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Obama & Health Care: The Straight Story

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Pete Souza/White House
President Obama signing the prosthetic arm of Sergeant Carlos Evans at the White House, March 2012. Evans was injured in Afghanistan during his fourth combat deployment.

Except for the US, no rich nation in the world fails to provide comprehensive health care that is free or inexpensive to its entire population. Yet roughly 50 million Americans, 16 percent of the population, have no health insurance at all; most of them are relatively poor and nearly one third of them are age eighteen to thirty-four.

The proportion of uninsured has been rising steadily since the 1970s. Research by the Kaiser Family Foundation and others finds that those without health insurance die younger, work less due to chronic health conditions, and face persistent personal financial problems brought on by illnesses. A Harvard Medical School study found that some 45,000 deaths a year are associated with lack of health insurance. We can also safely conjecture that many people without health insurance limit their ability to enjoy a full life for fear of accident or serious disease. Those who are forced to go to public hospitals for treatment as their only recourse often get it too late—and the costs for treatment of disease and injury neglected for too long are high.

Despite the lack of coverage for one out of six citizens, Americans pay more than 17 percent of the Gross Domestic Product for their health care, more than any other rich nation by far. Yet America’s health care system is not measurably better and often considerably worse than that of other rich nations. For example, the US ranks forty-eighth in infant mortality among all nations, and its position has been falling. In 1960, the US ranked twelfth.

Moreover, rising costs of health care will be the principal causes of soaring federal budget deficits starting in the mid-2020s because they will push up expenditures on Medicare and Medicaid benefits rapidly. The projected rise in federal health spending has encouraged historically radical proposals from congressmen, notably the Republican Representative Paul Ryan, to transform Medicare from a single-payer plan, in which the government raises taxes and pays doctors and other private providers for medical care, into a system of vouchers, subsidized by the government, with which the elderly will choose between Medicare and privately offered insurance programs, though the annual increase in the value of the vouchers is not expected to keep up with the increase in the costs of health care.

In March 2010, after sixty years of failed proposals, the Affordable Care Act (ACA), sponsored by President Obama, was passed by Congress following a year of laborious and heated congressional negotiations. It is America’s first program to provide coverage for almost all citizens, bringing health insurance to some 32 million more Americans. Half of the newly insured would be covered by significantly expanded Medicaid, the government program for the poor. The other half would be subject to an individual mandate, requiring them to sign up for at least a minimal insurance plan or pay a penalty. Lower-income Americans would be offered substantial subsidies to join the new plans. Four well-defined types of private insurance will be offered on state-run public exchanges, where premiums and benefits can be more easily compared.

Among other important reforms, the bill will also prevent health insurance companies from turning down applicants with preexisting health conditions or limiting annual benefits for those who get sick, two forms of protection that have been popular with the public. And employers with fifty or more workers would be required to provide insurance for them. None of these reforms goes into effect until 2014. One popular exception is the provision in the ACA that any child today may stay on his or her parent’s insurance plan up to age twenty-six, and already two million more young people are insured.

The major flaw of the ACA is that it lacks direct cost controls for money paid to hospitals and doctors, and for the purchase of drugs. There are no budget caps, for example. The bill does reduce somewhat the rate of growth of reimbursement for Medicare, however, and this may already be working to slow the growth of Medicare costs, although it is difficult to determine just what is causing slower growth rates because of the recent recession. The act also requires insurance companies to pay 80–85 percent of their premiums for medical care. Their current average is about 70 percent. The ACA has a number of experimental provisions that emphasize preventive care and change the way medical care is paid for. In one such experiment, providers will be rewarded for how well they treat a disease from diagnosis to cure rather than according to procedures prescribed.

The ACA will encourage the development of private accountable care organizations that will be held responsible for managing the costs of health care for their members. There will also be an Independent Payment Advisory Board to oversee the rise in health care costs, and recommend reducing them if they rise too rapidly. Experts are divided on whether these programs will be significant.

There is considerable good and some bad in the ACA, but it is at best attracting faint praise. Liberals in general are disappointed by the minimal insurance plans required by the mandate—basically the bill offers a plan with high deductibles that only covers catastrophic events. The most troubling failure of the ACA for liberals is the lack of a publicly run insurance alternative to the private plans offered on the health exchanges—the public option—that could have been the best way to keep costs down. Conservatives resent the individual mandate that all Americans buy insurance, even though mandates had been a staple of Republican health care proposals since the 1970s, for example the employer mandates proposed by Richard Nixon and individual mandates proposed by the conservative Heritage Foundation in 1989. They also dislike the new, more progressive taxes—mostly on those who earn $250,000 or more a year—to finance Medicare payments and to pay for the subsidies to individuals and the expanded coverage. The overall cost of the plan is an estimated $900 billion, half of which is financed by tax increases, the other half by changes to Medicare over time.

But overriding all these objections seem to be ideological issues, as Robert Blendon of the Harvard School of Public Health points out, not so much about how to deliver health care efficiently as about the appropriate scale and scope of government in America. A compilation of public opinion surveys by Blendon and John Benson, also of the Harvard School of Public Health, shows that, on balance, public opinion was more or less evenly split on or only slightly opposed to the ACA around the time it was passed. Yet there was considerable support for individual components of the ACA, such as requiring insurance companies to ignore preexisting conditions and the requirement that employers must provide insurance for their workers. Approval also breaks down by party affiliation and demographics. A large majority of Democrats, the young, the poor, and nonwhites strongly favored the plan, reflecting who the new legislation will help most.

Republican disdain, then, has a traditional source. The Obama health care plan is redistributive, helping the Democrats’ natural constituencies. Unsurprisingly, those without health insurance are disproportionately young, poor, and people of color.

Despite its passage, however, the ACA now faces its biggest challenge. Arguably its most important provision, the individual mandate, is under legal attack, with a Supreme Court decision expected this June. As the opponents fully understand, the individual mandate is critical to keeping premiums low on the new insurance plans that will not restrict membership for preexisting conditions or cap lifetime expenditures. Central to health insurance is that the healthy subsidize the unhealthy and the young subsidize the old.

If insurance companies must accept all people regardless of preexisting conditions, rational buyers would simply wait until they get sick before they sign up, and premiums would soar. Republicans are counting on the Court’s ruling to dismantle most of the ACA. Can it work without the individual mandate? As we shall see, it likely can, but not fully without additional changes that encourage voluntary enrollment.

The challenge in the Supreme Court reflects how partisan times have become. Republicans did not try to overturn Social Security when they gained control of Congress in the late 1930s. Similarly, they did not try to overturn Medicare after Lyndon Johnson signed it into law in 1965. But today, politics are more polarized and more fierce. Antigovernment doctrine is pervasive and well-financed organizations are in constant battle on these issues. Many constitutional lawyers believe that the mandate is constitutional, and even if the Supreme Court disagrees, there may be other ways to entice more of the noninsured to buy insurance. The question is whether Congress would endorse any such additions to the ACA, especially if Republicans retain strong control of the House in November whether Obama wins reelection or not.

Health care reform over the past sixty years has always been fought around intense ideological divisions. FDR favored universal health care before his death, though he hesitated to develop a specific plan; his successor, Harry Truman, favored a national health plan run by the government but a bill in Congress along these lines was defeated by fears that such a plan amounted to socialized medicine. A powerful opposition, led by the American Medical Association, the doctors’ well-financed union, conjured up images of Soviet-style central control amid rising fears during the cold war. The AMA called White House staffers followers of the Moscow party line.

Given such ideological resistance and the power of the AMA, Lyndon Johnson’s successful passage of Medicare in 1965, which covers all those sixty-five and older and is paid for directly by the government—a classic single-payer system—was a remarkable achievement. At the same time, LBJ also established Medicaid, the health plan mostly for families on welfare. It might have seemed that LBJ’s historic victories could have been a new beginning. In the early 1970s, Republican President Richard Nixon favored a universal health care system for all, albeit one based on mandates for employers to cover all workers and tax breaks for individuals to buy coverage. Senator Edward Kennedy, who had made health care the primary concern of his long legislative career, backed a more ambitious plan involving a full-fledged single-payer system for all. But Nixon and Kennedy, even as they tried to work out an agreement, could not win over Congress, and Nixon’s resignation after the Watergate scandal ended all practical hope of universal health care for another two decades.

As Paul Starr of Princeton points out in his valuable book, Remedy and Reaction, a large majority of Americans get their insurance either from their employers, who have benefited from a tax deduction for their plans since the 1950s, or from Medicare. Since most people insured by their employers are, according to surveys, moderately happy with their coverage, comprehensive reform to include the 50 million uninsured is made all the more difficult. Starr calls this America’s health care reform “trap.”

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