The next chapter in reforming healthcare
The following is a guest post by Stephen Davidson, a professor at Boston University’s School of Management and author of “Still Broken: Understanding the U.S. Health Care System.” The opinions expressed are his own.
President Obama brought back the healthcare debate yesterday by telling a White House audience, “I refuse to go back. And so do countless Americans.” Obama drew attention to the consumer protection regulations developed to implement the new law. Given the continuing controversy surrounding the new law and the relentless criticism from its opponents, the president’s remarks highlighted some of the law’s most dramatic early benefits.
Obama’s healthcare address was an early entry in what will undoubtedly be a series of efforts that emphasize how Americans will benefit from the healthcare bill. The political reality is that as the fall elections approach, the administration must continually inform the public of the beneficial effects of the reform so Democrats get electoral credit come midterm elections.
In the meantime, let’s take a take a step back and look at what the bill that was signed into law three months ago promises to achieve.
The new law makes substantial progress toward the kinds of systems found in other developed countries, which is a good thing. Those systems cost much less to run, cover all their citizens, and provide greater patient satisfaction and better health results. Beginning in 2014, America, too, will provide healthcare to almost all its citizens by mandating most Americans to buy affordable coverage. Federal subsidies will help those who cannot afford an available policy to pay both the premiums and cost-sharing amounts required. The result will be that more than 30 million additional Americans will gain access to affordable and comprehensive health care coverage.
Additionally, private insurers will be forced to improve their coverage by allowing parents to cover unmarried children through the age of 25 and by no longer being able to do the following:
–refuse to sell to people with pre-existing conditions or other risk factors
–charge more to subscribers with pre-existing conditions or other risk factors, with the lamentable exception of age
–cancel or refuse to renew policies for people who use services
–impose annual or lifetime limits on benefits
There is more left to be done, but these are substantial accomplishments. Other results of the bill will depend upon its implementation. States will establish exchanges on which participating insurers offer competing policies. The rules each state sets will determine the extent of the public benefit. Certainly, insurers will try to influence those rules to mitigate the effects on them.
Despite many attempts over the last 80 years, only one president was able to get the two houses of Congress to even vote on a healthcare bill. That president was Lyndon Johnson and the result was Medicare and Medicaid. The lessons from prior reform efforts help explain why the administration chose to rely on competing private insurers to achieve the goals of reform. The administration figured this strategy would give them the best shot at passing a bill, but the fact of the matter is that it is a weak strategy that few health policy analysts would have selected in the absence of political considerations. The reason: insurers have very limited ways to differentiate themselves in a competitive market.
One way is to keep premiums lower than competitors’ so that potential customers will choose their coverage. To do that they need to keep their costs down, but have only two ways to do so, both of which weaken coverage: one is to limit their customers to young, healthy people unlikely to use many services; the other is to limit the content and terms of coverage. Since this causes hardship for many Americans, the new consumer protection provisions banned insurers from doing so. Therefore, since insurers can do little to limit their expenditures in order to limit premiums, they will try to reduce the effects of the bill’s new limitations by influencing the rules adopted by the state exchanges during the implementation process.
Under the new law, one of the options left to insurers is to offer several levels of coverage which vary by the amount of cost shared by the patient. The least expensive, the bronze level, requires insurers to pay only 60 percent of the medical bills, leaving patients to pay the remaining 40 percent out of pocket. Many who can afford only the bronze level plans will be forced to forgo getting expensive tests done or filling prescriptions because they can’t afford to pay for the out-of-pocket portion for those services. This is already the case for today’s 25 million underinsured Americans. There are silver, gold, and platinum levels that cover more of the cost, but also cost more to have.
The bottom line? Since insurers can do little to control spending on care, premiums will continue to rise. Effective regulation – now being hammered out in Washington – will be needed to ensure that the efforts of the private insurance companies to cope with the new law do not undermine its goals.
The new law is a milestone that will cover almost everyone for all useful services and will cost less per capita than our present system, but the job is not finished. There are more regulations to decide upon to implement other components of the bill. With each new decision there is potential to improve the system even further, but there is also the same amount of potential to slip very far back, or even to make things worse than they are now. It is a sure bet insurers will try to influence officials at both federal and state levels to compensate for the constraints the new law places on them so unless the public weighs in as well, the rules will be written in favor of insurers and wind up eroding the potential benefits to the public. That next chapter is being written now. It’s up to us to join in that effort.