Obamacare's Most Hated (and Best) Part
Sometime in the near future, Republican critics of the Patient Protection and Affordable Care Act are going to have their chance to rewrite it.
The Supreme Court may hasten that day by ending insurance subsidies on federal exchanges in the case of King v. Burwell, but the GOP has clearly built its congressional majorities on a promise to end or radically amend Obamacare. And even Democrats cannot hold out forever in support of an unpopular law, as Sen. Chuck Schumer (D., N.Y.) has tacitly admitted.
There are many valid objections to Obamacare, including to its surtaxes on medical devices and the forced consolidation of standalone physician practices under regional hospitals. But as Republicans consider changes to the initial legislation, they will face an uncomfortable reality: What has emerged for the public as the ACA's most objectionable feature -- high deductibles -- is, in fact, one of the most fiscally responsible policies to come out of Washington in decades.
After all, what Democrat majorities amazingly managed to pass on a party-line vote in 2010 was not the single-payer plan that most liberals had always wanted. Democrats did not even pass a universal or a comprehensive health-insurance bill. What the party did pass is a national catastrophic insurance bill, one that covers expenses only when they exceed limits reached by a small percentage of the population in a given year. Completely contrary to the spirit of government programs in Canada and Europe, America's Left has made most of U.S. medical care an individual financial responsibility.
Unfortunately, President Obama's attempt to turn what we might call "less intensive" or "non-extraordinary" medicine over to the free market was not sold in a straightforward way. His promises of free or low-cost annual physicals, immunizations, cholesterol checks, breast screenings, and contraceptive services misled many voters into believing their out-of-pocket costs were actually going to go down. In reality, the average deductible for a silver plan sold on federal exchanges in 2014 was $2,907 for an individual and $6,078 for a family. This is more than two times the IRS definition of a high deductible plan, according to Kev Coleman, head of research for HealthPocket, a technology company that compares and ranks health plans.
The lower premium bronze plans had even higher deductibles of $5,081 for an individual and $10,386 for a family, or nearly four times the IRS benchmark. “These are very high amounts,” says Coleman. Even taking into account the fact that many individuals purchasing plans prior to the ACA deliberately opted for high deductibles to keep policy costs down, the Wall Street Journal has calculated that the bronze deductible for a single person is 40 percent higher than what the average person would have elected before the federal insurance overhaul.
With Obamacare, New York Times health correspondent Elisabeth Rosenthal recently observed, the new normal for millions of Americans is a high-deductible health plan that does not cover typical medical expenses. The White House may not call it "consumer-driven health care," but that is why the pharmacy sections of Walmart, CVS, Walgreens, and Costco increasingly look like full-service clinics.
In addition, the president's attempt to combine a mandatory catastrophic plan with substantial premium increases to subsidize policies for low-income Americans has left many in the middle class with little to spend on unreimbursed care for themselves. "People are very close to the line in terms of their budgets," says Sara Collins, vice president for Health Care Coverage and Access at the Commonwealth Fund. A recent New York Times/CBS poll found that 46 percent of Americans are having difficulty paying for medical care, up 10 percentage points in just one year.
But from the viewpoint of policymakers seriously committed to slowing America's high rate of health-care inflation, this the best news in years. In the 1970s, the RAND Corporation conducted what is still regarded as the gold standard in studies on individual responsibility for health, the Health Insurance Experiment. It found that paying out-of-pocket for drugs and medical procedures forces consumers to seek the lowest prices, which in turn drives down the general cost of care -- all without diminishing quality.
Even before Obamacare, insurance policies that shifted some of the cost to beneficiaries through co-pays led to cheaper generics' accounting for the vast majority of all prescription medications sold in the US. Such policies also resulted in once-expensive hospital surgeries, such as a breast biopsy or lipoma removal, being done routinely on an outpatient basis. Software systems under development will soon allow consumers to post their medical complaints online and let physician groups bid to treat them.
The challenge now for Republican lawmakers is how to perform radical surgery on Obamacare without eliminating its best idea. One way to accomplish this is by preserving and expanding Health Savings Accounts, which give a tax deduction or credit for money set aside to cover unreimbursed medical expenses.
The option to use HSA savings for non-medical purposes would maintain the incentive to seek out low-cost care while blunting the financial burden. A group called Physicians for Reform has suggested making HSAs more attractive by allowing a balance rollover into a tax-free retirement accounts once a person is eligible for Medicare.
Also, premiums could be lowered, as conservatives have always argued, by permitting insurance companies to sell policies more competitively across state lines and by capping reimbursements for medical malpractice. The Democrats who passed the ACA may have felt a political need to insulate their trial-bar supporters, but no group should be exempted from contributing to a reform that affects one-sixth of the entire economy.
Finally, the GOP should index the maximum allowed deductibles to the savings that will gradually accrue from a more vibrant marketplace in unreimbursed care. If turning consumers into cost-conscious shoppers for medical services has the predicted effect of lowering prices, then calibrating deductibles downward would be a fair way to reward the average citizen's contribution to health-care reform.
The fact that Democrats have felt obligated for six years to defend the implementation of the ACA's best, but most painful, provision has been God's political gift to the GOP, giving it control of the federal legislature. The task now is not to retreat from high deductible health insurance, but to make it more attractive.
Lewis M. Andrews is a senior policy analyst at the Yankee Institute for Public Policy in Hartford, Conn.