Howard and Reinhardt discuss potential changes to health reform in new administration

Wednesday, Nov 16, 2016
by Michael Hotchkiss and B. Rose Kelly

During the campaign, President-Elect Donald Trump said he would repeal the Affordable Care Act (ACA), a system that covers 20 million people who were previously uninsured. Now, Trump says he’ll hold on to certain ACA provisions, such as providing care for those with pre-existing conditions.

Regardless of what’s being said about the ACA (also known as Obamacare), there are likely to be changes, according to Princeton’s top health care experts. In the following Q&A, they answer questions about the ACA and the future of America’s health care system.

Heather Howard is a lecturer in public affairs at the Woodrow Wilson School of Public and International Affairs and a faculty affiliate at the Center for Health and Wellbeing. She is the director of two programs funded by the Robert Wood Johnson Foundation: Advancing Coverage in States, which provides technical assistance to states implementing the ACA, and the State Health and Value Strategies program, which supports state efforts to enhance the value of health care. Previously, Howard served as New Jersey’s commissioner of health and senior services.

Uwe Reinhardt is the James Madison Professor of Political Economy at the Wilson School. He is recognized as one of the nation’s leading authorities on health care economics. He is a past president of the Association of Health Services Research and, from 1986 to 1995, he served as a commissioner on the Physician Payment Review Committee, which was established by Congress. He is a prolific researcher and serves or has served on a number of editorial boards.

Q. Given the outcome of the election, major changes seem likely in the American health care system. What are the basic economic challenges facing the health care system that any changes need to address? 

Reinhardt: Not only is that possible, it probably may have to go that route, if Republicans want to repeal Obamacare. The Senate, although dominated by Republicans, is not filibuster proof. But pieces of the ACA that involve federal money — the subsidies toward insurance premiums on the market places or toward out-of-pocket expenses — can be dealt with as part of “reconciliation,” which needs only 51 votes. So the Republicans could yank those through this mechanism. It would gut Obamacare as we know it. But other parts of the ACA which do not involve federal money — the mandate to be insured, community rating and guaranteed issue — could not be eliminated through reconciliation. Proposals to do away with them would run into the chance of a filibuster.

My hunch (or advice to Donald Trump) is to make a big brouhaha of seeming to repeal Obamacare (to keep a campaign promise), but in fact to keep many of its features that work or could be made to work better and rechristen it to something like TrumpCare or FreedomCare or something like that. No one would be the wiser. After all, Obamacare really was a Democratic bill mounted on an old, 1990s vintage Republican chassis (the late Senator Lincoln Chafee’s 1993 bill or even the Heritage Foundation Plan of 1990 or RomneyCare in Massachusetts), including the mandate to be insured (an actuarial necessity). If we want close to universal coverage through the good offices of private health insurers, we shall need a chassis like that, regardless of who writes the law.

The alternative, of course, is to go back to the pre-2010 world, with premiums based on the individual’s health status, lifetime limits of coverage, denials of coverage and so on. That could happen as well.

Finally, everyone seems to believe that Obamacare is all pervasive throughout the United States health system. It is not. It covers a small appendix of the United States system — the market for individually purchased health insurance and that for small business firms — hardly touching employment-based health insurance (which covers about two-thirds of the United States population and one-third of total health spending), Medicare, Tricare, the Veterans Health Administration system, etc. Obamacare is just a smallish, complicated and somewhat ugly patch onto a hugely complicated and hugely ugly health care financing system.

Howard: The American health care system had been in need of reform for a very long time prior to the passage of the ACA. Consistent rises in health care spending, in what is already the most expensive health care system in the world, continues to be one of the most important issues facing our country. In recent years, we have begun to see health care costs increasing at a slower rate, reflecting some of the reforms that have been implemented. One of the primary reasons for this is continuing efforts to move health care toward payment models that incentivize value and quality, creating a more efficient health care system. It is still uncertain what the incoming administration has planned for many of the reforms that have been implemented. For example, what is the future of the Center for Medicare and Medicaid Innovation (CMMI), which has been taking the lead in testing new payment and delivery models?

Q. Is it possible to pick and choose parts of the ACA to keep or discard? Why?

Howard: While it is still too early to predict what the incoming administration will do, it is clear from past experiences that any changes will take time to enact and will likely be done incrementally. Despite Republican rhetoric criticizing the ACA and the party’s success in this year’s elections, we have learned that disruptions in health care are politically unpopular (think about the backlash surrounding President Obama’s statement that “if you like your health care, you can keep it.”) More than 20 million people have gained health insurance coverage, and much of the ACA is now enmeshed in our health care system, so it is hard to see how, even with control of the presidency and both chambers of Congress, dramatic action can happen quickly (and painlessly). Indeed, to date, Republicans have not produced a complete plan to “replace” the ACA, because it is by definition harder to propose solutions than to criticize them. And now health care interests that have benefited from the law — including hospitals and other providers, as well as governors in red and blue states that expanded Medicaid and have seen state budget savings — are unlikely to stay on the sidelines during debates that are no longer theoretical.

Recently, President-Elect Trump has expressed a desire to keep certain parts of the law that are particularly popular, including the prohibition from denying coverage due to pre-existing conditions and the ability for dependents to remain on their parent’s coverage until the age of 26. The impact of retaining these parts of the law while doing away with others, including the individual mandate, will be the topic of much research and discussion in the coming months.

Q. Are there myths or misconceptions about the ACA that should be addressed ahead of major changes?

Reinhardt: One misperception is that Obamacare is all pervasive throughout our health system, which, as noted, it is not. Another misperception is that Obamacare has been inflationary. In fact, it added less than 4 percent to what we would have spent on health care even in the absence of the ACA. The premium hikes we see in Obamacare now (the premiums for 2017 relative to those for 2016) reflect three things: many (perhaps most) private insurers underpriced their policies, either by error or to gain market share, in the early years, a chicken that now comes home to roost; government assistance to compensate for higher than anticipated risk (called risk corridors) were yanked by Congress; and within age bands, fewer healthy people enrolled than had been hoped for, leaving the insurance risk pools on the market place exchanges with sicker people who cost more to treat. Here it must be remembered that health spending is highly skewed. The top most costly 1 percent of Americans account for 21 percent of total national health spending, the top 5 percent for 51 percent, while the least costs 50 percent for only 3 percent. (See graphs below).

Howard: Unfortunately, there are many misconceptions about the ACA. To begin with, many people are likely going to realize as we begin any conversations about changes to the law that its full repeal would result in a loss of coverage for over 20 million Americans who would not otherwise have had access to affordable coverage. It is for this reason that full repeal without a replacement plan may be politically untenable.

It is also important to note the prevailing narrative that the law is unpopular and that the election served as a referendum on it.  In many ways, the law has become a scapegoat for the challenges of our health care system — most of which pre-date the ACA. The cost of care in the U.S. continues to rise at a rate consistently higher than inflation. These rising costs are reflected in both rising premiums, and in an increasing reliance on consumer financial contribution —especially in the form of deductibles. Premium increases like those we saw this year happened before the ACA, but Obamacare represented an easy target on which to pin blame. As such, it is appropriate to question whether the ACA is unpopular because of its policies, or because of the challenges that it did not adequately address.

Q. Are there other approaches to improving the health care system that show promise?

Howard: Unfortunately, it is difficult for us to examine potential plans from the incoming administration at this time, largely because the approaches espoused during the campaign were not very fleshed out. However, I am hopeful that aspects of the ACA which have, in some instances, achieved bipartisan support, would be part of the future. As you may recall, the expansion of Medicaid under the ACA was implemented in several states with Republican governors, including Vice President-elect Pence’s Indiana, Ohio and New Jersey. Decisions to expand Medicaid in 31 states and the District of Columbia have been vital both in improving the health of those states’ populations and in improving the economics in those states.

The Medicare Access and CHIP Reauthorization Act (MACRA), the major Medicare legislation that passed last year with significant bipartisan support, promotes popular and important opportunities to increase the efficiency of our health system, continues the drive toward health information technology adoption and incentivizes the health care system to help patients stay healthy. However, given that MACRA is very much entwined with the structure of the ACA, uncertainty remains in its future.

Reinhardt: A major problem has been that the Republican opponents of the ACA have been very good at criticizing this or that feature of the ACA and thus defining it in the public’s mind, but they have not been able to agree on a concrete replacement proposal of their own, aside from enunciating sets of principles that cannot be costed out by the Congressional Budget Office nor would allow one to describe to families how they would fare under particular circumstances. Republicans in this regard have been like drunken lovers at a bar: big talk, little action.

More ambitious ideas, like Senator Bernie Sanders’ single-payer approach, are dead on arrival — even dead before arrival — as the recent initiative in Colorado has shown.

So the best Americans can hope for is muddling through inelegantly, as we always have. One would hate to be lower-income in that system. Our health care financing system will always remain a horrendous mess and a fountain for such dismay among the providers of health care as well as among patients. We might as well get used to it: Americans will never have a health insurance system that does not confuse and anger people deeply, just as you cannot grow wheat at the North Pole. It’s a state of nature.

Q. What are the lessons of the ACA that can help inform whatever comes next?

Reinhardt: For one, if such a bill is passed, the president has to bestir himself to lead personally in explaining the bill to the public in simple terms.

It can be done. I could do it. President Obama did not do that. He allowed the opposition to define the ACA in the public’s mind. It is not clear to me why he chose that approach: Was he just lazy, or arrogant, or did he not understand the bill and hence could not explain it? A much better job could have been done by him there.

We saw a similar, laid-back, hands-off approach when it came to opening the market place exchanges (, and the entire edifice exploded. It all seemed news to him at the ill-fated launch time in October 2013. Any good CEO would have had detailed weekly updates all along the process. To me, it’s a very strange approach to governing. I wrote a column for The New York Times then, giving the president a flat F for managerial performance.

Whoever does health reform next should keep in mind that the reform must be explained by the president to the general public and he must lead on it. It is how Taiwan got health reform in 1994 and 1995. Taiwan’s president led.  

Howard: The most important lessons are that there is a demand for affordable coverage, and it can benefit not only individuals, but also state budgets and the health care sector. Nowhere is this more evident than in the states that elected to expand Medicaid under the law. Many of these so called “expansion states” saw significant positive impact to their state budgets because of the expansion. Mental health and substance abuse services became part of the Medicaid benefit, freeing up state dollars to invest in prevention and community supports, economic development and education.

Another critical lesson is that the health care system moves more like a massive cargo ship rather than a sports car. States were given four years to implement the ACA, and it was still arguably not enough time. Future changes must account for the time it takes to change direction, build new systems, set new policies and inform consumers. Health care is intensely personal and to the extent that changes impact the daily lives of Americans, it will always be politically charged.

WWS Reacts is a series of interviews with Woodrow Wilson School experts addressing current events.