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Jul 19, 2017 10:13AM
Jul 19, 2017 10:19AM
Understanding the American healthcare reform debate BMJ
2017; 357 doi: doi.org/10.1136/bmj.j2718
(Published 07 June 2017)Cite this as: BMJ
- Donald M Berwick, president emeritus and senior fellow
If you don't understand American healthcare, join the crowd. Donald M Berwick explains US government attempts to repeal and replace the Affordable Care Act
Debates over the US healthcare reform law—the Affordable Care Act (ACA) or "Obamacare"—have raged for almost a decade, with new fury now in the "repeal and replace" initiatives of the Trump administration. The act is complex, the more so because its provisions build on an already tortuous non-system of financing and delivering care to the people of the United States.
Here I present a quick tour of that non-system, an explanation of the basics of the ACA, and an analysis of the present attempts to undo it. Although I have tried to be technically correct, I make no claim to be non-partisan. I was President Obama's appointee as administrator of the US Centers for Medicare and Medicaid Services between July 2010 and December 2011, which provides insurance at a cost above $820bn (£640bn; €730bn) to over 100 million Americans and which was and is responsible for implementing and managing more than 70% of the provisions of the ACA. I am a fan of the ACA, and I strongly oppose its repeal.
Understanding the ACA and its critics requires an understanding of how the US funds its healthcare. There are seven main routes of funding (box 1).
Box 1: How the US funds healthcare
- Employer sponsored insurance for about 160 million people—workers and their families—in which premium costs are shared between employers (usually 60%-80% of the costs) and employees
- Medicare—the tax supported federal health insurance scheme established in 1965 for Americans over 65 years of age (about 50 million people) and some others with disabilities
- Medicaid—tax supported insurance, also begun in 1965, managed through the states and funded by a sharing of costs between states and the federal government, covering the care of people with low income, including those in long term care facilities. (Each state determines eligibility criteria.) About 70 million people each year have Medicaid coverage at some time during the year, but it is an ever changing pool as people come into and out of poverty
- Children's Health Insurance Program—essentially a Medicaid-like federal programme for about 8 million children
- Department of Defense's healthcare system for service members and their families (8 million)
- Veteran's Health Administration for military veterans and their families (8 million)
- The individual and small group market—consists of roughly 20 million people who do not qualify for any of the other forms of coverage and who either find insurance on their own or go without
The funds flowing through these channels now amount to about $3tr a year, 18% of the entire US economy. Healthcare costs account for more than 25% of the federal government's budget and are by far the fastest growing component of public expenditure in the US.
Closing the coverage gap
When President Barak Obama took office, around 50 million Americans lacked any health insurance because they did not fit into any of the existing payment streams. Many were simply unable to find affordable insurance or, because they had pre-existing medical conditions, could not find any insurance company willing to cover them.
President Obama made closing that coverage gap his flagship domestic policy initiative (allegedly against the advice of many of his staff). With enormous political conflict and through a long list of compromises with stakeholder groups, he was able to get the Affordable Care Act passed by Congress in March 2010, 14 months after his inauguration.
The ACA is hard to summarise briefly. It has 10 "titles" (sections) and is well over 1000 pages long. It may be best understood as, in effect, two bills in a single package.
One major theme is to improve healthcare insurance by extending coverage to more people and by placing insurers under new requirements that effectively make coverage more comprehensive and robust. More people are covered through Medicaid by setting a single, national threshold for eligibility (anyone whose annual income is less than 138% of the federally defined "poverty" definition). The act also established either state or federal "exchanges" (now called marketplaces) in which individuals between 138% and 400% of the federal poverty level can find commercial policies and receive a subsidy from the federal government to help them buy that coverage. In its initial design, the ACA was estimated to cover 16 million more people in Medicaid and 16 million more people in the exchanges. The ACA also introduced a popular provision that made children eligible for coverage under their parents' health insurance policies up to the age of 26 years.
To make this all work, the ACA introduced a range of requirements for the insurance industry. One—"guaranteed issue"—forbade insurers from denying coverage because of pre-existing conditions. Another—"community rating"—required pooling of well and ill beneficiaries in a common actuarial pool so that the premiums would be affordable to people with greater need for care.
By far the most controversial requirement was the "individual mandate," under which every American had to obtain health insurance or pay a penalty. Without that requirement, given the new guaranteed issue provision, a well person could choose not to buy insurance until he or she became ill, which would make the actuarial pools unsustainable—as if people could wait to buy fire insurance until their house was in flames.
The other main part of the ACA addressed delivery of care. It did this by introducing a wide range of payment mechanisms to create incentives for healthcare providers to work more closely together and to provide more integrated care. Among the best known of these were accountable care organisations (which could in theory unify the aims of hospitals and community based care) and "bundled payment" for episodes of care (such as total joint replacement) rather than elements of care (such as operating theatre time or physician fees). The ACA also created new forms of transparency, public reports, and antifraud enforcement, as well as a new Center for Medicare and Medicaid Innovation with $10bn of funds to support widespread trials of new designs of care.
The costs of the expanded coverage of the ACA—about $1tr over 10 years—were offset with projected savings from better care, some reductions in payments to hospitals and private insurers, and a series of new taxes facing mainly wealthier taxpayers.
Problems with Obamacare
The ACA achieved many of its aims. For example, by the time of President Trump's January 2017 inauguration, more than 20 million additional people had health coverage, the rate of rise of healthcare costs had somewhat slowed, major innovations in care and payment were being widely tested, reductions in hospital complications and readmissions were well documented, and the quality of insurance had generally improved. Problems were developing in many of the exchanges because of instability in enrolments in the fraught individual and small group market, and drug costs—never targeted by the ACA—were rising rapaciously. And, during the Obama years, the US Supreme Court weakened the Medicaid expansion provision by denying the federal government the authority to require expansion. As a result, when Obama left office, 19 states had still not expanded Medicaid.
More to the point, the prominence of the ACA as ground zero for political attacks from the Republican party never abated during the seven years between the ACA's passage and the election of Donald Trump as president. Their rhetoric was unremittingly negative, and the Republicans vowed that once in office they would repeal the law forthwith.
But despite Republicans getting control of the White House and Congress in 2016, the repeal of Obamacare has not gone to plan. Two headwinds developed.
Firstly, it has proved difficult, if not impossible, for the Republican party to agree internally on the exact terms of ACA repeal. Secondly, the American public has begun to experience and notice benefits from the ACA that most people are now reluctant to give up. People with pre-existing conditions feared loss of insurance if the ACA requirements were weakened. The 31 states that had expanded their Medicaid programmes (many of them Republican states) were enjoying newfound federal dollars to cover impoverished patients whose care would otherwise have to be paid for by states and their local charities. And hospitals found that the formerly "free care" populations they had to serve without payment now had insurance coverage.
It seemed politically unwise to wrench those improvements from the public, but the far right wing of the Republican Party—the Freedom Caucus—refused to support any repeal-and-replace bill that maintained the federal subsidies and requirements that would have been required to avoid that implosion.
Effect of repeal bill
The bill that finally passed the US House of Representatives on 4 May 2017, in a close vote (217 to 213), acceded to many of the Freedom Caucus's demands. It in effect would end the Medicaid expansion support (taking coverage away from about 14 million poor people and nursing home residents), end income based subsidies for purchase of policies in the exchanges (substituting inadequate age based subsidies), weaken guaranteed issue requirements, weaken community rating (thus putting insurance premiums for sicker people out of reach for millions), weaken coverage requirements (by permitting policies without such formerly required benefits as maternity care and mental healthcare), and begin to move Medicaid from a federal state partnership to a "block grant" in which states would assume much more risk for coverage costs. The bill also would end the ACA's investment in a crucially important Prevention Fund, intended to advance the work of the US Centers for Disease Prevention and Control and others on social determinants of health and the upstream causes of illness.
The non-partisan Congressional Budget Office determined that if the House bill became law about 23 million people would lose coverage, federal Medicaid contributions would fall by more than $800bn over 10 years, and Americans in higher income brackets (about $250 000 annual income) would experience about $1tr in lower taxes over 10 years. Compared with the ACA, the House bill thus amounts to a transfer of about $1tr over 10 years from older, sicker, and lower income Americans to those in the top 2% of the income distribution.
Each chamber in Congress has to come up with its own bill and then reconcile them. So the American Health Care Act (AHCA) being proposed will be substantially changed. The legislative ball has now shifted to the US Senate, where more moderate Republican voices tend to be heard than in the House. Republican Senate leaders have publicly stated that the House bill cannot pass the Senate, and are apparently shaping their own repeal-and-replace proposal. What that will be, and whether the Venn diagram overlaps at all with what could pass the House, is yet to be known.
In the meantime, a minor but important chorus has been developing, almost as a sideshow, not yet embraced by any visible bipartisan Congressional leaders, and not at all by the White House. That voice identifies a discrete set of technical problems with the ACA, such as in the details of the supports for the individual and small group market on the exchanges, ways to encourage young and healthy people to obtain insurance, and providing reinsurance and other supports to insurance companies who find themselves covering riskier populations than they had estimated.
In happier, less partisan times, an enterprise to improve an important and largely successful law based on empirical evidence and experience would seem obvious. And the wisest path would not only repair the ACA but also go on to address the needs of the people—over 20 million of them—that, even with the ACA, still lack insurance. But, for the present, that productive approach seems, sadly, out of reach.
It should not go unnoticed that a vocal minority of critics of the current American health insurance system argue persistently that the most straightforward remedy would be, not the amalgam of financing of the ACA, but rather a "single payer" system—essentially Medicare for all. That idea has not yet gained political traction, largely because of the opposition of powerful lobbying interests, most importantly the healthcare insurance industry, which would stand to lose the most.
Massive step backwards
Whatever the next act will be in the ACA drama, perhaps the most important fact of all is that the United States, despite its wealth, remains the only Western democracy that has not embraced universal healthcare, explicitly or implicitly, as a human right.
The Affordable Care Act, though imperfect, was the largest step towards that goal that the US has taken since the creation of Medicare and Medicaid in 1965. The AHCA in anything like the form the House approved would be a massive and immoral step backwards, leaving tens of millions of Americans once again to face needless risk, greater suffering, and, for many, destitution. The hope is that wiser heads and more compassionate hearts will prevail among the nation's leaders.
Donald M Berwick, a paediatrician by background, is a global authority on healthcare quality and improvement and a former administrator of the US Centers for Medicare and Medicaid Services.