Health Care Reform in the United States – Part XII

In recent installments of this series, we have employed the metaphor of horse racing’s Triple Crown to describe the challenges faced by the Affordable Care Act. The ACA, known perhaps more widely as ObamaCare, became law in 2010, but in many ways it has faced even greater challenges over the past twelve months. The first test in 2012 (its Kentucky Derby, as it were) was claimed on June 28, when a conservative-leaning Supreme Court upheld the central tenets of ObamaCare. The ACA then went on to win the Preakness in November with an Obama victory at the polls, ensuring there would be no outright repeal of the legislation under a Romney Administration.

All year, we had viewed the post-election convergence of three political hurdles (the expiration of Bush-era tax rates, the self-imposed trillion-dollar “sequester” of  Federal spending, and the January 1, 2013 debt-limit ceiling) as setting the stage for the third jewel in the crown — in many ways, the longest and most grueling race — likened to New York’s Belmont Stakes. Many a thoroughbred has faltered in its attempt to extend two victories into a third, and there was no assurance that in the grueling battles over revenues and outlays, the Affordable Care Act would wear the garland unchallenged.

But then the unexpected happened — the race was canceled, at least temporarily postponed.

The much-vaunted fiscal cliff never quite manifested. We did not foresee the ability of the Treasury Secretary to temporarily extend the date of default, nor did we predict a pared-down, last-minute deal between the Senate Minority Leader and the Vice President that separated the issues of tax policy from overall governmental spending. As such, our horse racing metaphor, which held up well for nearly a year, may finally have lost its relevance. And so we search for another.

To wit: On the evening of December 30, many of the federal government’s highest ranking power brokers — along with a good portion of the nation — were transfixed by a titanic, historic struggle. It was a clash that symbolized a conflict more than a century old. Yes, the Washington Redskins were locked in violent combat with the Dallas Cowboys for primacy in the Eastern Division of the National Football Conference. It was the last game of the regular season. Some might even have called it a “football cliff,” of sorts.

There is no telling how many of the nation’s elite were in the stands, but when Congress announced that no votes would be taken Sunday evening, official Washington was surely well represented in the audience. In the end, Washington won the game. Dallas went home.

Winners move forward.

In the midst of the New Year’s weekend football extravaganza, we celebrated the fundamental American need to win. The number of losing coaches and general managers whose heads rolled on Monday morning was a reminder of the singularity of victory as the metric for success. In the Capitol, despite bipartisan commission reports, pundit analysis, and the bobble-headed chatter of cable television, government had moved from discussion of a “grand bargain” on deficit reduction — with tax increases on the wealthy and deep spending cuts in government programs — to the more familiar process of helmet-to-helmet political combat wherein both brute force and creative feints are the rule.

Much has been written as events unfolded. Speaker John Boehner bargained with the president, perhaps with each party suspecting the other’s willingness or ability to implement an agreement. Perhaps sensing the Democrats’ momentum, he called in a special package and advanced his “Plan B” at the last moment. The Boehner proposal for revenue generation was to raise tax rates on those with million-dollar annual incomes or above, as opposed to the President’s starting position of raising marginal rates on individuals making more than $200,000 a year. Yet, the Speaker found that the Tea Party radicals in his own caucus were unwilling to support his position, hewing close to their pledge to never raise taxes, ever. His plan collapsed utterly.

Boehner sidelined, the president then moved the discussion to the Senate and in a now well-reported story, Minority Leader Mitch McConnell and ultimately Vice President Joe Biden separated the tax rate and spending reduction issues, focused on the former, and produced an 89-8 bipartisan affirmation of continued tax cuts for a more-expansively defined middle class, with rates on incomes over $400,000 returning to pre-Bush levels. A fragment of House Republicans, joined by a strong majority of House Democrats voted approval of the Senate plan.

In 2013, Boehner, although reelected as Speaker, is a weakened figure leading a divided majority. His contract has been renewed for a year, but he’s no longer the starting quarterback on the right, and he cannot rest easy. His half of the Congress is likely to take a backseat to the glimmer of bipartisan potential coming from the Senate, where Leader McConnell works to balance a new-found relevance with the threat of a likely Tea Party primary in Kentucky in 2014. Harry Reid will accept, if not enjoy, Joe Biden’s presence back in the chamber. Second-term Barack Obama and his signature health-care law await a real deficit debate, perhaps two months ahead — but by early January, it was clear that he and his team of Democrats had won this wildcard game. It wasn’t a blowout by any means. But a win is a win, and there is a possibility of maintaining that momentum into the playoffs just around the corner.

The beginning of a new presidential term and the seating of a new Congress mark a transition for the Affordable Care Act. Health-care costs will remain central to the intense fiscal debates which lie ahead. The life-or-death political perils which have marked the law’s first three years, however, now give way to a longer-term challenge: Can the law find stability as part of a still imperfect American health-care system?

One component of the ACA was a required expansion of Medicaid eligibility to a uniform level set at 133% of the poverty index across all states, with immediate federal financial support for 100% of the expansion costs, and 90% over a decade. In its single major change to the law’s design, the Supreme Court ruled that state participation in the Medicaid expansion must be voluntary. Health and Human Services Secretary Kathleen Sibelius (acknowledging the Court decision) has maintained a firm line for participation. Several states inquired if they could participate, but cover fewer people by drawing down the cutoff from 133% of the poverty level to, say, 100%. Those requests were denied. If a state chooses to participate, they must conform to the federal standards for coverage.

As the new year begins, around twenty states have agreed to 2014 implementation of the expanded Medicaid provision. Eleven states have said no to the expansion. A large number of states remain in varying degrees of uncertainty. Supporters of the ACA remain convinced that as policy deliberations move on from the political and ideological intensity of the initial debate, the value of the federal government’s offering to pick up the vast majority of the bill for the first decade will bend governors towards compliance. Medicaid coverage is an important part of the ACA vision. If full implementation by the states is achieved, an expanded Medicaid program will help to insure 20 million Americans — raising the current numbers covered from 60 to 80 million.

In the coming financial debate, the lingering uncertainty of the states’ participation in Medicaid expansion may serve to insulate those dollars from major budget slashing. After promising that the federal government would take up such a burden for a decade in the financing of an expansion, any cuts would allow recalcitrant, conservative governors an I-told-you-the-Feds-weren’t-trustworthy moment — and the whole game could turn on such a fumble. More likely is that Democrats will bend on Medicaid’s overall budgeting and target cuts at states that have been perceived to have unreasonably maximized federal support under current law.

Medicare, the program that provides health-care coverage to citizens over 65 years of age and disabled younger Americans, is also central to the upcoming fiscal debate. Moreover, it is the federal program most used by the ACA to promote innovation and achieve greater system-wide efficiency. The decades-long growth of per-beneficiary Medicare spending is central to the oft-heard claim that health-care costs are at the center of the nation’s financial problems. Addressing the growth of these health-care costs becomes critical in the coming decades as the number of beneficiaries grows from 47 million in 2010, to 64 million in 2020, and 80 million a decade later — all with fewer current workers paying taxes to support the program.

While the problem remains huge, recent actuarial estimates from the government have for the first time lowered per-beneficiary Medicare cost projections below overall economic growth for the next decade. This welcome news may have been induced by anticipation of the ACA and its many cost-control measures. The degree of the change — and whether it represents a trend — remains uncertain, but it is undeniably a glimmer of good news.

Having set aside, at least for now, a wholesale restructuring of Medicare (see our earlier essays about Congressman Ryan’s premium-support plan), Congress will choose from a playbook of three broad options over the coming year. These choices illustrate the complexity of real policy choices. All of the options recognize that the American health-care delivery system is inefficient. A recent report from the Institute of Medicine (a branch of the National Academy of Sciences) asserts that up to thirty percent of health care expenditures are in one way or another “wasted.”  Thus, the ACA contains myriad initiatives to reorganize how care is provided — to achieve value instead of volume as health care’s driving force.

As a first option, the government will pursue all of those potential cost-cutting measures written into the ACA. All of those efforts will require investment and governmental spending to get off the ground. Reducing projected expenditures supporting ACA implementation could well undermine these longer-term improvements. On this front, Republicans will no doubt try to put pressure on the passer to hurry his throws, if not to get an outright sack in the name of “cutting government spending,” even if such short-term costs could lead to more profound savings down the road.

A second option involves reducing the number of people eligible for Medicare, most often proposed by raising eligibility requirements from 65 years to 67 years of age, and even beyond. “Cover fewer people and spend less” goes the argument. It seems simple, but below the surface, the details of a non-cooperative reality cloud the choice. People in this age group are Medicare’s least-costly beneficiaries. Because of early retirement or weakness in the job market, without Medicare they would be uninsured or would effectively shift their health-care costs back to their employers. A simple choice on the surface creates adverse effects on other dimensions of the system.

The third Medicare cost-reduction strategy is direct action on premium levels, reimbursement rates, and the fees and taxes charged to the different entities in the business of providing care, such as doctors, hospitals, pharmaceutical companies, medical product manufacturers, etc. As noted during the presidential campaign, the ACA built more than $700 billion of savings over ten years into the program. Romney said he would restore the money to Medicare in what was perhaps the Republican campaign’s most profound departure from reality. The coming fiscal debate will again turn to these proven methods to achieve additional spending reductions. Cutting too deeply, however, may undermine the ability and willingness of the health-care community to embrace structural change.

To push the metaphor one more down — you want the doctors, the hospitals and the insurance companies to keep suiting up for the game.

The final challenge for the ACA in 2013 is the real-time implementation of expanded insurance coverage through Health Insurance Exchanges, set to begin on January 1, 2014. This marks the official implementation date for ObamaCare. The exchanges create a structure that allows individuals and small businesses to compare insurance products and receive federal tax subsidies, if financially eligible. States were chosen, after considerable controversy, as the ACA’s principal organizing units for the exchanges, with a default role for the federal government if states did not comply. As with the debate over Medicaid expansion, both caution and political ideology have resulted in only eighteen states formalizing their commitment. The remainder of states have either opposed setting up their own exchanges, or are considering a combined partnership between state and federal responsibility. Again, ACA supporters assume that time will trend toward more state leadership for a number of reasons, not the least because conservative political leaders in resistant states will not want to give the federal government more authority by default.

However the federal–state balance ultimately evolves, 19-million Americans are projected to purchase coverage through the exchanges. As the reality of implementation unfolds, potential beneficiaries will engage (many for the first time) with the reality of premium costs, co-payments, deductibles, limits on benefits, and varying access to doctors that, even after a financial subsidy, will be challenging to afford. They will no longer be uninsured, but they will be part of the broader fraternity of those who struggle every day with the complexities of insuring one’s health and the health of one’s family.

No matter what the color commentators are saying, ObamaCare is a benefit, not a gift.

Americans are still divided in their opinion toward the ACA. Polls have shown a remarkable consistency in the numbers. Despite the intensity of the public debate, around 42-43% favor the law, while 44-45% are opposed. Democrats dominate the former category, Republicans the latter.

A unifying reality, however, is that most people simply don’t understand the complexity of the game with the sophistication of the players and coaches. The creation and analysis of health-care policy exists on a level far deeper than a fan’s experience on a weekend afternoon or a Monday night. While ObamaCare will expand coverage and hopefully lower overall costs, it will not magically make the system easier to comprehend. And that is a liability for any team trying to make real change.

Thus far, the Democrats have won the regular season and ObamaCare is poised for a playoff run, but the challenges only get harder from here. As we look at the post-season match-ups, the ACA looks pretty good on paper. It has the potential to help both individuals and the overall economy by expanding access to insurance and moderating the explosive costs associated with health care in the coming decades. But the opponents of ObamaCare are not without their own strengths. First, there is the natural resistance to change amongst the populace. Combine that with the reaction of families finally faced with a governmental mandate to purchase an insurance plan that, while helpful, will also stretch budgets, and it would be foolhardy to predict a final score in a game just set to begin.

Still, as we stand at the cusp of the post-season, President Obama and the ACA are now rolling and have some momentum, while the Republicans seem in disarray. But, as the old football adage goes, all of that can change on any given Sunday. No matter what happens, one thing seems likely: this game is going to be won or lost in the trenches, by hard-hitting players unafraid of getting dirty.

Jim Tallon is the president of the United Hospital Fund, a think tank in New York City. He served previously as Majority Leader of the New York State Assembly. political cartoon by DonkeyHotey.