What was the ACA intended to do?
If you go back to the beginning, healthcare reform was supposed to be a lot of different reforms rolled together.
That included insurance reform, meaning that private insurance would be more consistent and meet a basic standard for essential items that must be covered by insurance. There was never a federal requirement for that before the ACA. Another goal was expansion—covering more people, through private markets, through public markets like Medicaid, or through a hybrid like the exchange plans, which are government subsidized plans but bought from private firms.
Another component was provider payment reforms. The aim was to restructure medicine so that we would move from volume-based care to value-based care. Most of American medicine prior to the ACA was structured so that if you did more, you got paid more. The incentives were mostly about inputs, not about outcomes. The ACA was supposed to change that, and I think many of us were optimistic that it would put us on a path to change that.
What progress has been made since the law was passed?
There has been a meaningful shift to value-based medicine over the 15 years since the ACA was first introduced in 2009 and passed in early 2010. But it’s certainly not gone nearly far enough. And of all the things that we thought about in passing the ACA, I would say that’s the one that has the fewest big wins.
But everything else really did have enormous wins.
I no longer encounter many 24-year-olds who tell me they can’t afford health insurance, because the vast majority of them maintain coverage on their parents’ policies if their parents have employer-based coverage. A lot of young people don’t even realize how new that is. That started with the ACA and now it’s just an accepted fact.
There were a large number of people who were absolutely uninsurable prior to the passage of the ACA unless they got insurance from a large employer. I would’ve been in that category because I had a history of atrial fibrillation and other conditions; fortunately I was employed by Yale, but it did mean that if I was an entrepreneur and wanted to leave Yale in 2008, I would’ve had to think long and hard about how I would get insurance. That’s also gone away. The individual market no longer rates on the basis of health. It can rate on the basis of age and tobacco use, geography and family size; but not health status nor gender. That’s another big thing that’s changed.
Medicaid expansions started off a little slowly, mostly in a select group of states that were governed by Democrats at the time, but has now expanded to the majority of the nation. Texas and Florida and some other states are still not expansion states, but even without them, Medicaid now covers tens of millions more people than it did prior to the ACA. That means that a large number of people in this country now get health insurance effectively for free—not on the basis of them having minor children, not on the basis of being a child, not on the basis of being a pregnant woman, but just on the basis of being below 138% of the federal poverty level in an expansion state.
And then there’s a large number of people who are able to get subsidized health insurance through what we call the exchanges, where individuals are able to buy health insurance at a reduced rate. And in some cases it is free there as well, though when it’s free, it’s often a high-deductible plan. But nonetheless, they get coverage that protects them from financial calamity.
So we’ve had an expansion of coverage. We’ve had coverage more available to people that have pre-existing conditions. We have coverage more available to young adults who were the most likely to be uninsured back in the early 2000s. But we’ve had relatively little reform of provider payments, relatively little movement in that direction relative to what we expected. We’re making progress; we’re just not making it fast enough.
Is there a danger of the ACA being repealed entirely in the new administration?
During the first Trump term there were sequential efforts to fully repeal the ACA, and a separate effort undertaken through the courts. And those have failed. In the meantime, the ACA has gone from being unpopular to being wildly popular, particularly when people know what it covers. A lot of the best coverage in the country from the ACA has occurred in red states that have typically supported incoming President Trump and Republicans.
So it is a popular program right now, but it does have relatively large expenses associated with it. The Medicaid expansion may not be costly relative to what it delivers, but it still is a costly program. The tax credits on the exchanges are also relatively costly, and some of the other requirements have imposed costs on either individuals or firms over time. It’s not like this was a free lunch, but I think most policymakers see it as a very significant step in the direction of having more people covered. We have one of the lowest uninsurance rates of the last 50 years right now.
The next few months and the next couple of years will test some of those issues, starting off with the premium tax credits, which were expanded during the pandemic emergency and then reauthorized as part of the Inflation Reduction Act. Those premium tax credits have made the exchange policies—which are for lower income but not poor individuals—much more affordable to many people, even to people above 400% of the federal poverty level.
Reauthorizing those policies for the next 10 years would cost a few hundred billion dollars. Not reauthorizing the tax credits would mean somewhere between 4 and 10 million people would lose insurance coverage and likely not regain it from any other source. So it is a very monumental decision that has to be made. It could be made right now during the lame-duck Congress. Otherwise, it will have to get reauthorized next year because it expires at the end of 2025. That’s the first thing that’s at meaningful risk.
If young, healthy individuals were allowed to buy a lower-cost, short-term plan, that could drive up the cost for older, sicker people in the original pool and make it harder for them to purchase insurance.
More concerning, I think, is the health reform side of things. When it comes to Medicaid expansion, the federal government could completely redo Medicaid or could just redo Medicaid for those states that had expansion, and that could have a very meaningful impact in how many people are covered by Medicaid. Right now it’s in the low 70 million range, and it could go down by 5 million, 10 million, or even more if you were to have some draconian type of changes to Medicaid. These require legislation, however.
They could also undermine the ACA by continuing to expand what are called short-term insurance policies, which are able to avoid the ACA rules about essential health benefits and are thinner policies, less robust policies. Those plans could pull off healthier, younger people and drive up the cost of the ACA policies. So that could also have a negative impact on coverage.
You mentioned the ban on excluding people from insurance plans based on pre-existing conditions. That would require new legislation to change, and that seems unlikely.
Yes, but the short-term plans are a subtle way to undermine that.
Pre-existing conditions have never been a big issue in the employer-based market; it’s in the individual market that the pre-existing conditions have always been a concern. Imagine that you have 20 million people all sharing the costs of healthcare in this marketplace. And imagine that 5 million of them are young, healthy individuals. Now imagine if they were allowed to buy a lower-cost, short-term plan that was only for healthy people. That could drive up the cost for the 15 million older, sicker people in the original pool and make it harder for them to purchase insurance. I don’t see that as likely, but there are ways to undermine the ACA through regulatory change and executive orders.
When the ACA was passed, there was a requirement to buy health insurance and a fine if you didn’t buy it. In the first Trump administration, they reduced that fine to zero.
Originally there was a mandate penalty, meaning that if you didn’t adhere to the mandate, you paid a penalty. The Supreme Court ruled that it’s really a tax.
The tax was not large, by the way, and it was unclear how much that tax would dissuade you. I used to tell my students that if you really want to mandate something, you’ve got to make the penalty appropriate. Students would ask what a strong penalty would be, and I’d say “jail.” If you have a choice between jail or getting health insurance that would cost you a few hundred dollars a year, you’re going to choose paying a few hundred dollars a year. But if the penalty is only a few hundred dollars, I don’t know if it’s enough to sway everybody.
The lame-duck Congress is the one thing people should be watching right now. If they could pass premium tax credit extension, that would help almost everybody, because President-Elect Trump doesn’t have to explain it away and the incoming Congress doesn’t have to take responsibility for it.
The Trump administration got rid of the penalty, but the subsidies for people below 400% of the federal poverty level were large enough to be a sufficient incentive to keep people buying insurance on the exchange. The penalty may have been important to a few hundred thousand people who are above 400% of the federal poverty level. But then along comes the pandemic and Congress enhances tax credits to buy ACA policies. And that is more powerful than those penalties ever were. So we’ve not fully tested how bad things would’ve gotten without a mandate tax and without these premium tax credits, because we’ve had them operating since the pandemic emergency.
A lot of people have benefitted from the ACA. How nervous should they be?
We should all remember there’s a difference between campaigning and governing. Often people are willing to say certain things while campaigning that they would be reluctant to say while in office, and vice versa.
The most expensive healthcare programs in the federal government are Medicare and Medicaid, and then after that, the VA. There is a strong emphasis on government efficiency with the new administration, and it would not surprise me if they at least propose changes to those three programs to save money, but there is a slim Republican majority in the House and the Senate, and it will be much easier said than done to make draconian moves.
So I would mostly say, stay tuned. Be aware that this is a marathon, not a sprint.
The lame-duck Congress is the one thing people should be watching right now. If they could pass premium tax credit extension, that would help almost everybody, because then President-Elect Trump doesn’t have to explain it away because he wasn’t president and the incoming Congress doesn’t have to take responsibility for it. If they extend the credits through the end of 2026, they kick the can to the next Congress.
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