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It’s Time to Fix Obamacare

It won't be easy, but these changes could save Obama's healthcare legacy.

Joe Raedle/Getty Images

As we all know by now, The Donald wants to repeal and replace the Affordable Care Act while Hillary wants to fix it. But what does that mean, and how would they do it?

The first question is what exactly do they want to repeal or fix. The ACA seems to have evolved into a great political Rorschach test somewhat devoid of real content but relying on projection of underlying beliefs.

For Republicans, it is evidence of governmental overreach and excess expenditures, while Democrats seem to think of it as the essence of collective action and shared responsibility for those less fortunate. As such, neither informs the specific directions we might take from here.

In reality, the ACA consists of four major parts:

  1. Expansion of Medicaid for low-income working poor, with mostly federal financing.
  2. Research on alternative ways to treat conditions to inform physician practice.
  3. Tests of innovative ways to organize and deliver health care for better value that can be quickly implemented across the system.
  4. The exchanges, for purchasing subsidized individual policies from private insurance companies.

Of course, it is mainly the exchanges that get public attention and, unfortunately, much of that is misinformed. And even if the candidates were to change or eliminate the exchanges, the other three parts, which may well be the most important and lasting legacy of the legislation, would most likely stand.

Medicaid madness?

The easiest part of the ACA was thought to be the expansion of Medicaid to the working poor, but it became a political battle. Medicaid expansion cuts states’ health care costs while providing coverage to millions more people.

The expansion required no expenditure of state money for the first three years, only an acceptance of federal dollars. Thus, many considered expansion a done deal and a crucial part of the law. Then the U.S. Supreme Court ruled that states could refuse to expand Medicaid.

Many—26, to be precise—did just that in 2014, as Republican governors and lawmakers in red states voted to not accept the federal money. Some later changed their minds, but as of now, 19 states still have not expanded Medicaid.

Even some red state governors who resisted the extra funds from the federal government to expand Medicaid coverage are reconsidering, albeit with some conditions that provide political cover. Only states’ rights advocates, for philosophical reasons, and budget hawks, who fear that the federal government will renege on their funding, are holding out for a repeal of this one.

Beyond the exchanges

While the double-digit premium increases have led to calls for repeal, it’s important to look at the law more broadly and what can be done to fix it.

Two parts of the ACA may have dramatic impact even though they totally avoid public scrutiny. They seek to change the way that health care is delivered at a very fundamental level. Research, called for by the ACA, is being done by health care systems, insurers, and providers at every level, focusing on alternative ways to treat problems—something that most would assume we already do. Under the law, reimbursements to providers is tied to their doing this.

But that’s not really the case. For example, the FDA is charged with assuring that a drug or device is effective (efficacious) and safe (not toxic or carcinogenic), not whether it is actually better than the alternative. So we have alternative drugs, devices, surgeries and so forth that all address a problem with little guidance as to which one actually is better.

The idea is that scientific findings will guide both physician practice and coverage decisions toward better value and blunt that drive toward more marginal treatment at ever higher cost with limited outcomes.

The alternative approach to this kind of cost control is just to cut payments, while allowing volume to expand. It is unlikely that those who support cost control and those who do not will want to proceed down that path. It will lead to bankruptcy and ever declining marginal value—although those who stand to lose money may resist.

In a similar way, the Innovation Center called for in the ACA is designed to try new organizational and payment models to see what works better and encourage adoption widely. The goal here is “value,” where that is defined as something that meets at least threshold quality metrics (e.g., hospital readmission rates) while meeting or beating actuarial estimates of cost.

The only ones who are arguing against these two little known parts of the act are those whose vested interests would be challenged. Drug companies are not wild about the additional standards of value for their products; hospitals argue the quality metrics are faulty, and physicians don’t like being forced into new organizations that may limit their autonomy.

Big bets have been made on the future of health care, and these cannot be recalled easily. But there are places here that will likely be part of Hillary’s “fixing” of the ACA.

And then there are marketplaces

So that leaves us with the “disaster” of the individual insurance markets decried by Trump, who has said he would eliminate the marketplaces in favor of open competition across state lines. Allowing insurance companies to offer insurance in different states, the thinking goes, will increase competition of plans and lower rates for consumers.

Unfortunately, the companies don’t seem interested since they already can do this to some extent but don’t. One reason is that premiums are based, in part, on negotiated rates with providers. It is hard to build provider networks in another state, from another state.

The level of competition insurers face is secondary and may be a detriment in driving provider rates lower.

In any event, cross-border competition hardly is a panacea for rising costs. It is, however, an unspoken attack on the insurers as a way to break their often solid capture of the regulation process which now resides at the state level. Thus, expect industry resistance to this traditional Republican proposal.

The problems of the individual insurance exchanges come from many directions. Besides insurance company pricing errors compounded by their natural risk avoidance, the government changed the rules midstream and limited the range of premiums insurers can charge, which forced the young to pay too much or the old too little.

This was compounded by a huge failure of Congress to hold up their end of the bargain in supporting the transitional support promised by the law to companies willing to take the plunge into the unknown of the exchanges, as I wrote about in The Conversation in August. When only 12 percent of the support promised to companies with higher than expected costs was paid, the higher risk and big losses drove many out of the markets. Thus, many of the problems of the exchanges lie directly at the feet of Congress.

A Democratic Congress would rectify this as part of the fix. Hillary also would allow people in the 55-64-year-old age group to buy into Medicare early. This is a form of the “public option” that would be popular and probably would enliven the areas where there is no competition on the exchanges.

The irony of the Republican opposition to the use of a competitive market with subsidies to make health insurance “affordable”— essentially their long time alternative—might become apparent, allowing them to engage in fixing the ACA if Congress goes blue.

Interestingly, Clinton has a number of other positions that one could argue would move us toward lower cost and higher quality as promised by the ACA. One of the most interesting concerns drugs, where she would allow Medicare to bargain for lower prices, permit importation of price-controlled prescription pharmaceuticals from other countries and limit direct-to-consumer advertising.

Given that this is the most inflationary of any sector of health care and that many firms seem to have engaged in exploitative pricing, these are likely to get attention from both sides of the aisle although Republicans have said little about their approach.

So overall, it is unlikely that we would actually see a full “repeal and replace” from the GOP. There are some signs that Congress is open to fixing the ACA, as evidenced by a few Republicans, such as Representative Dennis Ross of Florida. Realistically, in their weakened position (should Trump lose), compromise is more likely than in any time during the last eight years.

The fact that the ACA actually has reduced the deficit, although estimates vary by how much, and extended Medicare solvency by many years may mean that wholesale changes would not be good. It would be important to keep those parts that have saved money. And both sides have pledged their allegiance to both of these politically popular objectives.

Going forward, the most likely path is the same difficult one that the U.S. system as a whole must take toward improving access and value. There will be no quick fix.

This article was originally published on The Conversation. Read the original article.