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Posted at 3:23 PM ET, 01/ 7/2011

The biggest threat to health-care reform

By Ezra Klein

boehnerolled.jpg

Last night, I rounded up some of the GOP's criticisms of the score the Congressional Budget Office produced for the Affordable Care Act. If you want the full rundown, click here. They're a pretty ragged bunch. Most of them are false. A few of them contradict each other -- for instance, the argument that the legislation cuts Medicare too deeply, and also won't follow through on its proposed Medicare cuts. All of the arguments they make against CBO's process -- that it doesn't count discretionary spending, say -- have been the norm for decades, and have never bothered Republicans before. And we won't even get into the irony of the party that passed the Medicare Prescription Drug Benefit arguing that the health-care bill, with its $500 billion in Medicare cuts and its unpopular new taxes, isn't sufficiently fiscally responsible.

For a more persuasive critique of the ACA, read David Brooks's column this morning, which focuses on some bad signs for the bill going forward. Brooks notes that 1) the high-risk pools have basically failed, 2) the individual mandate is endangered by the courts, 3) it's possible that the bill could cost more than projected if employers make a rational calculation to stop offering their employees health-care insurance, 4) there's continuing consolidation in the health-care industry, and 5) the legislation remains unpopular.

All of this is true. And it gets to a more serious and honest worry about the legislation: If the bill works as CBO expects, or if it works better than CBO expects, it will reduce the deficit by quite a lot. But if it works much worse than CBO expects, it could increase it by quite a lot.

In a moment, I'll respond to the various points Brooks raises. But let me move the conclusion from the bottom of this post to the top: Some things in the bill will work better than we expect. Other sections will prove major disappointments. That's inevitable. When we see the bill in action, we can make the changes necessary to improve it. That's how all of this stuff works. The process of evaluating performance and making revisions is a necessary part of effective policymaking.

The danger, however, is that Republicans will refuse to compromise with Democrats on fixing the bill. They'll want repeal, but since they can't get it, they'll settle for making the legislation work poorly under the theory that it will eventually discredit itself. And then what America will get is not the Affordable Care Act, and nor will it be repeal of the Affordable Care Act. It'll be a hobbled version of the Affordable Care Act, where what works isn't expanded and what fails isn't replaced. And though that might be better than nothing for the uninsured, it will be pretty terrible policy.

Now, on to Brooks's more specific concerns:

What worries me on Brooks's list are the individual mandate, the consolidation in the health-care industry and the bill's continued unpopularity. The high-risk pools were a bad idea when they were the center of the Republican alternative to the legislation, and the best you can say about them now is that they have no connection to how the bill will work come 2014. They're a stopgap meant to help people until we actually fix the underlying problems in the insurance market that make it unworkable for people with preexisting conditions.

Moving on: I'm not going to try to predict whether the individual mandate will survive the Supreme Court. Ask Anthony Kennedy. As a policy matter, the bill could survive the death of the individual mandate quite easily if the individual mandate is replaced by an equivalent policy. This one, for instance, which does nothing to regulate inactivity and thus dodges the objection Republicans thought up when they decided to stop supporting the individual mandate and reframe it as a threat to liberty in late 2009.

But if Senate Republicans filibuster any replacement and House Republicans refuse to pass any replacement, that's a big problem for the bill: It means that sick people can sign up while healthy people can hang back. (As a side note, this could make the bill quite a bit cheaper, as fewer people will be using the exchanges and thus qualifying for the subsidies. But average premiums will be much higher and the exchanges won't emerge as a viable alternative to the current market.)

Consolidation in the health-care industry is an ongoing trend, and, as this report (pdf) documents, not a good one. The ACA will encourage more of it, as consolidations tend to follow changes in the competitive environment. As I wrote back during the health-care debate, one of the major problems in health-care politics is that we spend all our time worrying about the cost of insurance when the cost of the health-care services the insurance is buying are a bigger problem. There's some good reforms on the delivery-system side of the bill, but I'd like to see us go quite a bit further. Note that the way other countries deal with this problem is that the government just sets the prices that hospitals can charge, and it seems to work pretty well. An alternative in the American system would be -- gulp! -- strengthening insurers, perhaps through all-payer rate setting, which appears to work well in Maryland and New Jersey.

Before I get to the question of unpopularity, let me talk about employer dumping, which I've left out until now. The basic concern here is that employers will stop being such nice guys and giving people health care and instead dump them into the exchanges so they can buy it at subsidized rates. I don't think this will happen: If we were going to see it, we'd have seen it in Massachusetts, which, like the ACA, makes it much cheaper for employers to dump workers into the exchanges. But there's no evidence (pdf) that it's been happening. Employer coverage has been shockingly resilient given the recession.

That said, I can see the argument that it'd be good if it did happen. Basically, it would mean that employers stop paying employees with health-care insurance and begin paying them with cash. That's basically how the Wyden-Bennett bill worked, and both Brooks and I liked that bill. If it happens in an unstructured way in the ACA, it could cause more disruption, but it could also be a positive step that makes the bill look more like Wyden-Bennett.

Which brings us to the legislation's unpopularity. We can argue about why it's unpopular, or what the unpopularity means. But for the moment, let's just grant the point. The GOP is relying on that unpopularity. They're obviously doing their level best to fuel it. They will not consider the sort of routine fixes and compromises you'd expect on legislation of this size to work with their long-term strategy. And that could be a serious problem indeed.

Photo credit: AP Photo/Alex Brandon.

By Ezra Klein  | January 7, 2011; 3:23 PM ET
Categories:  Health Reform  
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Next: Health-care repeal not popular among House Democrats

Comments

The high level of dishonesty and the piling up of disinformation for the sake of self aggrandizement are strong indicators that movement conservatism is reaching a crisis point.

Posted by: pneogy | January 7, 2011 3:44 PM | Report abuse

At the end of the day we will end up exactly where Victor Fuchs and Zeke Emanuel predicted some five years ago and summarized here: http://www.washingtonmonthly.com/features/2005/0506.emanuel.html It's the only way to deal with Medicaid and Medicare in a manner that can garner cross party support. The only downside is the Republicans lockstep opposition to the national sales tax needed to fund the darn thing. They may see the light since anything short of this will either lead to bankruptcy of Medicare, death panels for Medicaid (pace Arizona), or a national health service in the manner of the UK and other countries. Slim pickings if you ask me.

Posted by: agoldhammer | January 7, 2011 3:45 PM | Report abuse

The GOP is going to do its best to keep the unpopularity up. That's because if they don't abort it before it all goes into effect, they will never kill it.
Unfortunately I don't think the Democrats have taken on the same level of urgency (because if the bill is aborted in its fetal stage, we're back where we were for the foreseeable future).

I agree on the employer dumps, but unfortunately the simplistic spin of the media will make it look like the end of the world.
And, again, Democrats will do little to stop that.

As for replacing the mandate, Republicans simply won't allow anything to replace it through. Then they can undermine it.

I'm starting to think the only way to save ACA if the mandate fails is for Democrats to retain the Senate but lose the presidency... The reasoning is that the media (other than Fox News) will shift their slant to attacking the new "party of the president" and shift the "centrist" part of our population back in favor of healthcare.

Posted by: RCBII | January 7, 2011 3:46 PM | Report abuse

yes and if or when it fails miserably Dems will scream "THEY DEFUNDED IT" even if defunding is minimal. Its sad that you're already making up excuses Ezra for its failure even before its failed. Heck even before its really even begun. But hey buck up, you can still rest on the premise that it is better than the status quo (until of course the status quo changes to be PPACA).


The assumption that you make is that people will be willing to pay 8.5 of their AGI to pay for healthcare when they pay zero now and get emergency care when they need it and pay for day to day care out of pocket when needed. Sure some will, many will but I think to a point you're discounting the nature of people when they can't afford something they'll go without even if its highly subsidized by their employer or the government now. up to 8.5% of a large number is much more than 0% of a large number or even a fine. Again this all may need to be tweeked when we see how implementation works itself out not to mention the fact that the rules will likely be nationwide rules but you could have it working well in parts of the country but worse in others.

Posted by: visionbrkr | January 7, 2011 3:54 PM | Report abuse

Good take on Brook's commentary by Dean Baker: http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-was-traumitized-by-the-health-care-bill

Posted by: alekdavis | January 7, 2011 3:59 PM | Report abuse

OK, so they want to repeal it, they might have a couple avenues towards doing so, and it may be popular. Or they can significantly damage it. So then what? Health Care costs are going to keep going up and at some point they will become unsustainable. There is no disputing this. So what's the alternative plan? I'm not asking rhetorically either: something has to be put in place if they repeal this. I don't want to so cynical to assume that the Republicans are solely focused on discrediting Obama, but that's the way it looks.

Posted by: jptormey | January 7, 2011 4:04 PM | Report abuse

Underreported in all of this is that one of the "assumptions" the CBO used when determining the cost savings and deficit impact of the bill was that the Bush tax would be allowed to expire. Instead, we've just thrown more gasoline on the fire.

Posted by: Hieronymous | January 7, 2011 4:05 PM | Report abuse

@jptormey said: I don't want to so cynical to assume that the Republicans are solely focused on discrediting Obama, but that's the way it looks.

That's not being cynical. That's simply taking them at their word.

Posted by: Hieronymous | January 7, 2011 4:08 PM | Report abuse

So I read today that all over the country insurance companies that offer polices from small businesses have seen an upswing in new polices from small (under 50 employees) businesses.
I thought the AHCA was jobs killer and would hurt the small business. Instead it seems to be just what SBs needed.

Posted by: vintagejulie | January 7, 2011 4:10 PM | Report abuse

Wow, low-IQ and/or intellectually dishonest people have taken over the U.S. House.

Posted by: paul65 | January 7, 2011 4:37 PM | Report abuse

"the high-risk pools have basically failed"

Specifically, Brooks is highlighting the fact that the government's expectations for costs and enrollment were wildly off.

You only have 2% of the expected population enroll, and yet the money allocated is might somehow still be insufficient.

This was just for the high risk pools, which were to begin immediately, and have already been tried by the states and should be well understood.

It casts tremendous doubt on how accurate our projections can be for a program which fundamentally redesigns the extremely complex American health care system over the course of the coming decade.

Posted by: justin84 | January 7, 2011 4:40 PM | Report abuse

This post reminds us why we read Ezra. Job well done Ezra, please keep doing it. This is truly important and critical for citizens of this country, those who want to think through the 'fog of political muck' which is being raised here.

Excellent, thanks for the post.

Let Victor Hansen's of the world keep throwing mud, they are for that only (serve ideology, but not for solving our problems).

Posted by: umesh409 | January 7, 2011 4:46 PM | Report abuse

Also, regarding the "employer dumps:" I'd like to see some numbers on how many employers were dropping health care benefits for their employees before the ACA went into effect vs how many did so after. I'm not disputing the claim outright, but I seem to remember all sorts of stories about companies doing this before health care reform even started.

Posted by: jptormey | January 7, 2011 4:47 PM | Report abuse

justin,


I'd think the high risk pools costs would be naturally higher than all the rest of the population so I don't know that I'd necesarily assume that their low costs projections would autmoatically mean others are but I see and understand and share to an extent your skepticism.

As far as the redesigning the already complex American healthcare system I agree that they'll certainly botch it similar to how they botched the COBRA subsidy thru ARRA. I have complete faith that the government in setting up the exchanges will screw it up royally even given years to do it properly. I also have complete faith that it won't be the government's fault they'll find someone else to blame.

Posted by: visionbrkr | January 7, 2011 4:52 PM | Report abuse

"Before I get to the question of unpopularity, let me talk about employer dumping, which I've left out until now. The basic concern here is that employers will stop being such nice guys and giving people health care and instead dump them into the exchanges so they can buy it at subsidized rates. I don't think this will happen: If we were going to see it, we'd have seen it in Massachusetts, which, like the ACA, makes it much cheaper for employers to dump workers into the exchanges. But there's no evidence that it's been happening. Employer coverage has been shockingly resilient given the recession."

Thanks for addressing the issue of employer dumping, however I'm not as sanguine as you are about Massachusetts being a model for the national exchanges.

Posted by: jnc4p | January 7, 2011 4:58 PM | Report abuse

jptormey,


yes employers have been dropping coverage because of cost but the point here made is that we were told by CBO that employer coverage would INCREASE. Now that's changing???

http://www.cbsnews.com/8301-503544_162-5191745-503544.html


here are stats for employer based (and other coverages) from 2008 to 2009 but again you've got to factor in the recession and layoffs here too. ARRA helped a little bit but not much.

http://healthaffairs.org/blog/2010/09/16/the-number-of-americans-with-health-coverage-declined-in-2009/


Don't kid yourself dumping will happen and the point of the matter is we were told by CBO that it wouldn't happen to a large degree. We'll see.

Posted by: visionbrkr | January 7, 2011 5:01 PM | Report abuse

I live in Massachusetts, and the way the plan works is good and bad. Yes, coverage is near total, which is good. But prices are still the highest in the country. This is due to a couple factors, one being it is a more heavily regulated market, another being that Mass. just has a higher cost of living than most places. I know I'm going to lose Ezra's conservative readers here, but the one crucial component missing is some kind of govt. sponsored public option that would compete with the private market and lower costs.

Posted by: jptormey | January 7, 2011 5:12 PM | Report abuse

"If the bill works as [sic] CBO expects, or if it works better than CBO expects, it will reduce the deficit by quite a lot. But if it works much worse than CBO expects, it could increase it by quite a lot."

Translation: our collective goose is cooked.

Posted by: ostap666 | January 7, 2011 6:05 PM | Report abuse

"I'd think the high risk pools costs would be naturally higher than all the rest of the population so I don't know that I'd necesarily assume that their low costs projections would autmoatically mean others are but I see and understand and share to an extent your skepticism."

Visionbrkr,

The scale of the miss is what really struck me. I expected a bit of a miss - even a decent sized miss (say 288,000 people ended up costing $7 billion) is one I'd consider more or less on target, despite being 82% more per person than expected.

The ACA allocates $5 billion for an expected 375,000 people, and we're sitting at 8,000 currently and there is already worries that funds are insufficient? That's a shocking miss, even for the government.

Consider this item from Brooks' article:

"New Hampshire’s plan has only about 80 members, but the state has already burned through nearly double the $650,000 that the federal government allotted to help run the program."

And again, this was for a program that has been tried in various states, that was to be enacted immediately and the broader health care landscape hadn't been changed.

Now, $625,000 for an entire state's worth of very sick people's health care seems outrageously small - even for a small state - but that's the point. What else is in the bil, or what else that will come to pass with implementation of this bill, will seem boneheaded after the fact?

What if health care premium costs are 15% higher than anticipated by 2019? That's not a crazy scenario, and every cent of the excess will be subsidies for those under 400% of the FPL.

"I have complete faith that the government in setting up the exchanges will screw it up royally even given years to do it properly. I also have complete faith that it won't be the government's fault they'll find someone else to blame."

Agreed.

Posted by: justin84 | January 7, 2011 7:14 PM | Report abuse

Man this is just wrong. The biggest threat to healthcare reform isn't John Boehner -- bluster aside he can't do much of anything with a Democratic Senate and President. The biggest threat is Rick Scott. And Rick Perry. And all the new Republicans elected to statehouses.

The two single most endangered parts of reform right now are 1) the exchanges and 2) Medicaid. States are suffering the biggest collapse in revenue in 60 years. They're laying off people left and right -- most of whom are in constituencies who have real political power right now. Those states that believe the law's unconstitutional are also going to do delay and do anything to undercut it. And they're going to effectively implement the biggest change in healthcare law in like 50 years?

Meanwhile, the program assumes a massive growth in Medicaid coverage. That's a little hard to manager when states are struggling to maintain their current levels. And with a crop of Oh-So-Pure Libertarians suddenly in Congress, there's a very good chance that we'll see states go the Arizona route and cut services to make up for the new costs.

Statehouses are where the real fight over healthcare is happening over the next year. If progressives could transfer even 1% of their public option anger to statehouses, we'd be much better off.

Posted by: NS12345 | January 7, 2011 8:16 PM | Report abuse

Yeah I don't really get the high risk pools either. Was there an assumption that states would provide some additional funds or something? Tons of states have tried high risk pools in the past and they've all collapsed, often very quickly (you mean an insurance plan composed entirely of sick people would be financially unstable????).

Posted by: NS12345 | January 7, 2011 8:23 PM | Report abuse


Companies will be barred from instituting caps on coverage when your costs for treatments goes up due to sickness, you can now get insurance with out caps on coverage at "Wise Health Insurance" search them online.

Posted by: jeremytaylore | January 8, 2011 2:20 AM | Report abuse

Ezra,

You state: "The high-risk pools were a bad idea when they were the center of the Republican alternative to the legislation, and the best you can say about them now is that they have no connection to how the bill will work come 2014. They're a stopgap meant to help people until we actually fix the underlying problems in the insurance market that make it unworkable for people with preexisting conditions."

That's called a dodge. In two regards: the point that Brooks is trying to make is that the actuarial/economic assumptions of the CBO were wrong. And every argument you have been making for the past year has been that the CBO get's it right. You have pointed out over and over that the CBO estimates of the cost of Medicare Part D were actually too high. And here you have an insanely complex piece of legislation with multi-variate incentives, affected groups, and trade-offs and you have put your full faith and credit into the accuracy of the CBO score. Here is the first evidence that they have it wrong and you blow it off. Secondly, you conveniently fail to explain how in 2014, when the other much more complex pieces of the legislation take effect, it's all going to fall into place and things will work as the technocrats designed. No they won't. As I, and other commenter's, have been saying all along, ACA fails to take cost control seriously and will bankrupt the country. Do I think the GOP will make things better? Of course not. They are stupid and insincere as your analysis of their critique of the CBO scoring aptly showed. But the best hope for the country is repeal and back to the drawing board with something that will work. A Singapore or even German modeled system would be better. A defined contribution plan would be a step in the right direction. Mandatory HSA's with universal catastrophic insurance would be better. But ACA needs to die.

Steve

Posted by: FatTriplet3 | January 8, 2011 5:21 PM | Report abuse

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