Healthcare Reform is Comatose

The Sanders/Klobuchar/Graham/Cassidy CNN healthcare “debate” is a must watch for anybody who cares about healthcare reform in the US. However, it’s not important because it was filled with intelligent and critical discussion of the health care system’s problems and the smartest ways to fix them. On the contrary, it’s essential viewing because it reveals how politically dogmatic and intellectually lazy the two sides have become.

To start off, the bright point of the debate was that both sides seem to finally agree that the ACA isn’t working. When the ACA marketplace’s average deductibles increased to $6,000 and premiums increased by 17% in 2017, the true believers argued that this was a one-time actuarial adjustment as the marketplaces aligned themselves to the demographics of the newly insured population. As we get closer to 2018, this position is becoming increasingly indefensible as it’s becoming clear that exchanges are going to see another wave of large premium increases. Florida, a state that expanded Medicaid under the ACA, is forecasting a 45% increase. It shouldn’t be a surprise that the marketplaces are spiraling since ACOs, which were the primary cost saving mechanism in the ACA, have been a tremendous failure at producing any meaningful results. Importantly, this mechanism has been a failure nationally as well as locally in Massachusetts, which was lauded as a better version of the ACA because it had more robust wealth transfers and higher individual mandate penalties. This is why nobody at the debate tried to argue that the ACA is working. The Democrats praised the law for expanding coverage, but were also eager to admit that something is rotten in the state of Denmark and called out to their Republican colleagues to work together on fixing it together. And this is where the problems begin. Despite agreeing that cooperation will be needed, the ACA has warped policy thought in DC to such a degree that neither side is capable of thinking of solutions outside of the “fund the ACA” vs “defund the ACA” paradigm.

Republicans for their part are completely obsessed with pushing through a repeal bill that also controls Medicaid spending. While their hearts may be in the right place (the CMS trust is still scheduled to run out of money in 2029), this is a fight against reality. Three Senate vote defeats have made it clear that a bill that reduces future spending will not pass and that bill writers need to move into a new direction, including consideration of increasing taxes to stop the fiscal hemorrhage. The proposed Trump tax cuts, however, provide little hope for a balanced budget. Similarly, the desire to completely delegate healthcare policy to the states is also unrealistic. Nicholas Bagley wrote up a reasonable critique pointing out how despite transferring control of funds, the federal government is not going give states the ability to pick and choose federal regulations. What may have worked for welfare in the 90s probably would not work for healthcare because of the entrenched special interests that protect themselves from competition through legal barriers to entry.

Democrats, on the other hand, may be in an even worse position. They quite literally have no idea what to do about the ACA. This is why Hillary’s campaign position on healthcare could be accurately summarized as “we will do stuff.” Despite agreeing with the Republicans that the ACA isn’t working, they seem to have stumbled unwillingly to the bizarre conclusion that the solution is to throw more money at the fire. The Maine and Alaska reinsurance programs Klobuchar championed at the debate is simply taxpayer funded nationalization of sick patients and their costs, and Graham was correct in criticizing it as throwing good money after bad. The other proposal from the Democrats is Bernie’s Medicare for All single payer, which not only throws good money after bad, it throws enough money to bankrupt the nation within a decade (his own words, not mine). The helplessness of the Democratic position is therefore fueling the growth of a malaise among ACA supporters. Where there was once exuberance and joy about the law’s potential, there is now a resigned feeling that this is the best that we can do. Aaron Carroll, ACA proponent and one of the panelists on NYTimes’ recent “Best Healthcare System” tournament, now says that “THERE IS NO WAY TO SPEND LESS, COVER MORE, AND MAKE IT BETTER” (his emphasis, not mine), which effectively concedes that the ACA does nothing to push the health production possibility frontier outward. Aaron Carroll is obviously wrong about this; competition and innovation have been making healthcare cheaper, broader and better for a century now. But more importantly, that statement reveals the lack of imagination that pushes the Democrats to promote more spending. In their view the only way to improve care for everybody is to spend more, so if we’re doomed to spend more then it’s better to do it now rather than later. There’s an internal logic to this fiscal suicide. In addition, because deficit spending and redistribution are critical to this vision, they are also doubling down on centralization of healthcare management in the federal government. Aaron Carroll criticizes the Republican’s state-oriented vision by claiming that none of the states have any idea how to fix this mess. It’s a strange  argument to use to defend the ACA, because it makes the false assumption that the federal government somehow does know what to do and ignores the fact that the ACA itself was a watered down version of a state idea.

Ultimately the biggest problem is that neither of these boring approaches is going to solve America’s problems. The ACA isn’t what’s wrong with healthcare in the US, it just magnified the problems by adding more money into the system. Whether you eliminate it completely or empower it with more money, you’ll still be left with the same structural problems that are driving the irrational healthcare sector. There are critical market focused reforms that need to be made to price transparency, provider market entry, occupational licensing, health insurance purchasing, drug patent law and funding for behavioral health, all of which would immediately and significantly bend the healthcare cost curve. Instead we’re going to keep going back and forth about ACA funding. With so little brain activity going in Congress, the only plausible conclusion is that healthcare reform is comatose for the foreseeable future until something critical breaks.

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