By Dr. Paul Clay Sorum
The Journal of County Administration, July/August 2011
The Accountable Care Act (ACA) has many good features (described by Erika Martin and Courtney Burke in the previous issue of the Journal of County Administration) (see also, the Kaiser Family Foundation’s summary).[1] It asserts the principle that everyone should have health insurance and—by expanding access to Medicaid and requiring most people who don’t have public insurance to purchase it (if, as expected, the Supreme Court upholds this provision)— expands access to some sort of health insurance. It tries to prevent the most predatory practices of at least some private insurers. It offers a few, if temporary, plums to primary care providers. It pays for a variety of worthwhile, if limited, experiments in changing how care is paid for and delivered.
But the ACA is hardly revolutionary. The lawmakers chose to fiddle with, prop up, and make additions to an already complicated and tottering structure rather than to tear it down and put its pieces back in a more rational and solid manner. Accordingly, the ACA does not change—indeed it tries to reinforce— the basic structure of US health insurance, with its primary reliance for the non-elderly population on employer provided private health insurance.
The US Census Bureau’s determination of the health insurance coverage of Americans during the year 2009 (i.e., prior to the passage of the ACA) is shown in Table 1.[2] The classification of “no insurance’ meant being without insurance all year; those who were uninsured only part of the year were counted in the insured categories. Note that, since many people’s coverage changed during the year, the percentages of private insurance, government insurance, and no insurance add up to greater than 100%.
The ACA maintains this reliance on employers and on private insurance: it requires employers with more than 50 employees to offer health insurance, either through private companies or through the new state run insurance exchanges, and the state-run exchanges will also offer to individuals without employer provided or government insurance the choice among a set of private plans. Table 2 shows the estimates by the Urban Institute and Robert Wood Johnson Fund of the changes for the non-elderly population when the law’s provisions about coverage are fully implemented in 2014.[3]
Congress’s decision, for political and ideological reasons, to maintain the fundamental structure of the US health care system is the ACA’s major, perhaps fatal, flaw. It contributes to a multitude of more specific flaws.
Flaws in the ACA
First, the system set up by the ACA is much too complex. Patients (or their employers) and providers will still have to deal with, waste time over, and get frustrated by the dozens of private and public insurers, most with multiple different and ever-changing plans and sets of rules. Medicaid will still be means-tested, i.e. potential enrollees will still have to prove they are poor enough. The new law will add to this complexity by creating the health exchanges, also means tested, which will be allowed to be different in each state (although all will have to fulfill the law’s requirements). It has been calculated that 50% of adults with family incomes below 200% of the federal poverty level will bounce between eligibility for Medicaid or for the exchanges as their incomes fluctuate during the year.[4] The requirement to purchase insurance requires mechanisms, mostly through income tax returns, to find, penalize, or give exemptions to people who fail to purchase health insurance. Furthermore, to compensate for some of its deficiencies, the law had to add a variety of fixes, such as a temporary pool for who are uninsurable because of preexisting conditions, a set of rules to reduce predatory practices by private insurance companies, and a federal watchdog to make sure that states regulate insurance premium increases adequately.[5] Because of this complexity, the law is hard to understand and hard to defend to the public, and, in spite of provisions to get private insurance companies to agree on common rules, it will increase rather than decrease the administrative costs of health care.
Second, change is coming much too slowly. It will take some eight years for the system to be rolled out completely (although most is to be done by the end of 2014).[6] In contrast, Medicare was instituted in less than a year. The reasons for the delay are the complexity of the changes—in particular, the need for each state to set up a health exchange—and the political calculation, I assume, of trying to reduce opposition to change by doing it very slowly (in particular, to spread out the costs of implementation).[ 7] This calculation was, however, short-sighted because of largely foreseeable political and economic events. Midterm elections commonly turn against the party in power, especially when the gain of Democratic seats in the House in 2008 came in usually Republican-voting districts. With the loss of the Democratic majority in the House, the Republican opponents of the reform have the opportunity to delay and derail—by withholding funding if not by repealing— as many of the provisions as possible. If the Republicans have their way, especially if they win the White House too, we may be left with a partial ACA, which may be worse than outright repeal of the whole act. Moreover, with the financial collapse that President Obama inherited and the resulting economic recession— and the ensuing debt crises on the state and federal levels—the state and federal monies, as well as (to a lesser extent) the business profits, required to expand health care are no longer there. The result is continuing pressure to reduce benefits and increase patient financial responsibilities in both tax-supported and employer supported plans—we can see that happening already[8]—and rising opposition to major expansion of health insurance, at least of government- financed insurance.[9]
Third, the ACA will not reduce costs. On the one hand, most of the excess “administrative” costs of the private insurance company—for insurers and for providers (the most recent estimate was just published online in Health Affairs[10]—such as for marketing, submitting and processing claims, obtaining prior approvals for services, and paying shareholders (for for-profit insurers) will persist, even if the law tries to limit them slightly by promoting common insurance forms and requiring “medical loss ratios” (the percentage of premiums spent on actual health care) to be at least 85% for group plans and 80% for individuals. In addition, as mentioned above, the Medicaid program and the state insurance exchanges will still require costly and burdensome means testing, the insurance exchanges will create an additional administrative layer, and the law requiring people to buy insurance will have to be enforced. The Urban Institute estimates that, if the ACA had been fully implemented in 2010, total spending on acute health care for the non-elderly by the government, employers, and individuals would have increased by 4.5%.[3] The Netherlands, which privatized its health care system in 2006 (creating a system similar to that envisioned by the ACA), has found that this “managed competition” is unpopular and has increased costs.[11] On the other hand, the much-ballyhooed experiments in new ways to deliver and pay for medical care—pay-for-performance, medical homes, accountable care organizations, and the like—are still experiments, promising in small projects but untested as ways to reduce costs on a large scale.[12]
The Commonwealth Fund had, in its optimistic assessment of a panoply of similar reform proposals, concluded that, together, they could bend the cost curve, but not prevent costs from rising faster than GDP.[13] Not surprisingly, therefore, the percentage of GDP devoted to
health care is expected to rise from 17.6% in 2009 to 18.1% in 2014 (when the state health exchanges are implemented and residents are required to have health insurance) to 19.8% in 2020.[14] The money to pay for care must come from somewhere. If governments and employers are unwilling to pay more, patients will either have to pay more or do without the medical services they expect. The Affordable Care Act is, therefore, affordable neither for the country nor for the patients.
Fourth, the ACA will not only leave millions still without insurance— the Urban Institute estimates 8.3% of non-elderly adults[3]—but it is likely to increase the number of “under-insured.” In 2007, the Commonwealth Fund estimated that 14% of nonelderly adults were underinsured— defined as spending 10% or more of income (or 5% if their income was less than 200% of the poverty level) on out-of-pocket medical expenses or having deductibles of 5% or more of income[15] (although these estimates may be low).[16] The ACA aims to decrease underinsurance by insisting on a basic set of benefits (yet to be defined) for the state-run health exchanges (in the footsteps of Massachusetts that lowered its underinsurance from 7.3% of adults to 5.6% a year after the enactment of its health reform).[17] Yet, even as envisioned now, these health exchanges will impose a financial burden: if people choose the most affordable bronze plan, its “actuarial value” is only 60%, i.e. the individual will have to pay for 40% of his or her expected health costs (up to, as currently defined, $5,950 for individuals and $11,900 for families), a large burden for a poor person who gets sick or injured. Moreover, faced with rising costs, increasing enrollments in Medicaid and in state insurance exchanges, and—at least until the economy recovers— stagnating business profits and tax revenues, employers and state and federal governments will have no choice but to offer plans with increased premiums and/or reduced benefits[8, 18] (as well as, if possible, with reduced payments to providers). In 2010, the average annual premium for employer-sponsored health insurance was up to $5,049 for single coverage and $13,770 for family coverage (of which the worker contributed $899 and $3997, respectively)[8] and is surely going higher. Faced with the need to keep premiums as affordable as possible in the exchanges, it seems likely that the state directors and ACA federal administrators will be under great pressure to lessen the benefit package required of all insurers participating in the exchanges.
Fifth, access to care may increase on paper, but it is likely, especially for poor people, to decrease in practice. We need to train more physicians to prevent a growing shortage—the Association of American Medical Colleges projects that by 2020 we will have shortage of 45,000 primary care physicians and 46,000 surgeons and medical specialists[19]—and we need current physicians, especially primary care physicians, to see the newly insured patients. For this, we need to offer them sufficient reimbursement. But this is unlikely to occur—indeed, quite the opposite. For Medicaid, payments to physicians are, in states like New York, so low already that private physicians see Medicaid patients largely out of a moral commitment to care for all patients. For Medicare, payments are already less than those from private payers so that some physicians do not accept Medicare and, if Medicare rates drop further (as is threatened yearly by the provisions of the Balanced Budget Act), many more will drop it. Yet state and federal governments are talking about cutting reimbursements to providers—a likely recommendation of the Congressional committee that is to propose further cuts in federal spending to reduce the federal debt— and the ACA sets up a committee that will suggest moneysaving cuts if the Medicare budget increases too fast (as it has done repeatedly in recent years).
How to Remedy the ACA
What can we do to remedy the flaws in the ACA? I see three possibilities. First, the Obama administration can try, through administrative acts and legislation, to make small improvements in the new system and, meanwhile, to wait for better economic and political times. This is the most likely course of action, but it does little to fix the ACA’s flaws.(even if the Republicans allow any improvements). Second, the politicians could scrap the new law and institute a better system, which, as I have argued before in these pages, would be a single-payer system, equivalent to an expanded and improved Medicare for All. The radical Republicans also want, of course, to repeal the law and reduce government’s role to providing vouchers for poor people to use to purchase private health insurance (as in Ryan’s ill-received proposal for privatizing Medicare). Neither the single-payer supporters nor the radical Republicans will be able to repeal the law, both because many of its provisions are already in place and because there is no political majority for either extreme. Third, we can facilitate the changes currently taking place in Vermont and help them spread to other states. This seems currently to be the most promising approach.
Vermont’s recently passed legislation [20] creates a public plan, Green Mountain Care, “to contain costs and to provide, as a public good, comprehensive, affordable, high-quality, publicly financed health care coverage for all Vermont residents in a seamless manner regardless of income, assets, health status, or availability of other health coverage.” Thus all Vermont residents will be eligible for Green Mountain Care “regardless of whether an employer offers health insurance for which they are eligible.” Green Mountain Care will be managed by an independent board, appointed by the governor and approved by Vermont’s Senate, advised by a committee of stakeholders; the board will contract with private-sector organizations, such as Blue Cross and Blue Shield of Vermont, to administer the system. Green Mountain Care will run the health exchange required by the ACA (which will be set up to be its “foundation”); insure state and municipal employees (including teachers); absorb Medicaid, SCHIP, and Medicare as federal waivers become available; and, it is expected, be more cost-effective for private employers to join than the competing private plans. In order to avoid under-insurance, the legislation stipulates that Green Mountain Care will provide all “medically necessary health services”—including primary care, preventive care, chronic care, acute episodic care, and hospital services— and that it will pay for “at least 87 percent of the full actuarial value of the covered health services.”
The architects of the Vermont plan, led by Harvard economist William C Hsiao, needed to convince Vermont interest groups and legislators that the expansion of coverage would not result in increased overall costs. They proposed funding through a payroll tax of 14.2% on all wages, capped at the Social Security level, with exemptions for families with incomes below 200% of poverty level. Employers would pay 10.6% (versus an estimated 12% under the ACA) and employees 3.6%. They concluded that the plan would save money each year of its implementation and after 10 years would be reducing overall health care expenses by 25.3% compared to what spending would be without the reform (7.3% from reduced administrative expenses, 5% from reduced fraud and abuse, 10% from payment reform and integration of the delivery system, 2% from malpractice reform, and 1% from changed governance and claims administration). They also argued that at this point the plan would be cutting employer and household health care spending by $200 million (though employers previously not providing insurance and families earning more than 400% of the poverty level would be paying more than now), would create 3,800 jobs, and would boost the state’s economic output by $100 million.[21]
Vermont’s goal in setting up Green Moun
tain Care was to “provide health benefits through a single payment system.” But the state could not do this immediately, and it is not certain that it will be able to reach its goal. The state must, in accordance with federal statutes, allow individuals or businesses to purchase private health insurance if they want, inside or outside of the exchange (as long as the private plans meet the requirements of the ACA); the assumption is that individuals and businesses will find it in their interests to switch to Green Mountain Care. The state must seek federal waivers to bring Medicare, Medicaid, and SCHIP into Green Mountain Care; these will not be available until 2017 unless Congress passes a law to allow states more flexibility earlier than 2017, and such passage will depend on federal politics and, in particular, on the results of the 2012 and 2014 elections. The Vermont legislature still has to decide on a financing mechanism. But, in spite of these uncertainties, the Vermont law is a momentous first step that shows other states how they too can create the embryo of a single payer system from within the ACA.[21]
County administrators should be excited by the ability of a Green Mountain Care and, moreover, of a complete single-payer system to reduce county taxes, to take over the health insurance of county employees and retirees, to provide health care to all county residents, and even to increase employment. It is time to take action—to support similar health reforms in your states and to lobby Congress for the waivers needed to make these state reforms successful.
References
1. Kaiser Family Foundation. Focus on health reform. Summary of new health reform law, March 26, 2010. Available at http://www.kff.org/healthreform/ upload/8061.pdf. Accessed on July 18, 2011.
2. U.S. Census Bureau. Income, poverty, and health insurance coverage in the United States, 2009. U.S. Government Printing Office, issued September 2010. Available at http://www.census.gov/ prod/2010pubs/p60-238.pdf. Accessed on July 17, 2011.
3. Buettgens M, Garrett B, Holahan J. Americans under the Affordable Care Act. Urban Institute, Robert Wood Johnson Fund, December 2010. Available at http:// www.rwjf.org/files/research/71555.pdf. Accessed on July 9, 2011.
4. Sommers BD, Rosenbaum S. Issues in health reform: how changes in eligibility may move millions back and forth between Medicaid and insurance exchanges. Health Aff 2011;30:228–236.
5. NY Times, July 26, 2011.
6. Kaiser Family Foundation. Health reform implementation timeline. Available at http://healthreform.kff.org/timeline. aspx. Accessed on August 4, 2011.
7. Oberlander J. Beyond repeal—the future of health care reform. N Engl J Med 2010;363:2277–2279.
8. Kaiser Family Foundation. Employer health benefits: 2010 summary of findings. Available at http://ehbs.kff.org. Accessed on July 28, 2011.
9. Newport F. U.S. still split on whether gov’t should ensure healthcare. Gallup Poll, Nov 18, 2010. Available at http://www.gallup.com/poll/144839/Split-Whether- Gov-Ensure-Healthcare.aspx. Accessed on August 4, 2011.
10. Morra D, Nicholson S, Levinson W, Gans DN, Hammons T, Casalino LP. US physicians practices versus Canadians: Spending nearly four times as much money interacting with payers. Health Aff 2011. Available at http://content.healthaffairs. org/content/early/2011/08/03/ hlthaff.2010.0893.full.pdf+html. Accessed on August 4, 2011.
11. Okma KGH, Marmor TR, Oberlander J. Managed competition for Medicare? Sobering lessons from the Netherlands. N Engl J Med 2011;365:287–289. Available at http://healthpolicyandreform.nejm.org/?p=14712#more-14712. Accessed on July 27, 2011.
12. Oberlander J. Throwing darts: Americans’ elusive search for health care cost control. J Health Politics, Policy and Law, June 2011.
13. Schoen C, Guterman S, Shih A, Lau J, Kasimow S, Gauthier A, Davis K. Bending the curve: options for achieving savings and improving value in U.S. health spending, The Commonwealth Fund, December 18, 2007. Available at http://www.commonwealthfund. org/Content/Publications/Fund-Reports/2007/Dec/Bending-the- Curve–Options-for-Achieving-Savings-and- Improving-Value-in-U-S–Health-Spending. aspx. Accessed on July 30, 2011.
14. Keehan SP, Sisko, AM, Truffer DJ, Poisal JA, Cuckler GA, Madison AJ, Lizonitz JM, Smith SD. National health spending projections through 2020: economic recovery and reform drive faster spending growth. Health Aff 2011;8. Available at http://content.healthaffairs. org/content/early/2011/07/27/ hlthaff.2011.0662.full.pdf+html. Accessed on July 30, 2011.
15. Schoen C, Collins SR, Kriss JL, Doty MM. How many are underinsured? Trends among U.S. adults, 2003 and 2007. Health Aff Web Exclusive, June 10, 2008:w298–w309
16. Abraham JM, DeLeire T, Royalty AB. Moral hazard matters: Measuring relative rates of underinsurance using threshold measures. Health Serv Res 2010;45:806–824.
17. Long SK. The impact of health reform on underinsurance in Massachusetts: Do the insured have adequate protection? The Urban Institute, October 2008.
18. Towers Watson. Shaping health care strategy in a post-reform environment. 16th annual Towers Watson/National Business Group on Health employer survey on purchasing value in health care, 2011. Available at http://www.towerswatson.com/ assets/pdf/3946/TowersWatson-NBGH- 2011-NA-2010-18560-v8.pdf. Accessed on July 27, 2011.
19. Association of American Medical College. Physician shortages to worsen without increases in residency training. Available at https://www.aamc.org/download/150584/ data/physician_shortages_factsheet.pdf. Accessed on August 4, 2011.
20. Vermont legislature, H202, 2011. Available at http://www.leg.state.vt.us/ docs/2012/BILLS/PASSED/H-202.pdf. Accessed on July 30, 2011. 21. Hsaio WC, Knight AD, Kappel S, Done N. What other states can learn from Vermont’s bold experiment embracing a single-payer health care financing system. Health Aff 2011;30:1232–1241.
