As we get closer to the implementation of the Affordable Care Act, we near a welcome time in which public debate may center on the actual outcomes of the legislation rather than speculation — or its destruction.
Perhaps these outcomes will force both sides to return to underlying problems of high costs and inefficiencies in the U.S. health care complex that are likely to persist. The important issues are straightforward: If the predictions of the act’s detractors are correct and we don’t like how it works, what should we do instead? And what do we do about problems for which the new regime promises few solutions?
The question of cost growth is highlighted in a recent annual report by the Kaiser Family Foundation on health care and health insurance. It found that the average cost of family insurance coverage increased 4 percent over the past year. Cumulating over the past decade, such insurance costs have increased 80 percent compared with average wage growth of 30 percent and overall inflation of 27 percent. And this pattern of health insurance cost growth greatly outstripping increases in income goes back more than one decade.
One should note that a 4 percent increase is moderate compared with longer-term trends. The 80 percent rise over 10 years works out to an average annual compound rate of growth over 6 percent a year. However, because many employers are increasing the portion of total premiums that their employees must pay, there is a widespread perception that we have galloping increases overall.
Remember that insurance costs go up because the cost of medical care continues to rise. Some of this is driven by new technology, some by an aging populace and by other factors.
But it also is true that our nation continues to have higher unit costs for many procedures, devices and drugs. We also spend more on administration, both of health care-providing institutions and on health insurance management, than does any other industrialized country.
Proponents of the Affordable Care Act, or ACA, argue that it contains measures, including a board to identify the most effective treatments, that should have some effect in limiting cost growth. But it also mandates that insurers include coverages that will add to costs. Meanwhile, critics are correct that the new law introduces few, if any, incentives for households to weigh overall costs before seeking treatments.
Covering the previously uninsured was an important priority for those that sought the law. Much of this is accomplished through a major expansion of Medicaid, the government’s health plan for lower income people.
This will cost the Treasury a lot of money, but a big chunk will represent a shift from state and local governments that now end up paying the tab, or from private insurance that effectively has to pay some of the cost of treating those uninsured who leave bills unpaid. And there may be some efficiencies in that people newly covered by Medicaid will seek earlier treatment for problems that, if not attended to promptly, might mushroom into much more costly conditions.
But there also will be an increase in health care utilization by people who did not have coverage before. Exactly how this will all play out in terms of additional Treasury outlays is uncertain. Before-the-fact estimates of outlays under Medicare and Medicaid turned out to be woefully low, although those for the more recent Medicare drug benefit have been fairly accurate.
If, on balance, the act is successful, the question for many Americans will be how to tweak it to make it better. If it turns out to be the abject failure that many Republicans predict, the question will be what to replace it with.
The challenge is much more difficult for Republicans than Democrats, as Newt Gingrich pointed out Tuesday in a speech to the annual meeting of the Republican National Committee in Boston. He excoriated his fellow Republicans for having “zero answer” to the “replace” half of the “repeal and replace” response to the Affordable Care Act that they have advocated for three years.
This problem stems from the fact that the act incorporates what for decades had been the conservative prescription for health reform. From research by free-market economists in the 1970s and 1980s, to the Heritage Foundation plan, to the Senate Republicans’ alternative to the Hillary Clinton plan 20 years ago, the core elements of the ACA — private insurance sold through organized exchanges with a mandate that individuals must buy and with government subsidies for those with low incomes — were the primary Republican alternatives to the favored Democratic plan of single-payer “Social Security for everybody.”
Yes, these proposals did not contain a large expansion of Medicaid or mandatory coverage of birth control or coverage of adult children up to age 26.
But in its key dimensions, the ACA is very congruent with the Massachusetts plan adopted under then governor Mitt Romney and the one advocated by Gingrich in “Real Change,” his 2008 book.
Jettison “Obamacare” and the Democrats will say, “Well, the only alternative left is single-payer.” But what will Republicans say? And will either party’s plan include any substantive measures to limit seemingly inexorable cost increases?
Wisconsin Republican Rep. Paul Ryan’s plan for “voucherizing” Medicare is one alternative they could flesh out. But some of the rhetoric deployed against the ACA over the last three years will make that difficult.
However it turns out, the next couple of years are going to be interesting for policy wonks. They may be fretful for households.