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President-elect Donald Trump and the new Republican leaders in Congress have announced that their first legislative priority is to repeal and replace the Affordable Care Act. This will be far easier said than done. As they consider their options, they face at least three significant obstacles.
First, every American has legal protections that didn’t exist ten years ago. We are guaranteed the opportunity to purchase insurance regardless of our health condition. Women cannot be required to pay more for insurance than men for the same health insurance policy. Annual and lifetime limits are prohibited for most benefits. And young adults up to the age of 26 are able to sign up on their parents’ plan.
Each of these new protections are overwhelmingly popular among Americans of all political stripes. But there is a catch. The only way that each of these new guarantees can work is if there is a large enough pool of healthy people paying into a health insurance pool to balance the costs of those who are not.
That is the simple rationale behind the individual mandate created in the ACA — no mandate, no guarantees. It is the same premise that has sustained the Medicare program for the past 50 years. The only alternative would be to fund these protections out of general tax revenues, but with our national federal debt approaching $20 trillion for the first time in all of American history, that option should not even be on the table.
Second, 31 states have availed themselves of the opportunity to expand the Medicaid program with no more than a 10 percent financial commitment to offsetting the additional cost of the newly eligible. In addition to providing health benefits for roughly more than nine million people, Medicaid expansion has created an enormously consequential economic stimulus.
The total value of this expanded program through 2020 is conservatively estimated to be over a half-trillion dollars and more than a million new jobs. This economic, job-creating benefit was never mentioned during the election cycle, but will be a major issue for every participating governor as they analyze the impact of the loss of the program on their state budgets in the coming years.
Third, more than 11 million Americans now have coverage through the national system of health insurance exchanges that have been in operation for the past four years. This is nearly 80 percent of the current individual marketplace. Almost all of these individuals lack access to health insurance through their place of employment and, until the passage of the ACA, were oftentimes prohibited from purchasing insurance because of pre-existing health problems.
To terminate these individuals’ access to health insurance now would not only be immoral, it would be politically explosive. While the vast majority of Americans continue to receive their health insurance from their employer, for those who do not, access to coverage made available by the ACA is potentially a matter of life or death and the return of the fear of living one illness away from financial bankruptcy.
To his credit, the president-elect has said he intends to keep the popular provisions of the ACA, while amending the law to reduce the cost of the program to those who are participating as well as to taxpayers. But as most health policy experts agree, this will be nearly impossible to achieve without a mandate to ensure a balance risk pool.
As the incoming administration seeks solutions, it is critical that they and members of Congress avoid the “cut and shift” tendency that has often been employed in similar circumstances in the past. Rather than shifting federal health costs on to the states, to businesses, to health stakeholders or to beneficiaries, policymakers must look for ways to redesign and improve the individual market place to ensure longer-term improvements in both quality and lower cost.
With this in mind, I would offer four principles for redesign and meaningful improvement of the ACA that should be supported by members of both parties.
First, we must acknowledge that a successful individual marketplace relies, first and foremost, on a viable public-private partnership. No business model can endure the responsibility of insuring millions of unhealthy Americans without some degree of public support. Both the Medicare Advantage program and the Medicare Prescription Drug Benefit program rely on a mutual commitment to risk-sharing between the public and private sectors. This partnership has worked well and has long received strong support from members of Congress on both sides of the aisle. For the individual marketplace to achieve meaningful viability, it is essential that a similar risk-sharing system be maintained.
Second, it must be acknowledged that the current system of enrollment is unsustainable. Too many people have the ability to seek coverage when in need of care and then subsequently drop their plan, shifting costs to payers, providers and other consumers. In addition, a provision of the law that authorizes “special enrollment periods” has allowed individuals to enroll outside of the annual enrollment period without upfront verification of eligibility.
The result has been unbalanced insurance pools with too few healthy individuals balancing out the costs of the sick. The pools are simply not actuarily sustainable, and the result has been the dramatic hikes in insurance premiums on the remaining subscribers that we have seen this year.
Far tighter enrollment mechanisms and policies that encourage continuous coverage are essential to create a viable health insurance pool in order to provide long-term sustainability in the individual health insurance marketplace.
Third, too many young and healthy people are not participating. That is a result of many factors not the least of which is young people’s confidence in sustaining their good health far into adulthood. This challenge has been addressed in part by allowing those under the age of 26 to sign on to their parents’ plan. However, this does not strengthen the individual marketplace. Further, limiting the penalty for non-participation to a fee well below the cost of an annual premium has failed to encourage uninsured health individuals to purchase coverage.
While increasing the mandate penalty would be highly unpopular and virtually a nonstarter, the law could be altered to require non-participants to be personally responsible for the cost of care if and when it is required. The prospect of having to pay thousands of dollars of health costs out-of-pocket may be a significant motivation for more people to participate.
Fourth, it is essential that policymakers understand that it is not just the individual health insurance market that needs repair, it is our entire health care sector. We continue to face enormous problems of access, cost and quality nationwide and only if we address all three problems will we be successful here.
We must continue the drive to value-driven care, work to improve transparency, and the delivery of care; emphasize the importance of prevention and wellness, and reduce the unacceptably high levels of administrative costs and fraud and abuse.
There is a reason opponents of the ACA have been unable to reach consensus. These are tough public policy challenges.
From the very beginning, the crux of the debate has been over the role of government. And while we may debate whether that role should be more or less, there is little doubt that for the foreseeable future, the public-private health partnership that is uniquely American will continue.
These challenges are no easier now than they were when the ACA was passed more than six years ago. But before the law is repealed, the American people have every right to expect that this new administration and Congress will seek and find bipartisan solutions that will be an improvement over the status quo.
Former Sen. Tom Daschle (D-S.D.) is CEO of The Daschle Group, and serves on the boards of the Edward M. Kennedy Institute, LBJ Foundation and Accumen, Inc.