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Wednesday, April 02, 2014

Affordable Care and the Lessons of History

The Affordable Care Act (ACA) seems to be gaining steam. After a rocky start in October, the new health insurance exchanges reached the government's enrollment goal of 7 million. As ACA's provisions continue to take effect, its status should solidify and transform the U.S. health care system in important ways.

Yet there also are reasons to be cautious about ACA's long-term prospects. The Act's basic framework may not have taken sufficient account of the lessons from history. After watching health insurers torpedo the Clinton plan in 1994, President Obama took care to secure support for ACA from the insurance industry, as well as drug companies, physicians, and other important interest groups. But there may have been more important lessons from the country's history with other public benefit programs, including Medicare, Medicaid, and food stamps.

As NPR and the New York Times reminded us with their ACA updates last week, federal-state partnerships can have serious drawbacks compared to programs operated by the federal government. Some states effectively meet the needs of their residents, but others do not. Just as Texas had the highest percentage of uninsured people under pre-ACA health care, Texas continues to lag other states under ACA in terms of access to health care coverage. Similarly, when states were responsible for setting eligibility standards for food stamps, the program reached counties with only 59 percent of the U.S. population. After a decade of state oversight, Congress established uniform eligibility standards.

Benefit programs also fare better when they are perceived by the public as having been earned. Medicare and Social Security have enjoyed strong support because they are funded in part by payroll deductions. Medicaid, on the other hand, with its funding from general revenues, often is viewed as providing handouts.

Finally, benefit programs for the poor tend to generate broad support only when the well-to-do also are eligible for the programs. Medicare with its universal eligibility is a much stronger program than is Medicaid. Under ACA, the more prosperous will continue to receive their health insurance from their employers or on their own, without government subsidies, while the poor will have to rely on Medicaid or federally-subsidized health exchange coverage. History tells us that political support flags over time when benefits are restricted to the less prosperous. Perhaps support for the exchange coverage subsidies will persist since poeple are eligible for the subsidies up to 400 percent of the federal poverty level, but the Medicaid expansion only goes up to 138 percent of the poverty level.

President Obama and congressional Democrats may have made the correct short-term political bet when they went with ACA rather than a federally-operated, Medicare-for-all system funded by payroll deductions. But the long-term prospects of ACA carry much uncertainty.

[cross-posted at HealthLawProf blog and orentlicher.tumblr.com]

Posted by David Orentlicher on April 2, 2014 at 10:33 AM in Current Affairs | Permalink


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A few questions --

(1) Do you think that there's as much of a politically salient rich/poor divide under the ACA as under other programs? You say that more prosperous people will continue to get health care from employers or "on their own," but isn't the "on their own" likely to be through the exchanges? I get the impression the exchanges are being used by a lot of self-employed or small-employer people. Even if they aren't getting subsidies, many of them experience the benefit of getting a better deal. It seems to me that everyone participating in the same system, with a sliding scale for costs, is more politically maintainable than something that is seen as "just for the poor." And maybe there is some potential for gradually decoupling health insurance from employment?

(2) Is there also potential for repeating what you describe happening with food stamps -- let the state "laboratories" experiment for a while, but eventually convert to a uniform approach?

Posted by: Jennifer Hendricks | Apr 2, 2014 1:48:33 PM

(1) Good point about the benefits of exchanges even for people who do not receive subsidies. That should broaden political support for the exchanges, with one caveat. Exchanges presumably can be preserved without preserving the subsidies, so those earning more than 400 percent of federal poverty could support the exchanges but withhold support for subsidies.

Decoupling health insurance from employment would create an even larger constituency for the exchanges, but in some ways, ACA relieves the pressure on employer-sponsored coverage. With the exchange subsidies and the Medicaid expansion, ACA does much to address the "job lock" problem. People no longer have to stay in their current jobs for the health benefits, nor do they have to worry as much about health benefits when picking their new jobs.

(2) Good question about conversion to a more uniform approach. On one hand, Congress tried to make Medicaid eligibility uniform with its expansion, but the Supreme Court undid the uniformity. If Democrats regain control in Washington and budget deficits diminish, we might get a uniform approach.

Posted by: David Orentlicher | Apr 2, 2014 2:45:08 PM

But David! You forgot the most important lesson of (recent) history of all: Congress wasn't ever going to pass anything like a "federally-operated, Medicare-for-all" system. That's not because of "short-term political bets." That's because of something else -- and I bet you know what it is, donchanow?

Posted by: Dalvino | Apr 2, 2014 2:50:40 PM

My opinion is that all of the sturm und drang about the nonuniform Medicaid expansion will be transient. There is just so much federal money out there for the states to expand, and the lion's share of that money will end up in the pockets of doctors and hospitals and nursing homes. Especially the latter two give LOTS of money to Republicans, especially at the state level. They can't ask them to sign on right now given the immediate political climate, but in my discussions with them, most of the industry groups and lobbyists indicate that by 2017 it will be a different story.

Posted by: Health lawyer | Apr 2, 2014 4:16:28 PM

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