For the past six years, Republicans have been voting to repeal and replace the Affordable Care Act. But they never actually came up with an alternative until June 22, 2016, when House Republicans unveiled their plan. It declares: “Obamacare simply does not work. It cannot be amended or fixed through incremental changes. Obamacare must be repealed so that Congress can move forward with the kinds of reforms that will give Americans the care they deserve.”
Are the Republicans right? Does the ACA not work?
No matter the metric – access, quality or cost – the ACA has undeniably been a success. It may not be perfect – but it is still a success.
On access: Over 20 million people have gained coverage because of the ACA. The uninsured rate is now at 11 percent, the lowest ever. And an additional 21.3 million Americans would be insured if all states had expanded Medicaid as anticipated under the ACA.
On quality: Between 2010 and 2015, hospital re-admissions dropped by 8 percent, meaning that over 565,000 re-admissions have been avoided by Medicare beneficiaries. Rates of most hospital-acquired infections have also dropped significantly.
On cost: While total costs have not gone down, cost growth has substantially leveled out. Since passage of the ACA in 2010, per capita Medicare spending has actually declined. A recent analysis by the Robert Wood Johnson Foundation and Urban Institute shows that total national health expenditures are expected to be 11 percent lower by 2019 than projected. Similarly, the Kaiser Family Foundation reported that the average premium for families with employer-sponsored health plans has seen a 40 percent reduction in cost growth since enactment of the ACA.
Clearly, six years after its passage, we are now better off with the ACA than without. Nevertheless, as with any piece of democratic legislation, the ACA was the result of a series of compromises and concessions, and so the inevitable consequences of such bargains are now becoming clearer. These issues require the ACA to be repaired, but certainly not repealed. What is a plausible sequence of reforms?
First, a series of changes are needed to shore up – and eventually expand – the health insurance exchanges. We need to have more insurers in the marketplaces in order to increase competition and lower premiums. This can be done by enhancing risk adjustment and risk corridors, which are fundamentally important to marketplace stability. Risk corridors in particular should be supported – remember, it was Republican Sen. Marco Rubio who torpedoed the risk corridors, a permanent part of Medicare Part D – given that these corridors actually could help exchange-based insurers.
With this greater risk protection, however, should come certain caveats: Insurers should be forced to bid for larger geographic areas, rather than being allowed to cherry-pick only the most profitable regions within a state. Additionally, expanding the banding from 3:1 to 4:1, or even to 5:1, would make buying in the exchanges more affordable for young adults and presumably encourage increased enrollment in the exchanges. Lastly, some of the money saved from lower premiums could be used to increase subsidies for households with incomes between 250 percent and 400 percent of the poverty line, thereby incentivizing even more people to join.
To further stabilize the exchanges, Healthcare.gov must undergo serious renovation. The website should be re-designed to function more like a high-end e-commerce site, with accompanying social media presences and targeted advertising aimed at young, first-time insurance buyers. This is especially important given that purchasing health insurance is still viewed by millennials as more of a hassle than a norm.
Additionally, the small business exchanges should be folded into the individual market exchanges. The IRS should also require that employer contributions to purchases in the insurance exchanges be eligible for the tax exclusion. This is an obvious reform, given that employer contributions to purchases in private exchanges already qualify for tax exclusion, while those in public exchanges inexplicably do not.
The glee expressed by conservatives regarding the difficulties of the exchanges is frankly puzzling. Experience shows that health-insurance exchanges are fragile. But if they do fail, what is the alternative to providing coverage with no pre-existing disease exclusions? It cannot be – as Republicans advocate – expensive and inefficient high-risk pools. That leaves single-payer health care. Do conservatives really find that choice so desirable?
Second, there should be no end to the efforts to control health care cost growth. The next key reform should be aggressive payment restructuring coupled with requirements for physicians to assume more financial risk for their clinical judgments. To do so, the Centers for Medicare & Medicaid Services should implement additional mandatory bundled payments in high-cost specialty areas, such as spine surgery, pneumonia care, and chronic obstructive pulmonary disease exacerbations. As bundled payment models have already shown savings and improved quality of care, they should be rapidly implemented nationwide under the ACA’s section 3023 authority.
Savings can also be achieved if Medicare rapidly revokes many of the rules that currently allow stakeholders to game the system. These reforms include reducing hospitals’ incentives to buy up physician practices, either by implementing site-neutral payments that eliminate the cost advantage to performing procedures in hospital outpatient facilities, or by reforming the 340B cancer drug program, which increases the margins on chemotherapy given at hospital-affiliated facilities. Medicare should also – as it has already done with the new cardiac bundles – move to regional pricing.
Reform of Medicare’s Accountable Care Organization program will also help curb costs. Physician-led ACOs have exhibited higher savings primarily because they have no incentive to keep hospital beds full. These ACOs should be given additional financial incentives to adopt physician payment models that link physician pay to total cost of care. In order to enhance ACO cost savings measures, CMS should also require any hospital that receives Medicare payment to inform physicians explicitly of patient admissions and discharges at that hospital within six hours of the event, so that physicians can properly manage the admission and discharge and avoid future re-admissions.
As a last cost-saving measure, we should rapidly enact the demonstration project on Part B drug costs and consider other measures, such as value-based pricing, to reign in drug costs, which continue to grow at rates much faster than those in other segments of health care.
Third, we need to enhance the health and well-being of the most vulnerable members of society: poor children. Expanding Nurse-Family Partnerships would do just that. This program sends nurses or other health care professionals to the homes of at-risk families and children to provide “coaching and guidance on health child development and link families with other important [social] services.” In the few years since their implementation, these kinds of programs have recorded a positive return on investment and have saved states and municipalities money by lowering costs of both health care and special education programs. The ACA has created a similar pilot, but it currently enrolls only 145,500 parents and children. Given the impressive results of the Nurse-Family Partnerships, we should require all states to provide similar programs to all pregnant Medicaid mothers. This could be financed by a fraction of a modest tobacco tax (see below).
Finally, there are important public health measures that should be implemented to improve America’s well-being. While smoking has dramatically declined in the last 50 years, 18 percent of adult Americans still smoke. A 50-cent per cigarette package tobacco tax would lower smoking rates among teenagers and young adults by 4 to 5 percent. This would have enduring benefits, because if someone does not start to smoke by age 21, they are unlikely ever to smoke. This modest tax would also have substantial, long-term health savings resulting from lower rates of COPD, lung cancer, heart disease and other outcomes associated with smoking. These savings could then be used to support the Nurse-Family Partnership for Medicaid mothers, as mentioned above.
Another necessary area of public-health intervention is our nation’s exercise habits. Just 7 hours per week of physical activity lowers premature mortality by 40 percent. Additionally, early introduction of physical activity increases the likelihood that such habits will continue into adolescence and adulthood. Therefore, one policy option is requiring all U.S. primary and secondary schools to provide at least 30 minutes of physical activity for students each day. Policymakers should also incentivize cities to adopt programs such as Open Streets, which encourages citizens to walk, run or bike by blocking off streets to cars one or two days per week.
The ACA is not a perfect bill. Yet it has significantly improved the U.S. health care system. Repeal will not happen, in large part because Republicans have never delineated a reasonable replacement option. Critics of the ACA must acknowledge that the only other alternative is single payer – not their preferred option. Consequently, we need to adopt sensible ACA reforms that will stabilize the exchanges, continue to reduce costs, enhance the care of the most vulnerable populations and improve our nation’s health. Should these reforms be enacted, the ACA’s potential is sure to be fulfilled.