Health Care Reform and Its Blockades
We have been fighting over state vs. federal regulation of insurance since 1869 when the Supreme Court ruled that “issuing a policy of insurance is not a transaction of commerce.”
When Teddy Roosevelt introduced comprehensive health reform in 1912, life insurance companies fought it and called it “Socialist” for fear of losing their brokers. In 1929, the American Medical Association (AMA ) created The Committee on the Costs of Medical Care to address escalating health care costs. When the final report was issued in 1932 the AMA branded the report as “Socialist” even though they had created the Committee. What killed the recommendations was the call for salaried physicians working in group practices with hospitals and having community health planning to address community needs. Health care became such a lightening rod issue that FDR kept it out of the New Deal for fear it would doom that legislation and Social Security. We’re still fighting the same fight, only now the attack is on “government run” health care.
The debate of private vs. public responsibility for health care changed with World War II and the wage price freeze. Companies needed workers and needed to reward them for their intense war effort. Employers argued to offer health care benefits instead of wages and they won. Health care became a form of employee compensation for those that worked for large companies. Not everyone worked for large employers. Individuals, seniors, some small businesses and the poor remained without health insurance and too often the means to pay for it.
The private vs. public battle remained well into the 1950’s. When Truman proposed comprehensive health reform it was killed as “Socialist” with intense attacks from the AMA and the US Chamber of Commerce (employers). Many Chambers still use the promise of more affordable health care benefits to attract Chamber members. When Medicare and Medicaid were passed in the 1960’s to help the elderly and the poor, the law was also strongly opposed by the AMA saying it would doom independent physician practices and intrude government into the practice of medicine.
In the 1970’s and another wage price freeze employers once again offered more health care benefits in lieu of raises. Nixon proposed a private health insurance employer mandate and proposed replacing Medicaid with state-run private health insurance plans based on income and enrollee cost sharing. The initiative died with Watergate. Ford did not follow through on those initiatives. Reagan proposed some payment reforms that were enacted, but not a comprehensive plan.
Clinton proposed a universal health plan in 1993. All citizens and permanent residents had to buy health insurance. They could not leave one plan without going into another. Each plan had a basic set of benefits, and continued the ‘fee for service’ payment system. The proposal also called for regional alliances of hospitals and doctors that would not be subject to state by state regulations.
Clinton’s health care proposal faced intense opposition with a $14-$20 million campaign funded by the Health Insurance Association of America (now American Association of Insurance Plans—AHIP). The campaign ran on TV and radio for a year from 1993 to1994, years before the widespread use of the internet. The new legislation also failed.
The Affordable Care Act (ACA) tried to avoid the outright opposition of insurance companies. The plan had an individual health insurance mandate or face fines. Subsidies were also available for those who could not afford the premiums. This prevented outright hostility from insurers because of the promise of more income with all the potential new enrollees. However, the ACA established limits on what insurers had to do in exchange for expanded coverage.
This current Presidential campaign brings intense calls to repeal “Obamacare” (The ACA). Once again these calls are for marketplace solutions largely in the form of Health Savings Accounts.
The history of reform has been a history of ‘no’s.” There have been few if any specific comprehensive alternatives proposed. There have been a few regulatory tweaks here and there, some with disastrous results in terms of costs. Consequently, until the ACA there has been no comprehensive reform since the passage of Medicare and Medicaid in the 1960’s. Even these programs are once again under fire.
With the ACA we now have specific building blocks that promise to re-shape the industry so it will focus on value, outcomes and greater transparency of both costs and quality. Even if ‘Medicare for All’ or ‘Health Savings Accounts’ were immediately adopted, none of those changes could happen overnight. The system is simply too large—nearly 20% of the American economy.
The ACA Building Blocks
Some cry the ACA goes too far. Others say it has not gone not far enough. Here is what the ACA has in fact done.
Even with its many flaws, the ACA offers the most sweeping reform since Medicare and Medicaid. It offers building blocks that reshape the health care marketplace. It also has some teeth to foster more accountability.
Specifically, the ACA requires insurance companies to cover everyone regardless of health. All insurers must offer a core package of Essential Benefits that includes preventive care. It prohibits insurance companies from placing financial lifetime limits on what they will pay if you are sick. It limits insurance company profits and overheads to 20 to 25 percent of the premiums they collect or they must give refunds. Fewer employees face ‘job lock’—the fear of leaving or losing a job for fear of losing health care benefits.
Today the Essential Benefits no longer depend on the state where you live or the policy you buy. The one key exception is employer-based health insurance, especially the large employers and unions which offer the most generous benefits. Many small businesses can phase into coverage requirements or let their employees buy insurance through the new Health Insurance Exchanges.The so-called “Cadillac Tax” on the more generous benefits of large employers and unions remains embroiled in debate and may well be dropped. As employer-based health care shrinks from the high of 70% of all American workers to less than 30% because of the shift from full-time to part-time and ‘contract’ workers, the fights over health benefits may change.
The ACA has begun to limit the power of insurance companies and simplify administrative costs by having a required set of benefits just to manage the different plans. Because of the plethora of plans in the past, administrative costs are staggering at all levels—insurance companies, employers and providers. As an example, a multi-specialty physician clinic in California with 125 doctors had to hire 35 people full-time to verify all the different eligibility, authorizations and referral rules in each and every different insurance plan. While the ACA is not a panacea for this problem, it certainly begins to makes a dent.
An eye-opening indication of the complexity and administrative waste and cost in the current system is the numerous publicly tax supported programs. There are over 39,044 general purpose local governments, including 19,492 municipal governments, 16,519 township governments and 3,033 county governments, in addition to 50,432 special purpose local governments. In addition there are 50 state and 16 territories. The health care for the employees in these publicly supported health plans are paid for with state, county and local tax dollars. Not to mention health care for Senators, Representatives, their staffs and all the Congressional staff members. All have different benefits, co-payments and deductibles. Each requires fleets of people to monitor those benefits. This aspect of “government run” health care is rarely discussed even by Governors or Congress.
Even with Health Savings Accounts or Single Payer/Medicare for All, it is simply impossible to move quickly and seamlessly from where we are to any new system public or private. The ACA offers building blocks. It took years for Medicare and Medicaid to be phased in and operational. Fights over both remain today. There are calls once again to privatize Medicare. Some states have private insurers managing Medicaid. Many states refuse to expand ACA’s Medicaid expansion to cover more of their residents. Calls to reform Medicare may fall on deaf ears. Most doctors participate in the program. With 10,000 people a day turning 65, there probably now may be fewer calls for major reform to Medicare.
The ACA offers building blocks to a comprehensive and more comprehensible system. It also has some teeth. Hospitals are now fined for poor quality. Doctors are rewarded for quality and value vs. volume which dominates a fee for service system. Doctors and hospitals are encouraged to ‘bundle’ bills for the same service, such as hip or knee replacements. Doctors are fined for financial ties to pharmaceutical companies. Hospitals are being held accountable to the communities they serve with the call for community health needs assessments. They are fined if they do not conduct an assessment and develop a strategic plan to meet those needs. Previously hospitals were accountable only to their Boards of Directors.
The ACA offers tools that can be used to move toward a more comprehensive and comprehensible system without destroying the best of what we have. We need to use them. After all, no one from the outside is coming to help.
Coming Next: Accountability: Who is Accountable to Whom?
Kathleen O’Connor February 25, 2016 ©