simon f. haeder is an assistant professor of public policy at Penn State’s School of Public Policy.
Published October 28, 2019
Critical bulwarks of society, like the health care system, are creatures of their time and place, reflections of political and economic institutions and the interactions between constitutional constraints and the culture. In America, these interactions inevitably echo a strong suspicion of government and a fear of concentrated power paired with devotion to individualism and personal responsibility.
Not surprisingly, then, the provisions for financing and delivering medical care that have survived the political gantlets often resemble creations of Rube Goldberg’s mind more than rationally designed policies. We make do with an uncoordinated, often inefficient, patchwork of programs that does not cover everyone, is excessively costly and often provides low-quality care.
At the root of the problem is the reality that Americans have never reached a consensus about the appropriate role of government in health care. And leaders who attempt to clarify that role and act accordingly risk a brush with the metaphoric political third rail. Yet, while often unacknowledged, government has, of necessity, long been deeply involved.
Indeed, governments at the federal, state and local levels have come to deeply influence every aspect of the American health care system. And how could it be otherwise? No modern government could afford to abdicate responsibility for a sector that is critical to the well-being of its citizens and accounts for almost one-fifth of the GDP.
Here, I offer a brief guide to why the last generation of health care reformers focused on the goal of expanding access incrementally, at the cost of ignoring the system’s other numerous shortcomings. History bears lessons for today. I believe that Democratic presidential candidates, who are now vigorously debating the merits of various sweeping reforms, would be well advised to aim lower if they reach the White House. The first task is to complete the job of making near-universal coverage a reality before confronting the big issues of financing and cost control on which Americans are so deeply divided. Campaign slogans will be harder to come by, of course.
Almost 10 years after its passage, the onslaught against the ACA has shown few signs of abatement. Indeed, the Trump administration has sought to roll back as much of the ACA as possible through regulations, executive orders and lawsuits.
But this kind of pragmatism carries tremendous benefits for the tens of millions who remain uninsured as well as for the broader system that carries all of us. What’s more, it has the potential to survive politically.
The ACA and its Enemies
When the Affordable Care Act (a k a Obama-care) was passed in 2010, it was hailed by supporters as a viable way to bring U.S. policies in line with those of our rich industrialized peers, while it was demonized by detractors as socialism. Neither side was correct. The ACA should be seen as a continuation of a long series of trial-and-error adaptations to circumstances going back to the early 1900s. Indeed, the ACA shored up a system patched together from various private and public components, making changes in how the private market for insurance functioned, and sweetening the deal with additional government funding. Thanks to its incremental approach, the rate of coverage would improve substantially, but in the process reveal new strains in the existing system.
For starters, not all Americans have benefited equally from the ACA, and the chasm in coverage and quality among states — and among citizens within these states — continues to deepen. Underestimating Republican persistence in opposition, Democrats decentralized administration in ways that created a significant divergence in the provision of public benefits based solely on residence. Not only did some states — notably, Texas and Florida, home to one in six Americans — do everything they could to impede the implementation of the ACA, but they used the courts to roll back several provisions for all Americans.
At the other end of the spectrum, the residents of blue states — notably, California and New York — disproportionately gained coverage because their states used the ACA to aggressively expand their Medicaid programs. They also invested heavily in outreach to enroll middle-income households in heavily subsidized private insurance. To the chagrin of the ACA’s architects, the gap in coverage among states has widened significantly in the decade.
The State of Play
Roughly half of all Americans currently obtain their health insurance through employers as part of their compensation. The federal government provides generous tax incentives to encourage employers to serve as intermediaries, at an annual cost exceeding $260 billion.
Despite this substantial encouragement to employers, the other half of Americans are not covered through work, thus requiring more direct government involvement to narrow the insurance gap. Elderly Americans and some of those afflicted with disabilities and end-stage renal disease — about 14 percent of the population — are covered by federally sponsored “single-payer” insurance, Medicare.
Since 1965, all working Americans have been required to pay into the Medicare system, which entitles them to hospital insurance after they reach age 65. They are free to purchase physician and prescription drug coverage through Medicare, too, with sliding-scale subsidies intended to make full coverage more accessible. Alternatively, about one-third of eligible individuals choose to obtain comprehensive coverage through private insurers in a government-paid program called Medicare Advantage.
Health insurance for the poor and near poor is largely through the joint state-federal program called Medicaid (also dating from 1965), which provides coverage for more than one American in five. Lacking the constitutional power to force states to bear any part of the financial or administrative load, Washington entices cooperation by shouldering the bulk of the cost while ceding to the states broad authority to run the programs as they like.
As a result, Medicaid varies significantly across the states in terms of who is eligible and what benefits they receive. For children and a very small number of adults living above the eligibility threshold of Medicaid, the federal government established yet another shared governance program in the 1990s commonly known as CHIP, or the Children’s Health Insurance Program.
Who are the remaining 30 million or so uninsured? The group is disproportionately compromised of Latinos, young adults, Southerners, those who work in small businesses, those with little formal education, and the poor.
Oh, wait … there’s more. In an arrangement that can only be described as socialistic, America’s military veterans and Native Americans are eligible for comprehensive health care services, often at no cost, through a separate network of clinics and hospitals fully owned and operated by the federal government. However, the Trump administration has pressed efforts to increase the role of private providers, with the apparent long-term goal of shifting the arrangement from one of direct care to insurance.
Those shut out of the various public and private arrangements, some 7 percent, are left to seek coverage on their own from private insurers. This category of insurance was tiny until the ACA created a formal marketplace, along with means-based subsidies to help pay the premiums for middle-income Americans.
Despite this multifaceted patchwork of private and public benefits, which in theory should make basic insurance accessible to most legal residents, about 10 percent of Americans remain uninsured. So their care is left to yet another hodgepodge of programs, which includes subsidies and tax benefits for private community health centers, and thousands of clinics and hospitals owned by cities, counties, states and public university systems. Yet at the end of the day, many Americans, don’t get medical attention until they stumble into emergency rooms or public clinics, or collapse on the street.
Who are these remaining 30 million or so uninsured? In no particular order, the group disproportionately consists of Latinos, young adults, Southerners, small business employees, the poor (particularly in states that have chosen not to expand Medicaid under the ACA) and those with little formal education.
Perhaps surprising to many (especially the uninsured), half of the 30 million qualify for free or heavily subsidized public coverage through Medicaid, CHIP or the ACA insurance marketplaces, but fail to enroll. Another 9 percent are offered employer-sponsored insurance but fail to opt for it. Add another 9 percent of the 30 million for individuals who would be eligible if their states had expanded Medicaid under what the sponsors of the ACA thought were irresistible incentives. That leaves about 16 percent who are undocumented immigrants and thus ineligible for most programs, as well as another 16 percent of Americans with incomes too high to qualify for any assistance.
So why have individuals, particularly those eligible for free or virtually free coverage, failed to obtain insurance coverage? Well, most do not know that they are eligible in the first place, and face significant barriers even if they do. With countless federal, state, local and private programs out there that lack coordination, it can be hard to keep track. Enrollment can be overwhelmingly challenging, too. Even for those who are eager to be insured and manage to cut through the clutter to enroll, maintaining coverage can be challenging. For ideological reasons — or simply because medical care for the poor is a low budget priority — some states have imposed undue administrative burdens on Medicaid recipients. Language and transportation barriers add further obstacles.
Universal insurance coverage is not automatically synonymous with universal access to high-quality medical care — as narrowing provider networks, ever-expanding deductibles and out-of-pocket payments and recent revelations about surprise medical bills indicate.
Now add some understandable, if unfortunate, factors. Some Americans, suspicious of government assistance because they see it as welfare, don’t apply. Consider, too, that many young and middle-aged Americans aren’t sick now and have never had the experience of an illness that required hospitalization. So, they ask themselves, why bother with insurance when the premium is money down the drain — or when the light bill is overdue?
For those with incomes too high to quality for any public assistance, the situation keeps getting worse as premiums outside the marketplaces keep skyrocketing. Countless actions by the Trump administration have successively worsened this situation. Combine this with the elimination of the individual mandate penalty as part of tax reform, and the incentive for buying insurance is further weakened for this group. While some states like California have recently opted to add a state-based penalty, the long-term effect remains questionable because penalties are paltry. The ever-increasing cost of insurance, of course, also dissuades many eligible employees from enrolling in their employers’ plans.
And in recent years, the increasing specter of immigration enforcement has further complicated the situation for households with a mix of documented and undocumented members who are reluctant to have any contact with government authorities. Now, the Trump administration is warning 13 million legal non-citizen immigrants that, if they accept public benefits like Medicaid, their green cards and path to citizenship are at risk.
Untying the Gordian Knot
Since the 1990s, the issue of government involvement in medical insurance has bitterly divided Americans. Republicans, for their part, have virtually ceded the role of producing workable reform proposals to the Democrats. (The only — very costly — exception: creation of a heavily subsidized prescription drug program for Medicare with bipartisan support in 2003). Furthermore, ever since the infamous Bill Kristol memo in 1993 warned that any fundamental reform of health insurance would undermine voter support for Republicans, the GOP has settled into the role of naysayers on the subject, intractable adversaries to any Democratic policy proposal.
On the other hand, Democrats, particularly those on the campaign trail, have been eagerly outbidding each other with sweeping reform proposals. Nearly all Democratic proposals allude to Medicare as a model, presumably in hope of making reform seem like an extension of an existing program with near-consensus support. However, Democrats are using the name quite casually, as a stand-in for a more complicated single-payer reform. Simply expanding Medicare to all Americans, by the way, would lead to a rude awakening for most, who would find themselves saddled with large out-of-pocket payments and rather limited benefits.
Ask Americans whether they think their compatriots should have access to care when needed, most will respond affirmatively.
Indeed, for most Americans with insurance coverage today, Medicare can be quite a disappointment. It’s easy to forget that for its first four decades, Medicare did not include a prescription drug benefit. Today, it still lacks dental and vision coverage. What’s more, the Part D drug benefit has plenty of detractors because, in order to save money, the plan includes a peculiar “doughnut hole” in which coverage temporarily evaporates as an individual makes more use of the benefit. Indeed, the hype for Medicare is seen as ironic to many health policy experts when its “little” brother, Medicaid, which covers an additional 23 million Americans and provides a relatively comprehensive benefits package, would be a more plausible matrix for reform. But don’t expect any calls for “Medicaid-4-All” anytime soon. The welfare stigma is just too potent.
Semantics aside, Democrats are basically settling into two major camps. In one corner are the incrementalists who want to expand coverage within the framework of the current system. Former Vice President Biden’s proposal is one of the more conservative from the presidential candidates. Building on the foundation of the ACA, it would merely add a “public option” — insurance direct from the federal government that would compete with private insurance on an equal footing. Senator Harris’s proposal, based on expanding the private Medicare Advantage alternative within Medicare, borrows Medicare’s name but basically amounts to an expansion of the ACA.
In the other corner are the transformationalists, notably, Senators Warren and Sanders, who would elect a single-payer option following in the footsteps of our neighbor to the north. At the core, their approach would give the government the power to set the prices of health care services and would effectively do away with the private health insurance industry altogether, throwing out not only the baby and the bathwater but the entire tub.
While very different in approach, the major goal of all Democratic proposals is quite simple — and in line with the premise of the ACA: expand coverage to more Americans. Of course, single-payer proposals go much further by starting afresh and making health care a universal right. But politically, addressing the coverage issue incrementally seems far more prudent at this stage. After all, who would want to take on both the Republican Party and the “health care industrial complex” made up of insurance carriers, pharmaceutical companies and the whole spectrum of care providers? Harry and Louise, the fiction-al middle Americans created by the health insurance lobby who torpedoed Bill Clinton’s health care reform initiative in 1993, send their regards.
Certainly, universal insurance coverage is not automatically synonymous with universal access to high-quality medical care — as narrowing provider networks, ever-expanding deductibles and out-of-pocket payments, and recent revelations about surprise medical bills indicate. But it is better than the unstable status quo, in which millions of middle- and low-income households lack any coverage and the ACA remains under assault in the courts.
But ...universal or nearly universal coverage remains the focus of all the Democratic candidates’ reform proposals — and, for that matter, the proposals that, from time to time, ricochet around academia and think tanks. But it cannot be the final destination of American health reform. No variation on the current system will be sustainable without a means to control costs. As a group of economists succinctly put it way back in 2003: “It’s the prices, stupid.” While new exotic technologies may someday be front and center in driving cost, that is not the case now. Today, the issue is straightforward: providers of every stripe in the U.S. are paid more than their peers in other rich countries. And there’s no evidence that spending more buys better outcomes.
This is not a problem that invites incremental fixes. In theory, single-payer approaches that give a planning agency the authority to decide what to pay for medical procedures, drugs and the like — as Canadian provinces do — would have a better shot. But it’s far from clear that America and Americans are ready for this. For that matter, it’s not clear how putting the government in charge of the prices of medical services would contain costs any better than putting the government in charge of deciding how many fighter planes it buys, or how much it pays for them. Decisions about what to buy and what to pay would still emerge from a convoluted political process subject to influence from trade-association lobbies that know a thing or two about campaign finance.
In any event, the Democrats’ debate about whether to go with a single-payer system probably won’t have much relevance even if a Democrat takes the White House in 2020. Congressional Republicans aren’t about to have a change of heart on major reform efforts, and it would take a great deal of political discipline and ruthlessness to pass legislation without a comfortable majority in the Senate. Democratic leadership will remember the electoral bloodbath — or “shellacking” as President Obama called it — in the wake of the ACA’s passage.
Nonetheless, there is a glimmer or two at the end of the tunnel for Democrats. For one thing, no major health reform bill needs to pass Congress for the executive branch (and for so-inclined state governments) to make a significant dent in the number of uninsured. As mentioned above, about half of the currently uninsured are eligible for public coverage of one form or another. Reducing administrative burdens would make a big difference here. The systemic barriers in establishing and maintaining eligibility, for example, could be lowered, allowing individuals to enroll online or over the phone, and then only requiring them to re-establish eligibility annually.
Arguably, the most effective approach would be the creation of fully streamlined and fully integrated eligibility determination across public assistance programs. We know that about 30 percent of the uninsured claim the Earned Income Tax Credit (cash back to the working poor), 13 percent receive SNAP (pejoratively referred to as “food stamps”) and 22 percent have a child who receives free or reduced-price lunch at school. Maryland, under Governor Larry Hogan (a conservative Republican eager to distinguish himself from Trump Republicans), is moving to utilize state tax returns to connect qualifying individuals to insurance coverage. By the same token, it would make a lot of sense to invest in outreach and enrollment campaigns, which were so successful for the ACA before the Trump administration virtually eliminated them.
At the end of the day, let’s not forget that Massachusetts, within the parameters of the current system and with reforms that began under former Governor Romney, a Republican, and continued under the ACA, has driven down the uninsured rate to less than 3 percent.
These are low-hanging fruit.
Another 9 percent could be shaved off the uninsured rate if all states expanded their Medicaid eligibility in line with the ACA incentives. Preferably, some minor adjustments to the ACA premium and out-of-pocket cost structure would also be advisable — perhaps along the German approach that sets the employee contribution at around 8 percent of income — to address valid concerns about affordability.
This is not the stuff likely to generate enthusiasm among Democratic primary voters. Few signs will be held up at rallies that read “Take your government hands off my streamlined integrated enrollment process” or “Guaranteed Auto-Enrollment for All.” Yet at the end of the day, let’s not forget that Massachusetts, within the parameters of the current system and with reforms that began under former Governor Romney, a Republican, and continued under the ACA, has driven down the uninsured rate to less than 3 percent. Texas, by comparison, has levels approaching 20 percent. Pushing the rest of the nation to the Massachusetts level would be an enormous achievement.
Going to War with the Army You Have
The American health care system reminds me of the old joke about a camel being a horse designed by a committee. But the joke is truly on us. And it’s quite a morbid one, causing immense human suffering with thousands of Americans dying for lack of care and even more experiencing financial hardship. The system is a creature of myth and ideology that manages as well as it does because, when all else fails, America is rich enough to throw money at seemingly intractable problems. Across the decades — especially the period since World War II — we can see incremental, haphazard adjustments to changing circumstances and needs without much rationality or overarching forethought. It got us the system we have today.
One can easily imagine a simpler, better approach — something along the lines of a single-payer systems like the one in Canada or a multipayer system like the one in Germany — that provides universal coverage and more or less controls costs through a mix of regulation and managed competition. As a practical matter, though, a combination of constitutional federalism, stark ideological divisions over the appropriate role of government and the power of interest-group incumbency make incrementalism the best hope for coming close to what other advanced industrialized countries achieved decades ago.
Health reform is more than a matter of applying economic analysis to settle on the most efficient and equitable solution. Health care reform is inevitably political. And recent history suggests that neither party can truly remake the system on its own without risking the wrath of the electorate stoked by its competitor. Indeed, no underlying consensus even exists about what kind of health care system the United States should have. Ask Americans whether they think their compatriots should have access to care when needed, most will respond affirmatively. Yet as soon as one digs into the specifics of how to get there, opinions refract through a prism of cable news ideology and sound bites.
With the demoralizing failure of the Clinton administration to revamp the system fresh on their minds, the Obama administration and Democrats in Congress put pragmatism above all else.
They opted to rock the boat as little as possible by picking the most conservative reform proposal that could be swallowed by Democrats, by buying off powerful stakeholders like the insurance and pharmaceutical industries, by devolving much of the implementation to states and by leaving some crucial issues, such as the control of cost and quality, virtually untouched. All eyes were on the prize of expanded coverage.
Ten years in, the ACA has been partially successful in spite of relentless partisan attacks. And as galling as the prospect of trench warfare seems as a means to consolidate gains and inch ahead, it’s hard to see a better path forward, at least for now.