Why “ObamaCare” Should Not be Repealed and/or Replaced*

The ACA is an extraordinary example of American innovation and leadership

The Patient Protection and Affordable Care Act of 2010 (Accountable Care Act, or ACA), sometimes referred to as “ObamaCare,” is constantly bashed from the right for being a government takeover of health care, and from the left as NOT being a government takeover (not a single-payer system). The ACA has its share of structural and functional flaws (which an engaged Congress would be addressing in an ongoing way), but it has also had much success (for example, in expanding coverage and reducing the rate of cost increases[i]). But, regardless of its track record, it faces political and ideological opposition, especially among many Republicans, who would like to see it entirely repealed and replaced. President-elect Trump made this one of his top campaign promises, though, after a post-election meeting with President Obama, he signaled that he might pull back a bit from a complete repeal. President-elect Trump and others should continue to hedge on this goal. The ACA is a classically American initiative on the frontiers of public policy in health care. We should see the ACA as much of the rest of the world does: as an extraordinarily important and promising initiative in bringing together the best of the public and private sectors to solve globally intractable problems with healthcare costs, quality, and access.

This assertion requires review of a little history. Most industrialized countries long ago made the commitment to universal access to health care through what is variously known as nationalized or socialized medicine. With the passage of the ACA, America finally joined the ranks of industrialized nations officially committed to the goal of universal coverage. It was passed not as an endpoint but as a starting point. It was designed to be implemented over more than 10 years, understanding that the law would be revisited and revised in parts for years to come. And much of the rest of the world has been watching and hoping that the ACA succeeds in showing the way to addressing the cost, quality, and access problems that plague every national health system worldwide.

In health policy circles, national health systems can be understood as “ . . . the organized response of a society to the health problems of its inhabitants.”[ii] National approaches to coverage and care are often categorized by those nations with solidarity-based systems and those with non-solidarity based systems. Two types of solidarity-based systems have predominated. One was established by Bismarck, the first chancellor of unified Germany at the end of the 19th Century. The other is named for Lord Beveridge of the United Kingdom, who founded the British National Health Service in 1948. [iii]

The Bismarck systems rest on a local/regional social insurance model, where patients pay insurance premiums to a sick fund, usually run by a beneficent organization, employer or labor union. These social insurers in turn contract with first-line general practitioners and second-line specialists and hospitals (which are non-profit institutions). The state sets umbrella terms for contracts between patients, providers and insurers, but control over delivery of care is left to doctors and hospitals. Patient satisfaction tends to be high in these localized, family-centered care systems. Countries currently with Bismarckian health systems include Austria, Germany, The Netherlands, Belgium, France, Switzerland, Luxembourg and Japan.

The other major solidarity-based model is the Beveridge National Health Service (NHS). This model is centralized and funded mostly through general taxation. While the medical profession retains a relatively independent status and primary care physicians work by contract with the NHS, the state provides and runs institutional-based care in state-owned hospitals. A Ministry of Health controls the overall health care budget. General practitioners are gatekeepers and patients need a referral for hospital or specialist care. Countries based in this model include the UK, Ireland, Denmark, Norway, Sweden, Finland, Iceland, Australia, Greece, Italy, Portugal, Spain, South Korea and New Zealand. (Canada is not a fully socialized medicine model, but instead has a state-run insurance system that is superimposed on a health delivery system that is essentially private.)

In contrast, non-solidarity systems feature predominantly private insurance and private hospital and physician/care-giver markets. Access and financing generally depend on ability to pay, with some special provisions for the poor and vulnerable. In the United States, Blue Cross and Blue Shield (“The Blues”) led the way in defining our system, starting in 1934. More recently we have seen other forms of private-sector coverage, including health maintenance organizations and the consolidation of large insurance organizations and hospital systems. But we also have significant public sector programs, including Medicare, Medicaid and the Veterans Administration, to provide insurance for the poor and elderly and other special populations. Countries with non-solidarity based systems have included the United States, South Africa, Uruguay, the Bahamas, Chile, Argentina and Zimbabwe.

But none of these systems is static.

Because of runaway health costs and disparities in the quality of health care across the globe, many if not most nations that began from a decentralized Bismarkian approach have been centralizing key processes. In fact, the health systems of Greece, Italy, Portugal, Spain, and South Korea were once based on the Bismarck model, but transitioned to the Beveridge model during the 1970’s and 1980’s, when costs began to skyrocket and significant health disparities were found to exist between different regions and localities.

At the same time, and for the same reasons, most nations that started from a centralized “Beveridge” NHS approach have adopted some decentralized approaches tailored to particular regions, populations and constituencies. Great Britain, among other nations, is investing more control in localities and is experimenting with private sector approaches and incentives.

When one thinks about the challenges any society faces in developing and maintaining its “organized response . . . to the health problems of its inhabitants,” especially given constant changes in technology and growth of populations, etc., all of this changing and adapting turns out to be both natural and necessary. Both the Bismarck and the Beveridge-based approaches have strong and weak aspects and nations continue to learn from one another about the best approaches to common systemic problems. But there’s more.

In the U.S., we started with a health system based on “The Blues.” The Blue Cross/Blue Shield model of private indemnity plan was developed by hospitals that had suffered devastating declines in patients as a result of the Great Depression and peoples’ inability to pay for care. In 1934, New York was the first state to pass an enabling law that exempted this new form of coverage from some of the insurance regulations of the time. Physicians were private practitioners. They operated as small businessmen (and almost exclusively men). Hospitals were private and mostly non-profit. The “Blues” enabled hospital organizations, especially, to help patients spread the cost of care and make care more affordable. The Blues soon became the dominant enabler of our market-based (non-solidarity) health care system.

America stayed with this extremely decentralized market-based “Blues” health system through about the 1970’s. But starting in the 1960s, things began to change. Health care had become increasingly expensive and those who could not afford insurance, particularly the retired, elderly, unemployed and poor, often went without the care they needed. Lyndon Johnson took on this problem and managed to get the Congress to pass both Medicare and Medicaid. At the time, the American Medical Association vehemently opposed these new health care systems for the most vulnerable, claiming that they were “socialized medicine” that would destroy the very fabric of the medical profession.

The irony is that Medicare was possibly the best thing ever to happen to physician practices and incomes. Medicare brought to the health care sector an enormous new cohort of patients needing a great deal of care and a government payment system willing to pay relatively well for each episode of care provided. And Medicaid was particularly helpful to medical schools and teaching hospitals, which were often embedded in or near poorer communities, where they trained health professionals in their charity clinics. Medicaid began to enable medical schools and hospitals to get paid for this work, which enabled the expansion of both the number of trainees and programs. And the Medicare program too started paying an important additional premium to teaching hospitals, all of which eventually led the medical profession to become one of Medicare’s biggest supporters.

The introduction of Medicare and Medicaid was the first recognition of the limitations of a Blues-only model in America. Private insurers were never able to figure out how to profitably insure poor, elderly and other vulnerable populations. As a result, in the midst of a very robust economy, millions of elders, children and vulnerable people were unable to access basic health services. There was eventually bi-partisan agreement on the need for the government to supplement America’s purely market-based model with programs that could serve these populations. Interestingly, legislators drew on both the Bismarck and Beveridge models. Medicare incorporated the Beveridge/NHS approach of more centralized national administration (though still farming out much of that administration to private sector contractors) that could pay for care by distributing the costs through a broad pool of taxpayers. Medicaid incorporated the Bismarckian approach of local control: States administer and manage their Medicaid programs, in this instance paid from a broad base of both state and federal tax revenues.

But, with the relative success of these new programs, in combination with “the Blues,” the costs of our health care system started to become a significant nationwide problem. By the early 1980’s, health care costs were growing every year by double digits, straining individual, family, business, state, and federal budgets. Even Medicare and Medicaid coverage was based on a “fee-for-service” model that paid doctors and hospitals for doing more — more visits, more days in the hospital, more procedures and surgeries — without much regard to cost and without measuring or evaluating the outcomes of all of this care in ways that could improve care overall. Insurance companies were raising premiums at much higher rates. Businesses were cutting health care benefits, pensions plans were dropping health care benefits, states were cutting back on Medicaid (states generally pay around 50% of Medicaid costs, the federal government pays the rest), and millions without employer benefits could not afford the cost of stand-alone individual or family policies. Medical bills became the leading cause of personal bankruptcy and there were hundreds of thousands of health cost-related personal bankruptcies every year. And, perhaps worst of all, throughout this period, about 15% -18% of Americans, or about 40 million people, were uninsured at any given time. And while, by law, emergency care cannot be denied, these millions of people did not get regular health care. And any care they received generally left them with unmanageable health care bills.

In the 1980’s, there began a mad dash through many major efforts to rein-in costs. This is the period when managed care and managed competition began to get a foothold. Once they really took hold in the 1990’s, the “business of health care” became a major national focus and we saw vast consolidations of health systems by regional and national hospital and physician corporations. The practice of medicine itself began to change. Hospitals worked to get patients out the door quickly. Doctors began to work less in individual or small practices and started moving into larger practices and health systems; and they worked to find efficiencies in their practices, including sometimes by instituting the 10-minute office visit. President Clinton invested a great deal of political capital in trying to fashion a national health reform package, an enormous effort led by First Lady Hillary Clinton. But, as with all past such presidential efforts, this one too failed to get the necessary Congressional support.

So costs continued to skyrocket, bankruptcies rose, tens of millions of people remained without health care coverage, and new data showed that the overall quality of care provided was below that found in most other industrialized countries. By the turn of the century, virtually everyone involved in the health care industry knew that something had to be done. Newly elected President Barack Obama developed a novel reform proposal that incorporated leading elements of both conservative and liberal reform proposals, and, with the backing of most of the health care industry, found a political path forward where no one else ever had.

The ACA was built around the idea that elements of our private sector-based insurance model, those good old American “Blues,” could remain a foundation of our health care delivery and financing system, but harnessed to a new marketplace designed to achieve the best possible health outcomes with new efficiencies and lower costs. State-based exchanges would be created where those unable to obtain insurance elsewhere (as through an employer) would have access to good insurance policies at affordable prices based on sliding scale public subsidies. This part of the bill was designed to extend insurance coverage to about 16- 20 million people who can’t afford or cannot obtain health insurance otherwise.

The second critical feature of the ACA is the reform of the private insurance market. Insurers, based in the “Blues” model, used to compete for business and profits in no small part by cherry-picking the healthiest subscribers, denying coverage (through pre-existing condition exclusions and other policies), and delaying care and reimbursement for services. In effect, the insurance market worked in many ways against the overall national interest in providing for better health. Under the ACA, insurers are transitioned into a market system where they compete on quality, service, outcomes, and price.

This is a key reform. The ACA’s insurance market reform is based on the proposition that the private sector, at its best, in a properly structured marketplace and when properly incentivized, is extremely good at competing to figure out how to achieve both efficiency and quality. By structuring the insurance market and incentivizing insurers to reward efficiency, lower costs, and better outcomes, the ACA is the first health care system designed to concentrate and then unleash this extraordinary market-based capacity for the benefit of a nation’s aspirations for improving the health of its population. But insurers insisted on an insurance mandate for all. Without such a mandate, people would be able to game the system by not buying insurance until they got sick. There could be no private insurance market (in other words, a way to equitably spread the costs of health care in the marketplace) if only the sick buy insurance.

So the “individual mandate,” the requirement that everyone must obtain health insurance, was incorporated into the ACA. It was seen as especially fitting — and politic! The individual mandate had been a fundamental element of almost all Republican reform proposals since first proposed in 1993 (the Health Equity and Access Reform Today (HEART) Act of 1993[iv]) by 19 leading Republican — and 2 Democratic — Senators as the alternative to the Clinton plan. The individual mandate is fundamental to ensuring a marketplace where insurers can compete on the basis of helping people get the care they need instead of by denying and delaying care. A major irony in some of the controversy over this provision is that the Republican Party, including those HEART Act sponsoring senators still serving, denounced this provision as an unconstitutional intrusion on individual rights (like mandating that everyone eat broccoli, one of them said), and completely denied any association with, let alone authorship of, this individual mandate. President Obama and the team that put this legislation together might rightly complain that, as the saying goes, “No good deed goes unpunished.” Nevertheless, this individual mandate is a key and indispensable provision.

A third major focus in the ACA was a vast expansion of Medicaid in the states. Because of the significant costs of Medicaid, states mostly cap their Medicaid budgets, thereby denying medical coverage to up to 20 million people. To address this, the ACA provides that the federal government initially will pay 100% of the costs of this expansion, and then 90% starting in 2020, compared with the normal 50%. Unfortunately, a conservative Supreme Court, while validating the law overall, ruled that the requirement in the PPACA for states to adopt the Medicaid expansion provision were overly intrusive on states’ rights. Medicaid expansion was left completely voluntary and so 19 Republican Governors and state legislatures have refused to participate in the expanded Medicaid provision. This unfortunate circumstance has denied access to health insurance for millions of people, mainly in states that already have rates of uninsurance and poor health far exceeding the national average.[v]

Other important ACA provisions addressed coverage gaps in Medicare that were extremely burdensome to many seniors, invested heavily in deploying the latest in health information technologies, and established federal and state bodies dedicated to identifying best care practices. There are also significant funds targeted to spurring innovation (a key home-grown American strength) throughout the health care system, including testing new approaches to health care delivery, payment, and so forth in the states and nationally.

Altogether then, the ACA can be seen to be designed around ideas and values that cross partisan lines to harness America’s strengths to tackle both national and global issues in health care quality, costs, and access.

Are there problems with the ACA? Of course. Any legislation of the scope of the PPACA will have issues as it rolls out that must be addressed both through policy and through patches and improvements in the law. Unfortunately, the ACA has been hamstrung by a Congress that is not interested in making improvements and is instead firmly entrenched in a highly-partisan commitment to “repeal and replace” the law. As a result, while some insurers are having a hard time competing and/or making money in the state exchanges, it is very difficult for the regulatory oversight agencies to provide sufficient remedies. In rural areas, especially, it remains difficult to find a balance of benefits and premium cost that can succeed in lower-density populations with significant health costs. But these areas are largely in Republican-controlled states, where there is little inclination to devise solutions. As a result, some insurers have dropped out of the exchanges, leaving “consumers” with few choices of insurance plans and/or increasing premiums.

There are other issues as well, including issues with young people not participating in the insurance exchanges at hoped-for rates and that new insurance coverage can still be costly for small businesses as well as for people with moderate incomes who don’t qualify for federal subsidies.

Are these problems fatal to the law or are they problems that could be solved by innovative legislative and regulatory action? It is pretty clear that these are solvable; but only by leadership in the Congress and the states dedicated to the success of the ACA.

Bismarck and Beveridge gave the world two very robust approaches for organizing national health care systems. So did the American Blues. National health care systems based in each of these organizing frameworks are experiencing similar endemic problems with health care quality and costs. Since the creation of Medicare and Medicaid to address the special circumstances of the elderly and the poor, America’s health system has been evolving to adapt elements of the Bismarck and Beveridge approaches to our uniquely private-sector Blues-based system. The ACA was designed to strengthen and leverage the best elements of each approach within a marketplace that incentivizes innovation that can solve endemic problems of health system costs, quality, and access, and help attain unprecedented levels of individual and overall public health.

From Bismarck to Beveridge to the uniquely American Blues, almost all national health systems are continuously experimenting with some combination of these approaches, because they all must. But America is best positioned of all to show the way forward in leveraging the best of both the public and private sectors. Rather than repeal and replace, we should improve and implement. Much of the world is hoping that America’s boldly innovative “organized response to the health problems of our inhabitants,” will show a way forward in controlling costs and providing access to the best quality of care for all.

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*Much of the content in this essay were developed for a more elaborate presentation for Lloyd B. Minor, M.D., then Provost of Johns Hopkins University. This presentation was delivered to several audiences in 2010. For the more elaborate presentation of these issues, see: [http://web.jhu.edu/administration/provost/docs/101014%20Minor%20Speech.pdf

*Thanks to Stephen Owades for helpful copy editing.

Notes:

[i] https://www.bostonglobe.com/opinion/2016/04/21/obamacare-unheralded-success/montTA45UvggSgwA0Myd8K/story.html

[ii] Van der Zee J, Boerma WGW, and Kroneman MW (2004) Health care systems: Understanding the stages of development. In: Jones R, Britten N, Culpepper L, et al. (eds) Oxford Textbook of Primary Medical Care vol. 1, pp. 51–55, Oxford, UK, Oxford U. Press

[iii] Van der Zee J, Kroneman, MW (2007) Bismarck or Beveridge: a beauty contest between dinosaurs. BMC Health Services Research 2007, 7:94

[iv] http://khn.org/news/gop-1993-health-reform-bill/

[v] http://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/?currentTimeframe=0