So, What Happened to Healthcare?

By Mike Koetting        March 8, 2018

Six months ago, healthcare was the issue of the land. Now, the issue pops up in disjointed fragments of policy and rhetoric. I read two or so healthcare blogs most days and I still find it hard to follow.  So I figured it might be useful to offer my own recap of what I think is the current state of healthcare policy in America.  It is, after all, on its way to eating up a full 20% of the GDP. (https://www.healthaffairs.org/do/10.1377/hblog20180214.597384/full/ ).

The short version is that for all the sound and fury, the basic ACA structure is much less damaged than we feared a year ago, but the Trump administration has given individual states more latitude to mau-mau the ACA. Of course, even in the absence of broad-scale collapse, some individuals have been hurt.

http://blogs.jamaicans.com/gwgraeme/2017/03/07/how-can-health-care-be-conservative/

Reviewing the Bidding

Simplifying radically, the ACA had one major goal:  to redistribute costs and access in a more transparent and equitable way, while retaining the basic framework of private health insurance. There were three major initiatives to this end:

• Reform the private insurance market, including requiring everyone to get insurance and requiring individual insurance coverage to be comprehensive
• Subsidize people with lower incomes so they can get comprehensive private insurance
• Expand Medicaid for those whose incomes would not support private insurance without an enormous subsidy

The assumption was that these initiatives would work together so that every citizen had access to insurance coverage that was comprehensive and would offer financial protection against health misfortune. Thus, it would reduce the burden on those who had serious health problems or who simply didn’t have income to afford insurance.

The Republicans, for all their huffing and puffing, never had any coherent substantive objection to the overall framework which is why they were unable to produce a coherent alternative. This left them in the awkward position of wanting to repeal the ACA with no alternative that made sense, as became clear.

So what’s happened since last summer?

Market Reform

The major change is the repeal of the universal mandate as part of the budget deals. This is stupid but frankly not catastrophic. Most people who still want insurance will be able to get it. But the price will rise because people who don’t get insurance are likely to be healthier, and by opting out they aren’t paying towards the costs of less healthy people. People who don’t want or can’t afford insurance, won’t get it. Which only works if they don’t get seriously ill. If they do, the costs are likely to be beyond what can be afforded and the rest of us will wind up paying for what they do get.

The other change that Republicans would like to make is to repeal the requirement that all individual insurance plans be comprehensive. Since they couldn’t pass legislation to achieve that, they are proposing a series of waivers that would allow states to waive these requirements. Some states will opt for these waivers. Idaho, in fact, is not even waiting for a waiver, but appears on the verge of authorizing plans that don’t meet this requirement—or that don’t comply with the prohibition on material medical underwriting. It remains to be seen how the Trump administration will respond to this move, which is unambiguously illegal. (On the other hand, Idaho is also seriously considering expanding Medicaid.  Go figure.)

Republicans apparently believe the general interest is served by having more people on less expensive insurance, even if it covers less. The Trump administration is pushing several additional schemes of this sort. These are all complicated ways of hiding the true costs to society while trying to impose more costs on people who have health problems. The latter only works to the point the costs are so large people can’t really pay, after which the costs end up being borne largely by the general public anyway

Hopefully, most states will maintain requirements for comprehensive plans in the individual market.  Some people will find those policies “too expensive”—particularly in the absence of the universal mandate. The issue, however, is not the unidimensional measure of “insured” versus “non-insured”, but rather whether the insurance actually provides coverage for the extreme conditions that can bankrupt a family in a flash. In the years immediately before the ACA took effect, 75% of all health-related bankruptcies were filed by people who had some form of insurance. Comprehensive coverage is more transparent and less punishing for those who have major health misfortunes.

The Exchanges

It is hard to figure out what the Republicans want. Somedays they want the exchanges to go away, other days they want to change their rules. Even the American Enterprise Institute, hardly a bastion of liberal thought, concedes the lack of Republican clarity about goals is a fundamental problem. https://www.healthaffairs.org/do/10.1377/hblog20180124.477922/full/

Skipping all kinds of inside baseball, the bottom line is that Exchanges have pretty well stabilized and are unlikely to go away. Exchange enrollment, despite all the uncertainties—and sometimes explicit obstacles—remains constant at about 12 million people, just under 4 percent of the entire population. Prices on the Exchanges have jumped as Republicans have been unwilling to adopt any stabilization measures, but even so they are starting to stabilize. The macro impact of the price increases is to increase the amount of subsidy the government pays in order to keep purchasers’ expenses at the level of their income dictated by the ACA. On the other hand, the complicated effects of plans changing coverage to respond to the new environment often has had substantial impacts, up or down, at the individual level. There is a secondary impact that increasing prices are forcing people with low or no subsidy out of the Exchange. This was never a large portion of the Exchange, but was presumably useful to the people who sought it.

Medicaid

There is less confusion here about what the Republicans want—fewer people on Medicaid. But they are having trouble achieving it because the Medicaid program is fundamentally a state-run program. And states better understand that knocking people off Medicaid not only hurts those people, but also winds up creating costs for society as a whole.

The result of these cross currents is that there hasn’t been much short-term change in Medicaid. The desire of some states to create “work requirements” for Medicaid recipients has received a fair amount of press, but will likely impact only a few red states and, even within those states, the impact will not be large because so many Medicaid clients are on Medicaid precisely because they can’t work. But, again, some individuals will be removed from Medicaid and the odds of them getting other health insurance is negligible. Among the care they will be missing is preventive care, which might save costs down the road. There is no evidence any of these policies are influenced by a real analysis of costs and benefits, but are mostly vehicles for various politicians to propagate their own concepts of public morality.

The bigger issues for Medicaid may be the various tax and budget provisions that reduce taxes and could result in longer term cuts in Medicaid. How these cuts would actually be implemented—or if they will—is unclear. It is a danger, but at this point undifferentiated from the many dangers posed by the feckless Republican fiscal policy.

Contraceptive Coverage

Perhaps smaller, but totally offensive, is the specific change the Trump administration is seeking by attacking the provisions that required contraceptive coverage with no co-payments. Although this provision is extremely popular (https://www.kff.org/womens-health-policy/issue-brief/new-regulations-broadening-employer-exemptions-to-contraceptive-coverage-impact-on-women/), Trump’s team has proposed significantly expanding the number of groups that can receive exemptions.  If finalized, this rule will result in additional costs for many women, and, no doubt, some uptick in unplanned pregnancies. At the moment, the rule is tied up in several court cases, so it remains to be seen how the story will end.

In short

Nothing to celebrate, but it could be much worse. Some individuals are disadvantaged and the administration continues to cater to certain conservative ideas—even though the majority of people oppose them. Perhaps they think the majority won’t notice.  Or vote in November.