array of new insurance choices. These choices will be specific to their community and dependent on the ultimate net costs of premiums, including government subsidies. Further, to participate as individuals in the new marketplaces, people will have to enter their own personal financial data for IRS verification. The technical capacity of the marketplace systems to process this information in a timely fashion may influence the success of ACA’s launch.
While ObamaCare remains for some the caricature of threatening darkness, the larger debate seems to be giving way to competing issues and the potential for still-to-be-defined political alignments. The economy lurches forward, having finally added an improvement, albeit imperfect, in health care financing with the Affordable Care Act. And the people remain as confused as ever about how all of this fits together, but perhaps with a bit more light now dawning on the subject.
To track this series from its beginning, click here.