On March 23, 2010, President Barack Obama signed into law the most sweeping overhaul of the health care system since Lyndon Johnson established the Medicare and Medicaid programs via the Social Security Amendments of 1965. Obama did so without a single Republican vote and against the wishes of a majority of US voters.
Last Tuesday, voters exacted their revenge by surprisingly electing Donald Trump as Obama’s successor, and putting the Affordable Care Act (ACA or, “Obamacare”) on life support.
Since the election, pundits have been scrambling to determine the fate of the health care system. Financial markets have punished medical care providers (HCA, Tenet, Community Health Systems) and device manufacturers, while rallying behind health insurers and drug manufacturers, reflecting the market’s view of winners and losers from an anticipated ACA overhaul.
Before attempting to guess how far and how fast ACA will be overhauled, it’s important to re-visit how well, or poorly, the ACA met its original expectations.
Contemporaneous writings at the time of ACA passage trumpeted three primary goals for the legislation:
· Reduce the number of uninsured Americans
· Bend the cost curve of national health care expenditures
· Render health care more affordable to average Americans
For the past several months, I have conducted extensive research of industry literature, government-published data and research analyses. Based on this review, I conclude that ACA met only 1 of these goals – to reduce the number of uninsured Americans – and failed on the other two. This conclusion may help inform how any ACA revision or replacement should occur.
Reduce the number of uninsured Americans – success (albeit nuanced)
ACA is touted as having added as many as 20 million Americans to the health insurance rolls. On its face, this is an outstanding accomplishment, and argues for ensuring that we don’t go backwards by making dramatic changes to the system. One should dig deeper, however, to understand the characteristics of the newly insured, and the remaining uninsured. Consider:
- A majority of the reduction in uninsured rates resulted from Medicaid Expansion in those states that opted for that provision of the Act. Most of the (underwhelming) enrollment via the Exchanges was offset by the 8 million that lost employer-sponsored coverage since 2010.
- The greatest improvement in insurance coverage was observed among the poor (at or near the federal poverty level) and minorities. Outstanding! Conversely, the largest segments of remaining uninsured are working class families and the young. ACA seems to have pushed healthcare even further from reach for these segments of the population.
Bend the cost curve of national health care expenditures - failure
Throughout the recent Presidential campaign, Democrats touted ACA’s success in lowering the rate of health care inflation. As recently as today, in his press conference before departing on his final foreign trip as President, Obama repeated this success, citing it as a reason for keeping ACA intact.
Ah don’t let facts get in the way of a good political argument!
The facts are that the slowdown in health care inflation began in 2008, long before ACA was enacted. Further, this inflation seems to have been resurrected in 2015-2016. So, if not ACA, what might explain the 6-year long slowdown and subsequent uptick?
An interesting analysis by the Kaiser Family Foundation and Altrum Institute provides a clue: Kaiser and Altrum researchers analyzed annual health expenditures from 1965 onward, attempting to discover causal factors for the annual rate of change in health care spending. Their finding was both surprising and enlightening: Despite all of our efforts to control health spending, 85% of the year-over-year change in spending could be explained by changes in GDP and in general inflation. Further, the impact of these factors took up to 5 years to fully exert their impact on health spending. In other words, the 2008 Recession had the effect of dampening health care spending through 2013!
Using the formula devised by Kaiser/Altarum, I re-projected health care spending from 2010-2015. Curiously, the Kaiser-Altarum model projected lower spending during each of these years than actually occurred. If true, ACA may have bent the curve upward, rather than downward!
Render health care more affordable to average Americans - failure
Recent reports suggest that 2017 premiums via the Exchanges are up 25% over 2016. And, while subsidies protect many from bearing the full brunt of this increase, it remains a significant problem for the middle class and working Americans.
An analysis by Kaiser and the Health Research and Educational Trust (HRET) paints a grimmer picture. Since 2010 when ACA was enacted:
- Inflation is up 9%
- Worker earnings are up 10%
- Healthcare premiums, single coverage, are up 24%
- Deductibles, single coverage, are up 67%
According to data from the Bureau of Labor Statistics, healthcare spending increased from 6.6% of household income in 2010 to 8% in 2014. Mean household spending on healthcare has increased by 8% per year since ACA was enacted.
To the average American, health care is more costly and unaffordable today than in 2010.
Where do we go from here?
Certainly, there are elements of ACA that should be retained through any revision or replacement. Among them: reductions in the rate of uninsured, the prohibition of deniability for pre-existing conditions, the inclusion of children up to age 26 on family coverage. Other elements should be re-considered: inappropriately low medical-loss ratios, rich mandatory benefits (side note – why do I have to pay for the mandatory pediatric dental coverage required by ACA?), limits on premium variations (i.e. premiums charged to older adults cannot exceed 3x those for younger adults).
Further, recognizing the impact on Medicaid Expansion on lowering uninsured rates among the poor, it would be wise to seek a solution that extends this impact. A GOP plan to replace Expansion with block grants to the states could be a positive move in this direction.
So, there are some good things about the Affordable Care Act and a host of not-so-good things. Let's hope we can do far better, now that we have been given a "mulligan".
Washington, it’s your move…
Washington, it’s your move…